Document

LIMONEIRA COMPANY


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2019
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE TRANSITION PERIOD FROM              TO             
  
Commission File Number: 001-34755
LIMONEIRA COMPANY
(Exact name of Registrant as Specified in its Charter)
Delaware
77-0260692
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
1141 Cummings Road, Santa Paula, CA
93060
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code: (805) 525-5541
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
 
 
 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol (s)
Name of Each Exchange of Which Registered
Common Stock, $0.01 par value
LMNR
The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ý  Yes    ¨  No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ý Yes ¨ No 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:  
¨    Large accelerated filer
ý  Accelerated filer
¨  Emerging growth company

¨    Non-accelerated filer
¨  Smaller reporting company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    ý  No

 As of May 31, 2019, there were 17,772,753 shares outstanding of the registrant’s common stock.

1


LIMONEIRA COMPANY
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
 
 
Item 1.
Financial Statements
 
 
 
Consolidated Balance Sheets – April 30, 2019 and October 31, 2018
 
 
Consolidated Statements of Operations – three and six months ended April 30, 2019 and 2018
 
 
Consolidated Statements of Comprehensive Income (Loss) – three and six months ended April 30, 2019 and 2018
 
 
Consolidated Statements of Stockholders' Equity and Temporary Equity – six months ended April 30, 2019 and 2018
 
 
Consolidated Statements of Cash Flows – six months ended April 30, 2019 and 2018
 
 
Notes to Consolidated Financial Statements
 
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
 
 
 
Item 4.
Controls and Procedures
 
 
 
PART II. OTHER INFORMATION
 
 
Item 1.
Legal Proceedings
 
 
 
Item 1A.
Risk Factors
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
Item 3.
Defaults Upon Senior Securities
 
 
 
Item 4.
Mine Safety Disclosures
 
 
 
Item 5.
Other Information
 
 
 
Item 6.
Exhibits
 
 
 
SIGNATURES


2


Cautionary Note on Forward-Looking Statements.
 
This Quarterly Report on Form 10-Q contains both historical and forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q are subject to a number of risks and uncertainties, some of which are beyond the Company’s control. The potential risks and uncertainties that could cause our actual financial condition, results of operations and future performance to differ materially from those expressed or implied include:

changes in laws, regulations, rules, quotas, tariff, and import laws;
adverse weather conditions, natural disasters and other adverse natural conditions, including freezes, rains, fires and droughts that affect the production, transportation, storage, import and export of fresh produce;
market responses to industry volume pressures;
increased pressure from disease, insects and other pests;
disruption of water supplies or changes in water allocations;
product and raw materials supplies and pricing;
energy supply and pricing;
changes in interest and currency exchange rates;
availability of financing for development activities;
general economic conditions for residential and commercial real estate development;
political changes and economic crisis;
international conflict;
acts of terrorism;
labor disruptions, strikes, shortages or work stoppages;
loss of important intellectual property rights; and
other factors disclosed in our public filings with the Securities and Exchange Commission (the "SEC").

The Company’s actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. Additional risks of which the Company is not currently aware or which the Company currently deems immaterial could also cause the Company’s actual results to differ, including those discussed in the section entitled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended October 31, 2018. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we undertake no obligation to update these forward-looking statements, even if our situation changes in the future.
 
The terms the “Company,” “Limoneira”, “we,” “our” and “us” as used throughout this Quarterly Report on Form 10-Q refer to Limoneira Company and its consolidated subsidiaries, unless otherwise indicated.


3


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
LIMONEIRA COMPANY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
($ in thousands, except share amounts) 
 
April 30,
2019
October 31,
2018
Assets
 

 

Current assets:
 

 

Cash
$
1,491

$
609

Accounts receivable, net
19,960

14,116

Cultural costs
2,821

5,413

Prepaid expenses and other current assets
11,808

10,528

Income taxes receivable

378

Total current assets
36,080

31,044

 
 
 
Property, plant and equipment, net
230,592

225,681

Real estate development
16,156

107,162

Equity in investments
57,470

18,698

Investment in Calavo Growers, Inc.
23,953

24,250

Other assets
19,034

14,504

Total assets
$
383,285

$
421,339

 
 
 
Liabilities and stockholders’ equity
 

 

Current liabilities:
 

 

Accounts payable
$
10,002

$
6,134

Growers payable
17,029

10,089

Accrued liabilities
4,828

7,724

Current portion of long-term debt
2,915

3,127

Total current liabilities
34,774

27,074

Long-term liabilities:
 

 

Long-term debt, less current portion
93,744

76,966

Deferred income taxes
24,751

25,372

Other long-term liabilities
3,347

3,647

Sale-leaseback deferral

58,330

Total liabilities
156,616

191,389

Commitments and contingencies (See Note 16)




 
 
Series B Convertible Preferred Stock – $100.00 par value (50,000 shares authorized: 14,790 shares issued and outstanding at April 30, 2019 and October 31, 2018) (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 April 30, 2019 and October 31, 2018) (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 April 30, 2019 and October 31, 2018)


Common Stock – $0.01 par value (39,000,000 shares authorized: 17,772,753 and 17,647,135 shares issued and outstanding at April 30, 2019 and October 31, 2018, respectively)
178

176

Additional paid-in capital
159,992

159,071

Retained earnings
59,757

50,354

Accumulated other comprehensive (loss) income
(4,643
)
8,965

Noncontrolling interest
575

574

Total stockholders’ equity
215,859

219,140

Total liabilities and stockholders’ equity
$
383,285

$
421,339

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4


LIMONEIRA COMPANY


CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
($ in thousands, except share amounts)
 
Three Months Ended
April 30,
 
Six Months Ended
April 30,
 
2019
 
2018
 
2019
 
2018
Net revenues:
 

 
 

 
 
 
 
Agribusiness
$
40,823

 
$
41,865

 
$
81,623

 
$
72,198

Rental operations
1,212

 
1,270

 
2,430

 
2,530

Real estate development

 

 

 

Total net revenues
42,035

 
43,135

 
84,053

 
74,728

Costs and expenses:
 

 
 

 
 
 
 
Agribusiness
37,078

 
28,798

 
75,994

 
56,960

Rental operations
1,095

 
976

 
2,174

 
2,041

Real estate development
24

 
39

 
52

 
69

Selling, general and administrative
4,843

 
3,942

 
9,858

 
8,016

Total costs and expenses
43,040

 
33,755

 
88,078

 
67,086

Operating (loss) income
(1,005
)
 
9,380

 
(4,025
)
 
7,642

Other income (expense):
 

 
 

 
 
 
 
Interest expense
(686
)
 
(284
)
 
(539
)
 
(794
)
Equity in earnings of investments
1,927

 
(126
)
 
1,969

 
(83
)
Unrealized gain (loss) on stock in Calavo Growers, Inc.
3,612

 

 
(298
)
 

Other income, net
56

 
16

 
360

 
257

Total other income (expense)
4,909

 
(394
)
 
1,492

 
(620
)
 
 
 
 
 
 
 
 
Income (loss) before income tax (provision) benefit
3,904

 
8,986

 
(2,533
)
 
7,022

Income tax (provision) benefit
(1,084
)
 
(2,380
)
 
677

 
8,207

Net income (loss)
2,820

 
6,606

 
(1,856
)
 
15,229

Net income attributable to noncontrolling interest
(5
)
 
(7
)
 
(22
)
 
(5
)
Net income (loss) attributable to Limoneira Company
2,815

 
6,599

 
(1,878
)
 
15,224

Preferred dividends
(126
)
 
(126
)
 
(251
)
 
(251
)
Net income (loss) attributable to common stock
$
2,689

 
$
6,473

 
$
(2,129
)
 
$
14,973

 
 
 
 
 
 
 
 
Basic net income (loss) per common share
$
0.15

 
$
0.45

 
$
(0.12
)
 
$
1.04

 
 
 
 
 
 
 
 
Diluted net income (loss) per common share
$
0.15

 
$
0.44

 
$
(0.12
)
 
$
1.02

 
 
 
 
 
 
 
 
Weighted-average common shares outstanding-basic
17,554,000

 
14,379,000

 
17,516,000

 
14,341,000

Weighted-average common shares outstanding-diluted
18,225,000

 
15,023,000

 
17,516,000

 
14,986,000

  
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 



5


LIMONEIRA COMPANY


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(In thousands)
 
Three Months Ended April 30,
 
Six Months Ended
April 30,
 
2019
 
2018
 
2019
 
2018
Net income (loss)
$
2,820

 
$
6,606

 
$
(1,856
)
 
$
15,229

Other comprehensive (loss) income, net of tax:
 

 
 

 
 
 
 
Foreign currency translation adjustments
(452
)
 
50

 
443

 
293

Minimum pension liability adjustment, net of tax of $28, $52, $55 and $103 for the three and six months ended April 30, 2019 and 2018, respectively.
72

 
123

 
146

 
247

Unrealized holding gains on security available-for-sale, net of tax of $0, $589, $0 and $1,758 for the three and six months ended April 30, 2019 and 2018, respectively.

 
1,421

 

 
4,242

Unrealized gains from derivative instrument, net of tax of $0, $25, $0 and $67 for the three and six months ended April 30, 2019 and 2018, respectively.

 
58

 

 
161

Total other comprehensive (loss) income, net of tax
(380
)
 
1,652

 
589

 
4,943

Comprehensive income (loss)
2,440

 
8,258

 
(1,267
)
 
20,172

Comprehensive (income) loss attributable to noncontrolling interest
13

 
13

 
1

 
36

Comprehensive income (loss) attributable to Limoneira Company
$
2,453

 
$
8,271

 
$
(1,266
)
 
$
20,208

 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 


6


LIMONEIRA COMPANY


CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND TEMPORARY EQUITY
($ in thousands)

 
Stockholders’ Equity
 
 
 
Temporary Equity
 
Common Stock
 
Additional
Paid-In
 
Retained
 
Accumulated
Other
Comprehensive
 
Noncontrolling
 
 
 
Series B
Preferred
 
Series B-2
Preferred
 
Shares
 
Amount
 
Capital
 
Earnings
 
Income (Loss)
 
Interest
 
Total
 
Stock
 
Stock
Balance at October 31, 2018
17,647,135

 
$
176

 
$
159,071

 
$
50,354

 
$
8,965

 
$
574

 
$
219,140

 
$
1,479

 
$
9,331

Dividends Common ($0.075 per share)

 

 

 
(1,332
)
 

 

 
(1,332
)
 

 

Dividends Series B ($2.19 per share)

 

 

 
(32
)
 

 

 
(32
)
 

 

Dividends Series B-2 ($10 per share)

 

 

 
(93
)
 

 

 
(93
)
 

 

Stock compensation
145,737

 
2

 
789

 

 

 

 
791

 

 

Exchange of common stock
(20,119
)
 

 
(305
)
 

 

 

 
(305
)
 

 

Net (loss) income

 

 

 
(4,693
)
 

 
17

 
(4,676
)
 

 

Other comprehensive income, net of tax
 
 
 
 
 
 
 
 
969

 
(12
)
 
957

 

 

Reclassification of unrealized gain on marketable securities upon adoption of ASU 2016-01

 

 

 
15,921

 
(15,921
)
 

 

 

 

Reclassification upon adoption of ASU 2018-02

 

 

 
(1,724
)
 
1,724

 

 

 

 

Balance at January 31, 2019
17,772,753
 
178

 
159,555

 
58,401

 
(4,263
)
 
579

 
214,450

 
1,479

 
9,331

Dividends Common ($0.075 per share)

 

 

 
(1,333
)
 

 

 
(1,333
)
 

 

Dividends Series B ($2.19 per share)

 

 

 
(33
)
 

 

 
(33
)
 

 

Dividends Series B-2 ($10 per share)

 

 

 
(93
)
 

 

 
(93
)
 

 

Stock compensation

 

 
437

 

 

 

 
437

 

 

Net (loss) income

 

 

 
2,815

 

 
5

 
2,820

 

 

Other comprehensive income, net of tax

 

 

 

 
(380
)
 
(9
)
 
(389
)
 

 

Balance at April 30, 2019
17,772,753
 
$
178

 
$
159,992

 
$
59,757

 
$
(4,643
)
 
$
575

 
$
215,859

 
$
1,479

 
$
9,331

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stockholders’ Equity
 
 
 
Temporary Equity
 
Common Stock
 
Additional
Paid-In
 
Retained
 
Accumulated
Other
Comprehensive
 
Noncontrolling
 
 
 
Series B
Preferred
 
Series B-2
Preferred
 
Shares
 
Amount
 
Capital
 
Earnings
 
Income (Loss)
 
Interest
 
Total
 
Stock
 
Stock
Balance at October 31, 2017
14,405,031

 
$
144

 
$
94,294

 
$
34,692

 
$
7,076

 
$
587

 
$
136,793

 
$
1,479

 
$
9,331

Dividends Common Stock ($0.0625 per share)

 

 

 
(908
)
 

 

 
(908
)
 

 

Dividends Series B ($2.19 per share)

 

 

 
(32
)
 

 

 
(32
)
 

 

Dividends Series B-2 ($10 per share)

 

 

 
(93
)
 

 

 
(93
)
 

 

Stock compensation
145,441

 
1

 
708

 

 

 

 
709

 

 

Exchange of common stock
(17,520
)
 

 
(401
)
 

 

 

 
(401
)
 

 

Net income

 

 

 
8,625

 

 
(2
)
 
8,623

 

 

Other comprehensive income, net of tax

 

 

 

 
3,291

 
25

 
3,316

 

 

Balance at January 31, 2018
14,532,952

 
145

 
94,601

 
42,284

 
10,367

 
610

 
148,007

 
1,479

 
9,331

Dividends Common Stock ($0.0625 per share)

 

 

 
(908
)
 

 

 
(908
)
 

 

Dividends Series B ($2.19 per share)

 

 

 
(33
)
 

 

 
(33
)
 

 

Dividends Series B-2 ($10 per share)

 

 

 
(93
)
 

 

 
(93
)
 

 

Stock compensation

 

 
230

 

 

 

 
230

 

 

Net income

 

 

 
6,599

 

 
7

 
6,606

 

 

Other comprehensive income, net of tax

 

 

 

 
1,652

 
6

 
1,658

 

 

Balance at April 30, 2018
14,532,952
 
$
145

 
$
94,831

 
$
47,849

 
$
12,019

 
$
623

 
$
155,467

 
$
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)
 
Six Months Ended
April 30,
 
2019
 
2018
Operating activities
 

 
 

Net (loss) income
$
(1,856
)
 
$
15,229

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 

 
 

Depreciation and amortization
4,247

 
3,434

(Gain) loss on disposals of assets
(11
)
 
193

Gain on sales of real estate development assets

 
(25
)
Stock compensation expense
1,228

 
939

Equity in earnings of investments
(1,969
)
 
83

Cash distributions from equity investments
282

 

Deferred income taxes
(642
)
 
(10,781
)
Accrued interest on notes receivable
(92
)
 
(83
)
Unrealized loss on stock in Calavo Growers, Inc.
298

 

Changes in operating assets and liabilities:
 

 
 

Accounts receivable
(5,838
)
 
(6,284
)
Cultural costs
2,608

 
2,112

Prepaid expenses and other current assets
(1,409
)
 
(1,052
)
Income taxes receivable
378

 

Other assets
(130
)
 
25

Accounts payable and growers payable
9,947

 
2,244

Accrued liabilities
(2,927
)
 
1,000

Other long-term liabilities
(96
)
 
49

Net cash provided by operating activities
4,018

 
7,083

 
 
 
 
Investing activities
 

 
 

Capital expenditures
(8,151
)
 
(5,420
)
Purchase of real estate development parcel

 
(1,444
)
Net proceeds from sales of real estate development assets

 
1,543

Agriculture property acquisition
(397
)
 

Payments to FGF Trapani (See Note 19)
(4,000
)
 

Collections of installments on note receivable
150

 

Equity investment contributions
(4,000
)
 
(3,500
)
Investments in mutual water companies
(16
)
 
(16
)
Net cash used in investing activities
(16,414
)
 
(8,837
)
 
 
 
 
Financing activities
 

 
 

Borrowings of long-term debt
58,340

 
41,801

Repayments of long-term debt
(41,844
)
 
(37,564
)
Dividends paid – common
(2,665
)
 
(1,816
)
Dividends paid – preferred
(251
)
 
(251
)
Exchange of common stock
(305
)
 
(401
)
Net cash provided by financing activities
13,275

 
1,769

Effect of exchange rate changes on cash
3

 
(14
)
Net increase in cash
882

 
1

Cash at beginning of period
609

 
492

Cash at end of period
$
1,491

 
$
493


8


LIMONEIRA COMPANY


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
(In thousands)
 
Six Months Ended
April 30,
 
2019
 
2018
Supplemental disclosures of cash flow information
 

 
 

Cash paid during the period for interest (net of amounts capitalized)
$
1,327

 
$
1,150

Cash paid during the period for income taxes, net of (refunds)
$
130

 
$
100

Non-cash investing and financing activities:
 

 
 

Unrealized holding gain on Calavo investment
$

 
$
(6,000
)
(Decrease) increase in real estate development and sale-leaseback deferral
$
(58,330
)
 
$
8,425

Reclassification from real estate development to equity in investments
$
(33,353
)
 
$

Increase in equity in investments and other long-term liabilities
$

 
$
750

Non-cash issuance of note receivable
$

 
$
3,000

Non-cash reduction of note receivable
$

 
$
68

Capital expenditures accrued but not paid at period-end
$
400

 
$
299

Accrued contribution obligation of investment in water company
$
450

 
$
315

Accrued Series B-2 Convertible Preferred Stock dividends
$
31

 
$
31

Non-cash issuance of note payable
$

 
$
1,435

 
In December 2018, the Company terminated its lease agreement with the Joint Venture (as defined herein) that is developing the East Area I real estate development project. As a result, the Company reduced its sale lease-back deferral and corresponding real estate development by $58,330,000 and reclassified $33,353,000 of the Company’s basis in the Joint Venture from real estate development to equity in investments as further described in Note 7 - Real Estate Development and Note 8 - Equity in Investments of the notes to consolidated financial statements included in this Quarterly Report on Form 10-Q.

In February 2013, the Company entered into an option agreement for the purchase of a 7-acre parcel adjacent to its East Area II real estate development project. In February 2018, the Company exercised its option and purchased the property for $3,145,000, by making a cash payment of $1,444,000 and issuing a note payable for $1,435,000.

In November 2017, the holder of the note receivable from a 2004 sale of property completed the drilling of a water well at the Company’s La Campana Ranch. The fair value of the well drilling services was $68,000 and the Company recorded a non-cash reduction of the note receivable.

In October 2017, the Company entered an agreement to sell its Centennial Square (“Centennial”) real estate development property for $3,250,000. This transaction closed in December 2017 with the Company receiving net proceeds of $179,000 and receiving a $3,000,000 promissory note secured by the property for the balance of the purchase price. 

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, picking and hauling citrus, and packing, marketing and selling lemons. The Company is also engaged in residential rentals and other rental operations and real estate development activities.

The Company markets and sells lemons directly to food service, wholesale and retail customers throughout the United States, Canada, Asia and other international markets. The Company is a member of Sunkist Growers, Inc. (“Sunkist”), an agricultural marketing cooperative, and sells its oranges, specialty citrus and other crops to Sunkist-licensed and other third-party packinghouses.

The Company sells all of its avocado production to Calavo Growers, Inc. (“Calavo”), a packing and marketing company listed on the NASDAQ Global Select Market under the symbol CVGW. Calavo’s customers include many of the largest retail and food service companies in the United States and Canada. The Company’s avocados are packed by Calavo, which are then sold and distributed under Calavo brands to its customers.

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 a controlling interest is held by the Company. Intercompany accounts and transactions have been eliminated. 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 accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially 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

Revenue Recognition

On November 1, 2018, the Company adopted Financial Accounting Standards Board (“FASB”) – Accounting Standards Update (“ASU”) ASU 2014-09, Revenue from Contracts with Customers (Topic 606), that amends the guidance for the recognition of revenue from contracts with customers. The results for the reporting period beginning after November 1, 2018 are presented in accordance with the new standard which was adopted using the modified-retrospective method and applied to those contracts that were not completed as of November 1, 2018. There was no net effect of applying the standard and therefore no cumulative adjustment to retained earnings was necessary at the date of initial application.

As a result comparative information has not been restated and the results for the reporting periods before November 1, 2018 continue to be reported under the accounting standards and policies in effect for those periods.

The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

Identify the contract(s) with a customer.
Identify the performance obligations in the contract.
Determine the transaction price.
Allocate the transaction price to the performance obligations in the contract.
Recognize revenue when (or as) the entity satisfies a performance obligation.

The Company determined the appropriate method by which it recognizes revenue by analyzing the nature of the products or services being provided as well as the terms and conditions of contracts or arrangements entered into with its customers. The Company accounts


10


LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. Summary of Significant Accounting Policies (continued)

Revenue Recognition (continued)

for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. A contract's transaction price is allocated to each distinct good or service (i.e., performance obligation) identified in the contract and each performance obligation is valued based on its estimated relative standalone selling price. 

The Company recognizes the majority of its revenue at a point in time when it satisfies a performance obligation and transfers control of the product to the respective customer. The amount of revenue that is recognized is based on the transaction price, which represents the invoiced amount and includes estimates of variable consideration such as allowances for estimated customer discounts or concessions, where applicable. The amount of variable consideration included in the transaction price may be constrained and is included only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period.

Upon adoption, the Company changed the accounting of certain brokered fruit sales. Under previous guidance, the Company was considered an agent and recorded revenues for certain brokered fruit sales and the costs of such fruit on a net basis in its consolidated statement of operations. Under the new revenue recognition standard, the Company is considered a principal in the transaction and revenues are recorded on a gross basis in the Company’s consolidated statement of operations with the related cost of such fruit included in agribusiness costs and expenses.

This change resulted in the recognition of additional agribusiness revenue and agribusiness costs and expenses of $162,000  and $168,000, respectively, during the three months ended April 30, 2019 and $456,000 and $420,000, respectively, during the six months ended April 30, 2019. Had it used the previous revenue recognition guidance, the Company would have recorded insignificant net agribusiness revenue for the three and six months ended April 30, 2019. No cumulative adjustment to retained earnings was necessary as there is no net effect of applying the standard.

Agribusiness revenue - Revenue from lemon sales is generally recognized at a point in time when the customer takes control of the fruit from the Company’s packinghouse, which aligns with the transfer of title to the customer. The Company has elected to treat any shipping and handling costs incurred after control of the goods has been transferred to the customer as agribusiness costs.

The Company’s avocados, oranges, specialty citrus and other specialty crops are packed and sold by Calavo and other third-party packinghouses. The Company delivers all of its avocado production from its orchards to Calavo. These avocados are then packed by Calavo at its packinghouse and sold and distributed under Calavo brands to its customers primarily in the United States and Canada. The Company’s arrangements with other third-party packinghouses related to its oranges, specialty citrus and other specialty crops are similar to its arrangement with Calavo. The Company’s arrangements with its third-party packinghouses are such that the Company is the producer and supplier of the product and the third-party packinghouses are the Company’s customers. 

The revenues the Company recognizes related to the fruits sold to the third-party packinghouses are based on the volume and quality of the fruits delivered, the market price for such fruit, less the packinghouses’ charges to pack and market the fruit. Such packinghouse charges include the grading, sizing, packing, cooling, ripening and marketing of the related fruit. The Company controls the product until it is delivered to the third-party packinghouses at which time control of the product is transferred to the third-party packinghouses and revenue is recognized. Such third-party packinghouse charges are recorded as a reduction of revenue as they are not for distinct services. The identifiable benefit the Company receives from the third-party packinghouses for packaging and marketing services cannot be sufficiently separated from the third-party packinghouses’ purchase of the Company’s products. In addition, the Company is not able to reasonably estimate the fair value of the benefit received from the third-party packinghouses for such services and as such, these costs are characterized as a reduction of revenue in the Company’s consolidated statements of operations.

Revenue from the sales of certain of the Company’s agricultural products is recorded based on estimated proceeds provided by certain of the Company’s sales and marketing partners (Calavo and other third-party packinghouses) due to the time between when the product is delivered by the Company and the closing of the pools for such fruits at the end of each month or harvest period. Calavo and other third-party packinghouses are agricultural cooperatives or function in a similar manner as an agricultural cooperative. The Company
estimates the variable consideration using the most likely amount method, with the most likely amount being the quantities actually shipped extended by the prices reported by Calavo and other third-party packinghouses. Revenue is recognized at time of delivery to
the packinghouses relating to fruits that are in pools that have not yet closed at month end if: (a) the related fruits have been delivered


11


LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. Summary of Significant Accounting Policies (continued)

Revenue Recognition (continued)

to and accepted by Calavo and other third-party packinghouses (i.e., Calavo and other third-party packinghouses obtain control) and (b) sales price information has been provided by Calavo and other third-party packinghouses (based on the marketplace activity for the related fruit) to estimate with reasonable certainty the final selling price for the fruit upon the closing of the pools. In such instances the Company has the present right to payment and Calavo and other third-party packinghouses have the present right to direct the use of, and obtain substantially all of the remaining benefits from, the delivered fruit. The Company does not expect that there is a high likelihood that a significant reversal in the amount of cumulative revenue recognized in the early periods of the pool will occur once the final pool prices have been reported by the packinghouses. Historically, the revenue that is recorded based on the sales price information provided to the Company by Calavo and other third-party packinghouses at the time of delivery, have not materially differed from the actual amounts that are paid after the monthly or harvest period pools are closed.

The Company has entered into brokerage arrangements with third-party international packinghouses. In certain of these arrangements, the Company has the exclusive ability to direct the use of and obtains substantially all of the remaining benefits from the fruit, and is therefore acting as a principal. As such, the Company records the related revenue and costs of the fruit gross in the consolidated statement of operations.

Revenue from crop insurance proceeds is recorded when the amount can be reasonably determined and upon establishment of the present right to payment.
 
Rental Revenue - Minimum rental revenues are generally recognized on a straight-line basis over the respective initial lease term. Contingent rental revenues are contractually defined as to the percentage of rent received by the Company and are based on fees collected by the lessee. Such revenues are recognized when actual results, based on collected fees reported by the tenant, are received. The Company's rental arrangements generally require payment on a monthly or quarterly basis.
 
Real Estate Development Revenue - The Company recognizes revenue on real estate development projects with customers at a point in time (i.e., the closing) when the Company satisfies the single performance obligation and transfers control of such real estate to a buyer. The transaction price, which is the amount of consideration the Company receives upon delivery of the completed real estate to the buyer, is allocated to this single obligation and is received at closing. Real estate development projects with non-customers are accounted for in accordance with Accounting Standards Code (“ASC”) 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets.
 
Recent Accounting Pronouncements

FASB ASU 2016-01, Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
The amendments in ASU 2016-01, among other things, require equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial assets (i.e., securities or loans and receivables). Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost.
ASU 2016-01 is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company’s adoption of this ASU on November 1, 2018 resulted in a cumulative-effect adjustment to the statement of financial position, with the Company reclassifying unrealized holding gains of $15,921,000, net of taxes, in Calavo common stock to retained earnings from accumulated other comprehensive income ("AOCI") at the date of adoption. In addition, the change in the fair value of Calavo common stock has been disclosed as a separate line item in the statement of operations subsequent to the adoption of ASU 2016-01.

FASB ASU 2016-02, Leases (Topic 842)

Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

12


LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and
A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing.

ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The ASU will be effective for the Company beginning in the first quarter of its fiscal year ending October 31, 2020. The Company is evaluating the effect this ASU may have on its consolidated financial statements, however it expects to apply the practical expedients provided in the ASU. Note 20 – Commitments and Contingencies of the notes to consolidated financial statements included in the Company's 2018 Annual Report on Form 10-K describes its operating lease arrangements as of October 31, 2018.

FASB ASU 2017-07, Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

The amendment requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed.

The amendment is effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The Company’s adoption of this ASU during the first quarter of fiscal year 2019 had no material impact on its consolidated financial statements.

FASB ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

This amendment provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act of 2017 (the "2017 Act") (or portion thereof) is recorded.

The amendment is effective for all organizations for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. Organizations should apply the proposed amendment either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the 2017 Act is recognized. The Company early adopted this ASU on November 1, 2018, and as a result recorded a cumulative-effect reclassification in the statement of financial position to retained earnings from AOCI at the date of adoption of $1,724,000 related to the investment in Calavo and pension liability.

FASB ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans

This amendment adds, removes and clarifies the disclosure requirements for employers that sponsor defined benefit pension or other post retirement plans.

13


LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

For public business entities, the amendments are effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The Company is evaluating the effect this ASU may have on its consolidated financial statements. 

SEC Amendments to Certain Disclosure Requirements
 
In August 2018, the SEC adopted amendments to certain disclosure requirements for a number of SEC rules, including Rule 3-04 of Regulation S-X. Rule 3-04 requires that a public registrant’s Form 10-Q include a reconciliation of changes in stockholders’ equity for each period for which a statement of comprehensive income is required to be filed. These amendments are effective for interim periods beginning after November 5, 2018, therefore the Company has included a separate statement of stockholders’ equity and temporary equity in this Quarterly Report on Form 10-Q.

3. Acquisitions
Agriculture Property Acquisition

In January 2019, the Company purchased land for use as a citrus orchard for a cash purchase price of $397,000. The acquisition was for 26 acres of agricultural property adjacent to the Company’s orchards in Lindsay, California. This agriculture property acquisition is included in property, plant and equipment on the Company’s consolidated balance sheet.

San Pablo
 
On July 18, 2018, the Company completed the acquisition of San Pablo ranch and related assets in La Serena, Chile, for $13,000,000. The San Pablo ranch consists of 3,317 acres on two parcels, including 247 acres producing lemons, 61 acres producing oranges, the opportunity to immediately plant 120 acres for lemon production, as well as the potential for approximately 500 acres of avocado production. This acquisition was accounted for as an asset purchase and is included in property, plant and equipment in the Company’s consolidated balance sheet. In addition, transaction costs of $111,000 were capitalized as part of total acquisition costs.

Below is a summary of the fair value of the net assets acquired on the acquisition date based on a third-party valuation (in thousands):

Cultural costs
$
579

Land and land improvements
9,114

Buildings and equipment
207

Orchards
2,058

Water rights
1,153

Total assets acquired
$
13,111


The unaudited, pro forma consolidated statement of operations as if San Pablo had been included in the consolidated results of the Company for the year ended October 31, 2018 results in revenue of $130,262,000 and net income of $18,785,000.

Business Combinations

Oxnard Lemon
 
On July 24, 2018, the Company and Oxnard Lemon Associates, Ltd., a California limited partnership (“Seller”), entered into an Asset Purchase Agreement (the “Purchase Agreement”). Pursuant to the Purchase Agreement, on July 26, 2018 (the “Initial Closing Date”), the Company acquired certain tangible assets of seller, including a packinghouse and related land (“Oxnard Lemon”), for a purchase price of $24,750,000 (the “Initial Acquisition”). Pursuant to the Purchase Agreement, the closing on the purchase and sale of the intangible assets of Seller, including Seller’s trade names, trademarks and copyrights, took place on October 31, 2018 (the “Final Closing Date”), at which point an additional $250,000 in purchase price was paid to Seller by the Company. The aggregate purchase price for the tangible assets and the intangible assets provided in the Purchase Agreement was $25,000,000. Additionally, the Purchase


14


LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. Acquisitions (continued)

Business Combinations

Agreement provided that Seller lease back the tangible assets from the Company until the Final Closing Date, pursuant to a lease executed on the Initial Closing Date. Transaction costs of $142,000 were included in selling, general and administrative expense.

Below is a summary of the fair value of the net assets acquired on the acquisition date based on a third-party valuation (in thousands):
Land and land improvements
$
7,294

Buildings and equipment
14,866

Customer relationships and trade names
2,270

Goodwill
570

Total assets acquired
$
25,000

The unaudited, pro forma consolidated statement of operations as if Oxnard Lemon had been included in the consolidated results of the Company for the year ended October 31, 2018 in revenue of $142,253,000 and net income of $19,728,000.

4. Fair Value Measurements
Under the FASB ASC 820, Fair Value Measurement and Disclosures, a fair value measurement is determined based on the assumptions that a market participant would use in pricing an asset or liability. A three-tiered hierarchy draws distinctions between market participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3).

The following table sets forth the Company’s financial assets and liabilities as of April 30, 2019 and October 31, 2018, which are measured on a recurring basis during the period, segregated by level within the fair value hierarchy (in thousands): 
April 30, 2019
Level 1
 
Level 2
 
Level 3
 
Total
Assets at fair value:
 

 
 

 
 

 
 

Equity securities
$
23,953

 
$

 
$

 
$
23,953

October 31, 2018
Level 1
 
Level 2
 
Level 3
 
Total
Assets at fair value:
 

 
 

 
 

 
 

Equity securities
$
24,250

 
$

 
$

 
$
24,250


Equity securities consist of marketable securities in Calavo common stock. At April 30, 2019 and October 31, 2018, the Company owned 250,000 shares, representing approximately 1.4% of Calavo’s outstanding common stock. These securities are measured at fair value by quoted market prices and changes in fair value are included in the statement of operations subsequent to the adoption of ASU 2016-01.

With the adoption of FASB ASU 2016-01 on November 1, 2018, changes in the fair value of the marketable securities result in gains or losses recognized in net income. The Company recorded an unrealized gains (losses) of $3,612,000 and $(298,000) during the three and six months ended April 30, 2019, respectively, which is included in other income (expense) in the consolidated statements of operations. The Company recorded unrealized holding gains of $2,010,000 ($1,421,000 net of tax) and $6,000,000 ($4,242,000 net of tax), during the three and six months ended April 30, 2018, which were included in AOCI in the consolidated balance sheet.

Calavo’s stock price at April 30, 2019 and October 31, 2018 was $95.81 and $97.00 per share, respectively. Prior to the adoption of ASU 2016-01, these equity securities were classified as available-for-sale securities and changes in fair value were recorded in AOCI net of tax.



15


LIMONEIRA COMPANY


5. Concentrations
Lemons procured from third-party growers were 59% and 43% of lemon supply in the three months ended April 30, 2019 and 2018, respectively. Lemons procured from third-party growers were 59% and 47% of lemon supply in the six months ended April 30, 2019 and 2018, respectively, of which one third-party grower was 10% of lemon supply at April 30, 2019. The Company sells all of its avocado production to Calavo and the majority of its oranges and specialty citrus to a third-party packing house.  

6. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands): 
 
April 30,
2019
 
October 31, 2018
Prepaid insurance
$
779

 
$
647

Prepaid supplies
1,165

 
1,196

Lemon supplier advances
508

 
170

Note receivable, net
2,552

 
2,797

Real estate development held for sale
5,024

 
5,024

Water assessment fees and other
1,780

 
694

 
$
11,808

 
$
10,528

 
7. Real Estate Development
Real estate development assets are comprised primarily of land and land development costs and consist of the following (in thousands):
 
April 30,
2019
 
October 31,
2018
East Area I
$

 
$
91,357

Retained Property - East Area I
10,613

 
10,408

East Area II
5,543

 
5,397

 
$
16,156

 
$
107,162


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. On November 10, 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 (the “LLC” or “Joint Venture”) as the development entity, contributed its East Area I property to the LLC and sold a 50% interest in the LLC to Lewis for $20,000,000.
 
The Company and the Joint Venture also entered into a Retained Property Development Agreement on the Transaction Date (the "Retained Property Agreement"). Under the terms of the Retained Property Agreement, the Joint Venture 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. In August 2018, the Retained Property, was transferred back to the Company. The net carrying value of the Retained Property as of April 30, 2019 and October 31, 2018 was $10,613,000 and $10,408,000, respectively, and classified as real estate development.

Further, on the Transaction Date, the Joint Venture and the Company entered into a Lease Agreement (the "Lease Agreement"), pursuant to which the Joint Venture would lease certain of the contributed East Area I property back to the Company for continuation of agricultural operations, and certain other permitted uses, on the property until the Joint Venture required the property for development. In December 2018, the Company terminated the Lease Agreement pursuant to the terms therein.

The Company’s sale of an interest in the LLC in which the Company’s contributed property comprises the LLC’s primary asset, combined with the Lease Agreement was considered a sale-leaseback transaction under FASB ASC 840, Leases, because of the Company’s continuing involvement in the property in the form of its agricultural operations. Accordingly, the property was carried on


16


LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

7. Real Estate Development (continued)

East Area I, Retained Property and East Area II (continued)

the consolidated balance sheet as real estate development, rather than being classified as an equity investment and a sale-leaseback deferral had been recorded for the $20,000,000 payment made by Lewis for the purchase of the LLC interest. Lease expense associated with the Lease Agreement was not required under sale-leaseback accounting since the Company was treated as though it continued to own the property. During the three and six months ended April 30, 2018, the Company recorded $5,699,000 and $8,425,000, respectively, of real estate development costs and corresponding increases in the sale-leaseback deferral to recognize real estate development costs capitalized by the LLC. There were no repayment requirements for the sale-leaseback deferral. When the Lease Agreement was terminated in December 2018 control of the property transferred to the Joint Venture and therefore, the Company reduced the sale lease-back deferral and corresponding real estate development by $58,330,000 and reclassified $33,353,000 to equity in investments upon derecognition of the real estate development. As the fair value of the Company’s ownership interest in the Joint Venture approximated the Company’s historical basis in the real estate development at the inception of the Joint Venture, no gain or loss was recorded.

The Company made contributions to the Joint Venture of $4,000,000 and $3,500,000 in the six months ended April 30, 2019 and 2018, respectively. Additionally, the Company recorded equity income, net of amortization of basis differences, of $2,270,000 for both the three and six months ended April 30, 2019.
 
In February and March 2019, the Company announced that its Joint Venture with Lewis closed the sales of the initial residential lots representing a total of 174 residential units.

Templeton Santa Barbara, LLC

The real estate development parcels within the Templeton Santa Barbara, LLC project are described as The Terraces at Pacific Crest (“Pacific Crest”), and Sevilla. The net carrying values of Pacific Crest and Sevilla were $2,481,000 and $2,543,000, respectively, as of April 30, 2019 and October 31, 2018. These projects were idle during the six months ended April 30, 2019 and 2018 and, as such, no costs were capitalized and expenses were insignificant.

In October 2018, the Company began negotiations to sell its Pacific Crest and Sevilla properties for a combined total price of $5,200,000. As a result, the Company recorded impairment charges on Pacific Crest and Sevilla of $769,000 and $789,000, respectively, in October 2018. These negotiations have not resulted in a sale and the Company is actively marketing these properties.
 
At April 30, 2019 and October 31, 2018, the $2,481,000 carrying value of Pacific Crest and the $2,543,000 carrying value of Sevilla were classified as held for sale and included in prepaid expenses and other current assets.

8. Equity in Investments
Equity in investments consist of the following (in thousands): 
 
April 30,
2019
 
October 31, 2018
Limoneira Lewis Community Builders, LLC
$
53,416

 
$
14,060

Limco Del Mar, Ltd.
2,001

 
1,935

Rosales
1,543

 
2,191

Romney Property Partnership
510

 
512

 
$
57,470

 
$
18,698


The Rosales equity investment includes the Company’s 35% interest acquired in fiscal year 2014 and an additional 12% interest acquired with the purchase of PDA in fiscal year 2017. The Company’s investment in Rosales is accounted for using the equity method of accounting based on the sum of its direct and indirect ownership.

The Limoneira Lewis Community Builders, LLC investment balance includes the value of the Company's ownership interest in the Joint Venture as described in Note 7 - Real Estate Development.


17


LIMONEIRA COMPANY


8. Equity in Investments (continued)

Unconsolidated Significant Subsidiary

The LLC investment balance includes the value of the Company's ownership interest in the LLC. In accordance with Rule 10-01(b)(1) of Regulation S-X, which applies for 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. Rule 10-01(b)(1) of Regulation S-X requires summarized income statement information of an equity method investee in an interim report if either of the two tests exceed 20%. During the current quarter, this threshold was met for the LLC and thus requires summarized income statement information in this Quarterly Report on Form 10-Q.

The following is unaudited summarized financial information for the LLC (in thousands):
 
Six Months Ended April 30,
 
2019
 
2018
Revenues
$
30,354

 
$

Cost of land sold
22,005

 

Operating expenses
107

 
83

Net income (loss)
$
8,242

 
$
(83
)
Net income (loss) attributable to Limoneira Company
$
3,481

 
$
(83
)

9. Other Assets
Other assets consist of the following (in thousands):
 
April 30,
2019
 
October 31, 2018
Investments in mutual water companies
$
5,486

 
$
5,026

Acquired water and mineral rights
3,841

 
3,783

Deposit for land purchase
608

 
593

Deferred lease assets and other
335

 
396

Notes receivable
815

 
566

Revolving funds and memberships
244

 
267

Acquired trade names, trademarks and customer relationships
2,270

 
2,442

Goodwill
1,435

 
1,431

Payments to FGF Trapani
4,000

 

 
$
19,034

 
$
14,504

 
10. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):
 
April 30,
2019
 
October 31, 2018
Compensation
$
2,258

 
$
2,784

Property taxes
21

 
785

Interest
342

 
297

Deferred rental income and deposits
460

 
497

Lease expense
78

 
378

Lemon supplier payables
53

 
1,214

Capital expenditures and other
1,616

 
1,769

 
$
4,828

 
$
7,724


18


LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

11. Long-Term Debt
Long-term debt is comprised of the following (in thousands):
 
 
April 30,
2019
 
October 31, 2018
Farm Credit West revolving and non-revolving lines of credit: the interest rate of the revolving line of credit is variable based on the one-month London Interbank Offered Rate (“LIBOR”), which was 2.50% at April 30, 2019, plus 1.60%. Effective July 1, 2018, the interest rate for the $40.0 million outstanding balance of the non-revolving line of credit was fixed at 4.77%. Interest is payable monthly and the principal is due in full on July 1, 2022.
 
$
69,142

 
$
50,888

Farm Credit West term loan: the interest rate is variable and was 4.95% at April 30, 2019. The loan is payable in quarterly installments through November 2022.
 
2,321

 
2,602

Farm Credit West term loan: the interest rate is variable and was 4.95% at April 30, 2019. The loan is payable in monthly installments through October 2035.
 
1,100

 
1,122

Farm Credit West term loan: the interest rate is fixed at 4.70%. The loan is payable in monthly installments though March 2036.
 
9,000

 
9,172

Farm Credit West term loan: the interest rate is fixed at 3.62% until March 2021, becoming variable for the remainder of the loan. The loan is payable in monthly installments though March 2036.
 
6,666

 
6,808

Wells Fargo term loan: the interest rate is fixed at 3.58%. The loan is payable in monthly installments through January 2023.
 
5,667

 
6,367

Banco de Chile term loan: the interest rate is fixed at 6.48%. The loan is payable in annual installments through January 2025.
 
1,470

 
1,857

Note Payable: the interest rate ranges from 5.00% to 7.00% and was 5.50% at April 30, 2019. The loan includes interest-only monthly payments and principal is due in February 2023.
 
1,435

 
1,435

Subtotal
 
96,801

 
80,251

Less deferred financing costs, net of accumulated amortization
 
142

 
158

Total long-term debt, net
 
96,659

 
80,093

Less current portion
 
2,915

 
3,127

Long-term debt, less current portion
 
$
93,744

 
$
76,966


On June 20, 2017, the Company entered into a Master Loan Agreement (the “Loan Agreement”) with Farm Credit West, FLCA (“Farm Credit West”) which includes a Revolving Credit Supplement and a Non-Revolving Credit Supplement (the “Supplements”). Proceeds from the Supplements were used to pay down all the remaining outstanding indebtedness under the revolving credit facility the Company had with Rabobank, N.A. On January 29, 2018, the Company amended the Revolving Credit Supplement to increase the borrowing capacity from $60,000,000 to $75,000,000. 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. The borrowing capacity based on collateral value was $115,000,000 at April 30, 2019.

All indebtedness under the Loan Agreements, including any indebtedness under the Supplements, is secured by a first lien on certain of the Company’s agricultural properties in Tulare and Ventura counties in California and certain of the Company’s building fixtures and improvements and investments in mutual water companies associated with the pledged agricultural properties. The Loan Agreement includes customary default provisions that provide should an event of default occur, Farm Credit West, at its option, may declare all or any portion of the indebtedness under the Loan Agreement to be immediately due and payable without demand, notice of non-payment, 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.

Interest is capitalized on non-bearing orchards, real estate development projects and significant construction in progress. The Company capitalized interest of $344,000 and $372,000 during the three months ended April 30, 2019 and 2018, respectively, and $611,000 and $949,000 during the six months ended April 30, 2019 and 2018, respectively. Capitalized interest is included in property, plant and equipment and real estate development in the Company’s consolidated balance sheets. 
 






19


LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

12. Basic and Diluted Net (Loss) Income per Share

Basic net income (loss) per common share is calculated using the weighted-average number of common shares outstanding during the period without consideration of the dilutive effect of conversion of preferred stock. Diluted net income (loss) per common share is calculated using the weighted-average number of common shares outstanding during the period plus the dilutive effect of conversion of unvested, restricted stock and preferred stock. The computations for basic and diluted net (loss) income per common share are as follows (in thousands, except per share amounts):
 
Three Months Ended April 30,
 
Six Months Ended April 30,
 
2019
 
2018
 
2019
 
2018
Basic net income (loss) per common share:
 

 
 

 
 
 
 
Net income (loss) applicable to common stock
$
2,689

 
$
6,473

 
$
(2,129
)
 
$
14,973

Effect of unvested, restricted stock
(16
)
 
(10
)
 
(33
)
 
(19
)
Numerator: Net income (loss) for basic EPS
2,673

 
6,463

 
(2,162
)
 
14,954

Denominator: Weighted average common shares-basic
17,554

 
14,379

 
17,516

 
14,341

Basic net income (loss) per common share
$
0.15

 
$
0.45

 
$
(0.12
)
 
$
1.04

Diluted net income (loss) per common share:
 

 
 

 
 
 
 
Numerator: Net income (loss) for diluted EPS
$
2,815

 
$
6,599

 
$
(2,162
)
 
$
15,224

Weighted average common shares–basic
17,554

 
14,379

 
17,516

 
14,341

Effect of dilutive unvested, restricted stock and preferred stock
671

 
644

 

 
645

Denominator: Weighted average common shares–diluted
18,225

 
15,023

 
17,516

 
14,986

Diluted net income (loss) per common share
$
0.15

 
$
0.44

 
$
(0.12
)
 
$
1.02


Diluted (losses) earnings per common share are computed using the more dilutive method of either the two-class method or the treasury 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. The Company excluded 140,000 and 94,000, unvested, restricted shares, as calculated under the treasury stock method, from its computation of diluted (losses) earnings per share for the three months ended April 30, 2019 and 2018, respectively, and 219,000 and 93,000 for the six months ended April 30, 2019 and 2018, respectively.

13. Related-Party Transactions
The Company rents certain of its residential housing assets to employees on a month-to-month basis. The Company recorded $182,000 and $178,000 of rental revenue from employees in the three months ended April 30, 2019 and 2018, respectively, and $360,000 and $355,000 in the six months ended April 30, 2019 and 2018, respectively. There were no rental payments due from employees at April 30, 2019 or October 31, 2018.
 
The Company has representation on the boards of directors of the mutual water companies in which the Company has investments. The Company recorded capital contributions and purchased water and water delivery services from such mutual water companies, in aggregate, of $81,000 and $166,000 in the three months ended April 30, 2019 and 2018, respectively, and $858,000 and $886,000 in the six months ended April 30, 2019 and 2018, respectively. Capital contributions are included in other assets in the Company’s consolidated balance sheets and purchases of water and water delivery services are included in agribusiness expense in the Company’s consolidated statements of operations. Water payments due to the mutual water companies were, in aggregate, $681,000 and $142,000 at April 30, 2019 and October 31, 2018, respectively.

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 of $540,000 and $508,000 from the association in the three months ended April 30, 2019 and 2018, respectively, and $856,000 and $815,000 in the six months ended April 30, 2019 and 2018, respectively, which are included in agribusiness expense in the Company’s consolidated statements of operations. Payments due to the cooperative were $185,000 and $142,000 at April 30, 2019 and October 31, 2018, respectively.



20


LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

13. Related-Party Transactions (continued)

The Company has an investment in and representation on the board of directors of Calavo and Calavo has an investment in and had representation on the board of directors of the Company. The Company recorded dividend income of $250,000 and $285,000 in the six months ended April 30, 2019 and 2018, respectively, on its investment in Calavo, which is included in other income (expense), net in the Company’s consolidated statements of operations. The Company paid $255,000 and $216,000 of dividends to Calavo for the six months ended April 30, 2019 and 2018, respectively. The Company had $540,000 and $935,000 in avocado sales to Calavo for the three months ended April 30, 2019 and 2018, respectively, and $543,000 and $935,000 for the six months ended April 30, 2019 and 2018, respectively. which are included in agribusiness revenues in the Company's consolidated statements of operations. There were $467,000 and zero amounts receivable by the Company from Calavo at April 30, 2019 and October 31, 2018, respectively. The Company leases office space to Calavo and received rental income of $80,000 and $73,000 in the three months ended April 30, 2019 and 2018, respectively, and $159,000 and $145,000 in the six months ended April 30, 2019 and 2018, respectively, which is included in rental operations revenues in the Company’s consolidated statements of operations. The Company purchased $1,000 and $4,000 of storage services from Calavo in the six months ended April 30, 2019 and 2018, respectively. Amounts due to Calavo at April 30, 2019 and October 31, 2018 were zero and $3,000, respectively.

Certain members of the Company’s board of directors market lemons through the Company. The aggregate amount of lemons procured from entities owned or controlled by members of the board of directors was $232,000 and $1,158,000 in the three months ended April 30, 2019 and 2018, respectively, and $609,000 and $1,386,000 in the six months ended April 30, 2019 and 2018, respectively, which are included in agribusiness expense in the Company’s consolidated statements of operations. Payments due to these board members were $500,000 and $487,000 at April 30, 2019 and October 31, 2018, respectively. Additionally, the Company leases approximately 31 acres of orchards from entities affiliated with a member on the board of directors and incurred $23,000 and $11,000 of lease expense related to these leases in the six months ended April 30, 2019 and 2018, respectively.
 
On July 1, 2013, the Company and Cadiz Real Estate LLC (“Cadiz”), a wholly-owned subsidiary of Cadiz Inc., entered into a long-term lease agreement (the “Lease”) for a minimum of 320 acres, with options to lease up to an additional 960 acres, located within 9,600 zoned agricultural acres owned by Cadiz in eastern San Bernardino County, California. The initial term of the Lease runs for 20 years and the annual base rental rate is equal to the sum of $200 per planted acre and 20% of gross revenues from the sale of harvested lemons (less operating expenses) not to exceed $1,200 per acre per year. A member of the Company’s board of directors serves as the CEO, President and a member of the board of directors of Cadiz Inc. Additionally, this board member is an attorney with a law firm that provided services of $12,000 and $10,000 to the Company during the three months ended April 30, 2019 and 2018, respectively, and $14,000 and $19,000 during the six months ended April 30, 2019 and 2018, respectively. Payments due to the law firm were zero and $67,000 at April 30, 2019 and October 31, 2018, respectively. The Company incurred lease and farming expenses of $22,000 and $50,000 in the three months ended April 30, 2019 and 2018, respectively, and $88,000 and $86,000 in the six months ended April 30, 2019 and 2018, respectively, which are recorded in agribusiness expense in the Company’s consolidated statements of operations.
 
On February 5, 2015, the Company entered into a Modification of Lease Agreement (the “Amendment”) with Cadiz. The Amendment, among other things, increased by 200 acres the amount of property leased by the Company under the lease agreement dated July 1, 2013. In connection with the Amendment, the Company paid a total of $1,212,000 to acquire existing lemon trees and irrigations systems from Cadiz and a Cadiz tenant. In February 2016, Cadiz assigned this lease to Fenner Valley Farms, LLC (“Fenner”), a subsidiary of Water Asset Management, LLC (“WAM”). An entity affiliated with WAM is the holder of 9,300 shares of Limoneira Company Series B-2 convertible preferred stock. Amounts due to Fenner were $80,000 and $100,000 at April 30, 2019 and October 31, 2018, respectively.

The Company has representation on the board of directors of Colorado River Growers, Inc. (“CRG”), a non-profit cooperative association of fruit growers engaged in the agricultural harvesting business in Yuma County, Arizona. The Company paid harvest costs to CRG of zero in the three months ended April 30, 2019 and 2018. The Company paid harvest costs to CRG of $3,841,000 and $2,451,000 in the six months ended April 30, 2019 and 2018, respectively. Such amounts are included in agribusiness expense in the Company’s consolidated statements of operations. Additionally, Associated provided harvest management and administrative services to CRG in the amounts of zero during the three months ended April 30, 2019 and 2018. Associated provided harvest management and administrative services to CRG in the amounts of $306,000 and $218,000 during the six months ended April 30, 2019 and 2018, respectively. Such amounts are included in agribusiness revenues in the Company’s consolidated statements of operations. There was zero and $232,000 due to Associated from CRG at April 30, 2019 and October 31, 2018, respectively, which is included in accounts receivable, net in the Company’s consolidated balance sheets.




21


LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

13. Related-Party Transactions (continued)

The Company has representation on the board of directors of Yuma Mesa Irrigation and Drainage District (“YMIDD”). The Company purchased water in the amounts of $53,000 and $65,000 during the three months ended April 30, 2019 and 2018, respectively, and $85,000 and $149,000 from YMIDD during the six months ended April 30, 2019 and 2018, respectively, which is included in agribusiness expenses in the Company’s consolidated statements of operations. There were no amounts due to YMIDD at April 30, 2019 or October 31, 2018.

The Company has a 1.3% interest in Limco Del Mar, Ltd. (“Del Mar”) as a general partner and a 26.8% interest as a limited partner. The Company provides Del Mar with farm management, orchard land development and accounting services and received expense reimbursements of $45,000 and $43,000 in the three months ended April 30, 2019 and 2018, respectively, and $80,000 and $95,000 in the six months ended April 30, 2019 and 2018, respectively. The Company procures lemons from Del Mar and fruit proceeds (due from) payable to Del Mar were $(2,000) and $709,000 at April 30, 2019 and October 31, 2018, respectively, and are included in grower’s payable in the Company’s consolidated balance sheets. The Company received no cash distributions and recorded equity in (losses) earnings of this investment of $(139,000) and $(45,000) in the three months ended April 30, 2019 and 2018, respectively, and $66,000 and $118,000, in the six months ended April 30, 2019 and 2018, respectively.

On August 14, 2014, the Company’s wholly owned subsidiary, Limoneira Chile SpA, invested approximately $1,750,000 for a 35% interest in Rosales, a citrus packing, marketing and sales business located in La Serena, Chile. The Company purchased an additional 12% interest in Rosales with the February 2017 acquisition of PDA. The Company recognized zero and $782,000 of lemon sales to Rosales in the three months ended April 30, 2019 and 2018, respectively, and $521,000 and $923,000 in the six months ended April 30, 2019 and 2018, respectively. Additionally, San Pablo recognized aggregate lemon and orange sales of $720,000 and $780,000 to Rosales for the three and six months ended April 30, 2019, respectively. PDA recognized aggregate lemon and orange sales of $685,000 and $421,000 to Rosales in the three months ended April 30, 2019 and 2018, respectively, and $765,000 and $703,000 in the six months ended April 30, 2019 and 2018, respectively, which are recorded in agribusiness revenues in the Company’s consolidated statements of operations. The aggregate amount of lemons and oranges procured from Rosales was zero in the three months ended April 30, 2019 and 2018 and $359,000 and zero in the six months ended April 30, 2019 and 2018, respectively. Amounts due from (payable to) Rosales were $234,000 and $(65,000) at April 30, 2019 and October 31, 2018, respectively. The Company recorded equity in (losses) earnings of this investment of $(119,000) and $3,000 in the three months ended April 30, 2019 and 2018, respectively, and amortization of fair value basis differences of $85,000 in the three months ended April 30, 2019 and 2018. The Company recorded equity in losses of this investment of $(196,000) and $(33,000) in the six months ended April 30, 2019 and 2018, respectively, and amortization of fair value basis differences of $169,000 in the six months ended April 30, 2019 and 2018. The Company received $283,000 and zero cash distributions from this equity investment in the six months ended April 30, 2019 and 2018, respectively.
 
14. Income Taxes
The Company’s estimated annual effective blended tax rate for fiscal year 2019 is approximately 28.2%. A 26.7% estimated effective blended tax rate, after discrete items, was utilized by the Company in the six months ended April 30, 2019 to calculate its income tax provision.

The Company has no uncertain tax positions as of April 30, 2019. The Company’s policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. The Company has not accrued any interest and penalties associated with uncertain tax positions as of April 30, 2019.

The Company applied the guidance in Staff Accounting Bulletin No. 118 (“SAB 118”) when accounting for the enactment-date effects of the 2017 Act throughout fiscal year 2018. At January 31, 2019, the Company completed its evaluation for all of the enactment-date income tax effects of the 2017 Act and no material adjustments noted to be made on the provisional amounts recorded at January 31, 2018.
 
15. Retirement Plans

The Limoneira Company Retirement Plan (the “Plan”) is a noncontributory, defined benefit, single employer pension plan, which provides retirement benefits for all eligible employees. Benefits paid by the Plan are calculated based on years of service, highest five-year average earnings, primary Social Security benefit and retirement age. Effective June 2004, the Company froze the Plan and no additional benefits accrued to participants subsequent to that date.



22


LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

15. Retirement Plans (continued)

The Plan is funded consistent with the funding requirements of federal law and regulations. There were funding contributions of $150,000 during both three months ended April 30, 2019 and 2018, respectively, and $300,000 during both six months ended April 30, 2019 and 2018, respectively. 

The components of net periodic pension cost for the Plan for the three and six months ended April 30, 2019 and 2018 were as follows (in thousands):
 
Three Months Ended
April 30,
 
Six Months Ended
April 30,
 
2019
 
2018
 
2019
 
2018
Administrative expenses
$
47

 
$
63

 
$
94

 
$
126

Interest cost
207

 
192

 
414

 
385

Expected return on plan assets
(272
)
 
(268
)
 
(544
)
 
(536
)
Prior service cost
11

 
11

 
22

 
22

Recognized actuarial loss
100

 
175

 
201

 
350

Net periodic benefit cost
$
93

 
$
173

 
$
187

 
$
347

 
16. 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.
 
17. 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 based on achievement of certain annual financial performance and other criteria. The number of shares granted is based on a percentage of the employee’s base salary divided by the stock price on the grant date. Shares granted under the Stock Plan vest over two to five-year periods.

In December 2018, 40,094 shares of common stock with a per share value of $18.74 were granted to management under the Stock Plan for fiscal year 2018 performance, resulting in total compensation expense of approximately $751,000, with $343,000 recognized in the year ended October 31, 2018 and the balance to be recognized over the next two years as the shares vest. In addition, 90,000 shares of common stock with a per share value of $19.84 were granted to key executives under the Stock Plan, resulting in a total compensation expense of approximately $1,786,000, to be recognized equally over the next three years as the shares vest.

During January 2019 and 2018, 15,642 and 14,033 shares, respectively, of common stock were granted to the Company’s non-employee directors under the Company’s stock-based compensation plans. The Company recognized $339,000 and $309,000 of stock-based compensation to non-employee directors during the six months ended April 30, 2019 and 2018, respectively.



23


LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

18. Segment Information

The Company operates in six reportable operating segments: fresh lemons, lemon packing, avocados, other agribusiness, rental operations and real estate development. 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 harvesting expenses and third-party grower costs relative to fresh lemons. The lemon packing segment includes packing revenues and shipping and handling revenues relative to lemon packing. The lemon packing segment expenses are comprised of 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 includes sales, farming and harvesting of oranges, specialty citrus and other crops. The rental operations segment includes housing and commercial rental operations, leased land and organic recycling. The real estate development segment includes real estate development operations.
 
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, other income, interest expense and income taxes, or specifically identify them to its operating segments. The Company earns packing revenue for packing lemons grown on its orchards and lemons procured from third-party growers. Intersegment revenues represent packing revenues related to lemons grown on the Company’s orchards.

Segment information for the three months ended April 30, 2019 (in thousands):
 
Fresh
Lemons(1)
Lemon
Packing
Eliminations
 
Avocados
Other
Agribusiness
Total
Agribusiness
Rental
Operations
Real Estate
Development
Corporate
and Other
Total
Revenues from external customers
$
32,428

$
3,954

$

$
540

$
3,901

$
40,823

$
1,212

$

$

$
42,035

Intersegment revenue

8,157

(8,157
)







Total net revenues
32,428

12,111

(8,157
)
540

3,901

40,823

1,212



42,035

Costs and expenses
27,915

10,664

(8,157
)
921

3,875

35,218

901

24

4,776

40,919

Depreciation and amortization





1,860

194


67

2,121

Operating income (loss)
$
4,513

$
1,447

$

$
(381
)
$
26

$
3,745

$
117

$
(24
)
$
(4,843
)
$
(1,005
)

Segment information for the three months ended April 30, 2018 (in thousands):
 
Fresh
Lemons
Lemon
Packing
Eliminations
 
Avocados
Other
Agribusiness
Total
Agribusiness
Rental
Operations
Real Estate
Development
Corporate
and Other
Total
Revenues from external customers
$
30,561

$
3,008

$

$
935

$
7,361

$
41,865

$
1,270

$

$

$
43,135

Intersegment revenue

7,152

(7,152
)







Total net revenues
30,561

10,160

(7,152
)
935

7,361

41,865

1,270



43,135

Costs and expenses
22,601

7,170

(7,152
)
875

3,808

27,302

781

39

3,889

32,011

Depreciation and amortization





1,496

195


53

1,744

Operating income (loss)
$
7,960

$
2,990

$

$
60

$
3,553

$
13,067

$
294

$
(39
)
$
(3,942
)
$
9,380


Segment information for the six months ended April 30, 2019 (in thousands):
 
Fresh
Lemons(1)
Lemon
Packing
Eliminations
 
Avocados
Other
Agribusiness
Total
Agribusiness
Rental
Operations
Real Estate
Development
Corporate
and Other
Total
Revenues from external customers
$
66,921

$
8,057

$

$
543

$
6,102

$
81,623

$
2,430

$

$

$
84,053

Intersegment revenue

15,201

(15,201
)







Total net revenues
66,921

23,258

(15,201
)
543

6,102

81,623

2,430



84,053

Costs and expenses
59,997

19,448

(15,201
)
1,637

6,385

72,266

1,785

52

9,728

83,831

Depreciation and amortization





3,728

389


130

4,247

Operating income (loss)
$
6,924

$
3,810

$

$
(1,094
)
$
(283
)
$
5,629

$
256

$
(52
)
$
(9,858
)
$
(4,025
)

24


LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

18. Segment Information (continued)

Segment information for the six months ended April 30, 2018 (in thousands):

 
Fresh
Lemons
Lemon
Packing
Eliminations
 
Avocados
Other
Agribusiness
Total
Agribusiness
Rental
Operations
Real Estate
Development
Corporate
and Other
Total
Revenues from external customers
$
55,537

$
5,841

$

$
935