Limoneira Company Announces Second Quarter Fiscal Year 2019 Financial Results

-Generates Second Quarter Fiscal Year 2019 Revenue of $42.0 Million-

-Company Continues to Expect Record Lemon Volumes for Fiscal Year
2019-

-Company Realizes $2.3 Million of Equity Earnings in Second Quarter
Fiscal Year 2019 from Harvest at Limoneira-

-Generates $4.0 Million of Operating Cash Flow in First Six Months of
Fiscal Year 2019-

-Company Updates Fiscal Year 2019 Guidance-

SANTA PAULA, Calif.–(BUSINESS WIRE)–Limoneira Company (the “Company” or “Limoneira”) (Nasdaq: LMNR), a
diversified citrus packing, selling and marketing company with related
agribusiness activities and real estate development operations, today
reported financial results for the second quarter ended April 30, 2019.

Management Comments

Harold Edwards, President and Chief Executive Officer, stated, “We
believe we will continue facing pricing headwinds from the overabundance
of larger fresh lemons due to previous heavy rains, until the end of
July 2019. This unusual larger sized fruit curve currently being
harvested is now expected to cycle through over the next 5 to 7 weeks
with a normal size curve returning by end of July, which is longer than
we previously expected. While the larger sized fruit is selling for
approximately $18.00 per carton, which is below our expected annual
average carton price for fiscal 2019, current market pricing for the
smaller and medium sized fruit is selling for approximately $30.00 per
carton, which is above our expected annual average carton price for
fiscal 2019.”

Mr. Edwards continued, “We expect to achieve record domestic and
international fresh lemon volume in fiscal year 2019, but our
operational costs are temporarily higher than previous expectations due
to lower fresh lemon utilization and the size of our fruit and timing of
new fruit on our trees being ready for picking is hard to predict. Even
though fiscal 2019 expected results have been temporarily affected by
the weather, we are well positioned for solid growth and improved
profitability in the coming years. Based on our organic lemon growth for
next year, expected rebound in avocado revenue and all recent
acquisitions coming on-line for a full fiscal year, we are very excited
about our continued long-term growth opportunities.”

Alex Teague, Senior Vice President, stated, “We recently announced the
completion of our strategic joint venture and land acquisition in
Argentina. This expands our lemon holdings by 1,200 acres and
strengthens our ability as a 365-day, 24/7 global supplier of fresh
citrus to our valued customers around the world. In addition, our
domestic packinghouse continues to achieve our operational expectations
for this year and third-party lemon volume is on plan.”

Fiscal Year 2019 Second Quarter Results

For the second quarter of fiscal year 2019, total net revenue was $42.0
million, compared to total net revenue of $43.1 million in the second
quarter of the previous fiscal year. Agribusiness revenue was $40.8
million, compared to $41.9 million in the second quarter of last fiscal
year. Rental operations revenue was $1.2 million, compared to $1.3
million in the second quarter of last fiscal year. There were no real
estate development revenues in the second quarter of fiscal year 2019 or
2018.

Agribusiness revenue for the second quarter of fiscal year 2019 includes
$36.4 million in lemon sales, compared to $33.6 million of lemon sales
during the same period of fiscal year 2018, with the increase primarily
the result of higher volume of lemon by-products partially offset by
lower prices of fresh lemons sold. The lower pricing was due to
excessive rains in Southern California during the first and second
quarters of fiscal year 2019 creating an overabundance of large fresh
lemons, which created a decrease in lemon carton pricing. Approximately
1,300,000 cartons of fresh lemons were sold during the second quarter of
fiscal year 2019 at a $20.26 average price per carton, compared to
approximately 1,157,000 cartons sold at a $23.42 average price per
carton during the second quarter of fiscal year 2018. The Company
recognized $0.5 million of avocado revenue in the second quarter of
fiscal year 2019, compared to $0.9 million in the same period last
fiscal year, with the decrease primarily the result of lower volume
partially offset by higher prices of avocados sold. The Company
recognized $2.0 million of orange revenue in the second quarter of
fiscal year 2019, compared to $5.2 million in the same period of fiscal
year 2018, primarily attributable to unfavorable weather conditions for
oranges resulting in significantly lower than expected volume and
pricing in the orange market. Approximately 361,000 cartons of oranges
were sold during the second quarter of fiscal year 2019 at a $5.52
average price per carton, compared to approximately 471,000 cartons sold
at an $11.09 average price per carton during the second quarter of
fiscal year 2018. Specialty citrus and other crop revenues were $1.9
million in the second quarter of fiscal year 2019, compared to $2.1
million in the second quarter of fiscal year 2018.

Total costs and expenses for the second quarter of fiscal year 2019
increased to $43.0 million, compared to $33.8 million in the second
quarter of last fiscal year. The second quarter of fiscal year 2019
increase in operating expenses was primarily attributable to increases
in agribusiness and selling, general and administrative costs and
expenses. Costs and expenses associated with its agribusiness include
packing costs, harvest costs, growing costs, costs related to the fruit
procured and sold for third-party growers and depreciation and
amortization expense.

Operating loss for the second quarter of fiscal year 2019 was $1.0
million, compared to operating income of $9.4 million in the second
quarter of the previous fiscal year.

Net income applicable to common stock, after preferred dividends, for
the second quarter of fiscal year 2019 was $2.7 million, compared to
$6.5 million in the second quarter of fiscal year 2018. Net income per
diluted share for the second quarter of fiscal year 2019 was $0.15
compared to net income per diluted share of $0.44 for the same period of
fiscal year 2018, based on approximately 18.2 million and 15.0 million,
respectively, weighted average diluted common shares outstanding.
Excluding the non-cash $3.6 million unrealized gain on stock in Calavo
Growers, Inc. (“Calavo”) and $2.3 million equity in earnings of
Limoneira Lewis Community Builders, LLC (“LLC”) for the second quarter
of fiscal year 2019, adjusted net loss applicable to common stock was
$1.6 million, compared to net income of $6.6 million for the same period
last fiscal year. Excluding the unrealized gain on stock in Calavo and
equity in earnings of LLC, adjusted net loss per diluted share for the
second quarter of fiscal year 2019 was $0.09, compared to net income per
diluted share of $0.44 for the same period of fiscal year 2018.

Adjusted EBITDA was $0.8 million in the second quarter of fiscal year
2019 compared to $11.0 million in the same period of fiscal year 2018. A
reconciliation of adjusted EBITDA to net income (loss) is provided at
the end of this release. Adjusted EBITDA excludes the quarterly fair
value non-cash effect of Calavo shares and equity in earnings of LLC.

Fiscal Year 2019 First Six Months Results

For the six months ended April 30, 2019, revenue was $84.1 million,
compared to $74.7 million in the same period last fiscal year. Operating
loss for the first six months of fiscal year 2019 was $4.0 million,
compared to an operating income of $7.6 million in the same period last
fiscal year. Net loss applicable to common stock, after preferred
dividends, was $2.1 million for the first six months of fiscal year
2019, compared to net income of $15.0 million in the same period last
fiscal year. Net loss per diluted share for the first six months of
fiscal year 2019 was $0.12, compared to a net income per diluted share
of $1.02 in the same period of fiscal year 2018. Excluding the non-cash
$0.3 million unrealized loss on stock in Calavo and $2.3 million equity
in earnings of LLC for the first six months of fiscal year 2019,
adjusted net loss applicable to common stock was $3.6 million compared
to adjusted net income of $5.2 million for the same period in fiscal
year 2018. Due to the Tax Cuts and Jobs Act of 2017, the Company
recognized a non-cash $10.0 million, or $0.67 per diluted share,
one-time tax benefit associated with the decrease in its deferred tax
liability balance during the first six months of fiscal year 2018.
Excluding the $0.3 million unrealized loss on stock in Calavo and $2.3
million equity in earnings of LLC in the first six months of 2019,
adjusted net loss per share was $0.21 compared to adjusted net income
per diluted share of $0.35 for the same period in fiscal year 2018,
based on approximately 17.5 million and 15.0 million, respectively,
weighted average diluted common shares outstanding.

Balance Sheet and Liquidity

During the six months ended April 30, 2019, net cash provided by
operating activities was $4.0 million, compared to $7.1 million in the
same period of the prior fiscal year. For the six months ended April 30,
2019, net cash used in investing activities was $16.4 million, compared
to $8.8 million in the same period of the prior fiscal year. Net cash
provided by financing activities was $13.3 million in the six months
ended April 30, 2019, compared to $1.8 million during the same period
last fiscal year.

Long-term debt as of April 30, 2019 was $93.7 million, compared to $77.0
million at the end of fiscal year 2018.

Recent Strategic Acquisition

On May 30, 2019, the Company acquired a 51% interest in a joint venture
formed with FGF Trapani (“FGF”), a multi-generational, family owned
citrus operation in Argentina, and acquired a 51% interest in an
Argentine Trust that holds a 75% interest in Finca Santa Clara (“Santa
Clara”), a ranch with approximately 1,200 acres of planted lemons. The
joint venture will control the trust and operate under the name Trapani
Fresh to grow, pack, market and sell fresh citrus. Total consideration
paid for the Company’s interest in Trapani Fresh was $15.0 million.

Real Estate Development

On November 10, 2015, 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 now named Harvest at
Limoneira
. The first phase of the project broke ground to commence
mass grading on November 8, 2017. Project plans include approximately
632 residential units in Phase 1. Grading began in November 2017 and
Phase 1 site improvements have been substantially completed. The joint
venture received lot deposits from two national homebuilders, Lennar and
KB Home, in fiscal year 2018 and initial lot sales representing 174
residential units closed in February and March of 2019. In addition, the
Company announced a partnership with another national homebuilder for an
additional 63 lots expected to close in the fourth quarter of fiscal
year 2019. Over the 6-9-year life of this project, the joint venture
will have approximately 1,500 total residential units to be built and
sold.

Fiscal Year 2019 Outlook

  • For fiscal year 2019, the Company and its international affiliates are
    reiterating volume expectations and continue to expect to sell 8.4 to
    9.0 million cartons of fresh lemons globally. Due to the competitive
    nature of international business, the Company is not providing average
    price projections for international lemon sales. Included in the
    global fresh cartons estimate is the Company’s domestic cartons, which
    it expects to sell between 5.2 and 5.5 million. Through the first six
    months of fiscal year 2019, the Company sold 2.6 million domestic
    cartons at an average price of $22.30. The Company is currently
    experiencing price fluctuations based on size of fresh lemons between
    $18 and $30 a carton and the lower priced large fruit its currently
    selling is flowing through the sales pipeline slower than previously
    expected due to amount of large fruit in the overall industry. For
    each movement of $0.50 per annual carton of fresh lemons in fiscal
    2019, it equates to an approximate $1.0 million change in adjusted
    EBITDA and $0.04 change in earnings per share and adjusted earnings
    per share.
  • The Company continues to expect to sell approximately 1.7 to 2.0
    million pounds of avocados at approximately $1.20 per pound.
  • Due to excessive heat in the summer of 2018 which significantly
    reduced avocado volume this year, the Company expects minimal revenue
    from avocados in fiscal year 2019. Offsetting this temporary event
    will be the benefit of crop insurance for approximately $2.5 million
    calculated on actual avocado harvest in fiscal year 2019, which will
    be recognized in the fourth quarter. The Company expects a meaningful
    increase in avocado revenue in fiscal year 2020.
  • For fiscal year 2019, the current unfavorable domestic conditions for
    oranges has resulted in significantly lower than expected pricing in
    the orange market, which is expected to continue well into the third
    quarter.
  • The Company expects operating income for fiscal year 2019 to be
    approximately $7.5 million to $12.5 million compared to previous
    expectations of $14.5 million to $17.5 million.
  • Fiscal year 2019 adjusted EBITDA is expected to be in the range of
    $17.0 million to $22.0 million.
  • The Company now expects fiscal year 2019 earnings per share to be in
    the range of $0.33 to $0.53 per diluted share with an estimated 18.4
    million diluted shares outstanding. Adjusted earnings per diluted
    share are now expected to be in the range of $0.25 to $0.45. Adjusted
    EPS guidance for fiscal year 2019 excludes estimated equity in
    earnings from Harvest at Limoneira and the potential impact of
    mark to market changes in the value of its 250,000 shares of Calavo.
    Beginning in fiscal year 2019, the Company is required to measure the
    changes in fair value of this investment on its statement of
    operations.
  • In addition, not included in adjusted earnings per share is a second
    quarter fiscal year 2019 benefit of $2.3 million of equity in earnings
    from its real estate development, Harvest at Limoneira.

As more fully described at the end of this release under “Non-GAAP
Financial Measures,” the Company is unable to reconcile without
unreasonable effort the above forward-looking non-GAAP measures related
to EBITDA, and the variability of the changes excluded from these
non-GAAP measures may have a significant and potentially unpredictable
impact on its future GAAP financial results.

Longer-Term Growth Pipeline

Fiscal year 2019 outlook estimates do not include equity in earnings
benefits from the Harvest at Limoneira project. Initial lot sales
representing 174 residential units closed in February and March of 2019
and the Company received a benefit of equity in earnings in the second
quarter fiscal year 2019 of $2.3 million. In addition, the company does
expect additional equity in earnings during the remainder of fiscal year
2019.

Looking beyond 2019, the Company has an additional 1,200 acres of
non-bearing lemons that are estimated to become full bearing over the
next four years, which will enable the Company to achieve strong organic
growth for many years to come. The Company expects the first 300 acres
of the 1,200 acres to become full bearing in fiscal year 2020. Beyond
these 1,200 acres, Limoneira intends to plant an additional 500 acres of
lemons in the next two years that it believes will further build its
long-term pipeline of productive acreage. The Company anticipates this
additional acreage will increase annual lemon supply from its 2019 level
by approximately 30%, or about 900 thousand to 1.3 million additional
fresh cartons, as the non-bearing and planned acreage becomes
productive. The Company also expects to have a steady increase in third
party grower fruit. The foregoing describes organic growth and does not
include potential acquisition opportunities for the Company in its
highly fragmented industry.

Conference Call Information

The Company will host a conference call to discuss its financial results
today at 1:30 pm Pacific Time (4:30 pm Eastern Time). Investors
interested in participating in the live call can dial (800) 289-0438
from the U.S. International callers can dial (323) 794-2423. A telephone
replay will be available approximately two hours after the call
concludes and will be available through Monday, June 24, 2019, by
dialing (844) 512-2921 from the U.S., or (412) 317-6671 from
international locations; passcode is 6813657.

About Limoneira Company

Limoneira Company, a 126-year-old international agribusiness
headquartered in Santa Paula, California, has grown to become one of the
premier integrated agribusinesses in the world. Limoneira (pronounced lē
mon΄âra) is a dedicated sustainability company with 15,700 acres of rich
agricultural lands, real estate properties, and water rights
in California, Arizona, Chile and Argentina. The Company is a leading
producer of lemons, avocados, oranges, specialty citrus and other crops
that are enjoyed throughout the world. For more about Limoneira Company,
visit www.limoneira.com.

Forward-Looking Statements

This press release contains forward-looking statements, including
guidance for fiscal year 2019, within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements are
based on Limoneira’s current expectations about future events and can be
identified by terms such as “expect,” “may,” “anticipate,” “intend,”
“should be,” “will be,” “is likely to,” “strive to,” and similar
expressions referring to future periods.

Limoneira believes the expectations reflected in the forward-looking
statements are reasonable but cannot guarantee future results, level of
activity, performance or achievements. Actual results may differ
materially from those expressed or implied in the forward-looking
statements. Therefore, Limoneira cautions you against relying on any of
these forward-looking statements. Factors which may cause future
outcomes to differ materially from those foreseen in forward-looking
statements include, but are not limited to: changes in laws,
regulations, rules, quotas, tariffs and import laws; weather conditions
that affect production, transportation, storage, and import and export
of fresh product; increased pressure from crop disease, insects and
other pests; disruption of water supplies or changes in water
allocations; pricing and supply of raw materials and products; market
responses to industry volume pressures; pricing and supply of energy;
changes in interest and currency exchange rates; availability of
financing for land development activities; political changes and
economic crises; international conflict; acts of terrorism; labor
disruptions, strikes or work stoppages; loss of important intellectual
property rights; inability to pay debt obligations; inability to engage
in certain transactions due to restrictive covenants in debt
instruments; government restrictions on land use; and market and pricing
risks due to concentrated ownership of stock. Other risks and
uncertainties include those that are described in Limoneira’s SEC
filings which are available on the SEC’s website at
http://www.sec.gov.
Limoneira undertakes no obligation to subsequently update or revise the
forward-looking statements made in this press release, except as
required by law.

Non-GAAP Financial Measures

Due to significant depreciable assets associated with the nature of the
Company’s operations and interest costs associated with its capital
structure, management believes that earnings before interest, income
taxes, depreciation and amortization (“EBITDA”) and adjusted EBITDA,
which excludes unrealized (gain) loss on stock in Calavo, LLC earnings
in equity investment and impairments on real estate development assets
when applicable. In addition, we have presented adjusted net (loss)
income attributable to Limoneira Company and adjusted (loss) income per
common share attributable to Limoneira Company to reflect the exclusion
of unrealized gain (loss) on stock in Calavo, LLC earnings in equity
investment and the Tax Cuts and Jobs Act of 2017 impact. This
presentation is an important measure to evaluate the Company’s results
of operations between periods on a more comparable basis. Such
measurements are not prepared in accordance with U.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 the Company and may not be
consistent with methodologies used by other companies. With respect to
our expectations under “Fiscal Year 2019 Outlook” above, the Company has
not provided a reconciliation of forward-looking non-GAAP measures,
primarily due to variability and difficulty in making accurate forecasts
and projections, as not all of the information necessary for a
quantitative reconciliation is available to the Company without
unreasonable efforts.

EBITDA and adjusted EBITDA are summarized and reconciled to net income
(loss) attributable to Limoneira Company, which management considers to
be the most directly comparable financial measure calculated and
presented in accordance with GAAP as follows (in thousands):

      Three Months Ended April 30,     Six Months Ended April 30,
2019   2018     2019   2018
Net income (loss) attributable to Limoneira Company $ 2,815   $ 6,599 $ (1,878 )   $ 15,224
Interest expense 686 284 539 794
Income tax provision (benefit) 1,084 2,380 (677 ) (8,207 )
Depreciation and amortization 2,121     1,744   4,247     3,434  
EBITDA 6,706 11,007 2,231 11,245
Unrealized (gain) loss on stock in Calavo Growers, Inc. (3,612 ) 298
LLC earnings in equity investment (2,270 )     (2,270 )    
Adjusted EBITDA $ 824     $ 11,007   $ 259     $ 11,245  

The following is a reconciliation of net income (loss) attributable to
Limoneira Company to adjusted net loss attributable to Limoneira Company
(in thousands, except share amounts):

    Three Months Ended April 30,     Six Months Ended April 30,
2019   2018     2019   2018
Net income (loss) attributable to Limoneira Company $ 2,815 $ 6,599 $ (1,878 ) $ 15,224
Preferred dividends and effect of unvested, restricted stock (142 ) (136 ) (284 ) (270 )
Net income (loss) for basic EPS 2,673 6,463 (2,162 ) 14,954
Unrealized (gain) loss on stock in Calavo (net of tax) (2,608 ) 219
LLC earnings in equity investment (net of tax) (1,639 ) (1,664 )
Tax Cuts and Jobs Act of 2017 impact       (10,000 )
Adjusted net (loss) income attributable to Limoneira Company $ (1,574 ) $ 6,463   $ (3,607 ) $ 4,954  
Adjusted net (loss) income for diluted EPS $ (1,574 ) $ 6,599   $ (3,607 ) $ 5,224  
Actual:
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  
Adjusted:
Basic net (loss) income per common share $ (0.09 ) $ 0.45   $ (0.21 ) $ 0.35  
Diluted net (loss) income per common share $ (0.09 ) $ 0.44   $ (0.21 ) $ 0.35  
Weighted-average common shares outstanding-basic 17,554,000   14,379,000   17,516,000   14,341,000  
Weighted-average common shares outstanding-diluted 17,554,000   15,023,000   17,516,000   14,986,000  
 

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
Fair value of derivative instrument
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
 
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
 

Contacts

Investor Contact:
John Mills
Managing Partner
ICR
646-277-1254

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