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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with “Selected Financial Data” and our consolidated financial statements and notes thereto that appear elsewhere in this Annual Report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those presented under “Risk Factors” included in Item 1A and elsewhere in this Annual Report.

Overview

Limoneira Company was incorporated in Delaware in 1990 as the successor to several businesses with operations in California since 1893. We are primarily an agribusiness company founded and based in Santa Paula, California, committed to responsibly using and managing our approximately 15,400 acres of land, water resources and other assets to maximize long-term stockholder value. Our current operations consist of fruit production, sales and marketing, rental operations, real estate and capital investment activities.

We are one of California’s oldest citrus growers. According to Sunkist, we are one of the largest growers of lemons in the United States and, according to the California Avocado Commission, one of the largest growers of avocados in the United States. In addition to growing lemons and avocados, we grow oranges and a variety of specialty citrus and other crops. We have agricultural plantings throughout Ventura, Tulare, San Luis Obispo and San Bernardino Counties in California, Yuma County in Arizona, La Serena, Chile, and Jujuy, Argentina, which collectively consist of approximately 6,000 acres of lemons, 900 acres of avocados, 1,400 acres of oranges and 900 acres of specialty citrus and other crops. We also operate our own packinghouses in Santa Paula and Oxnard, California and Yuma, Arizona, where we process, pack and sell lemons that we grow, as well as lemons grown by others. We have a 47% interest in Rosales, a citrus packing, marketing and sales business, a 90% interest in Fruticola Pan de Azucar S.A. (“PDA”), a lemon and orange orchard and 100% interest in San Pablo, a lemon and orange orchard, all of which are located near La Serena, Chile. We have a 51% interest in a joint venture, Trapani Fresh, a lemon growing, packing, marketing and selling business in Argentina.

Our water resources include water rights, usage rights and pumping rights to the water in aquifers under, and canals that run through, the land we own. Water for our farming operations is sourced from the existing water resources associated with our land, which includes rights to water in the adjudicated Santa Paula Basin (aquifer) and the un-adjudicated Fillmore and Paso Robles Basins (aquifers). We use ground water from the San Joaquin Valley Basin and water from water districts and irrigation districts in Tulare County, which is in California’s San Joaquin Valley. We also use ground water from the Cadiz Valley Basin in California's San Bernardino County and surface water in Arizona from the Colorado River through the Yuma Mesa Irrigation and Drainage District. We use ground water provided by wells and surface water for our PDA and San Pablo farming operations in Chile and our Trapani Fresh farming operations in Argentina.

For more than 100 years, we have been making strategic investments in California agriculture and real estate. We currently have an interest in three real estate development projects in California. These projects include multi-family housing and single-family homes comprised of 256 completed rental units and another approximately 1,150 units in various stages of planning and development.

We have three business divisions: agribusiness, rental operations and real estate development. Our agribusiness division is comprised of four reportable operating segments: fresh lemons, lemon packing, avocados and other agribusiness, and includes our core operations of farming, harvesting, lemon packing and lemon sales operations. The rental operations division includes our residential and commercial rentals, leased land operations and organic recycling. The real estate development division includes our investments in real estate development projects. Generally, we see our Company as a land and farming company that generates annual cash flows to support our progress into diversified real estate development activities. As real estate developments are monetized, our agriculture business will then be able to expand more rapidly into new regions and markets.

Recent Developments – Refer to Part I, Item 1 “Fiscal Year 2020 Highlights and Recent Developments”

Results of Operations

The following table shows the results of operations for ($ in thousands):

Years Ended October 31,

Revenues:

Costs and expenses:

Impairment of real estate development assets — — — — 1,558 1%

Loss (gain) on sale and disposal of property assets 502 — (1,069) (1)% — —

Operating (loss) income:

Loss (gain) on sale and disposal of property assets (502) 1,069 —

Other (expense) income:

Equity in earnings of investments, net 339 3,073 583

(Loss) gain on stock in Calavo Growers, Inc. (6,299) (2,117) 4,223

(Loss) income before income tax benefit (provision) (26,435) (6,563) 13,483

Loss (income) attributable to noncontrolling interest 1,506 (477) (24)

Non-GAAP Financial Measures

Due to significant depreciable assets associated with the nature of our operations and interest costs associated with our capital structure, management believes that earnings before interest, income taxes, depreciation and amortization (“EBITDA”) and adjusted EBITDA, which excludes loss on stock in Calavo, LLCB earnings in equity investment, sale and disposal of property assets and impairments on real estate development assets when applicable, is an important measure to evaluate our 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 us and may not be consistent with methodologies used by other companies. EBITDA and adjusted EBITDA are summarized and reconciled to net income attributable to Limoneira Company which management considers to be the most directly comparable financial measure calculated and presented in accordance with GAAP as follows (in thousands):

Years Ended October 31,

Loss on stock in Calavo Growers, Inc. 6,299 2,054 —

LLCB earnings in equity investments, net (326) (2,870) —

Loss (gain) on sale and disposal of property assets 502 (991) —

Impairment of real estate development assets — — 1,558

Fiscal Year 2020 Compared to Fiscal Year 2019

Revenues

Total revenues for fiscal year 2020 was $164.6 million compared to $171.4 million for fiscal year 2019. The 4% decrease of $6.8 million was primarily the result of decreased lemons agribusiness revenues, as detailed below ($ in thousands):

Agribusiness Revenues for the Years Ended October 31,

•Lemons: The decrease in fiscal year 2020 was primarily the result of lower prices partially offset by higher volume of fresh lemons sold compared to fiscal year 2019. During fiscal years 2020 and 2019, fresh lemon sales were $101.1 million and $110.1 million on 5.5 million and 5.2 million cartons of fresh lemons sold at average per carton prices of $18.32 and $21.00, respectively. COVID-19 related food service closures reduced the demand for lemons in the food service marketplace and created an over-supply in the retail marketplace. This oversupply of lemons resulted in lower average per carton prices in fiscal year 2020 compared to fiscal year 2019. Lemon revenues in fiscal years 2020 and 2019 included $13.4 million and $15.6 million shipping and handling, $4.1 million and $10.8 million lemon by-products and $18.9 million and $13.5 million other lemon sales, respectively.

•Avocados: The increase in fiscal year 2020 was primarily the result of higher volume partially offset by lower prices of avocados sold compared to fiscal year 2019. The California avocado crop typically experiences alternating years of high and low production due to plant physiology. During fiscal years 2020 and 2019, 8.0 million and 1.8 million pounds of avocados were sold at average per pound prices of $1.10 and $1.72, respectively. Lower prices in fiscal year 2020 were primarily related to higher supply of fruit in the marketplace. Fiscal year 2019 avocados revenues included approximately $2.3 million of crop insurance.

•Oranges: The increase in fiscal year 2020 was primarily due to higher prices partially offset by lower volume of oranges sold compared to fiscal year 2019. During fiscal years 2020 and 2019, sales consisted of 743,000 and 907,000 40-pound carton equivalents of oranges sold at average per carton prices of $10.39 and $6.64, respectively.

•Specialty citrus and other crops: The increase in fiscal year 2020 was primarily the result of higher prices partially offset by lower volume of specialty citrus sold compared to fiscal year 2019. In fiscal years 2020 and 2019, we sold 333,000 and 358,000 40-pound carton equivalents of specialty citrus at an average per carton price of $12.37 and $9.34, respectively.

Rental operations revenue was $4.6 million in fiscal year 2020 compared to $4.8 million in fiscal year 2019. The decrease in fiscal year 2020 was primarily due to decreased revenues from residential rental units leased to employees, former employees and non-employees compared to fiscal year 2019.

Real estate development revenue was zero in both fiscal years 2020 and 2019.

Costs and Expenses

Total costs and expenses for fiscal year 2020 were $183.6 million compared to $176.9 million for fiscal year 2019. This 4% increase of $6.7 million was primarily attributable to increases in our agribusiness expenses. Costs associated with our agribusiness division include packing costs, harvest costs, growing costs, costs related to the lemons we procure from third-party growers and depreciation and amortization expense. These costs are discussed further below ($ in thousands):

Agribusiness Costs and Expenses for the Years Ended October 31,

•Packing costs: Packing costs consist of the costs to pack lemons for sale such as labor and benefits, cardboard cartons, fruit treatments, packing and shipping supplies and facility operating costs. Lemon packing costs were $42.6 million and $37.7 million in fiscal years 2020 and 2019, respectively. The increase in fiscal year 2020 was primarily attributable to higher average per carton costs and higher volume of fresh lemons packed and sold compared to fiscal year 2019. In fiscal years 2020 and 2019, we packed and sold 5.5 million and 5.2 million cartons of lemons at average per carton costs of $7.71 and $7.20, respectively. The increase in average per carton costs in fiscal year 2020 compared to fiscal year 2019 was primarily due to decreased percentage of the crop that went to the fresh market. Additionally, in fiscal years 2020 and 2019, packing costs included $3.0 million and $3.2 million of shipping costs.

•Harvest costs: The increase in fiscal year 2020 was primarily attributable to increased volume of lemons and avocados harvested partially offset by decreased volume of oranges harvested compared to fiscal year 2019.

•Growing costs: Growing costs, also referred to as cultural costs, consist of orchard maintenance costs such as cultivation, fertilization and soil amendments, pest control, pruning and irrigation. The increase in fiscal year 2020 was primarily due to net increased costs for cultivation compared to fiscal year 2019. These net increases reflect farm management decisions based on weather, harvest timing and crop conditions.

•Third-party grower costs: We sell lemons that we grow and lemons that we procure from other growers. The cost of procuring lemons from other growers is referred to as third-party grower costs. The decrease in fiscal year 2020 was primarily due to lower prices of third-party grower lemons sold, partially offset by increased volume compared to fiscal year 2019. During fiscal years 2020 and 2019, of the 5.5 million and 5.2 million cartons sold, 3.3 million (60%) and 3.1 million (60%) were procured from third-party growers at average per carton prices of $11.71 and $15.52, respectively. Additionally, in fiscal years 2020 and 2019 we incurred $15.5 million and $9.0 million, respectively of costs for purchased, packed fruit for resale.

•Depreciation and amortization expense in fiscal year 2020 was $1.3 million higher than fiscal year 2019 primarily due to the acquisition of Trapani Fresh in May 2019.

Other operations expenses were $4.5 million in the fiscal year 2020 compared to $4.4 million in the fiscal year 2019.

Loss (gain) on sales of property assets for fiscal years 2020 and 2019 were $0.5 million and $(1.1) million, respectively.

Selling, general and administrative expenses for fiscal year 2020 were $21.3 million compared to $21.2 million for fiscal year 2019. This 1% increase of $0.1 million was primarily attributable to the following:

•$0.9 million increase in training, depreciation and other costs associated with an ERP implementation; and

•$0.8 million decrease in other selling, general and administrative expenses, including certain corporate overhead expenses.

Other (Expense) Income

Other (expense) income, for fiscal year 2020 was $(7.4) million compared to $(1.0) million for fiscal year 2019. The $6.4 million increase in expense is primarily the result of:

•$0.3 million decrease in interest expense as a result of lower interest rates;

•$2.7 million decrease in equity in earnings of investments primarily from LLCB; and

•$4.2 million increase in the loss on sales of stock in Calavo.

Income Taxes

We recorded an income tax benefit of $8.5 million for fiscal year 2020 on pre-tax loss of $26.4 million compared to an income tax benefit of $1.1 million for fiscal year 2019 on pre-tax loss of $6.6 million. The tax provision recorded for the fiscal year 2020 differs from the U.S. federal statutory tax rate of 21% due primarily to a $1.9 million discrete benefit related to the CARES Act. Our effective tax rate for fiscal years 2020 and 2019 was 32.2% and 17.1%, respectively.

Net (Loss) Income Attributable to Noncontrolling Interest

Net (loss) income attributable to noncontrolling interest primarily represents 10% of the net income of PDA and 49% of the net loss of Trapani Fresh.

Fiscal Year 2019 Compared to Fiscal Year 2018

Revenues

Total revenues for fiscal year 2019 was $171.4 million compared to $129.4 million for fiscal year 2018. The 32% increase of $42.0 million was primarily the result of increased agribusiness revenues, as detailed below ($ in thousands):

Agribusiness Revenues for the Years Ended October 31,

•Lemons: The increase in fiscal year 2019 was primarily the result of higher volume partially offset by lower prices of fresh lemons sold compared to fiscal year 2018. A portion of the increased revenue was the result of fresh lemon sales of $14.7 million by Trapani Fresh on 746,000 cartons of fresh lemons sold in fiscal year 2019. During fiscal years 2019 and 2018, fresh lemon sales were $110.1 million and $83.9 million on 5.2 million and 3.3 million cartons of fresh lemons sold at average per carton prices of $21.00 and $25.42, respectively. Lemon revenues in fiscal year 2019 included $15.6 million shipping and handling, $10.8 million lemon by-products and $13.5 million other lemon sales. Other lemon sales in fiscal year 2019 included $2.9 million of lemon sales in Chile by PDA and San Pablo and $9.5 million of brokered fruit sales, of which $8.8 million is due to the adoption of FASB ASU 2014-19. Lemon revenues in fiscal year 2018 included $9.0 million shipping and handling, $4.4 million lemon by-products and $6.5 million other lemon sales. Other lemon sales in fiscal year 2018 included $2.3 million of lemon sales in Chile by PDA and $1.1 million of commissions earned on 912,000 cartons of brokered fruit sales.

•Avocados: The decrease in fiscal year 2019 was the result of lower volume partially offset by higher prices of avocados sold compared to fiscal year 2018. The California avocado crop typically experiences alternating years of high and low production due to plant physiology. During fiscal years 2019 and 2018, 1.8 million and 6.3 million pounds of avocados were sold at average per pound prices of $1.72 and $1.04, respectively. Higher prices in fiscal year 2019 were primarily related to lower supply of fruit in the marketplace. Fiscal year 2019 avocados revenues included approximately $2.3 million of crop insurance.

•Oranges: The decrease in fiscal year 2019 was primarily due to lower prices partially offset by higher volume of oranges sold compared to fiscal year 2018. During fiscal years 2019 and 2018, sales consisted of 907,000 and 712,000 40-pound carton equivalents of oranges sold at average per carton prices of $6.64 and $12.48, respectively. Oranges revenues in fiscal years 2019 and 2018 included $0.3 million of orange sales in Chile.

•Specialty citrus and other crops: The slight increase in fiscal year 2019 was primarily the result of higher volume of wine grapes and pistachios sold offset by lower specialty citrus revenues compared to fiscal year 2018. In fiscal year 2019, we sold approximately 1,300 tons of wine grapes for $1.3 million compared to approximately 600 tons of wine grapes for $0.9 million in fiscal year 2018.

Corporate and other operations revenue was $4.8 million in fiscal year 2019 compared to $5.0 million in fiscal year 2018. The decrease in fiscal year 2019 was primarily due to decreased revenues from land leased to third-party agricultural tenants compared to fiscal year 2018.

Costs and Expenses

Total costs and expenses for fiscal year 2019 were $176.9 million compared to $119.9 million for fiscal year 2018. This 48% increase of $57.0 million was primarily attributable to increases in our agribusiness, real estate development and selling, general and administrative costs and expenses. Costs associated with our agribusiness division include packing costs, harvest costs, growing costs, costs related to the lemons we procure from third-party growers and depreciation and amortization expense. These costs are discussed further below ($ in thousands):

Agribusiness Costs and Expenses for the Years Ended October 31,

•Packing costs: Packing costs consist of the costs to pack lemons for sale such as labor and benefits, cardboard cartons, fruit treatments, packing and shipping supplies and facility operating costs. Lemon packing costs were $37.7 million and $21.4 million in fiscal years 2019 and 2018, respectively. The increase in fiscal year 2019 was primarily attributable to higher average per carton costs and higher volume of fresh lemons packed and sold compared to fiscal year 2018. In fiscal year 2019, we packed and sold 5.2 million cartons of lemons at average per carton costs of $7.20 compared to 3.3 million cartons of lemons sold at average per carton costs of $6.48 in fiscal year 2018. The increase in average per carton costs in fiscal year 2019 compared to fiscal year 2018 is primarily due to increased volume of lemon by-products and $5.8 million of operating costs incurred at the Oxnard Lemon facility. Additionally, packing costs included $3.2 million of shipping costs in fiscal year 2019 compared to $1.7 million in fiscal year 2018.

•Harvest costs: The increase in fiscal year 2019 was primarily attributable to increased volume of lemons and Navel oranges and specialty citrus harvested partially offset by decreased volume of avocados harvested compared to fiscal year 2018.

•Growing costs: Growing costs, also referred to as cultural costs, consist of orchard maintenance costs such as cultivation, fertilization and soil amendments, pest control, pruning and irrigation. The increase in fiscal year 2019 is primarily due to net increased costs for fertilization and soil amendments and pruning in addition to San Pablo and Trapani Fresh growing costs compared to fiscal year 2018. These net increases reflect farm management decisions based on weather, harvest timing and crop conditions.

•Third-party grower costs: We sell lemons that we grow and lemons that we procure from other growers. The cost of procuring lemons from other growers is referred to as third-party grower costs. The increase is primarily due to higher volume of third-party grower lemons sold. During fiscal years 2019 and 2018, of the 5.2 million and 3.3 million cartons sold, 3.1 million (60%) and 1.5 million (45%) were procured from third-party growers at average per carton prices of $15.52 and $20.89, respectively.

Additionally, in fiscal year 2019 we incurred $9.0 million of costs for purchased, packed fruit for resale compared to $0.4 million in fiscal year 2018.

•Depreciation and amortization expense in fiscal year 2019 was $1.4 million higher than fiscal year 2018 primarily due to the acquisitions of San Pablo, Oxnard Lemon and Trapani Fresh and an increase in assets placed into service.

Real estate development expenses for fiscal year 2019 were $0.1 million compared to $1.7 million in fiscal year 2018. Real estate development costs and expenses in fiscal year 2018 include $1.6 million impairment on Pacific Crest and Sevilla real estate development projects. Gain on sales of property for fiscal year 2019 includes $1.1 million for the sale of two properties.

Selling, general and administrative expenses for fiscal year 2019 were $21.2 million compared to $16.1 million for fiscal year 2018. This 32% increase of $5.1 million was primarily attributable to the following:

•$3.2 million in Trapani Fresh selling, general and administrative expenses;

•$0.8 million increase in legal, consulting and other administrative expenses primarily associated with our acquisition of Trapani Fresh in May 2019;

•$0.4 million increase in lemon selling expenses primarily due to an increase in personnel; and

•$0.7 million increase in other selling, general and administrative expenses, including certain corporate overhead expenses.

Other (Expense) Income

Other (expense) income, for fiscal year 2019 was ($1.0) million of expense compared to $4.0 million of income for fiscal year 2018. The $5.0 million decrease in income is primarily the result of:

•$1.0 million increase in interest expense as a result of higher debt;

•$2.5 million increase in equity in earnings of investments primarily from LLCB;

•$4.3 million decrease in the gain on sales of stock in Calavo; and

•$2.1 million in unrealized loss on stock in Calavo in fiscal year 2019.

Income Taxes

We recorded an income tax benefit of $1.1 million for fiscal year 2019 on pre-tax loss of $6.6 million compared to an income tax benefit of $6.7 million for fiscal year 2018 on pre-tax income of $13.5 million. Our effective tax rate was 17.1% for fiscal year 2019 compared to an effective tax rate of (49.9)% for fiscal year 2018. Our effective tax rate in fiscal year 2018 was primarily due to the approximate $10.3 million decrease in deferred tax liabilities related to the change in the federal tax rate from the Tax Cuts and Jobs Act of 2017. No such tax rate changes occurred in fiscal year 2019.

Net (Loss) Income Attributable to Noncontrolling Interest

Net (loss) income attributable to noncontrolling interest primarily represents 10% of the net income of PDA and 49% of the net income of Trapani Fresh.

Segment Results of Operations

We operate in four reportable operating segments: fresh lemons, lemon packing, avocados and other agribusiness. Our reportable operating segments are strategic business units with different products and services, distribution processes and customer bases. We evaluate the performance of our operating segments separately to monitor the different factors affecting financial results. Each segment is subject to review and evaluations related to current market conditions, market opportunities and available resources. See Note 22 - Segment Information of the notes to consolidated financial statements included in this Annual Report for additional information regarding our operating segments.

Segment information for fiscal year 2020 (in thousands):

Segment information for fiscal year 2019 (in thousands):

Segment information for fiscal year 2018 (in thousands):

Fiscal Year 2020 Compared to Fiscal Year 2019

The following analysis should be read in conjunction with the previous section “Results of Operations.”

Fresh Lemons

Fresh lemons segment revenue is comprised of sales of fresh lemons, lemon by-products and other lemon revenue such as purchased, packed fruit for resale. For fiscal year 2020, our fresh lemons segment revenue was $124.2 million compared to $134.3 million for fiscal year 2019. The 8% decrease of $10.2 million was primarily the result of lower prices partially offset by higher volume of fresh lemons sold, as discussed earlier.

Costs and expenses associated with our fresh lemons segment include harvest costs, growing costs, cost of fruit we procure from third-party growers, transportation costs and packing service charges incurred from the lemon packing segment to pack lemons for sale. For fiscal year 2020, our fresh lemon costs and expenses were $125.3 million compared to $121.0 million for fiscal year 2019. The 4% increase of $4.3 million primarily consisted of the following:

•Harvest costs for fiscal year 2020 were $0.7 million higher than fiscal year 2019.

•Growing costs for fiscal year 2020 were $2.3 million higher than fiscal year 2019.

•Third-party grower costs for fiscal year 2020 were $5.2 million lower than fiscal year 2019.

•Transportation costs for fiscal year 2020 were $0.2 million lower than fiscal year 2019.

•Intersegment costs and expenses for fiscal year 2020 were $6.7 million higher than fiscal year 2019.

Lemon Packing

Lemon packing segment revenue is comprised of intersegment packing revenue and shipping and handling revenue. For fiscal year 2020, our lemon packing segment revenue was $50.2 million compared to $45.7 million for fiscal year 2019. The 10% increase of $4.5 million was primarily due to increased volume of lemons packed and sold.

Costs and expenses associated with our lemon packing segment consist of the cost to pack lemons for sale such as labor and benefits, cardboard cartons, fruit treatments, packing and shipping supplies and facility operating costs. For fiscal year 2020, our lemon packing costs and expenses were $42.6 million compared to $37.6 million for fiscal year 2019. The 13% increase of $4.9 million was primarily due to increased volume of lemons packed and decreased fresh utilization.

Lemon packing segment operating income per carton sold was $1.39 and $1.54 for fiscal years 2020 and 2019, respectively.

The lemon packing segment included $36.8 million and $30.1 million of intersegment revenues for fiscal years 2020 and 2019, respectively, that are charged to the fresh lemons segment to pack lemons for sale. Such intersegment revenues and expenses are eliminated in our consolidated financial statements.

Avocados

For fiscal year 2020, our avocados segment revenue was $8.8 million compared to $5.4 million for fiscal year 2019, a 63% increase of $3.4 million.

Cost and expenses associated with our avocados segment include harvest costs and growing costs. For fiscal year 2020, our avocado costs and expenses were $5.2 million compared to $3.2 million for fiscal year 2019. The 64% increase of $2.0 million primarily consists of the following:

•Harvest costs for fiscal year 2020 were $0.9 million higher than fiscal year 2019.

•Growing Costs for fiscal year 2020 were $1.2 million higher than fiscal year 2019.

Other Agribusiness

For fiscal year 2020, our other agribusiness segment revenue was $13.6 million compared to $11.2 million for fiscal year 2019. The 21% increase of $2.4 million primarily consisted of the following:

•Orange revenue in fiscal year 2020 was $1.7 million higher than fiscal year 2019.

•Specialty citrus and other crop revenue for fiscal year 2020 was $0.7 million higher than fiscal year 2019.

Costs and expenses associated with our other agribusiness segment include harvest, growing and purchased fruit costs. Our other agribusiness costs and expenses for fiscal year 2020 were $12.1 million compared to $13.0 million for fiscal year 2019. The 7% decrease of $0.9 million primarily consisted of the following:

•Harvest costs for fiscal year 2020 were $0.2 million lower than fiscal year 2019.

•Growing costs for fiscal year 2020 were $2.6 million lower than fiscal year 2019.

•Purchased fruit costs for fiscal year 2020 were $1.9 million higher than fiscal year 2019.

Fresh lemons, lemon packing, avocados and other agribusiness depreciation and amortization for fiscal year 2020 were $8.9 million compared to $7.6 million in fiscal year 2019. The 17% increase of $1.3 million was primarily due to the acquisition of Trapani Fresh and an increase in assets placed into service.

Corporate and Other

Our corporate and other segment had revenues of approximately $4.6 million and $4.8 million in fiscal years 2020 and 2019, respectively. The $0.2 million decrease in fiscal year 2020 was primarily due to decreased revenues from residential rental units leased to employees, former employees and non-employees compared to fiscal year 2019.

Costs and expenses in our corporate and other segment were approximately $25.1 million and $23.5 million in fiscal years 2020 and 2019, respectively. Depreciation expense was approximately $1.2 million and $1.0 million in fiscal years 2020 and 2019, respectively.

Additionally, loss (gain) on sales of property assets for fiscal years 2020 and 2019 were $0.5 million and $(1.1) million, respectively.

Selling, general and administrative expenses

Selling, general and administrative expenses include corporate and other costs and expenses not allocated to the operating segments. Selling, general and administrative expenses for fiscal year 2020 were $0.1 million lower than fiscal year 2019.

Fiscal Year 2019 Compared to Fiscal Year 2018

The following analysis should be read in conjunction with the previous section “Results of Operations.”

Fresh Lemons

Fresh lemons segment revenue is comprised of sales of fresh lemons, lemon by-products and other lemon revenue such as purchased, packed fruit for resale. For fiscal year 2019, our fresh lemons segment revenue was $134.3 million compared to $94.8 million for fiscal year 2018, a 42% increase of $39.5 million, primarily the result of higher volume and Trapani Fresh revenue of fresh lemons sold, partially offset by lower prices of fresh lemons sold, as discussed earlier.

Costs and expenses associated with our fresh lemons segment include harvest costs, growing costs, cost of fruit we procure from third-party growers and packing service charges incurred from the lemon packing segment to pack lemons for sale. For fiscal year 2019, our fresh lemon costs and expenses were $121.0 million compared to $74.8 million for fiscal year 2018. The 62% increase of $46.2 million primarily consisted of the following:

•Harvest costs for fiscal year 2019 were $5.6 million higher than fiscal year 2018.

•Growing costs for fiscal year 2019 were $1.3 million higher than fiscal year 2018.

•Third-party grower costs for fiscal year 2019 were $25.8 million higher than fiscal year 2018.

•Transportation costs for fiscal year 2019 were $3.3 million higher than fiscal year 2018.

•Intersegment costs and expenses for fiscal year 2019 were $10.1 million higher than fiscal year 2018.

Lemon Packing

Lemon packing segment revenue is comprised of intersegment packing revenue and shipping and handling revenue. For fiscal year 2019, our lemon packing segment revenue was $45.7 million compared to $29.0 million for fiscal year 2018, a 58% increase of $16.7 million primarily due to increased volume of lemons packed and increased shipping and handling revenues.

Costs and expenses associated with our lemon packing segment consist of the cost to pack lemons for sale such as labor and benefits, cardboard cartons, fruit treatments, packing and shipping supplies and facility operating costs. For fiscal year 2019, our lemon packing costs and expenses were $37.6 million compared to $23.1 million for fiscal year 2018. The 63% increase of $14.6 million was primarily due to increased volume of lemons packed and increased shipping costs.

Lemon packing segment operating income per carton sold was $1.54 and $1.78 for fiscal years 2019 and 2018, respectively.

The lemon packing segment included $30.1 million and $20.0 million of intersegment revenues for fiscal years 2019 and 2018, respectively, that are charged to the fresh lemons segment to pack lemons for sale. Such intersegment revenues and expenses are eliminated in our consolidated financial statements.

Avocados

For fiscal year 2019, our avocados segment revenue was $5.4 million compared to $6.6 million for fiscal year 2018, an 18% decrease of $1.2 million.

Cost and expenses associated with our avocados segment include harvest costs and growing costs. For fiscal year 2019, our avocado costs and expenses were $3.2 million compared to $4.4 million for fiscal year 2018. The 28% decrease of $1.2 million primarily consists of the following:

•Harvest costs for fiscal year 2019 were $0.8 million lower than fiscal year 2018.

•Growing Costs for fiscal year 2019 were $0.5 million lower than fiscal year 2018.

Other Agribusiness

For fiscal year 2019, our other agribusiness segment revenue was $11.2 million compared to $13.9 million for fiscal year 2018. The 20% decrease of $2.8 million primarily consisted of the following:

•Orange revenue in fiscal year 2019 was $2.9 million lower than fiscal year 2018.

•Specialty citrus and other crop revenue for fiscal year 2019 was $0.1 million higher than fiscal year 2018.

Costs and expenses associated with our other agribusiness segment include harvest and growing costs. Our other agribusiness costs and expenses for fiscal year 2019 were $13.0 million compared to $9.5 million for fiscal year 2018. The 37% increase of $3.5 million primarily consisted of the following:

•Harvest costs for fiscal year 2019 were $0.6 million higher than fiscal year 2018.

•Growing costs for fiscal year 2019 were $2.9 million higher than fiscal year 2018.

Fresh lemons, lemon packing, avocados and other agribusiness depreciation and amortization for fiscal year 2019 were $7.6 million compared to $6.2 million in fiscal year 2018. The 22% increase of $1.4 million was primarily due to the acquisitions of San Pablo, Oxnard Lemon and Trapani Fresh and an increase in assets placed into service.

Corporate and Other Operations

Our corporate and other operations segment had revenues of approximately $4.8 million and $5.0 million in fiscal years 2019 and 2018, respectively. The $0.2 million decrease in fiscal year 2019 was primarily due to decreased revenues from land leased to third-party agricultural tenants.

Costs and expenses in our corporate and other operations segment were approximately $23.5 million and $20.8 million in fiscal years 2019 and 2018, respectively. Depreciation expense was similar in fiscal year 2019 compared to fiscal year 2018 at $1.0 million.

We recorded no impairment charge in fiscal year 2019 compared to $1.6 million in fiscal year 2018. Additionally, in fiscal year 2019 we sold two properties and recognized a gain on sales of property of approximately $1.1 million.

Selling, general and administrative expenses

Quarterly Results of Operations

The following table presents our operating results for each of the fiscal quarters in the periods ended October 31, 2020 and October 31, 2019, respectively (in thousands, except per share amounts). The information for each of these quarters is derived from our unaudited interim financial statements and should be read in conjunction with the audited consolidated financial statements included in this Annual Report. All necessary adjustments, which consist only of normal and recurring accruals, have been included to fairly present our unaudited quarterly results. As with any agribusiness enterprise, our agribusiness operations are highly seasonal in nature. The harvest and sale of our lemons, avocados, oranges and specialty citrus and other crops occurs in all quarters, but is generally more concentrated during the third quarter.

Three Months Ended 2020

Statement of Operations Data: Oct. 31, Jul. 31, Apr. 30, Jan. 31,

(Income) loss attributable to noncontrolling interest 97 509 423 477

Net (loss) income per common share:

Number of shares used in per common share computations:

Three Months Ended 2019

Statement of Operations Data: Oct. 31, Jul. 31, Apr. 30, Jan. 31,

(Loss) income before income tax benefit (provision) (4,094) 64 3,904 (6,437)

Loss (income) attributable to noncontrolling interest 138 (593) (5) (17)

Net (loss) income per common share:

Number of shares used in per common share computations:

The following information compares our fourth quarter ended October 31, 2020 to the fourth quarter ended October 31, 2019. Information concerning comparisons of our first, second and third quarters can be found in our quarterly reports on Form 10-Q.

•Total revenues decreased $6.7 million in the three months ended October 31, 2020 compared to the three months ended October 31, 2019 primarily due to decreased lemon and orange crop revenues of $3.0 million and $1.7 million, respectively. In addition, avocado revenues decreased $1.8 million primarily due to $2.3 million insurance revenue received in fiscal year 2019. During the fourth quarter of fiscal years 2020 and 2019, we sold 787,000 and 793,000 cartons of fresh lemons, at an average per carton price of $17.00 and $21.46, respectively. The decrease in orange revenues in the fourth quarter of fiscal year 2020 compared to the fourth quarter of fiscal year 2019 was primarily due to lower brokered fruit sales. During the

fourth quarter of fiscal year 2020, we sold 487,000 pounds of avocados at an average per pound price of $0.99, compared to no sales for the fourth quarter of fiscal year 2019.

•Total costs and expenses decreased $0.8 million in the three months ended October 31, 2020 compared to the three months ended October 31, 2019. Decreases in agribusiness costs and selling, general and administrative expenses of $1.7 million and $0.6 million, respectively were partially offset by the change in loss (gain) on the sale and disposal of property assets of $1.6 million. The decrease in agribusiness costs was primarily due to decreased harvest costs and cultural costs of $0.6 million and $1.3 million, respectively.

•Total other loss increased $0.1 million in the three months ended October 31, 2020 compared to the three months ended October 31, 2019.

•Income tax benefit increased $1.7 million in the three months ended October 31, 2020 compared to the three months ended October 31, 2019 primarily due to the increase in pre-tax loss of $6.1 million.

Liquidity and Capital Resources

Overview

Our liquidity and capital position fluctuates during the year depending on seasonal production cycles, weather events and demand for our products. Typically, our first and last fiscal quarters coincide with the fall and winter months during which we are growing crops that are harvested and sold in the spring and summer, which are our second and third quarters. To meet working capital demand and investment requirements of our agribusiness and real estate development divisions and to supplement operating cash flows, we utilize our revolving credit facility to fund agricultural inputs and farm management practices until sufficient returns from crops allow us to repay amounts borrowed. Raw materials needed to propagate the various crops grown by us consist primarily of fertilizer, herbicides, insecticides, fuel and water, all of which are readily available from local sources.

Cash Flows from Operating Activities

For the fiscal years ended October 31, 2020, 2019 and 2018, net cash (used in) provided by operating activities was $(11.3) million, $1.4 million and $18.4 million, respectively. The significant components of our cash flows provided by operating activities are as follows:

•Net (loss) income was $(17.9) million, $(5.5) million and $20.2 million for fiscal years 2020, 2019 and 2018, respectively. The components of net loss in fiscal year 2020 compared to fiscal year 2019 consist of an increase in operating loss of $13.5 million, an increase in total other expense of $6.4 million and an increase in income tax benefit of $7.4 million. The components of net income in fiscal 2019 compared to fiscal year 2018 consist of a decrease in operating income of $15.0 million, an increase in total other expense of $5.0 million and a decrease in income tax benefit of $5.6 million.

•The adjustments to reconcile net (loss) income to net cash (used in) provided from operating activities provided $17.6 million of cash in fiscal year 2020 compared to providing $7.6 million of cash in fiscal year 2019, primarily due to significant changes in depreciation and amortization, loss on stock in Calavo and equity in earnings of investments. The adjustments to reconcile net (loss) income to net cash provided from operating activities provided $7.6 million of cash in fiscal year 2019 compared to using $1.3 million of cash in fiscal year 2018 primarily due to an increase in loss (gain) on sale and disposals of property assets, a decrease in deferred taxes and an increase in loss on stock in Calavo.

•The changes in operating assets and liabilities, net of business combinations used $11.0 million of operating cash in fiscal year 2020 compared to using $0.8 million of operating cash in fiscal year 2019, primarily due to significant changes in accounts receivable, prepaid expenses and other current assets, income tax receivable, accounts payable and growers payable and accrued liabilities. The changes in operating assets and liabilities, net of business combinations used $0.8 million of operating cash in fiscal year 2019 compared to using $0.5 million of operating cash in fiscal year 2018, primarily due to a decrease in cultural costs, an increase in prepaid expenses and other current assets, a net increase in accounts and growers payable and a decrease in accrued liabilities.

Cash Flows from Investing Activities

For the years ended October 31, 2020, 2019 and 2018, net cash provided by (used in) investing activities was $3.8 million, $(23.7) million and $(50.8) million, respectively, and is primarily comprised of capital expenditures, business acquisitions, sales of assets and investments.

•Capital expenditures for fiscal year 2020 were comprised of $10.6 million for property, plant and equipment primarily related to orchard and real estate development projects. Additionally, in fiscal year 2020, we received proceeds from sale of stock in Calavo of $11.0 million, proceeds from sales of property assets of $6.3 million and contributed $2.8 million to the Joint Venture for the development of our East Area I real estate development project.

•Capital expenditures for fiscal year 2019 were comprised of $14.1 million for property, plant and equipment primarily related to orchard and vineyard development and the purchase of a photovoltaic solar array and $1.8 million for real estate development projects. Additionally, in fiscal year 2019, we purchased an agriculture property for $0.4 million, contributed $4.0 million to the Joint Venture for the development of our East Area I real estate development project and paid $15.0 million for the Trapani Fresh joint venture formation in Argentina. Further, we sold 50,000 shares of stock in Calavo for $4.8 million and sold property assets and a real estate development parcel for $4.0 million and $2.9 million, respectively.

•Capital expenditures for fiscal year 2018 were comprised of $12.2 million for property, plant and equipment primarily related to orchard and vineyard development and $1.7 million for real estate development projects. Additionally, in fiscal year 2018, we purchased San Pablo for $13.1 million, Oxnard Lemon for $25.0 million, a real estate development parcel for $1.4 million and contributed $3.5 million to the Joint Venture for the development of our East Area I real estate development project. Further, we sold 50,000 shares of stock in Calavo for $4.7 million and a real estate development parcel for $1.5 million.

Cash Flows from Financing Activities

For the years ended October 31, 2020, 2019 and 2018 net cash provided by financing activities was $7.4 million, $22.4 million and $32.5 million, respectively.

•The $7.4 million of cash provided by financing activities for fiscal year 2020 is primarily comprised of net borrowings of long-term debt in the amount of $17.0 million. Additionally, we paid common and preferred dividends, in aggregate, of $5.9 million and purchases of shares of our common stock of $3.5 million under our share repurchase program in fiscal year 2020.

•The $22.4 million of cash provided by financing activities for fiscal year 2019 is primarily comprised of net borrowings of long-term debt in the amount of $28.9 million. Additionally, we paid common and preferred dividends, in aggregate, of $5.8 million in fiscal year 2019.

•The $32.5 million of cash provided by financing activities for fiscal year 2018 is primarily comprised of net proceeds from our public offering of common stock of $64.1 million partially offset by net repayments of long-term debt in the amount of $26.4 million. Additionally, we paid common and preferred dividends, in aggregate, of $4.5 million in fiscal year 2018.

Transactions Affecting Liquidity and Capital Resources

Our Company and Farm Credit West, FLCA (“Farm Credit West”) are parties to that certain Master Loan Agreement (the “Loan Agreement”), dated June 20, 2017, which includes a Revolving Credit Supplement and a Non-Revolving Credit Supplement (together, the “Supplements”).

On June 30, 2020, we entered into a Conversion Agreement with Farm Credit West to convert term loans to fixed interest rate loans effective July 1, 2020. No changes were made to the outstanding principal balances on the term loans and no cash repayments of principal we made by us. The rates are subject to a prepayment restriction period for a portion of the fixed rate term that will expire on January 1, 2021, after which we may prepay any amounts without penalty.

In March 2020, we entered into a revolving equity line of credit promissory note and loan agreement with Farm Credit West for a $15.0 million Revolving Equity Line of Credit (the "RELOC") secured by a first lien on the Windfall Investors, LLC property. The RELOC matures in 2043 and features a 3-year draw period followed by 20 years of fully amortized loan payments. The interest rate is variable with monthly interest-only payments during the 3-year draw period and monthly principal and interest payments thereafter.

The Supplements and RELOC provide aggregate borrowing capacity of $130.0 million comprised of $75.0 million under the Revolving Credit Supplement, $40.0 million under the Non-Revolving Credit Supplement and $15.0 million under the RELOC. The borrowing capacity based on collateral value was $130.0 million at October 31, 2020.

The interest rate for any amount outstanding under the Supplements is based on the one-month London Interbank Offered Rate (“LIBOR”) rate plus an applicable margin, which is subject to adjustment on a monthly basis. The applicable margin ranges from

1.60% to 2.35% depending on the ratio of current assets plus the remaining available commitment divided by current liabilities. On July 1 of each year, we have the option to convert the interest rate in use under each Supplement from the preceding LIBOR-based calculation to a variable interest rate, or the reverse, as applicable. Any amounts outstanding under the Supplements are due and payable in full on July 1, 2022.

All indebtedness under the Loan Agreement and RELOC with Farm Credit West, including any indebtedness under the Supplements, is secured by a first lien on certain of our agricultural properties in Tulare and Ventura counties in California and certain of our 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 that 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 our right to draw or request funds on any loan or line of credit.

The Loan Agreement subjects us to affirmative and restrictive covenants including, among other customary covenants, financial reporting requirements, requirements to maintain and repair any collateral, restrictions on the sale of assets, restrictions on the use of proceeds, prohibitions on the incurrence of additional debt and restrictions on the purchase or sale of major assets of our business.

Under the Loan Agreement, we are required to comply with a minimum debt service coverage ratio (as calculated in accordance with the Loan Agreement) of 1.25:1.0 measured as of October 31 each year. In May 2020, the Loan Agreement was amended to adjust the debt service ratio to 1.00:1.0 for October 31, 2020. In August 2020, Farm Credit West modified the covenant to defer measurement at October 31, 2020 and revert to a debt service coverage ratio of 1.25:1.0 measured as of October 31, 2021. We expect to be in compliance with these covenants in fiscal year 2021. We expect to be in compliance with these covenants in 2021.

In February 2020, we received an annual patronage dividend of $1.0 million from Farm Credit West, of which $0.7 million was recorded as a reduction in interest expense and $0.3 million reduced our real estate development assets. In July 2020, Farm Credit West declared an additional annual cash patronage dividend of $0.6 million received in August 2020, of which we recorded $0.4 million as a reduction in interest expense and $0.2 million reduction in our real estate development assets as of October 31, 2020.

In April 2020, we entered into a Promissory Note with City National Bank for a $3.6 million loan (the “PPP Loan”) pursuant to the Paycheck Protection Program under the CARES Act. The PPP Loan had a two-year term, an interest rate of 1.0% per annum, and was able to be prepaid at any time prior to maturity with no prepayment penalties. In April 2020, we returned the $3.6 million in proceeds from the PPP Loan.

We finance our working capital and other liquidity requirements primarily through cash from operations and our Farm Credit West Credit Facility, which includes the Loan Agreement, Supplements and RELOC. In addition, we have Farm Credit West term loans, the Wells Fargo term loan, the Banco de Chile term loan and a note payable to the sellers of a land parcel. Additional information regarding the Farm Credit West Credit Facility, the Farm Credit West term loans, the Wells Fargo term loan, the Banco de Chile term loan and the note payable can be found in the notes to consolidated financial statements included in this Annual Report.

We believe that the cash flows from operations and available borrowing capacity from our existing credit facilities will be sufficient to satisfy our capital expenditures, debt service, working capital needs and other contractual obligations for fiscal year 2021. In addition, we have the ability to control a portion of our investing cash flows to the extent necessary based on our liquidity demands.

Farm Credit West Credit Facility

As of October 31, 2020, our outstanding borrowings under the Farm Credit West Credit Facility were $102.3 million and we had $27.7 million of availability. The Farm Credit West revolving line of credit balance of $62.3 million currently bears interest at a variable rate equal to the one-month LIBOR plus 1.60%. The interest rate resets on the first of each month and was 1.75% at October 31, 2020. We have the ability to prepay any amounts outstanding under the Farm Credit West revolving line of credit without penalty. We have the option of fixing the interest rate under the Farm Credit West Credit Facility on any portion of outstanding borrowings using interest rate swaps.

Farm Credit West Term Loans

As of October 31, 2020, we had an aggregate of approximately $17.1 million outstanding under Farm Credit West Term Loans, which are further discussed here:

•Term Loan Maturing November 2022. As of October 31, 2020, we had $1.4 million outstanding under the Farm Credit West Term Loan that matures in November 2022. On July 1, 2020, the term loan was converted to a fixed rate of 2.48% and is payable in quarterly installments through November 2022. This term loan is secured by certain of our agricultural properties.

•Term Loan Maturing October 2035. As of October 31, 2020, Windfall had $1.0 million outstanding under the Farm Credit West Term Loan that matures in October 2035. On July 1, 2020, the term loan was converted to a fixed rate of 3.24% and is payable in monthly installments through October 2035. This term loan is secured by the Windfall Farms property.

•Term Loan Maturing March 2036. As of October 31, 2020, we had $8.4 million outstanding under the Farm Credit West Term Loan that matures in March 2036. On July 1, 2020, the term loan was converted to a fixed rate of 3.24% and is payable in monthly installments through March 2036. This term loan is secured by certain of our agricultural properties.

•Term Loan Maturing March 2036. As of October 31, 2020, we had $6.2 million outstanding under the Farm Credit West Term Loan that matures in March 2036. On July 1, 2020, this loan was converted to a fix rate of 2.77% until July 1, 2025, becoming variable for the remainder of the loan at a variable rate equal to an internally calculated rate based on Farm Credit West’s internal monthly operations and their cost of funds and generally follows the changes in the 90-day treasury rates in increments divisible by 0.25%. This term loan is payable in monthly installments through March 2036 and is secured by certain of our agricultural properties.

The Farm Credit West Term Loans contain various conditions, covenants and requirements with which our Company and Windfall must comply. In addition, our Company and Windfall are subject to limitations on, among other things, selling, abandoning or ceasing business operations; merging or consolidating with a third party; disposing of a substantial portion of assets by sale, transfer, gifts or lease except for inventory sales in the ordinary course of business; obtaining credit or loans from other lenders other than trade credit customary in the business; becoming a guarantor or surety on or otherwise liable for the debts or obligations of a third party; and mortgaging, pledging, leasing for over a year, or otherwise making or allowing the filing of a lien on any collateral.

Wells Fargo Term Loan

As of October 31, 2020, we had $3.5 million outstanding under the Wells Fargo Term Loan. This term loan bears interest at a fixed rate of 3.58% and is payable in monthly installments through January 2023. Certain equipment associated with our new lemon packing facilities secure this loan. The loan contains affirmative and restrictive covenants including, among other customary covenants, financial reporting requirements, requirements to maintain and repair any collateral, restrictions on the sale of assets, restrictions on the use of proceeds, prohibitions on the incurrence of additional debt and restrictions on the purchase or sale of major assets. We are also subject to a covenant that we will maintain a debt service coverage ratio greater than 1.25:1.0 measured annually at October 31, with which we were not in compliance at October 31, 2020. The non-compliance was waived by Wells Fargo. We expect to be in compliance with these covenants in fiscal year 2021.

Banco de Chile Term Loan

Through the acquisition of PDA in February 2017, we assumed a $1.7 million term loan with Banco de Chile that matures in January 2025. This term loan bears interest at a fixed rate of 6.48% and is payable in eight annual installments which began in January 2018. This loan is unsecured and contains certain pre-payment limitations.

Banco de Chile Small Business Guarantee Fund Loans

In July and September 2020, PDA and San Pablo entered into term loan agreements for an aggregate amount of approximately $0.5 million. These small business loans are guaranteed by the Chilean government in response to economic instability caused by the COVID-19 pandemic. The unsecured loans mature in July and September 2024, bear interest at fixed rates of 3.48% and 2.90% and are payable in monthly installments beginning February and April 2021, respectively.

Note Payable

In February 2018, we exercised an option to purchase a 7-acre parcel adjacent to our East Area II real estate development project. In connection with this purchase, we issued a note payable for $1.4 million secured by first deed of trust, payable to the sellers. The note is due in February 2023, with interest-only, monthly payments at interest rates ranging from 5.0% to 7.0% and was 6.0% at October 31, 2020.

Public Offering of Common Stock

In June 2018, we completed the sale of an aggregate of 3,136,000 shares of our common stock, at a price of $22.00 per share, to a limited number of institutional and other investors in a registered offering under the shelf registration statement. The offering represented 18% of our outstanding common stock on an after-issued basis as of June 25, 2018. Upon completion of the offering and issuance of common stock, we had 17,669,000 shares of common stock outstanding. The net proceeds from the sale of shares, after deducting underwriting discounts and our expenses related to the offering, were approximately $64.1 million. In June and July 2018, we used the offering proceeds to pay down debt, purchase San Pablo ranch and purchase Oxnard Lemon's packinghouse, related land and certain other assets.

Interest Rate Swaps

From time to time, we enter into interest rate swap agreements to manage the risks and costs associated with our financing activities.

Our debt bears interest at fixed and variable rates, ranging from 1.75% to 6.48% at October 31, 2020. As of October 31, 2020 and 2019, we had no outstanding interest rate swap agreements.

Treasury Stock

On March 12, 2020, the Board of Directors of our Company approved a share repurchase program authorizing us to repurchase up to $10.0 million of our outstanding shares of common stock through March 2021. Under the share repurchase program, purchases of shares of common stock may be made from time to time in the open market or in privately negotiated transactions. The share repurchase program may be modified, suspended or discontinued at any time and does not commit us to repurchase shares of our common stock. During fiscal year 2020, we repurchased 250,977 shares under the share repurchase program for approximately $3.5 million.

Real Estate Development Activities and Related Capital Resources

As noted under “Transactions Affecting Liquidity and Capital Resources,” we have the ability to control a portion of our investing cash flows to the extent necessary based upon our liquidity demands. In order for our real estate development operations to reach their maximum potential benefit to us, however, we will need to be successful over time in identifying other third party sources of capital to partner with us to move those development projects forward. While we are frequently in discussions with potential external sources of capital in respect to all of our development projects, current market conditions for California real estate projects, while improving, continue to be challenging and make it difficult to predict the timing and amounts of future capital that will be required to complete the development of our projects.

In November 2015, we entered into the Joint Venture with Lewis for the residential development of our East Area I real estate development project. To consummate the transaction, we formed LLCB as the development entity, contributed our East Area I property to the Joint Venture and sold a 50% interest in the Joint Venture to Lewis for $20.0 million. We expect to receive approximately $100.0 million from the Joint Venture over the estimated 10 to 12-year life of the project including $20.0 million received on the consummation of the Joint Venture. The Joint Venture partners will share in capital contributions to fund project costs until loan proceeds and/or revenues are sufficient to fund the project. Since inception each Joint Venture partner has made funding contributions of $21.4 million, including $2.8 million, $4.0 million and $3.5 million in fiscal years 2020, 2019 and 2018, respectively. The first phase of the project broke ground to commence mass grading in November 2017. Project plans include approximately 1,500 residential units with 632 residential units in Phase 1 and site improvements substantially completed. Lot sales representing a total of 144 and 210 residential units closed in fiscal years 2020 and 2019, respectively. The Joint Venture closed on an additional 44 units in the first quarter of fiscal year 2021 and 354 residential units have closed from the projects inception to October 31, 2020.

Trend Information

Agribusiness Division

The worldwide fresh produce industry has historically enjoyed consistent underlying demand and favorable growth dynamics. In recent years, the market for fresh produce has increased faster than the rate of population growth, supported by ongoing trends including greater consumer demand for healthy, fresh and convenient foods, increased retailer square footage devoted to fresh produce, and greater emphasis on fresh produce as a differentiating factor in attracting customers. Health-conscious consumers are driving much of the growth in demand for fresh produce. Over the past several decades, the benefits of natural, preservative-free and

organic foods have become an increasingly significant element of the public dialogue on health and nutrition. As a result, consumption of fresh fruit and vegetables has markedly increased.

According to the USDA, U.S. per capita consumption of fresh lemons was 4.9 pounds in 2019, and since 2000, has averaged 3.4 pounds per capita versus 2.7 pounds per capita in the 1990s. Approximately 73% of the California crop has gone into the fresh market in the past decade. The fresh market is significantly more profitable than the processed market and the amount of production sold in the fresh market is referred to as fresh utilization. Our fresh utilization has historically been comparable to the California industry average and we expect that our fresh utilization will increase due to increased flexibility to sell lemons directly to food service wholesale and retail customers and increased customer interaction resulting from our direct lemon sales strategy.

According to the USDA, U.S. per capita consumption of avocados was 7.9 pounds in 2019, and since 2000, has averaged 4.9 pounds per capita versus 1.6 pounds per capita in the 1990's. A growing Hispanic population, an increasing awareness of healthier foods and the acceptance of mono-unsaturated fats has helped to spur demand for avocados. California is the largest U.S. producer of avocados producing approximately 87% of the nation's avocados. According to the California Avocado Commission, the 2020 crop produced approximately 376 million pounds compared to 217 million pounds in 2019, 338 million pounds in 2018 and the ten year average of 339 million pounds.

Navel oranges comprise most of California’s orange crop, accounting for approximately 82% over the past three growing seasons. Valencia oranges account for a vast majority of the remainder of California’s orange crop. While California produces approximately 44% of the nation’s oranges, its crop accounts for approximately 91% of those going to the fresh market. The share of California’s crop going to fresh market, as opposed to the processed market (i.e., juices, oils and essences) varies by season, depending on the quality of the crop.

Real Estate Development Division

We incurred impairment charges on one of our real estate development projects in fiscal years 2018 and future impairment is possible. No impairment charges were recorded in fiscal year 2020 or 2019. Due to these factors, we anticipate maintaining a cautious and patient perspective with respect to our real estate development activities. However, interest rates are also at historically low levels, which provide a favorable buying opportunity for potential home buyers. Additionally, we believe that our real estate development properties have certain unique characteristics and are located in desirable locations, particularly East Area I, and as economic or real estate market conditions improve or other factors arise, we will take advantage of such opportunities to develop our properties.

Contractual Obligations and Off-Balance Sheet Arrangements

The following table presents our contractual obligations at October 31, 2020, for which cash flows are fixed and determinable (in thousands):

Payments due by Period

Total < 1 year 1-3 years 3-5 years 5+ years

We believe that the cash flows from operations and borrowing capacity from existing and available credit facilities will be sufficient to satisfy our future capital expenditure, debt service, working capital and other contractual obligations for fiscal year 2021. In addition, we have the ability to control a portion of our investing cash flows to the extent necessary based on our liquidity demands.

Fixed Rate and Variable Rate Debt

Details of amounts included in long-term debt can be found above and in the accompanying notes to consolidated financial statements included in this Annual Report. The table above assumes that long-term debt is held to maturity.

Interest Payments on Fixed and Variable Debt

The above table assumes that our fixed rate and long-term debt is held to maturity.

Preferred Stock Dividends

In 1997, in connection with the acquisition of Ronald Michaelis Ranches, Inc., we issued 30,000 shares of Series B Convertible Preferred Stock at $100 par value (the “Series B Stock”), of which 14,790 shares are currently outstanding. The holders of the Series B Stock are entitled to receive cumulative cash dividends at an annual rate of 8.75% of par value. Such dividends are payable quarterly on the first day of January, April, July and October in each year and totaled $0.1 million in each of the fiscal years 2020, 2019 and 2018, respectively.

In 2014, we issued, in aggregate, 9,300 shares of Series B-2 Preferred Stock at $100 par value (the “Series B-2 Preferred Stock”). The holders of the Series B-2 Preferred Stock are entitled to receive cumulative cash dividends at an annual rate of 4% of the liquidation value of $1,000 per share. Such dividends are payable quarterly on the first day of January, April, July and October in each year and totaled $0.4 million in each of the fiscal years 2020, 2019 and 2018, respectively.

Defined Benefit Pension Plan

We have a noncontributory, defined benefit, single employer pension plan (the “Plan”), which provides retirement benefits for all eligible employees of our Company. Effective June 2004, we froze the Plan and no additional benefits accrued to participants subsequent to that date. We may make discretionary contributions to the Plan and we may be required to make contributions to adhere to applicable regulatory funding provisions, based in part on the Plan’s asset valuations and underlying actuarial assumptions. We made funding contributions of zero, $0.6 million and $0.6 million in fiscal years 2020, 2019 and 2018, respectively and we do not plan to contribute to the Plan in fiscal year 2021.

Operating Lease Obligations

We have numerous operating lease commitments with remaining terms ranging from less than one year to 17 years. We lease machinery and equipment for our packing operations and other land for our agricultural operations. Further information regarding our Company leases can be found in Note 13, "Leases" of the notes to consolidated financial statements included in this Annual Report.

Real Estate Development Activities, Capital Expenditures and Related Capital Resources

On November 10, 2015 (the “Transaction Date”), we entered into the Joint Venture with Lewis for the residential development of our East Area I real estate development project. To consummate the transaction, we formed LLCB as the development entity, contributed our East Area I property to the Joint Venture and sold a 50% interest in the Joint Venture to Lewis for $20.0 million.

The Joint Venture agreement provides that Lewis will serve as the manager of the Joint Venture with the right to manage, control and conduct its day-to-day business and development activities. Certain major decisions, which are enumerated in the Joint Venture agreement, require approval by an executive committee comprised of two representatives appointed by Lewis and two representatives appointed by Limoneira.

Pursuant to the Joint Venture agreement, the Joint Venture will own, develop, subdivide, entitle, maintain, improve, hold for investment, market and dispose of the Joint Venture’s property in accordance with the business plan and budget approved by the executive committee.

Further, on the Transaction Date, the Joint Venture and Limoneira entered into a lease agreement (the "Lease Agreement"), pursuant to which the Joint Venture leased certain of the contributed East Area I property back to Limoneira for continuation of agricultural operations, and certain other permitted uses, on the property until the Joint Venture required the property for development. Limoneira terminated this Lease Agreement per the agreement in fiscal year 2019.

Limoneira and the Joint Venture entity 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 will transfer certain contributed East Area I property, which is entitled for commercial development, back to Limoneira (the "Retained Property") and arrange for the design and construction of certain improvements to the Retained Property, subject to certain reimbursements by Limoneira. In August 2018, the Retained Property was transferred back to Limoneira.

We expect to receive approximately $100.0 million from the Joint Venture over the estimated 10 to 12-year life of the project including $20.0 million received on the consummation of the Joint Venture. The Joint Venture partners will share in capital contributions to fund project costs until project loan proceeds and or revenues are sufficient to fund the project. Since inception, each Joint Venture partner has made funding contributions of $21.4 million, including $2.8 million, $4.0 million and $3.5 million in fiscal years 2020, 2019 and 2018, respectively.

In January 2018, the Joint Venture entered into a $45.0 million unsecured Line of Credit Loan Agreement and Promissory Note (the “Loan”) with Bank of America, N.A. to fund early development activities. The Loan matures in January 2020, with an option to extend the maturity date until 2021, subject to certain conditions. The interest rate on the Loan is LIBOR plus 2.85%, payable monthly. The Loan contains certain customary default provisions and the Joint Venture may prepay any amounts outstanding under the Loan without penalty. In February 2018, the obligations under the Loan were guaranteed by certain principals from Lewis and by us. The Joint Venture recorded a $30.4 million outstanding loan balance at October 31, 2020 related to this Loan.

As noted above under “Transactions Affecting Liquidity and Capital Resources,” we have the ability to control the timing of a portion of our investing cash flows to the extent necessary based upon our liquidity demands. In order for our real estate development operations to reach their maximum potential benefit to our Company, however, we will need to be successful over time in identifying other third-party sources of capital to partner with us to move those development projects forward. While we are frequently engaged in discussions with several external sources of capital in respect of all of our development projects, current market conditions for California real estate projects, while improving, continue to be challenging and make it difficult to predict the timing and amounts of future capital that will be required to complete the development of our projects.

Off-Balance Sheet Arrangements

As discussed in Note 7 – Real Estate Development and Note 8 – Equity in Investments of the notes to consolidated financial statements included in this Annual Report, we have investments in joint ventures and partnerships that are accounted for using the equity method of accounting.

Inflation

Historically, inflation has not had a material effect on our results of operations. However, significant increases in inflation, including in Argentina, could have an adverse impact on our business, financial condition and results of operations.

Critical Accounting Policies

The preparation of our consolidated financial statements in accordance with GAAP requires us to develop critical accounting policies and make certain estimates and judgments that may affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates and judgments on historical experience, available relevant data and other information that we believe to be reasonable under the circumstances. Actual results may materially differ from these estimates under different assumptions or conditions as new or additional information become available in future periods. We believe the following critical accounting policies reflect our more significant estimates and judgments used in the preparation of our consolidated financial statements.

Revenue Recognition - On November 1, 2018, we adopted FASB 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.

We determined the appropriate method by which we recognize 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. We account 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.

We recognize 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, we changed the accounting of certain brokered fruit sales. Under previous guidance, we were 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, we are 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 within the fresh lemons segment of $8.8 million for the year ended October 31, 2019. Had we used the previous revenue recognition guidance, we would have recorded insignificant net agribusiness revenue for these transactions for the year ended October 31, 2019. No cumulative adjustment to retained earnings was necessary, as there is no net effect to the consolidated statement of operations.

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

Our avocados, oranges, specialty citrus and other specialty crops are packed and sold by Calavo and other third-party packinghouses. We deliver the majority of our avocado production from our 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. Our Company’s arrangements with other third-party packinghouses related to our oranges, specialty citrus and other specialty crops are similar to our arrangement with Calavo. Our arrangements with our third-party packinghouses are such that we are the producer and supplier of the product and the third-party packinghouses are our customers.

The revenues we recognize 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. We control 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 we receive from the third-party packinghouses for packaging and marketing services cannot be sufficiently separated from the third-party packinghouses’ purchase of our products. In addition, we are 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 our agricultural products is recorded based on estimated proceeds provided by certain of the our sales and marketing partners (Calavo and other third-party packinghouses) due to the time between when the product is delivered by us 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. We estimate 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 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 we have 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. We do 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 us 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.

Revenue from crop insurance proceeds is recorded when the amount can be reasonably determined and upon establishment of the present right to payment. We recorded agribusiness revenues from crop insurance proceeds of zero, $2.3 million and $0.1 million in fiscal years 2020, 2019 and 2018, respectively.

Rental Operations 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 us 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. Our rental arrangements generally require payment on a monthly or quarterly basis.

Real Estate Development Costs - We capitalize the planning, entitlement, construction and development costs and interest associated with our various real estate projects. Costs that are not capitalized, which include property maintenance and repairs, general and administrative and marketing expenses, are expensed as incurred. A real estate development project is considered substantially complete upon the cessation of construction and development activities. Once a project is substantially completed, future costs are expensed as incurred. Costs incurred to sell the real estate are evaluated for capitalization in accordance with ASC 340-40, and incremental costs of obtaining a contract and costs to fulfill a contract are capitalized only if the costs relate directly to a specifically identified contract, enhance resources to satisfy performance obligations in the future and are expected to be recovered.

Financing and payment - Our payment terms vary by the type and location of our customer and the products or services offered. Payment terms differ by jurisdiction and customer but payment is generally required in a term ranging from 30 to 60 days from date of shipment or satisfaction of the performance obligation. We do not provide financing with extended payment terms beyond generally standard commercial payment terms for the applicable industry.

Practical expedients and exemptions - Taxes collected from customers and remitted to government authorities and that are related to the sales of our products are excluded from revenues.

Foreign Currency Translation- PDA and San Pablo’s functional currency is the Chilean Peso. Their balance sheets are translated to U.S. dollars at exchange rates in effect at the balance sheet date and their income statements are translated at average exchange rates during the reporting period. The resulting foreign currency translation adjustments are recorded as a separate component of accumulated other comprehensive income.

Income Taxes - Deferred income tax assets and liabilities are computed annually for differences between the financial statement and income tax basis of assets and liabilities that will result in taxable or deductible amounts in the future. Such deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to affect taxable income. A valuation allowance is established, when necessary, to reduce deferred income tax assets to the amount expected to be realized.

Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

Business Combinations and Asset Acquisitions - Business Combinations are accounted for under the acquisition method in accordance with ASC 805, Business Combinations. The acquisition method requires identifiable assets acquired and liabilities assumed and any noncontrolling interest in the business acquired be recognized and measured at fair value on the acquisition date, which is the date that the acquirer obtains control of the acquired business. The amount by which the fair value of consideration transferred as the purchase price exceeds the net fair value of assets acquired and liabilities assumed is recorded as goodwill. Acquisitions that do not meet the definition of a business under the ASC are accounted for as asset acquisitions. Asset acquisitions are accounted for by allocating the cost of the acquisition to the individual assets acquired and liabilities assumed on a relative fair value basis. Goodwill is not recognized in an asset acquisition with any consideration in excess of net assets acquired allocated to acquired assets on a relative fair value basis. Transaction costs are expensed in a business combination and are considered a component of the cost of the acquisition in an asset acquisition.

Impairment of Long-Lived Assets - We evaluate our long-lived assets including our real estate development projects, for impairment when events or changes in circumstances indicate the carrying value of these assets may not be recoverable. As a result of various factors, in recent years, we recorded impairment charges of $1.6 million in fiscal year 2018. There were no impairment charges recorded in fiscal years 2020 or 2019.

Defined Benefit Retirement Plan - As discussed in the notes to our consolidated financial statements, we sponsor a defined benefit retirement plan that was frozen in June 2004, and no future benefits have been accrued to participants subsequent to that time. Ongoing accounting for this plan under FASB ASC 715, Compensation – Retirement Benefits, provides guidance as to, among other things, future estimated pension expense, pension liability and minimum funding requirements. This information is provided to us by third-party actuarial consultants. In developing this data, certain estimates and assumptions are used, including among other things, discount rate, long-term rate of return on assets and mortality tables. During 2020, the Society of Actuaries (SOA) released a new mortality improvement scale table, referred to as MP-2020, which is believed to better reflect mortality improvements and is to be used in calculating defined benefit pension obligations. In addition, during fiscal year 2020, the assumed discount rate to measure the pension obligation decreased to 2.5%. We used the latest mortality tables released by the SOA through October 2020 to measure our pension obligation as of October 31, 2020 and combined with the assumed discount rate and other demographic assumptions, our pension liability increased by approximately $0.5 million as of October 31, 2020. Further changes in any of these estimates could materially affect the amounts recorded that are related to our defined benefit retirement plan.

Recent Accounting Pronouncements

See Note 2, "Summary of Significant Accounting Policies" of the notes to consolidated financial statements included in this Annual Report for information concerning recent accounting pronouncements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

Borrowings under the Farm Credit West Credit Facility and Farm Credit West Term Loans are or will be subject to variable interest rates. These variable interest rates subject us to the risk of increased interest costs associated with any upward movements in interest rates. For the Farm Credit West Credit Facility and Farm Credit West Term Loans, our borrowing interest rate is an internally calculated rate based on Farm Credit West’s internal monthly operations and their cost of funds and generally follows the changes in the 90-day treasury rates in increments divisible by 0.25%. At October 31, 2020, our total debt outstanding under the Farm Credit West Credit Facility and the Farm Credit West Term Loans was $102.3 million and $17.1 million, respectively.

From time to time we enter into interest rate swap agreements to manage risks and costs associated with our financing activities.

Based on our level of borrowings at October 31, 2020, a 100 basis points increase in interest rates would increase our interest expense $0.6 million for fiscal year 2021 and an annual average of $0.1 million for the three subsequent fiscal years. Additionally, a 100 basis points increase in the interest rate would decrease our net income by $0.5 million for fiscal year 2021 and an annual average of $0.1 million for the three subsequent fiscal years. Refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” for additional information.

Item 8. Financial Statements and Supplementary Data

Limoneira Company

Index to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firms 60

Consolidated Financial Statements of Limoneira Company

Notes to Consolidated Financial Statements 68

All schedules are omitted for the reason that they are not applicable or the required information is included in the Consolidated Financial Statements or the notes thereto.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of Limoneira Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Limoneira Company and subsidiaries (the "Company") as of October 31, 2020 and October 31, 2019, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity and temporary equity, and cash flows, for each of the two years in the period ended October 31, 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, based on our audits and the report of the other auditors, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2020 and October 31, 2019, and the results of its operations and its cash flows for each of the two years in the period ended October 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We did not audit the financial statements of Limoneira Lewis Community Builders, LLC (“LLCB”), the Company's investment which is accounted for by use of the equity method. The accompanying financial statements of the Company include its equity investment in LLCB of $46,908,000 and $42,722,000 as of October 31, 2020 and 2019, respectively, and its equity earnings in LLCB of $1,386,000 and $4,368,000 000 for the years ended October 31, 2020 and 2019, respectively. The financial statements of LLCB were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for LLCB, is based solely on the report of the other auditors.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of October 31, 2020, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated January 14, 2021, expressed an adverse opinion on the Company's internal control over financial reporting because of a material weakness.

Change in Accounting Principles

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for leases effective November 1, 2019 due to adoption of Accounting Standards Update ("ASU") No. 2016-02, Leases.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Los Angeles, California

January 14, 2021

We have served as the Company’s auditor since 2019.

Report of Independent Registered Public Accounting Firm

The Stockholders and Board of Directors of Limoneira Company

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of operations, comprehensive (loss) income, stockholders' equity and temporary equity, and cash flows for the year ended October 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended October 31, 2018, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We served as the Company’s auditor from 2006 to 2018.

Los Angeles, California

January 14, 2019

LIMONEIRA COMPANY

CONSOLIDATED BALANCE SHEETS

($ in thousands, except share amounts)

October 31,

Assets

Current assets:

Prepaid expenses and other current assets 10,688 8,153

Receivables/other from related parties 2,294 2,985

Investment in Calavo Growers, Inc. — 17,346

Liabilities and Stockholders' Equity

Current liabilities:

Payables to related parties 6,273 906

Current portion of long-term debt 3,277 3,023

Long-term liabilities:

Commitments and contingencies — —

Stockholders' equity:

Accumulated other comprehensive loss (7,548) (7,255)

Total Liabilities and Stockholders' Equity $ 389,600 $ 399,867

See Notes to Consolidated Financial Statements.

LIMONEIRA COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

($ in thousands, except share amounts)

Years Ended October 31,

Net revenues:

Costs and expenses:

Impairment of real estate development assets — — 1,558

Loss (gain) on sale and disposal of property assets 502 (1,069) —

Other (expense) income:

Equity in earnings of investments, net 339 3,073 583

(Loss) gain on stock in Calavo Growers, Inc. (6,299) (2,117) 4,223

Loss (income) attributable to noncontrolling interest 1,506 (477) (24)

Net (loss) income attributable to Limoneira Company (16,435) (5,943) 20,188

Net (loss) income applicable to common stock $ (16,936) $ (6,444) $ 19,687

Basic net (loss) income per common share $ (0.96) $ (0.37) $ 1.26

Diluted net (loss) income per common share $ (0.96) $ (0.37) $ 1.25

See Notes to Consolidated Financial Statements.

LIMONEIRA COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands)

Years Ended October 31,

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments (707) (1,103) (1,255)

Residual state tax effects on sale of equity securities 140 — —

Total other comprehensive (loss) income, net of tax (293) (1,710) 1,889

See Notes to Consolidated Financial Statements.

LIMONEIRA COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND TEMPORARY EQUITY

($ in thousands)

Stockholders’ Equity Temporary Equity

Shares Amount Capital Earnings Income (Loss) Stock Interest Total Stock Stock

Dividends - common ($0.25 per share) — — — (4,025) — — — (4,025) — —

Dividends - Series B ($8.75 per share) — — — (129) — — — (129) — —

Dividends - Series B-2 ($40 per share) — — — (372) — — (372) — —

Exchange of common stock (39,582) — (656) — — — — (656) — —

Noncontrolling interest — — — — — — (37) (37) — —

Other comprehensive income, net of tax — — — — 1,889 — — 1,889 — —

Dividends - common ($0.30 per share) — — — (5,331) — — — (5,331) — —

Dividends - Series B ($8.75 per share) — — — (129) — — — (129) — —

Dividends - Series B-2 ($40 per share) — — — (372) — — — (372) — —

Exchange of common stock (36,692) — (606) — — — — (606) — —

Issuance of common stock — — — — — — — — — —

Acquired noncontrolling interest — — — — — — 14,410 14,410 — —

Other comprehensive income, net of tax — — — — (1,710) — (39) (1,749) — —

Reclassification upon adoption of ASU 2018-02 — — — (1,411) 1,411 — — — — —

Dividends - common ($0.30 per share) — — — (5,356) — — — (5,356) — —

Dividends - Series B ($8.75 per share) — — — (129) — — — (129) — —

Dividends - Series B-2 ($40 per share) — — — (372) — — — (372) — —

Exchange of common stock (11,314) — (213) — — — — (213) — —

Noncontrolling interest adjustment — — — — — — (145) (145) — —

Other comprehensive income, net of tax — — — — (293) — (30) (323) — —

See Notes to Consolidated Financial Statements

LIMONEIRA COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Years Ended October 31,

Operating activities

Impairment of real estate development assets — — 1,558

Loss (gain) on sale and disposals of property assets 502 (1,069) 153

Non-cash lease expense 470 — —

Equity in earnings of investments (339) (3,073) (583)

Cash distributions from equity investments — 351 526

Loss (gain) on stock in Calavo Growers, Inc. 6,299 2,117 (4,223)

Changes in operating assets and liabilities, net of business combinations:

Prepaid expenses and other current assets (44) (2,548) 99

Accrued liabilities and payables to related parties (685) 1,459 2,601

Other long-term liabilities (242) 117 (2)

Net cash (used in) provided by operating activities (11,317) 1,365 18,397

Investing activities

Purchase of real estate development parcel — — (1,444)

Net proceeds from sales of property assets 6,261 3,978 —

Net proceeds from sales of real estate development assets — 2,886 1,543

Agriculture property acquisitions — (397) (13,111)

Net proceeds from sale of stock in Calavo Growers, Inc. 11,048 4,785 4,721

Loan to Limoneira Lewis Community Builders, LLC (1,800) — —

Collections on loan and note receivable 1,800 150 200

Cash distribution from equity investment — 283 —

Investments in mutual water companies and water rights (64) (472) (343)

LIMONEIRA COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In thousands)

Years Ended October 31,

Financing activities

Purchase of treasury stock (3,493) — —

Issuance of common stock — — 64,097

Payments of deferred financing costs (66) (35) —

Effect of exchange rate changes on cash (5) (137) (21)

Supplemental disclosures of cash flow information

Non-cash investing and financing activities:

Unrealized holding gain on Calavo investment $ — $ — $ (6,765)

Non-cash receipt of note receivable $ — $ — $ 3,000

Non-cash reduction of note receivable $ — $ 89 $ 79

Capital expenditures accrued but not paid at year-end $ 4,269 $ 1,333 $ 399

Non-cash issuance of notes 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 Annual Report on Form 10-K.

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 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 received a $3,000,000 promissory note secured by the property for the balance of the purchase price.

See Notes to Consolidated Financial Statements.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business

Limoneira Company (together with its consolidated subsidiaries, the “Company”)engages primarily in growing citrus and avocados, 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, Europe 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 the majority 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. Calavo packs the Company's avocados, which are then sold and distributed under Calavo brands to its customers.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and the accounts of all the subsidiaries and investments in which the Company holds a controlling interest. The consolidated financial statements represent the consolidated balance sheets, statements of operations, statements of comprehensive income, statements of stockholders’ equity and temporary equity and statements of cash flows of Limoneira Company and consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company considers the criteria established under the Financial Accounting Standards Board (“FASB”) – Accounting Standards Code (“ASC”) 810, Consolidations, and the effect of variable interest entities, in its consolidation process.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Accounts Receivable

The Company grants credit in the course of its operations to cooperatives, companies and lessees of the Company’s facilities. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. The Company provides allowances on its receivables as required based on accounts receivable aging and other factors. At October 31, 2020 and 2019 the allowances totaled $812,000 and $631,000, respectively. For fiscal years 2020, 2019 and 2018, credit losses were insignificant.

Concentrations and Geographic Information

The Company sells the majority of its avocado production to Calavo. Sales of avocados to Calavo were $8,806,000, $3,080,000 and $6,576,000 in fiscal years 2020, 2019 and 2018, respectively. The Company sells the majority of its oranges and specialty citrus to a third-party packinghouse.

Concentrations of credit risk with respect to revenues and trade receivable are limited due to a large, diverse customer base. One individual customer represented 10% of revenue for the year ended October 31, 2020. One individual customer represented more than 10% of accounts receivable, net as of October 31, 2020, respectively.

Lemons procured from third-party growers were approximately 60%, 60% and 45% of the Company's lemon supply in fiscal years 2020, 2019 and 2018, respectively. One third-party grower was 39% and 40% of grower payable at October 31, 2020 and 2019, respectively.

The Company maintains its cash in federally insured financial institutions. The account balances at these institutions periodically exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of risk related to amounts on deposit in excess of FDIC insurance coverage.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. Summary of Significant Accounting Policies (continued)

Concentrations and Geographic Information (continued)

During fiscal years 2020, 2019 and 2018, the Company had approximately $3,521,000, $3,204,000 and $2,800,000, respectively, of total sales in Chile by Fruticola Pan de Azucar S.A. (“PDA”) and Agricola San Pablo SpA. ("San Pablo"). During fiscal years 2020 and 2019, the Company had approximately $14,150,000 and $14,651,000, respectively, of total sales in Argentina by Trapani Fresh. The majority of our avocados, oranges and specialty citrus and other crops are sold to packinghouses and processors located in the United States. Most of our long-lived assets are located within the United States. Long-lived assets, net of accumulated depreciation, located in Chile were $15,261,000 and $15,600,000 as of October 31, 2020 and 2019, respectively, and located in Argentina were $18,576,000 and $18,700,000 as of October 31, 2020 and 2019, respectively.

Cultural Costs

Growing costs, also referred to as cultural costs, consist of orchard maintenance costs such as cultivation, fertilization and soil amendments, pest control, pruning and irrigation. Harvest costs are comprised of labor and equipment expenses incurred to harvest and deliver crops to the packinghouses.

Certain of the Company's crops have distinct growing periods and distinct harvest and selling periods, each of which lasts approximately four to eight months. During the growing period, cultural costs are capitalized as they are associated with benefiting and preparing the crops for the harvest and selling period. During the harvest and selling period, harvest costs and cultural costs are expensed when incurred and capitalized cultural costs are amortized as components of agribusiness costs and expenses.

Due to climate, growing conditions and the types of crops grown, certain of the Company's other crops may be harvested and sold on a year-round basis. Accordingly, the Company does not capitalize cultural costs associated with these crops and therefore such costs, as well as harvest costs associated with these crops, are expensed to operations when incurred as components of agribusiness costs and expenses.

Most cultural costs, including amortization of capitalized cultural costs, and harvest costs are associated with and charged to specific crops. Certain other costs, such as property taxes, indirect labor, including farm supervision and management, and irrigation that benefit multiple crops are allocated to crops on a per acre basis.

Income Taxes

Deferred income tax assets and liabilities are computed annually for differences between the financial statement and income tax basis of assets and liabilities that will result in taxable or deductible amounts in the future. Such deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to affect taxable income. A valuation allowance is established, when necessary, to reduce deferred income tax assets to the amount expected to be realized.

Property, Plant and Equipment

Property, plant and equipment is stated at original cost, net of accumulated depreciation. Depreciation is computed using the straight-line method at rates based upon the estimated useful lives of the related assets as follows (in years):

Land improvements 10 – 30

Buildings and building improvements 10 – 50

Equipment 5 – 20

Orchards and vineyards 20 – 40

Costs of planting and developing orchards are capitalized until the orchards become commercially productive. Planting costs consist primarily of the costs to purchase and plant nursery stock. Orchard development costs consist primarily of maintenance costs of orchards such as cultivation, pruning, irrigation, labor, spraying and fertilization, and interest costs during the development period. The Company ceases the capitalization of costs and commences depreciation when the orchards become commercially productive and orchard maintenance costs are accounted for as cultural costs as described above.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. Summary of Significant Accounting Policies (continued)

Capitalized Interest

Interest is capitalized on real estate development projects and significant construction in progress using the weighted average interest rate during the fiscal year. Interest of $921,000 and $1,369,000 was capitalized during the years ended October 31, 2020 and 2019, respectively, and is included in property, plant, and equipment and real estate development assets in the Company’s consolidated balance sheets.

Real Estate Development Costs

The Company capitalizes the planning, entitlement, construction, development costs and interest associated with its various real estate projects. Costs that are not capitalized, which include property maintenance and repairs, general and administrative and marketing expenses, are expensed as incurred. A real estate development project is considered substantially complete upon the cessation of construction and development activities. Once a project is substantially completed, future costs are expensed as incurred. The Company capitalized costs related to its real estate projects of $4,034,000 and $1,797,000 in fiscal years 2020 and 2019, respectively.

Equity in Investments

Investments in unconsolidated joint ventures in which the Company has significant influence but less than a controlling interest, or is not the primary beneficiary if the joint venture is determined to be a Variable Interest Entity (“VIE”), are accounted for under the equity method of accounting and, accordingly, are adjusted for capital contributions, distributions and the Company’s equity in net earnings or loss of the respective joint venture.

Equity Securities

The Company’s equity securities, are stated at fair value with unrealized gains (losses) reported in net income. The Company has no equity securities as of October 31, 2020. At October 31, 2019, equity securities were comprised of the Company’s investment in Calavo.

Long-Lived and Intangible Assets

Intangible assets consist primarily of customer relationships, trade names and trademarks and a non-competition agreement. The Company’s definite-life intangible assets are being amortized on a straight-line basis over their estimated lives ranging from eight to nine years. Acquired water and mineral rights are indefinite-life assets not subject to amortization. Assets held for sale are carried at the lower of cost or fair value less estimated cost to sell.

The Company evaluates long-lived assets, including its definite-life intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated fair value or undiscounted future cash flows from the use of an asset are less than the carrying value of that asset, a write-down is recorded to reduce the carrying value of the asset to its fair value. The Company evaluates its indefinite-life intangible assets annually or whenever events or changes in circumstances indicate an impairment of the assets’ value may exist.

Goodwill

Goodwill is tested for impairment on an annual basis or when an event or changes in circumstances indicate that its carrying value may not be recoverable. Goodwill impairment is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Goodwill impairment testing involves significant judgment and estimates. The annual assessment of goodwill impairment was performed as of July 31, 2020 with no impairment recorded.

Fair Values of Financial Instruments

The fair values of financial instruments are based on level-one indicators within the fair value hierarchy or quoted market prices, where available, or are estimated using the present value or other valuation techniques. Estimated fair values are significantly affected by the assumptions used.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. Summary of Significant Accounting Policies (continued)

Fair Values of Financial Instruments (continued)

Accounts receivable, note receivable, accounts payable, growers payable and accrued liabilities reported on the Company’s consolidated balance sheets approximate their fair values due to the short-term nature of the instruments.

Based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities, the fair value of long-term debt is approximately equal to its carrying amount as of October 31, 2020 and 2019.

Business Combinations and Asset Acquisitions

Business combinations are accounted for under the acquisition method in accordance with ASC 805, Business Combinations. The acquisition method requires identifiable assets acquired and liabilities assumed and any noncontrolling interest in the business acquired be recognized and measured at fair value on the acquisition date, which is the date that the acquirer obtains control of the acquired business. The amount by which the fair value of consideration transferred as the purchase price exceeds the net fair value of assets acquired and liabilities assumed is recorded as goodwill. Acquisitions that do not meet the definition of a business are accounted for as asset acquisitions. Asset acquisitions are accounted for by allocating the cost of the acquisition to the individual assets acquired and liabilities assumed on a relative fair value basis. Goodwill is not recognized in an asset acquisition with any consideration in excess of net assets acquired allocated to acquired assets on a relative fair value basis. Transaction costs are expensed in a business combination and are considered a component of the cost of the acquisition in an asset acquisition.

Comprehensive (Loss) Income

Comprehensive (loss) income represents all changes in a company’s net assets, except changes resulting from transactions with shareholders. Other comprehensive income or loss primarily includes foreign currency translation items, defined benefit pension items and unrealized gains or losses on available for sale securities. Accumulated other comprehensive (loss) income is reported as a component of the Company's stockholders' equity.

The following table summarizes the changes in other comprehensive (loss) income by component (in thousands):

Minimum pension liability adjustments:

Available-for-sale securities:

Derivative instruments:

Other comprehensive gain before reclassifications — — — — — — 242 (79) 163

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. Summary of Significant Accounting Policies (continued)

Accumulated Other Comprehensive (Loss) Income

The following table summarizes the changes in accumulated other comprehensive (loss) income by component (in thousands):

Other comprehensive (loss) income (1,103) (607) — — (1,710)

Foreign Currency Translation

San Pablo and PDA’s functional currency is the Chilean Peso. Their balance sheets are translated to U.S. dollars at exchange rates in effect at the balance sheet date and their income statements are translated at average exchange rates during the reporting period. The resulting foreign currency translation adjustments are recorded as a separate component of accumulated other comprehensive (loss) income.

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.

•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 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.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. Summary of Significant Accounting Policies (continued)

LMNR US Equity

LMNR · 10-K · period ended 2020-10-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

LMNR US Equity☆

LMNR · 10-K · period ended 2020-10-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

LMNR US Equity