Limoneira Company: Limoneira Company Announces Third Quarter and Nine Months Fiscal Year 2015 Financial Results

Tickers: LMNR
September 9, 2015
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SANTA PAULA, Calif.--(BUSINESS WIRE)-- Limoneira Company (the "Company" or "Limoneira") (NASDAQ: LMNR), a leading agribusiness with prime agricultural land and operations, real estate and water rights in California and Arizona, today reported financial results for the third quarter and nine months ended July 31, 2015.

Fiscal Year 2015 Third Quarter Results

For the third quarter of fiscal year 2015, revenue was $29.8 million, compared to revenue of $36.5 million in the third quarter of the previous fiscal year. Agribusiness revenue was $28.5 million, compared to $35.2 million in the third quarter last year, primarily due to lower lemon and avocado sales. Rental operations revenue was $1.3 million in the third quarter of fiscal year 2015, compared to $1.2 million in the third quarter of last year. Real estate development revenue was $34,000 compared to $121,000 in the third quarter last year.

Agribusiness revenue for the third quarter of fiscal year 2015 includes $23.9 million in lemon sales, compared to $26.8 million of lemon sales during the same period of fiscal year 2014, primarily reflecting lower volume of fresh lemons sold partially offset by higher prices. The Company completed its fiscal year 2015 avocado harvest in July with total fiscal year 2015 revenue of $7.1 million on 7.0 million pounds compared to revenue of $7.3 million on 6.7 million pounds for fiscal year 2014. Avocado revenue for the third quarter of fiscal year 2015 was $3.0 million, compared to $6.1 million in the same period last year, primarily reflecting decreased volume and lower prices. In addition, third quarter of fiscal year 2015 avocado sales were impacted by a shift in production and harvest timing due to the Company's decision to accelerate its harvest plan due to early maturing of the California crop and the expected arrival of Peruvian avocados in the US market in June 2015. This decision resulted in additional revenue in the second quarter of fiscal year 2015 that typically is recognized in the third quarter. The Company recognized $1.0 million of orange revenue in the third quarter of fiscal year 2015 due to lower volume that was partially offset by higher sales prices, compared to $1.7 million of orange revenue in the same period of fiscal year 2014. Specialty citrus and other crop revenues were $0.6 million in the third quarter of fiscal year 2015, due to increased prices which were partially offset by lower sales volume, compared to $0.5 million in the third quarter of fiscal year 2014.

Costs and expenses for the third quarter of fiscal year 2015 were $22.0 million compared to $23.1 million in the third quarter of last fiscal year. The year-over-year decrease in operating expenses reflects lower agribusiness costs, real estate development expenses and selling, general and administrative expenses. In addition, third quarter of fiscal year 2014 costs and expenses include an impairment charge on real estate development assets of $435,000 on the Company's Centennial property.

Operating income for the third quarter of fiscal year 2015 was $7.8 million, compared to $13.4 million in the third quarter of the previous fiscal year. Net income applicable to common stock, after preferred dividends, for the third quarter of fiscal year 2015 was $5.2 million, compared to $8.8 million in the third quarter of fiscal year 2014. Earnings per diluted share for the third quarter of fiscal year 2015 were $0.36 on approximately 14.9 million weighted average diluted common shares outstanding, compared to earnings per diluted share of $0.61 on approximately 14.5 million weighted average diluted common shares outstanding in the same period of the prior year. On August 21, 2015, the Company completed the sale of its Wilson Ranch for approximately $2.8 million and the gain on the sale was approximately $0.9 million. The Company previously expected the Wilson Ranch sale to be completed in the third quarter of 2015.

Adjusted EBITDA was $9.1 million in the third quarter of fiscal year 2015 compared to $14.9 million in the same period of fiscal year 2014. A reconciliation of EBITDA to the GAAP measure net income is provided at the end of this release.

Fiscal Year 2015 First Nine Months Results

For the nine months ended July 31, 2015, revenue was $86.1 million compared to $87.2 million in the same period last year. Operating income for the first nine months of fiscal year 2015 was $9.5 million compared to $14.4 million in the same period last year. Net income applicable to common stock, after preferred dividends, was $6.0 million for the first nine months of fiscal year 2015 compared to $9.5 million in the same period last year. Earnings per diluted share for the first nine months of fiscal year 2015 was $0.42 on approximately 14.1 million weighted average diluted common shares outstanding compared to earnings per diluted share of $0.68 on approximately 14.2 million weighted average diluted common shares outstanding.

Adjusted EBITDA for the first nine months of fiscal year 2015 was $13.0 million compared to Adjusted EBITDA of $17.8 million in the same period last year.

Real Estate Development

On September 9, 2015, Limoneira announced that it entered into a Contribution Agreement as the first step that will facilitate a joint venture with The Lewis Group of Companies (the "Lewis Group"), a leading residential real estate investment company, for the planned development of Santa Paula Gateway. Limoneira received a deposit of $2.0 million from the Lewis Group upon entering into the Contribution Agreement. Upon the completion of certain conditions to close the transaction, which is anticipated in November 2015 and includes the contribution of the property to the joint venture, the Company expects to receive an additional $18 million from the Lewis Group for a 50% interest in the joint venture. The Company expects to receive approximately $100 million of net cash flow over the seven to ten year life of project. The joint venture partners will share equally in capital contributions to fund project costs until loan proceeds and/or revenues are sufficient to fund the project. The project is expected to begin selling developed lots to home builders during the fourth quarter of 2017.

Management Comments

Harold Edwards, President and Chief Executive Officer, stated, "We are excited about the recent progress that we have made with our key business initiatives. We recently announced that we entered into a Contribution Agreement that is expected to facilitate a joint venture with The Lewis Group of Companies, for the development of the Santa Paula Gateway Project. The Lewis Group is a leading real estate investment company with a proven track record of developing highly successful and sought after residential projects throughout Southern California and we are looking forward to working with them on this project. After working towards this project for many years, we are very pleased with the planned partnership and the terms of the deal for Limoneira. Over the anticipated seven to ten year course of the development, we expect the project will generate approximately $100 million of net cash flow for Limoneira."

Mr. Edwards continued, "In addition, we recently entered escrow to acquire approximately 900 acres of lemon, orange, and specialty citrus orchards in the San Joaquin Valley. We currently lease this property from the Sheldon family and expect incremental operating results and cash flows resulting from the elimination of profit sharing lease expense beginning in fiscal year 2016. This acquisition underscores our successful execution on our long-term growth strategy to expand our agribusiness orchards with productive acreage. As we benefit from cash flow related to our real estate development activities, we plan to make additional investments into our agribusiness growth."

Mr. Edwards concluded, "Our financial results for the third quarter were impacted by the previously discussed shift in the timing of the avocado harvest. Based on our year-to-date results and outlook for the fourth quarter, we are updating our annual guidance."

Balance Sheet and Liquidity

During the first nine months of fiscal year 2015, net cash provided by operating activities was $10.2 million compared to $17.8 million in the same period of the prior year. Net cash used in investing activities was $24.0 million in the first nine months of fiscal year 2015 compared to $15.2 million in the same period of the prior year, primarily related to the Company's investments in the expansion of its lemon packing facilities and additional farm worker housing units, a