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CAUTIONARY STATEMENT
This annual report on Form 10-K (this “Annual Report”) contains statements which, to the extent that they do not recite historical fact, constitute forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts and may include the words "may," "will," “could," "should," "would," "believe," "expect," "anticipate," "estimate," "intend," "plan" or other words or expressions of similar meaning. We have based these forward-looking statements on our current expectations about future events. The forward-looking statements include statements that reflect management’s beliefs, plans, objectives, goals, expectations, anticipations and intentions with respect to our financial condition, results of operations, future performance and business, including statements relating to our business strategy and our current and future development plans.
The potential risks and uncertainties that could cause our actual financial condition, results of operations and future performance to differ materially from those expressed or implied in this Annual Report include:
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changes in laws, regulations, rules, quotas, tariffs and import laws;
weather conditions, including freezes and rains, that affect the production, transportation, storage, import and export of fresh produce;
market responses to industry volume pressures;
increased pressure from disease, insects and other pests;
disruption of water supplies or changes in water allocations;
product and raw materials supplies and pricing;
energy supply and pricing;
changes in interest and currency exchange rates;
availability of financing for land development activities;
political changes and economic crises;
international conflict;
acts of terrorism;
labor disruptions, strikes or work stoppages;
loss of important intellectual property rights; and
other factors disclosed in this Annual Report.
In addition, this Annual Report contains industry data related to our business and the markets in which we operate. This data includes projections that are based on a number of assumptions. If these assumptions turn out to be incorrect, actual results could differ from the projections. We urge you to carefully review this Annual Report, particularly the section “Risk Factors,” for a complete discussion of the risks of an investment in our common stock.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Many factors discussed in this Annual Report, some of which are beyond our control, will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from forward-looking statements. In light of these and other uncertainties, you should not regard the inclusion of a forward-looking statement in this Annual Report as a representation by us that our plans and objectives will be achieved, and you should not place undue reliance on such forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
All references to “we,” “us,” “our,” “our Company,” “the Company,” or “Limoneira” in this Annual Report mean Limoneira Company, a Delaware corporation, and its wholly-owned subsidiaries.
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Limoneira Company was incorporated in Delaware in 1990 as the successor to several businesses with operations in California since 1893. Our business and operations are described below. For detailed financial information with respect to our business and our operations, see our consolidated financial statements and the related notes to consolidated financial statements, which are included in this Annual Report beginning on page 58. In addition, general information concerning our Company can be found on our website, the internet address of which is www.limoneira.com. All of our filings with the Securities and Exchange Commission (the “SEC”), including but not limited to, the annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments thereto, are available free of charge on our website as soon as reasonably practicable after such material is electronically filed or furnished to the SEC.
Overview
We are an agribusiness and real estate development company founded and based in Santa Paula, California, committed to responsibly using and managing our approximately 6,840 acres of land, water resources and other assets to maximize long-term stockholder value. Our current operations consist of fruit production sales and marketing, real estate development and capital investment activities.
We are one of California’s oldest citrus growers. According to Sunkist Growers, Inc. (“Sunkist”), we are one of the largest growers of lemons in the United States and, according to the California Avocado Commission, the largest grower of avocados in the United States. In addition to growing lemons and avocados, we grow oranges and a variety of other specialty citrus and other crops. We have agricultural plantings throughout Ventura and Tulare Counties in California, which plantings consist of approximately 1,766 acres of lemons, 1,254 acres of avocados, 1,062 acres of oranges and 401 acres of specialty citrus and other crops. We also operate our own packinghouse in Santa Paula, California, where we process and pack lemons that we grow as well as lemons grown by others.
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, Santa Barbara and Paso Robles Basins (aquifers). We also use ground water and water from local water districts in Tulare County, which is in the San Joaquin Valley.
For more than 100 years, we have been making strategic investments in California agricultural and development real estate. As of the date of this Annual Report, we have six active real estate development projects in California. These projects include multi-family housing and single-family homes comprising 188 completed units and another 1,873 units in various stages of planning and entitlement.
Fiscal Year 2011 Highlights
Commencing November 1, 2010, we began marketing and selling our lemons directly to our food service wholesale and retail customers throughout the United States, Canada, Asia, Australia and certain other international markets.
On February 3, 2011, we completed the exercise of the purchase option contained in our lease of the Rancho Refugio/Caldwell Ranch, which allowed us to acquire the property for a purchase price of $6,510,000. Concurrently with the close of our purchase option, we sold the property for $10,000,000 to Rancho Guacamole, LLC, a California limited liability company. The gain on the sale was $1,351,000, net of the $6,510,000 purchase price, $1,436,000 remaining capitalized in leasehold improvements and $703,000 of selling and transaction costs. The net cash realized from the transaction was $2,787,000.
In March 2011, the Ventura County Local Area Formation Committee (“LAFCo”) approved conditions that will allow for the annexation and incorporation of East Area 1 into the City of Santa Paula.
In May 2011, we sold our real estate development property in Arizona, 6037 East Donna Circle, LLC, for $2,275,000 cash, realizing net cash of $2,080,000 after selling and other transaction costs. The carrying value of the property at the time of the sale was $2,080,000, net of a second quarter 2011 impairment charge of $203,000.
In August 2011, we filed a Registration Statement on Form S-3 with the SEC in accordance with the Securities Act of 1933, as amended. Utilizing a “shelf” registration process, we registered common stock, par value $0.01 per share, which may be offered and sold in one or more offerings at indeterminate prices for a maximum aggregate offering price of up to $100,000,000.
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Business Segments
We have three business segments: agribusiness, rental operations, and real estate development. The agribusiness segment includes our farming and lemon packing and sales operations. The rental operations segment includes our residential and commercial rentals, leased land operations and organic recycling. The real estate development segment includes our real estate projects and development. Financial information and further discussion of these segments, are contained in Note 23 to the accompanying consolidated financial statements of this Annual Report.
Agribusiness
Our agribusiness segment includes our farming and lemon packing and sales operations. The agribusiness segment represented approximately 88%, 87% and 89% of our fiscal 2011, fiscal 2010 and fiscal 2009 consolidated revenues, respectively.
Farming
We are one of California’s oldest citrus growers and one of the largest growers of lemons and the largest grower 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 and Tulare Counties in California, which consist of approximately 1,766 acres of lemons, 1,254 acres of avocados, 1,062 acres of oranges and 401 acres of specialty citrus and other crops. We also operate our own packinghouse in Santa Paula, California, where we process, pack and sell lemons we grow as well as lemons grown by others.
Lemons. We are one of the largest lemon growers in the United States with approximately 1,766 acres of lemons planted throughout Ventura County, California and Tulare County in the San Joaquin Valley in Central California. In California, the lemon growing area stretches from the Coachella Valley to Fresno and Monterey Counties, with the majority of the growing areas being located in the coastal areas from Ventura County to Monterey County. Ventura County is California’s top lemon producing county. Approximately 86% of our lemons are grown in Ventura County and approximately 14% are grown in Tulare County in Central California’s San Joaquin Valley.
There are over fifty varieties of lemons, with the Lisbon, Eureka and Genoa being the predominant varieties marketed on a worldwide basis. California grown lemons are available 12 months of the year, with peak production periods occurring from January through August. Approximately 92% of our lemon plantings are of the Lisbon and Eureka varieties and approximately 8% are of other varieties such as sweet Meyer lemons, proprietary seedless lemons and pink variegated lemons. The storage life of fresh lemons is limited and generally ranges from one to 18 weeks, depending upon the maturity of the fruit, the growing methods used and the handling conditions in the distribution chain.