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Limoneira CO (LMNR)

CIK: 0001342423. SIC: 0100 Agricultural Production-Crops. Latest 10-K as of: 2025-12-23.

SIC breadcrumb: Agriculture, Forestry, And Fishing > SIC Major Group 01 > SIC 0100 Agricultural Production-Crops

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1342423. Latest filing source: 0001342423-25-000039.

Selected Fundamentals

MetricValueUnitFYFiled
Revenue159,723,000USD20252025-12-23
Net income-15,981,000USD20252025-12-23
Assets311,137,000USD20252025-12-23

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2025-12-23. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001342423.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Metric2016201720182019202020212022202320242025
Revenue111,789,000121,309,000129,392,000171,398,000164,559,000166,027,000184,605,000179,901,000191,503,000159,723,000
Net income8,058,0006,595,00020,188,000-5,943,000-16,435,000-3,441,000-236,0009,400,0007,716,000-15,981,000
Operating income9,188,00011,863,0009,486,000-5,514,000-19,008,000-6,333,0002,201,00010,783,000-6,178,000-20,405,000
Diluted EPS0.520.421.25-0.37-0.96-0.23-0.040.500.40-0.93
Operating cash flow14,304,00018,482,00018,397,0001,365,000-11,317,0009,605,00014,830,000-15,870,00017,853,000-6,009,000
Dividends paid2,834,0003,155,0004,025,0005,331,0005,356,0005,303,0005,315,0005,382,0005,406,0005,414,000
Assets305,448,000339,031,000421,339,000399,867,000389,600,000392,276,000368,518,000301,210,000298,815,000311,137,000
Liabilities166,719,000191,428,000191,389,000167,369,000183,030,000193,031,000176,654,000100,713,00096,314,000120,300,000
Stockholders' equity126,498,000136,793,000219,140,000221,688,000195,760,000188,435,000181,054,000189,687,000191,691,000180,027,000

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Metric2016201720182019202020212022202320242025
Net margin7.21%5.44%15.60%-3.47%-9.99%-2.07%-0.13%5.23%4.03%-10.01%
Operating margin8.22%9.78%7.33%-3.22%-11.55%-3.81%1.19%5.99%-3.23%-12.78%
Return on equity6.37%4.82%9.21%-2.68%-8.40%-1.83%-0.13%4.96%4.03%-8.88%
Return on assets2.64%1.95%4.79%-1.49%-4.22%-0.88%-0.06%3.12%2.58%-5.14%
Liabilities / equity1.321.400.870.750.931.020.980.530.500.67
Current ratio0.780.981.151.111.351.190.960.910.741.35

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-06-09. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001342423.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

QuarterEnd DateRevenueNet IncomeDiluted EPSMethod
2022-Q32022-07-310.40reported discrete quarter
2023-Q12023-01-310.84reported discrete quarter
2023-Q22023-04-30-0.10reported discrete quarter
2023-Q32023-07-3152,497,000-1,163,000-0.07reported discrete quarter
2023-Q42023-10-3141,433,000-3,455,000derived Q4 = FY annual - nine-month YTD
2024-Q12024-01-3139,731,000-3,585,000-0.21reported discrete quarter
2024-Q22024-04-3044,606,0006,567,0000.35reported discrete quarter
2024-Q32024-07-3163,305,0006,593,0000.35reported discrete quarter
2024-Q42024-10-3143,861,000-1,859,000derived Q4 = FY annual - nine-month YTD
2025-Q12025-01-3134,305,000-3,074,000-0.18reported discrete quarter
2025-Q22025-04-3035,119,000-3,361,000-0.20reported discrete quarter
2025-Q32025-07-3147,478,000-855,000-0.06reported discrete quarter
2025-Q42025-10-3142,821,000-8,691,000derived Q4 = FY annual - nine-month YTD
2026-Q12026-01-3118,205,000-9,427,000-0.53reported discrete quarter
2026-Q22026-04-3023,926,000-21,420,000-1.20reported discrete quarter

Quarterly Charts

Macro Cross-References

Latest quarter (10-Q)

Latest 10-Q source: 0001342423-26-000023.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high. Filing date: 2026-06-09. Report date: 2026-04-30.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Limoneira Company, a Delaware corporation, is 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 7,000 acres of land, water resources and other assets to maximize long-term stockholder value. Our current operations consist of fruit production and packing operations, rental operations, real estate and capital investment activities.

We are one of California’s oldest lemon growers and according to the California Avocado Commission, we are one of the largest growers of avocados in the United States. In addition to growing lemons and avocados, we grow wine grapes. We have agricultural plantings throughout Ventura and San Luis Obispo Counties in California, Yuma County in Arizona and Jujuy, Argentina, which collectively consist of approximately 2,300 acres of lemons, 1,700 acres of avocados and 400 acres of wine grapes. We also operate our own packinghouses in Santa Paula, California and Yuma, Arizona, where we process and pack lemons that we grow, as well as lemons grown by others. We have a 51% interest in a joint venture, Trapani Fresh Consorcio de Cooperacion (“Trapani Fresh”), a lemon orchard in Argentina. We have a 47% interest in Rosales S.A. (“Rosales”), a citrus packing, marketing and sales business located near La Serena, Chile. We have a 90% interest in Fruticola Pan de Azucar S.A. (“PDA”) and a 100% interest in Agricola San Pablo, SpA (“San Pablo”). Through November 7, 2025, these entities owned lemon and orange orchards located near La Serena, Chile.

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 also use surface water in Arizona from the Colorado River through the Yuma Mesa Irrigation and Drainage District (“YMIDD”). We use ground water provided by wells and surface water for 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, single-family homes and apartments of approximately 800 units in various stages of planning and development, as well as entitlement efforts related to Ventura County farmland.

Business Division Summary

We have three business divisions: agribusiness, rental operations and real estate development. The agribusiness division is comprised of four reportable operating segments: fresh lemons, lemon packing, avocados and other agribusiness, which primarily includes oranges, specialty citrus and wine grapes. The agribusiness division includes our core operations of farming, harvesting and lemon packing 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. Financial information and discussion of our four reportable segments are contained in the notes to the accompanying consolidated financial statements of this Quarterly Report.

Agribusiness Summary

In June 2025, Limoneira entered into a Commercial Packinghouse License Agreement (the “Sunkist Agreement”) with Sunkist Growers, Inc., a nonprofit marketing cooperative (“Sunkist”), effective as of November 1, 2025. The agreement permits us to grade, label, pack, prepare for marketing by Sunkist and ship Sunkist grower lemons, and to use Sunkist trademarks in these activities. The agreement has an initial term of three years with automatic one-year extensions. As of November 1, 2025, Sunkist performs the Company’s lemon sales and marketing operations. Prior to November 1, 2025, the Company marketed and sold citrus directly to food service, wholesale and retail customers throughout the United States, Canada, Asia and certain other international markets. We sell our avocados to third-party packinghouses and our wine grapes to wine producers.

Historically, our agribusiness division has been seasonal in nature, with quarterly revenues fluctuating depending on the timing and variety of crops being harvested. Cultural costs, also referred to as growing costs, in our agribusiness division tend to be higher in the first and second quarters and lower in the third and fourth quarters because of the timing of expensing cultural costs in the current year that were inventoried in the prior year. Our harvest costs generally increase in the second quarter and peak in the third quarter. In connection with the Sunkist Agreement, lemon revenues are expected to peak in the third and fourth quarters.

28

Fluctuations in price are a function of global supply and demand with weather conditions, such as unusually low temperatures, typically having the most dramatic effect on the amount of lemons supplied in any individual growing season. We believe we have a competitive advantage by maintaining our own lemon packing operations, even though a significant portion of the costs related to these operations are fixed. As a result, cost per carton is a function of fruit throughput. While we regularly monitor our costs for redundancies and opportunities for cost reductions, we also supplement the number of lemons we pack in our packinghouse with additional lemons procured from other growers. Because the fresh utilization rate for our lemons, or percentage of lemons we harvest and pack that are sold to the fresh market, is directly related to the quality of lemons we pack and, consequently, the price we receive per 40-pound box, we only pack lemons from other growers if we determine their lemons are of good quality.

Our avocado plantings have been profitable and historically were pursued to diversify our product line. Since fiscal year 2023, we expanded our avocado production by 800 acres, and we plan to expand an additional 200 acres through fiscal year 2027. This 1,000-acre expansion reflects our strategy to capitalize on robust consumer demand trends for avocados.

In addition to growing lemons and avocados, we grow wine grapes. We regularly monitor the demand for the fruit we grow in the current marketplace to identify trends.

Rental Operations Summary

Our rental operations include our residential and commercial rentals, leased land operations and organic recycling. Our residential and commercial rentals generate cash flows that we use to partially fund the operating costs of our business. In addition, our leased land business provides us with a profitable method to diversify the use of our land. Revenue from rental operations is generally level throughout the year.

Real Estate Development Summary

We invest in real estate investment projects and recognize that long-term strategies are required for successful real estate development activities. For real estate development projects and joint ventures, it is not unusual for the timing and amounts of revenues and costs, partner contributions and distributions, project loans, other financing assumptions and project cash flows to be impacted by government approvals, project revenue and cost estimates and assumptions, economic conditions, financing sources and product demand as well as other factors. Such factors could affect our results of operations, cash flows and liquidity.

Water and Mineral Rights

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. We believe we have adequate supplies of water for our agribusiness segments as well as our rental and real estate development activities. Water for our farming operations located in Ventura County, California is sourced from the existing water resources associated with our land, which includes approximately 8,500 acre-feet of water rights in the adjudicated Santa Paula Basin (aquifer) and additional rights in the un-adjudicated Fillmore Basin (aquifer). Our Windfall Farms property located in San Luis Obispo County, California obtains water from wells that derive water from the Paso Robles Basin (aquifer). Our farming operations in Yuma, Arizona source water from the Colorado River through the YMIDD, where we have access to approximately 11,500 acre-feet of Class 3 Colorado River water rights. We use ground water provided by wells and surface water for our Trapani Fresh farming operations in Argentina.

Southern California is experiencing above average precipitation for the 2025 to 2026 rainfall season. As of April 30, 2026, Ventura County was free from general drought conditions. We continue to assess the impact drought conditions may have on our California orchards.

In August 2025, the U.S. Bureau of Reclamation announced that Lake Mead will continue to operate in a Tier 1 shortage in 2026, which requires Arizona to forfeit approximately 18% of the state’s yearly allotment of water from Lake Mead. In response to this and prior years’ water shortages, we entered into fallowing agreements during fiscal years 2022 and 2023 and in February 2025, extended an existing fallowing agreement through calendar year 2026. In April 2026, we made a decision to remove all of our remaining lemon orchards in Yuma, Arizona. This decision aligns with our strategic plan to monetize Class 3 Colorado River water rights by conserving water via crop substitution to low water use crops. We continue to assess the impact these ongoing water reductions may have on our Arizona orchards.

29

Recent Developments

On June 6, 2025, we entered into a Commercial Packinghouse License Agreement with Sunkist Growers, Inc., a nonprofit marketing cooperative, effective as of November 1, 2025. The agreement permits us to grade, label, pack, prepare for marketing by Sunkist and ship Sunkist grower lemons, and to use Sunkist trademarks in these activities. The agreement has an initial term of three years with automatic one-year extensions. As of November 1, 2025, Sunkist performs the Company’s lemon sales and marketing operations.

On November 7, 2025, our Chilean subsidiaries, PDA and San Pablo (collectively, the “Sellers”), each entered into a Purchase and Sale Agreement and Novation Agreement (collectively, the “Purchase Agreements”) with San Pedro, SpA, a Chilean joint stock company (the “Buyer”), to sell certain real estate parcels consisting of approximately 500 acres of lemons, 100 acres of oranges and other unplanted lands including water rights associated with the parcels for an aggregate purchase price of $15.0 million. The transactions closed upon transfer of the deeds simultaneously with the execution of the Purchase Agreements.

After a period of approximately 120 days to record the transactions, which is customary in Chilean real estate transactions, the Buyer made an initial payment to the Sellers in the aggregate amount of $6.8 million, of which approximately $0.7 million is deferred until certain requirements have been fulfilled. The remainder of the Buyer’s payment obligations, in the aggregate amount of $8.2 million, will be made in installment payments in amounts that will be calculated based on the excess free cash flows of the combined operations of the sold properties and a third citrus ranch owned by the Buyer, measured annually as of

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization. Confidence: high. Filing date: 2025-12-23. Report date: 2025-10-31.

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to promote understanding of the results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying Notes to Consolidated Financial Statements (Part II, Item 8 of this Form 10-K). 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 on Form 10-K. This section generally discusses the results of operations for fiscal year 2025 compared to fiscal year 2024. For discussion related to the results of operations and changes in financial condition for fiscal year 2024 compared to fiscal year 2023 refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our fiscal year 2024 Form 10-K, which was filed with the United States Securities and Exchange Commission (SEC) on December 23, 2024.

Overview

Limoneira Company, a Delaware corporation, is 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 10,500 acres of land, water resources and other assets to maximize long-term stockholder value. Our operations consist of fruit production, sales and marketing, rental operations, real estate and capital investment activities.

We have three business divisions: agribusiness, rental operations and real estate development. The agribusiness division is comprised of four reportable operating segments: fresh lemons, lemon packing, avocados and other agribusiness, which primarily includes oranges, specialty citrus, wine grapes and farm management services. The agribusiness division 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.

Recent Developments – Refer to Part I, Item 1 “Fiscal Year 2025 Highlights and Recent Developments”

34

Results of Operations

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

Years Ended October 31,

2025

2024

2023

Net revenues:

Agribusiness

$

153,685 

96 

%

$

185,923 

97 

%

$

174,381 

97 

%

Other operations

6,038 

4 

%

5,580 

3 

%

5,520 

3 

%

Total net revenues

159,723 

100 

%

191,503 

100 

%

179,901 

100 

%

Costs and expenses:

Agribusiness

154,810 

86 

%

164,807 

83 

%

169,169 

99 

%

Other operations

4,477 

2 

%

5,274 

3 

%

4,612 

3 

%

Impairment of intangible asset

— 

— 

%

643 

1 

%

— 

— 

%

Gain on sales of water rights

(1,488)

(1)

%

— 

— 

%

— 

— 

%

Loss (gain) on disposal of assets, net

706 

1 

%

(507)

(1)

%

(28,849)

(17)

%

Gain on remeasurement of previously held equity method investment

(2,852)

(2)

%

— 

— 

%

— 

— 

%

Gain on legal settlement

— 

— 

%

— 

— 

%

(2,269)

(1)

%

Selling, general and administrative

24,475 

14 

%

27,464 

14 

%

26,455 

16 

%

Total costs and expenses

180,128 

100 

%

197,681 

100 

%

169,118 

100 

%

Operating (loss) income:

Agribusiness

(1,125)

21,116 

5,212 

Other operations

1,561 

306 

908 

Impairment of intangible asset

— 

(643)

— 

Gain on sales of water rights

1,488 

— 

— 

(Loss) gain on disposal of assets, net

(706)

507 

28,849 

Gain on remeasurement of previously held equity method investment

2,852 

— 

— 

Gain on legal settlement

— 

— 

2,269 

Selling, general and administrative

(24,475)

(27,464)

(26,455)

Operating (loss) income

(20,405)

(6,178)

10,783 

Other (expense) income:

Interest income

62 

118 

364 

Interest expense, net of patronage dividends

(1,553)

(961)

(494)

Equity in earnings of investments, net

798 

18,356 

5,322 

Other income (expense), net

93 

212 

(2,611)

Total other (expense) income

(600)

17,725 

2,581 

(Loss) income before income tax benefit (provision)

(21,005)

11,547 

13,364 

Income tax benefit (provision)

4,649 

(4,373)

(4,247)

Net (loss) income

(16,356)

7,174 

9,117 

Net loss attributable to noncontrolling interests, net

375 

542 

283 

Net (loss) income attributable to Limoneira Company

$

(15,981)

$

7,716 

$

9,400 

35

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 stock-based compensation, pension settlement cost, impairment of intangible asset, loss (gain) on disposal of assets, net, cash bonus related to sale of assets, gain on legal settlement, cash severance benefits, contract termination fee and gain on remeasurement of previously held equity method investment are important measures 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 (loss) 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):

Fiscal Year Ended

October 31,

2025

2024

2023

Net (loss) income attributable to Limoneira Company

$

(15,981)

$

7,716 

$

9,400 

Interest income

(62)

(118)

(364)

Interest expense, net of patronage dividends

1,553 

961 

494 

Income tax (benefit) provision

(4,649)

4,373 

4,247 

Depreciation and amortization

9,209 

8,374 

8,576 

EBITDA

$

(9,930)

$

21,306 

$

22,353 

Stock-based compensation

3,077 

4,116 

3,841 

Pension settlement cost

— 

— 

2,700 

Impairment of intangible asset

— 

643 

— 

Loss (gain) on disposal of assets, net

706 

(507)

(28,849)

Cash bonus related to sale of assets

— 

— 

2,000 

Gain on legal settlement

— 

— 

(2,269)

Cash severance benefits

447 

1,160 

— 

Contract termination fee

2,100 

— 

— 

Gain on remeasurement of previously held equity method investment

(2,852)

— 

— 

Adjusted EBITDA

$

(6,452)

$

26,718 

$

(224)

Fiscal Year 2025 Compared to Fiscal Year 2024

Revenues

Total net revenues for fiscal year 2025 were $159.7 million, compared to $191.5 million for fiscal year 2024. The 17% decrease of $31.8 million was primarily due to decreased agribusiness revenue from lemons, avocados, wine grapes and farm management, partially offset by increased agribusiness revenues from oranges, as detailed below ($ in thousands):

Fiscal Year Ended October 31,

2025

2024

Change

Lemons

$

124,958 

$

136,175 

$

(11,217)

(8)%

Avocados

11,741 

25,114 

(13,373)

(53)%

Oranges

7,745 

5,189 

2,556 

49%

Specialty citrus and wine grapes

4,010 

5,089 

(1,079)

(21)%

Farm management

1,622 

10,212 

(8,590)

(84)%

Other

3,609 

4,144 

(535)

(13)%

Agribusiness revenues

$

153,685 

$

185,923 

$

(32,238)

(17)%

36

•Lemons: The decrease for fiscal year 2025, compared to fiscal year 2024, was primarily due to lower prices, partially offset by increased volume of fresh and brokered lemons sold and other lemon sales. Fresh carton sales were $83.8 million and $84.0 million, in aggregate, on 4.7 million and 4.5 million cartons of lemons sold at average per carton prices of $17.74 and $18.87 for fiscal years 2025 and 2024, respectively. Lemon revenue included brokered lemons and other lemon sales of $21.6 million and $32.0 million, packing and handling revenue of $17.9 million and $17.1 million, and lemon by-product sales of $1.7 million and $3.0 million for fiscal years 2025 and 2024, respectively.

•Avocados: The decrease for fiscal year 2025, compared to fiscal year 2024, was due to decreased volume and lower prices of avocados sold. The California avocado crop typically experiences alternating years of high and low production due to plant physiology. We sold 7.4 million and 15.1 million pounds of avocados at average prices per pound of $1.60 and $1.67 for fiscal years 2025 and 2024, respectively.

•Oranges: The increase for fiscal year 2025, compared to fiscal year 2024, was primarily due to increased volume and higher prices of oranges sold. We sold 409,000 and 280,000 cartons of oranges at an average price per carton of $18.93 and $18.53 for fiscal years 2025 and 2024, respectively.

•Specialty citrus and wine grapes: The decrease for fiscal year 2025, compared to fiscal year 2024, was primarily due to decreased volume of wine grapes sold. We sold $1.8 million and $2.9 million of wine grapes during fiscal years 2025 and 2024, respectively.

•Farm management: Farm management revenue was comprised primarily of Northern Properties farming, management and operations services and decreased for fiscal year 2025 compared to fiscal year 2024 due to the FMA termination effective March 31, 2025.

•Other: Other revenue, comprised primarily of fallowing and shipping, decreased for fiscal year 2025, compared to fiscal year 2024, due to decreased shipping revenue.

Other operations revenue for fiscal year 2025 was $6.0 million, compared to $5.6 million for fiscal year 2024.

Costs and Expenses

Total costs and expenses for fiscal year 2025 were $180.1 million, compared to $197.7 million for fiscal year 2024. The 9% decrease of $17.6 million was primarily due to decreased agribusiness costs and expenses and selling, general and administrative expenses. Agribusiness costs and expenses are detailed below ($ in thousands):

Fiscal Year Ended October 31,

2025

2024

Change

Packing costs

$

47,381 

$

42,751 

$

4,630 

11%

Harvest costs

9,495 

12,585 

(3,090)

(25)%

Growing costs

17,510 

27,577 

(10,067)

(37)%

Third-party grower and supplier costs

70,068 

72,176 

(2,108)

(3)%

Other costs

2,113 

2,601 

(488)

(19)%

Depreciation and amortization

8,243 

7,117 

1,126 

16%

Agribusiness costs and expenses

$

154,810 

$

164,807 

$

(9,997)

(6)%

•Packing costs: Packing costs consist primarily 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. The increase for fiscal year 2025, compared to fiscal year 2024, was primarily due to increased volume, higher labor costs, and higher packing costs due to a $2.1 million contract termination fee related to our Commercial Packinghouse License Agreement with Sunkist. We packed and sold 4.7 million and 4.5 million cartons of lemons at average per carton costs of $10.03 and $9.60 for fiscal years 2025 and 2024, respectively.

•Harvest costs: The decrease in harvest costs for fiscal year 2025, compared to fiscal year 2024. was primarily due to decreased volume of lemons and avocados harvested.

•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 decrease for fiscal year 2025, compared to fiscal year 2024, was primarily due to the decrease in farm management growing costs related to the FMA termination and farm management decisions made in response to weather, harvest timing and crop conditions.

37

•Third-party grower and supplier costs: We sell fruit that we grow and fruit that we procure from other growers and suppliers. The cost of procuring fruit from other growers and suppliers is referred to as third-party grower and supplier costs. The decrease for fiscal year 2025, compared to fiscal year 2024, was primarily due to a decrease in incurred costs for brokered fruit for resale of $27.5 million compared to $31.3 million, respectively, partially offset by an increase in incurred costs of third party grower fruit of $42.5 million compared to $40.9 million, respectively. Of the 4.7 million and 4.5 million cartons of lemons packed and sold, 3.7 million (78%) and 3.2 million (72%) were procured from third-party growers at average per carton prices of $11.55 and $12.76 for fiscal years 2025 and 2024, respectively.

•Other costs: The decrease in other costs for fiscal year 2025, compared to fiscal year 2024, was due to decreased freight costs.

•Depreciation and amortization: The increase in depreciation and amortization expenses for fiscal year 2025, compared to fiscal year 2024, was primarily due to increases in agribusiness depreciation and amortization of finance leases.

Other operations expenses for fiscal year 2025 were $4.5 million compared to $5.3 million for fiscal year 2024. The decrease in other operations expenses was primarily due to severance benefits paid in fiscal year 2024 and decreased residential and commercial rental expenses.

Impairment of intangible asset was $0.6 million for fiscal year 2024. There was no impairment of intangible asset for fiscal year 2025.

Gain on sales of water rights was $1.5 million for fiscal year 2025. There was no sale of water rights for fiscal year 2024.

Loss (gain) on disposal of assets, net for fiscal year 2025 was $0.7 million compared to $(0.5) million for fiscal year 2024. The 2025 loss primarily relates to the disposal of orchards and the 2024 gain primarily relates to a deferred gain on the LLCB II sale.

Selling, general and administrative expenses for fiscal year 2025 were $24.5 million compared to $27.5 million for fiscal year 2024. The $3.0 million decrease was primarily due to:

•$5.3 million net decrease in salaries, benefits and incentive compensation;

•$1.0 million net increase in allowance for receivables from foreign related party, net; and

•$1.3 million net increase in other general and administrative expenses.

Other (Expense) Income

Total other (expense) income for fiscal year 2025 was $(0.6) million compared to $17.7 million for fiscal year 2024. The $18.3 million decrease in total other income was primarily due to:

•$17.6 million decrease of equity in earnings of investments, net, primarily due to LLCB’s closing of 554 residential homesites in fiscal year 2024;

•$0.6 million increase of interest expense, net of patronage dividends; and

•$0.1 million decrease of other income, net.

Income Taxes

We recorded an income tax benefit (provision) of $4.6 million and $(4.4) million on pre-tax (loss) income of $(21.0) million and $11.5 million for fiscal years 2025 and 2024, respectively. The tax benefit recorded for fiscal year 2025 differs from the U.S. federal statutory tax rate of 21.0% primarily due to foreign jurisdictions that are taxed at different rates, state taxes, tax impact of stock-based compensation, executive compensation, nondeductible tax items and valuation allowances on certain deferred tax assets of foreign subsidiaries. Our effective tax rate for fiscal years 2025 and 2024 was 22.1% and 37.9%, respectively.

Net Loss Attributable to Noncontrolling Interests, Net

Net loss attributable to noncontrolling interests represents 10% and 49% of the net loss of PDA and Trapani Fresh, respectively, for fiscal years 2025 and 2024. Fiscal year 2025 includes 45.5% of the net income of Del Mar for the period August 4, 2025 to October 31, 2025.

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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. During fiscal year 2025, the Company changed its presentation of fresh lemons and lemon packing revenue and costs to remove reference to intersegment revenue and costs and eliminations. Prior years’ information has been restated to conform to the current year’s presentation. The Company adopted ASU 2023-07 as of fiscal year 2025 and, as a result, expanded its segment information to include significant segment expenses and other segment items. See Note 20 - Segment Information for additional information regarding our operating segments.

Segment information for fiscal year 2025 is as follows (in thousands):

Fresh Lemons

Lemon

Packing

Avocados

Other

Agribusiness

Total

Agribusiness

Corporate

and Other

Total

Revenues from external customers

$

75,811 

$

49,147 

$

11,741 

$

16,986 

$

153,685 

$

6,038 

$

159,723 

Costs and expenses, excluding depreciation and amortization:

Labor and benefits

— 

19,820 

— 

— 

19,820 

— 

19,820 

Packing supplies and fruit treatments

— 

13,799 

— 

— 

13,799 

— 

13,799 

Harvest costs

7,777 

— 

1,385 

333 

9,495 

— 

9,495 

Growing costs

8,884 

— 

4,621 

4,005 

17,510 

— 

17,510 

Third party grower and supplier costs

60,928 

— 

— 

9,140 

70,068 

70,068 

Other segment items

— 

13,762 

— 

2,113 

15,875 

3,786 

19,661 

Gain on sales of water rights

— 

— 

— 

— 

— 

(1,488)

(1,488)

Loss on disposal of assets, net

— 

— 

— 

— 

— 

706 

706 

Gain on remeasurement of previously held equity method investment

— 

— 

— 

— 

— 

(2,852)

(2,852)

Selling, general and administrative

— 

— 

— 

— 

— 

24,200 

24,200 

Total costs and expenses, excluding depreciation and amortization

77,589 

47,381 

6,006 

15,591 

146,567 

24,352 

170,919 

Depreciation and amortization

— 

— 

— 

— 

8,243 

966 

9,209 

Operating (loss) income

$

(1,778)

$

1,766 

$

5,735 

$

1,395 

$

(1,125)

$

(19,280)

$

(20,405)

Segment information for fiscal year 2024 is as follows (in thousands):

Fresh Lemons

Lemon

Packing

Avocados

Other

Agribusiness

Total

Agribusiness

Corporate

and Other

Total

Revenues from external customers

$

86,917 

$

49,258 

$

25,114 

$

24,634 

$

185,923 

$

5,580 

$

191,503 

Costs and expenses, excluding depreciation and amortization:

Labor and benefits

— 

16,841 

— 

— 

16,841 

— 

16,841 

Packing supplies and fruit treatments

— 

10,902 

— 

— 

10,902 

— 

10,902 

Harvest costs

8,877 

— 

3,058 

650 

12,585 

— 

12,585 

Growing costs

10,258 

— 

4,276 

13,043 

27,577 

— 

27,577 

Third party grower and supplier costs

65,046 

— 

— 

7,130 

72,176 

— 

72,176 

Other segment items

— 

15,008 

— 

2,601 

17,609 

4,605 

22,214 

Impairment of intangible asset

— 

— 

— 

— 

— 

643 

643 

Gain on disposal of assets, net

— 

— 

— 

— 

— 

(507)

(507)

Selling, general and administrative

— 

— 

— 

— 

— 

26,876 

26,876 

Costs and expenses, excluding depreciation and amortization:

84,181 

42,751 

7,334 

23,424 

157,690 

31,617 

189,307 

Depreciation and amortization

— 

— 

— 

— 

7,117 

1,257 

8,374 

Operating (loss) income

$

2,736 

$

6,507 

$

17,780 

$

1,210 

$

21,116 

$

(27,294)

$

(6,178)

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Fiscal Year 2025 Segment Information Compared to Fiscal Year 2024 Segment Information

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 net of pack charge, lemon by-products, brokered lemons and other lemon revenue. Our fresh lemons segment total net revenues for fiscal year 2025 were $75.8 million compared to $86.9 million for fiscal year 2024. The 13% decrease of $11.1 million was primarily due to:

•Brokered lemons and other lemon sales decrease of $10.4 million;

•Lemon by-products sales decrease of $1.3 million; and

•Fresh lemons sales net of pack charge increase of $0.6 million.

Costs and expenses associated with our fresh lemons segment include growing costs, harvest costs and cost of lemons we procure from third-party growers and suppliers. Our fresh lemons segment costs and expenses for fiscal year 2025 were $77.6 million compared to $84.2 million for fiscal year 2024. The 8% decrease of $6.6 million was primarily due to:

•Third-party grower and supplier costs decrease of $4.1 million;

•Growing costs decrease of $1.4 million; and

•Harvest costs decrease of $1.1 million.

Lemon Packing

Lemon packing segment revenue is comprised of packing revenue and packing and handling revenue. Our lemon packing segment total net revenues for fiscal year 2025 were $49.1 million compared to $49.3 million for fiscal year 2024.

Costs and expenses associated with our lemon packing segment consist of the costs to pack lemons for sale such as labor and benefits, cardboard cartons, fruit treatments, packing and shipping supplies, subcontracted and facility operating costs. Our lemon packing costs and expenses for fiscal year 2025 were $47.4 million compared to $42.8 million for fiscal year 2024. The 11% increase of $4.6 million was primarily due to increased volume of lemons packed and sold, higher labor costs, and higher packing costs due to a $2.1 million contract termination fee.

Lemon packing segment operating income per carton sold for fiscal year 2025 was $0.37 compared to $1.46 for fiscal year 2024.

Avocados

Our avocados segment revenue for fiscal year 2025 was $11.7 million compared to $25.1 million for fiscal year 2024. The 53% decrease of $13.4 million was primarily due to decreased volume and lower prices.

Costs and expenses associated with our avocados segment include growing and harvest costs. Our avocados segment costs and expenses for fiscal year 2025 were $6.0 million compared to $7.3 million for fiscal year 2024. The 18% decrease of $1.3 million was primarily due to:

•Harvest costs decrease of $1.7 million; and

•Growing costs increase of $0.4 million.

Other Agribusiness

Our other agribusiness segment total net revenues for fiscal year 2025 were $17.0 million compared to $24.6 million for fiscal year 2024. The 31% decrease of $7.6 million was primarily due to:

•Farm management revenue decrease of $8.6 million;

•Specialty citrus and wine grape revenues decrease of $1.1 million;

•Other revenue decrease of $0.5 million; and

•Orange revenue increase of $2.6 million.

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Costs and expenses associated with our other agribusiness segment include growing costs, harvest costs, brokered fruit costs and shipping costs. Our other agribusiness costs and expenses for fiscal year 2025 were $15.6 million compared to $23.4 million for fiscal year 2024. The 33% decrease of $7.8 million was primarily due to:

•Growing costs decrease of $9.0 million;

•Shipping costs decrease of $0.5 million;

•Harvest costs decrease of $0.3 million; and

•Brokered fruit costs increase of $2.0 million.

Total agribusiness depreciation and amortization expenses for fiscal year 2025 were $8.2 million compared to $7.1 million for fiscal year 2024.

Corporate and Other

Our corporate and other operations revenues for fiscal year 2025 were $6.0 million compared to $5.6 million for fiscal year 2024.

Costs and expenses in our corporate and other operations for fiscal years 2025 and 2024 were $24.4 million and $31.6 million, respectively, and include selling, general and administrative costs and expenses, impairment of intangible asset, gain on sales of water rights, loss (gain) on disposal of assets and gain on remeasurement of previously held equity method investment not allocated to the operating segments. Depreciation and amortization expenses for fiscal year 2025 were $1.0 million compared to $1.3 million for fiscal year 2024.

Liquidity and Capital Resources

Overview

Our primary sources of liquidity are cash and cash flows generated from our operations, use of our revolving credit facility, sales of assets and distributions from our equity investments. Our liquidity and capital position fluctuate 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 projects and to supplement operating cash flows, we utilize our revolving credit facility to fund agricultural inputs 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.

Material contractual obligations arising in the normal course of business consist primarily of purchase obligations, long-term variable rate debt and related interest payments and operating and finance leases. See Note 11 - Long-Term Debt and Note 12 - Leases for amounts outstanding as of October 31, 2025, related to debt and leases. Purchase obligations consist of contracts primarily related to packing supplies, the majority of which are due in the next three years.

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 the next 12 months. We believe our revenue generating operations, distributions from equity investments and credit facilities will generate sufficient cash needed to operate beyond the next 12 months. In addition, we have the ability to control a portion of our investing and financing cash flows to the extent necessary based on our liquidity demands.

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Cash Flows from Operating Activities

Net cash (used in) provided by operating activities was $(6.0) million and $17.9 million for fiscal years 2025 and 2024, respectively. The significant components of our cash flows (used in) provided by operating activities were as follows:

•Net (loss) income was $(16.4) million and $7.2 million for fiscal years 2025 and 2024, respectively. The components of net loss for fiscal year 2025, compared to net income for fiscal year 2024, primarily consists of an increase in operating loss of $14.2 million, a decrease in total other income of $18.3 million and an increase in income tax benefit of $9.0 million.

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

◦Adjustments provided $15.2 million and $9.0 million for fiscal years 2025 and 2024, respectively, primarily related to depreciation and amortization, gain on remeasurement of previously held equity method investment, gain on sales of water rights, stock compensation expense, equity in earnings of investments, net, cash distributions from equity investments and deferred income taxes.

◦Changes in operating assets and liabilities used $4.9 million and provided $1.7 million of operating cash for fiscal years 2025 and 2024, respectively, primarily related to accounts payable/growers and suppliers payable, accrued liabilities/payables to related parties, income taxes receivable and other long-term liabilities.

Cash Flows from Investing Activities

▪The $18.3 million of net cash used in investing activities for fiscal year 2025 was comprised primarily of capital expenditures of $13.5 million mainly related to orchard development and $4.1 million related to acquiring additional shares of Del Mar.

▪The $9.2 million of net cash used in investing activities for fiscal year 2024 was comprised primarily of capital expenditures of $9.4 million related to orchard and vineyard development.

Cash Flows from Financing Activities

•The $22.8 million of net cash provided by financing activities for fiscal year 2025 was comprised primarily of net borrowings of long-term debt of $31.9 million, partially offset by common and preferred stock dividends of $5.9 million and exchange of common stock of $2.0 million.

•The $9.3 million of net cash used in financing activities for fiscal year 2024 was comprised primarily of common and preferred stock dividends of $5.9 million and exchange of common stock of $2.3 million.

Transactions Affecting Liquidity and Capital Resources

Credit Facilities and Long-Term Debt

We finance our working capital and other liquidity requirements primarily through cash from operations, distributions from equity investments and from our Credit Facility with AgWest Farm Credit, formerly known as Farm Credit West, (the "Lender"). In June 2025, we entered into a Master Loan Agreement (the “MLA”) dated June 26, 2025, together with a revolving credit facility supplement (the “Revolving Credit Supplement”) and a non-revolving credit facility supplement (the “Non-Revolving Credit Supplement” and, together with the Revolving Credit Supplement, the “Supplements”). The MLA governs the terms of the Supplements. The MLA amends and restates the previous Master Loan Agreement between the Company and the Lender and extends the principal repayment to July 1, 2030. Additional information regarding these loans can be found in Note 11- Long-Term Debt.

The Supplements provide aggregate borrowing capacity of $115.0 million, comprised of $114.0 million under the Revolving Credit Supplement and $1.0 million under the Non-Revolving Credit Supplement which can be used solely to support calls on Letters of Credit. There are no amounts outstanding on the Non-Revolving Credit Supplement. As of October 31, 2025, our outstanding borrowings under the Revolving Credit Supplement were $72.5 million and we had $41.6 million available to borrow.

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The MLA 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. We were subject to an annual financial covenant that required us to maintain compliance with a specific debt service coverage ratio of 1.0:1.0 for the fiscal year ending October 31, 2025, and 1.25:1.0 for any fiscal year ending thereafter. In September 2025, the Lender modified the annual debt service coverage ratio covenant to defer measurement as of October 31, 2025. In December 2025, the Lender modified the annual debt service coverage ratio covenant to defer measurement as of October 31, 2026 and resume a debt service coverage ratio of 1.25:1.0 measured as of October 31, 2027 and for any fiscal year ending thereafter.

We were also subject to a quarterly financial covenant that required us to maintain compliance with a specific total net leverage ratio as of the end of any fiscal quarter beginning July 31, 2026. In December 2025, the Lender modified this quarterly financial covenant to defer measurement through July 31, 2027 and resume measurement as of October 31, 2027. Additionally, in December 2025, the Lender added a new quarterly financial covenant for the period January 31, 2026 through July 31, 2027 which requires us to maintain a specific debt to capitalization ratio.

We received annual patronage dividends from the Lender of $0.6 million for fiscal years 2025 and 2024.

Real Estate Development Joint Venture

On April 9, 2025, we received a cash distribution of $10.0 million representing our share of a $20.0 million distribution from our joint venture, Harvest at Limoneira. As of October 31, 2025, the 50%-owned unconsolidated joint venture had $31.2 million of cash and cash equivalents on hand.

Dividends

The holders of the Series B Convertible Preferred Stock (the “Series B Stock”) and the Series B-2 Preferred Stock (the “Series B-2 Preferred Stock”) are entitled to receive cumulative cash dividends. Such preferred dividends paid totaled $0.5 million in each of the fiscal years 2025 and 2024.

Cash dividends declared in each of the fiscal years 2025 and 2024 totaled $0.30 per common share and such dividends paid totaled $5.4 million for both fiscal years 2025 and 2024.

Income Taxes

We paid income taxes of $0.7 million and $5.2 million for fiscal years 2025 and 2024, respectively.

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 collaborate 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 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 a 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. The first phase of the project broke ground to commence mass grading in November 2017. Approved project plans currently include approximately 1,750 residential units and site improvements. A total of 1,261 residential units have closed from the project’s inception to October 31, 2025.

In October 2022, we entered into another joint venture with Lewis for the development of our 17-acre East Area I Retained Property. We formed LLCB II as the development entity, contributed our Retained Property to the joint venture and sold a 50% interest to Lewis for $8.0 million. We recorded a gain on the transaction of $4.7 million, of which $0.5 million was deferred and recognized in fiscal year 2024. Approved project plans currently include approximately 300 residential units and site improvements.

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The joint venture partners will share in the capital contributions to fund project costs until loan proceeds and/or revenues are sufficient to fund the projects. Since inception, each partner has made funding contributions of $21.4 million to LLCB and $3.2 million to LLCB II. In April 2025, we received a cash distribution of $10.0 million from LLCB and we expect to receive approximately $155.0 million from LLCB, LLCB II and East Area II over the next five years of the projects.

Trend Information

The commodity pricing for our fresh produce, and therefore our revenues and margins, is significantly impacted by consumer demand. 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 fruits and vegetables markedly increased. Conversely, a decrease in demand, as was seen during the COVID-19 pandemic as a result of restaurant closures, had the impact of reducing our pricing and therefore our revenues and margins.

Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with GAAP requires us to develop critical accounting policies and make certain estimates, assumptions 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, and we continue to review and evaluate these estimates. Actual results may materially differ from these estimates under different assumptions or conditions as new or additional information becomes available in future periods. For further information on significant accounting policies, see discussion in Note 2 - Summary of Significant Accounting Policies.

Impairment of Real Estate Development Projects – We evaluate our real estate development projects, held either by us or as included specifically within our investments in LLCB and LLCB II, for impairment on an ongoing basis. Our evaluation for impairment involves an initial assessment of each real estate development project to determine whether events or changes in circumstances exist that may indicate that the carrying amounts of, or investment in, real estate development projects are no longer recoverable. Possible indications of impairment may include events or changes in circumstances affecting the entitlement process, litigation, zoning, government regulation, geographical demand for new housing or commercial property, and market conditions related to residential or commercial land lots. When events or changes in circumstances exist, we further evaluate the real estate development projects for impairment by a) comparing undiscounted future cash flows expected to be generated over the life of the real estate development projects to the respective carrying amount for our real estate development or b) determining if our equity in investment incurred an other-than-temporary decline in value.

We make significant judgments in evaluating each real estate development project, as held by us or within our investments in LLCB and LLCB II, for possible indications of impairment. These judgments may relate to the identification of appropriate and comparable market prices, the consideration of changes to legal factors or the business climate, the likelihood of successfully completing the entitlement process, changes in zoning or government regulation, and demand for new housing. Changes in these judgments could have a significant impact on real estate development or equity in investments. No impairment loss has been recognized on any real estate development and no other-than-temporary-impairment has been recognized on our equity in LLCB or LLCB II, for fiscal years 2025, 2024 and 2023.

The impairment calculation for real estate developments held by us compares the carrying value of the asset to the asset’s estimated future cash flows (undiscounted). If the estimated future cash flows are less than the carrying value of the asset, we calculate an impairment loss. The impairment loss calculation compares the carrying value of the asset to the asset’s estimated fair value, which may be based on estimated future cash flows (discounted). We recognize an impairment loss equal to the amount by which the asset’s carrying value exceeds the asset’s estimated fair value. If we recognize an impairment loss, the adjusted carrying amount of the asset will be its new cost basis. Restoration of a previously recognized impairment loss is prohibited. If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to impairment losses that could be material to our results of operations.

44

Whenever events or changes in circumstances indicate that the carrying amount of our equity investments in LLCB and LLCB II might not be recoverable, then we determine whether an impairment is other-than-temporary. If we conclude the impairment is other-than-temporary, we determine the estimated fair value of the investment by performing a discounted cash flow or market approach analysis and recognize an other-than-temporary impairment to reduce the investment to its estimated fair value.

We believe that the accounting estimate related to impairment of real estate development projects held by us, or other-than-temporary impairment of our equity investments in LLCB and LLCB II, is a critical accounting estimate because it is very susceptible to change from period to period; it requires management to make assumptions about future prices, production, and costs, and the potential impact of a loss from impairment could be material to our earnings. Management’s assumptions regarding future cash flows from real estate development projects or return on equity of our investments in LLCB and LLCB II have fluctuated in the past due to changes in prices, production and costs and are expected to continue to do so in the future as market conditions change.

Recent Accounting Pronouncements

See Note 2 - Summary of Significant Accounting Policies for information concerning recent accounting pronouncements.