Limoneira Company, a leading agribusiness with prime agricultural land and operations, real estate and water rights in California, today reported financial results for the fourth quarter and year ended October 31, 2012.
Fiscal Year 2012 Fourth Quarter Results
For the fourth quarter of fiscal year 2012, revenue was $14.8 million, compared to revenue of $10.9 million in the fourth quarter of the previous fiscal year. Agribusiness revenue increased 39% to $13.6 million, compared to $9.8 million in the fourth quarter last year. Rental operations revenue was $1.1 million in the fourth quarter of fiscal year 2012, compared to $1.0 million in the fourth quarter last year. Real estate development revenue was $90,000, compared to $41,000 in the fourth quarter last year.
Fourth quarter 2012 agribusiness revenue includes $8.5 million in lemon sales, compared to $7.8 million of lemon sales during the same period of fiscal year 2011, reflecting a larger number of cartons of fresh lemons sold as well as a higher average price per carton. The Company also experienced higher sales of lemon by-products compared to the same period last year. Avocado revenue was $3.3 million in the fourth quarter of fiscal year 2012 compared to $0.9 million in the fourth quarter last year. The increase in avocado sales reflects higher volume of fruit sold offset by a lower average price per pound. The Company generated $1.8 million of orange, specialty citrus and other crop revenues in the fourth quarter of fiscal year 2012 compared to $1.1 million in the same period of fiscal year 2011.
Costs and expenses for the fourth quarter of fiscal year 2012 were $14.3 million, compared to $10.0 million in the fourth quarter of last fiscal year. The year-over-year increase in operating expenses reflects increased agribusiness costs associated with the higher sales for this segment, as well as higher selling, general and administrative expenses due primarily to increased employee incentive and selling expenses as a result of improved operations in fiscal year 2012 versus fiscal year 2011.
Operating income for the fiscal year 2012 fourth quarter was $458,000, compared to $843,000 in the fourth quarter of the previous fiscal year. Fourth quarter 2012 operating income was lower than the prior year due primarily to $125,000 operating loss on the Sheldon Ranch leases and increased selling, general and administrative expenses. The Sheldon Ranch leases are comprised of six operating leases for approximately 1,000 acres of lemon, orange, specialty citrus and other crop orchards. Under the terms of the lease agreements and due to growing and harvest timing, Limoneira did not share in citrus crop revenue on the Sheldon property in fiscal year 2012 but incurred certain farming costs and lease expense associated with the property, resulting in a loss from operations of $125,000 in the fourth quarter of fiscal year 2012 and $735,000 for all of 2012. The Company expects that Sheldon Ranch operations will be profitable in fiscal year 2013.
Adjusted EBITDA (defined as net income excluding interest, income taxes, depreciation and amortization, and non-cash impairment charges on real estate development) in the fourth quarter of fiscal year 2012 was $1.1 million, compared to $1.5 million in the same period of fiscal year 2011. A reconciliation of Adjusted EBITDA to the GAAP measure net income is provided at the end of this release.
Primarily as a result of a larger amount of capitalized interest on real estate development projects during the fourth quarter of fiscal year 2012, interest expense was $114,000 compared to $298,000 in the same period of fiscal year 2011. Non-cash fair value adjustments on the Company's interest rate swap resulted in income of $212,000 in the fourth quarter of fiscal year 2012, compared to $109,000 of expense in the same period of the prior year.
Other income (expense) includes a $150,000 write off in the fourth quarter of fiscal year 2012 of a note receivable related to a coffee business that was discontinued in 2006.
Net income applicable to common stock, after preferred dividends, for the fourth quarter of fiscal year 2012 was $76,000, or $0.01 per share. Excluding the $125,000 operating loss associated with the previously discussed Sheldon Ranch leases and $150,000 in losses on notes receivable, net income would have been $351,000 or $0.03 per share. This compares to net income applicable to common stock, after preferred dividends, in the fourth quarter of fiscal year 2011 of $489,000, or $0.04 per share.
Fiscal Year 2012 Results
For the fiscal year ended October 31, 2012, revenue was $65.8 million, compared to $52.5 million last year. Operating income for fiscal year 2012 was $4.6 million, compared to $1.0 million last year. Net income applicable to common stock, after preferred dividends, for fiscal year 2012 was $2.9 million, or $0.26 per share, compared to $1.3 million, or $0.12 per share, in the same period last year. Excluding the $735,000 operating loss associated with the previously discussed Sheldon Ranch leases and $265,000 in notes receivable losses comprised of $150,000 related to a discontinued business unit described above and a $115,000 loan to an internet television company to assist it in promoting Santa Paula and surrounding areas, fiscal year 2012 net income applicable to common stock would have been $3.9 million or $0.35 per share.
Lemon sales increased 41% to $44.2 million in fiscal year 2012, compared to $31.2 million in fiscal year 2011 as a result of increased volume and higher average prices. Fresh lemon cartons sold increased 33% to 2.4 million in fiscal year 2012 from 1.8 million in fiscal year 2011.
Avocado sales increased 27% to $9.5 million in fiscal year 2012, compared to $7.5 million in fiscal year 2011 as a result of higher production, partially offset by lower prices. The California avocado crop typically experiences alternative years of high and low productivity due to plant physiology.
Management Comments
Harold Edwards, President and Chief Executive Officer, stated, "We are pleased to report a strong financial performance in fiscal year 2012, as we improved both our top and bottom line results compared to last fiscal year. Our total annual revenue increased 25% to $66 million, primarily reflecting the strength of our agribusiness -- in particular our lemon business -- throughout the year. We achieved solid Adjusted EBITDA of $6.9 million and generated cash from operating activities of $6.3 million in fiscal 2012. Due to our consistent cash flow, we continued to pay a quarterly dividend and announced a 20% dividend increase in September, underscoring our confidence in our business going forward."
Mr. Edwards continued, "In fiscal year 2012, we completed several strategic acquisitions and entered into key agreements that improved the overall position of our agribusiness and will benefit our financial results in fiscal year 2013. We acquired a total of 355 acres of productive agricultural land in California and entered into the Sheldon Ranch leases, most of which we believe will be accretive to our fiscal year 2013 results. We now own or lease over 8,000 acres of agriculture and real estate property, and continue to see a healthy pipeline of potential agriculture acquisition properties, which will enable us to further solidify our position as one of California's leading agribusinesses. Regarding our real estate development efforts, we continue to evaluate market conditions and are committed to capitalizing on opportunities to monetize our real estate portfolio at the appropriate time. We are pleased that on January 1, 2013 the Williamson Act expired for Windfall Farms, which allows the project to be subdivided into 76 ten acre parcels."
Balance Sheet and Liquidity
Cash generated by operating activities in fiscal year 2012 was $6.3 million, compared to $6.0 million fiscal year 2011. Net borrowings on long-term debt were $6.8 million in fiscal year 2012 to finance the acquisition of agriculture properties, real estate development activities and on-going capital requirements.
Real Estate Development
During fiscal year 2012, the Company continued to execute its real estate development strategy by capitalizing development costs of $5.1 million. In fiscal year 2011, the Company capitalized development costs of $5.2 million.
Fiscal 2012 Business Highlights
The Company continues to benefit from the success of its direct lemon sales and marketing strategy. In fiscal year 2012, lemon sales were comprised of approximately 79% to U.S. and Canada-based customers and 21% to domestic exporters.
Alex Teague, Senior Vice President, stated, "We continue to benefit from our direct lemon marketing and sales strategy. We now have over 100 different lemon customers, underscoring the success of our sales team. In fiscal year 2012, we sold approximately 600,000 more fresh lemon cartons than the last fiscal year, and we are looking forward to continued growth in fiscal year 2013. To bolster our direct lemon sales and marketing strategy, we launched a marketing campaign 'Unleash the Power of Lemons,' with the goal of building lemon sales and consumption through fun and easy consumption ideas. We have recently announced partnerships with experts in food, beauty, and lifestyle in major cities including Los Angeles, New York, and Chicago to promote the many innovative uses of lemons."
In fiscal year 2012, Limoneira continued to execute on its agribusiness growth strategy of acquiring prime agriculture property throughout California. The Company acquired 355 acres of agriculture property and entered into the Sheldon Ranch leases for another 1,000 acres. Limoneira currently owns or leases 8,246 acres of agriculture and real estate property compared to 6,840 acres owned or leased at the beginning of fiscal year 2012.
Fiscal 2013 Outlook
The Company enters 2013 with approximately 800 additional revenue generating agricultural acres, representing a 12% increase compared to the beginning of fiscal 2012.
For the fiscal year ending October 31, 2013, the Company expects to sell between 3.0 million to 3.2 million cartons of lemons, representing approximately 25% increase over fiscal year 2012 and expects to sell between 17 million to 19 million pounds of avocados, representing approximately 50% increase compared to fiscal year 2012. Lemon and avocado prices are expected to be less in fiscal year 2013 than 2012 due to higher industry production.
In addition, the Company expects the Sheldon Ranch leases to be profitable in fiscal 2013 compared to a loss of $735,000 in fiscal year 2012.
The Company expects the approval to annex East Area 1 into the city of Santa Paula and the submission of the application to annex East Area 2 into the city of Santa Paula to occur during the first six months of 2013. Development and tract mapping for East Area 1 is anticipated by early fiscal year 2014 with first phase construction to commence during 2014.
