Limoneira Company, a leading agribusiness with prime agricultural land and operations, real estate and water rights in California and Arizona, reported their financial results for the first quarter ended January 31, 2016 and raised its annual guidance range for fiscal year 2016. The company reports a decrease in revenue compared to last year.
Fiscal Year 2016 First Quarter Results
For the first quarter of fiscal year 2016, revenue was $25.0 million, compared to revenue of $28.0 million in the first quarter of the previous fiscal year. Agribusiness revenue was $23.6 million, compared to $26.9 million in the first quarter last fiscal year, primarily due to lower lemon sales. Rental operations revenue was $1.4 million in the first quarter of fiscal year 2016, compared to $1.1 million in the first quarter of last fiscal year. Real estate development revenue was $12,000 compared to $10,000 in the first quarter last fiscal year.
Agribusiness revenue for the first quarter of fiscal year 2016 includes $21.9 million in lemon sales, compared to $24.7 million of lemon sales during the same period of fiscal year 2015, primarily reflecting lower volume of fresh lemons sold, partially offset by higher prices. Approximately 753,000 cartons of fresh lemons were sold during the first quarter of fiscal year 2016 at a $23.46 average price per carton compared to approximately 869,000 cartons sold at a $23.40 average price per carton during the first quarter of fiscal year 2015. The decrease in volume in the first quarter of fiscal year 2016 was primarily due to lower production from the Company's orchards in Yuma, Arizona. Avocado revenue was not significant in the first quarter of fiscal years 2016 and 2015. The Company recognized $1.0 million of orange revenue in the first quarter of fiscal year 2016, compared to $1.5 million of orange revenue in the same period of fiscal year 2015. The lower orange revenue in the first quarter of fiscal year 2016 is primarily attributable to fewer harvest days in January 2016 due to increased rainfall. Specialty citrus and other crop revenues were $0.7 million in the first quarter of fiscal year 2016, which is similar compared to the first quarter of fiscal year 2015.
Harold Edwards, President and Chief Executive Officer, stated, "Our first quarter top line results reflect the typical seasonality of our business and were impacted by lower lemon volumes from our orchards in Arizona. Looking ahead, we believe that we are well positioned to deliver a strong year in fiscal 2016. We expect to benefit from additional lemon sales in certain districts/regions as well as more favorable lemon pricing, and we also anticipate realizing strong orange sales and pricing in coming quarters. Our expanded and modernized Santa Paula packing house is now operational and, beginning in March 2016, is expected to produce meaningful cost savings that will positively impact on our financial results. Based on these factors, we are raising our annual operating income, EBITDA, and earnings per share guidance."
Mr. Edwards continued, "Regarding our real estate development business, we continue to make progress on the development of Harvest at Limoneira. We expect to receive $100 million to $130 million from the joint venture over the seven to ten year life of the project, including the $20 million we received upon entering into the joint venture. We are also focused on the development of over 40 acres of commercial properties adjacent to project property, which represents an additional opportunity for meaningful cash flows."
Mr. Edwards added, "Our long-term goal is to be one of the leading global citrus agribusinesses. Over the past several years, we have made a number of strategic investments in both the US and internationally that will drive long-term top and bottom line results. We currently have approximately 7,600 planted agricultural acres of which approximately 1,500 are non-bearing and are estimated to become full-bearing over the next four years with plans to plant an additional 500 acres in the next two years. We anticipate this additional acreage will increase our annual lemon supply by approximately 0.9 million to 1.3 million fresh cartons as the non-bearing and planned acreage become productive, which our new packing house is expected to efficiently manage."
Recent Business Highlights
The Company continues to benefit from the success of its direct lemon sales and marketing strategy. During the first quarter of fiscal year 2016, lemon sales were comprised of approximately 72% domestic sales, 24% sales to domestic exporters, and 4% international sales.
Alex Teague, Senior Vice President stated, "We are excited about the outlook for our agribusiness in fiscal year 2016. With our lemon packing expansion and modernization project becoming operational, we anticipate increased efficiencies and cost savings as a result of the new facility. In addition, we expect to benefit from other investments and acquisitions that we have made over the past several years."
On December 2, 2015, the Company completed the acquisition of 757 acres of lemon, orange and specialty citrus orchards in the San Joaquin Valley, for approximately $15.1 million. This complements the Company's acquisition of an additional 157 acres of lemon, orange and specialty citrus orchards in the fourth quarter of fiscal year 2015. The orchards were acquired pursuant to purchase options contained in certain operating leases the Company has had since 2012 for approximately 1,000 acres of lemon, orange, specialty citrus and other crops, which the Company refers to as the Sheldon Ranch leases. The lease agreements included base rent of $500 per acre and contingent rent of 50% of the operating profit of the leased property as defined in the lease agreements. Total rent expense for fiscal year 2015 on the acquired property was approximately $1.0 million.
Increasing Fiscal Year 2016 Outlook
For the fiscal year ending October 31, 2016, the Company continues to expect to sell between 2.7 million and 3.0 million cartons of fresh lemons at an average price of approximately $23.00 per carton, increased from $22.50 previously expected, and expects to sell approximately 8.5 to 9.5 million pounds of avocados at approximately $0.80 per pound.
The Company is raising its guidance range for operating income, EBITDA, and earnings per diluted share for fiscal year 2016. The Company now expects operating income for fiscal year 2016 to be approximately $8.6 million to $9.1 million, compared to its previous range of $7.8 million to $8.3 million. Fiscal year 2016 EBITDA is now expected to be in the range of $14.6 million to $15.1 million, compared to the previous range of $13.6 million to $14.1 million. The Company now expects fiscal year 2016 earnings per diluted share to be in the range of $0.28 to $0.33, compared to the previous range of $0.25 to $0.29. Excluding transaction costs incurred in connection with the Limoneira / Lewis joint venture, fiscal year 2016 earnings per diluted share are expected to be in the range of $0.33 to $0.38, compared to previous estimates of $0.30 to $0.34.
Fiscal year 2016 estimated operating results reflect an anticipated increase in operating income primarily related to cost savings from the Company's new lemon packing facilities, increased revenues from additional farm worker housing units and the elimination of lease expense resulting from the acquisition of the previously leased Sheldon Ranches, offset by transaction costs of $1.2 million incurred on the close of the Limoneira / Lewis joint venture and an expected increase in depreciation expense that results from the new packing facilities, the acquired Sheldon Ranch property and the additional farm working housing units. In addition, interest expense is expected to increase in fiscal year 2016 related to the new packing house and the additional farm worker housing units being placed into service because related interest costs were capitalized during the construction period.
