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spk00: greetings and welcome to the limonera third quarter fiscal year 2021 financial results at this time all participants are in a listen-only mode a question and answer session will follow the formal presentation if anyone should require operator assistance during the conference please press star 0 on your telephone keypad as a reminder this conference is being recorded it is now my pleasure to introduce your host john mills with icr thank you you may begin
spk04: Good afternoon, everyone, and thank you for joining us for Lehman Era's third quarter fiscal year 2021 conference call. On the call today are Harold Edwards, President and Chief Executive Officer, and Mark Palamountain, Chief Financial Officer. By now, everyone should have access to the third quarter fiscal year 2021 earnings release, which went out today at approximately 4 p.m. Eastern time. If you've not had a chance to view the release, it's available on the investor relations portion of the company's website at LehmanEra.com. This call is being webcast and a replay will be available on the preliminary's website as well. Before we begin, we'd like to remind everyone that prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. Such statements involve a number of known and unknown risks and uncertainties, many of which are outside the company's control and could cause its future results, performance or achievements to differ significantly from the results, performance, or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risk details in the company's 10 Qs and 10 Ks filed with the SEC and those mentioned in the earnings release. Except as required by law, we undertake no obligation to update any forward-looking or other statements herein, whether a result of new information, future events, or otherwise. Please note that during today's call, we will be discussing non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater understanding of Lehman Air's ongoing results of operations, particularly when comparing underlying results from period to period. We've provided as much detail as possible on any items that are discussed on an adjusted basis. Also, within the company's earnings release and in today's prepared remarks, we include adjusted EBITDA, which is a non-GAAP financial measure. A reconciliation of adjusted EBITDA to the most directly comparable GAAP financial measures is included in the company's 10Q and press release, which have been posted to its website. And with that, it's my pleasure to turn the call over to the company's president and CEO, Mr. Harold Edwards.
spk03: Thanks, John, and good afternoon, everyone. During the third quarter, our increase in fresh lemon utilization higher price per carton of fresh lemons, and continuing cost improvement initiatives were the primary driving factors behind our 86% increase in operating income year over year. We achieved this improvement despite the previously announced reduced sizing of our avocado fruit due to lack of rainfall, as well as the widely publicized global logistical delays that are affecting the entire agricultural industry, and reduced exports to Asia due to the COVID-19 Delta variant in these countries. Our team worked very hard to reduce the effect these temporary headwinds had on our third quarter results, and we're excited about how we are positioned for revenue and earnings growth in fiscal year 2022. Our real estate development project, Harvest at Lima Nera, continues to perform very well, and I will provide an update on this project in a few minutes. I'll now discuss each of our business divisions' performance for the third quarter, starting with agribusiness. Agribusiness revenues was $48 million compared to $52 million in the third quarter of fiscal year 2021. Fresh lemon revenue was $24 million compared to $35 million during the same period of fiscal year 2020. The decreased volume of fresh lemons partially relates to harvesting and logistical delays affecting our industry. As expected, fresh lemon pricing and utilization were strong in the third quarter of fiscal year 2021. However, supply constraint due to the delayed harvest in Chile and Argentina, along with the congested ports throughout the world, have temporarily delayed shipments of many agricultural products, including lemons, into the fourth fiscal quarter. Overall, pricing was $21.34 average price per carton, compared to $17.19 average price per carton last year. Fresh lemon utilization rates were 77% to 80% compared to 57% to 60% in the prior year period. Avocado revenue decreased $4.1 million compared to $6.1 million due to the highly publicized lack of rainfall throughout California and the West Coast, which reduced the overall size of the actual avocado fruit pieces and resulted in reduced pounds sold. Orange revenue was lower in the third quarter as higher volume was offset by lower prices of oranges sold. Turning now to our real estate development segment. Our real estate development project, Harvest at Lima Nera, continues to perform very well and has now closed 556 lots since inception, including 92 new lot closings in the third quarter of fiscal year 2021. We are confident in the timing of the expected $80 million of cash distributions from Harvest at Lima Nera over the next six years, beginning in fiscal year 2022. In addition, we believe there is potential upside to our stated cash distributions due to increased number of sellable lots entitled in Harvest at Lima Nera, as well as the potential opportunity of the recently announced medical campus in our East Area 2 development. We are constantly striving to improve our efficiencies throughout all aspects of our business, and you can see the improvements in our operating expenses compared to last year. In order to stay in front of the fast-paced fresh produce industry from tree to consumer, we are implementing a digital transformation we are calling the Farm to Table by a Tablet initiative. This innovative program will monitor daily tree health and fruit growth along with tying together the entire distribution chain from tree to customer dock. This real-time information system will tie the entire One World of Fresh Citrus worldwide team together on one accessible platform to raise yields and quality while increasing the efficiencies of farming, harvest, packing, and sales. This initiative utilizes sensors located in every block of our ranches that gather consistent data on many factors, including moisture levels in the soil and trees, as well as temperature and wind. This data combines with the constant measurement of fruit size, creating models to predict the time and quality of harvest. We then centralize all data to create more predictive algorithms that enable our sales team to improve fresh utilization by matching harvests, fruit grades, and sizes with global client demands. This also improves efficiencies within our harvest and packing teams by ensuring we are being efficient with hiring of labor and distribution needs throughout the year. These measurements will also enable us to be more efficient with our valuable water assets. Throughout the spring and summer, there's been a lot of attention on the current lack of rainfall on the West Coast and corresponding water rights. We are fortunate at Lima Nera to have over 28,000 acre feet of strong water rights covering all of our ranches, including Class III Colorado River water rights, which are in the front of Las Vegas and Phoenix. Each day, water becomes more valuable, and we continue to work to improve the use of this valuable asset. Additionally, we continue to work with local communities to make sure that we are all driving to a sustainable future with this precious asset as illustrated with our tree monitoring system, which tells us exactly when the tree and where the tree needs water. Our water quality and supply is maintained through rigorous lab testing, flotation systems, and a network of microsprinklers to ensure we maximize this asset. Our digital information systems utilize water probes to measure volumetric water content and are connected to data sensors in the irrigation control system. Soil and tree moisture stations then log water data and send it to the main controlling system. We have been proud stewards of our land for over 128 years, and by utilizing technology, we will be able to grow the best crops for future generations. And with that, I'll now turn the call over to Mark.
spk02: Thank you, Harold, and good afternoon, everyone. For the third quarter of fiscal year 2021, total net revenue was $49.1 million compared to total net revenue of $53.6 million in the third quarter of the previous fiscal year. Agribusiness revenue was $48 million compared to $52.4 million in the third quarter last year. Other operations revenue was similar to the prior fiscal year at $1.2 million. Agribusiness revenue for the third quarter of fiscal year 2021 includes $24.4 million in fresh lemon sales compared to $35.4 million of fresh lemon sales during the same period of fiscal year 2020. Approximately 1,144,000 cartons of fresh lemons were sold during the third quarter of fiscal year 2021 at a $21.34 average price per carton. compared to approximately 1,979,000 cartons sold at a $17.91 average price per carton during the third quarter of fiscal year 2020. The decreased volume of fresh lemons partially relates to harvesting and logistical delays affecting our industry. As expected, fresh lemon pricing and utilization was strong in the third quarter of fiscal year 2021, However, supply constraints due to delayed harvests in Chile and Argentina, along with congested ports throughout the world, have temporarily delayed shipments of many agriculture products, including lemons, into the fourth fiscal quarter. The company recognized $4.1 million of avocado revenue in the third quarter of fiscal year 2021, compared to $6.1 million in the same period last fiscal year. Approximately 3.5 million pounds of avocados were sold during the third quarter of fiscal year 2021 at a $1.16 average price per pound, compared to approximately 6.1 million pounds sold at $1 average price per pound during the third quarter of fiscal year 2020. The reduction in avocado revenue compared to the prior year is due to the highly publicized lack of rainfall throughout California and the West Coast, which reduced the overall size of the actual avocado fruit pieces. This resulted in reduced pounds sold for the company's avocados in the third quarter of fiscal year 2021. The lack of rainfall has not affected Limonera's lemons in Southern California or Arizona due to the company's strong water assets as well as the irrigation systems for the lemon groves. The company recognized $2 million of orange revenue in the third quarter of fiscal year 2021 compared to $2.2 million in the same period of fiscal year 2020, primarily attributable to lower prices partially offset by increased volume of oranges sold. Approximately 259,000 cartons of oranges were sold during the third quarter of fiscal year 2021 at a $7.65 average price per carton, compared to approximately 184,000 cartons sold at a $12.13 average price per carton during the third quarter of fiscal year 2020. Specialty citrus and other crop revenues was similar to the prior fiscal year at $1.1 million compared to $800,000 in the third quarter of fiscal year 2020. Total costs and expenses for the third quarter of fiscal year 2021 decreased to $45.8 million compared to $51.7 million in the third quarter of last fiscal year. Despite the temporary challenges to the company's supply chain, operating income for the third quarter of fiscal year 2021 increased by 86% to $3.4 million compared to $1.8 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 2021 was $3.6 million compared to $2.2 million in the third quarter of fiscal year 2020. Net income per diluted share for the third quarter of fiscal year 2021 was 20 cents compared to net income per diluted share of 12 cents for the same period of fiscal year 2020. Adjusted net income applicable to common stock for the third quarter of fiscal year 2021 was $3.7 million compared to $2.4 million in the same period of fiscal year 2020, which excludes the loss on stock in Calabo. Adjusted net income for diluted share was 20 cents compared to adjusted net income for diluted share of 13 cents for the third quarter of fiscal year 2020. A reconciliation of adjusted net income to net income is provided at the end of our earnings release. Adjusted EBITDA was $7.8 million in the third quarter of fiscal year 2021 compared to $6 million in the same period of fiscal year 2020. A reconciliation of adjusted EBITDA to net income or loss is provided at the end of our earnings release. For the first nine months ended July 31, 2021, revenue was $132.5 million compared to $134.8 million in the same period last year. The company recognized $2.6 million of lemon and orange sales in Chile by PDA in San Pablo and $3.3 million of lemon sales in Argentina by Tropony Fresh in the nine months ended July 31, 2021. Operating income for the first nine months of fiscal year 2021 was $118,000 compared to an operating loss of $9.5 million in the same period last year. Net income applicable to common stock after preferred dividends was $1.1 million for the first nine months of fiscal year 2021 compared to a net loss of $9.4 million in the same period last fiscal year. net income per diluted share for the first nine months this fiscal year was $0.06 compared to a net loss per diluted share of $0.54 in the same period of fiscal year 2020. For the first nine months of fiscal year 2021, adjusted net income applicable to common stock was $1 million compared to adjusted net loss of $4.2 million for the same period in fiscal year 2020. Adjusted net income per diluted share was $0.06 compared to adjusted net loss per diluted share of $0.24 for the same period in fiscal year 2020. Based on approximately $17.4 million and $17.6 million respectively weighted average diluted shares common shares outstanding. Turning now to our balance sheet and liquidity, long-term debt as of July 31, 2021 was $120.9 million compared to $122.6 million at the end of fiscal year 2020. In December 2020, the company received $5 million of federal tax refunds related to the CARES Act and received an additional $900,000 of California state refunds in the third quarter of fiscal year 2021. Now, I'd like to turn the call back to Harold to discuss our fiscal year 2021 outlook and longer-term growth pipeline.
spk03: Thank you, Mark. The COVID-19 pandemic continues to affect our food service business on a global basis, and many of the Asian countries we serve have temporarily reduced fruit shipments because of COVID-related decrease in food service needs. Because of this, we believe it is prudent to not provide specific lemon guidance at this time. However, we do believe due to lower projected imports from Mexico and Spain in fiscal year 2022, improved industry-wide supply chain improvements, and continued increased fresh utilization, we believe we will achieve an increase in price per carton in fiscal year 2022. We also have an additional 1,200 acres of non-bearing lemons estimated to become full bearing over the next four years. which will enable us to achieve strong organic growth for years to come. The company expects 200 of the 1,200 acres to become full bearing in fiscal year 2021. Beyond these 1,200 acres, we intend to plant an additional 250 acres of lemons in the next two years that we believe will further build our long-term pipeline of productive acreage. We anticipate this additional acreage will increase domestic supply of lemons from our 2020 level by approximately 50% or about 900,000 to 1.3 million additional fresh cartons as the non-bearing and planned acreage becomes productive. We also expect to have a steady increase in third-party grower fruit. Also, due to continued steady improvement in the real estate development of harvested limonera, We are confident we will generate cash distributions from harvest as follows. Fiscal year 2021 is expected to be neutral. Fiscal year 2022 is expected to generate $3 million of cash to Lehman ERA. Fiscal year 2023 is expected to generate $15 million. Fiscal year 2024 is expected to generate $27 million. Fiscal year 2025 is expected to generate $25 million. And 2026 is expected to generate $10 million. This will be $80 million of cash back to Lehman era in the next six years. These expectations from harvest do not include the potential upside from increased numbers of residential lots. We, we are entitled to sell at harvest as well as the potential opportunity of a medical campus in our East area to development. We expect to be in position to provide greater transparency on these opportunities later this year. And with that, I'd like to open the call up to your questions. Operator?
spk00: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Our first question is from Ben Bienvenu of Stevens. Please state your question.
spk05: Hey, thanks. Good afternoon, guys. Good afternoon, Ben. I know you're not providing lemon guidance, but I am curious if you have the ability to provide any color on what level of visibility you have on how much of the volumes that should have been in 3Q that might shift to 4Q. And then second question, you talk about you expect the third-party volumes to steadily grow over the long term. You referenced your internally produced levels or volumes growing relative to that 2020 base. when you're talking about the third party volumes, are you talking relative to that 2020 base as well, or relative to the 2021 base?
spk03: Thanks. So I think somewhere between 250,000 to 300,000 cartons pushed from the third quarter to the fourth quarter, if that's helpful. Um, we, we do believe the, uh, the shipments are there and the fruits there. So one of the, one of the challenges to that is just simply that with the congestion in the ports that we're experiencing, That fruit typically has to be unloaded and then reworked because, you know, it's been, it's been on the water for longer than it normally would be. So that would be the only thing that would kind of challenge that, that number, but I think 250 to 300 is the number. And, um, and then sort of just, uh, anecdotally, we think that the, uh, the, the, the tree crop in district three is up, uh, fairly significantly. which should offset some of the land that we've fallowed because of the water opportunity in District 3. So I think if we get normal utilization rates out of the desert, we should have similar volumes to last year with roughly a similar split between our fruit and outside grower fruit. We believe the crop in District 1 up in the San Joaquin Valley, which is the winter crop, is 15 to 20 percent larger as a tree crop and because of our competitiveness this year we expect to recruit new growers there. But I think we should expect growth in the winter period both because of non-bearing acreage becoming more bearing but also because it's a larger tree crop and we expect to recruit new growers there. So, Mark, the split between outside and our in District 1 is? Right now, it's about 60-40, us to outside.
spk02: And we're 50-50 overall for 2021.
spk03: Yeah, and then the last piece of that puzzle, Ben, is the coastal crop, which is the spring-summer crop. And initial estimates are that that will be bigger, too. And we have non-bearing acres that are becoming bearing in this area. And because of the competitiveness of our returns this last year, we expect to grow outside growers here as well. So directionally, this fiscal year 2021, we should come in somewhere around 4.2 million total domestic cartons. And we believe directionally, if we can achieve the fresh utilization rates next year, that should be trending closer to 5 million total cartons domestically. And as Mark pointed out, 50% would be our fruit and 50% would be outside grower fruit.
spk05: Okay, very helpful. My second question is, you talked about your strategic positioning around water rights and the access that you have to those resources, positioning you well in the near to intermediate term. How should we think about you know, the risk of longer-term threat to productivity across your, or costs across your network if drought conditions persist for, you know, a longer period of time?
spk03: So, different answer in different places, but starting on the Colorado River and our assets in Yuma, Arizona, we've actually fallowed 600 acres in anticipation of a following program which will incent producers to fallow land in return for providing the water rates associated with that land to other users on the Colorado River. And so we're working on that plan and those programs right now and hope to have an announcement on what that program looks like for next year, for 2021. We believe we've been able to do that without disrupting our supply chain at all because of a larger overall crop in Arizona. So that's the first piece to that puzzle. And the rest of the water is actually, the answer to your question is more specifically related to where that asset is and what resource is available to that asset and the condition of that asset. Here in Ventura County, we're very fortunate to have very deep underground aquifers that allows us to access water for a long period of time of extended drought. We've done this before and been in good shape. So I wouldn't anticipate a real challenge to the overall health and survivability of the tree. We'll experience impacts if it doesn't rain next year, for instance, in the sizing of avocados, which we experienced this year most likely. But generally, we think we're in pretty good shape here in our Ventura County assets. And then the San Joaquin Valley is where some of the sort of the bigger challenges exist as it relates to access to riparian flows of rivers and streams being dramatically reduced and then an over dependence of groundwater pumping which pushes us and all of our neighbors into groundwater pumping situations. At this point, we believe our assets are in good shape and we have access to water, but that's where we would see increasing costs based on our requirement to pay money to buy additional access to water when our groundwater pumping wasn't sufficient. Again, at this point, we believe we have a sufficient supply of water but that's where you would see your costs increase.
spk05: Okay, very helpful. Thanks very much, guys.
spk04: Thanks, Ben. Thank you.
spk00: Our next question is from Vincent Anderson of CECL. Please state your question.
spk07: Yeah, thanks. Good afternoon. Hey, Vince. Hey. So I completely respect you don't have details on the District 3 water rights now, but you called it a program. I was kind of hoping you could at least give us an idea of maybe who is involved here. Are you leading it? Is it a public-private partnership? You must be fairly confident in the direction it's heading that you already followed acres.
spk03: Yeah, so we were going to follow the acres anyways because we were in the process of transitioning older blocks. getting ready to replant younger blocks but with the potential of water following programs we're slowing that down and and looking to just put those programs into what would be a short term like two three year um fallow programs where we would commit in a public private partnership how it's being contemplated right now there's always the potential that the bureau of reclamation could come in and create a a broader program, but at this point it's more of just a public-private situation where it would be fallowed land in return for not pumping that water and providing the access to that water to another large water user along the Colorado River. The economics, it's a little too early to talk about it, but directionally something that would give us benefit to the approximately $1,000 an acre And that actually works pretty profitably because you can basically eliminate your expenses on that fallowed land. So the idea is to get the program going, and then as water scarcity continues to become more and more pervasive, to basically develop that program in a bigger way over a longer period of time. As the over-allocation of the Colorado River is sort of dealt with, by the biggest users.
spk02: And Vance, there was a similar program that was in place, I think about 2013, where we got about half of that. So it ended up being about $500 an acre, and you could put in a certain amount of acreage. So it's still unclear if you can put in all of the acreage that you're planning to follow or expect to be followed. But really, as Harold alluded to, it's setting up that ability to to be able to move water back to the Colorado River and then set up those future large value transactions, whether we sell the actual wet water or the water right, which is the bigger take.
spk07: Okay, so a bit more opportunistic for now. We'll see where it goes.
spk03: Correct. We actually think, without getting too far in front of ourselves, that the combination of the reduction of expense as it related to following 600 acres the larger crop, which should keep our supply chain of lemons intact, and then the following program should be a significant profit swing for us with our Yuma, Arizona assets. So that should be a big benefit to us in 2022.
spk02: And just to be clear, so the completion of the following will be once we harvest the remainder of this season's crop, which would be the end of the calendar year.
spk07: Okay. All right. Perfect. Thank you. And so switching over, we've just been reading a lot about issues in Argentina with yields. We've brought that up all year, I think. And then you have the export timing and logistics constraints. But we're still seeing a heck of a lot of Argentinian lemons ending up in the U.S. And so you touched on some of this, but can you just Give us an idea of what's going on. Is Argentina just flat out prioritizing the U.S. market? And is that leaving any opportunities for you to backfill elsewhere with your lemons?
spk03: So there's basically two things going on for Limonera in Argentina. One, we're a 50% owner of a productive lemon ranch in the furthest northmost province in the country of Argentina. And our harvests and our yields out of that ranch have been delayed. They're coming, but have been delayed. But at the same time, we continue to source fruit from outside growers on a pure brokerage level. And our volume of those lemons are actually up. And the brokerage part of our business is up considerably, although it's delayed. So how that nets out for us at the end of the year should be pretty much on track as it relates to the performance of the ranch being down for yield reasons, but the performance of the brokerage being up because we've moved a lot of Argentine lemons in our brokerage programs. So net-net, the financials of Argentina should be pretty much on our plans as we laid them out at the beginning of the year.
spk07: Okay, excellent. And then I guess just really quick, you know, you mentioned Mexico, you expect to be down enough to be supportive of price into next year. Just anything specific you're seeing there, maybe size-wise, I think they normally come in on the smaller end anyways, but any specifics you wanted to share?
spk03: It's just typically smaller size and quality, and then the shippers have a lower cost of production. So typically will come in much under market just to get the fruit movement of a lower quality product. So that's going on, but it's a smaller overall Mexican crop, so that should be very helpful. The thing that's creating the choppiness and the sloppiness in the markets right now have been these delayed southern hemisphere Chilean and Argentine shipments that are coming in and being delayed, and then that fruit then all needs to be reworked and it's old, and so the quality has deteriorated. So as the importers are dealing with that situation in the local terminal markets, it's really putting downward pressure on the pricing. We're seeing pricing in the $22 to $23 range right now, which all things considered is not that bad. But once that fruit is done and the Mexican fruit is basically now competing against the desert fruit, which we'll be participating in,
spk02: We expect pricing to begin to improve, and that should finish up in four to six weeks on the East Coast. Yeah.
spk07: All right, perfect. I really appreciate it. Thank you.
spk02: Thanks.
spk00: Our next question is from Ben Clive of Lake Street Capital Markets. Please state your question.
spk06: All right, thanks for taking my questions. Most of what I have has been asked already here, but I have a question about the digital initiative that you outlined in your prepared remarks. Can you talk a bit about the implications of this program on yield that you're expecting, on improved water efficiency that you're expecting? Talk about how this maybe is performed in beta testing. Any detail would be appreciated from that perspective.
spk03: No, happy to, Ben. Yeah, it's actually a pretty exciting program, but every single one of our ranches can be broken down into what we call blocks. And the characteristics of the productiveness of the trees in each block tends to be pretty similar. And so what we've done is for every block in every one of our ranches around the world, we've actually implemented sensors into trees Those sensors are actually detecting moisture level within the trees. Then we combine that data and information with data that we pull from the soil around the trees using what we call tensiometers that are actually measuring the moisture levels in the soil. The combination of the moisture level in the tree and the moisture level in the soil then gives us direct access to decide when is the optimal time to irrigate versus not. And that allows us to be much better conservationists with our water. But it also allows us to irrigate based on need versus on how it's traditionally done in the industry, which is the availability of the water from the irrigation company. And so that sounds very fundamental, but that's actually a really important change in the way that we're farming and using that information and data to farm more efficiently. And then the other piece of the technology that we're implementing actually in every block of our ranches is actually measuring fruit size, fruit grade, and fruit color. And it's giving us the ability based on the information that we're tracking is how fast that fruit's growing, and it allows us to create these very efficient predictive algorithms that tell us on a 30, 60, 90, 180-day basis when the fruit will be optimally ready to harvest, and then also the condition that that fruit will be in at the time of harvest, which allows our sales team to then get in front of that information and the supply that's coming through the supply chain to go set up specific programs directly with our food service buyers and our retail buyers so that when the fruit is harvested, there's already a customer that's there ready to take it. And how that will manifest itself in our business from a profitability standpoint is that should keep our fresh utilization ranges levels much higher than without the use of that technology. And again, remember, if we can sell it fresh, we're selling it an average of $23, $24 a 40-pound carton versus if we can't sell it fresh and we have to send it to the juice plant because we couldn't sell it or the quality of the fruit dictated that it wasn't able to go fresh, we get about $2 a fresh carton for that. So you see the massive incentive economically for us to be successful with our fresh utilizations.
spk06: Got it. That's all helpful and an interesting initiative. Look forward to hearing more about that here in coming quarters. Appreciate the caller there. I think that does it for me. I'll get back in queue.
spk05: Thank you. Thanks.
spk00: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we pull for additional questions. Our next question is from Jerry Sweeney of Roth Capital Partners. Please state your question.
spk01: Hey, good morning, or good afternoon, guys. How are you doing?
spk00: Hi, Jerry.
spk01: Good afternoon, Jerry. Quick question on utilization. Obviously, 77% to 80%, much higher than last year. How much of that is market-driven versus, I know last year, you know, food service was on and off and off. at different times, and then you also pushed more, I think, into the grocery chain. Have you expanded some of your distribution channels to potentially increase utilization or at least give you additional outlets?
spk02: Yeah, so I think there's two parts to that question. One, this year we saw a better balance of supply with the lower overall crop in most of the areas, so less fruit availability into what we'll call burgeoning demand. We set up the initiatives to put bagging in to go chase that more profitable retail business, which also allowed us to have grades across in bags, which created more flexibility into Costco and some of the bigger players. So really that was... the component. And just when you have that opportunity to balance the supply as it is versus the prior year's oversupply due to COVID and then the year before when we had that one size that was just the supply issues, you can really see the effect in the fresh utilization. And we had many months, April, May, June, where we were sold out of most of our sizes and grades for, you know, we had to cut people back to 80% of orders. I think we're in a good balance now, and, you know, we're seeing smaller sizes, but in general, it's that balance.
spk03: And, Jerry, one other comment about this that's kind of interesting is that one of our biggest customers is a restaurant chain, a QSR chain called Raising Cane's that's a competitor to Chick-fil-A. And just like Chick-fil-A, they make fresh lemonade every two hours in every one of their stores. Their chain is growing very rapidly, but that's where we sell a lot of our standard grade, which is the lower quality, highest juice content product, but a great customer to have because rather than having to send it to the juice plant at low economic levels, we're able to sell that standard as a fresh piece of fruit to our very valuable customer, Raising Cane's, and That one customer was almost a million cartons of business for us this year. As they grow and expand, we look forward to expanding and growing with them. And that's been a huge part of our fresh utilization success is having that right balance for our standard grades, but also the right kind of top-end buyers for our fancy grades, which typically go to the highest ends of retail and exports.
spk01: Gotcha. And then one really simple question, just curious, just more curiosity, to be quite honest with you. Avocados not irrigated?
spk03: No, they're irrigated. They're irrigated, and that goes a long way to keeping the tree healthy and alive and growing and producing. But there's something that happens to a fruit tree with natural rainfall that accelerates the growth of the fruit over and above just the health of the tree. And so that's really where we suffered this year is that even though last year we had sort of below normal levels of total rainfall, the way the rain fell in 2020 was actually good for the avocado crop, and we actually got good growth in size of the fruit. This last year we had very, very little, so one of the lowest recorded years of rainfall, and the fruit just did not size.
spk01: Got you. Okay. I appreciate it. That's it for me. Thanks, Jerry. Thanks, Jerry.
spk00: There are no more questions at this time. We have reached the end of the question and answer session. I will now turn the call back over to Harold Edwards for closing remarks.
spk03: Thank you very much for your questions and interest in Lima Nera. Have a great day.
spk00: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.
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