Limoneira Co

should have access to the fourth quarter fiscal year 2025 earnings release, which went out today at approximately 4.05 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 limanera.com. This call is being webcast, and a replay will be available on Limanera'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 can 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 Form 10Qs and 10Ks 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 statement 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 or operations, particularly when comparing underlying results from period to period. We provide 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 and adjusted diluted earnings per share, which are non-GAAP financial measures. A reconciliation of adjusted EBITDA and adjusted diluted earnings per share to the most directly comparable GAAP financial measures are included in the company's press release, which has been posted to its website. And with that, it is my pleasure to turn the call over to the company's president and CEO, Mr. Harold Edwards.

Thanks, John, and good afternoon, everyone. Today, I want to update you on the substantial progress we've made in transforming Limonera's business model. Over the past two years, we've systematically addressed the fundamental oversupply in the global lemon market by repositioning our company around multiple profit centers and dramatically improving our cost structure. The strategic initiatives we began implementing in fiscal year 2023 were driven by a clear assessment of market realities. We took decisive action to reduce our exposure to volatile lemon pricing while building sustainable competitive advantages. In the fourth quarter of fiscal year 2025, we accelerated this work by reducing future costs to position us for stronger fiscal year 2026 results. Our return to Sunkist exemplifies this strategy in action. In fiscal year 2026, we expect to generate $10 million in cost savings compared to fiscal year 2025. Importantly, Sunkist provides enhanced customer access to premium accounts and major U.S. retailers through a full category citrus offering. This positions us to deliver comprehensive solutions for retail buyers while removing pricing pressure from the marketplace and strengthening both our packing margins and grower partner relationships. Another key initiative involved expanding our avocado offering. Today we have 1,500 acres planted with only 800 acres currently bearing fruit. The additional 700 acres will begin bearing fruit over the next three to four years, representing a near 100% increase in our avocado production capacity. California avocados command premium pricing due to superior quality and our strategic location provides logistical advantages to the highest per capita consumption markets in the western United States. Our strategic initiatives extend well beyond agriculture. We have our planned 50-50 organic recycling joint venture with Ackerman that we expect to process 300,000 tons of organic waste annually and generate $4 to $5 million in additional EBITDA beginning in fiscal year 2027. We also have our real estate development project, Harvest at Lima Nera. We continue to expect future distributions to total $155 million over the next five fiscal years. Phase three of the project consists of approximately 500 home lots and 300 apartments, plus we have an additional 35-acre East Area 2 medical pavilion development that we believe could be begin to be monetized in fiscal year 2026. Additionally, we have Limco Del Mar, our 221-acre agricultural property that is infill property within the city of Ventura, which represents a strategic asset with potential for residential development and significant long-term value creation. We are also unlocking value by divesting non-strategic assets and monetizing our water rights, to fuel this transformation and strengthen our balance sheet. We successfully completed the sale of our Chilean assets in November for $15 million. We are now advancing the monetization of our windfall farms vineyard in Paso Robles and Argentina agricultural assets together valued at approximately $40 million with completion targeted by the end of fiscal year 2026. Simultaneously, our water monetization strategy is gaining momentum. We realized $1.7 million from the sales of Santa Paula Basin pumping water rights this past year and are positioned to capture an additional $50 to $70 million in value through fiscal year 2027 from our Class III Colorado River water rights and Santa Paula Basin conserved pumping rights. These represent a transformation of our business model, shifting from a focus on oversupplied lemons to higher demand avocados, optimizing our asset base through strategic divestitures and partnerships, and operating with a more asset-light structure across multiple profit centers. Fiscal year 2026 will mark the beginning of this transformation's financial impact, with multiple value drivers converging simultaneously. We expect to realize a 50% reduction in SG&A, or approximately $10 million in savings in fiscal year 2026 from our operational restructuring initiatives completed in the fourth quarter of fiscal year 2025. Our expanding avocado production will begin contributing meaningfully in fiscal year 2027 as our 700 acres of non-bearing trees begin maturing. Additionally, our diversification strategy gains momentum with our planned Agramon Organic Recycling joint venture moving toward its expected $4 to $5 million EBITDA contribution beginning in fiscal year 2027. Combined with continued asset optimization and reduced commodity exposure, we expect fiscal year 2026 to deliver substantially improved financial performance. The proof points are clear. Our cost structure is dramatically improved. Our customer access is enhanced. Our product mix is optimized. and our asset base is being monetized. These are strategic initiatives that we believe will drive financial results beginning in fiscal year 2026. As our cash generation improves, we will evaluate capital allocation opportunities, including share repurchases if our stock price doesn't reflect our operational improvements, debt reduction, and potential dividend increases as our diversified cash flows improve. In closing, Lee Minera today is fundamentally different from the company we were 18 months ago. We've transformed from a commodity lemon producer to a diversified agricultural and real estate company with multiple growth engines and a dramatically improved cost structure. Now let me turn it over to Mark for the financial details, and then we'll take your questions.

Thank you, Harold, and good afternoon, everyone. Before I begin, I would remind you it is best to view our business on an annual, not quarterly basis, due to the seasonal nature of our business. Historically, our first and fourth quarters have been the seasonally softer quarters, while our second and third quarters have been stronger, a pattern that has held true for the fiscal year 2025. However, beginning in fiscal year 2026, our seasonal cadence will shift due to our Sunkist partnership transition. Under this new structure, we expect the cadence of the quarterly results to be as follows. The first and second quarters will be the seasonally softer quarters, while our third and fourth quarters now will be stronger. This represents an important change in our quarterly rhythm that investors should factor into their modeling as we move forward. For the fourth quarter of fiscal year 2025, total net revenue was $42.8 million and compared to total net revenue of $43.9 million in the fourth quarter of the previous fiscal year. Agribusiness revenue was $41.3 million, compared to $42.5 million in the fourth quarter last year. Other operations revenue was $1.5 million in the fourth quarter of fiscal year 2025, compared to $1.4 million in the fourth quarter last year. Agribusiness revenue for the fourth quarter of fiscal year 2025 includes $19.2 million in fresh-packed lemon sales compared to $8.4 million during the same period of fiscal year 2024. Approximately 821,000 cartons of U.S. packed fresh lemons were sold during the fourth quarter of fiscal year 2025 at a $23.33 average price per carton compared to 470,000 cartons sold at a $17.95 average price per carton during the fourth quarter of fiscal year 2024. Brokered lemons and other lemon sales were $12.5 million and $14.7 million in the fourth quarter of fiscal years 2025 and 2024, respectively. The company recognized $300,000 of avocado revenue in the fourth quarter of fiscal year 2025 compared to $8.9 million of avocado revenue in the same period of fiscal year 2024. Approximately 396,000 pounds of avocados were sold in aggregate during the fourth quarter of fiscal year 2025 at a 79 cent average price per pound. compared to approximately 4.6 million pounds sold at a $1.92 average price per pound during the fourth quarter of fiscal year 2024. The California avocado crop typically experiences alternate years of high and low production due to plant physiology and was the primary reason for lower volume this year compared to last year. We achieved our avocado volume goal for fiscal year 2025. The company recognized $2.9 million of orange revenue in the fourth quarter of fiscal year 2025 compared to $1.7 million in the fourth quarter of fiscal year 2024. Approximately 148,000 cartons of oranges were sold during the fourth quarter of fiscal year 2025 at a $19.67 average price per carton compared to approximately 91,000 cartons sold at an $18.99 average price per carton during the fourth quarter of fiscal year 2024. Specialty citrus, wine grape, and other revenues were $2.9 million in the fourth quarter of fiscal year 2025, compared to $3.5 million in the fourth quarter of fiscal year 2024. Due to the termination of our farm management agreement effective March 31, 2025, there was no farm management revenue in the fourth quarter of fiscal year 2025 compared to $2.9 million in the same period of fiscal year 2024. Total costs and expenses for the fourth quarter of fiscal year 2025 were $53.9 million compared to $46.6 million in the fourth quarter of last year. Operating loss for the fourth quarter of fiscal year 2025 was $11.1 million compared to operating loss of $2.8 million in the fourth quarter of the previous fiscal year. Net loss applicable to common stock after preferred dividends for the fourth quarter of fiscal year 2025 was $8.8 million compared to net loss applicable to common stock of $2 million in the fourth quarter of fiscal year 2024. Net loss per diluted share for the fourth quarter of fiscal year 2025 was 49 cents compared to a net loss per diluted share of 11 cents for the same period of fiscal 2024. The increase in net loss and net loss per share compared to the prior year reflects $6.7 million in strategic transformation costs, including expenses related to the Sunkist transition, tree disposals for the expansion of avocado production, and other non-recurring costs and expenses. In addition, we incurred costs related to a power outage at our storage facilities, which we expect to recover through insurance proceeds in the first quarter of fiscal year 2026. Adjusted net loss for diluted EPS for the fourth quarter of fiscal year 2025 was $8 million, or 45 cents per diluted share, compared to adjusted net loss for diluted EPS of $1.6 million or $0.09 per diluted share in the same period of fiscal year 2024. A reconciliation of net income or loss attributable to Lehman Air Company to adjusted net income or loss for diluted EPS is provided at the end of the earnings release. Non-GAAP adjusted EBITDA for the fourth quarter of fiscal year 2025 with a loss of $7 million compared to income of $1.2 million in the same period of fiscal year 2024. A reconciliation of net income or loss attributable to limonera companies to adjusted EBITDA is also provided at the end of our earnings release. Looking beyond this year, the Citrus Sales and Marketing Plan we announced with Sunkist is anticipated to enhance our resilience to market volatility by creating a more efficient cost structure. For the fiscal year ended October 31, 2025, total net revenue was $159.7 million compared to $191.5 million last year. The decrease was primarily driven by decreased agribusiness revenues from lemons, avocados, wine grapes, and farm management. partially offset by increased agribusiness revenues from oranges. Operating loss for fiscal year 2025 was $20.4 million compared to an operating loss of $6.2 million last year. Net loss applicable to common stock after preferred dividends was $16.5 million for fiscal year 2025 compared to net income of $7.2 million for fiscal year 2024. Net loss for diluted share for fiscal year 2025 was 93 cents compared to net income for diluted share of 40 cents in fiscal year 2024. For fiscal year 2025, adjusted net loss for diluted EPS was $14 million compared to adjusted net income for diluted EPS of $11 million for fiscal year 2024. Adjusted net loss per diluted share for fiscal year 2025 was 79 cents compared to adjusted net income per diluted share of 62 cents for fiscal year 2024 based on approximately 17.8 million and 17.7 million weighted average diluted common shares outstanding respectively. The effective tax rates for fiscal year 2025 and 2024 were 22.1% and 37.9% respectively. For fiscal year 2025, adjusted EBITDA was a loss of $6.5 million compared to an income of $26.7 million for fiscal year 2024. Turning now to our balance sheet and liquidity. Long-term debt as of October 31 2025 was $72.5 million compared to $40 million at the end of fiscal year 2024. Debt levels as of October 31, 2025, less $1.5 million of cash on hand resulted in a net debt position of $71 million at the end of fiscal year 2025. In April 2025, we received $10 million of our share of a $20 million cash distribution from our 50-50 real estate development joint venture with the Lewis Group of Companies. The distribution came from the joint venture's available cash and cash equivalents, which as of October 31, 2025, totaled $31.2 million. Last week, we negotiated more favorable banking covenants that allow us to continue to use the full capacity of our $115 million credit facility, of which we had $41.6 million of availability as of October 31, 2025. Now, I'd like to turn the call back to Harold to discuss our fiscal year 2026 outlook and longer-term growth pipeline. Thank you, Mark.

Looking ahead to fiscal 2026, we expect this to be the year of strategic transformation begins delivering measurable financial results. We enter fiscal 2026 with approximately $10 million in anticipated cost savings initiated in fiscal year 2025 that are expected to benefit fiscal year 2026. This includes the benefits of our Sunkist partnership, which will be visible in our fiscal year 2026 results through improved cost structure and enhanced customer relationships. Our avocado expansion continues on schedule with significant production increases expected in fiscal year 2027 as our non-bearing acreage matures. For fiscal 2026, we are providing the following guidance. Fresh lemon volumes of 4 to 4.5 million cartons and avocado volumes of 5 to 6 million pounds. Beyond our core operations, we have several additional value creation opportunities Our real estate pipeline remains strong with $155 million in expected distributions over the next five fiscal years. The LIMCO Del Mar entitlement process represents another significant real estate development opportunity. And our planned organic recycling joint venture is expected to contribute meaningful EBITDA beginning in fiscal year 2027. We've built a more resilient business model that's less dependent on commodity lemon pricing while creating multiple engines for profitable growth. Operator, we'll now open the calls to questions.

Thank you. We will now be conducting a question and answer session. 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. You may press star two if you would like to remove your question from the queue. For any participants using speaker equipment, it may be necessary to pick up your handset before pressing your star keys. Our first question comes from Puran Sharma with Stevens. You may proceed with your question.

Good afternoon, and thanks for the question. Just wanted to start off with the partnership here. I know you just mentioned here 10 million of cost savings. Just wondering if you could just give us a little bit more granularity into kind of operationally how you kind of, how you expect to get that 10 million. And then also, you did quote better customer relationships in your prepared comments. Just wondering if you could parse that out a little bit more. Maybe just give us a sense on how much of your lemon volumes are moving toward contracted versus open, and maybe how this compares to your guys' business before the partnership.

Great. Thank you, Varun. So I'll take the first part around the cost and the cost reduction, and then Harold will go for your second question. So as you recall, back in our June quarter, we announced – our transition to Sunkist that we expected to generate approximately about another $5 million of EBITDA, and that's the transition of our sales and marketing team, which most of those employees did go over to Sunkist and expand their program with all of our customers. And as we analyzed the rest of the structure and the program, we really took a deeper check at storage first and foremost and all of our operational processes there. While our sales and marketing plan with Sunkist now has a new cadence, which requires more storage, we've successfully renegotiated some of our storage contracts and also utilized some of the Sunkist unused capacities, which have allowed us to lower transportation costs and also leasing costs. And so there's a pretty good split in the $10 million, so five that we started with, which was the sales employees and all those going over, and then another five relative to storage and operational efficiencies, as well as using the opportunity to what we'll say right-size our own business, whether in every category from farming, accounting, packing, just to make sure we were going to become smaller to get bigger. We had the best platform to be able to do that. And as we go through 26 and start to see that and recognize that and then pile on the new revenue opportunities as we'll double plus our avocado production, I think that's what we're really trying to set ourselves up for.

And Puran, I might just follow up with that by saying that when we did a deep dive into our cost structure and we held ourselves accountable to the entire cost team that we'd put together to advance the marketing and sales efforts. We realized that we were spending all in, including all the administrative support and efforts that went behind the sales and marketing function, about $1.50 a carton for that sales and marketing effort. And by returning to Sunkist now, that is now fixed at $0.60 a carton. So if you multiply that over 4 million to 4.5 million cartons you see where the savings comes from. As to the second part of your question about stronger marketing and selling opportunities by returning to Sunkist, it's really driven by two things. Number one, we were beginning to face challenges in the retail segment of the market because as a single commodity supplier of just selling lemons, we were really challenged competitively against the other big marketers and sellers like Sunkist who had the full category of citrus. And as we all know, citrus buyers at retail like one-stop shopping. And so by us rejoining Sunkist and becoming part of that supply chain with lemons across their full category of citrus, We now take advantage of much greater access to the top retail customers in the country, but also a lot of their prices are fixed for a period of time, which versus the spot markets give us a much greater pricing advantage, which should manifest itself in better grower returns for our grower partners, but also in greater returns back to our own lemon production as a large lemon grower. And then the last part to the puzzle, which is one of the biggest reasons we returned, is Sunkist has an exclusivity in supply to one of the largest food service buyers of fresh lemons. This one customer makes fresh lemonade in all of their quick-serve restaurants across the country, and they do that by using exclusively Sunkist lemons. And so for us to now become part of Sunkist's lemon supply chain, it gives us access to some of the top food service customers at very excellent pricing, which gives us a greater opportunity for higher fresh utilization, but ultimately for higher pricing, not only for our grower partners, but also for ourselves as a large lemon producer.

Great. Appreciate the call there. Maybe wondering if we could talk about some of the strategic assets or I should say non-core assets that you're selling off. And I wanted to specifically focus in on water. Looks like you made some moves this quarter. I think you've mentioned in the past a range of valuation that you get per acre-feet. How does this compare versus your expectations? And could you maybe go through some of the puts and takes in terms of trying to achieve a higher valuation? Do you get pushback from some of the local governments? Would just love to hear some color regarding your water assets.

Yes, water is complex because it sort of follows that when you're dealing with water in water scarce areas, the value of the water is much higher than when you're dealing with and managing water assets in areas where there's water abundance. We really have two dynamics where we're dealing with local scarcity. One is as we continue to operate our agricultural operations in the Santa Paula Basin, We're surrounded on both sides of our operations by municipalities to the west, the city of Ventura, and to the east, the city of Santa Paula. And as a result of the scarcity and the lack of water supply in both of those municipalities, the opportunity to monetize conserved water rights and pumping rights as we do a better job with conservation and sustainability in our own operations, creates opportunities periodically to monetize some of these conserved rights. When a city is following an urban growth mandate, which all cities in California do, there's a certain requirement for new development of residential, commercial, or industrial development to bring water to any specific project. And typically the developers of these projects don't have water, so they pay a fee in lieu to the city, and the cities then need to go out and purchase the water rights. So we've put ourselves in a position to be one of the suppliers of some of these water rights for some of those opportunities as it relates to opportunities in the Santa Paula Basin. The other interesting water monetization opportunity relates to our assets that we own in Yuma, Arizona, which have Class III Colorado River riparian water rights. And as the Department of Interior and the Bureau of Reclamation have mandated that one-third of the consumptive use of the Colorado River be cut, we have put ourselves into position to take advantage of following programs where entities like the Central Arizona Project, like the Bureau of Reclamation, actually pay farmers to not use the water so that water can be diverted off for higher and better uses, which in this case typically is for urban use. And so as a result, those following programs have become very, very valuable. The Colorado River has just ended its 25-year accord that was on the river and is now looking to put the next 25 years of following purge together. We believe that those programs will be put into place by the end of 2026. And we're negotiating and working with other agricultural water owners to figure out the best way to monetize those water rights. But fundamentally, those water rights are very, very valuable and most likely will be contributed to following programs of which we'll be paid to not use that water.

Got it. Appreciate the color there.

I'll jump back in the queue.

Our next question comes from Jerry Sweeney with Roth Capital Partners. You may proceed with your question.

Good afternoon, Harold and Mark. Thanks for taking my call. Just following up on the water side. Obviously, you know, the renegotiation of the Colorado River Compact is underway, starting. I think there was a big confab in Vegas last week discussing this. I would imagine my senses or what I'm hearing is that there's going to be a lot of cuts along the river and less allocation there. So, specifically impacting Arizona and Southern California. I would believe this would be a strong positive for your water rights strategy. Can you confirm that and maybe provide a little bit of details around it?

Yeah, you bet. So, as Harold alluded to, we have Class III Colorado River water rights, and there's eight different classes throughout the system. which start with the American Indians, the Mexican government, and then third is ours, which are original generation farms that were formed in the early to mid-1900s. Following that, subsequently, four, five, six, seven, eight, you have Phoenix, Tucson, Scottsdale, Las Vegas, California, and all of the western states that have their piece of that pie. It was recently, as we've all watched Lake Mead in the last two to three years with all of the drought, federally mandated that one-third of the water needs to come off the river and getting everyone in agreement. So everyone has been in the back room, all of the federal, state, and local agencies paired with local agricultural growers and commercial water users. And I think, as you mentioned, that water conference last week was a big step forward We weren't there, but we did have here a lot of it, and a lot of the people that were working negotiations that were thinking about contributing our water for the better good of that were going very well. Now, 12-31-26 is the deadline when everybody needs to agree, which means everyone needs to agree before the summer starts, and As we see, obviously it's raining in California and it's about to rain a lot more and sometimes that makes people complacent. But the water values that people are talking about just sort of in the back rooms have been double per acre foot of the current fouling programs and allowing more use of your total acreage. The one part that we're very conscious about is the social aspect of it and the conserved nature of the water. So not just walking away from the water in the community, like, for example, Yuma, Arizona, where we have farmers and jobs and local communities. Part of the whole plan will need to incorporate that. So really going to, as an example, a low-use water crop, like an agave, where you can still have jobs, you can still have economies, and then also have the rest of those that need, whether it's California, Arizona crops, or other western states to have that water. So I think the answer is yes, yes, and yes. There's going to get a deal that's going to need to be done. People are starting to come to the table and agree, and they'll be at higher values.

Just curious on that front, since you're Class 3, right? So most people, I don't know, understand that it's first in time and place. So Class 1, the American Indians, they have the most senior water rights, and Class 3 is very senior as well, so that's where you're standing. Is there any talk of cuts down to class three or would the cuts come in classes that are below you or later in time?

No, that's a great question because we've always had our eye on that, Jerry. As you know, there's eight tiers and in times of scarcity or cuts, they cut tier eight first, then seven, six, five, four, three, so on. And all of the discussions that have been held to our level of awareness have been below class three, down to class five is what we've heard. A lot of the central Arizona projects, all the housing that Mark was talking about from Phoenix to Tucson and all of Las Vegas, those are class five water rights. And so that's really where the demand's coming is for all the urban uses of class five water, that needs to be replaced with a more senior class And to your earlier point, that puts us in a great spot to take advantage of that. Gotcha.

Super helpful. A couple more questions. Before I go to the asset, but Linko Del Mar, obviously, that's infoland right in the town. Any ideas on how that develops? And I would imagine that acreage is highly valuable. And when I say how it develops, I'm just curious if you've come up to a conclusion whether or not, I mean, do you sell it? Do you self-develop it? Do you partner again and take a similar track with like you did at the Harvest at Luminaire?

No, that's a great, great question. So there's two pieces to this. The first part, which is the heavy lift, is the entitlement piece. As you know, Jerry, in Ventura County, there's legislation that mandates a public vote to convert an agricultural piece of land into an urban development piece of land. And it follows that people would much rather look at a beautiful orchard than a strip mall and a bunch of condos and houses. And so the trick to gaining entitlements is to build development agreements that have enough benefit to the local communities that they're willing to vote to endure the cost of the loss of the beautiful agriculture and the traffic that they'll have to endure and just the general inconvenience of development. So there's an art to it. And so what that art involves is a lot of outreach and public charrettes where we'll be listening to the local community members tell us what they really want incorporated into this project. And following these public charrettes, which will take place throughout most of 2026, we'll then take the ideas that we've pulled together and incorporate them into a specific plan. We will then do all of the environmental impact review and CEQA work, which is arduous and comprehensive, and there's just a lot of work, a lot of studying, And then once that's done, we'll sit down with the city officials in the city of Ventura to create a development agreement that provides a lot of the benefits that we hope to bring to the community in terms of types of housing and parks and recreations and schools and all kinds of things that will be contemplated. And then once all of that's put together, then we have to go to the polls and have a public vote. If we win that vote, then at that point, that property becomes entitled to convert, at which point then we go through another agency, which is called LAFCO for the annexation of that property into the city of Ventura. And then we can start the second phase, which is where the big, the biggest value or a lot of the values created, which is the development phase. Your question related to how we would go about developing. And I think we're not, we're not there yet. We're not sure. We have great relationships with our development partner at Harvest at Lima Nera. We're in discussions with them about the potential of moving forward with Del Mar, but there's a lot of heavy lifting to be done with the entitlement part of the project. So that's really what we're focusing on right now. Got it.

I would imagine there's a pretty hefty increase in value to the land as well when it moves from Del Mar the entitlement, if you were to win the entitlement vote, that's a pretty heavy lift itself, correct?

Yeah, and it's a heavy lift. If you get the vote, anecdotally, the value of the land goes from $100,000 an acre to a million dollars an acre.

Okey-dokey. Well, that's a good number.

It's a good vote to get.

Yes. And I know CEQA is not easy, too. That's a process.

That's right, and I don't mean to be flippant about it. It's a very arduous and challenging process, and you only win that vote if you truly have connected with the local community, so that's really what we're really trying to do.

Got it. Switching gears, I don't want to take this over, but switching gears real quick, just the avocados. I have two questions on that front. The cadence of the 700 acres coming into production and in We've talked about the operating income per acre for avocados, if we could touch upon that again.

Yeah, so right now we've got 700 acres that are non-varying at the moment. We have another 250 to 300 acres to plant this year and then the same the following year. So as you see, and it's still the same in our deck, and I think most people have that and it's up to date, but next year will be our first year of our first planting. So think about four to five total plantings of 250 acres a year, starting in 27 and going all the way through 2021 maturing equally. So as we have, as you know, avocados are alternate bearing. And so as we go through those years, we think we will still have increasing volumes, even with that, that those alternate bearing acres and, and remember that, The new plantings are twice as dense. So instead of 90 trees per acre, there are 120 trees per acre. So we're expecting an average of about 17,000 pounds an acre if you consider the alternate bearing going forward over a 10-year period. You'll have the lows to 10 to 12 and the highs to 25 plus thousand pounds per acre. And we expect anywhere, if we use historical pricing, Over the last 10 years, it was about $1.33 a pound. This year was a little bit of an anomaly. You saw a bigger heavy crop this late summer, which took the price below $1. We're starting to see that recover, and then you obviously get the infamous Super Bowl time and Cinco de Mayo and when the prices come back. So we're really comfortable with a long-term price of $1.30 plus. And, you know, using anywhere from, you know, $12,000 to $14,000 in operating profit per acre, it ends up costing us about $5,000 to farm it per acre. And currently right now it's about $3,500 to pick and haul it. So, you know, the math off of that, you know, $20,000 an acre or $12,000 an acre ends up being about $12,000 to $14,000 of operating profit.

Okay. Gotcha. I really appreciate it, and I'll jump back in queue. Thanks.

Before we move on to our next question, as a reminder, if you'd like to ask a question, you may press star and the number one on your telephone keypad to enter the queue. Our next question comes from Mark Smith with Lake Street Capital Markets. You may proceed with your question.

Hi, guys. I wanted to look – first at kind of the expense side of things. You guys talked about streamlining operations and potential cost cutting, and I think you gave some insight into potential SG&A savings next year on the work that you've already done. Can you just give us more update on that? How much of that has worked in the transition to Sunkist, and how much is kind of other projects that you've been working on?

So, good question. It's pretty complex. So, really, November 1 was the start, right? And so, it's never a perfect cutoff line. We had a transition of the Salesforce go over. Actually, some of them left a little bit before. Some of them left a little bit after. And then some of the ancillary accounting positions, we did, if you remember, transition our whole brokerage business, which is why we'll have the large drop in revenue, which was that 6% to 8% commission business, about $30 million. And so that closed out. We actually just finished selling the brokerage business. So you'll have some of that cleanup. If you looked at a full calendar year, 12 months, probably is the realistic conservative $10 million. But we also think that in that number, transportation, we used to have a packing house up in the Central Valley. We packed District 1 through with about a half a million dollars of transportation costs. There's just going to be a number of new items that are shut down and no longer this year that are not included from our budgetary purposes or guidance. So I think we'll be surprised. It'll be, you know, as we see it and prove it out. And then really, you know, we'll get through January. We just are finalizing integrating all the computer systems. Sunkist has a different system, obviously, and we just finalized implementing a system of our own. So those are starting to work well together. So a lot of those operational efficiencies. Another specific one was we renegotiated our lease. at Oxnard Lemon that saved us about $700,000 in that one respect. And so we've got some more work to do around storage. So we're going to be learning the transition in Sunkist and being asked to store fruit longer. So we've got to have Mother Nature as our friend always working with that. But the value proposition from the new Sunkist plan and holding that fruit longer into a higher price market into those Chick-fil-A and Raising Cane's kinds of customers makes a lot of sense to us. And so that's why you saw in our fourth quarter this year, we had our first glimpse into those customers, and it's an average price of over $23. So bottom line is a lot of the people costs have moved out. There will be a little bit of dragging through December, and then it's all right straight into operational, and that's going to be our focus.

Okay. And then just, you'd mentioned some lemon pricing, just any insights you can give us into your outlook for kind of lemon pricing here in near term, or even, you know, through the fiscal year.

Yeah. So that's the $10 million question. So last year we had the Chernobyl market, which I hadn't seen in my 15 years here, where we had a, a, one of the packing houses left sun kissed and, and, and with the home with, with 4 million cartons without a home. And so the only way you, sell lemons without a home and real good customers is with price. And so we saw an imbalance in the market that took pricing January, February last year, sometimes below $10. Right now the price is somewhere just below $20. Typically we see a dip go into the $16, $17 range in sort of February, January, February, March range. And a lot of it's contract-based, and so if you don't have much of the market fruit, which now being in the Sunkist system we don't, you really get that floor protection. And so then going into the summer, what's going to happen again, which we think will be a repeat of next summer, because Turkey and Spain had a really tough freeze last year, which will turn into a two-year event. And what happens there is, again, it's all about balance of supply. Most of the southern hemisphere fruit will go to Europe this summer instead of come to the U.S. And so our fruit, which we'll be holding, will be in a better balance. So at the end of the day, I'd like to say there'd be a two in front of the average price this year. We're not going to put a formal forecast out, but if it plays out like last year and we don't get the low lows in February, then we should have a good opportunity to try to hit that.

Excellent. I think the last question is just kind of comfort around the balance sheet. You guys talked about kind of reworking some covenants and stuff, just any update and thoughts around the debt and kind of your comfort levels.

Yeah. So first thing we want to do is pay down debt when we can get to, I think, you know, $40 million issues is a good number. We've always had our, had our target on this year was elevated obviously with, with, the operating loss, and then the continued foot on the gas for the CapEx. We also, as you might have seen, our loan was up at term this summer, and so we had to put a new term out there and new conditions. And one of the new conditions was this max leverage debt ratio that came out. And it was new for the bank, it was new for us, and it was backwards looking four quarters, which And on the face of it, it looked good. But as a company that's in development, i.e., 40% of our acreage is non-bearing but with a continued expense, it was challenging to have a backward-looking measurement. And while you don't breach it until you breach it, obviously, from the accounting side in Deloitte, you have to forecast out what looks forward. And so it being in that position was something that we weren't comfortable in. And the bank, we sat down with everybody at the bank. We went through a good forecast. And we have a new ratio, which is basically a capitalization ratio or balance sheet based, which we forecasted out as far as at the end of 27 and looks like it's in good shape. So it's basically debt divided by assets minus liabilities in a ratio there. And then the other ratio that we have, which is the debt service coverage ratio, which is basically computing interest expense and your ability to pay, they suspended that measurement until the end of fiscal 27. So it really gave us free reign to open up and use our capacity. We've had a great lender in Farm Credit AgWest, and they just showed up again. So it was just very helpful, and it was a real positive.

Mark, the oversimplified way to try to explain this is that all of the efforts we're working on with the avocados, the organic recycling, and our return back to Sunkist is to get our core operating agricultural business to generate consistently more EBITDA, while at the same time then using asset monetization and real estate development as the stopgap between now and when that core business is really generating consistent growing cash flows to pay down debt and to de-lever that way. So EBITDA up, debt down with a core business that then can operate sustainably and very profitably and begin to generate free cash flow that then, you know, at that point the world is our oyster and then we'll have some great sort of capital allocations decisions to make.

Okay. Great. Thank you, guys.

Thank you.

This now concludes our question and answer session. I would like to turn the call back over to Harold Edwards for closing comments.

So I'd like to thank you all for your questions and your interest in Lima Nera. And finally, I'd like to wish you all a very happy holidays. Thank you for your time.

Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines and have a wonderful day.