Tony Brenner - ROTH Capital Partners Brent Rystrom - Feltl & Company

Good day and welcome to the Limoneira Fourth Quarter Fiscal Year 2013 Conference Call. Today’s conference is being recorded. At this time I would like to turn the conference over to Mr. John Mills of ICR. Please go ahead, sir.

Good morning, everyone, and welcome to Limoneira’s Fourth Quarter and Full Year 2013 Conference Call. On the call today are Harold Edwards, President and Chief Executive Officer; and Joe Rumley, Chief Financial Officer. By now everyone should have had access to the Fourth Quarter Fiscal 2013 earnings release which went out today at approximately 7:00 AM Eastern Time. If you’ve not had a chance to review the release it’s available on the Investor Relations portion of the Company’s website at www.limoneira.com. This call is being webcast and a replay will be available on Limoneira’s website as well at limoneira.com. Before we begin we would 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 that 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 detailed 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 as a result of new information, future events, or otherwise. Also, within the Company’s earnings release and in today’s prepared remarks we include EBITDA which is the non-GAAP financial measure. A reconciliation of EBITDA to the most directly-comparable GAAP financial measures is included in the Company’s press release which has been posted on our website. And with that it is my pleasure to turn the call over to the Company’s President and CEO, Mr. Harold Edwards. Go ahead, Harold.

Thanks, John. Good afternoon, everyone, and thank you for joining us. On today’s call I’ll begin with a brief overview of some financial highlights for the year and provide an update about our business progress and some of our growth opportunities. Joe will review the financial results for the fourth quarter and full year in more detail and I’ll then provide you, 2014 outlook and open the call up for your questions. We are pleased to report a record year for Limoneira. In fiscal 2013 we generated solid revenue, EBITDA and net income growth, driven by many aspects of our business, including year-over-year growth for lemons and avocados. Total revenue increased 29% to $84.8 million, primarily driven by agribusiness sales which increased 30% compared to last year. Our lemon business preformed well throughout the year. For the full year our lemon sales increased 32% compared to the fiscal year 2012 sales underscoring the success of our direct lemon sales and marketing strategy as well as our ability to integrate acquired citrus orchards over the past few years into our operations. Our avocado revenue also contributed to our agribusiness growth, increasing to $11.7 million compared to $9.5 million last year, reflecting higher volume partially offset by lower prices. We also delivered year-over-year growth for our orange and specialty citrus and other crops business. This strong performance across the board for our agribusiness highlights our growing portfolio of productive agricultural acres as well as our operating expertise based on our agricultural history and experience. For the year we generated $5.3 million in operating income, $9.9 million in adjusted EBITDA and earnings per share of $0.36. We also made significant improvements to our balance sheet throughout the year, and ended the year with an improved overall financial position. Joe will discuss our balance…

Thank you, Harold. Good morning everyone. For the fourth quarter ended October 31, 2013 revenue was $14.3 million compared to revenue of $14.8 million in the fourth quarter of the previous year. Agribusiness revenue was $12.9 million compared to $13.6 million in the fourth quarter of last year primarily reflecting lower avocado volume and revenue, rental operations was $1.1 million in the fourth quarter of fiscal year ’13 and fourth quarter last year. Real estate development revenue was $316,000, compared to $90,000 in the fourth quarter of last year. Our fourth quarter 2013 agribusiness revenue includes $9.5 million in lemon sales, compared to $8.5 million of lemon sales during the same period of fiscal year 2012, reflecting a lower number of cartons fresh to offset by higher average price per carton. Avocado revenue was $1.2 million compared to $3.3 million during the same period of the previous fiscal year, reflecting lower harvest volume partially offset by higher price per pound. The lower volume is due to an earlier completion of the harvest period in fiscal ’13 compared to fiscal 2012. We recognized $400,000 of orange revenue in the fourth quarter of ‘13 compared to $700,000 of orange revenue in the same period of fiscal year 2012, this decrease reflects a smaller crop compared to fiscal 2012. Specialty, citrus and other crop revenues were $1.7 million in the fourth quarter of fiscal year 2013, compared to $1.1 million in the fourth quarter of fiscal year 2012. Turning to costs and expenses, for the fourth quarter of fiscal year 2013 we incurred $15.9 million of cost and expenses compared to $14.3 million in the fourth quarter of last year. The year-over-year increase in operating expenses primarily reflects increased agribusiness costs associated with our growing agribusiness, including the acquisition of Associated Citrus Packers.…

Thanks Joe. For the first and second quarters of fiscal year 2014, we expect to realize incremental revenue and earnings resulting from the acquisitions of Associated and Lemons 400. For the fiscal year ending October 31, 2014 the Company expects to sell between 3 million and 3.3 million cartons of fresh lemons and expects to sell approximately 6 million pounds of avocados. The California avocado crop typically experiences alternating years of high and low production due to plant physiology. Fiscal 2013 was a high avocado production year and fiscal 2014 is expected to be a lower avocado production year. Lemon and avocado prices are expected to be higher in fiscal year 2014 than 2013 due to lower industry production. We expect to earn approximately $7 million in operating income in the fiscal year 2014, representing an approximate increase of 30% compared to fiscal year 2013 operating income of $5.4 million. The expected increase in operating income is primarily due to the additional lemon revenues to be generated by the acquisitions of Associated and Lemons 400, partially offset by lower expected avocado revenues. Fiscal year 2014 pre-tax earnings are anticipated to be similar to fiscal year 2013 as $1.3 million of earnings from asset sales and $700,000 of interest rate swap income realized in fiscal 2013 are not expected to recur in fiscal year 2014. We begin fiscal year 2014 with approximately 2,300 additional agricultural acres, representing a 30% increase compared to the beginning of fiscal year 2013. And with that I would now like to open up the call for your questions, operator?

and:

Thank you. (Operator Instructions) We’ll take our first question from Tony Brenner with ROTH Capital Partners.

Harold you’ve been in negotiations with homebuilders for quite a while and earlier you had indicated that this would be included before the end of the fiscal year than before the end of the calendar year and at this point they’re still on going home sales which as I recall originally with such a beginning at the end of fiscal ’13 now look like they are not going to take place until fiscal 2015 so I’m wondering what really is the timeline here and why is this tracking on for so long? ROTH Capital Partners: Harold you’ve been in negotiations with homebuilders for quite a while and earlier you had indicated that this would be included before the end of the fiscal year than before the end of the calendar year and at this point they’re still on going home sales which as I recall originally with such a beginning at the end of fiscal ’13 now look like they are not going to take place until fiscal 2015 so I’m wondering what really is the timeline here and why is this tracking on for so long?

Thank you, Tony good question. We anticipated that question and essentially for the last six months we’ve been in exclusive negotiations with a single homebuilder which ultimately did not conclude in a satisfactory way for Limoneira. And during that time period we received some very good suggestions on slight alterations to the specific plan that we believe upon incorporation will do a much better job helping us to meet the true market demand when the first product start to get built. So in essence we lost about six months during these negotiations. We’ve just come out of that period of exclusivity and we are back at the table speaking with a number of different builders now. And we believe that while a little bit later than we’d hoped the strength of the project has built the quality of the project has increased and we -- while we’re trying to hedge our bets and do a better job communicating to the market of our expectations of announcing a deal or deals of the homebuilders we’ve put a sort of a place holder of being able to announce this in the next 12 to 18 months but I think the best way to characterize it is, that we are in ongoing conversations with a number of builders currently and we hope to announce a relationship or relationships with a number of builders in a short period of time. That being said the process that sort of lies back ahead of us related to the homebuilding involves a significant amount of rock remediation of the project. We’ve actually begun to remove the rock off the project which is preparing now the land for ultimately soil compaction and that leads to grading. And then the first pieces of infrastructure set to be built, which are roads and utilities which we anticipate to begin by the end of fiscal 2014. It’s our goal to have an announcement of builder -- a builder or builders by the end of ’14 so that by the time that the infrastructure is laid down or at least the first phase of infrastructure is laid down we’ll begin to build the very first product beginning at the end of 2014 or the beginning of 2015. And while that still is kind of rough and I know not specific to the level that some hope we do believe we’ve done the right thing for the shareholders by sticking to our belief in the values of the project and continuing our ongoing negotiations with homebuilders.

When you say you have changed the objective for the structure of the deal originally you were contemplating developing land and then selling that land to homebuilders. So does that mean you’re thinking of a different way of doing this now? ROTH Capital Partners: When you say you have changed the objective for the structure of the deal originally you were contemplating developing land and then selling that land to homebuilders. So does that mean you’re thinking of a different way of doing this now?

No, we believe that’s still the way to do it. I think what I meant by that comment is as we look forward to the demand in the marketplace for the type of product, which could be single-family homes attached, single-family homes detached, product for rent, product for sale, we have a much better feeling today for what we believe the market will want and absorb along with the appropriate sizes of the homes and price points of the homes. And so in order to incorporate those ideas we’ve laid out the project slightly differently. In terms of -- from an investor standpoint the way we believe the project will perform financially, we are still of the belief that we will create numbers of finished lots, which we will then sell to a homebuilder or homebuilders over the life of the project.

(Operator Instructions) We’ll go next to Brent Rystrom with Feltl.

Just a couple of quick ones, thanks for allowing, did you guys sustain any damage in December from the cold weather out there? Feltl & Company: Just a couple of quick ones, thanks for allowing, did you guys sustain any damage in December from the cold weather out there?

Hi Brent, no, we were very fortunate in that all of the Limoneira assets navigated through the extremely cold temperatures very effectively. With the one exception that some of the orange properties were affected. We believe that at this point it’s still preliminary but we believe our total orange crops were affected into the tune of about 10% damage. That being said, the reason that we haven’t made much noise about as we believe that our estimates of production are approximately 10% up over where we thought they were going to be. So net-net, we believe that our oranges will make it through relatively on scale and we are anticipating increased pricing which we’re starting to see in both lemons and oranges currently.

And then that’s going to be my question I was up here last week and talked to about a dozen growers and a couple of packing houses and everybody was talking about pretty significant damage, a little bit higher than you are talking, maybe 10% to 25% damage to the crop, and everything grading lower, so and imagine you are going to have a pretty good pricing cycle coming out of that region? Feltl & Company: And then that’s going to be my question I was up here last week and talked to about a dozen growers and a couple of packing houses and everybody was talking about pretty significant damage, a little bit higher than you are talking, maybe 10% to 25% damage to the crop, and everything grading lower, so and imagine you are going to have a pretty good pricing cycle coming out of that region?

We are already seeing it in lemons Brent and for instance last year our average FOB for the year was about $16.50 for a 40 pound carton. And currently we’re enjoying average sales prices in the $23 range right now. We believe that those prices will continue to be sustained. On the orange side it’s still a little bit early to predict, just because the packing houses are still going through very strict efforts to make sure that they don’t ship any bad product, and so the pricing is holding fairly steady. But as you point out we do expect prices to firm up here in the coming weeks.

And then any updates, last time I was here with you we talked a little about possibly starting to plant wine grapes on some of the land, any updates or thoughts on that? Feltl & Company: And then any updates, last time I was here with you we talked a little about possibly starting to plant wine grapes on some of the land, any updates or thoughts on that?

Yes, so I was just up at our Windfall Farms property in Paso Robles. It is currently staked out and the trellises will begin to be put in, beginning in February-March. The wines are ordered and 60,000 wines will be planted about the middle of April and the first 100 acres of Windfall Farms will be planted to predominantly cabernet sauvignon.

And at this time we have no further questions in the queue. I will turn the conference back over to management for any additional remarks.

Thank you for your questions and interest in Limoneira. We will be presenting at the ICR Exchange Investor Conference today and over the next several months we will be attending select investor events, and we hope to see many of you there. Thank you again and have a great day.

And that does conclude today’s conference. Again thank you for your participation.