Good day and welcome to Limoneira's First Quarter 2018 Earnings Call. Today’s conference is being recorded and at this time I'd like to turn the conference over to Mr. John Mills of ICR. Please go ahead, sir.

Great. Thank you. Good afternoon everyone and thank you for joining us for Limoneira's first quarter fiscal year 2018 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 first quarter fiscal year 2018 earnings release, which went out today at approximately 4:00 P.M. Eastern Time. If you not had a chance to review the release, it's available on the Investor Relations portion of the Company's website at limoneira.com. This call is being webcast and a replay will be available on the Limoneira's website as well. 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 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 detail 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 about Limoneira's ongoing results of operations, particularly when comparing underlying results from period to period. We have 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 EBITDA, which is a non-GAAP financial measure. A reconciliation of EBITDA to the most directly comparable GAAP financial measures is included in the Company's 10-Q and press release which have been posted to our website. And with that, it's my pleasure to turn the call over to the Company's President and CEO, Mr. Harold Edwards.

Thanks John and good afternoon, everyone. Thank you for joining us. On today's call, I will begin with a brief overview of our financial results for the first quarter of 2018 and provide an update on our progress across all of our business areas. Mark will review the financial results in more detail than I will discuss our outlook for fiscal year 2018. After that, we will open up the call and take your questions. We are pleased with the great start to 2018. In the first quarter, revenue increased 12% to $31.6 million, primarily due to higher volumes and pricing of our citrus portfolio. Our operating loss for the first quarter improved to $1.7 million compared to a $3.2 million loss in the prior year period. Our EBITDA was positive, $200,000 in the first quarter of fiscal year 2018 compared to a loss of $1.3 million in the same period of fiscal year 2017. Our ability to generate positive EBITDA is a great accomplishment in what is traditionally our slowest seasonal quarter from an income perspective. This was the result of higher citrus revenues and improving the seasonal balancing of our business as we continue to execute against our one world of citrus initiative which is steadily growing our global footprint. Shifting to our business segments, we'll start with agribusiness. Over the past few years we have made significant investments that are driving our top and bottom line growth. We've expanded our customer base to over 200 customers and increased distribution by leveraging our domestic and international marketing and sales channels. We are focused on our trade marketing and consumer facing strategies as well as increasing our packing capacity. In addition, we have eliminated seasonality for our customers by sourcing citrus from different global locations giving us 365 days…

Thank you Harold and good afternoon everyone. I will discuss some of the details of our financial results for the first quarter ended January 31, 2018. For the first quarter of fiscal year 2018, net revenue increased 12% to $31.6 million compared to net revenue of $28.1 million in the first quarter of the previous fiscal year. Our agribusiness revenue was $30.3 million compared to $26.8 million dollars in the first quarter last year, primarily the result of higher prices in volume of fresh lemon sold, as well as an increase in the volume and price of oranges and other specialty citrus compared to the same period in fiscal year 2017. Rental operations revenue was $1.3 million in the first quarter of fiscal year 2018 and 2017. Agribusiness revenue for the first quarter of fiscal year 2018 includes $27.8 million in lemon sales compared to $26 million of lemon sales during the same period of fiscal year 2017, with the increase primarily the result of higher prices and volume of fresh lemons sold versus the prior year period. Approximately 912,000 cartons of fresh lemons were sold during the first quarter of fiscal year 2018 at a $26.32 average price per carton compared to approximately 909,000 carton sold at a $23.10 average price per carton during the first quarter of fiscal year 2017. As anticipated due to the seasonality of the avocado crop we recognize no avocado revenue in the first quarter of fiscal year 2018 and 2017. We did have solid growth and revenue in the first quarter of fiscal year 2018 to $1.3 million as compared to $500,000 in the first quarter of fiscal year 2017. Specialty citrus and other crop revenues in the first quarter of fiscal year 2018 experience similar growth and we're $900,000 higher than the…

Thanks Mark. We expect our agribusiness to continue to benefit from the more efficient infrastructure we have in place, as we are able to build revenues through expansion of our in-house citrus orchards as well as growth in third party volumes that we pack and market. We feel great about the long-term growth trajectory we're on and look forward to continuing to deliver value for our shareholders. With that let's discuss our second quarter and fourth fiscal year 2018 outlook. We are updating our fiscal year 2018 guidance to include the expected benefits from the recent Tax Cut and Jobs Act that was signed into law. This Act had the effect of lowering the company's corporate tax rate from 38.4% to 28.2% which results in earnings per share benefit of $0.10 per share for the full fiscal year of 2018. Based on this, we are raising our fiscal 2018 adjusted earnings per diluted share guidance by $0.10 a share to a new range of $0.65 to $0.75 per share. Importantly this guidance excludes the onetime non-cash deferred tax benefit of $0.67 per diluted share that the company recognized in the first fiscal quarter of 2018. We also wanted to provide some additional quarterly seasonality guidance to our business for the remainder of 2018. We expect our second quarter this year to be stronger compared to last year due to the timing of our citrus and avocado crops. Third quarter and fourth quarter will be slightly lower than last year due the timing of crops as well. The underlying full year fundamental business drivers for our core agribusiness remain unchanged and are summarized as follows. We continue to expect to sell between 3.1 million cartons and 3.3 three million cartons of fresh lemons at an average price of approximately $24.50 per…

[Operator Instruction] And we'll go first to Gerry Sweeney with Roth Capital.

Good afternoon, Harold. Hi Mark. Just a question on the top line, obviously some of the fourth quarter was pushed into the first quarter. Do you know how much that got pushed around maybe like on an apples-to-apples basis what Q1 could be?

Not exactly Gerry, at that at any given time we’re always sort of estimating this year's crop and then next year's crop. But on an order of magnitude I might say that, of the call it 12% increase year on year maybe 3% or 4% of that might have been attributable to last year's crop pushing into this quarter and the remainder just purely a bigger crop for this year than last year.

Okay. And then obviously the pricing was $26 and change I mean pretty good. What were the dynamics behind that? Obviously, there's - on a go forward basis there's a lot of puts and takes, but curious if there's two factors?

Two factors, one, a stronger market than a year ago at this time, but also a higher concentration of more fancy fruit and better product mix sales which aggregated to result in higher Applebee's year on year.

How is the market looking today versus couple months ago in terms of still getting stronger market dynamics?

Yeah. So, the markets are still very strong the issue that we will face for the remainder of our fiscal year 2018 relates to quality issues that were the result of very, very strong winds that accompanied that terrible Thomas fire that we all heard about and Limoneira experience firsthand. And so, how that manifests itself in our forecast, Gerry is that that creates more second grade fruit or - so the three grades of lemons are fancy choice and standards and it pushes more of the grade towards choice and standards which has a negative impact on our average Applebee. So, we've seen our average Applebee decline, but it really has less to do with market dynamics and more with higher quality fruit.

Got it. Make sense. And then ask you was I missed something on the or in the prepared remarks you talked about it 8200 acres, 1600 are non-fruit bearing but then you said you're going to plant, I think 500 more within that within the next two years? Was that what you said there?

Yes. Correct and that's actually expansion acreage which were coming out of no-crop leases and actually converting those into actual Limoneira lemon plantings.

Got it. And then on that front how much would see you have acreage sort of coming into production at different intervals of several years. Could you run through that real quick? Just for my memory.

The way we have it sketched out it's 900,000 at 1.3 million cartons over the next four years and it's actually fairly evenly spread. In our models we’re basically using 0.25 million cartons of new additional Limoneira lemons per year over the next four years.

Okay. Great. And then finally how's the recruiting of the third party going any well love to see them like that?

Yes, we have as we stated goal for fiscal year 2018 to recruit a net growth amount of 500,000 new. And what's different about that goal versus last year's goal was before it was still the same goal of 500,000 cartons but it wasn't the net goal. So, on any day we’re gaining growers or losing growers. And so, when you add it all up at the end of the year - last year our net result was about 300,000 new cartons. And so, this year we've challenged ourselves to have 500,000 cartons of net growth and through the first quarter we're way ahead of our schedule and are somewhere on the order of magnitude of 300,000 cartons of new fruit recruited. And that's for 2019 Gerry.

Well congratulation I know it's a great start of the year. It's always great to see and I appreciate your time. I'll jump back on line.

[Operator Instructions] We'll go next to Eric Larson with Buckingham Research Group.

Yeah. Good morning. Good afternoon gentlemen how are you. So just a follow up on some of Gerry's questions, but you're right your own revenue your other citrus revenue Herald for the last few quarters particularly this quarter again was really strong. Could you talk a bit more fundamentally what's going on in that business? And is this sustainable - I'm not saying this the percentage change is sustainable going forward. But you know the absolute level going forward is just sustainable? And how should we take a look at that other citrus revenue?

Yes, that's a great question Eric and I appreciate the question. So, we can peel the onion and explain the situation better. It's sort of good news bad news story. And the bad news in the story was that last year's Orange performance was substandard. And it was substandard for a number of reasons, but predominantly driven by ill-timed weather. You'll remember we had a large rain events, last year and even though we desperately needed the rain and so that was good news. The bad news was it kept us from getting a lot of our crop into the packing house and then into the export market. So, we were almost completely shut out of our export markets last year where we in essence butter our bread with our with our oranges. This year with our new alliance with Suntreat and more cooperation from Mother Nature with weather, we we're much more on-track with our with our orange shipments. So, the second part of your question was, is this sustainable? And we feel this is sustainable. So, it was really more of a function of last year being bad and this year being returning to normalcy which is great news from an ongoing sustainability of the orange and other citrus performance, but also then highlights how substandard last year's performance was.

Okay. That makes -- that makes perfect sense. So, if you look at this again I think it goes back to partially one of Gerry's question, your lemon pricing for the quarter. You had you actually had decent amount volume of 900,000 cartons a little over 900,000 cartons in the quarter and you start off with a much, much higher average price per carton. So, in your - I don't believe you actually changed your mind - maybe just being conservative given the good strong start and pricing you did not change your guidance on average lemon price for the year. Is there something that the next several quarters you might give a little of that back because of something going on in the marketplace or how should we look at that?

Yeah. We don't know anything Eric. So, your analysis is spot on and we're just we're attempting to be conservative with it only because as I mentioned we had very heavy winds earlier in the year that tends to downgrade the quality of the fruit which means that a product mix standpoint probably more choice and Standard Fruit going into the market than fancy in choice fruit. And so just in an attempt to be conservative and not have to guide down later, we kept our guidance unchanged even though we built up a good lead in the first quarter.

Okay. It really relates to kind of a guidance question, I thought it was maybe more prudent and conservative rather than you know set expectations too high. So, I think that's good. Also, can you give us a quick update on the question at the end of Q4 with the wildfires, we were worried about the quality of the fruit and maybe the amount of the fruit from avocados the high, high winds. Any update on what that might do for this year as well?

The good news about the timing of the fire and our communication of the fire is that, we hadn't provided any guidance of what we felt the crop for 2000 – the avocado crop for 2018 was going to be. So that, when we came out with our first guidance it was after the impacts of the heavy, heavy winds and the fire. The actual result was damaging in that we believed initially we had somewhere between 9 to 10 million pounds hanging on the trees and the winds and the fire, we downgraded that to 6 million pounds. So, we felt like we lost about a 1/3 of the fruit in the wind events. And that was pretty consistent across all growers down in this part of California. So, but we do believe that we still have 6 to 6.5 million pounds. And you know the big issue in our minds is really going to be how we can manage the harvest of this fruit to get that volume and also to connect with that $1.30 a pound price that we've guided to. The markets are close to that right now. We still have yet to pick our first avocado. However, you know if there's risk to that plan it's more on the pricing side I believe. So, we’re timing our view of the market against the very large amount of Mexican and Peruvian fruit shipments that will make their way in the United States. And really trying to find our windows of supply when we can hit that pricing opportunity in the U.S. market.

It sounds good. And then one question for Mark. Your effective tax rate this fiscal year given you cross over both calendar years will be 28. I believe you said, if you do your on-off, apples to apples full year, full year benefit. What would be your -- what would be a tax rate, let's say for fiscal, if you just look at fiscal '19 we're not trying to – I am not for guidance per se, but would it be 23, 24, 25 what would that tax rate number be for '19 if you had a full year of it?

Right now, we're looking at about 25% based on everything we know today for fiscal '19. So about three – two to three points delta from our effective rate this year.

And by the looks of it, the majority of that tax benefit isn't only GAAP of tax benefit but it's also cash taxes too. So, you get you get almost all of that as increased cash in the bank as well. Is that a fair assumption?

Yeah that's a perfect exemption.

Thanks guys. I'll go back in the queue.

[Operator Instruction] And with no further questions in queue, I'd like to turn the call back to Harold Edwards for closing remarks.

Thank you for your questions and interest in Limoneira. We look forward to updating you again in June on our second quarter recall. Thank you again and have a great day.

Ladies and gentlemen that does conclude today's conference. We thank you for your participation. You may now disconnect.