By Pacific Coast Business Times Staff Monday, March 29th, 2010

Santa Paula-based Limoneira is ready to put a sour year behind it as it gears up to become a fully publicly traded company in coming months.

In mid-February, the citrus and avocado giant filed papers with the Securities and Exchange Commission to begin trading its shares on the Nasdaq stock exchange. The move to Wall Street comes after more than a century of essentially being a family-run company.

Trading on the Nasdaq will mean higher costs and closer scrutiny under Sarbanes-Oxley rules, but opening itself up to Wall Street investors will also allow Limoneira to tap previously unreachable equity. Shares of the firm will likely begin trading on the Nasdaq under the LMNR symbol sometime around mid-May, Chief Executive Officer Harold Edwards said at the company’s annual shareholders meeting March 23.

Also at the meeting, shareholders voted on and passed several proposals, including a 10-for-1 non-dilutive stock split. Doing so will allow a higher volume of shares to trade at more accessible prices on the Nasdaq, Edwards said.

“Greater common stock liquidity should result,” he said.

But even with new access to global capital markets, Limoneira first has to get past a tumultuous 2009.  The citrus and avocado grower’s revenues plummeted last year, with a dismal avocado harvest and low lemon prices caused by oversupply. It lost $2.9 million in 2009, compared to pulling in profits of $3.5 million the year prior.

Last year “represented an unpleasant historic speed-bump” for the company, Edwards said.

Limoneira is likely the largest avocado and citrus grower in the U.S., but the firm is much more than a family-run farm nestled in the Heritage Valley. It is also a major real estate developer, with massive projects such as East Area 1, a tract of up to 1,500 homes near Santa Paula, and several Santa Maria-area investments — including the development of 120 single-family homes on 37 acres.

Limoneira even has two luxury home developments in Paradise Valley, Ariz. — ventures which had to be temporarily converted to for-lease projects when the real estate market turned toxic.

Agribusiness

Limoneira drew in $31 million in revenues from its agribusiness operations in 2009 — down from $49.8 million the year prior. Its lemon revenues dropped 49 percent last year, although it still pulled in $1.8 million in profit from that sector, Edwards told shareholders.

Avocados had their third year of below-average results. Although the company anticipated a rebound after a severe freeze in 2007 devastated its 2008 harvest, an unexpected heat wave in 2008 again damaged last year’s crops. Oranges saw lower production and “anemic sales prices,” Edwards said, and the firm’s specialty produce production dropped by 35 to 40 percent.

The firm’s outlook for 2010 is brighter. “We currently have one of the largest avocado crops hanging in the trees,” Edwards said, adding that the sector looks bullish.

Real estate

Limoneira’s ambitious real estate investments haven’t turned into cash crops yet — in fact they’re weighing heavy on the firm’s balance sheet.

The real property sector represented less than 1 percent of its consolidated revenues last year, Limoneira said in SEC filings. It recorded impairment charges related to its real estate assets totaling $6.2 million last year, compared to $1.3 million in such charges the year prior.

“As a result of the continuing downturn in the overall real estate market during the past year we reduced the basis in our Santa Maria development projects by $4.6 million to their appraised value of $18.8 million,” the firm wrote in SEC filings.

It also owns Windfall Farms, a thoroughbred breeding and training facility in Creston, which it hopes to subdivide into mini parcels, or “ranchettes” in 2012, when Williamson Act restrictions on the property expire.

Perhaps most interestingly, though, is Limoneira’s involvement with two luxury homes in Paradise Valley, Ariz., an affluent vacation home community. The so-called Donna Circle and Cactus Wren projects were built in partnership with an Arizona developer. The first home was completed in December 2008 but pulled off the for-sale market the following summer and temporarily converted to a for-lease project. Limoneira secured a two-year lease on the home, but hopes to have it back up with a for-sale sign when the economy turns around.

The second home, completed in June 2009, still sits waiting to be sold. The Paradise Valley projects had to be written down by $1.6 million to their appraised value of $6.2 million, the company said in public filings.

Asked by the Business Times why a Santa Paula lemon grower is in the business of building Arizona vacation homes, Edwards said, “the relationship with the builder and knowledge of the township gave us the ability to test the waters of home building.”

“This was the way for us to go through all the phases of land development and home building,” he told the Business Times after the shareholder meeting. “While that market is challenged, we’ve been fortunate enough to find tenants.”

Whether Wall Street will look favorably on an agricultural firm with such an interesting mix of investments remains to be seen. “I think we’re going to be an interesting case study,” Edwards said. “It’s all going to be based on our ability to return on invested capital.”

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