Q2 2021 Limoneira Co Earnings Call
[music].
Greetings and welcome to the Lima, Naira and second quarter of 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.
And the press Star Zero on your telephone keypad as a reminder, this conference is being recorded.
Now my pleasure to introduce your host scared of Thompson with ICR. Thank you you may begin.
Good afternoon, everyone and thank you for joining us for Lehman era of second quarter fiscal year, 'twenty 'twenty 1 conference call.
On the call today are Harold Edwards, President and Chief Executive Officer, and Mark Pillow Mountain Chief Financial Officer.
By now everyone should have access to the second quarter fiscal year, 'twenty 'twenty, 1 and earnings release, which went out today at approximately 4 P. M. Eastern time, if you've.
Not at the chance to review the rule.
And it's available on the Investor Relations portion of the company's website at Ww Dot Lehman era of Dot com.
This call is being webcast and a replay will be available on <unk> website as well.
Before we begin we'd like to remind everyone. The prepared remarks contain forward looking statements and management.
May make additional forward looking statements and response to your questions.
Such statements involve the 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.
And it's been it's forward looking statements.
Important factors that could cause or contribute to such differences include risk details and the Companys 10, Qs and 10-K as filed with the SEC and those mentioned in the earnings release ex.
As required by law, we undertake no obligation to update any forward looking or other.
And I sit here and whether result of new information future events or otherwise.
Please note the journey of 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 luminaire.
<unk> ongoing results of operations, particularly when comparing underlying results from period to period we.
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 adjusted EBITDA, which is the non-GAAP financial measure.
A reconciliation of adjusted EBITDA to the most directly comparable GAAP financial measures is included and the company's 10-Q 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.
Thanks, Deirdre and good afternoon, everyone.
Yeah.
We are very pleased with our 14% second quarter top line growth and bottom line improvement.
These results were driven by record second quarter of 11 volume and improved pricing as well as strong avocado volume.
Our focus on retail food and club grocery business continues to.
Everyone, well and we are beginning to experience an improvement and domestic foodservice and export sales as dining out increases from COVID-19 vaccine distribution.
Additionally, due to our continued focus on cost improvement initiatives, our adjusted EBITDA improved to $6 million.
Compared to a loss of $100000 from the same period last year.
Also our real estate development project harvest at Lehman era continues to perform very well and I will discuss that and more detail and a few moments.
I'll now discuss each of our business divisions' performance for.
Fourth quarter, starting with our agribusiness.
Our agribusiness revenue was $44 million compared to $38.4 million and the second quarter of fiscal year 2020, fresh Lemon revenue was $28.7 million compared to $25.3 million during the same period of fiscal year.
2020.
Our stronger results were driven by volume and price.
Overall pricing was $18 and 79.
Average price per carton compared to $17 and 14 average price per carton.
Fresh lemon utilization rates were 75% to 80%.
The second compared to 50% to 55% and the prior year period.
Avocado revenue improved to $2.7 million compared to $2 million for the same period last year.
Orange revenue was lower and the second quarter as higher prices of oranges were partially offset by the timing of our harvest.
The Orange season has had a slower start than anticipated. However, it is our expectation for fiscal year, 2020, 1 to have similar profitability and fewer cartons and acres dedicated to oranges and specialty citrus and other crop revenue was similar to prior fiscal year period at $1.2 million.
Turning now to our real estate development segment.
We have now closed 524 lots since inception, including 66 lot closings in the second quarter of fiscal 2021, and 60, new lot closings, so far and the third quarter of fiscal year 2021.
The pace of home sales has been increasing this year and as each quarter closes we gained confidence and the timing of the expected $80 million of cash distributions from harvest at Lehman era over the next 6 years beginning in fiscal year 2022. In addition, we believe there is the potential upside to our stated.
Stated cash distributions due to increased number of housing units and harvest at Lehman era, as well as the potential opportunity of of medical campus and our east area 2 development.
As we enter our third quarter, we are very confident we will achieve improved year over year results due to our expanded footprint and retail.
As well as the early signs of improving foodservice coming back online both domestically and globally. We are encouraged by the record of fresh lemon volume during our second quarter and the continued improvement and our cost structure.
We expect positive cash flow of towards the end of fiscal year 2022 from harvest at Lehman era.
And look forward to updating you on our agribusiness and real estate progress in the coming months and with that I'll now turn the call over to Mark.
Thank you Harold and good afternoon, everyone for the second quarter of fiscal year 2021, total net revenue was $45.1 million compared to total net revenue.
The new of $39.6 million and the second quarter of the previous fiscal year agribusiness business revenue was $44 million compared to $38.4 million and the second quarter of last year. Other operations revenue was similar to the prior fiscal year at $1.1 million.
Agribusiness revenue for the second quarter of fiscal year, 2021 includes $28.7 million and fresh lemon sales compared to $25.3 million of fresh lemon sales. During the same period of fiscal year 2020, approximately 1.528 million cartons of.
Of fresh lemons were sold during the second quarter of fiscal year 2021 at an average of $18.79 per carton compared to approximately $1 million 475000, cartons sold and a $17.14 average price per carton during the second quarter of fiscal year 2020.
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The company recognized $2.7 million of avocado revenue and the second quarter of fiscal year 2021, compared to $2 million and the same period last fiscal year, approximately $2.1 million pounds of avocados were sold during the second quarter of fiscal year 2021.
And a $1.26, and average price per carton compared to approximately $1.2 million pounds sold at a $1.60 force that average price per pound during the second quarter of fiscal year 2020.
The company recognized $1.4 million of Orange revenue.
In the quarter of fiscal year, 2021, compared to $2.7 million and the same period of fiscal year 2020, primarily attributable to decreased volume, partially offset by higher prices of oranges sold.
Approximately 154000 cartons of oranges were sold during the second.
Second quarter of fiscal year, 2021, and a $9.12 and average price per carton compared to approximately 356000 cartons sold at a $7.49 and average price per carton during the second quarter of fiscal year 2020. It is our expectation for the second half.
Half of fiscal year, 'twenty 'twenty, 1 to have similar profitability on fewer cartons with less acreage dedicated to oranges.
Specialty citrus and other crop revenue was similar to the prior fiscal year at $1.2 million.
Total costs and expenses for the second quarter of fiscal year 2021 was.
$42.7 million compared to $42.4 million and the second quarter of last fiscal year.
Operating income for the second quarter of fiscal year, 2021 was $2.4 million compared to an operating loss of $2.8 million and the second quarter of the previous.
Fiscal year net.
Net income applicable to common stock after preferred dividends for the second quarter of fiscal year, 2021 was $1.8 million compared to a net loss of $5 million and the second quarter of fiscal year 2020.
Net income per diluted share for the SEC.
Part of fiscal year 'twenty 'twenty, 1 was 10 cents compared to a net loss per diluted share of 29.
For fiscal year 2020.
Adjusted net income applicable to common stock for the second quarter of fiscal year, 'twenty 'twenty, 1 was $1.8 million compared to an adjusted net.
Loss of $1.5 million and the same period of fiscal year, 'twenty, and 'twenty, which excludes the loss on stock and collateral.
Adjusted net income per diluted share was <unk> 10 cents compared to adjusted net loss per diluted share of <unk> for the second quarter of fiscal year 2020.
<unk> core and a reconciliation of adjusted net income.
Our loss and net income is provided at the end of our earnings release.
Adjusted EBITDA was $6 million and the second quarter of fiscal year 2021, compared to a loss of $100000 and 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 6 months ended April 32021 revenue was $83.4 million compared to $81.2 million and the same period last year.
The company.
Recognized $2 million of Lemon and Orange sales and Chile by PTA, and some Pablo and $2.6 million of Lemon sales and Argentina by Trapani fresh and the 6 months ended April 32021 operating loss for this first 6 months of fiscal year 2021 with 3.
$3 million compared to an operating loss of $11.3 million and the same period last fiscal year net.
Net loss applicable to common stock after preferred dividends was $2.5 million for the first 6 months of fiscal year 2021, compared to a net loss of.
0.3, $6 million and the same period last fiscal year.
Net loss per diluted share for the first 6 months of this fiscal year was 15 cents compared to a net loss per diluted share of 66 cents and the same period of fiscal year 2020.
For the first 6 months of.
Fiscal year 2021, adjusted net loss applicable to common stock was $2.6 million compared to adjusted net loss of $6.6 million for the same period and fiscal year 2020.
Adjusted net loss per diluted share was 15 cents compared to adjusted.
Net loss per diluted share of 38 cents for the same period and fiscal year 2020.
Based on approximately $17.4 million and $17.6 million, respectively weighted diluted common shares outstanding.
Turning now to our balance sheet and liquidity.
Long term.
Debt as of April 32021 was $128.2 million compared to $122.6 million at the end of fiscal year 2020.
In December of 'twenty, and 'twenty, the company received $5 million of federal tax refunds related to the cares act and expects and and.
Additional 900000 of California state refunds and fiscal 'twenty 'twenty 1.
Now I would like to turn the call back to Harold to discuss our fiscal year 2021 outlook and longer term growth pipeline.
Thank you Mark the.
COVID-19 pandemic continues to affect our foodservice business.
On a global basis.
We are seeing signs of improvement in the states and beginning to see early signs of improvement outside of the United States.
The company believes it is prudent to not provide lemon guidance at this time until the COVID-19 vaccine is widely distributed and we begin to see consistent openings of the foodservice market.
And that we expect the improved year over year results, we experienced and the second quarter will continue with improved year over year results for the third due to slowly increasing demand from food service and export marketers as well as improving cost control measures.
We also have an additional 1002.
And 200 acres of non bearing lemons estimated to become full bearing over the next 4 years, which will enable us to achieve strong organic growth for many years to come.
The company expects 200 of the 1200 acres to become full bearing and fiscal year 2021 beyond These 1002 hundred acres, we intend.
And an additional 250 acres of lemons and the next 2 years that we believe will further build our long term pipeline of productive acreage.
We anticipate this additional acreage acreage will increased domestic supply of lemons from our 2020 level by approximately 50% or about 900000 of 1.
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.
And also due to continued steady improvement and the development of harvest and Lehman era. We are confident we will generate cash distributions.
And to plan the harvest as follows.
Fiscal 2021 is expected to be neutral fiscal 2020.2 is expected to generate $3 million of cash Selim Minera fiscal 2023 is expected to generate $15 million fiscal 'twenty 'twenty 4 is expected to generate $27 million.
<unk> for 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 luminary and the next 6 years.
These expectations from harvest do not include the potential upside from increased density and housing at harvest.
<unk> as well as the potential opportunity of developing a medical campus and our east area 2 development.
We expect to be and are positioned to provide greater transparency on these opportunities later this year.
And with that I'd now like to open the call up to your questions operator.
Thank you at this time, we'll be conducting a question and answer session.
To ask the questions. Please press star 1 on the telephone keypad and confirmation.
Line is and the question can you mean price.
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Speaker of Clinton and may be necessary to pay it out of your handset before pressing.
Okay cool.
1 moment please call for cash.
John.
Okay.
My first question is from Vincent Anderson of Stifel.
Please state your question.
Yes, thanks, and good afternoon Fellows.
Okay. So.
And if I have a more nuanced way.
The assets other than.
We just saw lemon prices and shoot up over 20% and the last couple of weeks I'd like to get your thoughts on that.
We saw it too and in fact, we're enjoying at the the price has gone up approximately $2 average per carton over the last.
And I really don't.
And we right now are sort of averaging somewhere between.
Sorry, Mark Mark John has gone up $2 and that's 22 Bucks the 20th and it's at $22 right now as the average price and as you know Vince and within embedded and that as the sort of assumed product mix between the fancy and.
And the choice and the standard grades, but we have I think the the real story for us at least to date. This year has been the significant improvement and our fresh utilization, which is allowing us to keep our costs low while we're enjoying this.
This rapidly inflating pricing environment.
Last month.
That is perfect.
Turnover to Argentina of little bit here so.
And it's just still look exceptionally advantaged.
Compared to what the rest of the country is dealing with but now that we're seeing kind of labor and weather both impacting logistics as well as your competitors yields are you finally, starting.
And to see some pressure there and.
And maybe just what your outlook is for for Argentina and in general this year.
Yes, so our game plan. This year is as you know there's 3 different production areas in California, and Arizona that gives us the majority of our supply chain. So we finished the desert and we finish the.
Valley.
And now we're in and of the coastal lemon and that used to be the lemon that carried us all the way through the spring and the summer, but what we've done is we've accelerated our harvest and our sales of that fruit were about 77% harvested now here and.
On the coasts here.
And the cornea. So now all of our attention will be down to the southern hemisphere out of Argentina, and Chile, and we expect 1.2 million cartons to come in from Argentina, and Chile, a 50% will be our own produced fruit and 50% will be outside grower fruit, but we believe.
And Calif fruit is coming in to hit.
And underserved market because of the smaller crop that we're dealing with the here on the coast.
So we believe and to the to the sort of the essence of your question that where we're really in perfect position. This year to see the the full benefits of our 1 world of citrus business model.
Model, where that southern hemisphere fruit will be filling a void that's been created by the lack of certain grades and sizes that the market wants and that's part of the reason that the price. The price is driving up so fast is theres, a theres actually a shortage of certain grades and sizes and.
And Vince I might add just so.
You know in March and April we had the range down in Argentina, which really caused us delays of getting in and we had of recent locked down.
For I believe 9 or 10 days of this.
This last week, we got in the 2 of our Santa Clara Ranch, and harvested 40000, cartons and so it should play pretty well into the summer pricing increase.
I think we just have to be careful get the fruit off by mid August and which will have us still have the stuff on the water through September so the.
Feels like it's going to play out correctly.
Okay.
Excellent and if I could just ask 1 more and I'll hop back hop.
I'll hop back into the queue after but.
And I guess, if we could talk hypotheticals and how do you feel about availability through the end of the year.
Foodservice were to come back strong now that you have all of this retail.
Yeah.
All of this retail exposure could you handle that demand coming back without potentially having to burn bridges.
Passing on business either on the retail side or the service side.
That's a great question.
I think we are about to be and are in a supply side challenge versus the demand side challenge. We've just come through the 24 months of demand side challenges. So certainly the nature of your question is spot on and if there.
And if there are challenges in the next 6 months it will be.
And on having the adequate supplies too.
Just to stay with our customers, but that said I think our team has a pretty good handle on the actual supplies that we have access to and we've just tried to be very realistic with our customer.
<unk> base, so that we don't disappoint any of them. So I expect it to be a good scenario for all of US you know I think we'd always at.
And these situations you always wish you had more fruit, but but we will we work very hard to not burned any bridges by making commitments we can't keep.
Perfect great.
From that.
So yes, the luck I'll.
I'll hop back in the queue.
Thanks Vince.
Our next question is from Ben and Stephen.
Please state your question.
Hey, guys good evening.
And then revenue and for you guys I guess.
I wanted.
Wanted to start maybe with harvest you made some comments and your press release and in your prepared remarks.
About potential upside there.
It seems like potentially booths and magnitude of the distributions and the timing I guess, maybe the best way to ask it would be what do you need to see to confer.
Firm.
The potential upside and make it more formal vs. Inform all at this point of it and what should we be mindful of from our side of things.
So there's a little bit of a story that goes behind the answer to this spend but.
As you May know across the highway from the residential development harvest at Lehman era, we had been working very closely.
And with a number of different potential retail partners.
And the city of Santa Paula to get a big box retail investment to serve the residential needs of the of the harvest development and just because of the the profile of our big box retail has changed so significantly because of the internet.
Close packed on retailing and and.
And a big Big Big box retailers, like Walmart or target rethinking their physical plants and their physical buildings around the country and the world for that matter it became pretty clear that a big box retail offering across the highway was probably not possible.
And that then changed.
And the attitude of the city of Santa Paula who are depending on the sales tax revenues to drive Citi funding. So the city has actually approached us and asked for additional ways in which they can generate more benefit from the harvest at luminary of project.
And because the luminary of company.
It is no longer going to build and elementary school because the student generation was a lot less than anticipated. When we first started the development and also just student generation and in general across the entire community has been much lower so that the unified School district.
And need to build of new school. It freed up 12 acres of property in the middle of the harvest development and it also then allowed a 17 acre parcel the Lehman era has that's within the harvest at Lehman era.
The development plan for those to be contemplated as potential.
Expansion areas. So the city is open to entertaining the idea of increasing more supply and more housing to.
And to the tune of potentially up to 500 new units.
As a way for the city to generate additional fees for them to meet some of their.
There are future financial obligations that they're trying to manage so it seems like theres, a pretty good opportunity for the city and it seems like it'll be of great opportunity for the harvest at Lima, and air of project, but what's interesting about all of that is because of 17 of those acres is exclusively owned by Lehman era a big.
Chunk of that benefit would come directly to Lehman era versus coming through the approximately 50.50 joint venture that we have with our development partner of the Lewis group of companies.
I see okay very helpful.
My second question is on the fresh utilization rate I think you mentioned that you were trending.
And kind of the 75% to 80% range on Limon press utilization is that we're shoot we should expect to be for the balance of this year and a.
A tighter supply environment.
You know create the opportunity for higher fresh utilization of what should we be thinking about for the variable, but determined kind of getting.
And the higher end of that range versus the lower end of that range, because I think if I recall, but that's a fairly normalized kind of utilization rate range net.
It's actually and excellent rate, but but youre right, we target, 75% and we've been trending at $75 to even the low 80%, 80% range, but the.
The answer to your question is Theres 2 pieces to it there is the market demand piece like do we have the right fruit for the market for the right for the fruit of the market wants and as you know from the prior 2 years. The answer to that question is not always been yes, but the the other side of it is is the physiological.
It will impact that mother nature has had on our fruit and as you recall, we had some really severe east wins earlier in the year that created a a downgraded supply of our fancy or our first grade fruit and given us much more choice and standard grade fruit and the challenge.
And that created initially was that most of that fruits outlet is through foodservice.
And and so with struggling foodservice demand, which is now improving as the effects of the pandemic are becoming.
The less and less.
And we're optimistic and I think very.
Excited to see that demand returning back to normal so given that we fully expect that these fresh utilization levels should be.
<unk> maintained and continue the.
With the 1 caveat that when we get and and actually harvest the remainder of this fruit.
And it just it's all going to come down.
And 2 how much of it is sellable and how much of it is not sellable because the impacts of the wind makes us have to send it to the juice plant, but I think it's realistic for us to think in terms of 75% to 80% for the remainder of the season.
Okay, Yeah, and I understand okay great.
Thanks, guys.
And best of luck.
Thank you Matthew.
Our next question is from Ben clean of late.
The capital market.
Please state your question.
Alright, Thanks for taking my questions. This afternoon.
Couple from me first of all of it was really encouraging to see the growth growth.
The profit you guys were able to command here and still relatively light pricing environment I'm wondering.
Beyond the fresh utilization rate being.
And being so good can you talk about.
How your how your cost structure has evolved given these given the restructuring efforts and you guys have taken on and how much of.
It fit all of those efforts as was seen on the on the cost of production versus SG&A.
And the quarter.
Yeah, So I'll take that 1 Ben.
So start with the SG&A side, so SG&A and we've done an incredible job.
Now through the pandemic, we've kept all of our people and we've got.
The benefit of 195% vaccinated and we've continued outside of conferences and travel to really support our employees and year over year. Our G&A has been down which we feel really proud of we went through a series of cost cutting initiatives last year to the tune of north of 2.
And from that side and it really it really really is showing now.
And from the production side I think I think you'll note and the packing operations.
And our cost.
And the same current period versus prior period was approximately similar on similar units right and the heels.
Of the.
The minimum wage increases here in California, which were which were $1 or more and we don't even keep our people at minimum wage so and then the opportunity to run more units through the house.
Had some of our biggest months and the history of the company and as you know as you run more units through there.
It's it's just completely ads on the to hitting against those fixed fixed costs. So.
The the team, we're really proud of the team and everything they've come together and.
It's nice to see these improvements coming through.
Got it that's helpful and.
95% vaccinated.
Vaccination rates, congratulations and May I suggest that you guys are looking for a site off and we'll get into and the <unk>.
Public health.
That's correct.
Uh huh.
A couple of the quick ones from me and Harold you talked of you've talked a lot about kind of the international opportunities and the kind of the return of the export market.
Wondering if you.
You can elaborate at all on that where have you seen the real.
And improvements in this market and then.
To what degree are you still seeing supply chain challenges driven by COVID-19 of versus non market really getting the kind of back to normal.
I know, it's hard to consider kind of where this is going to be but you know what inning.
And do you think we're in here in terms of moving the export market back to the state of normalcy.
I think we're still in the early innings, because our primary markets as you know from our prior discussions and conversations are the southeast Asian markets and.
And they've been extraordinarily cautious and continue to.
Open and then pull back open and pulled back so our Japanese demand is just beginning to get back to sort of pre COVID-19 levels.
We had a little spike in demand that was caused by the container issue you know you've been reading about the challenges that the ports around the world.
And I've had and the challenges of containerized shipping and and the Japanese market really took it and the churn during a lot of that and created some supply chain disruption that artificially created some some challenges for them on the supply side, which then resulted in and US having to go back out and pipeline fill which was really helpful.
For our business, but as it relates to just true demand in the Japanese market and even the Korean market, they're just now getting back to what we what we might've seen pre COVID-19.
And we haven't seen that sort of euphoric spike in purchase price.
The purchase behavior like.
We're seeing here and the United States.
But we're hopeful that we will and then we're moving quite of bit of fruit into the into Hong Kong and some of the other Asian markets as well I'd say sort of anecdotally, we're probably at about 60% to 70% of what we what we would call normal export.
Levels, but the but every week that that that's improving where the biggest spike and our businesses has been has been here domestically and the north American market and the U S where we're just seeing just every week from like dramatic improvement and increases in volume and.
More people are going out to eat and drink and bars again.
Got it got it got it.
And that's all very encouraging.
My last question and when we get back in queue.
The regarding 1 or so.
It looks like to be of a pretty terrible setup.
And that's borne this year regarding drought conditions across the southwest how does the current environment affect your outlook on your water rights.
And.
And anything you can elaborate on there would be helpful.
Well I think the first thing that maybe say is that we.
We're in great shape.
Set up from as it relates to our own ability to continue to irrigate and keep our agricultural production.
At full capacity with no cutbacks and any of our assets envisioned.
And where the opportunities are beginning to crop up and we're studying them very very carefully and staying very close to them.
<unk>.
As you as you know and you've been reading the the the scarcity of that's coming around the Colorado River and sort of the systemic over allocation of some of that water and now with the pervasive drought really putting more and more pressure on certain.
Parts of the constituent.
But the Colorado River serves its creating a sort of and interesting new dynamic.
For the potential monetization of some of those water rights. So we're studying that very very carefully.
And I would characterize our position and California.
As.
And so we're just making sure that we have access to our own ample access to our own water to continue to irrigate and keep our agricultural production and business.
But there are certain parts of the state and unfortunately, we're not as impacted as others that we are.
No and farm around but there are certain part of the parts.
As we ate the.
The allocation has gone to literally zero. So this is going to be of very very difficult year for the state of California, agriculturally and you'll really get you'll have a front row seat to view sort of the winners and losers in that and that whole scenario I would say that we're in great shape, which fundamentally.
I guess puts more and more value and intrinsic value on the on the of the value of that that water resource but.
But we'll just have to see how it all plays out because they are literally our allocations of zero percent coming.
Coming out of just a severely.
It's of the impacted negatively impacted snowpack and and rainfall that was just a fraction of normal for all of us and California. This year.
Gotcha Gotcha very good well I appreciate all of the color that does it for me and I'll get back in queue.
Thanks.
Thanks, Brad and thank you.
As a reminder.
And like to ask a question. Please press star 1 on your telephone keypad. The confirmation kind of indicate your line is and the question can you.
All participants using speaker equipment and may be necessary to pick up your handset before pressing the backlog.
1 of them.
While we poll for additional questions.
Okay.
Our next question is from Vincent Anderson of Stifel.
And with your question.
Hi, yes, thanks, Hello again.
I'm not sure how much you can share.
And with Lehman Air share is up nicely here year to date I think it's just.
With the asking if you have anything you are allowed to.
And communicate in terms of collage of those intentions for their stake and the company.
No not at this at this point, we don't we don't know of anything.
And I guess originally I was.
I guess, we were under the impression that they would we're thinking that they would liquidate their position but.
And our recent discussions Ive had with board members and and management at Colorado, I think they see a significant upside in their ownership of of the asset.
So the last communication, we had with them is that they they really were not intending on liquidating their position at this point.
So I think and I think the really the only thing to add publicly is that they and their most recent filing I think was December and January I can't recall, but they show adding share is actually.
I think it was nominal and the 42000 or something like that so.
But as far as we know there they're holding.
Okay. Thank you that's actually a portion of the expected.
To get so I appreciate it and then just a quick follow up on the earlier question about exports and your comments on Chile.
Youre trying to build our footprint and.
And in China, and with the U S kind of getting more and more positive as the days go by.
Coming back to the question about being able to serve all of the demand how do you think about the priorities between building up.
Demand in China and out of Chile has access versus just getting it up to the U S where you can.
Can you kind of know where you are what you learn.
No that's of Great question, and we're very optimistic and bullish on that Chinese demand and the reason being that fundamentally if every production area in the world is firing on all cylinders, we sort of exist and and oversight.
Oversupplied situation, so if that Chinese demand improves to a level thats material so of certain amount of the southern hemisphere can be diverted into that market. It just means that's less imported fruit that comes into the U S market, which will give us a much better balance between supply and demand and give us.
More and more pricing power.
So we think that Chinese demand is is really significant and.
And really important to develop and and work. So we're doing that out of out of Chile and <unk>.
And very hopeful that a large part of our production.
Can find its way into the Chinese market.
Alright, perfect. Thank you again.
Great. Thanks, Vince.
There are no more questions at this time, we have reached the end of the question and answer session and I will now turn the call back over to Harold Edwards for closing remarks.
Thank you very much for all of your questions and for your interest and luminaries and have a great day. Thank you again.
Yes.
Okay.
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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Yeah.
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Greetings and welcome to the Luminaire and second quarter fiscal year 'twenty 'twenty 1 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.
And since during the conference. Please press Star Zero on your telephone keypad. As a reminder, this conference is being recorded and is now my pleasure to introduce your host theater of Thompson with ICR. Thank you you may begin.
Good afternoon, everyone and thank you for joining us for Lehman Narrows and second quarter fiscal year 2021 conference call.
On the call today are Harold Edwards, President and Chief Executive Officer, and Mark Tullow Mountain Chief Financial Officer.
By now everyone should have access to the second quarter fiscal year 2021 earnings release, which went out today at approximately 4 P. M Eastern time if.
And if you've not had the chance to review.
The release is available on the Investor Relations portion of the company's website at Ww Dot Lehman era of Dot com.
This call is being webcast and a replay will be available on <unk> website as well.
Before we begin we'd like to remind everyone. The prepared remarks contain forward looking statements.
And management May make additional forward looking statements and responses to your questions.
Such statements involve the 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.
Or implied by such forward looking statements.
Important factors that could cause or contribute to such differences include risks detailed in the Companys 10, Qs and 10-K as 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.
Statements here, and whether result of new information future events or otherwise.
Please note the 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.
Or others 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 adjusted EBITDA, which is the non-GAAP financial measure.
A reconciliation of adjusted EBITDA to the most directly comparable GAAP financial measures is included and the company's 10-Q 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.
Thanks, Deirdre and.
Good afternoon, everyone.
We're very pleased with our 14% second quarter top line growth and bottom line improvement.
These results were driven by record second quarter of 11 volume and improved pricing as well as strong avocado volume.
Our focus on retail food and club grocery business.
Continues to perform well and we are beginning to experience an improvement and domestic foodservice and export sales is done anything out increases from COVID-19 vaccine distribution.
Additionally, due to our continued focus on cost improvement initiatives, our adjusted EBITDA improved to 6.
$6 million compared to a loss of $100000 for the same period last year of.
Also our real estate development project harvest at Lehman era continues to perform very well and I will discuss that and more detail and a few moments.
I'll now discuss each of our business divisions performed.
For the second quarter, starting with our agribusiness.
And our agribusiness revenue was $44 million compared to $38.4 million and the second quarter of fiscal year 2020, fresh Lemon revenue was $28.7 million compared to $25.3 million during the same period.
<unk> of fiscal year 2020.
Our stronger results were driven by volume and price.
Overall pricing was $18 and 79.
Average price per carton compared to $17 and 14 average price per carton.
Fresh lemon utilization rates were 75%.
The 80% compared to 50% to 55% in the prior year period of.
Avocado revenue improved to $2.7 million compared to $2 million for the same period last year.
Orange revenue was lower and the second quarter as higher prices of oranges were partially offset by the timing of our harvest.
The Orange season has had a slower start than anticipated. However, it is our expectation for fiscal year 2021 to have similar profitability and fewer cartons and acres dedicated to oranges.
Specialty citrus and other crop revenue was similar to prior fiscal year period at $1.2 million.
Harvest.
Turning now to our real estate development segment.
We have now closed 524 lots since inception, including 66 lot closings in the second quarter of fiscal 2021, and 60, new lot closings, so far and the third quarter of fiscal year 2021.
John the.
The pace of home sales has been increasing this year and as each quarter closes we gained confidence and the timing of the expected $80 million of cash distributions from harvest at <unk> over the next 6 years beginning in fiscal year 2022. In addition, we believe there is the potential upside.
To our stated cash distributions due to increased number of housing units and harvest at Lima, and era as well as the potential opportunity of of medical campus and our east area 2 development.
As we enter our third quarter, we are very confident we will achieve improved year over year results due to our expanded footprint and retail.
Retail as well as the early signs of improving foodservice coming back online both domestically and globally. We are encouraged by the record fresh lemon volume during our second quarter and the continued improvement and our cost structure.
We expect positive cash flow of towards the end of fiscal year 2022 from harvest.
And Lehman era, and look forward to updating you on our agribusiness and real estate progress and the coming months.
And with that I'll now turn the call over to Mark.
Thank you Harold and good afternoon, everyone for the second quarter of fiscal year 2021, total net revenue was $45.1 million compared to.
Total net revenue of $39.6 million and the second quarter of the previous fiscal year agribusiness business revenue was $44 million compared to $38.4 million and the second quarter of last year. Other operations revenue was similar to the prior fiscal year at $1.1 million.
Agribusiness revenue for the second quarter of fiscal year, 2021 includes $28.7 million and fresh lemon sales compared to $25.3 million of fresh lemon sales during the same period of fiscal year 2020.
Approximately $1 million 528000 cartons.
Of fresh lemons were sold during the second quarter of fiscal year 'twenty 'twenty, 1 at an average of $18.79 per carton compared to approximately $1 million 475000, cartons sold and a $17.14 average price per carton during the second quarter of fiscal year.
<unk> the 20.
The company recognized $2.7 million of avocado revenue and the second quarter of fiscal year 2021, compared to $2 million and the same period last fiscal year, approximately $2.1 million pounds of avocados were sold during the second quarter of fiscal year 2000 and.
21, and a $1.26, and average price per carton compared to approximately $1.2 million pounds sold at a $1.64 average price per pound during the second quarter of fiscal year 2020.
The company recognized $1.4 million of Orange.
20, <unk> and the second quarter of fiscal year, 2021, compared to $2.7 million and the same period of fiscal year 2020, primarily attributable to decreased volume, partially offset by higher prices of oranges sold.
Approximately 154000 cartons of oranges were sold.
During the second quarter of fiscal year, 2021, and a $9.12 and average price per carton compared to approximately 356000 cartons sold at a $7.49 and average price per carton during the second quarter of fiscal year 2020. It is our expectation for.
Robin can half of fiscal year 'twenty 'twenty, 1 to have similar profitability on fewer cartons with less acreage dedicated to oranges.
Specialty citrus and other crop revenue was similar to the prior fiscal year at $1.2 million.
Total cost and expenses for the second quarter of fiscal year 2021.
The second was $42.7 million compared to $42.4 million and the second quarter of last fiscal year of.
Operating income for the second quarter of fiscal year, 2021 was $2.4 million compared to an operating loss of $2.8 million and the second quarter.
1 previous fiscal year net.
Net income applicable to common stock after preferred dividends for the second quarter of fiscal year 'twenty 'twenty, 1 was $1.8 million compared to a net loss of $5 million and the second quarter of fiscal year 2020.
Net income per diluted share.
Of the second quarter of fiscal year, 2021 was 10 cents compared to a net loss per diluted share of 29.
For fiscal year 2020.
Adjusted net income applicable to common stock for the second quarter of fiscal year, 2021 was $1.8 million compared to an adjusted.
Sure for the net loss of $1.5 million and the same period of fiscal year, 'twenty, and 'twenty, which excludes the loss on stock and collateral.
Adjusted net income per diluted share was <unk> 10 cents compared to adjusted net loss per diluted share of <unk> for the second quarter of fiscal year 2020.
Adjusted a reconciliation of adjusted net income.
Our loss and net income is provided at the end of our earnings release.
Adjusted EBITDA was $6 million and the second quarter of fiscal year 2021, compared to a loss of $100000 and the same period of fiscal year 'twenty.
A reconciliation of adjusted EBITDA to net income or loss is provided at the end of our earnings release.
For the 6 months ended April 32021 revenue was $83.4 million compared to $81.2 million and the same period last year.
2 of the company recognized $2 million of Lemon and Orange sales and Chile by PTA, and some Pablo and $2.6 million of Lemon sales and Argentina by Trapani fresh and the 6 months ended April 32021 operating loss for this first 6 months of fiscal year 2021.
With $3.3 million compared to an operating loss of $11.3 million and the same period last fiscal year.
Net loss applicable to common stock after preferred dividends was $2.5 million for the first 6 months of fiscal year 2021 compared to a net.
1 of $11.6 million and the same period last fiscal year.
Net loss per diluted share for the first 6 months of this fiscal year was 15 <unk> co.
Compared to a net loss per diluted share of <unk> 66 cents and the same period of fiscal year 2020.
For the first 6.
Net lines of fiscal year 2021, adjusted net loss applicable to common stock was $2.6 million compared to adjusted net loss of $6.6 million for the same period and fiscal year 2020.
Adjusted net loss per diluted share was 15 cents compared.
6 of adjusted net loss per diluted share of 38 cents for the same period and fiscal year 2020 based on approximately $17.4 million and $17.6 million, respectively weighted diluted common shares outstanding.
Turning now to our balance sheet and liquidity.
Compared to long term debt as of April 32021 was the $128.2 million compared to $122.6 million at the end of fiscal year 2020.
In December of 2020, the company received $5 million of federal tax refunds related to the cares Act and.
And <unk> and an additional 900000 of California state refunds and fiscal 2021.
Now I would like to turn the call back of the Harold to discuss our fiscal year 2021 outlook and longer term growth pipeline.
Thank you Mark the co.
<unk> and 19 pandemic continues to affect our foodservice.
And of course business on a global basis.
But we are seeing signs of improvement in the states and beginning to see early signs of improvement outside of the United States. The company believes it is prudent to not provide lemon guidance at this time until the COVID-19 vaccine is widely distributed and we begin to see consistent openings of the food.
The service market.
We expect the improved year over year results, we experienced in the second quarter will continue with improved year over year results for the third due to slowly increasing demand from food service and export marketers as well as improving cost control measures.
We also have an and.
Additional 1200 acres of non bearing lemons estimated to become full bearing over the next 4 years, which will enable us to achieve strong organic growth for many years to come.
The company expects 200 of the 1200 acres to become full bearing and fiscal year 2021 beyond these 1200.
<unk> serves we intend to plant and an additional 250 acres of lemons and the next 2 years that we believe will further build our long term pipeline of productive acreage. We anticipate this additional acreage acreage will increase domestic supply of lemons from our 2020 level by approximately 50% or about 9.
100000 of 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 of.
Also due to continued steady improvement and the development of harvest and the Minera, we are confident we will generate.
<unk> cash distributions from harvest as follows.
<unk> 'twenty 'twenty, 1 is expected to be neutral.
Fiscal 2022 is expected to generate $3 million of cash the Lehman era fiscal 2020.3 is expected to generate $15 million fiscal 2024 is expected to generate 27 million.
Fiscal year, 2020.5 is expected to generate $25 million and 2020.6 is expected to generate $10 million.
This will be $80 million of cash back to luminary and the next 6 years. These expectations from harvest do not include the potential upside from increased density and housing.
<unk> and harvest as well as the potential opportunity of developing a medical campus and our east area 2 development.
We expect to be and are positioned to provide greater transparency on these opportunities later this year.
And with that I'd now like to open the call up to your questions operator.
Thank you.
Time will be conducting a question and answer session and he would like to ask a question. Please press star 1 on your telephone keypad and <unk>.
Formation.
Your line is and the question queue, you may price start to if he would like to remove your question in the queue.
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1 moment, please while we poll for questions.
Yes.
Our first question is from Vincent Anderson of Stifel.
Please state your question.
Yes, thanks, and good afternoon fellas.
Hey, Ben.
Okay.
And your hands.
Really don't have a more nuanced way.
To ask this other than I know.
We just saw lemon prices and shoot up over 20% and the last couple of weeks and I'd like to get your thoughts on that.
We saw it too and in fact, we.
We're enjoying at the price has gone up approximately $2 average per car.
So over the last month and.
And we are right now are sort of averaging somewhere between.
Sorry, Mark Mark something has gone up $2. That's 22 Bucks the 20th and it's at $22 right now as the average price and as you know Vince and within embedded in that is the sort of assumed product mix between the fancy.
<unk> and the choice and the standard grades, but we have I think the the real story for us at least to date. This year has been the significant improvement and our fresh utilization, which is allowing us to keep our costs low while we're enjoying this.
And this rapidly inflating pricing environment.
Fancy right.
That is perfect, so and let's turn it over to Argentina of little bit here. So your operations just still look exceptionally advantaged.
Compared to what the rest of the countries dealing with but now that we're seeing kind of labor and weather both impacting logistics as well as your competitors yields are you finally, starting.
And some pressure there and.
And maybe just what your outlook is for for Argentina in general of this year.
Yes, so our game plan. This year as you know there's 3 different production areas in California, and Arizona that gives us the majority of our supply chain. So we finished the desert and we finished the.
And the Sally and now we're in and of the coastal lemon and that used to be the lemon that carried us all the way through the spring and the summer, but what we've done is we've accelerated our harvest and our sales of that fruit were about 77% harvested now here and.
On the coasts here.
The cornea. So now all of our attention will be down to the southern hemisphere out of Argentina, and Chile, and we expect 1.2 million cartons to come in from Argentina, and Chile, a 50% will be our own produced fruit and 50% will be outside grower fruit, but we believe.
And California is coming in to hit a.
And underserved market because of the smaller crop that we're dealing with the here on the coast. So we believe and to the to the sort of the essence of your question that where we're really in perfect position. This year to see the the full benefits of our 1 world of citrus business.
Leave that where that southern hemisphere fruit will be filling a void that's been created by the lack of certain grades and sizes that the market wants and that's part of the reason that the price. The price is driving up so fast is theres, a theres actually a shortage of certain grades and sizes and.
And Vince I might add just.
Model, though in March and April we had the range down in Argentina, which really caused the delays of getting in and we had of recent locked down.
For I believe 9 or 10 days.
This last week, we got it and the 2 of our Santa Clara Ranch, and harvested 40000, cartons and so it should play pretty well into the summer pricing increase.
So you know I think we just have to be careful we'll get the fruit off by mid August which will have us still have stuff on the water through September so.
The it feels like it's going to play out correctly.
Okay.
Excellent and if I could just ask 1 more and ill hop back hop.
Hop back into the queue after but.
Kris and Dale if we could talk hypotheticals and how do you feel about availability through the end of the year yes.
Foodservice were to come back strong now that you have all of this retail.
Yeah.
All of this retail exposure could you handle that demand coming back without potentially having to burn bridges.
I'm passing on the business either on the retail side or the service side.
That's a great question.
I think we are about to be and are in a supply side challenge versus the demand side challenge. We've just come through 24 months of demand side challenges. So certainly the nature of your question is spot on and if there.
There are challenges in the next 6 months it will be.
And on having the adequate supplies to.
Just to stay with our customers, but that said I think our team has a pretty good handle on the actual supplies that we have access to and we've just tried to be very realistic with our customer.
So that we don't disappoint any of them. So I expect it to be a good scenario for all of US I think we'd always you know and.
And these situations you always wish you had more fruit, but but we will we work very hard to not burned any bridges by making commitments we can't keep.
Perfect great.
Problem.
<unk>, Yes of luck I'll hop back in the queue. Thanks.
Thanks Vince.
Our next question is from Ben B and venue and Steven.
Please state your question.
Hey, guys good evening.
Hey, Ben referenced and for you guys I guess.
And I went out.
Art, maybe with harvest you made some comments and your press release and in your prepared remarks.
About potential upside there.
It seems like potentially both and magnitude of the distributions and the timing I guess, maybe the best way to ask it would be what do you need to see to confer.
Firm.
Wanted to start of upside and make it more formal vs. Inform all at this point of it and what should we be mindful of from our side of things.
So there's a little bit of a story that goes behind the answer to this spend but.
As you May know across the highway from the residential development harvest at Lehman era, we had been working very.
Closely with a number of different potential retail partners and the city of Santa Paula to get a big box retail investment to serve the residential needs of the of the harvest development and just because of the the profile of Big box retail has changed so significantly because of the internet.
The impact on retailing and and.
And a big Big Big box retailers, like Walmart or target rethinking their physical plants and their physical buildings around the country and the world for that matter it became pretty clear that of big box retail offering across the highway was probably not possible.
And nothing changed.
And the attitude of the city of Santa Paula who are depending on the sales tax revenues to drive Citi funding. So the city has actually approached us and asked for additional ways in which they can generate more benefit from the harvest at luminary of project.
And because the luminary of company.
It is no longer going to build and elementary school because the student generation was a lot less than anticipated. When we first started the development and also just student generation and in general across the entire community has been much lower so that the unified School district.
And I need to build of new school. It freed up 12 acres of property in the middle of the harvest development and it also then allowed a 17 acre parcel of the Lehman era has that's within the harvest at Lehman era.
The development plan for those to be contemplated as potential.
I did mention areas. So the city is open to entertaining the idea of increasing more supply and more housing to.
To the tune of potentially up to 500 new units.
As away from the city to generate additional fees for them to meet some of their.
Expand your financial obligations that they're trying to manage so it seems like theres, a pretty good opportunity for the city and it seems like it'll be of great opportunity for the harvest at the Lima and air of project, but what's interesting about all of that is because of 17 of those acres is exclusively owned by Lehman era a big.
There are few that benefit would come directly to Lehman era versus coming through the approximately 50.50 joint venture that we have with our development partner of the Lewis group of companies.
I see okay very helpful.
My second question is on the fresh utilization rate I think you mentioned that you were trending.
Chunk of and the 75% to 80% range on live and press utilization is that we're shoot we should expect to be for the balance of this year and a.
A tighter supply environment does it.
Create the opportunity for higher fresh utilization of what what should we be thinking about from the variable but determined.
And of getting.
And kind of end of that range versus lower end of that range, because I think if I recall, but that's a fairly normalized kind of utilization rate range net.
It's actually and excellent rate, but youre right, we target, 75% and we've been trending at 75 to even the low 80, 80% range, but the.
The the hard to your question is Theres 2 pieces to it there is the market demand piece like do we have the right fruit for the market for the right for the fruit of the market wants and as you know from the prior 2 years. The answer to that question is not always been yes, but the the other side of it is is the physiological.
The answer impact that mother nature has had on our fruit and as you recall, we had some really severe east wins earlier in the year that created a a downgraded supply of our fancy or our first grade fruit and given us much more choice and standard grade fruit.
And the challenge.
Will it created initially was that most of that fruits outlet is through foodservice.
And and so with struggling foodservice demand, which is now improving as the effects of the pandemic are becoming.
The less and less.
We're optimistic and I think very.
At the excited to see that demand returning back to normal so given that we fully expect that these fresh utilization levels should be.
<unk> maintained and continue.
With the 1 caveat that when we get in and actually harvest the remainder of this fruit.
It just it's all going to come down.
How much of it is sellable and how much of it is not sellable because the impact of the wind makes us have to send it to the juice plant, but I think it's realistic for us to think in terms of 75% to 80% for the remainder of the season.
Okay, Yeah, I understand okay great.
Thanks, guys.
To what.
Thank you Matthew.
Our next question is from Ben Cleave of Lake Street capital markets.
Please state your question.
Alright, Thanks for taking my questions. This afternoon.
Couple from me first of all of it was really encouraging to see the growth growth.
And but you guys were able to command here and still relatively light pricing environment I'm wondering.
Beyond the fresh utilization rate being.
Being so good can you talk about.
How your how your cost structure has evolved given these given the restructuring efforts and you guys have taken on and how much of.
The profit of those efforts has seen them on the cost of production versus SG&A.
And the quarter.
Yeah, So I'll take that 1 Ben.
So I'll start with the SG&A side, so SG&A, we've done an incredible job as you know through the pandemic, we've kept all of our people.
We've gotten.
The band and 195% vaccinated and we've continued outside of conferences and travel to really support our employees and year over year. Our G&A has been down which we feel really proud of we went through a series of cost cutting initiatives last year to the tune of north of 2.
And <unk> from that side and it really it really really is showing now.
From the production side I think I think Youll note in the in the packing operations our cost.
And the same current period versus prior period was approximately similar on similar units right and the heels of.
Minimum wage increases here in California, which were which were $1 or more and we don't even keep our people at minimum wage so and then the opportunity to run more units through the house.
And we've had some of our biggest months and the history of the company and as you know as you run more units through there.
It's it's just completely ads on the hitting against those fixed fixed costs so and.
And I think the the team we're really proud of the team and everything they've come together and.
It's nice to see these improvements coming through.
Got it that's helpful and.
95% vaccinated.
At the finish and rich congratulations and May I suggest that you guys are looking for a site off and we'll get into and the public health.
That's correct.
Uh huh.
[laughter].
A couple of the quick ones from me Harold you talked you talked a lot about kind of the international opportunities and the kind of the return of the export market I am wondering if you.
And on that where have you seen the real.
Improvements in this market and then.
To what degree are you still seeing supply chain challenges driven by COVID-19 versus non market really getting the kind of back to normal.
I know, it's hard to consider kind of where this is going to be but you know what inning.
And elaborate in here in terms of moving the export market back to the state of normalcy.
I think we're still in the early innings, because our primary markets as you know from our prior discussions and conversations or are the southeast Asian markets and they've been extraordinarily cautious and continue to.
Do you think open and then pull back open and pulled back so our Japanese demand is just beginning to get back to sort of pre COVID-19 levels.
We had a little spike in demand that was caused by the container issue you've been reading about the challenges that the ports around the world.
And to the.
And the challenges of containerized shipping and and the Japanese market really took it and the churn during a lot of that and created some supply chain disruption that artificially created some.
Some challenges for them on the supply side, which then resulted in and US having to go back out and pipeline fill which was really helpful.
Of had business, but as it relates to just true demand in the Japanese market and even the Korean market, they're just now getting back to what we what we might've seen pre COVID-19.
We haven't seen that sort of euphoric spike in purchase.
Purchase behavior like we're.
And for our being here and the United States.
But we are hopeful that we will and then.
We're moving quite of bit of fruit into the into Hong Kong and some of the other Asian markets as well I'd say sort of anecdotally, we're probably at about 60% to 70% of what we what we would call normal export.
We're seeing levels, but but every week.
That's improving where the biggest spike and our business has been has been here domestically and the north American market and.
And the U S.
And where we're just seeing just every week from like dramatic improvement and increases in volume as.
Or people are going out to eat and drink and bars again.
Got it got it got it.
And that's all very encouraging.
My last question and I'll get back in queue.
And the regarding water so.
It looks like to be a pretty terrible setup.
As borne this year regarding drought conditions across the southwest how does the current environment affect your outlook on your water rights.
And.
And if you can elaborate on there would be helpful.
Well I think the first thing that maybe say is that we.
We're in great shape.
Set up for that as it relates to our own ability to continue to irrigate and keep our agricultural production.
And at full capacity with no cutbacks and any of our assets envisioned.
And where the opportunities are beginning to crop up and we're studying them very very carefully and staying very close to them.
<unk>.
As you as you know and you've been reading the the scarcity of that's coming around the Colorado River and sort of the systemic over allocation of some of that water and now with the pervasive drought really putting more and more pressure on certain.
Parts of the constituent.
And so that the Colorado River serves its creating a sort of and interesting new dynamic.
For the potential monetization of some of those water rights. So we're studying that very very carefully.
I would characterize our position and California.
As.
We're we're just making sure that we have access to our own ample access to our own water to continue to irrigate and keep our agricultural production and business.
But there are certain parts of the state Unfortunately were not as impacted as others that we are.
No and farm around but there is certain part of the parts.
Of the state the allocation has gone to literally zero. So this is going to be of very very difficult year for the state of California, agriculturally and you'll really get of Youll have a front row seat to view sort of the winners and losers in that and that whole scenario I would say that we're in great shape, which fundamentally.
Cash puts.
Puts more and more value and intrinsic value on the on the on the value of that that water resource but.
But we'll just have to see how it all plays out because they are literally our allocations of zero percent.
Coming out of just a severely.
And I guess impacted negatively impacted snowpack and.
And and rainfall that was just a fraction of normal for all of Us and California and this year.
Gotcha Gotcha very good well I appreciate all the color of that does it from me and I'll get back in queue.
Thank you.
As a reminder, and he would like to ask a question. Please press star 1 on your telephone keypad. The confirmation tone will indicate your line is and the question queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the Sakhalin 1.
1 moment.
Thanks, Paul for additional question.
Okay.
Our next question is from Vincent Anderson of Stifel. Please state your question.
Hi, yes, thanks, Hello again.
I'm not sure how much you can share.
With the luminaire shares up nicely here year to date I think it's.
Ladies and asking if you have anything you are allowed to.
Communicate in terms of collage of those intentions for their stake and the company.
No not at this at this point, we don't we don't know of anything.
And I guess originally.
Just I guess, we were under the impression that they would we're thinking that they would liquidate their position but.
Recent discussions Ive had with board members and and management at Colorado, I think they see a significant upside in their ownership of of the asset.
Net so the last communication, we had with them is that they they really were not intending on liquidating their position at this point.
So I think and I think the really the only thing to add publicly is that they and their most recent filing I think was December of January I can't recall, but they show adding share is actually.
It was nominal and the 42000 or something like that so.
But as far as we know there they are holding.
Okay. Thank you Ed good morning, and the expected.
To get so I appreciate it and then just a quick follow up on the earlier question about exports and your comments on Chile.
Youre trying to build of footprint and.
And I think in China, and with the U S kind of getting more and more positive as the days go by.
Coming back to us.
And about being able to serve all of the demand how do you think about the priorities between building up.
Demand in China, and now the Chile has access versus just getting it up to the U S where you.
And you kind of know where you are what you learn.
No that's of Great question, and we're very optimistic and bullish on that Chinese demand and the reason being that fundamentally if every production area in the world is firing on all cylinders, we sort of exist and and oversight.
Can <unk> situation, so if that Chinese demand improves to a level thats material so of certain amount of the southern hemisphere can be diverted into that market. It just means that's less imported fruit that comes into the U S market, which will give us a much better balance between supply and demand and give us.
Oversupply of more more pricing power.
We think that Chinese demand is is really significant and.
And really important to develop and and work. So we're doing that out of out of Chile and <unk>.
And very hopeful that a large part of our production.
You can find its way into the Chinese market.
Alright, perfect. Thank you ma'am.
Great. Thanks, Vince.
There are no more questions at this time, we have reached the end of it.
Quick question and I will now turn the call back over to Harold Edwards for closing remarks.
Thank you very much for all of your questions and for your interest in the Minera have a great day. Thank you again.
Okay.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation in Appalachia.