Q3 2021 Limoneira Co Earnings Call
[music].
Greetings and welcome to the Luminaire as third 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. Please press star zero on your telephone keypad as a reminder, this conference is b.
Being recorded it is now my pleasure to introduce your host John Mills with ICR. Thank you you may begin.
Good afternoon, everyone and thank you for joining us for <unk> third quarter fiscal year 2021 conference call on the call today are Harold Edwards, President and Chief Executive Officer, and Mark Palo Mountain Chief Financial Officer.
By now everyone should have access to the third quarter of fiscal year 2021 earnings release, which went out today at approximately four P. M. Eastern time, if you've not had a chance to view the release, it's available on the Investor Relations portion of the company's website at Lehman era Dot com.
This call is being webcast and a replay will be available on <unk> website as well.
Before we begin wed 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 details 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 result of new information.
Future events or otherwise. Please note that during today's call, we will be discussing non-GAAP financial measures, including resulted in an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater understanding of <unk> ongoing results of operations, particularly when comparing underlying results from period to period.
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 a non-GAAP financial measure a reconciliation of adjusted 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 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, John and good afternoon, everyone during.
During the third quarter, our increase in fresh lemon utilization higher.
Higher price per carton of fresh lemons and continuing cost improvement initiatives were the primary driving factors behind our 86% increase in operating income year over year.
We achieved this improvement despite the previously announced reduced sizing of our avocado fruit due to lack of rainfall as well as the widely publicized global logistical delays that are affecting the entire agricultural industry and reduced exports to Asia due to the COVID-19 Delta variance in these countries are.
<unk> worked very hard to reduce the effect. These temporary headwinds had on our third quarter results and we're excited about how we're positioned for revenue and earnings growth in fiscal year 2022.
Our real estate development project <unk> at Lehman era continues to perform very well and I will provide an update on this project in a few minutes.
I will now discuss each of our business divisions' performance for the third quarter, starting with agribusiness.
Agribusiness revenues was $48 million compared to $52 million in the third quarter of fiscal year 2021 fresh.
Fresh lemon revenue was $24 million compared to $35 million. During the same period of fiscal year 2020, the decreased volume of fresh lemons, partially relates to harvesting and logistical delays affecting our industry.
As expected fresh lemon pricing and utilization were strong in the third quarter of fiscal year 2021, However supply constraint due to the delayed harvest in Chile, and Argentina, along with the congested ports throughout the world have temporarily delayed shipments of many agricultural products, including lemons into the fourth fiscal quarter.
Overall pricing was $55.0 average price per carton compared to $36.0 average price per carton last year.
<unk> utilization rates were 77% to 80% compared to 57% to 60% in the prior year period.
Avocado revenue decreased $5.0 million compared to $7.0 million due to the highly publicized lack of rainfall throughout California, and the west coast, which reduced the overall size of the actual avocado fruit pieces and resulted in reduced pounds sold.
Orange revenue was lower in the third quarter as higher volume was offset by lower prices of Orange is sold.
Turning now to our real estate development segment are.
Our real estate development project harvest at Lehman era continues to perform very well and is now closed 556 lots since inception, including 92, new lot closings closings in the third quarter of fiscal year 2021, we.
We are confident in the timing of the expected $80 million of cash distributions from harvest at <unk> over the next six years beginning in fiscal year 2022.
In addition, we believe there is potential upside to our stated cash distributions.
Due to increased number of Sellable lots entitled at harvest at Lehman era, as well as the potential opportunity of the recently announced medical campus and our east area two development.
We are constantly striving to improve our efficiencies throughout all aspects of our business and you can see the improvements in our operating expenses compared to last year.
In order to stay in front of the fast paced fresh produce industry from tree to consumer.
Implementing a digital transformation, we are calling the farm to table via tablet initiative.
This innovative program will monitor daily tree health and fruit growth along with tying together the entire distribution chain from tree to customer dock.
This real time information system will tie the entire oneworld of fresh citrus worldwide team together on one accessible platform to raise yields and quality, while increasing the efficiencies of farming harvest packing and sales.
This initiative utilizes sensors located every block of our ranch's that gather consistent data on many factors, including moisture levels in the soil and trees as well as temperature and wind.
This data combined with the constant measurement of fruit size, creating models to predict the time and quality of harvest.
We then centralize all data to create more predictive algorithms that enable our sales team to improve fresh utilization by matching harvest fruit grades and sizes with global client demands.
This is all this also improves efficiencies within our harvest and packing teams by ensuring we are being efficient with hiring of labor and distribution needs throughout the year.
These measurements will also enable us to be more efficient with our valuable water assets.
Throughout the spring and summer Theres been a lot of attention on the current lack of rainfall on the west coast and corresponding water rights. We are Fortunately minera to have over 28000 acre feet of strong water rights covering all of our ranch's, including class III, Colorado River water rights, which are in the front of Las Vegas and Phoenix.
Each day water becomes more valuable and we continue to work to improve the use of this valuable asset.
Additionally, we continue to work with local communities to make sure that we are all driving to a sustainable future with this precious asset as illustrated with our tree monitoring system, which tells us exactly when the tree and where the tree needs water.
Our water quality and supply is maintained through rigorous lab testing floatation systems and a network of micro sprint sprinklers to ensure we maximize this asset our digital information systems utilize water probes to measure volumetric water content and are connected to data sensors in the irrigation.
Control system.
Soil and tree moisture stations than log water data and send it to the main controlling system.
We have been proud stewards of our land for over 128 years and by utilizing technology, we will be able to grow the best crops for future generations.
And with that I'll now turn the call over to Mark.
Thank you Harold and good afternoon, everyone for.
For the third quarter of fiscal year 2021, total net revenue was $50.0 million.
Compared to total net revenue of $59.0 million in the third quarter of the previous fiscal year.
Agribusiness revenue was $48 million compared to $56.0 million in the third quarter last year. Other operations revenue was similar to the prior fiscal year at $3.0 million.
Agribusiness revenue for the third quarter of fiscal year 2021 includes $28.0 million in fresh lemon sales compared to $39.0 million of fresh lemon sales during the same period of fiscal year 2020 <unk>.
Approximately $1 million 144000 cartons of fresh lemons were sold during the third quarter of fiscal year 2021 at a $55.0 average price per carton.
<unk> to approximately $1 million 979000 cartons sold at a $108.0 average price per carton during the third quarter of fiscal year 2020.
The decreased volume of fresh lemons, partially relates to harvesting and logistical delays affecting our industry.
As expected fresh lemon pricing and utilization was strong in the third quarter of fiscal year 2021, However supply constraints due to delayed harvests in Chile, and Argentina, along with congested ports throughout the world have temporary delayed shipments of many agriculture products, including lemons into the fourth fiscal quarter.
<unk>.
The company recognized $5.0 million of avocado revenue in the third quarter of fiscal year 2021, compared to $7.0 million in the same period last fiscal year.
Approximately $8.0 million pounds of avocados were sold during the third quarter of fiscal year 2021 at a $1 <unk> average price per pound compared to approximately $7.0 million pounds sold at $1 average price per pound during the third quarter of fiscal year 2020.
The reduction in avocado revenue compared to the prior year is due to the highly publicized lack of rainfall throughout California, and the west coast, which reduced the overall size of the actual avocado fruit pieces.
This resulted in reduced pounds sold for the company's avocados in the third quarter of fiscal year 2021.
Lack of rain call has not affected luminaries lemons in southern California, or Arizona due to the company's strong water assets as well as the irrigation systems for the lemon growth.
The company recognized $2 million of Orange revenue in the third quarter of fiscal year 2021, compared to $4.0 million in the same period of fiscal year 2020, primarily attributable to lower prices, partially offset by increased volume of oranges sold.
Approximately 259000 cartons of oranges were sold during the third quarter of fiscal year 2021 at a $72.0 average price per carton compared to approximately 184000 cartons sold at a $25.0, <unk> average price per carton during the third quarter of fiscal year 2000.
'twenty.
Specialty citrus and other crop revenues with similar to the prior fiscal year at $2.0 million compared.
Compared to $800000 in the third quarter of fiscal year 2020.
Total costs and expenses for the third quarter of fiscal year 2021 decreased to $53.0 million compared to $58.0 million in the third quarter of last fiscal year.
Despite the temporary challenges to the company's supply chain operating income for the third quarter of fiscal year 2021 increased by 86% to $7.0 million compared to $9.0 million in the third quarter of the previous fiscal year.
Net income applicable to common stock after preferred dividends for the third quarter of fiscal year, 2021 was $9.0 million compared to $4.0 million in the third quarter of fiscal year 2020.
Net income per diluted share for the third quarter of fiscal year 2021 was 20.
Compared to net income per diluted share of <unk> 12.
For the same period of fiscal year 2020.
Adjusted net income applicable to common stock for the third quarter of fiscal year, 2021 was $10.0 million compared to $6.0 million in the same period of fiscal year, 2020, which excludes the loss on stock in collateral.
Adjusted net income per diluted share was <unk> 20.
Compared to adjusted net income per diluted share of <unk> 13 for the third quarter of fiscal year 2020.
A reconciliation of adjusted net income to net income is provided at the end of our earnings release.
Adjusted EBITDA was $15.0 million in the third quarter of fiscal year 2021, compared to $6 million in the same periods 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 first nine months ended July 31, 2021 revenue was $137.0 million compared to $142.0 million in the same period last year the.
The company recognized $8.0 million of Lemon and Orange sales in Chile by PTA, and some Pablo and $6.0 million of Lemon sales in Argentina by Trapani fresh in the nine months ended July 31.2021.
Operating income for the first nine months of fiscal year, 2021 was $118000 compared to an operating loss of $14.0 million in the same periods last year.
Net income applicable to common stock after preferred dividends was $2.0 million for the first nine months of fiscal year 2021 compared to a net loss of $13.0 million in the same period last fiscal year.
Net income per diluted share for the first nine months this fiscal year was <unk> <unk>.
Compared to a net loss per diluted share of 54 cents in the same period of fiscal year 2020.
For the first nine months of fiscal year 2021, adjusted net income applicable to common stock was $1 million compared to adjusted net loss of $6.0 million for the same period in fiscal year 2020.
Adjusted net income per diluted share was <unk> <unk> compared to adjusted net loss per diluted share of 24.
For the same period in fiscal year 2020.
Based on approximately $21.0 million and $23.0 million, respectively weighted average diluted shares common.
Shares outstanding.
Turning now to our balance sheet and liquidity long term debt as of July 31, 2021 was $129 million compared to $128.0 million at the end of fiscal year 2020.
In December 2020, the company received $5 million of federal tax refunds related to the cares Act and received an additional $900000 of California state refunds in the third quarter of fiscal year 2021, now I'd like to turn the call back to Harold to discuss our fiscal year 2021 hour.
Look and longer term growth pipeline.
Thank you Mark.
19 pandemic continues to affect our foodservice business on a global basis and many of the Asian countries. We serve have temporarily reduced fruit shipments because of COVID-19 related decrease in foodservice needs.
Because of this we believe it is prudent to not provide specific lemon guidance. At this time. However, we do believe due to lower projected imports from Mexico, and Spain in fiscal year 2022 improved industry wide supply chain improvements and continued increased fresh utilization. We believe we will achieve in <unk>.
Increase in price per carton in fiscal year 2022.
We also have an additional 1200 acres of non bearing lemons estimated to become full bearing over the next four years, which will enable us to achieve strong organic growth for years to come the.
The company expects 200 of the 1200 acres to become full bearing in fiscal year 2021 beyond. These 1200 acres, we intend to plant an additional 250 acres of lemons in the next two years that we believe will further build our long term pipeline of productive acreage we.
<unk>. This additional acreage will increase domestic supply of lemons from our 2020 level by approximately 50% or about 900000 to one 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.
Yeah.
Also due to continued steady improvement in the real estate development of harvest at Lehman era. We are confident we will generate cash distributions from harvest as follows fiscal year 2021 is expected to be neutral fiscal year 2022 is expected to generate $3 million of cash Chilean Minera Phil.
School year 2023 is expected to generate $15 million fiscal year 2024 is expected to generate $27 million fiscal.
<unk> 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 Lehman ore in the next six years. These expectations from harvest do not include the potential upside from increased numbers of residential lots we are in.
Titled to sell at harvest as well as the potential opportunity of a medical campus in our east area two development.
We expect to be in position to provide greater transparency on these opportunities later this year.
And with that I'd like to open the call up to your questions operator.
Thank you at this time, we will be conducting a question and answer session.
Like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two.
To your question from the queue.
All participants using speaker equipment, it may be necessary to pick up your handset before pressing the satcom.
On the call for questions.
Our first question is from Ben Bienvenu.
That's great.
Please state your question.
Hey, Thanks, good afternoon guys.
Good afternoon.
I know youre, not providing guidance limon guidance, but I am curious if you have the ability to provide any.
Any color on what level of visibility you have on how much of the volume.
Should have been in <unk> that might shift to <unk>.
And then second question you talked about you expect the third party volumes to steadily grow over the long term.
You reference your internally produced levels, our volumes growing relative to that 2020 base.
When you're talking about the third party volumes or are you talking relative to that 2020 base as well or relative to the 2021 base. Thanks.
So I think somewhere between 250000 to 300000 cartons pushed from the third quarter to the fourth quarter. If that's helpful.
We do believe the shipments are there and the fruits there. So the one on one of the challenges to that is just simply that with the congestion and the ports that were experiencing that fruit typically has to be unloaded and then reworked because it's been it's been on the water for longer than it normally would be so that would be the only thing that would kind of challenge.
Is that that number but I think $52.0 to 300 is the number.
<unk>.
And then sort of just.
Anecdotally, we think that the the tree crop in district three is up.
Fairly significantly which should offset some of the land that we've followed because of the water opportunity and district three so I think.
If we get normal utilization rates out of out of the desert, we should have similar volumes to last year with with roughly a similar split between our fruit and outside grower fruit.
We believe the crop and district, one up in the San Joaquin Valley, which is the winter crop.
Is 15% to 20% larger as a tree crop and because of our competitiveness. This year, we expect to recruit new growers there.
But I think we should expect growth in the winter winter period.
Both because of non bearing acreage, becoming more bearing but also because it's a larger tree crop and we expect to to recruit new growers there.
So mark the split between outside and are in district. One is right now it's about 60.40 us to outside.
We're 50.50 overall for 2021, Yeah, and then it will and then the last piece of that puzzle. Ben is the is the coastal crop which is the spring summer crop.
And we.
Estimates are that that will be bigger too and we have non bearing acres that are becoming bearing in this area.
And because of the competitiveness of our returns this last year, we expect to grow outside growers here as well.
So directionally.
This fiscal year 2021, we should come in somewhere around $6.0 million total domestic cartons and we believe directionally. If we can achieve the fresh utilization rates next year that should be.
Trending closer to $5 million total cartons domestically and as Mark pointed out 50% would be our fruit and 50% would be outside grower fruit.
Okay very helpful.
My second question is you talked about your your strategic positioning around water rights.
<unk>.
Excess that you have so those resources.
Positioning you well in the near to intermediate term.
How should we think about the risk of longer term threat to productivity across your ore costs across your network.
Conditions persist for a.
A longer period of time.
So a different answer in different places, but starting on the Colorado River and our assets in Yuma, Arizona.
Actually followed 600 acres in anticipation of a following program, which will incent producers to fallow land in return for providing the water rates associated with that land to other users on the Colorado River and so.
We're working on on that plan and those programs right now and hope to have an announcement on what that program looks like for next year for 2021, we believe we have been able to do that without disrupting our supply chain at all because of a larger overall crop in in <unk>.
In Arizona.
So that's the first piece of that puzzle.
And in the rest of the water is actually.
The answer to your question is more specifically related to where that asset is and what what resource is available to that asset and the condition of that of that asset. So here in Ventura County, we're very fortunate to have very deep underground Aqua <unk> that allows us to access.
Water for a long period of time of extended drought, we've done this before and been in been in good shape.
So I wouldn't anticipate a real challenge to the overall health and survivability of the tree.
We'll experience impacts if it doesn't rain next year for instance, in the sizing of avocados, which we experienced this year most likely.
But generally we think we're in pretty good shape here in our Ventura County assets and then the San Joaquin Valley is where some of the sort of the bigger challenges exist as it relates to.
Access to repair inflows of rivers and streams being dramatically reduced and then over dependence of groundwater pumping, which pushes us in all of our neighbors into groundwater pumping situations. At this point, we believe our assets are in good shape and we have access to water.
But that's where we would see increasing costs.
Based on our requirement to pay money to buy additional access to water when our groundwater groundwater pumping wasn't sufficient.
Again at this point, we believe we have a sufficient supply of water, but thats, where you would see your cost increase.
Okay very helpful. Thanks, very much guys.
Thanks Pat.
Our next question is from Anderson of Stifel. Please state your question.
Yes, thanks, good afternoon.
Okay.
Okay. So.
So I completely respect you don't have details on logistics district, three water rights now.
But you called it a program I was I was kind of hoping you can at least give us an idea of maybe who is involved here are you leading it isn't a public private partnership.
You must be fairly confident in the direction, it's heading that you're already followed acres.
<unk> year.
Solow programs, where we would commit in a public private partnership how it's being contemplated right now there's always the potential that the bureau of reclamation could come in and create a.
A broader program at this point, it's more of just a public private.
Situation, where it would be.
Solid land in return for not pumping that water in providing that that the access to that water to another large water user along the Colorado River.
The economics, it's a little too early to talk about it but directionally something that would give us benefit to the approximately $1000 an acre.
Level and that actually works pretty profitably because you can you can basically eliminate your expenses on that followed land.
So the idea is to get the program going in and then as water scarcity continues to become more and more pervasive to basically.
Develop that program on a bigger in a bigger way over a longer period of time as the over allocation of the Colorado River is is sort of dealt with.
By the biggest users advanced there was a similar program that was in place.
I think about 2013, where we got about half of that.
So it ended up being about $500, an acre and you could put in a certain amount of acreage. So it is still unclear. If you can put in all of the acreage that youre planning to follow or expect to be followed but really it's harold alluded to it's setting up that ability to be able to move water back to the Colorado River and then set up those future large value.
Whether we sell the actual westwater.
Or the water right.
Which is which is the bigger take.
Take.
Okay, so a bit more opportunistic for now and we'll see where it goes.
Correct.
I think without getting too far in front of ourselves that the combination of the reduction of expense as it related to following 600 acres, the larger crop, which should keep our supply chain of lemons intact and then the following programs should be a significant profit swing for us with our with our.
Yuma, Arizona.
Assets, so that should be a big benefit to us in 2022, and just to be clear. So the completion of the following will be once we harvest the remainder of this season's crop which will be the end of the end of the calendar year.
Okay, Alright, perfect. Thank you.
And so switching over.
We've just been reading a lot about issues in Argentina with yields we've brought that up all year I think you have the XP.
For timing and logistics constraints, but.
But we're still seeing a heck of a lot of Argentinean lemons are ending up in the U S. And so you touched on some of this but can you just give us an idea of what's going on is Argentina, just flat out prioritizing the U S market.
Is that leaving any opportunities for you to backfill elsewhere with zero lemon.
So there's there's basically two things going on for Lee Minera in Argentina at one.
We're a 50% owner of a productive lemon ranch.
In the furthest north most province in the country of Argentina.
And.
Our harvest and our yields out of that that that rents have been delayed and theyre coming but have been delayed.
But at the same time, we continue to source fruit from outside growers on a pure brokerage level and our volume of those lemons are actually up and.
The brokerage part of our business is up considerably although it's delayed.
So how that nets out for us, but at the end of the year should be pretty much on track as it relates to.
The performance of the of the ranch being down for yield reasons, but the performance of the brokerage being up because we've moved a lot of Argentine lemons in our in our brokerage programs. So net net the financials of Argentina should be pretty much on our on our plans as we as we laid them out at the beginning of the year.
<unk>.
Okay excellent and then I guess, just really quick you mentioned Mexico.
<unk> to be down enough to be support of pricing into next year, just anything specific youre seeing there maybe size wise I think they normally come in on the smaller end anyways, but.
Any specifics you wanted to share.
It's just it's just typically smaller size and quality and then the shippers have a lower cost of production. So typically will come in much under market just to get the fruit movement of a lower quality product.
So that's going on but it's a smaller overall Mexican crop so that should that should be very helpful.
The thing Thats, creating the choppiness in the sloppiness in the market right now have been these delayed southern hemisphere, Chilean and Argentine shipments that are coming in and being delayed and then that fruit that all needs to be reworked and its old and so the quality has deteriorated so that as.
As the importers are dealing with that situation in the local terminal markets, it's really putting downward pressure on the on the pricing.
We're seeing pricing in the 22% to $23 range right now, which you know.
All things considered is not that bad but once that fruit is done and the Mexican fruit is is basically now competing against the desert fruit, which will be participating in we expect pricing to begin to improve and that should finish up in four to six weeks on the east coast yet.
Alright, perfect I really appreciate it thank you.
Thanks.
Our next question is from Ben <unk> of Lake Street Capital markets. Please state.
Your question.
Alright, Thanks for taking my questions. Most of what I had has been asked already here, but.
I have a question about the digital initiatives that you outlined in your prepared remarks can you talk a bit about kind of the implications of this program on.
On yield that you're expecting on water.
Improve on our efficiency that you're expecting.
Talk about how this maybe it's performed in beta testing.
You don't really add.
Any detail would be would be appreciate it from that perspective.
No happy to Ben Yes, it's actually a pretty exciting program, but but every single one of our ranch's can be broken down into what we call blocks and the characteristics of the productiveness of the trees and each block tends to be pretty similar and so what we've done is we've for every block.
And every one of our ranch's around the world, we've actually implemented sensors into trees and those those sensors are actually detecting moisture level within the in the trees and then we combine that data and information with data that we pull from the soil around the trees using what we call <unk>.
C amateurs, but are actually measuring the moisture levels in the in the soil and the combination of the moisture level in the tree and the moisture level. The soil then gives us direct access.
To decide when is the optimal time to irrigate.
This is not and that allows us to be much better conservationists with our with our water, but it also allows us to irrigate based on need versus on how <unk> traditionally done in the industry, which is the available the availability of the water from the irrigation company and so that that sounds very fundamental.
That's actually a really important change in the way that we're farming and using that information and data to far more efficiently.
And then the other piece of it.
The technology that we're implementing actually in every block of our ranch's is actually measuring fruit size fruit grade and fruit color and it's giving us the ability based on the information that we're that we're tracking is how fast that fruit is growing and it allows us to create these.
Very efficient predictive algorithms that tell us on a 30.60 90.180 day basis, when the fruit will be optimally ready to harvest and then also the condition that that fruit will be in at the time of harvest, which allows our sales team and then get in front of that.
That information in the supply the supply that's coming through the supply chain to go set up specific programs directly with our foodservice buyers in our retail buyers. So that when the fruit is harvested there's already a customer thats.
They are ready to take it and how that will manifest itself in our business.
From a profitability standpoint is that should keep our fresh utilization ranges levels much higher than without the use of that technology and again remember if we can sell it fresh we're selling at an average of $47.0, a 40 pound carton versus if we cant sell it fresh and we have to send it to the juice.
Plant, because we couldnt sell it or the quality of the fruit dictated that it wasn't able to go fresh we get about $2 a fresh carton for that so you see the massive incentive economically for us to to be successful with our fresh utilization.
Okay great.
Got it that's that's all helpful.
Interesting initiatives look forward to hearing more about that here in coming quarters.
I appreciate the color there I think that does it for me I'll get back in queue.
Thank you.
As a reminder, if you'd like to.
To ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
All participants using speaker equipment, it may be necessary to pick up your handset before pressing the star.
One moment, please poll for additional questions.
Our next question is from Gerry Sweeney of Roth Capital Partners. Please.
State your question.
Hey, good morning, or good afternoon, guys. How are you doing hi, Gerry afternoon Gerry.
Quick question on utilization, obviously, 77% to 80% much higher than last year, how much of that is market driven versus I know last year.
Foodservice was on and off and off.
At different times, and then you also pushed more I think into the grocery chain.
Have you expanded some of your distribution.
Channels to potentially increase utilization.
Or at least give you additional outlets.
Yes, so I think there's two parts to that question. One this year, we saw a better balance of supply with lower overall crop and most of the areas. So less fruit availability into what we'll call a burgeoning demand we.
<unk> set up the initiatives to put bagging into go chase that that more profitable retail business, which had also allowed us to have grades across and bags, which created more flexibility with with.
Into Costco and some of the bigger players, but really that that was the component and just when you have that opportunity to balance the supply as it is versus the prior year's oversupply due.
Due to Covid and then the year before when we had that one size that was just the supply issues you can really see the effect in the fresh utilization than we had.
Many months April May June where we were sold out of most.
Of our sizes and grades for we had to cut people back to 80% of orders and I think we're in a good balance now and we're seeing smaller sizes, but in general it's that balance and Jeremy one other comment about this that's kind of interesting is that.
One of our biggest customers is a restaurant chain <unk> chain called raising caines, that's a competitor chick fillet and just like Chick fillet, they make they make fresh lemonade every two hours in every one of their stores.
Theyre chain is growing very rapidly but.
That's where we sell a lot of our standard grade, which is the lower quality highest juice content product, but but a great customer to have because rather than having to send it to the juice plant at low economic levels, we're able to sell that that standard as a as a fresh piece of fruit too.
Very valuable customer raising Cain.
That one customer was.
Almost 1 million cartons of business for us this year as they as they grow and expand we look forward to expanding and growing with them.
And that's been a huge part of our of our fresh utilization success is having that right balance for our standard grades, but also the right kind of top end buyers for our fancy grades, which typically go to the highest ends of retail and exports.
Got you and then one really simple question just curious.
This is my curiosity.
Quite honest with you.
Avocados not irrigated.
No they're irrigated their irrigated and that goes a long way to keeping the tree healthy and alive and growing and producing but there's something that happens to a fruit tree with natural rainfall that accelerates the growth of the fruit.
Over and above just the health of the tree and so that's really where we suffered this year is that even though last year.
We had sort of below normal levels of total rainfall the way the Rand. The rain fell in 2020 was actually good for the avocado crop and we actually got good growth in size of the fruit. This last year, we had very very little so one of the lowest recorded years of rainfall and the fruit just did.
Not size.
Got you Okay I appreciate it that's it for me.
Thanks, Jerry Thanks Gerry.
Yeah.
There are no more questions at this time.
A question and answer session I will now turn the call back over to Harold Edwards for closing remarks.
Thank you very much for your questions and interest in <unk> have a great day.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
[music].
Okay.
[music].
[music].