Greetings, and welcome to Limoneira's Q3 fiscal year 2022 financial results conference call. At this time, all participants are in a listen-only mode. A Q&A session will follow the formal presentation. As a reminder, this conference is 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 Limoneira's Q3 fiscal year 2022 conference call. On the call today are Harold Edwards, President and Chief Executive Officer, and Mark Palamountain, Chief Financial Officer. By now, everyone should have access to the Q3 fiscal year 2022 earnings release, which went out today at approximately 4 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 limoneira.com. This call is being webcast, and a replay will be available on Limoneira's website as well. Before we begin, we'd 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 a result of new information, future events, or otherwise. Please note that during today's call, we will be discussing non-GAAP financial measures, including results on an adjusted basis.
We believe these adjusted financial measures can facilitate a more complete analysis and greater understanding of Limoneira's ongoing results of operations, particularly when comparing underlying results from period to period. We have provided as much detail as possible on any items that are discussed on an adjusted basis. Also, within the company's earnings release, and in today's prepared remarks, we include 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 has been posted to our website. With that, it is my pleasure to turn the call over to the company's President and Chief Executive Officer, Mr. Harold Edwards.
Thanks, John, and good afternoon, everyone. Operating income increased over 200%, and our top line grew by 20%, driven by record avocado revenues and strong fresh lemon sales in the Q3 of fiscal 2022 compared to the prior year period. Our strategic approach to fresh utilization enabled our sales and marketing team to successfully market our fresh lemons throughout the year. The investments we have made in technology and our supply chain have resulted in superior market timing compared to our peers and brought more grower partners to our company. Even though overall lemon pricing remained challenged in the Q3 as the domestic and global lemon markets continued to work through a surplus of inventory, we were able to offset many industry-wide inflationary pressures and logistical issues.
In addition, our avocado segment has continued to outperform expectations with pricing almost doubling year over year, resulting in record revenues of $12.6 million in the Q3 of 2022. Our results are even more impressive when you consider the fact that our industry continued to face rising labor costs and higher packing and supplier costs. Our strong top line and efficient marketing and selling plans more than offset these cost increases. Last quarter, we informed you of our plan to unlock the value of our many assets and better leverage our leading global citrus position by expanding our One World of Citrus, increasing our avocado plantings, and selling certain assets to dramatically increase our cash flow in the near future.
Today, we are updating that plan, and we expect the updated plan to increase our One World of Citrus business by focusing on growth of asset-lighter sales using more grower partner fruit in order to reduce the impact of pricing volatility and rising farming costs. We will continue to develop best-in-class grower services to recruit additional grower partners. We have over 15,400 ac of rich agricultural lands, real estate properties, and water rights in California, Arizona, Chile, and Argentina with a fair market value of over $600 million in today's market, yet a book value on our balance sheet of $220 million because many of these assets were acquired years ago at low cost basis. We believe selective monetization of certain assets in our portfolio creates a tremendous value creation opportunity for our shareholders.
As a reminder, our board's objectives with our new directive include the following. Reduce debt and right-size our balance sheet. We also reiterated today that we expect to receive approximately $95 million over the next five years from Harvest at Limoneira, beginning this year with $8 million expected in the Q4 of fiscal year 2022. In addition to Harvest, we have identified assets that we will be monetizing and selling in the coming months to streamline our operations. Our updated strategic plan involves four specific initiatives. First, our One World of Citrus to an asset-lighter business model.
In order to unlock the value of our many assets and better leverage our leading global citrus position, we will be expanding our One World of Citrus model while also strategically selling certain assets and streamlining our operations to dramatically increase our long-term cash flow. In order to accomplish this, we will be increasing our focus on growth of asset-light sales using more grower partner fruit in order to reduce the impact of pricing volatility and rising farming costs. We will continue to develop best-in-class grower services to recruit additional grower partners. We will also be reconfiguring our global lemon packing network to better support our grower partners' fruit. This may include reducing certain orange and lemon acreage globally while still maintaining the packing and marketing of the fruit grown on these locations.
In the coming years, we expect 30% of our lemon global supply chain to come from Limoneira fruit and 70% to come from grower partner fruit while maintaining our overall growth goals. To put this in perspective, today 50% of our lemons sold are produced on Limoneira properties. Number two, this asset-lighter model will enable us to achieve improvements in the following metrics our board is using to measure progress and position us to improve shareholder value. The first is reduced investment risk outside of North America. The second is to generate more stable and higher growth in EBITDA and earnings. Lastly, to improve our annual return on invested capital.
During the past 12 years, as we grew our One World of Citrus offering, we also made certain investments in assets that were embedded in this growth and the overall infrastructure of Limoneira.
Now, we will be focusing on monetizing certain of these assets that have increased in value over the years, and this will dramatically improve our return on invested capital. As an example, today, we announced that we expect to generate $8 million in cash in the fiscal Q4 of 2022 from the sale of 17 ac to our joint venture with the Lewis Group to potentially develop an additional 200 or more residential units within Harvest. Number three, we expect to also leverage our leading avocado position by increasing our avocado production base in Ventura County and exploring additional ways to participate in the packing, marketing, and selling of avocados as a complement to our One World of Citrus. Number four, our fourth strategic objective is enhancing our ESG goals.
Limoneira has a long history of sustainability practices, and this is one of the reasons our company has enjoyed almost 130 years of giving back to the community. We build housing for farmworkers, sponsor community programs, feed farmworkers, reduce our carbon footprint with 7 solar installations, manage green waste with a facility that receives over 200 tons per day of organic green waste. We minimize pesticides and herbicides through integrated pest management programs, and we are a pioneer in water conservation. However, in order to ensure our land is here for future generations, we are redoubling our efforts on environmental, social, and governance standards. We are increasing our focus on regenerative agricultural practices, including expanding our relationship with third-party agronomists to further enhance and properly nurture our soil and water conservation efforts.
We continue to use new technology and improve our digital information system to increase efficiencies across our supply chain. This system will work in tandem with our ag practices by monitoring daily tree health and fruit growth, identifying labor and distribution needs, predicting the right time to harvest, and match harvests, fruit grades, and sizes to meet global demand. Lastly, we are evolving our governance structure, and last month, we announced enhancements to our board of directors. Scott Slater was appointed Chairperson of the Board of Directors. Scott Slater, who joined the board in 2012, succeeds Gordon Kimball, who has stepped down as the Chairperson due to health reasons and will remain a director of the company.
In addition, Amy Fukutomi resigned as a director of the company and will now serve as our Vice President of Compliance and Corporate Secretary of the company.
We believe this updated strategic plan will result in an asset-lighter business model, a dramatic debt reduction, reduced volatility and an increase in EBITDA and earnings per share, higher returns on invested capital, an increase in our quarterly dividend, higher ESG scores, expansion of global fruit packaged and marketed by Limoneira, and lastly, an increase in the packaging and marketing of avocado production. We will update you on a regular basis regarding our progress, and we believe we will be in a position to announce additional asset sales and streamlining of our business model in the coming quarters. With that, I'll now turn the call over to Mark.
Thank you, Harold, and good afternoon, everyone. As a reminder, there is a seasonal nature to our business, with our revenue driven by varying harvest periods from year- to- year. Our first and Q4s are seasonally softer quarters, while our second and Q3s are stronger. Therefore, it is best to view our business on an annual, not a quarterly basis. For the Q3 of fiscal year 2022, total net revenue was $58.9 million compared to net revenue of $49.1 million in the Q3 of the previous fiscal year. Agribusiness revenue was $57.6 million compared to $48 million in the Q3 last year. Other operations revenue increased to $1.3 million in the Q3 of fiscal 2022 compared to prior year period of $1.2 million.
Agribusiness revenue for the Q3 of fiscal year 2022 includes $27.8 million in fresh lemon sales compared to $24.4 million during the same period of fiscal year 2021. Approximately 1,512,000 cartons of fresh lemons were sold during the Q3 of fiscal year 2022 at an $18.39 average price per carton, compared to approximately 1,144,000 cartons sold at a $21.34 average price per carton during the Q3 of fiscal year 2021. The company recognized $12.6 million of record avocado revenue in the Q3 of fiscal year 2022, compared to $4.1 million in the same period last fiscal year.
Approximately 5.7 million pounds of avocados were sold during the Q3 of fiscal year 2022 at a $2.21 average price per pound, compared to approximately 3.5 million pounds sold at a $1.16 average price per pound during the Q3 of 2021. The company recognized $3.7 million of orange revenue in the Q3 of fiscal year 2022, compared to $2 million in the same period of fiscal year 2021. Approximately 209,000 cartons of oranges were sold during the Q3 of fiscal year 2022 at a $17.88 average price per carton, compared to 259,000 cartons sold at a $7.65 average price per carton in the prior year period.
Specialty citrus and other crop revenues were similar to the prior year at $1.1 million for the Q3 of fiscal years 2022 and 2021. Total costs and expenses for the Q3 of fiscal year 2022 were $47.9 million, compared to $45.8 million in the Q3 of last fiscal year. Costs as a percent of revenue decreased year-over-year as improvements in our cost structure offset industry-wide inflationary pressures. Operating income for the Q3 of fiscal year 2022 increased to $11.1 million compared to income of $3.4 million in the Q3 of the previous fiscal year.
Net income applicable to common stock after preferred dividends for the Q3 of fiscal year 2022 was $7.3 million, compared to net income of $3.6 million in the Q3 of fiscal year 2021. Net income per diluted share for the Q3 of fiscal year 2022 was $0.40, compared to net income per diluted share of $0.20 for the same period of fiscal year 2021. Adjusted net income for diluted EPS for the Q3 of fiscal year 2022 was $7.5 million, compared to $3.7 million in the same period of fiscal year 2021. Adjusted income per diluted share was $0.41, compared to adjusted net income per diluted share of $0.20 for the Q3 of fiscal year 2021.
A reconciliation of net income to adjusted net income is provided at the end of our earnings release. Adjusted EBITDA was $14.2 million in the Q3 of fiscal year 2022, compared to $7.8 million in the same period of fiscal year 2021. A reconciliation of net income to adjusted EBITDA is also provided at the end of our earnings release. Now turning to our balance sheet and liquidity. Long-term debt as of July 31, 2022 was $129 million, compared to $130.4 million at the end of fiscal year 2021. We believe the level of debt will continue to decrease throughout fiscal 2022 due to the monetization of certain real estate assets. Now I'd like to turn the call back to Harold.
Thanks, Mark. Continue to expect fresh lemon volumes to be in the range of 4.5-5 million cartons for fiscal year 2022, and avocado volumes were eight million pounds compared to our previous range of six-seven million pounds for fiscal year 2022. We continued to expand our product offerings in fiscal year 2022 by marketing another producer's oranges and specialty citrus through our One World of Citrus program. We have a growing list of customers that enjoy our ability to provide all of their citrus needs from one single supplier. By increasing our oranges and specialty citrus offerings, we'll be able to attract even more customers. In addition, our ability to successfully sell over 80% of our lemons fresh at competitive prices enables us to enhance our grower partner recruiting efforts.
We continue to expect to receive $95 million from Harvest at Limoneira during the next five fiscal years, beginning in fiscal year 2022, which includes $8 million during the Q4 of this fiscal year. The breakdown of annual cash flows expected from Harvest at Limoneira is as follows. Fiscal year 2023 is expected to generate $15 million, fiscal year 2024 is expected to generate $27 million, fiscal year 2025 is expected to generate $30 million, and fiscal year 2026 is expected to generate $15 million. These expectations from Harvest do not include potential opportunity of a medical campus in our East Area Two development. We also have a number of non-strategic real estate asset sales planned that we expect to be able to provide more color on during our Q4 call in December.
Now I will open up the call to your questions. Operator?
At this time, we'll be conducting a Q&A session. If you would 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 remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question comes from the line of Ben Bienvenu with Stephens. You may proceed with your question.
Hey, thanks. Good afternoon.
Hi, Ben.
Hey, Ben.
You guys, you know, it sounds like you're still relatively early innings on kind of the monetization of non-core, or non-essential assets, and we're kind of at the outset of a lot of cash coming in the door to the business. Can you talk to us a little bit about maybe the pipeline of reinvestment that you're considering? You talked about kind of the strategy shift to a more asset light sort of model. If you could talk to us a little bit about kind of the balance of returning cash to shareholders versus reinvesting it into a business transformation.
From a financial perspective, you know, sort of minimum return thresholds that you're thinking about, whether it's IRR or return on capital, that would be a helpful paradigm for us to think about.
Great, Ben. That's a great question. I'll take a stab at the higher level sort of part of that question, and Mark might be able to dig in with some more granular components to it. We're very interested in investing in new packing capacity in Chile that we think will complement our North American lemon packing as well as potentially new packing operations up in the San Joaquin Valley that we're exploring right now that'll give us better logistical control over our District one crop. We're also, as we've mentioned, earlier, planning on expanding our avocado production in our coastal California properties. That effort will serve two purposes.
One, we find ourselves in sort of a chronically oversupplied situation in that growing district just because of too many lemons being produced at any one time by too many producers. Our pulling back our own production and converting to avocados, we believe will not only do a better job for strengthening the lemon pricing out of that region, but also allowing us to capture greater value with more avocado production. Last, as we've alluded to, we're also exploring potentially investing into packing and marketing avocados as a complement to our One World of Citrus citrus product offerings. Those are the primary sort of directional shifts you'll see operationally that we're contemplating.
In terms of hurdle rates or internal rates of return, we talk in general terms of a 10% hurdle rate that we're working to achieve. We've just gone through a really interesting process with our board, analyzing the last 10 years of acquisitions and doing a post-completion audit of how those investments actually performed versus how we said they would perform. Typical of any portfolio, I think we had some investments that really hit the cover off the ball and performed extraordinarily well, and some that performed suboptimally.
It was a great process for us and the board to go through because we really were able to understand that, a big part of the capital that we've invested over the years, over the last decade anyways, a big chunk of that capital was embedded in land and water assets that were fundamentally appreciating, but until they were monetized, weren't really generating the returns on capital that we were hoping to achieve. That's sort of the logic behind the strategy, but I think that, as we have success with monetization, we do look forward to increasing the dividend and sharing some of that benefit with our shareholders.
Also taking the capital that we generate, reducing our debt to more moderate levels, given rising interest rates in the environment we find ourselves in today, given the inflationary pressures. Then also make those new investments that we think will be extremely accretive to us and our shareholders over time. Mark, any more color?
Yeah, I'll just add that, you know, our weighted average cost of capital is about 7%, and so reiterating that IRR, you know, 10-12 is sort of how we've been looking at things. You know, as we've seen over the last 10 years, you know, our cost of debt has been sub 2%. And we've got a really nice fixed piece now at just above 3.5% at $40 million, and then the rest is basically revolving. We'll have the opportunity to pay that down, you know, as this plan monetizes and then reinvest into those projects that Harold had mentioned.
Okay. That's great. My second question, you touched on it a little bit, just supply demand. It sounds like you guys are making an effort to repurpose production to avocados away from lemons. Can you talk about the demand piece of the equation for lemons and, you know, maybe what the path back to a more constructive lemon price environment looks like? Is it others doing what you are doing? Is it, you know, multiple years of that sort of endeavor? Maybe just help us think about the sensitivities there.
Fundamental to that question, Ben, there's two pieces to it. One piece is going back to sort of pre-pandemic market growth rates. Remember, a big part of the story were emerging markets in Southeast Asia that were growing at double-digit rates. Because of the health and wellness trends in the United States, seeing domestic consumption growing at 5%-6% annually. I think we're really excited to see both food service and retail demand finding its way back to those pre-pandemic growth levels that we're experiencing right now. We're really pleased with the domestic demand. The export demand in Southeast Asia isn't back 100%. It's still struggling with COVID-related issues and supply chain-related issues.
As we have greater visibility into just, for example, the Japanese level of consumption and the Korean levels of consumption, take China out of the discussion for a second, we're really excited to see that growth is right back to pre-pandemic levels, and that demand is right back there as well. From a demand perspective, I think we're gonna get back to where we were pre-pandemic once we kind of wrestle through these sort of intrinsic supply chain challenges that I think were really COVID related and are working their way through and improving. I'm optimistic that you'll see the demand return.
One of the challenges is as certain parts of California grapple with water challenges, lemons consume a lot less water than other types of crops. You saw an overexuberance of lemon planting in each of the districts in California and Arizona. We're all reading about what's going on on the Colorado River and all the production of lemons that are feeding off of that water, as well as all of the desert lemons in the Coachella, Imperial, and valleys and then Yuma, Arizona. Just because of the water situation there, we are going to see a lot of lemon production coming out of production as fallowing programs are put in place, and then just access to water, it becomes more scarce and limited.
District one is also overplanted, but you know, this is year four in suboptimal lemon returns for many growers. You're starting to see growers there begin to pull lemons out, but also you're seeing water challenges there challenge more lemon production. Finally, you come down to the coast where we are and we're already seeing it. In fact, if you got in the truck and drove around Ventura County with us, we can show you blocks here and blocks there of growers that have had it and have pulled out their lemons and are basically thinking about planting other crops. I think the two dynamics of an increasing demand landscape and a decreasing supplier production landscape is really gonna help.
There's always the factor of a freeze or things that disrupt supply chains that also are there to help producers. You know, it's been a while since we've had, you know, really nasty weather events. I think that longer term, you're going to see the situation begin to improve. Right now, we're actually beginning to see improvement in overall lemon pricing, and I expect that will continue to be the case as both the demand and the supply situation work themselves through.
Okay. Very helpful. Thank you both.
Thanks, Ben.
Thanks, Ben.
As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes to the line of Vincent Anderson with Stifel. You may proceed with your question.
Good afternoon, guys.
Hi, Vincent.
Hey, Vince.
Yeah, Ben had me thinking a little bit there. With that growth in desert lemons and, you know, lower labor costs certainly than California, I'd imagine. Do you not still have that old packing plant down there? Is there any value opportunity to dust that off and just really move to only a packing kind of outfit down in that growing region?
It's a great question and shows a lot of insight. We continue to conduct that analysis of, you know, what happens if you take that throughput away of our very efficient Santa Paula facility and move it to a closer logistically closer facility, but a lot less efficient in Yuma. So far the analysis says, keep it coming to Santa Paula because the efficiencies you drive of bringing that much volume through a common facility outweighs the added cost of logistics versus if we packed locally.
We are looking at that though, and you know, it's just gonna be really interesting to see as more and more of the Yuma lemons come out, you're going to see that analysis become more and more interesting because it's not just us, it's all the producers that are dependent on the river that are gonna be impacted in some way, shape, or form.
Okay. No, that makes sense. I'm just trying to dig into avocados a little bit more. There's a couple of pretty big players out there. I think you know both of them pretty well on the packing and marketing side. You mentioned wanting to get into that game as well, and I'm just wondering what's the attractiveness of that relative to lemons, or is it more, you know, avocados might be your best route to diversify into, say, Mexican agriculture, and it's really about getting into Mexico?
No, I think it's just the opposite. I think it's really focusing in on California. You know, so we're one of the largest producers of avocados in the United States and in California, and we think we see a pretty good opportunity to establish leadership in California. Yeah, as you mentioned, we're good friends and know very well the other big players, and they each have embraced different operating models that might not be as focused on California as we believe we might be able to be. But in order to be really strong in California, as you know, Vince, you need to have a Mexican program and probably a Peruvian program to round out your product offerings to your customers. So that's really those are all the things we're exploring.
You know, it's interesting, you know, this was our first year since 2005 that we marketed our avocados independently. The results are really interesting. It was, you know, obviously an interesting year because of the supply chain shortages coming out of Mexico that created a unique opportunity for California. We also pounced on it and were very, very aggressive to harvest earlier than we've ever harvested. Mother Nature treated us very favorably, and we had good size to actually get into the market earlier than historically we have. We captured pricing that we've never seen because of our ability to really be aggressive in how we marketed and sold the fruit using a number of different handlers.
Interesting. I don't know much about avocado packaging, but is there an opportunity to retrofit like Oxnard or even if there's enough spare capacity in Yuma or not Yuma? I apologize. The other California pack house, the main one.
In Santa Paula?
Santa Paula.
Yeah, I think you're getting right to the issue, which is we see a great opportunity to expand our campus, if you will, in Santa Paula. The vision is to increase the amount of storage we have in Santa Paula for lemons and then take advantage of other cold storage capabilities for other commodities that might help us in how we distribute, market, and sell our citrus offerings. Avocados could be a really interesting big piece of that, it would be really easy to. Easy is a relative term, I guess, but it would be possible for us to contemplate packaging and then marketing and selling avocados from that common facility in Santa Paula.
Okay. Excellent. I'll hop back into the queue for the other questions. Thank you.
Thanks, Vince.
Thank you.
Our next question comes from the line of Ben Klieve with Lake Street Capital Markets. You may proceed with your question.
All right. Thanks for taking my questions. First, congratulations on a really nice quarter here. First question, and I apologize if I'm gonna make you guys repeat yourselves here. I dropped off for a couple minutes in the prepared comments. Question regarding brokered fruit. You know, looks like, from what I see in the Q, this was down a little bit. Can you talk about the dynamics on the brokered fruit side, on, you know, in the quarter specifically, and then kind of your outlook on the full year in 2022 and into 2023?
Mark, you wanna jump on that?
Sure, yeah. As you know, a lot of the brokered fruit we get is from the southern hemisphere out of Argentina and Chile primarily. As we saw dramatic increase in containerized shipping costs year-over-year more than doubling, and along with the low lemon price, there was a lot of hesitance from those shippers to send. I think Argentina volumes were down about 30% year-over-year just from an industry perspective. Our volumes weren't off as dramatically. I think you'll see us similar to where we ended up last year from a revenue perspective. Again, it's primarily just those shippers shipping into a market that's less than breakeven for them. We've picked up some different commodities.
We've been selling some picked up some navels and mandarins and other baskets to help offset that reduction in lemons. You'll see a little bit of variety there.
Maybe I'll just jump in and add just, but going all the way back to Ben Bienvenu's question about, you know, what's gonna make the lemon pricing better. One of the things that will make it better is, you know, the high logistical costs for southern hemisphere imports in a way increases the opportunity to get better pricing protection for the domestic fruit. That in a way, in a strange way, it helps. Now, you know, in a way it hurts also because we do take advantage of those imports. You know, we make more money with our domestic production, if that makes sense. Ironically, the cost of a 40-ft container literally doubled from the southern hemisphere up to the northern hemisphere year-over-year.
Those costs are actually helping us improve the lemon pricing that we receive for our domestic production.
Gotcha. Yeah. All those dynamics absolutely make sense. I don't think that'll surprise anybody on the call, you know, hearing about those challenges. I guess that brings up then a follow-up question, you know, regarding the outlook for brokered fruit. If you know, in a world like we're in now where, you know, where commodity costs are a challenge, where transportation costs are a challenge here, and that business is, you know, subsequently, you know, a difficult one. Given how you guys have talked about brokered fruit growing, you know, kind of over the long term, to what extent does that growth really, you know, depend upon a stabilization and improvement of the overall market?
I mean, without an improved market, is the brokered fruit business, you know, gonna kind of be stagnant, or is there opportunity to really grow that materially if, you know, these conditions continue?
Yeah, I think there's gonna be an opportunity to grow it materially. As you're seeing from a year like this year, though, it won't be linear growth. It'll be sort of ups and downs as the world changes and the dynamics change. Fundamentally, just Mother Nature is always messing around with supply chains around the world, but also taking into consideration the true seasonality of each of the growing regions in the world, gives us a real confidence in being able to continue to grow that brokered fruit business, or we call it agency business. Because it technically should be coming into a market that is underserved from domestic supplies.
Every year, the fruit will migrate in the way that it will migrate based on the reality of the cost structures and the supply chains coming to serve customers. This year, it just so happened that the cost of the containers were so high that coming from southern hemisphere to the northern hemisphere and into a relatively oversupplied market because of the large crops that came out of each of the growing districts in California and Arizona, that it really prevented that level of brokerage business to grow as we had contemplated the year before. I suspect next year you'll see us continuing to put our foot on the gas and getting more growth.
We'll just have to see, and you know, that's the neat thing about our model, is that it allows us to be very, very flexible, and if the market's not there, then we won't chase it, and if the market's there, we will chase it. The key thing is just to keep focusing in on our customers. As we get more and more market share every year, we're able to hang on to it because we actively source the fruit efficiently to serve that market share that we've attained.
Yeah, just also I might add, as we open up more source countries that we haven't been to yet, so for example, Peru and Morocco are heavy in citrus. Those will provide more opportunities for that for different varieties as well. That will be a help in the growth.
Okay , very good. One more from me, and then I'll get back in queue regarding the you know, expansion of avocado production. Harold, you noted that you know, perhaps some of the existing lemon acreage would be potentially converted into avocado production. Can you talk about the level of you know, lemon acreage that you have that is you know, really agronomically optimal for avocado production?
Yeah, that's a great question. You know, in each of the growing areas, each of the districts, it starts in the desert, and we farmed 1,300 ac in Yuma, but we fallowed 400 of those acres. I think we still have 700 active producing acres of lemons there. That opportunity is not there because avocados don't grow in the desert. Really it's specifically in District Two, which is coastal California. The total amount of lemons that we produce in District Two, Mark, do you know that number?
It's about 3,000 ac.
About 3,000 ac. Order of magnitude, Ben, we're talking about 500 ac of transition.
Got it. Okay. Very good. That's helpful. Appreciate all the color. Again, congratulations on a good quarter, and I'll get back into queue.
Thank you.
Great. Thank you.
Our next question comes from the line of Eric Larson with Seaport Research Partners. You may proceed with your question.
Yeah, thanks, guys. A good quarter. Thanks for kind of working me in here.
Eric?
You know, can you guys hear me?
Yes. Thank you, Eric.
Oh, okay. Sorry. I thought I cut on you. Mark and Harold, you know, I think I'd really like to pursue sort of your a deeper dive into your strategic actions, and I think this is probably the most important part of your stock price. Literally, it's kind of the next step for your whole company. The asset sales though, that you're talking about, it seems that you could maybe take debt down on your balance sheet by, I'm guessing, you know, putting a number out there, $100 million. Tell me if I'm wrong, Mark and Harold, but at the end of the day, you have an opportunity to take this company to a whole different level, and that hasn't been part of the discussion here on the call today.
I think that's really important. What are you gonna as you get rid of these, let's say, underperforming or low return assets, et cetera, you kind of liquefy your balance sheet, what are you gonna do with your balance sheet, the cash? I think that's probably one of the more exciting parts of your story.
That is the exciting part of the story, Erik. As Mark would agree, I think it's extremely exciting. I think the number you threw out, $100 million, is light. I think right now we have about $120 million of debt. We had it in the script. There's easily more than $120 million of cash that should be coming back to the company in the near term based on the sort of the near term results we hope to execute on with the monetization strategy.
You know, as Mark mentioned, we have some really favorable fixed pieces to our debt structure, so we'll probably choose to keep those in place while we accumulate cash. Then the big question for an investor is what do we do with all that, you know, this reloaded balance sheet and, you know, all this cash? Certainly, increasing the dividend is going to be important as we achieve, you know, historic related returns on invested capital results. Because the monetization of these assets come with, you know, huge appreciation potential built into them.
We hope to share some of that with our shareholders through a dividend structure. We look forward to reinvesting this capital into areas that we believe can produce more consistent and more reliable returns on invested capital. For example, one of the best investments that we made the last decade is into our modernized new packing house in Santa Paula. We proved to ourselves that we could deploy the capital, we could operate the machine, and we could consistently achieve great returns on that capital and insulate ourselves from the volatility of market pricing, which as we're all experiencing go up and down based on the circumstances of supply and demand. The lemon example is the perfect example right now.
Completely insulated from that pricing exposure in the commodity is our ability to now provide services to our grower partners through packing, marketing, and selling, where we have control on what we charge for those services, and we have control over our ability to manage those expenses, and we have control of our ability to drive good margins on our performance. That's the most exciting part of our business because that's the logic behind the transition in the model. It's not necessarily at the expense of our own production, it's just to really focus on this growth by investing in new packing capacity around the world where we can capture that more reliable return.
I think that's gonna be really well received from investors who get kind of sick of the up and down of, you know, the inconsistent quarters. By being more focused on this asset lighter model, we should be able to do a better job having more reliable earnings and more reliable cash flows.
Okay, thanks. You know, this might be a question for Mark. As you sell these assets, I'm assuming that they're probably pretty low cost basis assets and that there's some probably some pretty significant tax cash tax outlays for that. Is there a way you can preserve? Can you preserve that? Can you do 1031 exchanges? Is there a way for you to, you know, enhance your growth through the sale of these assets by actually transferring to other assets?
Yeah, that's a great question, Erik, and we are actively reviewing those tax strategies right now. Fortunately, from being unfortunate in the past few years, we've got about $16 million or $17 million of net operating losses on the books from a tax perspective. That paired with our pension that we are terminating at the end of this year, we've got a little over $20 million of shelter already on any gains that will come. You know, and as you know, there are very low basis, some properties are appraised at more than double of what their book values are. I think that it'll be a combination. We're certainly gonna also look if there were any tax 1031 opportunities.
You know, we're trying not to get back into hard assets, so we probably will pay the tax on a portion of it. Again, we've got at least $20 million of that sheltered.
Eric, just also to layer on there, some of these assets are high basis, and so we are ringing the bell in terms of achieving some great appreciation above the high basis that we invested in. I would just say as a placeholder, none of the assets we're contemplating monetizing are the legacy, like the core assets, like the Santa Paula assets that are on the books for $400 an acre, but have a fair market value of $100,000 an acre. Those aren't what we're talking about.
Okay. Okay, great. Thanks, guys. That's pretty good. That's very good color. Thanks. We'll follow up.
Our next question comes from the line of Vincent Anderson with Stifel. You may proceed with your question.
Yeah, thanks. I'm just trying to keep track of all of the different strategic options that you have. You have the avocados, those will take a while to grow. You want to stay asset light, but you're still pretty focused on this Chilean pack house, and then you have the balance sheet that you wanna work back down. Could you maybe just looking out over the next two, three years, assuming the asset sales progresses as you hope, maybe line up for us what might be the priorities?
Yeah. When we talk about asset lighter, we consider like an investment in a packing house an asset lighter move. The reason there, Vincent, is because, yes, it's capital to put up the packing house, but it doesn't cost us anything to go out and recruit a new grower partner to come bring his fruit through our facility. That's really the rationale behind that. To tee up the sort of the progression of investments, we're already working right now on the replanting of about 250 ac of avocados, so that's sort of going on right now. That's basically looking at less productive lemon acreage that was gonna be pulled anyways. Rather than going back into lemons, we're now going into avocados.
That's already underway. I think the next thing you'd see that would be logical would be the expansion of our packing capacity in Chile. Also, we hope to do a much better job articulating our success in the expansion of our grower partner fruit domestically. We formed a grower services team that's cross-functional in nature. You know, we've got some of our farming guys on that team, we've got our harvest guys on that team, we've got people from Mark's accounting and finance on that team, we have IT people on that team. Basically together, they go out and create business solutions for grower partners as hooks to get those grower partners recruited.
The better job we're able to do recruiting, and recruiting sort of starts with the competitiveness of our returns, but also then evolves into the quality of the services that are actually perceived as great services enough to convince a grower to leave whoever's handling their fruit today to go to Limoneira. That's kind of the game that we're playing. Just the results that we've had over the last 12 months have been really gratifying in terms of our abilities to attract more grower partners into the Limoneira family to expand our supply chains that way. That's really how we're gonna grow. The way to kind of look at that is look at the overall growth in sales that we had year-over-year in the quarter.
A large part of that growth is because of our success in handling more grower partner fruit domestically.
Okay, excellent. If I could just ask one last one, digging into the brokering side of the business a bit more. What specifically would that entail from an investment perspective? I'm thinking maybe specifically about like areas of growth, like South Africa seems to be getting a lot of market share in Europe. You've got whatever crops these new entrants to the lemon markets left behind in California that might, you know, be leaving a gap for you to take advantage of. Like, how are you approaching that, and what does it actually take to expand brokering operations?
Mark, you wanna do that one?
Yeah. Vincent, really, actually, it's just a human capital question. A lot of hustling. We've got a team of two on it right now. It basically can handle, you know, a few million cartons. I think this year, you know, we're between 1 million and 1.5 million is our target, similar to last year. It's really getting out on the road, trade shows. As I mentioned earlier, markets like Morocco, we had a visit there to open up to some mandarins. It's a travel budget and probably adding one or two more people.
We see that business growing, you know, as we stabilize in pricing in lemons and then flex out into other commodities, you know, at a 10% rate is sort of our goal.
You asked us. I think Eric Larson asked the great question about how we should sort of think about where the capital would be deployed. Vincent, you asked sort of what the roadmap looks like. A big part of the capability also involves forward warehousing and added value or value-adding in your forward warehousing capability. We're looking for a facility on the East Coast right now. We have been on this project for about six months and look to invest in not an actual acquisition, but more through a long-term lease, a cold storage facility which are close to the ports of Philadelphia, where we bring a lot of our fruit in on a brokerage basis.
We can add value to it through repacking or bagging and get that fruit out to our Northeast, Southeast, and Midwest customers really effectively.
Yeah. Right now we're using third-party logistics for that, so internalizing that function will be a much better profit situation for us.
Okay, excellent. That is perfectly clear and very helpful. Thanks again, guys.
Thanks, Vince.
Thanks, Vince.
Ladies and gentlemen, we have reached the end of today's Q&A session. I would like to turn this call back over to Mr. Harold Edwards for closing remarks.
Thank you for your questions and your interest in Limoneira. Have a great day.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Enjoy the rest of your day.