John Mills - Senior MD Harold Edwards – President & CEO Mark Palamountain - CFO.

Eric Larson - The Buckingham Research Group Incorporated Gerard Sweeney - Roth Capital Partners Sain Godil - Global Alpha Capital Management Ltd. Christopher Krueger - Lake Street Capital Markets.

Good day, and welcome to the Limoneira Fourth Quarter Fiscal 2017 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. John Mills of ICR. Please go ahead, sir..

Thank you. Good afternoon, everyone, and thank you for joining us for Limoneira's Fourth Quarter Fiscal Year 2017 Conference Call.

On the call today are Harold Edwards, President and Chief Executive Officer; Joe Rumley, Chief Financial Officer; and Mark Palamountain, who has been transitioning from his current role of Senior Director of Agricultural Operations to his new position of Chief Financial Officer as of today.

By now, everyone should have access to the fourth quarter fiscal year 2017 earnings release, which went out today at approximately 4 PM Eastern Time. If you have 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 would like to remind everyone that prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions.

Such statements involve a number of known and unknown risks and uncertainties, many of which are outside the company's control and could cause its future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements.

Important factors that could cause or contribute to such differences include risk details in the company's 10-Qs and 10-Ks filed with the SEC and those mentioned in the earnings release.

Except as acquired by law, we undertake no obligation to update any forward-looking or other statements herein, whether as 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 disclosed on an adjusted basis.

Also within the company's earnings release in today's prepared remarks, we include EBITDA and adjusted EBITDA, which are non-GAAP financial measures. A reconciliation of EBITDA and adjusted EBITDA to the most directly comparable GAAP financial measures is included in the company's 10-K and press release, which has 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. Thank you for joining us. On today's call, I will begin with a brief overview of our financial results for the fourth quarter of 2017 and provide an update on our progress across all of our business areas.

Mark will review the financial results in more detail, then I will discuss our outlook for fiscal year 2018. After that, we will open the call and take your questions.

In fiscal 2017, we achieved numerous operational accomplishments, which we will discuss today, that resulted in record revenue and operating income despite encountering a weather-related delay of our fourth quarter 2017 desert lemon harvest.

Last month, we announced that the excessive heat in the Arizona desert slowed fruit sizing during our fourth quarter of fiscal year 2017, which delayed timing of the lemon harvest for our desert crop near Yuma, Arizona until the first quarter of fiscal year 2018.

This was the primary reason for the decrease in revenue when comparing the fourth quarter of 2017 to the fourth quarter of 2016.

Regarding the well-publicized wildfires in Southern California during December, initial indications are that our orchards did not suffer significant damage, 14 of our 265 farmworker housing units were destroyed by the fire and a brief power outage occurred at the company's packing house.

However, we do not expect the fire and wind damage to have a material impact on our results of operations going forward. We are very thankful for the hundreds of firefighters that braved the fires to protect our properties as well as the properties of our friends and neighbors.

We will know in the coming months if the fires affected our avocado or citrus crops for fiscal 2018. In addition, we do not believe the wildfires caused any long-term damage to our orchards.

As I mentioned, despite these obstacles, we were able to generate record revenue for fiscal 2017 and record operating income of $11.9 million, representing an increase of 29% compared to the year-ago period, which reflects the company's efforts to create a scalable and efficient agribusiness that's poised for continued long-term growth.

Shifting to our business segments, we will start with agribusiness. Over the past few years, we have made significant investments that are driving our top and bottom line growth. We've expanded our customer base to over 200 customers and increased distribution by leveraging our domestic and international marketing and sales channels.

During the past few years, we have focused on our trade marketing and consumer-facing strategies as well as increasing our packing capacity. Our new packing house in Santa Paula has doubled the annual capacity and increased operating efficiency of our lemon packing operations.

Since commissioning the new packing facility in March of 2016, we have realized a material increase in our packing productivity. During fiscal year 2017, we packed 300,000 additional fresh lemon cartons versus the same period last year for $400,000 less cost.

This improved efficiency has reduced our per carton lemon packing cost to $6.75 per carton for fiscal year 2017 compared to $7.55 per carton in the prior year period.

We expect the new lemon packing facility will allow us to efficiently manage the planned growth in our fresh lemon volume from our own acreage as it becomes productive as well as additional third-party grower lemons, which we are actively recruiting.

We currently have over 8,200 planted agricultural acres, of which approximately 1,600 acres are currently nonbearing lemons and are estimated to become full bearing over the next four years.

Beyond these 1,600 acres, Limoneira currently intends to plant an additional 500 acres of lemons in the next two years that will further build our long-term pipeline of productive acreage.

We anticipate this additional acreage will increase our annual lemon supply from our current level by approximately 30% or about 900,000 to 1.3 million additional fresh cartons as the nonbearing and planned acreage becomes productive.

We are also expanding our footprint internationally, most recently with our acquisition this year of Pan de Azúcar, or PDA, in Chile.

Similar to other new acreage that Limoneira has recently planted in the United States, a portion of PDA citrus orchards are young and beginning to enter their prime production, making our combined business well suited to address increasing global demand in the years to come.

The acquisition of PDA marks an important expansion of our business that is expected to contribute through the execution of our long-term goal of expanding our agribusiness internationally as a year-round supplier of citrus, complementing our ONE WORLD OF CITRUS strategy.

As our lemon business grows, our customers recognize the quality and consistency they receive with Limoneira lemons as well as high levels of service that are a fundamental part of our culture.

The acquisition of PDA in Chile, coupled with our other international relationships and our recently announced citrus marketing relationship with Suntreat, underscores our commitment to being one of the leading global year-round citrus agribusinesses.

In addition to our fruit grown in the United States and Chile, Limoneira is also managing the marketing and sales function for locally sourced citrus from business partners in South Africa, Chile, Argentina and Mexico. These efforts combine to make us an important and consistent source of fresh citrus supply to our growing roster of global customers.

From an operational standpoint, we believe vertical integration of international production and marketing combine to maximize our revenue and margin opportunities while smoothing out the seasonality of our business over the long term. Turning now to our real estate development segment.

The partnership between Limoneira and the Lewis Group of Companies for the development of Harvest at Limoneira is progressing well. The total cash that Limoneira expects to receive over the life of the project will depend on several factors, including the median home price and the related lot sales price.

But with its highly desirable location near the Pacific Ocean, we believe that Limoneira should receive between $100 million and $130 million over the estimated 7 to 10-year life of the project, which includes $20 million we received from Lewis when the joint venture was formed.

The company contributed $2.3 million to the joint venture in fiscal 2016, $7.5 million in fiscal 2017 and additional $3.5 million in the first quarter of fiscal 2018, matching Lewis' contribution to fund ongoing development activities. The first phase of the project broke ground to commence mass grading on November 8, 2017.

Project plans include approximately 632 residential units in Phase 1. We anticipate Phase 1 site improvements will begin during the winter of this year. In December of 2017, we recorded Final Tract Map 5854 for the development of Harvest at Limoneira.

The recordation of Final Tract 5854 Map subdivides the three main parcels of land into legal lots for the parks, schools, recreation areas, commercial areas, open space and the backbone streets. This is a significant step in delivering lots to homebuilders in the near future.

This Final Tract Map is a complex and significant accomplishment in a sequence of events for development. The lot sale process with homebuilders is expected to begin in the spring of 2018, and initial closings of the lot sales are anticipated to begin in the first quarter of fiscal year 2019.

In addition to the residential aspect of the project, we are also planning the development of approximately 40 acres of commercial property adjacent to the residential development that is not included in the partnership plans and financial projections and represent additional cash flow opportunities.

Initial interest from potential commercial tenants is very encouraging. Since the end of fiscal 2017, we've closed on two of our Santa Maria properties. The commercial portion of our Sevilla property closed in November for $1.5 million, which after closing cost resulted in a gain of approximately $10,000.

Additionally, our Centennial property closed in December for $3.25 million, which after estimated closing cost is anticipated to result in a gain of approximately $200,000.

In December of 2017, the company accepted an offer on its Pacific Crest property for sales price of $3.5 million, which after estimated transaction cost is anticipated to result in a gain of approximately $40,000.

Combined, these three properties had an immaterial impact on our financial -- on the results of our operations, but are expected to generate approximately $7.8 million in cash after transaction costs. Lastly, turning to the rental operation segment of our business.

The segment is not only a steady contributor to our operating results, but is an important component that helps us maintain a consistent supply of labor for our agribusiness operations via our workforce housing units, which encompass the majority of our tenants.

Our rental units averaged near full occupancy and should continue to be a consistent source of positive cash flow for the company going forward. In summary, we're pleased with our full year performance.

As we enter fiscal year 2018, we are well positioned to continue to expand our agribusiness, accelerate our cash flow generation on a more efficient operating platform and make progress towards our goal of becoming a leading global citrus provider. And with that, I'll now turn the call over to Mark..

Thank you, Harold, and good afternoon, everyone. Let me first take a moment to say that I'm excited about stepping into the role of CFO, and I would like to thank Joe Rumley for all of his work over the last seven years to establish what is an extremely strong financial reporting team.

We are in an exciting period of growth at Limoneira, and I look forward to helping drive shareholder value in the years to come. With that, I'll transition to discuss some of the details of our financial results for the fourth quarter and full year ended October 31, 2017.

For the fourth quarter, revenue was $15.9 million compared to $19.5 million in the fourth quarter of 2016.

Agribusiness revenue was $14.6 million compared to $18.2 million in the fourth quarter last year, primarily due to the previously announced decrease in lemon revenues stemming from the delayed lemon harvest at our Arizona ranches that were impacted by excessive heat and lower prices.

Rental operations revenue was $1.3 million in the fourth quarters of fiscal years 2017 and 2016, and there were no real estate development revenues in the fourth quarter of fiscal year 2017.

Agribusiness revenue for the fourth quarter of fiscal year 2017 includes $12 million in lemon sales compared to $16.4 million of lemon sales during the same period of fiscal year 2016, with the decrease primarily the result of the aforementioned delay in the timing of the lemon harvest in select markets as well as lower prices versus the prior year period.

Approximately 414,000 cartons of fresh lemons were sold during the fourth quarter of fiscal year 2017 at a $21.01 average price per carton compared to approximately 521,000 cartons sold at a $25.91 average price per carton during the fourth quarter of fiscal year 2016.

As anticipated, we recognized minimal avocado revenue in the fourth quarter of fiscal year 2017, which is similar to last year. We recognized a similar amount of orange revenue in the fourth quarter of fiscal year 2017 at $600,000 as compared to the fourth quarter of fiscal year 2016.

Specialty citrus and other crop revenues in the fourth quarter of fiscal year 2017 were $800,000 higher than the fourth quarter of fiscal year 2016, primarily due to the increased wine grape harvest volume.

Total costs and expenses for the fourth quarter of fiscal year 2017 were $20.2 million compared to $20.4 million in the fourth quarter of last fiscal year.

The fourth quarter of fiscal year 2017 decrease in operating expenses was primarily attributable to decreases in the company's agribusiness costs, mainly due to the decreased third-party grower costs, which were partially offset by increased packing, growing, depreciation costs and expenses.

Operating loss for the fourth quarter of fiscal year 2017 increased to $4.3 million compared to a loss of $900,000 in the fourth quarter of the previous fiscal year, with lower lemon revenues being the primary factor in the decrease.

Net loss applicable to common stock after preferred dividends for the fourth quarter of fiscal year 2017 was $2.8 million, and that compares to a net loss of $100,000 in the fourth quarter of fiscal year 2016.

Net loss per diluted share for the fourth quarter of fiscal year 2017 was $0.19 compared to a net loss per diluted share of $0.01 for the same period for fiscal year 2016. Adjusted EBITDA was a loss of $2.5 million in the fourth quarter of fiscal year 2017 compared to earnings of $2 million in the same period of fiscal year 2016.

Turning to our full year fiscal 2017 results. As Harold mentioned, we are proud of the numerous operational accomplishments that resulted in record revenue and operating income despite encountering a weather-related delay of our fourth quarter desert lemon harvest.

Revenue increased 9% to $121.3 million and operating income increased 29% to $11.9 million, both compared to fiscal 2016. Adjusted EBITDA decreased 5% to $19 million versus the prior year.

Net income applicable to common stock after preferred dividends decreased 19% to $6 million and net income per diluted share decreased the same amount to $0.42, both compared to fiscal 2016.

The increase in operating income for fiscal 2017 was primarily the result of higher volume of fresh lemons sold, partially offset by lower prices compared to the same period in fiscal year 2016 as well as cost efficiencies of our new lemon packing facility.

In addition, the results of our operations for the prior fiscal year October 31, 2016, include a $3.4 million gain on sale of Calavo Growers, Inc.

stock, a $1 million gain on the sale of a conservation easement and $1.2 million of transaction cost associated with entering into the real estate development joint venture with the Lewis Group of Companies. Lastly, our long-term debt at October 31, 2017, was $102.1 million compared to $88.2 million at the end of fiscal year 2016.

Now I would like to turn the call back to Harold to discuss our fiscal year 2018 outlook..

Thanks, Mark. Before I review the specifics of our fiscal 2018 guidance, we are currently reviewing the terms of the new tax reform bill and analyzing the impact it could have to Limoneira. We believe tax reform will provide a great benefit to us and a lower effective tax rate.

We do expect that a portion of the potential benefit will be reinvested to drive future growth for the company and our shareholders. We haven't recognized any benefit of tax reform in our guidance. We will provide an update on potential savings from the new tax bill during our first quarter 2018 earnings call.

Although the statutory rate will drop to 21%, that won't be the effective rate because there will be puts and takes in terms of benefits and deductions that are no longer allowed under the law. And that's the analysis that we're undergoing.

The other thing that I would like to say is that we are undergoing an analysis of the opportunities that we have to reinvest some of that benefit to drive growth and efficiency and enhance shareholder value.

Having said that, we expect our agribusiness to continue to benefit from the more efficient infrastructure we have in place, as well as we are able to build revenues through expansion of our in-house citrus orchards as well as growth in third-party volumes that we pack and market.

We feel great about the long-term growth trajectory we are on and look forward to continuing to deliver value for our shareholders. With that, let's discuss our fiscal 2018 outlook.

We expect to sell between 3.1 million cartons and 3.3 million cartons of fresh lemons at an average price of approximately $24.50 per carton, and we expect to sell approximately 6 million pounds to 6.5 million pounds of avocados at approximately $1.30 per pound.

We believe operating income for fiscal year 2018 will increase approximately 41% at the midpoint of our guided range of $15.7 million to $17.8 million, which compares to operating income of $11.9 million for fiscal year 2017.

Fiscal year 2018 EBITDA is expected to be in the range of $23 million to $25 million, which compares to 2017 adjusted EBITDA of $19 million. We expect fiscal year 2018 earnings per diluted share to be in the range of $0.55 to $0.65 a share, which compares to 2017 earnings per diluted share of $0.42 per share.

Our estimates do not include potential equity income from Harvest at Limoneira project. The first phase of the project broke ground to commence mass grading on November 8, 2017.

The lot sale process with homebuilders is expected to begin in the spring of 2018 and initial closings of lots are anticipated to begin in the first quarter of fiscal year 2019. The total cash that Limoneira is expected to receive over the life of the project will depend on several factors, including the median home price.

But with its highly desirable location near the Pacific Ocean, we believe that Limoneira should receive between $100 million and $130 million, which includes the initial $20 million payment from the Lewis Group. And with that, I'd like to open the call up to your questions.

Operator?.

[Operator Instructions]. And we'll take our first question from Eric Larson with Buckingham Research Group..

A couple of questions. First, I understand that you had an issue with the Arizona harvest in the fourth quarter, but your average pricing was quite a bit lower versus a year ago for lemon pricing.

Can you just try to -- give us from point A to point B of why pricing was so low?.

Yes. I think the way to think about it, Eric, is the market was actually very similar, but it was really more of a product mix issue for us and that we sold a lot more of the standards and the choice fruit, whereas in the prior year, we'd sold a lot more of the fancy and the choice fruit, and that resulted in a lower average FOB.

What we've seen as we've transitioned now into the higher quality desert fruit and now just recently up into the Northern California fruit of our operations is we're seeing much, much higher FOBs on a week-to-week basis right now. And so it really wasn't a result of anything in the market, it was more of a result of our product mix..

Okay. That makes sense.

And looking at your guidance, the 3.1 million to 3.3 million cases, what's the rough division of that between Limoneira-owned fruit and third party, roughly?.

It's 55%, roughly. 55% Limoneira, 45% outside growers..

That's right..

There's plus or minus 5 percentage points, given any year, just like we talked about the product mix and quality and what goes to juice and whatnot..

Got it. Okay. Okay, sounds good. And then when you look at the substantial increase in your operating profit for the upcoming year, no income really from the Harvest at Limoneira, et cetera.

Is a lot of this driven by lower cost per case for your packing plant? And where would you expect that cost per carton next year to go?.

We think that there's probably another $0.50 that may come out per carton potential. Whether we're able to execute that or not, we'll work everyday to try to do that.

So the answer to your question is partially an improved efficiency from the packing house, but also from doing more specialty packing that allows us to get upcharges to our customers, expanding our margins in total for both our fruit and the outside growers fruit that we handle. So those two pieces are driving much of this change.

But probably the biggest piece that's driving the improvement in the profitability is the forecasted improvement in our orange operations.

Last year, we were affected by weather-related issues, mostly rain, which prevented us from getting a timely harvest, which then prevented us from getting into several export market windows that we normally get into.

But also, with our new relationship and our strategic alliance with Suntreat, we believe we'll see a potential $2 million swing in the operating profit of our orange business next year..

That's where the big delta is. Okay. It was hard for me to determine where that was coming from, so I thought it was maybe in the packing operations and that continues to be a huge positive for you. So -- and it looks like it still will be, but it didn't explain that whole variance..

Yes..

One other final question, and I'll pass it to others.

When you look at your sizing issue that you had this year, was that significant for the full year? Or was it really a fourth quarter phenomena, Harold?.

Yes. It was really just a fourth quarter phenomenon because we do know that the desert crop is, in its total size for the industry, is off significantly versus prior year. But we also experienced the sizing of the fruit issues, so that delayed the harvest and pushed it from the fourth quarter into the first quarter.

The complementing offset to that is at much higher prices than we imagined. So we believe that we will deliver very robust lemon results in the first quarter 2018, well over and above what we probably would've experienced in fourth quarter 2017 have we been able to harvest the fruit just because the market conditions today are so much better..

Okay, okay. And then just the other final question on avocados. It's probably going to be a few months yet before you know whether there was significant wind damage on the orchards from the wildfires.

Is that affecting, number one, maybe the size of the avocados or the total number, did a lot of your fruit get blown off the trees? And then finally, this year is probably the off year from the genetic side of the avocado trees.

Is that a fair thing to say? And then fiscal '19 would be a higher production year on most trees?.

Yes. So addressing a couple of issues that you brought up there. This actually was just the opposite. This was supposed to be the bigger year, and it actually was set up to be a much bigger year. And what is not being talked about much when we talk about these horrible fires were the wind events that exacerbated the damage from the fires.

And we experienced wind gusts somewhere between 50 and 100 miles an hour across most of our Ventura County ranches, and that took a pretty significant toll of wind drop on the fruit. And if the fruit falls on the ground, we can't harvest it.

So we've actually lowered our forecast by somewhere between 0.5 million to 1 million pounds of avocados due to the wind. So our updated guidance now, while it's the first guidance that we've given publicly, internally, we've been sort of assessing the damage from the wind and downgrading our own internal forecast.

And so we're somewhere between 6 million to 6.2 million pounds today. Which, if you look at year-on-year, would look like it was basically flat production, but it's really just the result of -- it was supposed to be a bigger year, but we lost a lot of fruit due to the wind..

Thank you. And I just want to say thank you to Joe for all of your help given us to understand this business and best of luck in the future. And Mark, welcome aboard. Looking forward to working with you as well..

We'll take our next question from Gerry Sweeney with Roth Capital..

Hopefully, you can hear me all right. I'm in a little bit of a tough spot. But I just want to follow up on the avocado side.

But my understanding is that while your projection is lower in terms of pounds, the whole state of California or the whole avocado crop as a whole is going to be lower across the board, correct?.

Correct..

Okay.

And can you sort of frame out the change in the projected avocado crop size?.

Okay. So I'll do it anecdotally because I don't have the specific California Avocado Commission numbers. But the order of magnitude was something like a forecasted crop of 300 million pounds has been decreased to 200 million pounds. And I believe California lost 100 million pounds due to the wind events..

Okay. And that's only 30 that you pointed out there, I figured exactly what the avocados finished up at in '17.

But is there a potential, if we saw sort of demand that we've seen in years past and maybe some of the imports, is there some potential upside to that above 30?.

I would say there's potential upside, but there's also a potential downside. Mexico, as you know, Gerry, has a forecasted large crop this year. And the Mexico -- the influence of the Mexican production coming into the U.S. could have a very negative impact on that pricing as well.

So that being said, we love the fact that consumers really enjoy California-produced avocados, and so we have carved out a little bit of a niche. But pricing is the big issue for us as we go into the year in which we sort of have the least amount of clarity..

Got it. No, I mean, that's fair. But that's helpful if you understand that Mexico is on the larger harvest this year. And then switching gears a little bit. Again, you talked about the fire, you don't project any long-term damage. But I was curious in terms of not quite being on the East Coast fully understanding exactly where all the fires were.

But is there a potential that any of the fire's damage any of your third-party lemon packing well, say, associated with the guys you buy from that could impact the third-party packing for you?.

Yes. We believe not. We do know of one grower that was influenced nearby us. But we don't think it will have an impact on the total amount of volume that we would receive.

So I guess, just to say it, fortunately, most of the fire damage near us burned up into the uninhabited and uncultivated canyons that ultimately wound up just horrifically in the city of Ventura and burned over 500 homes down in the city of Ventura.

But as the fire went from the East to the West and ultimately wound up in Ventura, it missed most of the agricultural areas. The other thing to remember, Gerry, is that where this fire was in Ventura County, that we received relatively lower percentage of third-party grower fruit than the other 2 locations of Yuma and D1.

The percentage of third-party grower fruit's hire. So we're not expecting any and plus it's a lower percentage overall in the Ventura County area..

Got it. That's helpful, too. And then on the real estate side, you talked about the cash flow sort of range.

But correct me if I'm wrong, but I believe is the agreement with the Lewis group, do they get a larger percentage of the cash flow initially and then it sort of flips in a couple of years and you get a larger percentage of the cash flow? Does my memory serve correct on that?.

It starts out as a 50-50 deal, and then goes through over a course of a series of financial milestones. Once they're reached, it triggers a different split in the profits that come out.

So that running the course of the pro forma projections, that gets us into a situation where Limoneira would receive 70% of the benefits and Lewis would receive 30% of the benefits..

Got it. Okay, that's helpful. I appreciate it guys. And Joe, as was echoed, thanks for all your help, really appreciate it and good luck and stay in touch..

And our next question comes from Sain Godil with Global Alpha Capital Management..

This is Sain from Global Alpha. Just a question about can we talk a little bit more on the revenue and profit recognition [indiscernible]. And you spoke about the lots being delivered in 2019.

Is that the reason why there's no forecast included in 2018 numbers?.

Yes. So if we go back and look at how we've tried to communicate about the way that the real estate earnings will be generated and the timing of it, it had always been very unclear because of the uncertainty of the timing of getting the final entitlements and ultimately, recording the tract maps, which we've just recently done.

And so right now -- and a previous guidance was to begin lot sales in the spring with the first closings beginning in October of this year, which, if you look at our fiscal year, is our last month of our fiscal year 2018.

So we pushed out into 2019, not because we don't believe that October is still the month, but just the majority of the closings in the first phase will begin to be recognized, we believe, in the first quarter of 2019.

And the way that the cash will flow is that the homebuilders will be bidding on certain numbers of lots, and at which time, those homebuilders actually make a commitment to taking down a certain number of lots. They will put down a down deposit into the joint venture. At that point, there will be no income recognized.

It will sit as in essence a prepayment on the lot. And the actual revenue and the actual transaction won't be completed until the lot is delivered and there's a closing. And so we anticipate those first closings which then would trigger the first revenue to be recognized by Limoneira to take place in the first quarter of 2019, which is fairly close.

It's actually consistent with what we've been communicating all along. The sales will start in the spring of 2018, but the closings won't take place, which is when we'll actually record the revenue until the first quarter of 2019..

[Operator Instructions]. We'll move on to our next question from Chris Krueger with Lake Street Capital Markets..

I just have one question related to the real estate project.

With the new tax plan that was recently passed, does that change the outlook for real estate in general or demand? Or how do you think about that as far as that goes?.

We're still assessing it. Part of the tax plan includes a limit on the deductibility of the interest in a mortgage. And I believe that, that limit is $750,000.

So I don't believe that, that will have any negative impact on our specific Harvest project just because we don't anticipate seeing mortgages much above that, but we're analyzing it and we're studying that.

The new housing starts in Ventura County remain very, very low and the level of appreciation that's being recognized almost on a weekly basis right now because of the lack of supply of new homes in that part of California has also had a very, very positive impact on the market.

And then when you also then layer in the very tragic displacement of hundreds of people because of the fires, the actual outlook for the values of the lots and the value of the houses is actually very bullish right now..

And it looks like we have a follow-up question from Gerry Sweeney with Roth Capital..

Just a follow-up. There was a comment I think you made on the Q&A about how much more you could take out of the packing cost, and I think you said $0.50.

Is that $0.50 in this upcoming fiscal year I would assume because -- is that a fair assumption, or if you execute on it?.

It's possible. It would be a function of volume and then efficiency in terms of controlling the costs right there. And so that's more of a swag that we've kicked around. And so we have a great team who are really thinking about this and managing the personnel on a daily basis and really working on trying to make it as efficient as possible.

I would tell you from our experience that we had a full operating 12 months last year is we really get into a tough spot when we see volumes dropped, which is all due to the seasonality below specific levels. And so if we can manage to keep the levels of packing more consistent through the 12 months, we can deliver another $0.50 of savings..

The sort of a number I had in my model consistent with sort of variability on that. And I apologize, as you know, I'm sitting in a hotel room.

But I didn't get a chance to see if the queue was followed but what were the packing cost per carton in the fourth quarter?.

Do you know? Joe might have it..

Joe, do you know that?.

Yes, I don't think we have it for the fourth quarter, but it was significantly more. For the year, it was, what, $6.75. It was significantly more than that, but we don't have that off the top of our heads right now..

So I mean, is that like probably in the $8, $9 range, something like that, correct?.

I think it was in the $8, if I recall. Yes..

I think that's right..

Yes, that makes sense. Yes. And I'm just backing into it because I think there's a lot of leverage there over the longer term as you add on that unbearing or nonbearing acreage and add additional third-party packing, et cetera..

And there are no further questions. I'd now like to turn the call back over to Mr. Harold Edwards..

Thank you for your questions and interest in Limoneira. We look forward to updating you again in March on our first quarter call. Thank you again, and have a great day..

And this concludes today's call. Thank you for your participation. You may now disconnect..