Three months ended January 31,
         (in thousands)                     2009           Change         2008

         Net sales to third-parties:
         Fresh products                  $    60,159          (2.6 )%   $ 61,760
         Processed products                   10,488           0.1 %      10,481

         Total net sales                 $    70,647          (2.2 )%   $ 72,241

         As a percentage of net sales:
         Fresh products                         85.2 %                      85.5 %
         Processed products                     14.8 %                      14.5 %

                                               100.0 %                     100.0 %

Net sales for the first quarter of fiscal 2009, compared to fiscal 2008, decreased by $1.6 million, or 2.2%. The decrease in fresh product sales during the first quarter of fiscal 2009 was primarily related to decreased sales of Chilean sourced avocados, as well as tomatoes. These decreases were partially offset, however, by increased sales

from Mexican and California sourced avocados, additional sales related to the acquisitions of Hawaiian Sweet, Inc. (HS) and Hawaiian Pride, LLC (HP), as well as pineapples. While the procurement of fresh avocados related to our fresh products segment is very seasonal, our processed products business is generally not subject to a seasonal effect. For the related three-month period, our processed products business stayed relatively consistent with the prior year. This consistency was due to a decrease in total pounds of product sold, offset by a net increase in sales prices.
Net sales to third parties by segment exclude value-added services billed by our Uruapan packinghouse and our Uruapan processing plant to the parent company. All intercompany sales are eliminated in our consolidated results of operations. Fresh products
Net sales delivered by the business decreased by approximately $1.6 million, or 2.6%, for the first quarter of fiscal 2009, when compared to the same period for fiscal 2008. As discussed above, this decrease in fresh product sales during the first quarter of fiscal 2009 was primarily related to decreased sales of Chilean sourced avocados (due to decrease in size of the Chilean avocado crop for 2008/2009 due primarily to poor weather conditions), as well as tomatoes (the increase in units sold was offset by the decrease in sales price due to high volume). These decreases were partially offset, however, by increased sales from Mexican and California sourced avocados, additional sales related to the acquisitions of Hawaiian Sweet, Inc. (HS) and Hawaiian Pride, LLC (HP), as well as pineapples.
Sales of Chilean sourced avocados decreased $2.4 million, or 55.9%, for the first quarter of 2009, when compared to the same prior year period. This decrease was primarily related to the decrease in the volume of Chilean fruit sold of 2.0 million pounds, or 52.5%. This decrease was primarily related to the significantly smaller size of the Chilean avocado crop. The price per pound experienced a marginal decrease for the first quarter of fiscal 2009, when compared to the same period for fiscal 2008.
Sales of tomatoes decreased $2.1 million, or 34.4%, for the first quarter of fiscal 2009, when compared to the same period for fiscal 2008. The decrease in sales for tomatoes is primarily due to the decrease in the average per carton selling price by 55.9%. This was partially offset by an increase in the volume of tomatoes by approximately 0.2 million cartons, or 47.9%, when compared to the same prior year period. We attribute some of this decrease in the per carton selling price to the volume of tomatoes in the U.S. marketplace.
Partially offsetting such decreases was an increase in sales of Mexican sourced avocados, which increased $0.6 million, or 1.2%, for the first quarter of 2009, when compared to the same prior year period. The increase in Mexican sourced avocados was primarily related to an increase in the volume of Mexican fruit sold of 9.8 million pounds, or 27.3%, when compared to the same prior year period. We attribute some of this increase to the anticipated large Mexican avocado crop for fiscal 2009. Such increase was partially offset, however, by a decrease in the average selling price per carton of Mexican avocados, which decreased approximately 20.5% when compared to the same prior year period. We attribute much of this decrease on the realized and expected size of the Mexican avocado crop.
Sales of California sourced avocados increased $0.1 million, or 5.5% for the first quarter of fiscal 2009, when compared to the same period for fiscal 2008. This increase is primarily related to a 4.5% increase in pounds of avocados sold, when compared to the same prior year period. The average selling price, on a per carton basis, of California avocados sold remained consistent when compared to the same prior year period.
The additional sales in our first quarter of 2009 related to the acquisitions of HS and HP, when compared to the related party, pre-acquisition papaya sales for the first quarter of 2008, totaled $0.4 million, or 23.7%.
Sales of pineapples increased $0.5 million, or 16.5% for the first quarter of fiscal 2009, when compared to the same period for fiscal 2008. The increase in sales for pineapples is primarily due to an increase in volume by 13.9%

when compared to the same prior year period. The per carton sales price for pineapples remained consistent with the prior year.
We anticipate that California avocado sales will experience a seasonal increase during our second fiscal quarter of 2009, as compared to the first fiscal quarter of 2009.
We anticipate that net sales related to non-California sourced avocados, tomatoes, and pineapples will remain consistent during our second fiscal quarter of 2009, as compared to the first fiscal quarter of 2009, with the exception of Chilean avocados, which we anticipate to experience a seasonal decrease. Processed products
For the quarter ended January 31, 2009 when compared to the same period for fiscal 2008, sales to third-party customers stayed relatively consistent with the prior year period. This consistency is primarily related to a 13.1% decrease in total pounds sold. The decrease in pounds sold primarily related to a decrease in the sale of our frozen guacamole products, which decreased approximately 26.2%, but was partially offset by an increase in the pounds sold of our high-pressure guacamole products, which increased approximately 10.5% when compared to the same prior year period. This remaining decrease in sales was substantially offset by an increase in the average selling price per pound of 13.4% for our first fiscal quarter of 2009 when compared to the same prior year period.
Based primarily on the slowing economy in the United States, we believe that retail sales, as a percentage of total net processed product sales, may increase in the future.
Gross Margins
The following table summarizes our gross margins and gross profit percentages by business segment for each of the three-month periods ended January 31, 2009 and 2008:

                                            Three months ended January 31,
           (in thousands)                 2009             Change        2008

           Gross margins:
           Fresh products              $     8,789            156.2 %   $ 3,431
           Processed products                3,670             41.3 %     2,598

           Total gross margins         $    12,459            106.7 %   $ 6,029

           Gross profit percentages:
           Fresh products                     14.6 %                        5.6 %
           Processed products                 35.0 %                       24.8 %
           Consolidated                       17.6 %                        8.3 %

Our cost of goods sold consists predominantly of fruit costs, packing materials, freight and handling, labor and overhead (including depreciation) associated with preparing food products and other direct expenses pertaining to products sold. Gross margins increased by approximately $6.4 million, or 106.7%, for the first quarter of fiscal 2009 when compared to the same period for fiscal 2008. These increases were attributable to improvements in both our fresh products and our processed products segments.
During our first fiscal quarter of 2009, as compared to the same prior year period, the increase in our fresh products segment gross margin percentage was primarily related to a significant decrease in fruit costs for Mexican sourced avocados, as well as a decrease in substantially all operating costs related to our Mexican operations. These decreases are primarily related to the anticipated large Mexican avocado crop, as well as the considerable strengthening of the U.S. Dollar compared to the Mexican Peso. Additionally, during our first quarter of 2009, when compared to the prior year period, we experienced an increase in the volume of Mexican sourced avocados sold by 9.8 million pounds or 27.3%. Combined, these had the effect of decreasing our per pound costs, which, as a result,

positively impacted gross margins. These decreases were partially offset by a decrease in per carton sales prices for Mexican avocados of 20.5%.
The processed products gross profit percentages for the first quarter of fiscal 2009, as compared to the same prior year period, increased primarily as a result of lower fruit and operating costs, partially offset by a decrease in total pounds sold. As discussed above, the anticipated large Mexican avocado crop, as well as the considerable strengthening of the U.S. Dollar compared to the Mexican Peso, significantly decreased our per pound costs.

Selling, General and Administrative

                                                  Three months ended January 31,
       (in thousands)                            2009           Change        2008

       Selling, general and administrative    $   5,300            11.6 %   $ 4,750
       Percentage of net sales                      7.5 %                       6.6 %

Selling, general and administrative expenses include costs of marketing and advertising, sales expenses and other general and administrative costs. Selling, general and administrative expenses increased $0.6 million, or 11.6%, for the three months ended January 31, 2009, when compared to the same period for fiscal 2008. This increase was primarily related to higher corporate costs, including, but not limited to, costs related to an increase in salaries and benefits (totaling approximately $0.3 million), and as well as an increase in expected management bonuses (totaling approximately $0.3 million).

Other Income, net

                                            Three months ended January 31,
             (in thousands)               2009            Change         2008

             Other income, net          $   255             (2.3 )%     $ 261
             Percentage of net sales        0.4 %                         0.4 %

Other income, net, includes interest income and expense generated in connection with our financing and operating activities, as well as certain other transactions that are outside of the course of normal operations. For the three months ended January 31, 2009, other income, net, includes dividend income of $0.1 million from Limoneira Company, as well as $0.1 million of income from Maui Fresh, LLC.

Provision for Income Taxes

                                                                     Three months ended January 31,
(in thousands)                                                  2009              Change             2008

Provision for income taxes                                   $   2,708              488.7 %        $  460
Percentage of income before provision for income taxes            38.2 %                             38.6 %

For the first three months of fiscal 2009, our provision for income taxes was $2.7 million, as compared to $0.5 million for the comparable prior year period. We expect our effective tax rate to be approximately 38% during fiscal 2009. Liquidity and Capital Resources
Cash provided by operating activities was $5.2 million for the three months ended January 31, 2009, compared to $5.5 million used in operations for the similar period in fiscal 2008. Operating cash flows for the three months ended January 31, 2009 reflect our net income of $4.4 million, net non-cash charges (depreciation and amortization, stock compensation expense, provision for losses on accounts receivable, interest on deferred consideration, and

income from Maui, LLC) of $0.8 million and a net increase in the noncash components of our operating capital of approximately $0.1 million.
Our operating capital increase includes a net increase in income tax payable of $2.6 million, a decrease in inventory of $1.5 million, and an increase in trade accounts payable and accrued expenses of $1.3 million, partially offset by an increase in advances to suppliers of $2.8 million, a decrease in payable to growers of $1.8 million, an increase in accounts receivable of $0.5 million, and an increase in prepaid expenses and other current assets of $0.2 million.
The increase in our advances to suppliers, as of January 31, 2009, when compared to October 31, 2008, primarily reflects advances made to Agricola Belher related to the receipt of tomatoes. The decrease in payable to our growers primarily reflects a decrease in California fruit delivered in the month of January 2009, as compared to October 31, 2008. The decrease in inventory is primarily related to a decrease in the fresh fruit on hand at January 31, 2009. This was primarily driven by less fruit being delivered for California sourced avocados in the month of January 2009, as well as an increase in the volume of Mexican avocados sold during our first fiscal quarter of 2009. The decrease in income tax receivable and the increase in income tax payable primarily relates to income from operations through the three months ended January 31, 2009.
Cash used in investing activities was $0.7 million for the three months ended January 31, 2009 and related principally to the purchase of property, plant and equipment items.
Cash used by financing activities was $4.6 million for the three months ended January 31, 2009, which related principally to the payment of our $5.0 million dividend, which was partially offset by $0.4 million provided from our net borrowings on our lines of credit.
Our principal sources of liquidity are our existing cash reserves, cash generated from operations and amounts available for borrowing under our existing credit facilities. Cash and cash equivalents as of January 31, 2009 and October 31, 2008 totaled $1.4 million and $1.5 million. Our working capital at January 31, 2009 was $19.7 million, compared to $15.4 million at October 31, 2008.
We believe that cash flows from operations and available credit facilities will be sufficient to satisfy our future capital expenditures, grower recruitment efforts, working capital and other financing requirements. We will continue to evaluate grower recruitment opportunities and exclusivity arrangements with food service companies to fuel growth in each of our business segments. Our non-collateralized, revolving credit facilities with Farm Credit West, PCA and Bank of America, N.A. expire in February 2012 and July 2009. Under the terms of these agreements, we are advanced funds for both working capital and long-term productive asset purchases. Total credit available under these combined borrowing agreements was $40 million, with a weighted-average interest rate of 2.6% and 4.8% at January 31, 2009 and October 31, 2008. Under these credit facilities, we had $23.5 million and $23.1 million outstanding as January 31, 2009 and October 31, 2008, of which $13.0 million was classified as a long-term liability as January 31, 2009 and October 31, 2008. These credit facilities contain various financial covenants, the most significant relating to working capital, tangible net worth (as defined), and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) (as defined). We were in compliance with all such covenants at January 31, 2009. We believe we will renew our Bank of America, N.A agreement in our second or third fiscal quarters of 2009.
Contractual Obligations
There have been no material changes to our contractual obligations from those previously disclosed in our Annual Report on Form 10-K for our fiscal year ended October 31, 2008. For a summary of the contractual obligations at October 31, 2008, see Part II, Item 7, page 27 in our 2008 Annual Report on Form 10-K. Impact of Recently Issued Accounting Pronouncements See footnote 1 to the consolidated condensed financial statements that are included in this Quarterly Report on Form 10-Q.