UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the Fiscal Year Ended
or
For the transition period
from ____________________to_________________________
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The aggregate market value of the voting and nonvoting common equity held by non-affiliates based on the closing price, as quoted on the Nasdaq Global Select Market as of March 31, 2022 (the last business day of Alico’s most recently completed second fiscal quarter) was $
Documents Incorporated by Reference:
Portions of the Proxy Statement of Registrant for the 2023 Annual Meeting of Stockholders (to be filed with the SEC under Regulation 14A within 120 days after the end of the Registrant's fiscal year), are incorporated by reference in Part III of this report.
ALICO, INC.
FORM 10-K
For the fiscal year ended September 30, 2022
2
Cautionary Statement
This Annual Report on Form 10-K contains certain “forward-looking statements,” as such term is defined in Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). They are based on management’s current expectations and assumptions regarding our business and performance, the economy and other future conditions and forecasts of future events, circumstances and results. These forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often include words such as “may,” “will,” “could,” “should,” “would,” “believes,” “expects,” “anticipates”, “estimates”, “projects,” “intends,” “plans” and other words and terms of similar substance in connection with discussions of future operating or financial performance. Such forward-looking statements include, but are not limited to, statements regarding future actions, business plans and prospects, prospective products, trends, future performance or results of current and anticipated products, sales efforts, expenses, interest rates, the outcome of contingencies, such as legal proceedings, plans relating to dividends, government regulations, the adequacy of our liquidity to meet our needs for the foreseeable future and our expectations regarding market conditions.
As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. Our actual results may vary materially from those expressed or implied in our forward-looking statements. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements.
We undertake no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the U.S. Securities and Exchange Commission ("SEC"). We provide in Item 1A, “Risk Factors,” a cautionary discussion of certain risks and uncertainties related to our businesses. These are factors that we believe, individually or in the aggregate, could cause our actual results to differ materially from expected and historical results. We note these factors for investors as permitted by Section 21E of the Exchange Act. In addition, the operation and results of our business are subject to risks and uncertainties identified elsewhere in this Annual Report on Form 10-K as well as general risks and uncertainties such as those relating to general economic conditions. You should understand that it is not possible to predict or identify all such risks. Consequently, you should not consider such discussion to be a complete discussion of all potential risks or uncertainties.
Explanatory Note
This Annual Report on Form 10-K for the year ended September 30, 2022 includes the restatements of our previously issued audited consolidated balance sheet, audited consolidated statements of changes in equity and related disclosures as of September 30, 2021 included in our Annual Report on Form 10-K for the year ended September 30, 2021 previously filed with the Securities and Exchange Commission (the “SEC”) (the “2021 10-K”) and our previously issued unaudited consolidated balance sheet, unaudited consolidated statements of changes in equity and related disclosures as of the end of each quarterly period ended June 30, 2022, March 31, 2022, December 31, 2021, June 30, 2021, March 31, 2021, and December 31, 2020 included in our respective Quarterly Report on Form 10-Q for each of the quarters then ended previously filed with the SEC (together with the 2021 10-K, the “Financial Statements”). The restatement had no impact on our Consolidated Statements of Operations or our Consolidated Statements of Cash Flows for any period after fiscal year 2019.
Except where specifically noted herein, all information set forth in this Annual Report on Form 10-K as of September 30, 2022 is reflected on a restated basis.
As disclosed in our Current Report on Form 8-K filed on the date hereof, on December 12, 2022, the audit committee of our board of directors (the “Audit Committee”) concluded that the Company’s previously issued Financial Statements can no longer be relied upon due to an error identified during the completion of this Annual Report on Form 10-K. The error that led to the Audit Committee’s conclusion relates to the calculation of deferred tax liabilities for the fiscal years 2015 through 2019, as more fully discussed in Note 2, “Restatement of Previously Issued Consolidated Financial Statements” in the notes to the consolidated financial statements included in this Annual Report on Form 10-K.
We have not filed and do not intend to file amendments to (1) the 2021 10-K or (2) our Quarterly Reports on Form 10-Q for any of the quarterly periods in the fiscal years 2021 and 2022. Accordingly, investors should rely only on the restated Financial Statements and related disclosures included in this Form 10-K for the applicable periods or in future filings with the SEC (as applicable), and not on any previously issued or filed reports, earnings releases or similar communications including the Financial Statements.
3
PART I
Item 1. Business
Alico, Inc. (“Alico”) was incorporated under the laws of the state of Florida in 1960. Collectively with its subsidiaries (the “Company”, “we”, “us” or “our”), our business and operations are described below. For detailed financial information with respect to our business and our operations, see Management’s Discussion and Analysis of Financial Condition and Results of Operations which is included in Item 7 in this Annual Report on Form 10-K, and the accompanying Consolidated Financial Statements and the related Notes, which are included in Item 8. In addition, general information concerning our Company can be found on our website, the internet address of which is http://www.alicoinc.com. All of our filings with the U.S. Securities and Exchange Commission (the “SEC”) including, but not limited to, the Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments thereto, are available free of charge on our website as soon as reasonably practicable after such material is electronically filed or furnished with the SEC. Our recent press releases and information regarding corporate governance, including the charters of our audit, compensation, nominating and governance, and sustainability and corporate responsibility committees, as well as our code of business conduct and ethics are also available to be viewed or downloaded electronically at http://www.alicoinc.com. Unless explicitly stated herein, the information on our website is not incorporated by reference into this Annual Report on Form 10-K and the Company disclaims any such incorporation by reference.
Overview
Alico is an agribusiness with a legacy of achievement and innovation in citrus and conservation. The Company owns approximately 74,000 acres of land in eight Florida counties (Charlotte, Collier, DeSoto, Glades, Hardee, Hendry, Highlands and Polk), and approximately 90,000 acres of mineral rights throughout Florida. Alico holds these mineral rights on substantially all its owned acres, with additional mineral rights on other acres. Our principal lines of business are citrus groves and land management.
Alico is one of the largest citrus producers in the United States of America.
Alico, Inc. operates two divisions: Alico Citrus, a citrus producer on its own land and as a manager of citrus groves for third parties, and Land Management and Other Operations, which includes land conservation, encompassing environmental services, land leasing and related support operations.
The Company manages its land based upon its primary usage and reviews its performance based upon two primary classifications - Alico Citrus and Land Management and Other Operations. The Alico Citrus division includes the production, cultivation and sale of citrus on its owned lands and as a manager of citrus groves for third parties. Land Management and Other Operations include leases for grazing rights, hunting leases, a farm lease, a lease to a third party of an aggregate mine, leases of oil extraction rights to third parties, and other miscellaneous operations generating income. Alico presents its financial results and the related discussion based upon its two business segments: (i) Alico Citrus and (ii) Land Management and Other Operations.
Recent Developments
Hurricane Ian
On September 28, 2022, Hurricane Ian made landfall on the southwest coast of Florida and a majority of the Company’s groves were impacted by the storm. The full impact of Hurricane Ian on Alico’s operations is still being assessed at this time, but we believe the lessons learned over the past 124 years, especially since Hurricane Irma in 2017, allowed us to be better prepared prior to landfall and to begin recovery more rapidly after impact. The implementation of our disaster programs, our dedicated workforce, and experienced management appear to have limited the damage to our properties. Our approximately 48,900 gross acres of citrus groves, which are in Charlotte, Collier, DeSoto, Hardee, Hendry, Highlands and Polk Counties, sustained hurricane, or tropical storm force winds for varying durations of time. Based upon ongoing field assessment, the Company has identified significant fruit drop since the impact of the storm.
While we lost a small percentage of trees, the force and duration of the storm impacted the majority of the groves. Based upon prior experience with serious storms of this nature, we expect it will take up to two full seasons or more for the groves to recover to pre-hurricane production levels. We maintain crop insurance and are working closely with our insurers and adjusters to evaluate and determine the amount of insurance recovery we may be entitled to, if any. We are also working with Florida Citrus Mutual, the industry trade group, and government agencies on securing potential federal relief programs.
4
Departure and Appointment of Chief Financial Officer
On May 17, 2022, Richard Rallo notified the Company of his decision to resign from his role as the Company’s Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) effective as of May 31, 2022. Mr. Rallo’s decision to resign was for personal reasons to eliminate extensive travel and/or avoid relocation to Florida and was not related to any disagreement with the Company or its independent registered public accountants on any matter relating to the Company’s financial or accounting operations, policies, or practices. Mr. Rallo has agreed to provide consulting services to the Company through December 31, 2022 and has been providing such services.
On September 6, 2022, the Company announced the appointment of Perry G. Del Vecchio, age 55, as the Chief Financial Officer (Principal Financial and Accounting Officer) of the Company, effective as of September 6, 2022. Mr. Del Vecchio is responsible for all corporate finance, treasury and accounting functions of the Company and reports directly to John Kiernan, the Company's President and Chief Executive Officer.
Employment and Bonus Agreement
On April 1, 2022, the Company entered into an amended and restated employment agreement with John E. Kiernan (the “Employment Agreement”). At the same time, the Company and Mr. Kiernan entered into an annual performance and long-term bonus agreement (the “Bonus Agreement”). Pursuant to the Employment Agreement, Mr. Kiernan will remain President and Chief Executive Officer of the Company, for a term commencing on April 1, 2022, and ending on September 30, 2024, subject to extension and termination pursuant to the provisions of the Employment Agreement. The Bonus Agreement sets forth the terms under which Mr. Kiernan would be eligible and entitled to short-term and long-term incentive cash and equity bonuses. For further details of this Employment and Bonus Agreement, please see the Form 8-K filed by the Company on April 5, 2022.
Termination of the Citrus Grove Management Agreement
In June 2022, the Company was notified by a primary group of third-party grove owners, who are affiliated with each other (collectively, the “Grove Owners”) and for which the Company was managing groves that the Grove Owners were terminating the management relationship under a certain property management agreement dated as of July 16, 2020 (the “Property Management Agreement”) with the Company as the Grove Owners decided to exit the citrus business. As a result, all services relating to this caretaking management initiative and the accompanying management fee and reimbursed costs associated with performing caretaking management services have ceased as of June 10, 2022.
The COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the current novel coronavirus outbreak (“COVID-19”) to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country have imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures have had a significant adverse impact upon many sectors of the economy, including certain agriculture businesses. While epidemiological conditions in the United States have improved as of September 30, 2022, and most of the restrictions on social and commercial activity have been relaxed, a resurgence of the virus could cause epidemiological and macroeconomic conditions to deteriorate and more severe restrictions to be put in place. It is not possible for the Company to predict the duration or magnitude of any adverse effects due to a resurgence at this time. We will continue to monitor the COVID-19 pandemic and its impacts on our business, financial condition and results of operations.
Prepayment and Restructure of Fixed-Rate Term Loans
On April 29, 2022, the Company made a prepayment on one of its Met Variable-Rate Term Loans in an amount of approximately $15,625,000 and the loan, after also considering a final scheduled principal payment made on May 2, 2022, was fully satisfied.
Sales of Land
On May 31, 2022, the Company sold approximately 400 acres of Alico Ranch to a third party for approximately $1,900,000 and recognized a gain of $1,700,000.
During the month of April 2022, the Company sold approximately 788 acres from the Alico Ranch to third parties for approximately $4,100,000 and recognized a gain of approximately $3,900,000. One of these sales transactions, consisting of approximately 142 acres, was sold to an employee of the Company for approximately $651,000.
On March 15, 2022, the Company sold approximately 6,286 acres of Alico Ranch to third parties at an average sales price of $4,500 per acre, realizing approximately $28,288,000 of gross proceeds.
5
On December 3, 2021, the State of Florida purchased, under the Florida Forever program, approximately 1,638 acres of the Alico Ranch for approximately $5,675,000 pursuant to an option agreement entered into between the State of Florida and the Company. The Company recognized a gain of approximately $5,570,000.
During November 2021, the Company sold approximately 302 acres from the Alico Ranch to various third parties for approximately $1,458,000 and recognized a gain of approximately $1,400,000.
Federal Relief Program – Hurricane Ian
It remains unclear whether there may be Hurricane Ian federal relief programs and, if available, the extent to which the Company will be eligible. The Company intends to take advantage of any such available programs as and when they become available. The Company is currently working with Florida Citrus Mutual, the industry trade group, and government agencies on federal relief programs.
Federal Relief Program – Hurricane Irma
The Company was eligible for Hurricane Irma federal relief programs for block grants that were being administered through the State of Florida. The Company has received a total of approximately $25,600,000 in Hurricane Irma federal relief for the period ended September 30, 2019 through September 30, 2022. During the fiscal years ended September 30, 2022, 2021 and 2020, the Company received approximately $1,123,000, $4,299,000 and $4,629,000, respectively, under the Florida Citrus Recovery Block Grant (“CRBG”) program. These federal relief proceeds are included as a reduction to operating expenses in the Consolidated Statements of Operations.
The Land We Manage
We regularly review our land-holdings to determine the best use of each parcel based upon our management expertise. Our total return profile is a combination of operating income potential and long-term appreciation. Land holdings not meeting our total return criteria are considered surplus to our operations and efforts are being made to sell such land holdings or to exchange such land holdings for land considered to be more compatible with our business objectives and total return profile, or to lease such land holdings.
Our land holdings and the operating activities in which we engage are categorized in the following table:
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Gross Acreage |
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Operating Activities |
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Alico Citrus |
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Citrus Groves |
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48,845 |
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Citrus Cultivation |
Citrus Nursery |
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22 |
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Citrus Tree Development |
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48,867 |
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Land Management and Other Operations |
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Ranch |
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24,161 |
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Leasing and Conservation |
Other Land |
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526 |
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Mining Lease and Office |
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24,687 |
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Total |
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73,554 |
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Alico Citrus
We own and manage citrus land in DeSoto, Polk, Collier, Hendry, Charlotte, Highlands, and Hardee Counties in the State of Florida and engage in the cultivation of citrus trees to produce citrus for delivery to the fresh and processed citrus markets. Alico citrus groves total 48,867 gross acres or 66.4% of our land holdings.
Termination of the Citrus Grove Management Agreement
In June 2022 the Company was notified by the Grove Owners, for which the Company was managing groves, that the Grove Owners were terminating the management relationship under the Property Management Agreement with the Company as the Grove Owners decided to exit the citrus business.
Citrus Land Lease
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The Company signed three agreements to lease approximately 2,100 of these citrus acres from the Grove Owners and thus have the rights to citrus production on such leased acreage for a one-year term at a cost of approximately $157,000. Additionally, on the same terms and conditions, the Company has the right to extend two of these leases representing approximately 1,600 acres for two one-year periods and has the right to extend the third lease with a one-year option. These leases expand the Company’s citrus production acreage by approximately 6% to approximately 36,000 net citrus acres.
Our citrus acreage is further detailed in the following table:
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Net Plantable |
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Producing |
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Developing |
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Fallow |
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Total Net |
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Support |
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Gross |
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DeSoto County |
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16,232 |
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115 |
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522 |
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16,869 |
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4,623 |
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21,492 |
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Polk County |
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4,870 |
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— |
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— |
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4,870 |
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2,237 |
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7,107 |
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Collier County |
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4,261 |
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— |
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— |
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4,261 |
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2,905 |
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7,166 |
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Hendry County |
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5,735 |
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57 |
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175 |
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5,967 |
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2,799 |
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8,766 |
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Charlotte County |
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1,724 |
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— |
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138 |
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1,862 |
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676 |
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2,538 |
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Highlands County |
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1,063 |
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— |
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— |
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1,063 |
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161 |
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1,224 |
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Hardee County |
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403 |
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— |
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— |
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403 |
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171 |
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574 |
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Total |
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34,288 |
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172 |
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835 |
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35,295 |
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13,572 |
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48,867 |
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Of the 48,867 gross acres of citrus land we own and manage, 13,572 acres are classified as support and other acreage. Support and other acreage include acres used for roads, barns, water detention, water retention and drainage ditches integral to the cultivation of citrus trees, but which are not capable of directly producing fruit. In addition, we own a small citrus tree nursery consisting of approximately 22 acres and utilize the trees produced in this nursery in our own operations. The 35,295 remaining acres are classified as net plantable acres. Net plantable acres are those that are capable of directly producing fruit. These include acres that are currently producing, acres that are developing (i.e., acres that are planted with trees too young to commercially produce fruit) and acres that are fallow.
In an effort to increase the density of our citrus groves, Alico has planted approximately 1,900,000 new trees since 2017. This level of planting has been substantially higher than the normal level of tree attrition. We will continue to evaluate the density throughout our groves and determine the appropriate tree plantings moving forward. Typically, citrus trees become fruit bearing approximately four to five years after planting and peak around seven to eight years after planting.
Our Alico Citrus business segment cultivates citrus trees to produce citrus for delivery to the processed and fresh citrus markets. Our sales to the processed market were approximately 84.5%, 82.7%, and 91.0% of Alico Citrus revenues for the fiscal years ended September 30, 2022, 2021 and 2020, respectively. The overall decrease in sales to processed markets as a percentage of citrus revenues during the fiscal years ended September 30, 2022 and September 30, 2021 as compared to such percentage for the fiscal year ended September 30, 2020, was due to revenues generated under an agreement entered into on July 16, 2020 with a group of third-party grove owners (“Grove Owners”), who are affiliated with each other, to provide citrus grove caretaking and harvest and haul management services (“Grove Management Services”) for approximately 7,000 acres owned by the Grove Owners. Under the terms of this agreement, the Company was reimbursed by the Grove Owners for all its costs incurred related to providing these Grove Management Services and received a management fee based on acres covered under this agreement. The Company recorded both an increase in revenues and expenses when the Company provided these Grove Management Services. In June 2022, the Company was notified by the Grove Owners that they were exiting the citrus business and the management relationship under the Property Management Agreement with the Company. As a result, all services relating to this caretaking management initiative and the accompanying management fee and reimbursed costs associated with performing caretaking management services ceased on June 10, 2022. The management fee was paid through June 30, 2022. For the fiscal year ended September 30, 2022, under this agreement, the Company recorded approximately $10,598,000 of operating revenue relating to these Grove Management Services, including the management fee. Excluding these revenues for these citrus grove caretaking and harvest and haul management services, revenue to processed markets represents approximately 92.7% of total citrus revenues.
The average pound solids per box was 5.28, 5.66, and 5.96 for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.
We generally use multi-year contracts with citrus processors that include pricing structures based on a floor and ceiling price. Therefore, if pricing in the market is favorable relative to our floor price, we benefit from the incremental difference between the floor and the final market price to the extent it does not exceed the ceiling price.
Our citrus produced for the processed citrus market in fiscal year 2022 under our largest agreement was subject to floor prices and ceiling prices. Under this agreement, if the market price was below the floor prices or exceeded the ceiling prices, then 50% of the shortfall or excess was
7
deducted from the floor price or added to the ceiling price. Under our next largest agreement, our citrus produced is subject to a minimum floor price and maximum ceiling price and is based on a cost-plus structure.
On each of May 18, 2020 and May 20, 2020, the Company entered into two new agreements to supply Tropicana, its largest customer, with citrus fruit. These new agreements were effective October 1, 2020, expire on July 31, 2024, and succeeded our existing largest agreement with this customer which expired at the end of September 2020.
Although we believe other markets and customers are available for our citrus products, we also believe that new arrangements in these other markets or with other customers may be less favorable than our current contracts.
Our sales to the fresh citrus market constituted approximately 1.4%, 0.6%, and 2.6% of our Alico Citrus revenues for the fiscal years ended September 30, 2022, 2021 and 2020, respectively. We produce numerous varieties for the fresh fruit market including grapefruit, navel and other fresh varieties. Generally, our fresh fruit is sold to packing houses by the box and the packing houses are responsible for the harvest and haul of these boxes. We produced approximately 91,000, 61,000, and 267,000 fresh fruit boxes for each of the fiscal years ended September 30, 2022, 2021 and 2020, respectively.
On July 16, 2020, the Company executed a Property Management Agreement with the Grove Owners to provide citrus grove caretaking and harvest and haul management services (“Grove Management Services”) for approximately 7,000 acres owned by such third parties. Under the terms of the Property Management Agreement, the Company was reimbursed by the Grove Owners for all of its costs incurred related to providing these services and also received a management fee based on acres covered under this Property Management Agreement. In August 2021, one of the affiliates from the Grove Owners purchased approximately 900 acres, which was in addition to the acres then receiving Grove Management Services. In June 2022, the Company was notified by the Grove Owners that they were exiting the citrus business and the management relationship under the Property Management Agreement with the Company. As a result, all services relating to this caretaking management initiative and the accompanying management fee and reimbursed costs associated with performing caretaking management services ceased on June 10, 2022. The management fee was paid through June 30, 2022. The Company, prior to this agreement, was already providing grove management services to several small third-party grove-owners on acres within the Company’s groves and continues to provide such services. Revenues generated from our grove management services were approximately 13.3%, 16.1%, and 5.1% of our total citrus revenues for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.
On October 30, 2020, the Company purchased approximately 3,280 gross acres located in Hendry County for a purchase price of $18,230,000. This acquisition allows the Company to add additional scale to its then approximately 46,000 gross acres of citrus properties. Strategically, with these acquired groves neighboring existing Alico groves, Alico believes that this acquisition will help Alico with its operation designed to be a low-cost, high-producing citrus grower.
Revenues from our Alico Citrus operations were approximately 97.5%, 97.5%, and 96.6% of our total operating revenues for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.
Land Management and Other Operations
We own and manage land in Collier, Glades, and Hendry Counties and are engaged in land leasing for recreational and grazing purposes, conservation, and mining activities. Our Land Management and Other Operations land holdings total 24,687 gross acres, or 33.6% of our total acreage.
Our Land Management and Other Operations acreage is detailed in the following table as of September 30, 2022:
|
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Acreage |
|
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Hendry County |
|
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20,139 |
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Glades County |
|
526 |
|
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Collier County |
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|
4,022 |
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Total |
|
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24,687 |
|
On May 31, 2022, the Company sold approximately 400 acres of Alico Ranch to a third party for approximately $1,900,000 and recognized a gain of $1,700,000.
During the month of April, the Company sold approximately 788 acres from the Alico Ranch to third parties for approximately $4,100,000 and recognized a gain of approximately $3,900,000. One of these sales transactions, consisting of approximately 142 acres, was sold to an employee of the Company for approximately $651,000.
8
On March 15, 2022, the Company sold approximately 6,286 acres from the Alico Ranch to third parties for approximately $28,288,000 and recognized a gain of approximately $26,554,000.
On December 3, 2021, the State of Florida purchased, under the Florida Forever program, approximately 1,638 acres of the Alico Ranch for approximately $5,675,000 pursuant to an option agreement entered into between the State of Florida and the Company. The Company recognized a gain of approximately $5,570,000. This is the third sales transaction we have completed with the State of Florida within the last three years, aggregating over 18,000 acres, including the April 15, 2021 sale and the September 2020 sale described below.
During November 2021, the Company sold approximately 302 acres from the Alico Ranch to various third parties for approximately $1,458,000 and recognized a gain of approximately $1,400,000.
On June 3, 2021, the Company sold approximately 11,700 acres, which were encumbered by an easement, to a third-party for approximately $12,219,000. In 2013, these acres were enrolled in the Wetlands Reserve Program (“WRP”), which calls for the restoration and maintenance of the property for the duration of the WRP easement. As part of that enrollment in 2013, Alico received approximately $1,800 per acre.
On April 15, 2021, the State of Florida purchased, under the Florida Forever program, approximately 5,734 acres of Alico Ranch for approximately $14,445,000, pursuant to an option agreement between the State of Florida and Alico dated December 15, 2020. Alico used most of the net sales proceeds to prepay a portion of its fixed-rate term debt.
On September 10, 2020, the Company sold approximately 10,700 acres on the western part of Alico Ranch to the State of Florida. Because the acres involved in the sale would have been critical to our planned dispersed water storage project, the Company has decided to no longer pursue permit approval activities for this project from that point forward. As a result of this decision to no longer pursue permit approval activities for this project, the Company has renamed this segment Land Management and Other Operations to better reflect the components of this segment. The Company did not ever get to the point where it was generating any revenue from the dispersed water storage project and incurred expenses of $0, $0, and $1,346,000 for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.
On March 27, 2020, the Company sold certain sections at the East Ranch for approximately $2,980,000 and realized a gain of approximately $2,748,000. The Company subsequently used substantially all of the net cash proceeds to purchase a like-kind asset in May 2020, which has allowed the Company to defer substantially all of the tax impact of the gain on sale of this ranch land.
Revenues from Land Management and Other Operations were approximately 2.5%, 2.5%, and 3.4% of total operating revenues for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.
Our Strategy
Our core business strategy is to maximize stockholder value through continuously improving the return on our invested capital, either by holding and managing our existing land through skilled agricultural production, leasing, or other opportunistic means of monetization, disposing of under productive land or business units and acquiring new land or operations with appreciation potential.
Our objectives are to produce the highest quality agricultural products, create innovative land uses, opportunistically acquire and convert undervalued assets, sell under-productive land and other assets not meeting our total return profile, generate recurring and sustainable profit with the appropriate balance of risk and reward, and exceed the expectations of stockholder, customers, clients and partners.
Our strategy is based on best-management practices of our agricultural operations and the environmental and conservation stewardship of our land and natural resources. We try to manage our land in a sustainable manner and evaluate the effect of changing land uses while considering new opportunities. Our commitment to environmental stewardship is fundamental to the Company’s core beliefs.
Intellectual Property
While we consider our various intellectual property to be valued assets, we do not believe that our competitive position or our operations are dependent upon or would be materially impacted by any single piece of intellectual property or group of related intellectual property registrations or rights.
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Seasonal Nature of Business
As with any agribusiness enterprise, our agribusiness operations and revenues are predominantly seasonal in nature. The following table illustrates the seasonality of our agribusiness revenues:
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Fiscal Year |
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Q1 |
Q2 |
Q3 |
Q4 |
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Ending 12/31 |
Ending 3/31 |
Ending 6/30 |
Ending 9/30 |
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Oct |
Nov |
Dec |
Jan |
Feb |
Mar |
Apr |
May |
Jun |
Jul |
Aug |
Sept |
Harvest Fresh and Early/Mid Varieties of Oranges |
|
X |
X |
X |
X |
|
|
|
|
|
|
|
Harvest Valencia Oranges |
|
|
|
|
|
X |
X |
X |
X |
|
|
|
Significant Customers
Revenue from Tropicana represented approximately 79.7%, 77.5%, and 86.9% of our consolidated revenue for the fiscal years ended September 30, 2022, 2021 and 2020, respectively. The revenue in fiscal year 2022 from Tropicana was generated primarily from two separate contracts. This revenue was generated from the sale of our citrus product in the processed market. No other single customer provided more than 10% of our consolidated revenue in fiscal years 2022, 2021 or 2020.
The slight increase in the Tropicana revenue, as a percentage of sales, for the fiscal year ended September 30, 2022 is primarily due to the Grove Owners in June 2022 terminating the management relationship under the Property Management Agreement with the Company. The decrease in Tropicana revenue, as a percentage of sales, for the fiscal year ended September 30, 2021 was expected and attributable to an increase in overall sales generated from the agreement entered into in July 2020 with the Grove Owners to provide citrus grove caretaking and harvest and haul management services for approximately 7,000 acres owned by the Grove Owners. Under the terms of the Property Management Agreement, the Company was reimbursed by the third parties for all its costs incurred related to providing these services and received a management fee based on acres covered under this agreement. The Company recorded both an increase in sales revenue and an increase in expenses as and when the Company provided these citrus grove caretaking management services. Revenue from Tropicana represents approximately 90.1% of total revenues when excluding these grove caretaking services for the fiscal year ended September 30, 2022.
Competition
The orange and specialty citrus markets are intensely competitive, but no single producer has any significant market power over any market segments, as is consistent with the production of most agricultural commodities. Citrus is grown domestically in several states including Florida, California, Arizona, and Texas, as well as foreign countries, most notably Brazil and Mexico. Competition is impacted by several factors including quality, production, demand, brand recognition, market prices, weather, disease, export/import restrictions and foreign currency exchange rates.
Environmental, Social and Governance (“ESG”)
Alico is an agricultural company which, based upon its rich heritage and traditions, seeks not only to maximize value for its customers and stockholders, but also to enhance its legacy by employing sustainable practices in all aspects of operations including stewardship of both its natural and human resources. The Company recognizes the increased emphasis by stockholders, business partners and other key constituents in recent years on ESG programs that are embedded into day-to-day business policies and practices. The Company is proud of its commitment to doing the right thing for communities, the environment, and its employees.
Governmental Regulations
Our operations are subject to various federal, state and local laws regulating the discharge of materials into the environment. Management believes we are in material compliance with all such rules including permitting and reporting requirements. Historically, compliance with environmental regulations has not had a material impact on our financial position, results of operations or cash flows.
Management monitors environmental legislation and requirements and makes every reasonable effort to remain in compliance with such regulations. In addition, we require in our leases that lessees of our property comply with environmental regulations as a condition of leasing.
We are subject to other laws of the United States and the rules and regulations of various governing bodies within the United States, which may differ among jurisdictions. Compliance with these laws, rules and regulations has not had, and is not expected to have, a material effect on our capital expenditures, results of operations and competitive position as compared to prior periods.
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Human Capital Management
Purpose and Company Values
Supporting our people is a fundamental value for Alico. We believe the Company’s success depends on its ability to attract, develop and retain key personnel. The skills, experience and industry knowledge of our employees and the employees of our independent contractors significantly benefit our operations and performance. The Company's management oversees various employee initiatives and also monitors the effectiveness of the personnel provided by independent contractors with which we contract for certain harvesting and hauling services.
Employees
We believe in a culture of equity, diversity and inclusion. We are also committed to advancing safe and respectful work environments where our employees are invited to bring their talents, backgrounds and expertise to bear on the success of our business and where every person has the opportunity to thrive personally and professionally.
Hiring, Development and Retention
Employee levels are managed to align with the pace of business and consider the services that are provided for us by our independent contractors. We rely on our independent contractors to manage their respective employee levels so that the harvesting and hauling services they are obligated to perform for us are consistent with the contractual obligations of these independent contractors and enable us to satisfy our harvesting and hauling needs. Management believes that through its own employees, coupled with the human capital supplied by its independent contractors, it has sufficient human capital to operate its business successfully. Management believes that the Company's employee relations are favorable, that its relations with its independent contractors is favorable, and that the relations that the independent contractors and the Company have with the employees of the independent contractors is favorable.
Employee Safety and Well-Being
Health and safety in the workplace for our employees and personnel provided by independent contractors with which we contract is one of the Company’s core values. Hazards in the workplace are actively identified and management tracks incidents so remedial actions can be taken to improve workplace safety. In order to support and enhance health and safety practices, the Company routinely conducts safety training with employees to emphasize safety when conducting grove caretaking, general employee health, proper equipment operating techniques, office ergonomics and other important safety topics. The COVID-19 pandemic has underscored for us the importance of keeping our employees and the personnel provided by independent contractors safe and healthy. In response to the pandemic, the Company has taken actions aligned with the Centers for Disease Control and Prevention to protect its workforce so that its workforce can more safely and effectively perform their work.
Inclusion and Diversity
People are critical to our efforts to drive growth and deliver value for stockholders. One of the ways we have put people at the center is by continuing to work toward a more inclusive and diverse workplace where each person feels respected, valued and seen and can be the best version of themselves – from women and ethnically diverse employees to veterans, among others. With employees, management and directors representing the diversity around the world, the Company can access stronger insights into different cultures and backgrounds, which ultimately helps the Company to better operate the business.
As of September 30, 2022, ethnically diverse employees represent 73% of the Company’s Citrus operations, 32% of Corporate, General, Administrative and Other. Women made up 22% of the Company’s Corporate, General, Administrative and Other and 22% of the Company’s Citrus operations. On August 6, 2020, the Board of Directors of the Company increased the size of the Board to nine and appointed Ms. Katherine English as a director, Ms. English currently serves (i) on the Compensation Committee, (ii) on and as chair of the Nominating and Governance Committee, and (iii) on the Sustainability and Corporate Responsibility Committee. Ms. English’s appointment is part of the Company’s commitment to promote diversity and inclusion.
Based on our Inclusion and Diversity strategy, the Company promotes a greater sense of inclusion through a variety of initiatives, which includes a Company-wide women’s group to promote mentoring, career advancement, training, comradery, and empowerment.
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Compensation and Benefits
Our compensation and benefits are designed to support the financial, mental, and physical well-being of our employees. We are committed to equal pay for equal work, regardless of gender, race, ethnicity, or other personal characteristics. We believe our base wages and salaries, which we review annually, are fair and competitive with the external labor markets in which our employees work. We also regularly review our compensation practices to promote fair and equitable pay. We also offer competitive benefit programs, in line with local practices and with the flexibility to accommodate the needs of a diverse workforce. The benefit programs include, among others, paid holidays, family leave, disability insurance, life insurance, healthcare, and a 401(k) plan with a company match. As of September 30, 2022, we had 206 full-time employees. Our employees work in the following divisions:
Alico Citrus |
|
|
180 |
|
Land Management and Other Operations (1) |
|
|
0 |
|
Corporate, General, Administrative and Other |
|
|
26 |
|
Total employees |
|
|
206 |
|
None of our employees are subject to a collective bargaining agreement. We believe that our relations with our employees are good.
Workforce Housing
We own and maintain 37 residential housing units located in various counties in Florida that we lease to employees and former employees. Our residential units provide affordable housing to many of our employees, including our agribusiness employees. Employees live close to their work, which reduces traffic and commuting times. This unique employment benefit helps us maintain a dependable, long-term employee base.
Capital Resources and Raw Materials
Management believes that the Company will be able to meet its working capital requirements for at least the next 12 months, and over the long term, through internally generated funds, cash flows from operations, the sale of under-productive land and other assets, our existing lines of credit and access to capital markets. The Company has commitments providing for lines of revolving credit that are available for our general and corporate use.
Raw materials needed to cultivate the various crops grown by the Company consist primarily of fertilizers, herbicides, insecticides and fuel and are readily available from local suppliers.
Societal Well-Being
The Company remains committed to a healthy and equitable society to ensure our collective well-being for future generations. In the past year, we provided cash grants and supporting donations to support our communities and promote health and safety, education, and justice.
Available Information
We will provide electronic copies of our SEC filings free of charge upon request. Additionally, our reports, amendments thereto, proxy statements and other information are also made available, free of charge, on our investor relations website at ir.alicoinc.com as soon as reasonably practicable after we electronically file or furnish such information with the SEC. Any information posted on or linked from our website is not incorporated by reference in this Annual Report on Form 10-K. The SEC also maintains a website at http://www.sec.gov, which contains annual, quarterly and current reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
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Item 1A. Risk Factors
Our business and results of operations are subject to numerous risks and uncertainties, many of which are beyond our control. The following is a description of key known factors that we believe may materially affect our business, financial condition, results of operations or cash flows. They should be considered carefully, in addition to the information set forth elsewhere in this Annual Report on Form 10-K, including Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8, Financial Statements and Supplementary Data, including the related Notes to the Consolidated Financial Statements in making any investment decisions with respect to our securities. Additional risks or uncertainties that are not currently known to us that we currently deem to be immaterial or that could apply to any company could also materially adversely affect our business, financial condition, results of operations or cash flows.
Risks Related to our Business
Adverse weather conditions, natural disasters and other natural conditions, including the effects of climate change, could impose significant costs and losses on our business.
Fresh produce is vulnerable to adverse weather conditions, including windstorms, floods, drought and temperature extremes, which are quite common and may occur with higher frequency or be less predictable in the future due to the effects of climate change. Unfavorable growing conditions can reduce both crop size and crop quality. In extreme cases, entire harvests may be lost in some geographic areas. Citrus groves are subject to damage from frost and freezes, and this has happened periodically in the recent past, including most recently the impact from the freeze in the last week of January 2022. In some cases, the fruit is damaged or ruined; in the case of extended periods of cold, the trees can also be damaged or killed. These factors can increase costs, decrease revenues and lead to additional charges to earnings, which may have a material adverse effect on our business, results of operations, financial condition and cash flows.
Our citrus groves are subject to damage and loss from disease including but not limited to citrus greening and citrus canker which could negatively impact our business, financial condition, results of operations and cash flows.
Our citrus groves are subject to damage and loss from diseases such as citrus greening and citrus canker. Each of these diseases is widespread in Florida and exists in our citrus groves and in the areas where our citrus groves are located. The success of our citrus business is directly related to the viability and health of our citrus groves.
Citrus greening is one of the most serious citrus plant diseases in the world. Once a tree is infected, its productivity generally decreases. While the disease poses no threat to humans or animals, it has devastated citrus crops throughout the United States and abroad. Named for its green, misshapen fruit, citrus greening disease has now killed millions of citrus plants in the southeastern United States and has spread across the entire country. Infected trees produce fruits that are green, misshapen and bitter, unsuitable for sale as fresh fruit or for juice. Infected trees can die within a few years. At the present time, there is no known cure for citrus greening once trees have become infected. Primarily, as a result of citrus greening, orange production in the State of Florida has continued to drop.
Citrus canker is a disease affecting citrus species and is caused by a bacterium which is spread by contact with infected trees or by windblown transmission. There is no known cure for citrus canker at present although some management practices, including the use of copper-based bactericides, can mitigate its spread and lessen its effect on infected trees; however, there is no assurance that currently available technologies will control such disease effectively.
Both of these diseases pose a significant threat to the Florida citrus industry and to our citrus groves. While we try to use best management practices to attempt to control diseases and their spread, there can be no assurance that our mitigation efforts will be successful. These diseases can significantly increase our costs which could materially adversely affect our business, financial condition, results of operations and cash flows. Our citrus groves produce the significant majority of our annual operating revenues. A significant reduction in available citrus from our citrus groves could decrease our operating revenues and materially adversely affect our business, financial condition, results of operations and cash flows.
Our citrus groves are geographically concentrated in Florida and the effects of adverse weather conditions including hurricanes and tropical storms could adversely affect our results of operations, financial position and cash flows.
Our citrus operations are concentrated in central and south Florida with our groves located in parcels in DeSoto, Polk, Collier, Hendry, Charlotte, Highlands, and Hardee Counties. Because our groves are located in close proximity to each other, the impact of adverse weather conditions may be material to our results of operations, financial position and cash flows. Florida is particularly susceptible to the occurrence of hurricanes and tropical storms. Depending on where any particular hurricane or tropical storm makes landfall, our properties could experience significant, if not catastrophic damage. Hurricanes and tropical storms have the potential to destroy crops and impact citrus production through the loss of fruit and destruction of trees and/or plants either as a result of high winds or through the spread of windblown disease. Such damage could materially
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affect our citrus operations and could result in a loss of operating revenues from those products for a multi-year period. For instance, recent Hurricane Ian is expected to have a material adverse effect on the fruit production from our trees for this current harvest season and, potentially to a lesser extent, the next season and future seasons. We seek to minimize hurricane risk by the purchase of insurance contracts, but the majority of our crops remain uninsured. In addition to hurricanes and tropical storms, the occurrence of other natural disasters and climate conditions in Florida, such as tornadoes, floods, freezes (such as the freeze in the last week of January 2022), unusually heavy or prolonged rain, droughts and heat waves, could have a material adverse effect on our operations and our ability to realize income from our crops or properties.
A significant portion of our revenues are derived from our citrus business and any adverse event affecting such business could disproportionately harm our business.
Our revenues from our citrus business were approximately 97.5%, 97.5%, and 96.6% of our operating revenues in fiscal years 2022, 2021 and 2020, respectively. Our citrus division is one of the largest citrus producers in the United States and because of the significance of the revenues derived from this business, we are more vulnerable to adverse events or market conditions affecting our citrus business, in particular, or the citrus business, generally, which could have a significant adversely impact on our overall results of operations, financial condition and cash flows.
Our failure to effectively perform grove management functions or to effectively manage an expanded portfolio of groves could materially and adversely affect our business, financial condition, and results of operations.
If we are unable to effectively perform grove management services for both our own groves and the groves owned by third parties at the level and/or the cost that we expect, or if we were to fail to allocate sufficient resources to meet the grove management of our own groves and the groves owned by these third parties, it could adversely affect our performance and reputation. Our ability to perform the grove management services will be affected by various factors, including, among other things, our ability to maintain sufficient personnel and retain key personnel, the ability of the independent contractors whom we engage to assist in providing these services to maintain sufficient personnel and retain key personnel, and the number of acres and groves that we will manage. Increases in the number of acres and groves we are managing have required us to hire a greater number of additional qualified personnel and have required the independent contractors whom we engage to assist in providing these services to maintain a greater number of additional qualified personnel to provide those services. No assurance can be made that we will continue to be successful in attracting and retaining skilled personnel or in integrating any new personnel into our organization or that the independent contractors whom we engage to assist in providing these services will continue to be successful in attracting and retaining skilled personnel or in integrating any new personnel into their respective organizations.
Our business is highly competitive, and we cannot assure you that we will maintain our current market share.
Many companies compete in our different businesses and offer products that are similar to our products or are direct competitors to our products. We face strong competition from these and other companies engaged in the agricultural product business.
Important factors with respect to our competitors include the following:
There can be no assurance that we will continue to compete effectively with our present and future competitors, and our ability to compete could be materially adversely affected by our debt levels and debt service requirements.
We depend on our relationship with Tropicana and Tropicana’s relationship with certain third parties for a significant portion of our business. Any disruption in these relationships could harm our revenue. Additionally, if certain criteria are not met under one of our contracts with Tropicana, we could experience a significant reduction in revenues and cash flows.
The Company's contracts with Tropicana accounted for 79.7%, 77.5%, and 86.9% of the Company's revenues in fiscal years 2022, 2021 and 2020, respectively. The revenue for Tropicana is primarily generated from two contracts. Should there be any change in our current relationship structure, whereby they do not buy our oranges, we would need to find replacement buyers to purchase our remaining crop, which could take time and expense and may result in less favorable terms of sale. The loss of Tropicana as a customer or significant reduction in business with Tropicana may cause a material adverse impact to our financial position, results of operations and cash flows.
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With the sale of a majority of ownership of Tropicana to a French private equity firm, there is some heightened risk and uncertainty in our current relationship with Tropicana, which potentially could result in a significant reduction in revenues and cash flows if that relationship were to be changed as a result.
With the sale of a majority ownership of Tropicana by PepsiCo to a French private equity firm (the “Firm”), there is some heightened risk and uncertainty in our current relationship with Tropicana, which potentially could result in a significant reduction in revenues and cash flows if that relationship were to be changed as a result. The Company currently has citrus supply contracts with Tropicana that expire in both 2023 and 2024, with the majority expiring in 2024. If the Firm caused Tropicana to reduce the volume of oranges purchased from us and/or purchased from owners of groves that we manage, we would need to find, and/or the owners of groves that we manage would need to find or work with us to find, replacement buyers to purchase any remaining crop of our and/or of the owners of the groves we manage, which could take time and expense and may result in less favorable terms of sale. The loss of Tropicana as a customer or significant reduction in business with Tropicana for us and/or for the owners of the groves we manage may cause a material adverse impact to our financial position, results of operations and cash flows.
Our agricultural products are subject to supply and demand pricing which is not predictable.
Agricultural operations traditionally provide almost all of our operating revenues with citrus being the largest portion and are subject to supply and demand pricing. Prior to the COVID-19 pandemic, according to Nielsen data, consumer demand for orange juice had decreased significantly to its lowest level in almost a decade; however, we have been able to offset the impact of such decline with higher prices based on a lower supply of available oranges. Although the demand for orange juice has increased during the COVID-19 pandemic, it is uncertain as to whether such increased demand can be maintained, whether we will see a return to a decline in the future and whether, if there were to be such a decline, the impact could be again offset by higher prices. Although our processed citrus is subject to minimum pricing, we are unable to predict with certainty the final price we will receive for our products. In some instances, the harvest and growth cycle will dictate when such products must be marketed which may or may not be advantageous in obtaining the best price. Excessive supplies tend to cause severe price competition and lower prices for the commodity affected. Limited supply of certain agricultural commodities due to world and domestic market conditions can cause commodity prices to rise in certain situations.
If we are unable to successfully develop and execute our strategic growth initiatives, or if they do not adequately address the challenges or opportunities we face, our business, financial condition and prospects may be adversely affected.
Our success is dependent, in part, on our ability to identify, develop and execute appropriate strategic growth initiatives that will enable us to achieve sustainable growth in the long term. The implementation of our strategic initiatives is subject to both the risks affecting our business generally and the inherent risks associated with implementing new strategies. These strategic initiatives may not be successful in generating revenues or improving operating profit and, if they are, it may take longer than anticipated. As a result, and depending on evolving conditions and opportunities, we may need to adjust our strategic initiatives and such changes could be substantial, including modifying or terminating one or more of such initiatives. Termination of such initiatives may require us to write down or write off the value of our investments in them. Transition and changes in our strategic initiatives may also create uncertainty in our employees, customers and partners that could adversely affect our business and revenues. In addition, we may incur higher than expected or unanticipated costs in implementing our strategic initiatives, attempting to attract revenue opportunities or changing our strategies. There can be no assurance that the implementation of any strategic growth initiative will be successful, and we may not realize anticipated benefits at levels we project or at all, which would adversely affect our business, financial condition and prospects.
We are subject to the risk of product contamination and product liability claims.
The sale of agricultural products for human consumption involves the risk of injury to consumers. Such injuries may result from tampering by unauthorized third parties, product contamination or spoilage, including the presence of foreign objects, substances, chemicals, other agents, or residues introduced during the growing, storage, handling or transportation phases. While we are subject to governmental inspection and regulations and believe our facilities comply in all material respects with all applicable laws and regulations, we cannot be sure that our agricultural products will not cause a health-related illness in the future or that we will not be subject to claims or lawsuits relating to such matters. Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness or injury could adversely affect our reputation with existing and potential customers and our corporate and brand image. Moreover, claims or liabilities of this sort might not be covered or fully covered by our insurance or by any rights of indemnity or contribution that we may have against others. We maintain product liability insurance; however, we cannot be sure that we will not incur claims or liabilities for which we are not insured or that exceed the amount of our insurance coverage.
Our agricultural operations are subject to water use regulations restricting our access to water.
Our operations are dependent upon the availability of adequate surface and underground water. The availability of water is regulated by the state of Florida through water management districts which have jurisdiction over various geographic regions in which our lands are located. Currently,
15
we have permits in place for the next 15 to 20 years for the use of underground and surface water which are believed to be adequate for our agricultural needs.
Surface water in Hendry County, where much of our agricultural land is located, comes from Lake Okeechobee via the Caloosahatchee River and a system of canals used to irrigate such land. The Army Corps of Engineers controls the level of Lake Okeechobee and ultimately determines the availability of surface water even though the use of water has been permitted by the state of Florida through the water management district. The Army Corps of Engineers decided in 2010 to lower the permissible level of Lake Okeechobee in response to concerns about the ability of the levee surrounding the lake to restrain rising waters which could result from hurricanes. Changes in availability of surface water use may result during times of drought, because of lower lake levels and could materially adversely affect our agricultural operations, financial condition, results of operations and cash flows.
Changes in immigration laws could impact our ability to harvest our crops.
We engage third parties to provide personnel for our harvesting operations. The availability and number of such workers is subject to decrease if there are changes in the U.S. immigration laws. Immigration reform and enforcement has been attracting significant attention from the U.S. Government (particularly in the current U.S. administration and U.S. Congress), with enforcement operations taking place across the country, resulting in arrests and detentions of unauthorized workers. It remains unclear how the U.S. administration and U.S. Congress will approach immigration reform and enforcement. However, if new immigration legislation is enacted in the U.S. and/or if enforcement actions are taken against available personnel, such legislation and/or enforcement activities may contain provisions that could significantly reduce the number and availability of workers. Termination of a significant number of personnel who might be found to be unauthorized workers or the scarcity of other available personnel to harvest our agricultural products could cause harvesting costs to increase or could lead to the loss of product that is not timely harvested which could have a material adverse effect to our citrus grove business, financial condition, results of operations and cash flows.
Our acquisition of additional agricultural assets and other businesses could pose risks.
We seek to opportunistically acquire new agricultural assets from time to time that we believe would complement our business. For example, (i) in fiscal year 2015, we acquired three Florida citrus properties, including Orange-Co and Silver Nip Citrus, which resulted in our citrus division being one of the largest citrus producers in the United States, and (ii) in October 2020 we acquired another Florida citrus property. While we expect that our past and future acquisitions will successfully complement our business, we may fail to realize all of the anticipated benefits of these acquisitions, which could reduce our anticipated results. We cannot assure that we will be able to successfully identify suitable acquisition opportunities, negotiate appropriate acquisition terms, or obtain any financing that may be needed to consummate such acquisitions or complete proposed acquisitions. Acquisitions by us could result in accounting changes, potentially dilutive issuances of equity securities, increased debt and contingent liabilities, reduce the amount of cash available for dividends, debt service payments, integration issues and diversion of management’s attention, any of which could adversely affect our business, results of operations, financial condition, and cash flows. We may be unable to successfully realize the financial, operational, and other benefits we anticipate from our acquisitions and our failure to do so could adversely affect our business, results of operations, financial condition and cash flows.
Dispositions of our assets may adversely affect our future results of operations.
We also routinely evaluate the benefits of disposing of certain of our assets which could include the exit from lines of business. For example, in November of 2014, we sold significant sugarcane assets and we are no longer involved in the sugarcane business and, in January of 2018, we sold our breeding herd and no longer engage in cattle operations. Most recently, we sold certain ranch acres to the State of Florida and because these acres would have been critically important for carrying out the Company’s planned dispersed water storage project, the Company is no longer pursuing permit approval relating to this dispersed water storage project. While such dispositions increase the amount of cash available to us, it could also (i) result in a potential loss of significant operating revenues and income streams that we might not be able to replace, (ii) make our business less diversified and (iii) could ultimately have a negative impact on our results of operations, financial condition and cash flows.
Harm to the Company’s reputation could have an adverse effect on the business, financial condition and results of operations.
Maintaining a strong reputation with fruit processors and third-party partners is critical to the success of the Company’s business. The Company devotes significant time and resources to training programs, relating to, among other things, ethics, compliance and product safety and quality, as well as sustainability goals, and has published ESG goals (i.e., environmental, sustainability and governance), including relating to environmental impact and sustainability and inclusion and diversity, as part of its ESG Strategy. Despite these efforts, the Company may not be successful in achieving its goals, might provide materially inaccurate information, or might receive negative publicity about the Company, including relating to product safety, quality, efficacy, ESG or similar issues, whether real or perceived, and reputational damage could occur. In addition, the Company’s products could face withdrawal, recall or other quality issues, which could lead to decreased demand for the Company’s products or services and reputational damage.
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Widespread use of social media and networking sites by consumers has greatly increased the accessibility and speed of dissemination of information. Negative publicity, posts or comments about the Company, whether accurate or inaccurate, or disclosure of non-public sensitive information about the Company, could be widely disseminated through the use of social media or in other formats.
If a transaction intended to qualify as a Section 1031 Exchange is later determined to be taxable, we may face adverse consequences, and if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of properties in the future on a tax deferred basis.
From time to time we dispose of properties in transactions that are intended to qualify as Section 1031 Exchanges under the federal income tax law. It is possible that the qualification of a transaction as a Section 1031 Exchange could be successfully challenged and determined to be currently taxable and we could also be required to pay interest and penalties. As a result, we may be required to borrow funds in order to pay additional income taxes, and the payment of such taxes could cause us to have less cash available. Moreover, it is possible that legislation could be enacted that could modify or repeal the laws with respect to Section 1031 Exchanges, which could make it more difficult or not possible for us to dispose of properties in the future on a tax deferred basis.
We may undertake one or more significant corporate transactions that may not achieve their intended results, may adversely affect our financial condition and our results of operations or result in unforeseeable risks to our business.
We continuously evaluate the acquisition or disposition of operating businesses and assets and may in the future undertake one or more significant transactions. Any such acquisitive transaction could be material to our business and could take any number of forms, including mergers, acquisitions, joint ventures and the purchase of equity interests. The consideration for such acquisitive transactions may include, among other things, cash, common stock or equity interests in the Company or our subsidiaries, or a contribution of property or equipment to obtain equity interests, and in conjunction with a transaction we might incur additional indebtedness. We also routinely evaluate the benefits of disposing of certain assets. Such dispositions could take the form of asset sales, mergers or sales of equity interests.
These transactions may present significant risks such as insufficient assets to offset liabilities assumed, potential loss of significant operating revenues and income streams, increased or unexpected expenses, inadequate return of capital, regulatory or compliance issues, the triggering of certain financial covenants in our debt instruments (including accelerated repayment) and unidentified issues not discovered in due diligence. In addition, such transactions could distract management from current operations. As a result of the risks inherent in such transactions, we cannot guarantee that any such transaction will ultimately result in the realization of its anticipated benefits or that it will not have a material adverse impact on our business, financial condition, results of operations or cash flows. If we were to complete such an acquisition, disposition, investment or other strategic transaction, we may require additional debt or equity financing that could result in a significant increase in our amount of debt and our debt service obligations or the number of outstanding shares of our common stock, thereby diluting holders of our common stock outstanding prior to such acquisition.
Our citrus business is seasonal.
Our citrus groves produce the majority of our annual operating revenues and the citrus business is seasonal because it is tied to the growing and picking seasons. Historically, the second and third quarters of our fiscal year generally produce the majority of our annual revenues, and our working capital requirements are typically greater in the first and fourth quarters of our fiscal year coinciding with our planting cycles. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year or in future quarters. If our operating revenues in the second and third quarters are lower than expected, it would have a disproportionately large adverse impact on our annual operating results.
We face significant competition in our agricultural operations.
We face significant competition in our agricultural operations both from domestic and foreign producers and do not have any branded products. Foreign growers generally have an equal or lower cost of production, less environmental regulation and in some instances, greater resources and market flexibility than us. Because foreign growers have greater flexibility as to when they enter the U.S. market, we cannot always predict the impact these competitors will have on our business and results of operations. The competition we face from certain foreign suppliers of orange juice is mitigated by a governmentally imposed tariff on orange imports. Accordingly, a reduction in the government’s orange juice tariff could adversely impact our results of operations.
Our earnings are sensitive to fluctuations in market supply and prices and demand for our products.
Excess supplies often cause severe price competition in our industry. Growing conditions in various parts of the world, particularly weather conditions such as windstorms, floods, droughts and freezes, as well as diseases and pests, are primary factors affecting market prices because of their influence on the supply and quality of product.
17
Fresh produce is highly perishable and generally must be brought to market and sold soon after harvest. Many of the items involved in our business, such as oranges, must be sold more quickly than other produce our competitors may produce, such as lemons. As such, our competitors may be able to maintain certain items they produce in inventory for longer periods than we are able to maintain our inventory which may offer our competitors strategic advantages when they respond to fluctuations in market supply and demand that are not available to us.
In addition, general public perceptions regarding the quality, safety or health risks associated with particular food products could reduce demand and prices for some of our products. To the extent that consumer preferences evolve away from products that we produce for health or other reasons, and we are unable to modify our products or to develop products that satisfy new consumer preferences, there will be a decreased demand for our products. If excess supplies do exist, this could result in reduced pricing or unusable inventory which could adversely impact our results of operations.
Climate change, or legal, regulatory, or market measures to address climate change, may negatively affect our business and operations.
There is growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters. In the event that such climate change has a negative effect on the productivity of our citrus groves, it could have an adverse impact on our business and results of operations. The increasing concern over climate change also may result in more regional, federal, and/or global legal and regulatory requirements to reduce or mitigate the effects of greenhouse gases or climate change. In the event that such regulation is enacted, we may experience significant increases in our costs of operations, including but not limited to increased energy, environmental, and other costs and capital expenditures. In particular, increasing regulation of fuel emissions could substantially increase the distribution and supply chain costs associated with our products. As a result, climate change could negatively affect our financial condition and results of operations.
ESG issues, including those related to climate change and sustainability, may have an adverse effect on our business, financial condition, results of operations, and cash flows and damage our reputation.
Companies across all industries are facing increasing scrutiny relating to their ESG policies. Increased focus and activism related to ESG may hinder the Company’s access to capital, as investors may reconsider their capital investment as a result of their assessment of the Company’s ESG practices. In particular, customers, investors and other stakeholders are increasingly focusing on environmental issues, including climate change, water use, deforestation, plastic waste, and other sustainability concerns. There have also been changing consumer preferences for natural or organic products and ingredients and increased consumer concerns or perceptions (whether accurate or inaccurate) regarding the effects of substances present in certain consumer products. Responding to and complying with these preferences, concerns and demands could cause us to incur additional costs or to make changes to our operations that could negatively affect our business, financial condition and results of operations.
If the Company does not adapt to or comply with new regulations or fails to meet its ESG goals or meet the evolving investor, industry or stakeholder expectations and standards, or if the Company is perceived to have not responded appropriately to the growing concern for ESG issues, fruit processors and consumers may choose to stop purchasing our products or purchase products from another company or a competitor, and the Company’s reputation, business, financial condition, results of operations and cash flows may be adversely affected.
Increases in labor, personnel and benefits costs could adversely affect our operating results.
We primarily utilize labor contractors to harvest and deliver our fruit to outside packing facilities. Our employees and contractors are in demand by other agribusinesses and other industries. Shortages of labor, particularly as a result of the recent low unemployment rate in the United States and in Florida in particular, could delay our harvesting or orange processing activities or could result in increases in labor costs.
We and our labor contractors are subject to government mandated wage and benefit laws and regulations. In addition, current or future federal or state healthcare legislation and regulation, including the Affordable Care Act, may increase our medical costs or the medical costs of our labor contractors that could be passed on to us.
Increases in commodity or raw product costs, such as fuel and chemical costs, could adversely affect our operating results.
Many factors may affect the cost and supply of citrus, including external conditions, commodity market fluctuations, changes in governmental laws and regulations, tariffs, agricultural programs, severe and prolonged weather conditions and natural disasters. Increased costs for products, as we have experienced in this last year, can negatively impact our operating results and there can be no assurance that they will not adversely affect our operating results in the future.
We are subject to transportation risks.
We depend on third party providers of transportation and have no control over such third parties. An extended interruption in our ability to harvest and haul our products could have a material adverse effect on our business, financial condition and results of operations. Similarly, any extended disruption in the distribution of our products could have a material adverse effect on our business, financial condition and results of operations.
18
While we believe we are adequately insured and would attempt to transport our products by alternative means if we were to experience an interruption due to strike, natural disasters or otherwise, we cannot be sure that we would be able to do so or be successful in doing so in a timely and cost-effective manner.
We benefit from reduced real estate taxes due to the agricultural classification of a majority of our land. Changes in the classification or valuation methods employed by county property appraisers could cause significant changes in our real estate property tax liabilities.
For the fiscal years ended September 30, 2022, 2021 and 2020, we paid approximately $2,679,000, $2,570,000, and $2,714,000 in real estate taxes, respectively. These taxes were based upon the agricultural use (“Green Belt”) values determined by the county property appraisers in which counties we own land, of approximately $85,159,000, $82,790,000, and $87,976,000 for the fiscal years ended September 30, 2022, 2021 and 2020, respectively, which differs significantly from the fair values determined by the county property appraisers of approximately $391,049,000, $467,948,000, and $463,799,000, respectively. Changes in state law or county policy regarding the granting of agricultural classification or calculation of "Green Belt" values or average millage rates could significantly and adversely impact our results of operations, cash flows and/or financial position.
If the real estate industry weakens or instability of the mortgage industry and commercial real estate financing exists, it could have an adverse effect on our Alico Ranch sales.
If the residential real estate market weakens or instability of the mortgage industry and commercial real estate financing exists, our Alico Ranch sales could be adversely affected. A decrease in property demand might have a negative impact on our ability to sell our Alico Ranch.
Liability for the use of fertilizers, pesticides, herbicides and other potentially hazardous substances could increase our costs.
Our agricultural business involves the use of herbicides, fertilizers and pesticides, some of which may be considered hazardous or toxic substances. We may be deemed liable and have to pay for the costs or damages associated with the improper application, accidental release or the use or misuse of such substances. Our insurance may not be adequate to cover such costs or damages, or may not continue to be available at a price or under terms that are satisfactory to us. In such cases, if we are required to pay significant costs or damages, it could materially adversely affect our business, results of operations, financial condition and cash flows.
Compliance with applicable environmental laws may substantially increase our costs of doing business which could reduce our profits.
We are subject to various laws and regulations relating to the operation of our properties, which are administered by numerous federal, state and local governmental agencies. We face a potential for environmental liability by virtue of our ownership of real estate property. If hazardous substances (including herbicides and pesticides used by us or by any persons leasing our lands) are discovered emanating from any of our lands and the release of such substances presents a threat of harm to the public health or the environment, we may be held strictly liable for the cost of remediation of these hazardous substances. In addition, environmental laws that apply to a given site can vary greatly according to the site’s location, its present and former uses, and other factors such as the presence of wetlands or endangered species on the site. Management monitors environmental legislation and requirements and makes every effort to remain in compliance with such regulations. Furthermore, we require lessees of our properties to comply with environmental regulations as a condition of leasing. We also purchase insurance for environmental liability when it is available; however, these insurance contracts may not be adequate to cover such costs or damages or may not continue to be available at prices and terms that would be satisfactory. It is possible that in some cases the cost of compliance with these environmental laws could exceed the value of a particular tract of land, make it unsuitable for use in what would otherwise be its highest and best use, and/or be significant enough that it would materially adversely affect us.
Our business may be adversely affected if we lose key employees.
We depend to a large extent on the services of certain key management personnel. These individuals have extensive experience and expertise in the business lines and segments in which they work. The loss of any of these individuals could have a material adverse effect on our businesses. We do not maintain key-man life insurance with respect to any of our employees. Our success will be dependent on our ability to continue to attract, employ and retain skilled personnel in our business lines and segments.
On May 17, 2022, Richard Rallo notified the Company of his decision to resign from his role as the Company’s Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) effective as of May 31, 2022. Mr. Rallo’s decision to resign was for personal reasons to eliminate extensive travel and/or avoid relocation to Florida and was not related to any disagreement with the Company or its independent registered public accountants on any matter relating to the Company’s financial or accounting operations, policies, or practices. Mr. Rallo has agreed to provide consulting services to the Company through December 31, 2022.
19
On September 6, 2022, the Company announced the appointment of Perry G. Del Vecchio, age 55, as the Chief Financial Officer (Principal Financial and Accounting Officer) of the Company, effective as of September 6, 2022. Mr. Del Vecchio is responsible for all corporate finance, treasury and accounting functions of the Company and reports directly to John Kiernan, the Company's President and Chief Executive Officer.
Material weaknesses and other control deficiencies relating to our internal control over financial reporting could result in errors in our reported results and could have a material adverse effect on our operations, investor confidence in our business and the trading price of our securities.
Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls or fraud. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.
Management’s assessment of our internal control over financial reporting as of September 30, 2022 concluded that our internal control over financial reporting was not effective and that a material weakness existed. This material weakness resulted in the restatements of our consolidated balance sheets, consolidated statements of changes in equity and related disclosures as of September 30, 2021, and as of the end of each quarterly period ended June 30, 2022, March 31, 2022, December 31, 2021, June 30, 2021, March 31, 2021, and December 31, 2020 to correct errors relating to the calculation of deferred tax liabilities and make adjustments to the amounts of previously reported deferred tax liabilities and retained earnings. As described in “Part II—Item 9A—Controls and Procedures,” we began the process of remediating our identified material weakness. Management’s continuing evaluation and work to enhance our internal control over financial reporting has required and will continue to require the dedication of additional resources and management time and expense. If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results could be harmed, and we could fail to meet our financial reporting obligations, which in turn could affect the market price of our securities. In addition, perceptions of us among customers, lenders, investors, securities analysts and others could also be adversely affected. Current material weakness or any weaknesses or deficiencies identified in the future could also hurt confidence in our business and the accuracy and completeness of our financial statements, and adversely affect our ability to do business with these groups.
We can give no assurances that the remediation measures we have begun implementing, or any future measures we may take, will remediate the material weakness identified or that any additional material weaknesses will not arise in the future due to our failure to implement and maintain adequate internal control over financial reporting. In addition, even if we are successful in strengthening our controls and procedures, those controls and procedures may not be adequate to prevent or identify irregularities or ensure the fair and accurate presentation of our financial statements included in our periodic reports filed with the SEC.
The restatements and any resulting investigations, legal or administrative proceedings could result in fines, injunctions, orders, and penalties which could materially adversely affect our business, financial condition, results of operations, and liquidity.
The restatements, and any investigations, legal or administrative proceedings that could result therefrom, may divert our management’s time and attention and cause us to incur substantial costs. Such investigations can also lead to fines or injunctions or orders with respect to future activities. At this point, we are unable to predict whether the SEC or any other regulatory agencies will commence any investigations or commence legal action. Any such investigations may result in us being subject to criminal and civil penalties and other remedial measures, which could have an adverse impact on our business, results of operations, financial condition and liquidity.
Inflation can have a significant adverse effect on our operations.
Inflation can have a major adverse impact on our citrus operations and there has been significant recent inflationary developments in the United States. It is uncertain as to whether these recent inflationary pressures will continue, will increase or will be brought under control. Our citrus operations are most affected by escalating costs and unpredictable revenues and high irrigation water costs. High fixed water costs related to our citrus lands will continue to adversely affect earnings. Prices received for many of our products are dependent upon prevailing market conditions and commodity prices. Therefore, in addition to making it difficult to accurately predict revenue, we are unable to pass on cost increases caused by general inflation, except to the extent reflected in market conditions and commodity prices. As a result, if market conditions and commodity prices do not enable us to pass along such cost increases, these recent and future inflationary pressures would likely negatively affect our results of operations, cash flows and/or financial position.
Rising inflation and the deadly conflict in Ukraine could adversely affect the Company’s business, financial condition, results of operations and cash flows.
During the fiscal year ended September 30, 2022, we continued to experience inflationary pressure on transportation and commodity costs, which we expect to continue through 2023. A number of external factors, including the deadly conflict in Ukraine, the COVID-19 pandemic, adverse weather conditions, supply chain disruptions (including raw material shortages) and labor shortages, have impacted and may continue to impact
20
transportation and commodity costs. When prices increase, we may or may not pass on such increases to our customers without suffering reduced volume, revenue, margins and operating results.
We incur increased costs as a result of being a publicly traded company.
As a company with publicly traded securities, we have incurred, and will continue to incur, significant legal, accounting and other expenses. In addition, the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as well as rules promulgated by the SEC and Nasdaq, require us to adopt corporate governance practices applicable to U.S. public companies. These laws, rules and regulations may increase our legal and financial compliance costs, which could adversely affect the trading price of our common stock.
System security risks, data protection breaches, cyber-attacks and systems integration issues could disrupt our internal operations or services provided to customers, and any such disruption could reduce our expected revenues, increase our expenses, damage our reputation and adversely affect our stock price.
Computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our confidential information or that of third parties, create system disruptions or cause shutdowns. Computer programmers and hackers also may be able to develop and deploy viruses, worms, and other malicious software programs that attack our systems and databases or otherwise exploit any security vulnerabilities of our systems and databases. In addition, sophisticated hardware and operating system software and applications that we develop internally or procure from third parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of the system. The costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential customers that may impede our sales, distribution or other critical functions.
Portions of our information technology infrastructure also may experience interruptions, delays or cessations of service or produce errors in connection with systems integration or migration work that takes place from time to time. We may not be successful in implementing new systems and transitioning data, which could cause business disruptions and be more expensive, time consuming, disruptive and resource intensive. Such disruptions could adversely impact our ability to track sales and could interrupt other operational or financial processes, which in turn could adversely affect our financial results, stock price and reputation.
The COVID-19 pandemic continues to create macroeconomic uncertainty and could adversely affect the Company’s business, financial condition, results of operations and cash flows.
We are vulnerable to the general economic impacts of pandemics, such as the ongoing COVID-19 pandemic and any emergence of variants for which vaccines may not be effective. The COVID-19 pandemic continues to create significant macroeconomic uncertainty and supply chain constraints. The COVID-19 pandemic has also resulted in the implementation of numerous measures to contain the virus worldwide, which may continue to cause significant disruptions to the US and global economy. The extent to which COVID-19 and related challenges will continue to impact our results will depend on future developments, which are uncertain and cannot be predicted with confidence.
Potential negative impacts of the pandemic could include, but are not limited to, the following:
21
Our business operations could be significantly harmed by natural disasters or global epidemics.
Our business could be adversely affected by natural disasters such as pandemics, epidemics, outbreaks or other health crises. An outbreak of avian flu or H1N1 flu in the human population, or another similar health crisis, such as the current COVID-19 pandemic referred to above, could adversely affect economies and financial markets, particularly those in the United States. Moreover, any related disruptions to transportation or the free movement of persons could hamper our operations and force us to close our offices temporarily.
The occurrence of any of the foregoing or other natural or man-made disasters could cause damage or disruption to us, our employees, operations, markets and customers, which could result in significant delays in deliveries or substantial shortages of our products and adversely affect our business results of operations, financial condition or prospects.
Risks Related to Our Indebtedness
We maintain a significant amount of indebtedness which could adversely affect our financial condition, results of operations or cash flows and may limit our operational and financing flexibility and negatively impact our business.
As of September 30, 2022, we had approximately $106,696,000 in principal amount of indebtedness outstanding under our secured credit facilities and an additional availability of approximately $89,762,000 is available under our working capital and revolving lines of credit. Our loan agreements, as well as other debt instruments we may enter into in the future, may have negative consequences to us and could limit our business because we will use a substantial portion of our cash flows from operations to pay debt service costs which will reduce the funds available to us for corporate and general expenses and it may make us more vulnerable to economic downturns and adverse developments in our business. Our loan agreements require us to comply with various restrictive covenants and some contain financial covenants that require us to comply with specified financial ratios and tests. Our failure to meet these covenants could result in default under these loan agreements and would result in a cross-default under other loan agreements. In the event of a default and our inability to obtain a waiver of the default, all amounts outstanding under loan agreements could be declared immediately due and payable. Our loan agreements also contain various covenants that limit our ability to engage in specified types of transactions. We expect that we will depend primarily upon our citrus operations to provide funds to pay our corporate and general expenses and to pay any amounts that may become due under any credit facilities and any other indebtedness we may incur. In addition, there are factors beyond our control that could negatively affect our citrus business revenue stream. Our ability to make these payments depends on our future performance, which will be affected by various financial, business, macroeconomic and other factors, many of which we cannot control.
We may be unable to generate sufficient cash flow to service our debt obligations.
To service our debt, we require a significant amount of cash. Our ability to generate cash, make scheduled payments or refinance our obligations depends on our successful financial and operating performance. Our financial and operating performance, cash flow and capital resources depend upon prevailing economic conditions and various financial, business, and other factors, many of which are beyond our control. These factors include among others:
If our cash flow and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell material assets or operations, obtain additional capital or restructure our debt. If we are required to take any actions referred to above, it could have a material adverse effect on our business, financial condition and results of operations. In addition, we cannot assure investors
22
that we would be able to take any of these actions on terms acceptable to us, or at all, or that these actions would enable us to continue to satisfy our capital requirements or that these actions would be permitted under the terms of our various debt agreements.
Some of our debt is based on variable rates of interest, which could result in higher interest expenses in the event of an increase in the interest rates.
Our credit facility and certain of our term loans that we have currently bear interest at variable rates, which will generally change as interest rates change. Currently, we are experiencing, and are expecting to continue to experience increases in interest on our variable rate term loans. We bear the risk that the rates we are charged by our lenders will increase faster than the earnings and cash flow of our business, which could reduce profitability, adversely affect our ability to service our debt, cause us to breach covenants contained in our credit facility and term loans, any of which could materially adversely affect our business, financial condition, results of operations and cash flows.
Risks Related to our Common Stock
We may not be able to continue to pay or maintain our cash dividends on our common stock and the failure to do so may negatively affect our share price.
We have historically paid regular quarterly dividends to the holders of our common stock and in June 2021 announced an increase in our quarterly dividend to $0.50 per common share, from $0.18 per common share. Our ability to pay cash dividends depends on, among other things, our cash flows from operations, our cash requirements, our financial condition, the degree to which we are/or become leveraged, contractual restrictions binding on us, provisions of applicable law and other factors that our Board of Directors may deem relevant. There can be no assurance that we will generate sufficient cash from continuing operations in the future or have sufficient cash surplus or net profits to pay dividends on our common stock. Our dividend policy is based upon our directors’ current assessment of our business and the environment in which we operate, and that assessment could change based on business developments (which could, for example, increase our need for capital expenditures) or new growth opportunities. Our Board of Directors may, in its discretion, decrease the level of cash dividends or entirely discontinue the payment of cash dividends. The reduction or elimination of cash dividends may negatively affect the market price of our common stock.
There can be no assurance that we will resume the repurchase of shares of our common stock.
In March 2017, our Board of Directors authorized the repurchase of up to $5,000,000 of the Company’s common stock beginning March 9, 2017 and continued through March 9, 2019. In May 2017, our Board of Directors authorized the repurchase of up to an additional $2,000,000 of the Company’s common stock beginning May 24, 2017 and continued through May 24, 2019. There can be no assurance that we will repurchase shares in the future in any particular amounts or at all. A reduction in, or elimination of, share repurchases could have a negative effect on our share price.
If we were to conduct another tender offer or engage in an additional share repurchase program, holders of our securities would be subject to certain risks associated with a decrease in the outstanding number of shares of our common stock.
In September 2018 the Company announced the commencement of the Tender Offer. During the Tender Offer the Company repurchased an aggregate of 752,234 shares at a price of $34.00 per share aggregating $25,575,956. These shares represented approximately 9.2% of the total number of shares of the Company’s common stock issued and outstanding as of October 2, 2018. While we have no plans to conduct another tender offer at this time, we may conduct another tender offer or engage in the repurchase of our shares in the future. Stockholders could be adversely affected by a reduction in our “public float,” that is, the number of shares owned by outside stockholders and available for trading in the securities markets, if the Company makes future tender offers or private or open market repurchases of its shares. Although the Company is not currently pursuing a tender offer or repurchase program, there are no assurances that our Board of Directors will not authorize the Company to do so in the future. Engaging in a tender offer or repurchase program in the future could have a negative effect on our share price.
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Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
As of September 30, 2022, Alico owned approximately 74,000 acres of land located in eight counties in Florida. Acreage in each county and the primary classification with respect to the present use of these properties is shown in the following table:
|
|
Total |
|
|
Hendry |
|
|
Polk |
|
|
Collier |
|
|
DeSoto |
|
|
Glades |
|
|
Charlotte |
|
|
Hardee |
|
|
Highlands |
|
|||||||||
Alico Citrus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Citrus Groves |
|
|
48,845 |
|
|
|
8,766 |
|
|
|
7,107 |
|
|
|
7,166 |
|
|
|
21,470 |
|
|
|
— |
|
|
|
2,538 |
|
|
|
574 |
|
|
|
1,224 |
|
Citrus Nursery |
|
|
22 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
22 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total Citrus Groves |
|
|
48,867 |
|
|
|
8,766 |
|
|
|
7,107 |
|
|
|
7,166 |
|
|
|
21,492 |
|
|
|
— |
|
|
|
2,538 |
|
|
|
574 |
|
|
|
1,224 |
|
Land Management and Other Operations |
|
|
24,161 |
|
|
|
20,139 |
|
|
|
— |
|
|
|
4,022 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Mining |
|
|
526 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
526 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
73,554 |
|
|
|
28,905 |
|
|
|
7,107 |
|
|
|
11,188 |
|
|
|
21,492 |
|
|
|
526 |
|
|
|
2,538 |
|
|
|
574 |
|
|
|
1,224 |
|
Approximately 54,600 acres of the properties listed are encumbered by credit agreements totaling approximately $216,500,000, of which there was approximately $106,696,000 outstanding at September 30, 2022. For a more detailed description of the credit agreements and collateral please see Note 6. “Long-Term Debt and Lines of Credit” to the Company’s fiscal year 2022 consolidated financial statements.
Although the Company has mineral rights on approximately 90,000 acres, the Company currently collects mining royalties on only approximately 526 acres of the land included in the table above located in Glades County, Florida and on none of the non-owned lands with respect to which it holds mineral rights. These royalties do not represent a significant portion of operating revenues or gross profits.
Item 3. Legal Proceedings
From time to time, Alico may be involved in litigation relating to claims arising out of its operations in the normal course of business. There are no current legal proceedings to which the Company is a party or of which any of its property is subject that it believes will have a material adverse effect on its financial position, results of operations or cash flows.
Item 4. Mine Safety Disclosures
Not Applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Common Stock
Our common stock is traded on the Nasdaq Global Select Market under the symbol ALCO.
Holders
On December 2, 2022, our stock transfer records indicated there were 7,592,937 holders of record of our common stock. A greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers and other financial institutions.
Dividend Policy
The declaration and amount of any actual cash dividend are in the sole discretion of our Board of Directors and are subject to numerous factors that ordinarily affect dividend policy, including the results of our operations and financial position, as well as general economic and business conditions.
25
Stock Performance Graph
The graph below represents our common stock performance, comparing the value of $100 invested on September 30, 2017 in our common stock, the S&P 500 Index, the S&P Agricultural Products Index and a Company-constructed peer group, which includes Forestar Group, Inc., Limoneira Company, The St. Joe Company, Tejon Ranch Co. and Texas Pacific Land Trust.
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INDEXED RETURNS |
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Base |
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Years Ending |
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Company Name / Index |
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Sept 17 |
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Sept 18 |
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Sept 19 |
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Sept 20 |
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Sept 21 |
|
|
Sept 22 |
|
|||||
Alico, Inc. |
|
|
100 |
|
|
99.75 |
|
101.21 |
|
|
86.15 |
|
|
107.35 |
|
|
|
93.70 |
|
|||
S&P 500 Index |
|
|
100 |
|
|
117.91 |
|
|
122.93 |
|
|
|
141.55 |
|
|
|
184.02 |
|
|
155.55 |
|
|
S&P Agricultural Products Index |
|
|
100 |
|
|
112.67 |
|
|
95.30 |
|
|
|
113.30 |
|
|
160.33 |
|
|
193.24 |
|
||
Peer Group |
|
|
100 |
|
|
163.18 |
|
|
129.83 |
|
|
106.17 |
|
|
235.39 |
|
|
297.94 |
|
|||
(Includes reinvestment of dividends)
Recent Sale of Unregistered Securities
None.
Issuer Repurchases of Equity Securities
We adopted Rule 10b5-1 share repurchase plan under the Securities Exchange Act of 1934 (the “Plan”) in connection with share repurchase authorizations. The Plan allows us to repurchase our shares of common stock at times when it otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods. Because repurchases under the Plan are subject to certain pricing parameters, there is no guarantee as to the exact number of common shares that will be repurchased under the Plan or that there will be any repurchases pursuant to the Plan. We did not repurchase any of our common stock under our Plan during the year ended September 30, 2022.
Item 6. [Reserved]
26
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the accompanying Consolidated Financial Statements and related Notes thereto.
Cautionary Statement Regarding Forward-Looking Information
We provide forward-looking information in this Annual Report on Form 10-K, particularly in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any statements in this Annual Report on Form 10-K that are not historical facts are forward-looking statements. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on our current expectations, estimates and projections about our business based, in part, on assumptions made by our management and can be identified by terms such as “plans,” “expect,” “may,” "anticipate,” “intend,” “should be,” “will be” “is likely to,” “believes,” and similar expressions referring to future periods. Alico believes the expectations reflected in the forward-looking statements are reasonable but cannot guarantee future results, level of activity, performance or achievements. Actual results may differ materially from those expressed or implied in the forward-looking statements. Therefore, Alico cautions you against relying on any of these forward-looking statements. Factors which may cause future outcomes to differ materially from those foreseen in forward-looking statements include, but are not limited to: changes in laws, regulation and rules, including tax laws and tax rates; climate change; weather conditions that affect production, transportation, storage, demand, import and export of fresh product and their by-products, and that may result in impairment expense such as the freeze in the last week of January 2022 or Hurricane Ian in the last week of September 2022; increased pressure from diseases including citrus greening and citrus canker, as well as insects and other pests; disruption of water supplies or changes in water allocations; market pricing of citrus; pricing and supply of raw materials and products; market responses to industry volume pressures; pricing and supply of energy, including, but not limited to, changes due in part to the deadly conflict in Ukraine; changes in interest rates; availability of refinancing; availability of financing for land development activities and other growth and corporate opportunities; onetime events; acquisitions and divestitures; ability to make strategic acquisitions or divestitures; our ability to maintain effective internal control over financial reporting; the impact of, and costs related to, any investigations, legal or administrative actions that may result from the restatements described in this Annual Report on Form 10-K; ability to redeploy proceeds from divestitures; ability to consummate selected land acquisitions; ability to take advantage of tax deferral options; ability to retain executive officers and to replace departed executive officers; ability to replace the Company’s primary third party grove management customer and even further expand the third party grove management program; ability to complete and implement land use planning activities, including adding to entitlements applicable to owned real estate; seasonality; labor disruptions; inability to pay debt obligations; inability to engage in certain transactions due to restrictive covenants in debt instruments; government restrictions on land use; changes in land values, agricultural or otherwise; the extent to which real estate value appreciates; impact of the COVID-19 outbreak and coronavirus pandemic on our agriculture operations, including without limitation demand for product, supply chain, health and availability of our labor force, the labor force of contractors we engage, and the labor force of our competitors; other risks related to the duration and severity of the COVID-19 outbreak and coronavirus pandemic and its impact on Alico’s business; the impact of the COVID-19 outbreak and coronavirus pandemic on the U.S. and global economies and financial markets, including without limitation related legislative and regulatory initiatives; access to governmental loans and incentives; access to governmental relief programs; settlement of insurance claims; any reduction in the public float resulting from repurchases of common stock by Alico; changes in equity awards to employees; whether the Company's dividend policy, including its recent increased dividend amounts, is continued; expressed desire of certain of our stockholders to liquidate their shareholdings by virtue of past market sales of common stock, by sales of common stock or by way of future transactions designed to consummate such expressed desire; political changes and economic crises; ability to implement ESG initiatives; competitive actions by other companies; increased competition from international companies; changes in environmental regulations and their impact on farming practices; the land ownership policies of governments; changes in government farm programs and policies and international reaction to such programs; changes in pricing calculations with our customers; fluctuations in the value of the U.S. dollar, interest rates, inflation and deflation rates; length of terms of contracts with customers; impact of concentration of sales to one customer; and changes in and effects of crop insurance programs, global trade agreements, trade restrictions and tariffs; and soil conditions, harvest yields, prices for commodities, and crop production expenses. These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those Risks Factors included in Part I, Item 1A and elsewhere in this Annual Report on Form 10-K.
Restatement of Previously Issued Consolidated Financial Statements
As described in the Explanatory Note above, Note 2, “Restatement of Previously Issued Consolidated Financial Statements” of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K, and Exhibit 99.1, Select Balance Sheet Data (Restated) for each of the eight quarterly periods in fiscal 2022 and 2021 filed herewith, we have restated our audited consolidated balance sheet, statements of changes in equity and related disclosures as of September 30, 2021 to reflect adjustments in the amounts of previously reported deferred tax liabilities and retained earnings. The restatement also impacted the same line items in the audited consolidated balance sheet, statements of
27
changes in equity and related disclosures as of September 30, 2022 included in this Annual Report on Form 10-K. In addition, as reflected in Exhibit 99.1 to this Annual Report on Form 10-K, we have restated our unaudited consolidated balance sheet, statements of changes in equity and related disclosures as of the end of each quarterly period ended June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021, and December 30, 2020, in each case, to reflect adjustments in the amounts of previously reported deferred tax liabilities and retained earnings.
These adjustments did not impact any of the items in our results of operations or our liquidity discussed in this section or in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in each of our Annual Report on Form 10-K for the year ended September 30, 2021 or our Quarterly Reports on Form 10-Q for each of the quarters ended June 30, 2022, March 31, 2022, December 31, 2021, June 30, 2021, March 31, 2021, and December 31, 2020.
Introduction
Alico, Inc. (“Alico”), together with its subsidiaries (collectively, the “Company", "we", "us" or "our”), is a holding company with assets and related operations in agriculture, land management and natural resources. We are a Florida agribusiness and land management company with a legacy of achievement and innovation in citrus, cattle and resource conservation. We own approximately 74,000 gross acres of land and approximately 90,000 acres of mineral rights throughout Florida. Alico holds these mineral rights on substantially all its owned acres, with additional mineral rights on other acres. Our principal lines of business are now citrus groves and land management and other operations, which include land conservation, encompassing environmental services, land leasing and related support operations. Prior to the sale of certain ranch land to the State of Florida in September 2020, the Company’s business line also included Water Resources. Our mission is to create value for our customers and stockholders by managing existing lands to their optimal current income and total returns. Alico opportunistically acquires new agricultural assets and produces high quality agricultural products while exercising responsible environmental stewardship. Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help provide an understanding of results of operations, financial condition and changes in financial condition for the periods presented. This MD&A is organized as follows:
Business Overview
Business Description
Alico, Inc., together with its subsidiaries (collectively, “Alico”, the “Company”, “we”, “us” or “our”) generates operating revenues primarily from the sale of its citrus products, caretaking management services, and grazing and hunting leasing. The Company operates as two business segments, and all of its operating revenues are generated in the United States. For the fiscal year ended September 30, 2022, the Company generated operating revenues of approximately $91,947,000, loss from operations of approximately $24,844,000, and net income attributable to common stockholders of approximately $12,459,000. Cash provided by operating activities was approximately $6,523,000 for the fiscal year ended September 30, 2022.
Fiscal Year Highlights and Other Developments
Hurricane Ian
On September 28, 2022, Hurricane Ian made landfall in Florida and the majority of the Company’s groves were impacted by the storm. We believe the lessons learned over the past 125 years, especially since Hurricane Irma in 2017, allowed us to be better prepared prior to landfall and to more rapidly begin recovery after impact. The implementation of our disaster programs, our dedicated workforce, and our experienced
28
management appear to have limited the damage to our properties. Our approximately 48,900 gross acres of citrus groves, which are in Charlotte, Collier, DeSoto, Hardee, Hendry, Highlands and Polk Counties, sustained hurricane, or tropical storm force winds for varying durations of time. Field assessments identified significant drop of fruit from the trees and the estimated impact has been reflected in the casualty loss and inventory impairment charge in the fourth quarter ended September 30, 2022.
While we lost a small percentage of trees, the force and duration of the storm impacted the majority of the groves. Based upon prior experience with serious storms of this nature, we expect it will take up to two full seasons or more for the groves to recover to pre-hurricane production levels. We maintain crop insurance and are working closely with our insurers and adjusters to evaluate and determine the amount of insurance recovery we may be entitled to, if any. We are also working with Florida Citrus Mutual, the industry trade group, and government agencies on securing potential federal relief funds.
Departure and Appointment of Chief Financial Officer
On May 17, 2022, Richard Rallo notified the Company of his decision to resign from his role as the Company’s Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) effective as of May 31, 2022. Mr. Rallo’s decision to resign was for personal reasons to eliminate extensive travel and/or avoid relocation to Florida and was not related to any disagreement with the Company or its independent registered public accountants on any matter relating to the Company’s financial or accounting operations, policies, or practices. Mr. Rallo agreed to provide consulting services to the Company through December 31, 2022 and has been providing such services.
On September 6, 2022, the Company announced the appointment of Perry G. Del Vecchio, age 55, as the Chief Financial Officer (Principal Financial and Accounting Officer) of the Company, effective as of September 6, 2022. Mr. Del Vecchio is responsible for all corporate finance, treasury and accounting functions of the Company and reports directly to John Kiernan, the Company's President and Chief Executive Officer.
Employment and Bonus Agreement
On April 1, 2022, the Company entered into an amended and restated employment agreement with John E. Kiernan (the “Employment Agreement”). At the same time, the Company and Mr. Kiernan entered into an annual performance and long-term bonus agreement (the “Bonus Agreement”). Pursuant to the Employment Agreement, Mr. Kiernan will remain President and Chief Executive Officer of the Company, for a term commencing on April 1, 2022, and ending on September 30, 2024, subject to extension and termination pursuant to the provisions of the Employment Agreement. The Bonus Agreement sets forth the terms under which Mr. Kiernan would be eligible and entitled to short-term and long-term incentive cash and equity bonuses. For further details of this Employment and Bonus Agreement, please see the Form 8-K filed by the Company on April 5, 2022.
Termination of the Citrus Grove Management Agreement
In June 2022, the Company was notified by a primary group of third-party grove owners, who are affiliated with each other (collectively, the “Grove Owners”) and for which the Company was managing groves, that the Grove Owners were terminating the management relationship under a certain property management agreement dated as of July 16, 2020 (the “Property Management Agreement”) with the Company, as the Grove Owners decided to exit the citrus business. As a result, all services relating to this caretaking management initiative, and the accompanying management fee and reimbursed costs associated with performing caretaking management services, ceased as of June 10, 2022.
Prepayment and Restructure of Fixed-Rate Term Loans
On April 29, 2022, the Company made a prepayment on one of its Met Variable-Rate Term Loans in an amount of approximately $15,625,000 and the loan, after also considering a final scheduled principal payment made on May 2, 2022, was fully satisfied.
In April 2021, the Company made a prepayment of $10,312,500 on the Met Fixed-Rate Term Loans and, effective May 1, 2021, the Company modified its Met Fixed-Rate Term Loans, which in the aggregate, after the prepayment, had a balance of $70,000,000, to be interest only with a balloon payment to be paid at maturity, which is November 1, 2029. As part of this modification, the interest rate on these Met Fixed-Rate Term Loans, which were bearing interest at 4.15%, has been adjusted to 3.85% and the Company no longer has the prepayment option previously allowed under the arrangement.
Sales of Land
During the fiscal year ended September 30, 2022, the Company sold approximately 1,187 acres from the Alico Ranch to third parties for approximately $5,997,000 and recognized a gain of approximately $5,616,000. One of these sales transactions, consisting of approximately 142 acres, was sold to an employee of the Company for approximately $651,000.
29
On March 15, 2022, the Company sold approximately 6,286 acres of Alico Ranch to third parties at an average sales price of $4,500 per acre, realizing approximately $28,288,000 of gross proceeds.
The COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the current novel coronavirus outbreak (“COVID-19”) to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures had a significant adverse impact upon many sectors of the economy, including certain agriculture businesses. While epidemiological conditions in the United States have improved as of September 30, 2022, and most of the restrictions on social and commercial activity have been relaxed, a resurgence of the virus could cause epidemiological and macroeconomic conditions to deteriorate and more severe restrictions to be put in place. It is not possible for the Company to predict the duration or magnitude of any adverse effects due to a resurgence at this time. We will continue to monitor the COVID-19 pandemic and its impacts on our business, financial condition, and results of operations.
To date, the Company has experienced no material adverse impacts from this pandemic.
Federal Relief Program – Hurricane Ian
It remains unclear whether there may be Hurricane Ian federal relief programs and, if available, the extent to which the Company will be eligible. The Company intends to take advantage of any such available programs as and when they become available. The Company is currently working with Florida Citrus Mutual, the industry trade group, and government agencies on federal relief programs.
Federal Relief Program – Hurricane Irma
The Company was eligible for Hurricane Irma federal relief programs for block grants that were being administered through the State of Florida. The Company received a total of approximately $25,600,000 in Hurricane Irma federal relief for the period ended September 30, 2019 through September 30, 2022. During the fiscal years ended September 30, 2022, 2021 and 2020, the Company received approximately $1,123,000, $4,299,000 and $4,629,000, respectively, under the Florida Citrus Recovery Block Grant (“CRBG”) program. These federal relief proceeds are included as a reduction to operating expenses in the Consolidated Statements of Operations.
30
Consolidated Results of Operations
The following discussion provides an analysis of Alico's results of operations and should be read in conjunction with the accompanying Consolidated Statements of Operations for the fiscal years ended September 30, 2022, 2021 and 2020:
(in thousands) |
|
Fiscal Year Ended |
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
September 30, |
|
|
Change |
|
|
September 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||||||
Operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Alico Citrus |
|
$ |
89,681 |
|
|
$ |
105,796 |
|
|
$ |
(16,115 |
) |
|
|
(15.2 |
)% |
|
$ |
105,796 |
|
|
$ |
89,369 |
|
|
$ |
16,427 |
|
|
|
18.4 |
% |
Land Management and Other Operations |
|
|
2,266 |
|
|
|
2,768 |
|
|
|
(502 |
) |
|
|
(18.1 |
)% |
|
|
2,768 |
|
|
|
3,138 |
|
|
|
(370 |
) |
|
|
(11.8 |
)% |
Total operating revenues |
|
|
91,947 |
|
|
|
108,564 |
|
|
|
(16,617 |
) |
|
|
(15.3 |
)% |
|
|
108,564 |
|
|
|
92,507 |
|
|
|
16,057 |
|
|
|
17.4 |
% |
Gross (loss) profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Alico Citrus |
|
|
(16,511 |
) |
|
|
21,903 |
|
|
|
(38,414 |
) |
|
NM |
|
|
|
21,903 |
|
|
|
17,088 |
|
|
|
4,815 |
|
|
|
28.2 |
% |
|
Land Management and Other Operations |
|
|
1,746 |
|
|
|
1,990 |
|
|
|
(244 |
) |
|
|
(12.3 |
)% |
|
|
1,990 |
|
|
|
831 |
|
|
|
1,159 |
|
|
|
139.5 |
% |
Total gross (loss) profit |
|
|
(14,765 |
) |
|
|
23,893 |
|
|
|
(38,658 |
) |
|
NM |
|
|
|
23,893 |
|
|
|
17,919 |
|
|
|
5,974 |
|
|
|
33.3 |
% |
|
General and administrative expenses |
|
|
10,079 |
|
|
|
9,453 |
|
|
|
626 |
|
|
|
6.6 |
% |
|
|
9,453 |
|
|
|
10,998 |
|
|
|
(1,545 |
) |
|
|
(14.0 |
)% |
(Loss) income from operations |
|
|
(24,844 |
) |
|
|
14,440 |
|
|
|
(39,284 |
) |
|
NM |
|
|
|
14,440 |
|
|
|
6,921 |
|
|
|
7,519 |
|
|
|
108.6 |
% |
|
Total other income, net |
|
|
37,799 |
|
|
|
31,947 |
|
|
|
5,852 |
|
|
|
18.3 |
% |
|
|
31,947 |
|
|
|
24,456 |
|
|
|
7,491 |
|
|
|
30.6 |
% |
Income before income taxes |
|
|
12,955 |
|
|
|
46,387 |
|
|
|
(33,432 |
) |
|
|
(72.1 |
)% |
|
|
46,387 |
|
|
|
31,377 |
|
|
|
15,010 |
|
|
|
47.8 |
% |
Income tax provision |
|
|
1,069 |
|
|
|
11,567 |
|
|
|
(10,498 |
) |
|
|
(90.8 |
)% |
|
|
11,567 |
|
|
|
7,663 |
|
|
|
3,904 |
|
|
|
50.9 |
% |
Net income |
|
|
11,886 |
|
|
|
34,820 |
|
|
|
(22,934 |
) |
|
|
(65.9 |
)% |
|
|
34,820 |
|
|
|
23,714 |
|
|
|
11,106 |
|
|
|
46.8 |
% |
Net loss (income) attributable to noncontrolling interests |
|
|
573 |
|
|
|
39 |
|
|
|
534 |
|
|
NM |
|
|
|
39 |
|
|
|
(52 |
) |
|
|
91 |
|
|
NM |
|
||
Net income attributable to Alico, Inc. common stockholders |
|
$ |
12,459 |
|
|
$ |
34,859 |
|
|
$ |
(22,400 |
) |
|
|
(64.3 |
)% |
|
$ |
34,859 |
|
|
$ |
23,662 |
|
|
$ |
11,197 |
|
|
|
47.3 |
% |
NM - Not Meaningful
The following table presents our operating revenues, by segment, as a percentage of total operating revenues for the fiscal years ended September 30, 2022, 2021 and 2020:
|
|
Fiscal Year Ended |
|
|||||||||
|
|
September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Operating revenues: |
|
|
|
|
|
|
|
|
|
|||
Alico Citrus |
|
|
97.5 |
% |
|
|
97.5 |
% |
|
|
96.6 |
% |
Land Management and Other Operations |
|
|
2.5 |
% |
|
|
2.5 |
% |
|
|
3.4 |
% |
Total operating revenues |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
31
The following discussion provides an analysis of the Company's operating segments:
Alico Citrus
(in thousands, except per box and per pound solids data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
Fiscal Year Ended |
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
September 30, |
|
|
Change |
|
|
September 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Unit |
|
|
% |
|
|
2021 |
|
|
2020 |
|
|
Unit |
|
|
% |
|
||||||||
Operating Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Early and Mid-Season |
|
$ |
28,287 |
|
|
$ |
31,525 |
|
|
$ |
(3,238 |
) |
|
|
(10.3 |
)% |
|
$ |
31,525 |
|
|
$ |
31,303 |
|
|
$ |
222 |
|
|
|
0.7 |
% |
Valencias |
|
|
47,529 |
|
|
|
55,918 |
|
|
|
(8,389 |
) |
|
|
(15.0 |
)% |
|
|
55,918 |
|
|
|
50,060 |
|
|
|
5,858 |
|
|
|
11.7 |
% |
Fresh Fruit |
|
|
1,256 |
|
|
|
608 |
|
|
|
648 |
|
|
|
106.6 |
% |
|
|
608 |
|
|
|
2,321 |
|
|
|
(1,713 |
) |
|
|
(73.8 |
)% |
Grove Management Services |
|
|
11,928 |
|
|
|
16,983 |
|
|
|
(5,055 |
) |
|
|
(29.8 |
)% |
|
|
16,983 |
|
|
|
4,599 |
|
|
|
12,384 |
|
|
NM |
|
|
Purchase and Resale of Fruit |
|
|
574 |
|
|
|
623 |
|
|
|
(49 |
) |
|
|
(7.9 |
)% |
|
|
623 |
|
|
|
850 |
|
|
|
(227 |
) |
|
|
(26.7 |
)% |
Other |
|
|
107 |
|
|
|
139 |
|
|
|
(32 |
) |
|
|
(23.0 |
)% |
|
|
139 |
|
|
|
236 |
|
|
|
(97 |
) |
|
|
(41.1 |
)% |
Total |
|
$ |
89,681 |
|
|
$ |
105,796 |
|
|
$ |
(16,115 |
) |
|
|
(15.2 |
)% |
|
$ |
105,796 |
|
|
$ |
89,369 |
|
|
$ |
16,427 |
|
|
|
18.4 |
% |
Boxes Harvested: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Early and Mid-Season |
|
|
2,175 |
|
|
|
2,519 |
|
|
|
(344 |
) |
|
|
(13.7 |
)% |
|
|
2,519 |
|
|
|
3,146 |
|
|
|
(627 |
) |
|
|
(19.9 |
)% |
Valencias |
|
|
3,274 |
|
|
|
3,779 |
|
|
|
(505 |
) |
|
|
(13.4 |
)% |
|
|
3,779 |
|
|
|
4,165 |
|
|
|
(386 |
) |
|
|
(9.3 |
)% |
Total Processed |
|
|
5,449 |
|
|
|
6,298 |
|
|
|
(849 |
) |
|
|
(13.5 |
)% |
|
|
6,298 |
|
|
|
7,311 |
|
|
|
(1,013 |
) |
|
|
(13.9 |
)% |
Fresh Fruit |
|
|
91 |
|
|
|
61 |
|
|
|
30 |
|
|
|
49.2 |
% |
|
|
61 |
|
|
|
267 |
|
|
|
(206 |
) |
|
|
(77.2 |
)% |
Total |
|
|
5,540 |
|
|
|
6,359 |
|
|
|
(819 |
) |
|
|
(12.9 |
)% |
|
|
6,359 |
|
|
|
7,578 |
|
|
|
(1,219 |
) |
|
|
(16.1 |
)% |
Pound Solids Produced: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Early and Mid- Season |
|
|
11,034 |
|
|
|
13,598 |
|
|
|
(2,564 |
) |
|
|
(18.9 |
)% |
|
|
13,598 |
|
|
|
17,947 |
|
|
|
(4,349 |
) |
|
|
(24.2 |
)% |
Valencias |
|
|
17,756 |
|
|
|
22,042 |
|
|
|
(4,286 |
) |
|
|
(19.4 |
)% |
|
|
22,042 |
|
|
|
25,631 |
|
|
|
(3,589 |
) |
|
|
(14.0 |
)% |
Total |
|
|
28,790 |
|
|
|
35,640 |
|
|
|
(6,850 |
) |
|
|
(19.2 |
)% |
|
|
35,640 |
|
|
|
43,578 |
|
|
|
(7,938 |
) |
|
|
(18.2 |
)% |
Pound Solids per Box: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Early and Mid-Season |
|
|
5.07 |
|
|
|
5.40 |
|
|
|
(0.33 |
) |
|
|
(6.1 |
)% |
|
|
5.40 |
|
|
|
5.70 |
|
|
|
(0.30 |
) |
|
|
(5.3 |
)% |
Valencias |
|
|
5.42 |
|
|
|
5.83 |
|
|
|
(0.41 |
) |
|
|
(7.0 |
)% |
|
|
5.83 |
|
|
|
6.15 |
|
|
|
(0.32 |
) |
|
|
(5.2 |
)% |
Price per Pound Solids: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Early and Mid-Season |
|
$ |
2.56 |
|
|
$ |
2.32 |
|
|
$ |
0.24 |
|
|
|
10.3 |
% |
|
$ |
2.32 |
|
|
$ |
1.74 |
|
|
$ |
0.58 |
|
|
|
33.3 |
% |
Valencias |
|
$ |
2.68 |
|
|
$ |
2.54 |
|
|
$ |
0.14 |
|
|
|
5.5 |
% |
|
$ |
2.54 |
|
|
$ |
1.95 |
|
|
$ |
0.59 |
|
|
|
30.3 |
% |
Price per Box: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fresh Fruit |
|
$ |
13.80 |
|
|
$ |
9.97 |
|
|
$ |
3.83 |
|
|
|
38.4 |
% |
|
$ |
9.97 |
|
|
$ |
8.69 |
|
|
$ |
1.28 |
|
|
|
14.7 |
% |
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of Sales |
|
$ |
81,944 |
|
|
$ |
55,660 |
|
|
$ |
26,284 |
|
|
|
47.2 |
% |
|
$ |
55,660 |
|
|
$ |
52,492 |
|
|
$ |
3,168 |
|
|
|
6.0 |
% |
Harvesting and Hauling |
|
|
15,965 |
|
|
|
16,922 |
|
|
|
(957 |
) |
|
|
(5.7 |
)% |
|
|
16,922 |
|
|
|
19,897 |
|
|
|
(2,975 |
) |
|
|
(15.0 |
)% |
Grove Management Services |
|
|
10,547 |
|
|
|
15,084 |
|
|
|
(4,537 |
) |
|
|
(30.1 |
)% |
|
|
15,084 |
|
|
|
3,817 |
|
|
|
11,267 |
|
|
NM |
|
|
Purchase and Resale of Fruit |
|
|
449 |
|
|
|
526 |
|
|
|
(77 |
) |
|
|
(14.6 |
)% |
|
|
526 |
|
|
|
704 |
|
|
|
(178 |
) |
|
|
(25.3 |
)% |
Other |
|
|
(2,713 |
) |
|
|
(4,299 |
) |
|
|
1,586 |
|
|
|
(36.9 |
)% |
|
|
(4,299 |
) |
|
|
(4,629 |
) |
|
|
330 |
|
|
|
(7.1 |
)% |
Total |
|
$ |
106,192 |
|
|
$ |
83,893 |
|
|
$ |
22,299 |
|
|
|
26.6 |
% |
|
$ |
83,893 |
|
|
$ |
72,281 |
|
|
$ |
11,612 |
|
|
|
16.1 |
% |
Gross (Loss) Profit |
|
$ |
(16,511 |
) |
|
$ |
21,903 |
|
|
$ |
(38,414 |
) |
|
NM |
|
|
$ |
21,903 |
|
|
$ |
17,088 |
|
|
$ |
4,815 |
|
|
|
28.2 |
% |
|
NM - Not Meaningful
Our citrus groves produce the majority of our annual operating revenues and the citrus grove business is seasonal because it is tied to the growing and harvest season. Historically, the second and third quarters of Alico's fiscal year produce the majority of the annual revenues and working capital requirements are typically greater in the first and fourth quarters of the fiscal year, coinciding with the growing cycles.
The Company sells its Early and Mid-Season and Valencia oranges to processors that convert the majority of the citrus crop into orange juice. The processors generally buy the citrus crop on a pound solids basis, which is the measure of the soluble solids (sugars and acids) contained in one box of fruit. The Company’s fresh fruit is generally sold to packing houses that purchase the citrus on a per box basis. The Company also provides citrus grove caretaking and harvest and haul management services to third parties from which revenues are generated, including a management fee. Other revenues consist of the purchase and reselling of fruit.
Alico's operating expenses consist primarily of cost of sales, harvesting and hauling costs and grove management service costs. Cost of sales represents the cost of maintaining the citrus groves for the preceding calendar year and does not vary in relation to production. Harvesting and
32
hauling costs represent the costs of bringing citrus product to processors and varies based upon the number of boxes produced. Grove management services include those costs associated with citrus grove caretaking and harvest and haul management services provided to third parties. Other expenses include the period costs of reselling third-party fruit.
The decrease in revenue for the fiscal year ended September 30, 2022, compared to the fiscal year ended September 30, 2021 was primarily due to a decrease in both the Early and Mid-Season and Valencia fruit harvested and a decrease in grove management services revenue.
The decrease in Early and Mid-Season and Valencia fruit harvested was primarily driven by a decrease in processed box production and a decrease in pound solids per box. The processed box production for the fiscal year ended September 30, 2022 decreased by 13.5%, as compared to the same period in the prior fiscal year, primarily due to greater fruit drop, attributed to disease and weather conditions. In addition, as previously mentioned, in late January 2022, the Company’s groves, along with many of the other groves in Florida, were impacted by a freeze event. Specifically, the Company’s Valencia box production was negatively impacted by the freeze event. Because the Company’s Early and Mid-Season harvest was substantially complete at the time of the freeze, there was no material impact to the Company’s Early and Mid-Season box production because of this freeze event.
The aggregate decrease in pound solids per box of 6.6% during the fiscal year ended September 30, 2022, as compared to the prior fiscal year ended September 30, 2021, was mainly due to the internal quality of the fruit not being as strong as it had been in the previous year. This decrease in pound solids per box was also due in part to an acceleration of the harvesting of the Valencia crop in the fiscal year ended September 30, 2022, which acceleration was implemented in an effort to maximize the box production and avoid less damage due to the freeze event, but as a result led to the realization of lower pound solids per box.
Partially offsetting the decrease in processed box production and pound solids per box for the fiscal year ended September 30, 2022, compared to the fiscal year ended September 30, 2021, was an increase in the price per pound solid of 7.2%, the increase in large part was due to production being down in Florida as well as in Brazil and due to the continued strong consumption of Not from Concentrate Orange Juice (“NFC”), both of which have led to continued low inventory levels.
The Company, for the fiscal year ended September 30, 2022 compared to the fiscal year ended September 30, 2021, recorded a decrease in revenue from grove management services. The decrease is primarily due to the Grove Owners, to whom the Company was providing caretaking management services, deciding to exit the citrus business at the beginning of the three months ended June 30, 2022. This decision to exit the citrus business eliminated the need for caretaking management services. As a result, caretaking management services and the accompanying reimbursement of caretaking expenses decreased during the fiscal year ended September 30, 2022, when compared to the same period in the prior year. Additionally, all services relating to caretaking management services ceased on June 10, 2022 and the accompanying caretaking management fee ceased on June 30, 2022.
The Company recorded approximately $10,598,000 and $15,752,000 of operating revenue relating to these grove management services, including the management fee, in the fiscal years ended September 30, 2022 and 2021, respectively. The Company recorded approximately $9,711,000 and $14,342,000 of operating expenses relating to these grove management services in fiscal years ended September 30, 2022 and 2021, respectively.
The USDA, in its October 12, 2022 Citrus Crop Forecast for the 2021-22 harvest season, indicated the overall Florida orange crop decreased from approximately 52,950,000 boxes for the 2020-21 crop year to approximately 41,050,000 boxes for the 2021-22 crop year, a decrease of approximately 22.5%. The Company experienced a decline in total box production in the 2021-2022 harvest season crop of 12.9%. The Company believes this lower rate of decline, as compared to the state forecast, is due to the efficiencies of the Company’s comprehensive grove management program, as well as certain precautionary measures the Company took to minimize the impact of the freeze event on its groves and production.
The increase in operating expenses for the fiscal year ended September 30, 2022, as compared to the fiscal year ended September 30, 2021, primarily relates to the Company recording adjustments to inventory as a result of Hurricane Ian. During the fourth quarter ended September 30, 2022, the Company recorded an inventory casualty loss adjustment of approximately $14,900,000 and an inventory impairment adjustment of approximately $6,676,000 to adjust the inventory to its estimated net realizable value as of September 30, 2022. Partially offsetting the increase was a reduction in expenses related to the grove management services as a result of the Grove Owners termination of the Property Management Agreement in June 2022.
The increase in revenue for the fiscal year ended September 30, 2021, compared to the fiscal year ended September 30, 2020 was primarily due to an increase in the revenue generated from grove management services and the Valencia fruit harvested.
On July 16, 2020, the Company executed an agreement with a group of third parties, who are affiliated with each other (collectively, the “Grove Owners”), to provide citrus grove caretaking and harvest and haul management services for approximately 7,000 acres at the time of executing the contract. Under the terms of this agreement, the Company was reimbursed by the Grove Owners for all its costs incurred related to providing these services and received a management fee based on acres. The Company recorded both an increase in revenues and expenses as the Company
33
provided these citrus grove caretaking management services. For the fiscal year ended September 30, 2021, the Company recorded approximately $15,752,000 of operating revenue relating to these grove management services, including the management fee, as compared to approximately $3,311,000 in the fiscal year ended September 30, 2020.
The increase from the Valencia fruit harvest was driven by an increase in the market price per pound solids as compared to the prior year. The increase in the price per pound solids was due to increased consumption of Not-from-Concentrate Orange Juice (“NFC”) as well as tighter supplies of citrus fruit from Florida, Brazil, and Mexico, which, in turn, led to reduced inventory levels. Largely offsetting this increase in pricing was the effect of fewer Valencia boxes harvested and lower pound solids per box for the fiscal year ended September 30, 2021, compared to the fiscal year ended September 30, 2020. The Company, along with the Florida industry in general, recorded a smaller number of boxes harvested as a result of greater fruit drop rate during the current harvest season as compared to the previous year. In addition, the internal quality of the fruit was not as strong as in the previous year resulting in lower pound solids per box during the fiscal year ended September 30, 2021.
Total processed boxes harvested in fiscal year 2021 decreased by approximately 13.9%, as compared to fiscal year 2020. Pound solids decreased by approximately 24.2% for the Early and Mid-Season crop and decreased by approximately 14.0% for the Valencia crop. The combination of these items resulted in approximately 7,938,000 fewer pound solids sold in fiscal year 2021, as compared to fiscal year 2020.
The increase in citrus cost of sales for the fiscal year ended September 30, 2022 was mainly due to recording inventory adjustments relating to the estimated casualty loss and inventory impairment as a result of Hurricane Ian of $14,900,000 and $6,676,000, respectively, as well as increases in fuel and fertilizer costs, when compared to the fiscal year ended September 30, 2021. Partially offsetting these increases was a decrease in the Company's caretaking expenses for the fiscal year ended September 30, 2022, as compared to the fiscal year ended September 30, 2021, due to the Grove Owners deciding to exit the citrus business during the quarter ended June 30, 2022. Additionally, a reduction in harvest and haul expenses was recognized due to a decrease in Early and Mid-Season and Valencia boxes harvested, as compared to the same period in the prior year, due to the termination of the management relationship under the Property Management Agreement with the Grove Owners during the quarter ended June 30, 2022.
The decrease in gross profit for fiscal year 2022, as compared to fiscal year 2021, related primarily to decreased revenues of approximately $16,115,000 discussed above, and the recording of an inventory casualty loss of approximately $14,900,000 and inventory impairment of approximately $6,676,000 relating to fruit loss as a result of Hurricane Ian.
The increase in operating expenses for the fiscal year 2021, as compared to the fiscal year 2020, primarily relates to grove management services it provides to third parties. As mentioned above, the Company executed an agreement with the Grove Owners to provide citrus grove caretaking and harvest and haul management services for approximately 7,000 acres owned by such Grove Owners. Under this agreement, for the fiscal years ended September 30, 2021 and 2020, the Company recorded approximately $14,342,000 and $3,016,000, respectively, of operating expenses relating to these grove management services. Additionally, the increase in operating expenses was attributable to the Company purchasing additional citrus acres in May and October 2020, which resulted in cost of sales relating to these groves in the fiscal year ended September 30, 2021. Partially offsetting these increases was a reduction in harvest and haul expenses attributable to a decrease in Early and Mid-season and Valencia boxes harvested.
The credit amounts shown in “Other” in operating expenses above, for the most part, represent federal relief proceeds received under the CRBG program for the fiscal years ended September 30, 2022, 2021, and 2020.
34
Land Management and Other Operations
The table below presents key operating measures for the fiscal years ended September 30, 2022, 2021 and 2020:
(in thousands) |
|
Fiscal Year Ended |
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
September 30, |
|
|
Change |
|
|
September 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||||||
Revenue From: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Land and other leasing |
|
$ |
1,655 |
|
|
$ |
2,404 |
|
|
$ |
(749 |
) |
|
|
(31.2 |
)% |
|
$ |
2,404 |
|
|
$ |
2,683 |
|
|
$ |
(279 |
) |
|
|
(10.4 |
)% |
Other |
|
|
611 |
|
|
|
364 |
|
|
|
247 |
|
|
|
67.9 |
% |
|
|
364 |
|
|
|
455 |
|
|
|
(91 |
) |
|
|
(20.0 |
)% |
Total |
|
$ |
2,266 |
|
|
$ |
2,768 |
|
|
$ |
(502 |
) |
|
|
(18.1 |
)% |
|
$ |
2,768 |
|
|
$ |
3,138 |
|
|
$ |
(370 |
) |
|
|
(11.8 |
)% |
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Land and other leasing |
|
$ |
516 |
|
|
$ |
762 |
|
|
$ |
(246 |
) |
|
|
(32.3 |
)% |
|
$ |
762 |
|
|
$ |
955 |
|
|
$ |
(193 |
) |
|
|
(20.2 |
)% |
Water conservation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
% |
|
|
— |
|
|
|
1,346 |
|
|
|
(1,346 |
) |
|
|
(100.0 |
)% |
Other |
|
|
4 |
|
|
|
16 |
|
|
|
(12 |
) |
|
|
(75.0 |
)% |
|
|
16 |
|
|
|
6 |
|
|
|
10 |
|
|
|
166.7 |
% |
Total |
|
$ |
520 |
|
|
$ |
778 |
|
|
$ |
(258 |
) |
|
|
(33.2 |
)% |
|
$ |
778 |
|
|
$ |
2,307 |
|
|
$ |
(1,529 |
) |
|
|
(66.3 |
)% |
Gross Profit |
|
$ |
1,746 |
|
|
$ |
1,990 |
|
|
$ |
(244 |
) |
|
|
(12.3 |
)% |
|
$ |
1,990 |
|
|
$ |
831 |
|
|
$ |
1,159 |
|
|
|
139.5 |
% |
Land and other leasing include lease income from leases for grazing rights, hunting leases, a farm lease, a lease to a third party of an aggregate mine, leases of oil extraction rights to third parties, and other miscellaneous income.
The decrease in revenues from Land Management and Other Operations for the fiscal year ended September 30, 2022, compared to the fiscal year ended September 30, 2021, was primarily due to a reduction in the leased acreage relating to grazing and hunting leases. The reduction in the leased acreage was due to the sale of certain acres in fiscal year 2022, which were previously included under these lease arrangements, thus resulting in fewer acres being leased under these grazing and hunting leases during fiscal year 2022.
The decrease in revenues from Land Management and Other Operations for the fiscal year ended September 30, 2021, compared to the fiscal year ended September 30, 2020, was primarily due to a reduction in the leased acreage relating to grazing and hunting leases. The reduction in the leased acreage was due to the sale of certain acres in fiscal year 2021, which were previously included under these lease arrangements, thus resulting in fewer acres now being leased under these grazing and hunting leases during fiscal year 2021.
Upon the Company selling approximately 10,700 acres on the western part of Alico Ranch to the State of Florida, as mentioned above, and deciding to no longer pursue permit approval activities for a previously proposed water management project, the Company wrote-down approximately $598,000 of assets relating to this project during the fourth quarter of the fiscal year ended September 30, 2020.
General and Administrative
General and administrative expenses for the fiscal year ended September 30, 2022 were approximately $10,079,000, compared to approximately $9,453,000 for the fiscal year ended September 30, 2021. The increase was attributable in large part to increases relating to (i) an increase in legal expense in the twelve months ended September 30, 2022, when compared to the twelve months ended September 30, 2021, with the fiscal year 2021 legal expense having been lower because of a reimbursement of approximately $658,000 from insurers for a corporate legal matter from 2018 that was received during the twelve months ended September 30, 2021, (ii) a net increase in stock compensation expense of approximately $188,000 relating to restricted stock awarded to certain executives, senior managers and employees, and (iii) an increase of approximately $91,500 relating to a company-sponsored incentive for employees to obtain the COVID 19 vaccine. Partially offsetting these increases were reductions relating to (i) a decrease in payroll expenses of approximately $268,000 primarily relating to the reduction in administrative personnel made during the fiscal year ended September 30, 2021 and during the twelve months ended September 30, 2022, and (ii) a reduction in Company’s director fees of approximately $183,000, relating to a modification of the compensation arrangement for the Board of Directors.
General and administrative expenses for the fiscal year ended September 30, 2021 were approximately $9,453,000, compared to approximately $10,998,000 for the fiscal year ended September 30, 2020. The decrease in general and administrative expenses for the fiscal year ended September 30, 2021, as compared to the fiscal year ended September 30, 2020, was attributable to (i) a reduction in legal expense of approximately $805,000, primarily resulting from the receipt of insurance proceeds for the reimbursement of legal fees in the amount of approximately $658,000 during the fiscal year ended September 30, 2021 relating to corporate legal matters, (ii) a reduction in stock compensation expense of approximately $241,000 in light of the fact that in the prior fiscal year, in January 2020 certain stock options had vested, which in turn resulted in an acceleration of expense in that prior fiscal year, (iii) a reduction in payroll expenses for the fiscal year ended September 30, 2021 of approximately $259,000 relating to the resignation of a senior manager in December 2019 and the reduction in other administrative personnel made during fiscal year ended September 30, 2021 and (iv) a reduction in pension expense related to the Company’s deferred retirement benefit
35
plan of approximately $207,000 as a result of the Company terminating such plan and paying out each of the plan participants in August 2020. Partially offsetting this decrease was the Company’s incurring of approximately $200,000 in corporate advisory fees in the fiscal year ended September 30, 2021.
Other Income, net
Other income, net, for the fiscal years ended September 30, 2022 and 2021 was approximately $37,799,000 and approximately $31,947,000, respectively. The increase in other income, net was primarily due to the Company recognizing significant gains on sales of real estate, property and equipment and assets held for sale in both fiscal years. For the fiscal year ended September 30, 2022, the Company recorded gains on sale of real estate, property and equipment and assets held for sale of approximately $41,102,000 relating primarily to the sale of approximately 9,400 acres from the Alico Ranch to several third parties. For the fiscal year ended September 30, 2021, the Company recognized a gain on sale of real estate, property and equipment and assets held for sale of approximately $35,898,000. Additionally, a decrease in interest expense of approximately $663,000 for the fiscal year ended September 30, 2022, as compared to the fiscal year ended September 30, 2021, was primarily due to the reduction of the Company’s long-term debt from the making of mandatory principal payments and certain prepayments.
Other income, net, for the fiscal years ended September 30, 2021 and 2020 was approximately $31,947,000 and approximately $24,456,000, respectively. The increase in other income, net was primarily due to the Company recognizing significant gains on sales of real estate, property and equipment and assets held for sale in both fiscal years. For the fiscal year ended September 30, 2021, the Company recorded gains on sale of real estate, property and equipment and assets held for sale of approximately $35,898,000 relating primarily to the sale of approximately 19,776 acres from the Alico Ranch to several third parties. For the fiscal year ended September 30, 2020, the Company recognized a gain on sale of real estate, property and equipment and assets held for sale of approximately $30,424,000. Additionally, a decrease in interest expense of approximately $1,994,000 for the fiscal year ended September 30, 2021, as compared to the fiscal year ended September 30, 2020, was primarily due to the reduction of the Company’s long-term debt from the making of mandatory principal payments and certain prepayments. In addition, the Company maintained lower balances on both its working capital line of credit and revolving line of credit, which also resulted in reduced interest expense.
Income Taxes
For the fiscal years ended September 30, 2022, 2021 and 2020, the provision for income taxes was approximately $1,069,000, $11,567,000 and $7,663,000, respectively, and the related effective income tax rates were approximately 8.25%, 24.94% and 24.42%, respectively. The decrease in the dollar amount of the tax provision for the fiscal year ended September 30, 2022 is the result of the Company generating lower net income during the current fiscal year as compared to the prior fiscal year and recognizing a charitable deduction for tax purposes. During the fiscal year ended September 30, 2022, the Company sold 1,638 acres of land to the state of Florida at a price below market value, which resulted in a charitable contribution and a charitable deduction for tax purposes. The charitable contribution generated a tax benefit of $6,300,000 of which approximately $500,000 was utilized in the current fiscal year. The Company does not anticipate it will be able to recognize the entire charitable deduction carryover before it expires in 2027. A valuation allowance of $4,300,000 was recorded to partially offset the charitable contribution carryover deferred tax asset, resulting in a net benefit of $1,500,000. The increase in the dollar amount of the tax provision for the fiscal year ended September 30, 2021 is the result of the Company generating greater net income during the fiscal year 2021 as compared to the prior fiscal year.
Seasonality
The Company is primarily engaged in the production of fruit for sale to citrus markets, which is of a seasonal nature, and subject to the influence of natural phenomena and wide price fluctuations. Historically, the second and third quarters of Alico's fiscal year produce the majority of the Company's annual revenue. Working capital requirements are typically greater in the first and fourth quarters of the fiscal year, coinciding with harvesting cycles. Because of the seasonality of the business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.
36
Liquidity and Capital Resources
A comparative balance sheet summary is presented in the following table:
(in thousands) |
|
September 30, |
|
|
|
|
||||||
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|||
Cash and cash equivalents |
|
$ |
865 |
|
|
$ |
886 |
|
|
$ |
(21 |
) |
Total current assets |
|
$ |
31,616 |
|
|
$ |
54,913 |
|
|
$ |
(23,297 |
) |
Total current liabilities |
|
$ |
16,525 |
|
|
$ |
22,306 |
|
|
$ |
(5,781 |
) |
Working capital |
|
$ |
15,091 |
|
|
$ |
32,607 |
|
|
$ |
(17,516 |
) |
Total assets |
|
$ |
409,255 |
|
|
$ |
433,217 |
|
|
$ |
(23,962 |
) |
Principal amount of term loans and lines of credit |
|
$ |
111,624 |
|
|
$ |
126,294 |
|
|
$ |
(14,670 |
) |
Current ratio |
|
1.91 to 1 |
|
|
2.46 to 1 |
|
|
|
|
|||
Sources and Uses of Liquidity and Capital
Alico's business has historically generated positive net cash flows from operating activities. Sources of cash primarily include cash flows from operations, sales of under-performing land and other assets, amounts available under the Company's credit facilities and access to capital markets. Access to additional borrowings under revolving lines of credit is subject to the satisfaction of customary borrowing conditions. As a public company, Alico may have access to other sources of capital. However, access to, and availability of, financing on acceptable terms in the future will be affected by many factors, including (i) financial condition, prospects, and credit rating, (ii) liquidity of the overall capital markets and (iii) the state of the economy. There can be no assurance that the Company will continue to have access to the capital markets on acceptable terms, or at all.
The principal uses of cash that affect Alico's liquidity position include the following: operating expenses including employee costs, the cost of maintaining the citrus groves, harvesting and hauling of citrus products, capital expenditures, stock repurchases, dividends, debt service costs including interest and principal payments on term loans and other credit facilities and acquisitions.
Management believes that a combination of cash-on-hand, cash generated from operations, asset sales and availability under the Company's lines of credit will provide sufficient liquidity to service the principal and interest payments on its indebtedness and will satisfy working capital requirements and capital expenditures for at least the next twelve months and over the long term.
Borrowing Facilities and Long-term Debt
Alico has a $70,000,000 working capital line of credit, which maturity was just extended to November 2025 on October 27, 2022, of which approximately $64,762,000 is available for general use as of September 30, 2022, and a $25,000,000 revolving line of credit, all of which is available for general use as of September 30, 2022 (see Note 6. “Long-Term Debt and Lines of Credit" to the accompanying Consolidated Financial Statements). Additionally, effective May 1, 2021, the Company converted its Met Fixed-Rate Term Loans into interest bearing only loans with a balloon payment of the balance due at maturity, which is November 1, 2029. Such conversion has increased available cash and can be expected to continue to increase the available cash for the foreseeable future. With the increase in available cash, the Company could utilize the available cash for other possible uses such as paying down indebtedness, citrus grove acquisitions, share repurchases, additional increased dividends, and funding operations under extenuating circumstances, like most recently, Hurricane Ian. If the Company chooses to pursue significant growth and other corporate opportunities, such as the transaction whereby it acquired 3,280 citrus grove acres on October 30, 2020 for $18,230,000, pay down of indebtedness, engaging in share repurchases or paying increased dividends, these actions could have a material adverse impact on its cash balances and may require the Company to finance such activities by drawing down on its lines of credit or by obtaining additional debt or equity financing. There can be no assurance that additional financing will be available to the Company when needed or, if available, that it can be obtained on commercially reasonable terms. Any inability to obtain additional financing could adversely impact Alico's ability to pursue different growth and other corporate opportunities.
The level of debt could have important consequences on Alico's business, including, but not limited to, increasing its vulnerability to general adverse economic and industry conditions, limiting the availability of cash flow to fund future investments, capital expenditures, working capital, business activities and other general corporate requirements, and limiting flexibility in planning for, or reacting to, changes in its business and industry.
Alico’s credit facilities are subject to various debt covenants including the following financial covenants: (i) minimum debt service coverage ratio of 1.10 to 1.00; (ii) tangible net worth of at least $160,000,000 increased annually by 10% of consolidated net income for the preceding years, or approximately $173,216,000 applicable for the year ended September 30, 2022; (iii) minimum current ratio of 1.50 to 1.00; (iv) debt to
37
total assets ratio not greater than .625 to 1.00; and (v) solely in the case of the WCLC, a limit on capital expenditures of $30,000,000 per fiscal year. As of September 30, 2022, the Company was in compliance with all of the financial covenants.
Cash Management Impacts
Cash and cash equivalents decreased from approximately $886,000 as of September 30, 2021 to approximately $865,000 as of September 30, 2022. Cash and cash equivalents and restricted cash decreased from approximately $19,687,000 as of September 30, 2020 to approximately $886,000 as of September 30, 2021. The components of these changes are discussed below.
Consolidated Statements of Cash Flows
The following table details the items contributing to the changes in cash and cash equivalents and restricted cash for fiscal years ended September 30, 2022, 2021 and 2020:
(in thousands) |
|
Fiscal Year Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Net cash provided by operating activities |
|
$ |
6,523 |
|
|
$ |
16,504 |
|
|
$ |
1,049 |
|
Net cash provided by (used in) investing activities |
|
|
22,468 |
|
|
|
(3,268 |
) |
|
|
9,489 |
|
Net cash used in financing activities |
|
|
(29,012 |
) |
|
|
(32,037 |
) |
|
|
(14,689 |
) |
Net decrease in cash and cash equivalents and restricted cash |
|
$ |
(21 |
) |
|
$ |
(18,801 |
) |
|
$ |
(4,151 |
) |
Net Cash Provided By Operating Activities
(in thousands) |
|
Fiscal Year Ended |
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2021 |
|
|
2020 |
|
|
Change |
|
||||||
Net income |
|
$ |
11,886 |
|
|
$ |
34,820 |
|
|
$ |
(22,934 |
) |
|
$ |
34,820 |
|
|
$ |
23,714 |
|
|
$ |
11,106 |
|
Depreciation, depletion and amortization |
|
|
15,229 |
|
|
|
15,122 |
|
|
|
107 |
|
|
|
15,122 |
|
|
|
14,282 |
|
|
|
840 |
|
Debt issue costs expense |
|
|
255 |
|
|
|
179 |
|
|
|
76 |
|
|
|
179 |
|
|
|
238 |
|
|
|
(59 |
) |
Deferred income tax (benefit) expense |
|
|
(3,876 |
) |
|
|
2,249 |
|
|
|
(6,125 |
) |
|
|
2,249 |
|
|
|
7,603 |
|
|
|
(5,354 |
) |
Cash surrender value |
|
|
160 |
|
|
|
(14 |
) |
|
|
174 |
|
|
|
(14 |
) |
|
|
(10 |
) |
|
|
(4 |
) |
Deferred retirement benefits |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,226 |
) |
|
|
5,226 |
|
Gain on sale of real estate, property and equipment and assets held for sale |
|
|
(41,102 |
) |
|
|
(35,898 |
) |
|
|
(5,204 |
) |
|
|
(35,898 |
) |
|
|
(30,424 |
) |
|
|
(5,474 |
) |
Inventory net realizable value adjustment |
|
|
6,676 |
|
|
|
— |
|
|
|
6,676 |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
Casualty loss - tree damage |
|
|
1,258 |
|
|
|
— |
|
|
|
1,258 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss on disposal of property and equipment |
|
|
3,251 |
|
|
|
2,338 |
|
|
|
913 |
|
|
|
2,338 |
|
|
|
1,382 |
|
|
|
956 |
|
Inventory casualty loss |
|
|
14,900 |
|
|
— |
|
|
|
14,900 |
|
|
— |
|
|
— |
|
|
|
— |
|
|||
Casualty loss - building |
|
|
142 |
|
|
|
— |
|
|
|
142 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Impairment of long-lived assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
598 |
|
|
|
(598 |
) |
Impairment of right-of-use asset |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
87 |
|
|
|
(87 |
) |
Insurance proceeds received for damage to property and equipment |
|
|
— |
|
|
|
(103 |
) |
|
|
103 |
|
|
|
(103 |
) |
|
— |
|
|
|
(103 |
) |
|
Stock-based compensation expense |
|
|
1,235 |
|
|
|
1,230 |
|
|
|
5 |
|
|
|
1,230 |
|
|
|
1,306 |
|
|
|
(76 |
) |
Change in working capital |
|
|
(3,491 |
) |
|
|
(3,419 |
) |
|
|
(72 |
) |
|
|
(3,419 |
) |
|
|
(12,501 |
) |
|
|
9,082 |
|
Net cash provided by operating activities |
|
$ |
6,523 |
|
|
$ |
16,504 |
|
|
$ |
(9,981 |
) |
|
$ |
16,504 |
|
|
$ |
1,049 |
|
|
$ |
15,455 |
|
The decrease in net cash provided by operating activities for the fiscal year ended September 30, 2022, as compared to the fiscal year ended September 30, 2021, was primarily due to a decrease in net income and deferred income tax expense and was partially offset by the Company recording an inventory casualty loss and inventory net realizable value adjustment which were the direct result of Hurricane Ian and other casualty losses on fixed assets (see Note 3. “Inventories” in the Notes to the Consolidated Financial Statements for further discussion on inventory casualty loss and net realizable adjustment).
The increase in net cash provided by operating activities for the fiscal year ended September 30, 2021, as compared to the fiscal year ended September 30, 2020, was primarily due to an increase in net income and an increase in working capital which was primarily driven by an increase in accounts payable and timing of income tax payments. The increase in accounts payable relates to the timing and billing of fertilizer and
38
chemical applications in the citrus groves. Offsetting a significant portion of this increase was the amount of gain on sale of real estate, property and equipment and assets held for sale being greater in the fiscal year ended September 30, 2021 as compared to the prior year, primarily resulting from a greater number of acres being sold in the fiscal year ended September 30, 2021.
Due to the seasonal nature of Alico's business, working capital requirements are typically greater in the first and fourth quarters of its fiscal year. Cash flows from operating activities typically improve in the second and third fiscal quarters, as sales of its harvested citrus are made.
Net Cash Provided By (Used In) Investing Activities
The following table details the items contributing to Net Cash Provided By (Used In) Investing Activities for the fiscal years ended September 30, 2022, 2021 and 2020:
(in thousands) |
|
Fiscal Year Ended |
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2021 |
|
|
2020 |
|
|
Change |
|
||||||
Purchases of property and equipment |
|
$ |
(20,731 |
) |
|
$ |
(22,258 |
) |
|
$ |
1,527 |
|
|
$ |
(22,258 |
) |
|
$ |
(18,785 |
) |
|
$ |
(3,473 |
) |
Purchases of citrus groves |
|
|
(136 |
) |
|
|
(18,527 |
) |
|
|
18,391 |
|
|
|
(18,527 |
) |
|
|
(2,920 |
) |
|
|
(15,607 |
) |
Net proceeds from sale of real estate, property and equipment and assets held for sale |
|
|
43,159 |
|
|
|
37,266 |
|
|
|
5,893 |
|
|
|
37,266 |
|
|
|
31,541 |
|
|
|
5,725 |
|
Insurance proceeds received for damage to property and equipment |
|
|
— |
|
|
|
103 |
|
|
|
(103 |
) |
|
|
103 |
|
|
— |
|
|
|
103 |
|
|
Change in deposits on purchase of citrus trees |
|
|
176 |
|
|
|
217 |
|
|
|
(41 |
) |
|
|
217 |
|
|
|
(458 |
) |
|
|
675 |
|
Advances on notes receivables, net |
|
|
— |
|
|
|
371 |
|
|
|
(371 |
) |
|
|
371 |
|
|
|
136 |
|
|
|
235 |
|
Purchases of mineral rights |
|
|
— |
|
|
|
(453 |
) |
|
|
453 |
|
|
|
(453 |
) |
|
|
— |
|
|
|
(453 |
) |
Other |
|
|
— |
|
|
|
13 |
|
|
|
(13 |
) |
|
|
13 |
|
|
|
(25 |
) |
|
|
38 |
|
Net cash provided by (used in) investing activities |
|
$ |
22,468 |
|
|
$ |
(3,268 |
) |
|
$ |
25,736 |
|
|
$ |
(3,268 |
) |
|
$ |
9,489 |
|
|
$ |
(12,757 |
) |
The shift from net cash used in investing activities for the fiscal year ended September 30, 2021 to net cash provided by investing activities for the fiscal year ended September 30, 2022 was primarily due to a reduction in the purchase of additional citrus groves in the fiscal year ended September 30, 2022. Additionally, net proceeds received for the sale of real estate, property and equipment and assets held for sale was greater in the fiscal year ended September 30, 2022, as compared to the same period in the prior year (see Note 4. “Assets Held for Sale” and Note 5. “Property and Equipment, Net” to the accompanying Consolidated Financial Statements), including the Company’s receipt of approximately $5,893,000 more in net proceeds from the sale of ranch land to various third parties in the fiscal year ended September 30, 2022, than the proceeds received in the fiscal year ended September 30, 2021.
39
The shift from net cash provided by investing activities for the fiscal year ended September 30, 2020 to net cash used in investing activities for the fiscal year ended September 30, 2021 was primarily due to the use of funds to purchase approximately 3,280 gross acres located in Hendry County for a purchase price of approximately $18,230,000 in October 2020 and the acquisition of additional smaller citrus groves. Partially offsetting this shift was net proceeds received for the sale of real estate, property and equipment and assets held for sale being greater in the fiscal year ended September 30, 2021 as compared to the same period in the prior year (see Note 4. “Assets Held for Sale” and Note 5. “Property and Equipment, Net” to the accompanying Consolidated Financial Statements), including the Company’s receipt of approximately $5,725,000 more proceeds from the sale of ranch land to various third parties in the fiscal year ended September 30, 2021 than the proceeds received in the fiscal year ended September 30, 2020.
Net Cash Used In Financing Activities
The following table details the items contributing to Net Cash Used In Financing Activities for the fiscal years ended September 30, 2022, 2021 and 2020:
(in thousands) |
|
Fiscal Year Ended |
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2021 |
|
|
2020 |
|
|
Change |
|
||||||
Repayments on revolving lines of credit |
|
$ |
(52,227 |
) |
|
$ |
(50,735 |
) |
|
$ |
(1,492 |
) |
|
$ |
(50,735 |
) |
|
$ |
(114,581 |
) |
|
$ |
63,846 |
|
Borrowings on revolving lines of credit |
|
|
57,155 |
|
|
|
47,793 |
|
|
|
9,362 |
|
|
|
47,793 |
|
|
|
117,523 |
|
|
|
(69,730 |
) |
Principal payments on term loans |
|
|
(19,598 |
) |
|
|
(21,957 |
) |
|
|
2,359 |
|
|
|
(21,957 |
) |
|
|
(15,198 |
) |
|
|
(6,759 |
) |
Treasury stock purchases |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(238 |
) |
|
|
238 |
|
Dividends paid |
|
|
(15,101 |
) |
|
|
(7,138 |
) |
|
|
(7,963 |
) |
|
|
(7,138 |
) |
|
|
(2,466 |
) |
|
|
(4,672 |
) |
Exercise of stock options |
|
|
465 |
|
|
|
— |
|
|
|
465 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Deferred financing costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(23 |
) |
|
|
23 |
|
Capital contribution received from noncontrolling interest |
|
|
294 |
|
|
|
— |
|
|
|
294 |
|
|
|
— |
|
|
|
294 |
|
|
|
(294 |
) |
Net cash used in financing activities |
|
$ |
(29,012 |
) |
|
$ |
(32,037 |
) |
|
$ |
3,025 |
|
|
$ |
(32,037 |
) |
|
$ |
(14,689 |
) |
|
$ |
(17,348 |
) |
The decrease in net cash used in financing activities for the fiscal year ended September 30, 2022, as compared to the fiscal year ended September 30, 2021, was primarily due to an increase in the net borrowings under the revolving line of credit, as well as lower principal payments on the term loans, partially offset by an increase in the dividends paid. During the fiscal year ended September 30, 2022, the company made a prepayment on one of its Met Variable-Rate Term Loans in an amount of approximately $15,625,000 and during the fiscal year ended September 30, 2021, the Company prepaid approximately $10,312,000 of principal on its fixed rate term loans with MetLife and also paid approximately $4,070,000 of principal on one of its loans outstanding with Prudential, which matured in September 2021. Partially offsetting these changes in borrowings was the Company's payment of a greater amount of dividends to stockholders of the Company’s common stock during the current fiscal year, as compared to the prior year, as a result of the Company increasing its annual dividend to $2.00 per common share in June 2021. Additionally, the conversion of the Company’s Met Fixed-Rate Term Loans into interest bearing only loans with a balloon payment of the balance due on November 1, 2029, further reduced the principal payments required.
The increase in net cash used in financing activities for the fiscal year ended September 30, 2021, as compared to the fiscal year ended September 30, 2020, was primarily due to the Company paying down a greater amount on its long-term debt during the fiscal year ended September 30, 2021, as compared to the prior year. During fiscal year ended September 30, 2021, the Company prepaid approximately $10,312,000 of principal on its fixed rate term loans with MetLife and also paid approximately $4,070,000 of principal on one of its loans outstanding with Prudential which matured in September 2021. Partially offsetting these increased payments was the effect of the conversion of the Company’s Met Fixed-Rate Term Loans into interest bearing only loans with a balloon payment of the balance due on November 1, 2029. Additionally, the Company paid a greater amount of dividends to stockholders of the Company’s common stock during the fiscal year ended September 30, 2021, as compared to the prior year, as a result of the Company increasing its annual dividend to $2.00 per common share in June 2021. The Company also paid down, net of borrowings, its revolving line of credit during the fiscal year ended September 30, 2021 as compared to the prior fiscal year.
Alico had $4,928,000 outstanding on its revolving lines of credit as of September 30, 2022 and approximately $89,762,000 remaining availability.
The WCLC line of credit agreement provides for Rabo Agrifinance, Inc. to issue up to $2,000,000 in letters of credit on the Company’s behalf. As of September 30, 2022, there was approximately $310,000 in outstanding letters of credit, which correspondingly reduced Alico's availability under the line of credit.
40
Contractual Obligations
Alico has various contractual obligations which are fixed and determinable. The following table presents the Company's significant contractual obligations and commercial commitments on an undiscounted basis as of September 30, 2022 and the future periods in which such obligations are expected to be settled in cash.
(in thousands) |
|
Payments Due by Period |
|
|||||||||||||||||
|
|
Total |
|
|
<1 Year |
|
|
1-3 Years |
|
|
3-5 Years |
|
|
5+ Years |
|
|||||
Long-term debt |
|
$ |
111,624 |
|
|
$ |
3,035 |
|
|
$ |
6,070 |
|
|
$ |
10,998 |
|
|
$ |
91,521 |
|
Interest on long-term debt |
|
|
25,567 |
|
|
|
4,340 |
|
|
|
8,086 |
|
|
|
7,295 |
|
|
|
5,846 |
|
Operating leases |
|
|
822 |
|
|
|
446 |
|
|
|
261 |
|
|
|
115 |
|
|
|
— |
|
Tree purchase commitments |
|
|
5,891 |
|
|
|
5,891 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
143,904 |
|
|
$ |
13,712 |
|
|
$ |
14,417 |
|
|
$ |
18,408 |
|
|
$ |
97,367 |
|
Purchase Commitments
The Company enters into contracts for the purchase of citrus trees during the normal course of its business. As of September 30, 2022, the Company had approximately $5,891,000 relating to outstanding commitments for these purchases, which will be paid upon delivery.
Impact of Inflation and Changing Prices
Our financial statements included in this Annual Report on Form 10-K have been prepared in accordance with U.S. GAAP, which requires us to measure financial position and operating results primarily in terms of historic dollars. Changes in the relative value of money due to inflation or recession generally are not considered. We are exposed to the impact of inflation on our cost of products sold. We use a number of strategies to mitigate the effects of cost inflation including commodity hedging and pursuing cost productivity initiatives. We experienced higher inflation in fiscal year 2022 and expect to experience increased inflation in fiscal year 2023. Pricing actions and supply chain productivity initiatives introduced at the end of fiscal year 2021 will mitigate a portion of this inflationary pressure, but we do not expect such benefits will fully offset the incremental costs in fiscal year 2023.
Critical Accounting Policies and Estimates
Alico's Consolidated Financial Statements are prepared in accordance with U.S. GAAP, which requires management to make estimates, judgments and assumptions that affect the amounts reported in those financial statements and accompanying notes. Management considers an accounting policy to be critical if it is important to the Company's financial condition and results of operations and if it requires significant judgment and estimates on the part of management in its application. Management considers an accounting estimate to be critical if it is made in accordance with generally accepted accounting principles, involves a significant level of estimation uncertainty, and has had or is reasonably likely to have a material impact on the Company’s financial condition or results of operations. Alico considers policies and estimates relating to the following matters to be critical accounting policies:
Revenue Recognition
The Company recognizes revenue at the amount it expects to be entitled to be paid, determined when control of the products or services is transferred to its customers, which occurs upon delivery of and acceptance of the fruit by the customer and the Company has a right to payment. For grove management services, the Company recognizes operating revenue, including a management fee, when services are rendered and consumed. Management reviews the reasonableness of the revenue accruals quarterly based on buyers’ and processors’ advances to growers, cash and futures markets and experience in the industry. Adjustments are made throughout the fiscal year to these estimates as more current relevant industry information becomes available. Differences between the estimates and the final realization of revenues can be significant and can be either positive or negative. During the periods presented in this Annual Report on Form 10-K, no material adjustments were made to the reported revenues from our crops.
Inventories
The costs of growing crops, including but not limited to labor, fertilization, fuel, crop nutrition and irrigation, are capitalized into inventory throughout the respective crop year. Such costs are expensed as cost of sales when the crops are harvested and are recorded as operating expenses in the Consolidated Statements of Operations. Inventories are stated at the lower of cost or net realizable value. The cost for unharvested citrus crops is based on accumulated production costs incurred during the period from January 1 through the balance sheet date. In the event that there is a casualty loss due to severe weather or other significant incident which negatively impacts inventory, the company will undertake a process to estimate the amount of casualty loss. The process includes a number of factors, including touring all of the citrus groves by operational personnel, to assess the estimated fruit drop by grove and estimate the amount of fruit the Company expects to produce for the respective harvest
41
season. As a result of this process, the Company would estimate the amount of casualty loss, if any, to reduce the carrying value of unharvested fruit crop on trees inventory.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Major improvements are capitalized while maintenance and repairs are expensed in the period the cost is incurred. Costs related to the development of citrus groves, through planting of trees, are capitalized. Such costs include land clearing, excavation and construction of ditches, dikes, roads and reservoirs among other costs. After the planting, caretaking costs or pre-productive maintenance costs are capitalized for four years. After four years, a grove is considered to have reached maturity and the accumulated costs are depreciated over 25 years, except for land clearing and excavation, which are considered costs of land and not depreciated.
Income Taxes
The Company uses the asset and liability method of accounting for deferred income taxes. The provision for income taxes includes income taxes currently payable and those deferred as a result of temporary differences between the financial statements and the income tax basis of assets and liabilities. Deferred income tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in income tax rates on deferred income tax assets and liabilities is recognized in income or loss in the period that includes the enactment date. A valuation allowance is provided to reduce deferred tax assets to the amount of future tax benefit when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Projected future taxable income and ongoing tax planning strategies are considered and evaluated when assessing the need for a valuation allowance. Any increase or decrease in a valuation allowance could have a material adverse or beneficial impact on the Company’s income tax provision and net income or loss in the period the determination is made. For the fiscal year ended September 30, 2022, the Company recorded a valuation allowance of approximately $4,300,000, and for the fiscal years ended September 30, 2021 and 2020, the Company did not record any valuation allowances. The Company recognizes interest and/or penalties related to income tax matters in income tax expense.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which a change in judgment occurs. The Company records interest related to unrecognized tax benefits in income tax expense.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The Company records impairment losses on long-lived assets used in operations, other than goodwill, when events and circumstances indicate that the asset or asset group might be impaired and the estimated cash flows (undiscounted and without interest charges) to be generated by those assets or asset group over the remaining lives of the assets are less than the carrying amounts of those assets. In calculating impairments and the estimated cash flows, the Company assigns its asset groups by determining the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of the other Company assets. The net carrying values of assets or asset groups not recoverable are reduced to their fair values. Our cash flow estimates are based on historical results adjusted to reflect our best estimates of future market conditions and operating conditions. As of September 30, 2022 and 2021, long-lived assets were comprised of property and equipment.
Fair Value Measurements
The carrying amounts in the balance sheets for operating accounts receivable, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term maturity of these items. The carrying amounts reported for our long-term debt approximates fair value as our borrowings with commercial lenders are at interest rates that vary with market conditions and fixed rates that approximate market rates for comparable loans.
Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized into one of three
42
different levels depending on the assumptions (i.e., inputs) used in the valuation. Assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The fair value hierarchy is defined as follows:
Level 1- Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2- Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.
Level 3- Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date.
Impact of Accounting Pronouncements
See Item 8. "Financial Statements and Supplementary Data" - Note 1. "Description of Business and Basis of Presentation" for additional information about the impact of accounting pronouncements.
Subsequent Events
The working capital line of credit agreement was amended on October 27, 2022, and the primary terms of the amendment were an extension of the maturity to November 1, 2025, and the conversion of the interest rate from LIBOR plus a spread to SOFR plus a spread, which is adjusted quarterly, based on the Company's debt service coverage ratio for the preceding quarter and can vary from 175 to 250 basis points, effective October 1, 2022. There were no changes to the commitment amount.
43
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Market Risk - Market risk represents the potential loss resulting from adverse changes in the value of financial instruments, either derivative or non-derivative, caused by fluctuations in interest rates, foreign exchange rates, commodity prices, and equity security prices. The Company handles market risks in accordance with its established policies; however, Alico does not enter into derivatives or other financial instruments for trading or speculative purposes. The Company does consider, on occasion, the need to enter into financial instruments to manage and reduce the impact of changes in interest rates; however, the Company entered into no such instruments during the three-year period ended September 30, 2022. The Company held various financial instruments as of September 30, 2022 and 2021, consisting of financial assets and liabilities reported in the Company’s Consolidated Balance Sheets and off-balance sheet exposures resulting from letters of credit issued for the benefit of Alico.
Interest Rate Risk - The Company is subject to interest rate risk from the utilization of financial instruments such as term loan debt and other borrowings. The Company’s primary long-term obligations are fixed rate debts subject to fair value risk due to interest rate fluctuations. The Company believes that the carrying value of our long-term debt approximates fair value given the stability of market interest rates.
The Company is also subject to interest rate risk on its variable rate debt. A one-percentage-point increase in prevailing interest rates would have increased interest expense on our variable rate debt obligations by approximately $300,000 for the fiscal year ended September 30, 2022.
Foreign-Exchange Rate Risk - The Company currently has no exposure to foreign-exchange rate risk because all of its financial transactions are denominated in U.S. dollars.
Commodity Price Risk - The Company has no financial instruments subject to commodity price risk.
Equity Security Price Risk - None of the Company’s financial instruments have potential exposure to equity security price risk.
Item 8. Financial Statements and Supplementary Data
44
Index to Consolidated Financial Statements
|
|
|
Page |
Report of Independent Registered Public Accounting Firm (PCAOB ID |
|
46 |
|
|
|
|
|
Consolidated Financial Statements: |
|
|
|
|
|
|
|
|
|
50 |
|
|
|
51 |
|
|
|
52 |
|
|
|
55 |
|
|
|
56 |
|
|
|
|
|
All schedules are omitted for the reason that they are not applicable or the required information is included in the financial statements or notes. |
|
|
|
45
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Alico, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Alico, Inc. and its subsidiaries (the Company) as of September 30, 2022 and 2021, the related consolidated statements of operations, changes in equity and cash flows for each of the three years in the period ended September 30, 2022, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2022, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's and subsidiaries’ internal control over financial reporting as of September 30, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Our report dated December 13, 2022 expressed an opinion that the Company had not maintained effective internal control over financial reporting as of September 30, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
Restatement of Previously Issued Financial Statements
As discussed in Note 2 to the financial statements, the 2021 and 2020 financial statements have been restated to correct a misstatement.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Casualty Loss and Net Realizable Value of Unharvested Fruit Crop on the Trees
As described within Note 3 and 4 to the financial statements, the Company values inventory at the lower of cost or net realizable value, which can be impacted by many factors including when a significant weather event has impacted the Company’s unharvested fruit crop on the trees. At September 30, 2022, the consolidated inventory balance included unharvested fruit crop on the trees of $26,717,000, which was reduced by total losses of $21,576,000 recorded during the year ended September 30, 2022 to record a casualty loss and reduce inventory to its net realizable value due to a significant weather event. The Company assesses the impact of a significant weather event on carrying value of unharvested fruit crop on the trees, including the determination of a casualty loss and adjustments to net realizable value, by applying judgment in developing estimates such as the expected future crop yield and future citrus pricing.
46
We identified the casualty loss and net realizable value of unharvested fruit crop on the trees as a critical audit matter because of the significant judgments utilized by management in developing the accounting estimate. Auditing management’s estimates and assumptions required a high degree of auditor judgment and increased audit effort due to the impact these assumptions have on the casualty loss and net realizable value of unharvested fruit crop on the trees.
Our audit procedures related to the Company’s estimates and assumptions of the casualty loss and the net realizable value of unharvested fruit crop on the trees included the following, among others:
We performed site observations and obtained industry data to evaluate the reasonableness of management's estimates of future crop yield and future citrus pricing.
/s/
We have served as the Company's auditor since 2007.
December 13, 2022
47
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Alico, Inc.
Opinion on the Internal Control Over Financial Reporting
We have audited Alico Inc.'s (the Company) internal control over financial reporting as of September 30, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, because of the effect of the material weaknesses described below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of September 30, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Alico, Inc. and its subsidiaries (the Company) as of September 30, 2022 and 2021, the related consolidated statements of operations, changes in equity and cash flows for each of the three years in the period ended September 30, 2022, and the related notes to the consolidated financial statements of the Company and our report dated December 13, 2022 expressed an unqualified opinion.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management's assessment arising from the following deficiencies:
This material weakness resulted in an identified misstatement in the consolidated financial statements.
This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2022 financial statements, and this report does not affect our report dated December 13, 2022 on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
48
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ RSM US LLP
We have served as the Company's auditor since 2007.
Orlando, Florida
December 13, 2022
49
ALICO, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
|
|
September 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
|
|
|
|
|
(Restated) |
|
||
ASSETS |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Accounts receivable, net |
|
|
|
|
|
|
||
Inventories |
|
|
|
|
|
|
||
Income tax receivable |
|
|
|
|
|
|
||
Assets held for sale |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Other non-current assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued liabilities |
|
|
|
|
|
|
||
Long-term debt, current portion |
|
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Long-term debt: |
|
|
|
|
|
|
||
Principal amount, net of current portion |
|
|
|
|
|
|
||
Less: deferred financing costs, net |
|
|
( |
) |
|
|
( |
) |
Long-term debt less current portion and deferred financing costs, net |
|
|
|
|
|
|
||
Lines of credit |
|
|
|
|
|
— |
|
|
Deferred income tax liabilities, net |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Stockholders’ equity: |
|
|
|
|
|
|
||
Preferred stock, |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Additional paid in capital |
|
|
|
|
|
|
||
Treasury stock, at cost, |
|
|
( |
) |
|
|
( |
) |
Retained earnings |
|
|
|
|
|
|
||
Total Alico stockholders’ equity |
|
|
|
|
|
|
||
Noncontrolling interest |
|
|
|
|
|
|
||
Total stockholders’ equity |
|
|
|
|
|
|
||
Total liabilities and stockholders’ equity |
|
$ |
|
|
$ |
|
||
See accompanying notes to the consolidated financial statements.
50
ALICO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
|
|
Fiscal Year Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Operating revenues: |
|
|
|
|
|
|
|
|
|
|||
Alico Citrus |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Land Management and Other Operations |
|
|
|
|
|
|
|
|
|
|||
Total operating revenues |
|
|
|
|
|
|
|
|
|
|||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Alico Citrus |
|
|
|
|
|
|
|
|
|
|||
Land Management and Other Operations |
|
|
|
|
|
|
|
|
|
|||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|||
Gross (loss) profit |
|
|
( |
) |
|
|
|
|
|
|
||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|||
(Loss) income from operations |
|
|
( |
) |
|
|
|
|
|
|
||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|||
Investment and interest income, net |
|
|
|
|
|
|
|
|
|
|||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Gains on sale of real estate, property and equipment and assets held for sale |
|
|
|
|
|
|
|
|
|
|||
Other income (expense), net |
|
|
— |
|
|
|
|
|
|
( |
) |
|
Total other income, net |
|
|
|
|
|
|
|
|
|
|||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|||
Income tax provision |
|
|
|
|
|
|
|
|
|
|||
Net income |
|
|
|
|
|
|
|
|
|
|||
Net loss (income) attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
( |
) |
||
Net income attributable to Alico, Inc. common stockholders |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Per share information attributable to Alico, Inc. common stockholders: |
|
|
|
|
|
|
|
|
|
|||
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Weighted-average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
|
|
|
|
|
|
|
|
|||
Diluted |
|
|
|
|
|
|
|
|
|
|||
Cash dividends declared per common share |
|
$ |
|
|
$ |
|
|
$ |
|
|||
See accompanying notes to the consolidated financial statements.
51
ALICO, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands)
52
|
|
Common stock |
|
|
Additional |
|
|
Treasury |
|
|
Retained |
|
|
Total |
|
|
Non- |
|
|
Total |
|
|||||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Stock |
|
|
Earnings |
|
|
Equity |
|
|
Interest |
|
|
Equity |
|
||||||||
September 30, 2019 (As originally reported) |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Restatement Adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
September 30, 2019 (Restated) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Treasury stock purchases |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Capital contribution received from noncontrolling interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Stock-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Directors |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Executives and managers |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
September 30, 2020 (Restated) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Stock-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Directors |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Executives and managers |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
September 30, 2021 (Restated) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Capital contribution received from noncontrolling interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Executives stock exercises |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Stock-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Directors |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Executives and managers |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Employees |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
September 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
53
See accompanying notes to the consolidated financial statements.
54
ALICO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
Fiscal Year Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|||
Depreciation, depletion and amortization |
|
|
|
|
|
|
|
|
|
|||
Debt issue costs expense |
|
|
|
|
|
|
|
|
|
|||
Deferred income tax expense |
|
|
( |
) |
|
|
|
|
|
|
||
Cash surrender value |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Deferred retirement (expense) benefit |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Gain on sale of real estate, property and equipment and assets held for sale |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Inventory net realizable value adjustment |
|
|
|
|
|
— |
|
|
— |
|
||
Casualty loss – tree damage |
|
|
|
|
|
— |
|
|
|
— |
|
|
Loss on disposal of property and equipment |
|
|
|
|
|
|
|
|
|
|||
Inventory casualty loss |
|
|
|
|
— |
|
|
— |
|
|||
Casualty loss – building |
|
|
|
|
|
— |
|
|
|
— |
|
|
Impairment of long-lived assets |
|
|
— |
|
|
|
— |
|
|
|
|
|
Impairment of right-of-use-asset |
|
|
— |
|
|
|
— |
|
|
|
|
|
Insurance proceeds received for damage to property and equipment |
|
|
— |
|
|
|
( |
) |
|
— |
|
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|||
Accounts receivable |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Inventories |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income tax receivable |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other assets |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Accounts payable and accrued liabilities |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Income tax payable |
|
— |
|
|
— |
|
|
|
( |
) |
||
Other liabilities |
|
|
|
|
|
( |
) |
|
|
|
||
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Purchases of citrus groves |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net proceeds from sale of real estate, property and equipment and assets held for sale |
|
|
|
|
|
|
|
|
|
|||
Insurance proceeds received for damage to property and equipment |
|
|
— |
|
|
|
|
|
— |
|
||
Change in deposits on purchase of citrus trees |
|
|
|
|
|
|
|
|
( |
) |
||
Advances on notes receivables, net |
|
|
— |
|
|
|
|
|
|
|
||
Purchases of mineral rights |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Other |
|
|
— |
|
|
|
|
|
|
( |
) |
|
Net cash provided by (used in) investing activities |
|
|
|
|
|
( |
) |
|
|
|
||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|||
Repayments on revolving lines of credit |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Borrowings on revolving lines of credit |
|
|
|
|
|
|
|
|
|
|||
Principal payments on term loans |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Treasury stock purchases |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Dividends paid |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Exercise of stock options |
|
|
|
|
|
— |
|
|
|
— |
|
|
Deferred financing costs |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Capital contribution received from noncontrolling interest |
|
|
|
|
|
— |
|
|
|
|
||
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net decrease in cash and cash equivalents and restricted cash |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Cash and cash equivalents and restricted cash at beginning of the period |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents and restricted cash at end of the period |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
|||
Cash paid for interest, net of amount capitalized |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Cash paid for income taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|||
Dividends declared but unpaid |
|
$ |
|
|
$ |
|
|
$ |
|
|||
See accompanying notes to the consolidated financial statements.
55
ALICO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Description of Business and Basis of Presentation
Description of Business
Alico, Inc., together with its subsidiaries (collectively, “Alico”, the “Company”, “we”, “us” or “our”), is a Florida agribusiness and land management company owning approximately
Basis of Presentation
The Company has prepared the accompanying financial statements on a consolidated basis. These accompanying Consolidated Financial Statements, which are referred to herein as the “Financial Statements”, have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). All significant intercompany transactions and account balances between the consolidated businesses have been eliminated.
Segments
Operating segments are defined in the criteria established under the Financial Accounting Standards Board – Accounting Standards Codification (“FASB ASC”) Topic 280 as components of public entities that engage in business activities from which they may earn revenues and incur expenses for which separate financial information is available and which is evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to assess performance and allocate resources. The Company’s CODM assesses performance and allocates resources based on two operating segments: (i) Alico Citrus and (ii) Land Management and Other Operations.
Principles of Consolidation
The Financial Statements include the accounts of Alico and the accounts of all the subsidiaries in which a controlling interest is held by the Company. Under U.S. GAAP, consolidation is generally required for investments of more than 50% of the outstanding voting stock of an investee, except when control is not held by the majority owner. The Company’s subsidiaries include: Alico Land Development, Inc., Alico-Agri, Ltd., Alico Plant World, LLC, Alico Fruit Company, LLC, Alico Citrus Nursery, LLC, Alico Chemical Sales, LLC, 734 Citrus Holdings, LLC and subsidiaries, Alico Skink Mitigation, LLC and Citree Holdings 1, LLC (“Citree”). The Company considers the criteria established under FASB ASC Topic 810, “Consolidations” in its consolidation process. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the accompanying Financial Statements, the disclosure of contingent assets and liabilities in the Financial Statements and the accompanying Notes, and the reported amounts of revenues and expenses and cash flows during the periods presented. Actual results could differ from those estimates. The Company evaluates estimates on an ongoing basis. The estimates are based on current and expected economic conditions, historical experience, the experience and judgment of the Company’s management and various other specific assumptions that the Company believes to be reasonable.
Noncontrolling Interest in Consolidated Subsidiary
The Financial Statements include all assets and liabilities of the less-than-100%-owned subsidiary the Company controls, Citree. Accordingly, the Company has recorded a noncontrolling interest in the equity of such entity. Citree had net loss of $
56
Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform. The Company’s floating rate notes and variable funding notes have historically borne interest at fluctuating interest rates based on LIBOR. Because LIBOR will cease to exist, the Company has recently renegotiated its variable rate loan agreements, to instead utilize fluctuating interest rates based on the 30 day Secured Overnight Financing Rate (SOFR), some with the change taking effect in late fiscal year 2022, and one with the change taking effect in early fiscal year 2023. ASU 2020-04 is currently effective on or before December 31, 2022, and upon adoption may be applied prospectively to contract modifications made. The Company is currently assessing the impact of adopting this standard and the impact on its consolidated financial statements.
The Company has reviewed other recently issued accounting standards which have not yet been adopted in order to determine their potential effect, if any, on the results of operations or financial condition. Based on the review of these other recently issued standards, the Company does not currently believe that any of those accounting pronouncements will have a significant effect on its current or future financial position, results of operations, cash flows or disclosures.
Recently Adopted Accounting Pronouncements
In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-04, “Intangibles-Goodwill and Other” (Topic 350), which simplifies the accounting for goodwill impairment. The updated guidance eliminates Step 2 of the impairment test, which requires entities to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value, determined in Step 1. The Company adopted ASU 2017-04 effective October 1, 2020, using the prospective approach, and will apply this standard in future impairment tests.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements” (“ASU 2018-13”), which aims to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies when preparing fair value measurement disclosures. ASU 2018-13 became effective for annual and interim periods in the fiscal years beginning after December 15, 2019. Retrospective adoption was required, except for certain disclosures, which will be required to be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. The Company adopted ASU 2018-13 effective October 1, 2020, and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Leases (Topic 842). The standard was effective for the Company on October 1, 2020. The Company adopted ASU 2018-19 effective October 1, 2020, and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions to the general principles in the existing guidance for income taxes and making other minor improvements. The Company adopted ASU 2019-12 effective October 1, 2021, and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
The COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the current novel coronavirus outbreak (“COVID-19”) to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state, and local governments throughout the country imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures had a significant adverse impact upon many sectors of the economy, including certain agriculture businesses. While epidemiological conditions in the United States have improved as of September 30, 2022, and most of the restrictions on social and commercial activity have been relaxed, a resurgence of the virus, could cause epidemiological and macroeconomic conditions to deteriorate and more severe restrictions to be put in place. It is not possible for the Company to predict the duration or magnitude of any adverse effects due to a resurgence at this time. We will continue to monitor the COVID-19 pandemic and its impacts on our business, financial condition, and results of operations.
To date, the Company has experienced no material adverse impacts from this pandemic.
57
Reclassifications
Certain prior year amounts have been reclassified in the accompanying Financial Statements for consistent presentation to the current period. These reclassifications had no impact on net income, equity, cash flows or working capital as previously reported.
Seasonality
The Company is primarily engaged in the production of fruit for sale to citrus markets, which is of a seasonal nature, and subject to the influence of natural phenomena and wide price fluctuations. Historically, the second and third quarters of Alico’s fiscal year produce most of the Company’s annual revenue. Working capital requirements are typically greater in the first and fourth quarters of the fiscal year, coinciding with harvesting cycles. Because of the seasonality of the business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.
Note 2. Restatement of Previously Issued Financial Statements
During the audit of our financial statements for the period ending September 30, 2022, the Company discovered an error in the calculation of the deferred tax liabilities for the fiscal years 2015 through 2019, remaining present in the deferred tax liabilities previously reported in the financial statements in the fiscal year ended September 30, 2020 and 2019.
The Company has presented a restated consolidated balance sheet as of September 30, 2022 in this Form 10-K to reflect the changes in the amounts of previously reported deferred tax liabilities and retained earnings to reflect the correction of this error. The impact of the accounting errors was a cumulative reduction in the deferred tax liability of approximately $
The following is a summary of the effect of the restatement to correct an error in the September 30, 2021 financial statements on the Consolidated Balance Sheet for the year ended September 30, 2021:
58
ALICO, INC. |
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September 30, 2021 |
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|||||
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|
Previously Reported |
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Restated |
|
||
ASSETS |
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|
||
Current assets: |
|
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|
|
||
Cash and cash equivalents |
|
$ |
|
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$ |
|
||
Accounts receivable, net |
|
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|
||
Inventories |
|
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|
||
Income tax receivable |
|
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|
||
Assets held for sale |
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|
||
Prepaid expenses and other current assets |
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|
||
Total current assets |
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|
||
Property and equipment, net |
|
|
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|
||
Goodwill |
|
|
|
|
|
|
||
Other non-current assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
||
Current liabilities: |
|
|
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|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued liabilities |
|
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|
||
Long-term debt, current portion |
|
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|
||
Other current liabilities |
|
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|
||
Total current liabilities |
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||
Long-term debt: |
|
|
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|
||
Principal amount, net of current portion |
|
|
|
|
|
|
||
Less: deferred financing costs, net |
|
|
( |
) |
|
|
( |
) |
Long-term debt less current portion and deferred financing costs, net |
|
|
|
|
|
|
||
Lines of credit |
|
|
|
|
|
— |
|
|
Deferred income tax liabilities, net |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
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|
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||
|
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|
|||
Stockholders' equity: |
|
|
|
|
|
|
||
Preferred stock, |
|
|
|
|
|
— |
|
|
Common stock, $ |
|
|
|
|
|
|
||
Additional paid in capital |
|
|
|
|
|
|
||
Treasury stock, at cost, |
|
|
( |
) |
|
|
( |
) |
Retained earnings |
|
|
|
|
|
|
||
Total Alico stockholders' equity |
|
|
|
|
|
|
||
Noncontrolling interest |
|
|
|
|
|
|
||
Total stockholders' equity |
|
|
|
|
|
|
||
Total liabilities and stockholders' equity |
|
$ |
|
|
$ |
|
||
59
Note 3. Summary of Significant Accounting Policies
Revenue Recognition
Revenues are derived from the sale of processed fruit, fresh fruit, other citrus revenue, revenues from grove management services, leasing revenue and other resource revenues. Most of the revenue is generated from the sale of citrus fruit to processing facilities, fresh fruit sales and grove management services.
For fruit sales, the Company recognizes revenue in the amount it expects to be entitled to be paid, determined when control of the products or services is transferred to its customers, which occurs upon delivery of and acceptance of the fruit by the customer and when the Company has a right to payment.
For the sale of fruit, the Company has identified one performance obligation, which is the delivery of fruit to the processing facility of the customer (or harvesting of the citrus in the case of fresh fruit) for each separate variety of fruit identified in the respective contract with the respective customer. The Company initially recognizes revenue in an amount which is estimated based on contractual and market prices, if such market price falls within the range (known as “floor” and “ceiling” prices) identified in the specific respective contracts. Additionally, the Company also has a contractual agreement whereby revenue is determined based on applying a cost-plus structure methodology. As such, since all these contracts contain elements of variable consideration, the Company recognizes this variable consideration by using the expected value method. On a quarterly basis, management reviews the reasonableness of the revenues accrued based on buyers’ and processors’ advances to growers, cash and futures markets and experience in the industry. Adjustments are made throughout the year to these estimates as more current relevant industry information becomes available. Differences between the estimates and the final realization of revenues at the close of the harvesting season can result in either an increase or decrease to reported revenues.
Receivables under contracts, whereby pricing is based on contractual and market prices, are primarily paid at the floor amount and are collected within seven days after the harvest week. Any adjustments to pricing as a result of changes in market prices are generally collected or paid thirty to sixty days after final market pricing is published. Receivables under those contracts where pricing is based off a cost-plus structure methodology are paid at the final prior year rate. Any adjustments to pricing because of the cost-plus calculation are collected or paid upon finalization of the calculation and agreement by both parties. As of September 30, 2022, and September 30, 2021, the Company had total receivables relating to sales of citrus of approximately $
For grove management services, the Company has identified one performance obligation, which is the management of the third party’s groves. Grove management services include caretaking of the citrus groves, harvesting and hauling of citrus, management and coordination of citrus sales and other related activities. The Company is reimbursed for expenses incurred in the execution of its management duties and the Company receives a per acre management fee. The Company recognizes operating revenue, including a management fee, and corresponding operating expenses when such services are rendered and consumed.
In June 2022, the Company was notified by a group of third-party grove owners, who are affiliated with each other, for which the Company was managing groves that such third-party grove owners were terminating the property management agreement dated as of July 16, 2020 with the Company as such third-party grove owners decided to exit the citrus business. As a result, all services relating to this caretaking management initiative and the accompanying management fee and reimbursed costs associated with performing caretaking management services have ceased as of June 10, 2022.
The Company recorded approximately $
60
Disaggregated Revenue
Revenues disaggregated by significant products and services for the fiscal years ended September 30, 2022, 2021 and 2020 are as follows:
(in thousands) |
|
Fiscal Year Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Alico Citrus |
|
|
|
|
|
|
|
|
|
|||
Early and Mid-Season |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Valencias |
|
|
|
|
|
|
|
|
|
|||
Fresh fruit |
|
|
|
|
|
|
|
|
|
|||
Grove management services |
|
|
|
|
|
|
|
|
|
|||
Other |
|
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Land Management and Other Operations |
|
|
|
|
|
|
|
|
|
|||
Land and other leasing |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Other |
|
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Total Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Fair Value of Financial Instruments
The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to the short term and immediate nature of these financial instruments. The carrying amounts of the Company’s debt approximates fair value as the debt is with commercial lenders at interest rates that vary with market conditions or have fixed rates that approximate market rates for obligations with similar terms and maturities (see Note 8. “Fair Value Measurements”).
Cash and Cash Equivalents
The Company considers cash in banks and highly liquid instruments with an original maturity of three months or less to be cash and cash equivalents. At various times throughout the fiscal year, and as of September 30, 2022, some accounts held at financial institutions were in excess of the federally insured limit of $
Accounts receivable
Accounts receivable from customers are generated from revenues based on the sale of citrus, grove management, leasing and other transactions. The Company grants credit in the course of its operations to third party customers. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. The Company provides an allowance for doubtful accounts for amounts which are not probable of collection. The estimate, evaluated quarterly by the Company, is based on historical collection experience, current macroeconomic climate and market conditions and a review of the current status of each customer’s account. Changes in the financial viability of significant customers and worsening of economic conditions may require changes to its estimate of the recoverability of the receivables. Such changes in estimates are recorded in the period in which these changes become known. The bad debt expense is included in general and administrative expenses in the Consolidated Statements of Operations.
The following table presents accounts receivable, net, as of September 30, 2022 and 2021:
(in thousands) |
|
September 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Accounts receivable |
|
$ |
|
|
$ |
|
||
Allowance for doubtful accounts |
|
|
( |
) |
|
|
( |
) |
Accounts receivable, net |
|
$ |
|
|
$ |
|
||
61
Concentrations
Accounts receivable from the Company’s major customer as of September 30, 2022 and 2021 and revenue from such customer for the fiscal years ended September 30, 2022, 2021 and 2020, are as follows:
(in thousands) |
|
Accounts Receivable |
|
|
Revenue |
|
|
% of Total Revenue |
|
|||||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
||||||||
Tropicana |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
|
|
% |
|
|
% |
|||||||
The citrus industry is subject to various factors over which growers have limited or no control, including weather conditions, disease, pestilence, water supply and market price fluctuations. Market prices are highly sensitive to aggregate domestic and foreign crop sizes, as well as factors including, but not limited to, weather and competition from foreign countries.
The overall increase in Tropicana revenue as a percentage of sales was primarily due to lower caretaking revenue due to the termination in June 2022 of the agreement entered into in July 2020 with a group of third-party grove owners, who were affiliated with each other, to provide citrus grove caretaking and harvest and haul management services for approximately
Real Estate
In February 2017, the FASB issued ASU 2017-05, “Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets” (ASC 610-20): This standard clarified the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets and clarified the scope and application of ASC 610-20 on the sale, transfer, and derecognition of nonfinancial assets and in substance nonfinancial assets to non-customers, including partial sales. The standard provided guidance on how gains and losses on transfers of nonfinancial assets and in substance nonfinancial assets to non-customers are recognized. The Company recognizes a gain on the sale of real estate as outlined by ASC 610-20.
Inventories
The costs of growing crops, including but not limited to labor, fertilization, fuel, crop nutrition, irrigation, and depreciation, are capitalized into inventory throughout the respective crop year. Such costs are expensed as cost of sales when the crops are harvested and are recorded as operating expenses in the Consolidated Statements of Operations. Inventories are stated at the lower of cost or net realizable value. The cost for unharvested citrus crops is based on accumulated production costs incurred during the period from January 1 through the balance sheet date.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation, depletion and amortization. Major improvements are capitalized while expenditures for maintenance and repairs are expensed when incurred. Costs related to the development of citrus groves through planting of trees are capitalized. Such costs include land clearing, excavation and construction of ditches, dikes, roads, and reservoirs, among other costs. After the planting, caretaking costs or pre-productive maintenance costs are capitalized for
Real estate costs incurred for the acquisition, development and construction of real estate projects are capitalized.
Depreciation is provided on a straight-line basis over the estimated useful lives of the depreciable assets, with the exception of leasehold improvements and assets acquired through capital leases, which are depreciated over their estimated useful lives if the lease transfers ownership or contains a bargain purchase option, otherwise the term of the lease.
62
The estimated useful lives for property and equipment are primarily as follows:
Citrus trees |
|
|
Equipment and other facilities |
|
|
Buildings and improvements |
|
Changes in circumstances, such as technological advances or changes to our business model or capital strategy could result in the actual useful lives differing from the original estimates. In those cases where the Company determines that the useful life of property and equipment should be shortened, Alico depreciates the asset over its revised estimated remaining useful life, thereby increasing depreciation expense (see Note 5. “Property and Equipment, Net”).
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The Company records impairment losses on long-lived assets used in operations, or asset group, when events and circumstances indicate that the assets might be impaired and the estimated cash flows (undiscounted and without interest charges) to be generated by those assets or asset group over the remaining lives of the assets or asset group are less than the carrying amounts of those assets. In calculating impairments and the estimated cash flows, the Company assigns its asset groups by determining the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of the other Company assets. The net carrying values of assets or asset group not recoverable are reduced to their fair values. Alico’s cash flow estimates are based on historical results adjusted to reflect best estimates of future market conditions and operating conditions. For the fiscal years ended September 30, 2022 and September 30, 2021, the Company did not record impairments of its long-lived assets. For the fiscal year ended September 30, 2020, the Company recorded impairments of its long-lived assets (see Note 5. “Property and Equipment, Net”). As of September 30, 2022 and 2021, long-lived assets were comprised of property and equipment.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price of acquired businesses over the fair value of the assets acquired less liabilities assumed in connection with such acquisition. In accordance with the provisions of ASC 350, Intangibles-Goodwill and Other, goodwill and intangible assets with indefinite useful lives acquired in an acquisition are not amortized, but instead are tested for impairment at least annually, on the same date, or more frequently, should an event occur or circumstances indicate that the carrying amount may be impaired. Such events or circumstances may be a significant change in business climate, economic and industry trends, legal factors, negative operating performance indicators, significant competition, changes in strategy or disposition of a reporting unit or a portion thereof.
The carrying value of goodwill is tested for impairment annually as of September 30, and, additionally on an interim basis, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The accounting standards for goodwill allow for the assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company does not utilize a qualitative assessment approach, then the quantitative goodwill impairment test is utilized to identify potential impairments. The Company identifies any potential impairment by comparing the carrying value of a reporting unit to its fair value. The Company typically determines the fair value of its reporting units using a discounted cash flow valuation approach. If a potential impairment is identified, the Company will determine the amount of goodwill impairment by comparing the fair value of a reporting unit with its carrying amount. As of September 30, 2022 and 2021, no impairment was required.
Other Non-Current Assets
Other non-current assets primarily include intangible assets relating to mineral rights, water permits, right-of-use assets relating to lease obligations, investments owned in agricultural cooperatives, cash surrender value on life insurance, and deposits on the purchase of citrus trees. Investments in stock related to agricultural cooperatives are carried at cost.
63
Income Taxes
The Company uses the asset and liability method of accounting for deferred income taxes. The provision for income taxes includes income taxes currently payable and those deferred as a result of temporary differences between the financial statements and the income tax basis of assets and liabilities. Deferred income tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in income tax rates on deferred income tax assets and liabilities is recognized in income or loss in the period that includes the enactment date. A valuation allowance is provided to reduce deferred tax assets to the amount of future tax benefit when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Projected future taxable income and ongoing tax planning strategies are considered and evaluated when assessing the need for a valuation allowance. Any increase or decrease in a valuation allowance could have a material adverse or beneficial impact on the Company’s income tax provision and net income or loss in the period the determination is made. For the fiscal year ended September 30, 2022, the Company recorded a valuation allowance of $
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which a change in judgment occurs. The Company records interest related to unrecognized tax benefits in income tax expense.
Earnings per Share
Basic earnings per share for the Company’s common stock is calculated by dividing net income attributable to Alico common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per common share is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares of common stock issuable under equity-based compensation plans in accordance with the treasury stock method, or any other type of securities convertible into common stock, except where the inclusion of such common shares would have an anti-dilutive effect.
The following table presents a reconciliation of basic to diluted weighted average common shares outstanding for fiscal years ended September 30, 2022, 2021 and 2020:
(in thousands) |
|
Fiscal Year Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Weighted Average Common Shares Outstanding – Basic |
|
|
|
|
|
|
|
|
|
|||
Effect of dilutive securities – stock options and unrestricted stock |
|
|
|
|
|
|
|
|
|
|||
Weighted Average Common Shares Outstanding – Diluted |
|
|
|
|
|
|
|
|
|
|||
For the fiscal years ended September 30, 2022, 2021 and 2020, respectively, the Company issued
Stock-Based Compensation
Stock-based compensation is measured based on the fair value of the equity award at the grant date and is typically expensed on a straight-line basis over the vesting period. Upon the vesting of restricted stock, the Company issues common stock from common shares held in treasury.
Total stock-based compensation expense for the three years ended September 30, 2022, 2021 and 2020 in general and administrative expense was as follows:
(in thousands) |
|
Fiscal Year Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Stock-based compensation expense: |
|
|
|
|
|
|
|
|
|
|||
Executives |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Management and other employees |
|
|
|
|
|
|
|
|
|
|||
Forfeitures |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
Board of Directors |
|
|
|
|
|
|
|
|
|
|||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|||
64
Note 4. Inventories
Inventories consist of the following at September 30, 2022 and 2021:
(in thousands) |
|
September 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Unharvested fruit crop on the trees |
|
$ |
|
|
$ |
|
||
Other |
|
|
|
|
|
|
||
Total inventories |
|
$ |
|
|
$ |
|
||
The Company records its inventory at the lower of cost or net realizable value.
In September 2022, the State of Florida’s citrus business, including the Company’s unharvested citrus crop, was significantly impacted by Hurricane Ian. The impact of Hurricane Ian resulted in the premature drop of unharvested fruit. Accordingly, for the fiscal years ended September 30, 2022, the Company recorded approximately $
The Company was eligible for Hurricane Irma federal relief programs for block grants that were being administered through the State of Florida. During the fiscal years ended September 30, 2022, September 30, 2021 and 2020, the Company received approximately $
Note 5. Assets Held for Sale
In accordance with its strategy to dispose of non-core and under-performing assets, the following assets have been classified as assets held for sale as of September 30, 2022 and September 30, 2021:
(in thousands) |
|
Carrying Value |
|
|||||
|
|
Fiscal Year Ended September 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Ranch |
|
$ |
|
|
$ |
|
||
Total Assets Held for Sale |
|
$ |
|
|
$ |
|
||
On May 31, 2022, the Company sold approximately
During April 2022, the Company sold approximately
On March 15, 2022, the Company sold approximately
On December 3, 2021, the State of Florida purchased, under the Florida Forever program, approximately
65
During November 2021, the Company sold approximately
On June 3, 2021, the Company sold approximately
On April 15, 2021, the State of Florida purchased, under the Florida Forever program, approximately
On December 18, 2020, the Company sold approximately
Additionally, during fiscal year 2021, the Company sold an aggregate of approximately
On September 10, 2020, the State of Florida purchased, under the Florida Forever program, approximately
On March 27, 2020, the Company sold certain sections at the East Ranch for approximately $
The Company recorded
The Company has used a portion of the proceeds from these various asset sales to pay down debt (see Note 6. “Long-Term Debt and Lines of Credit”), purchase citrus groves and fund the increased dividend and plans to use the remaining cash proceeds from the sale of these assets to purchase other citrus groves, pay down other debt and to fund future working capital requirements and for other corporate purposes.
Note 6. Property and Equipment, Net
Property and equipment, net consists of the following at September 30, 2022 and September 30, 2021:
(in thousands) |
|
September 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Citrus trees |
|
$ |
|
|
$ |
|
||
Equipment and other facilities |
|
|
|
|
|
|
||
Buildings and improvements |
|
|
|
|
|
|
||
Total depreciable properties |
|
|
|
|
|
|
||
Less: accumulated depreciation and depletion |
|
|
( |
) |
|
|
( |
) |
Net depreciable properties |
|
|
|
|
|
|
||
Land and land improvements |
|
|
|
|
|
|
||
Property and equipment, net |
|
$ |
|
|
$ |
|
||
For the fiscal year ended September 30, 2022, the Company recorded a casualty loss of approximately $
For the fiscal years ended September 30, 2022, and 2021, the Company did
66
Note 4. Assets Held For Sale) and because the sale of those acres affected the proposed dispersed water management project, the Company decided to suspend all permit approval activities for its dispersed water management project and the Company wrote-down the assets relating to this project during the fourth quarter of the fiscal year ended September 30, 2020. This impairment related to the Company’s Land Management and Other Operations segment and was recorded in Operating Expenses in the Consolidated Statement of Operations.
In connection with the State of Florida’s condemnation of a certain portion of Alico’s property in October 2021, the Company received approximately $
On June 1, 2020, the Company sold approximately
On May 4, 2020, the Company purchased
Note 7. Long-Term Debt and Lines of Credit
The following table summarizes long-term debt and related deferred financing costs, net of accumulated amortization at September 30, 2022 and September 30, 2021:
|
|
September 30, 2022 |
|
|
September 30, 2021 |
|
||||||||||
(in thousands) |
|
Principal |
|
|
Deferred |
|
|
Principal |
|
|
Deferred |
|
||||
Long-term debt, net of current portion: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Met Fixed-Rate Term Loans |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Met Variable-Rate Term Loans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Met Citree Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pru Loans A & B |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less current portion |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Long-term debt |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table summarizes amounts outstanding under lines of credit and related deferred financing costs, net of accumulated amortization at September 30, 2022 and September 30, 2021:
|
|
September 30, 2022 |
|
|
September 30, 2021 |
|
||||||||||
(in thousands) |
|
Principal |
|
|
Deferred |
|
|
Principal |
|
|
Deferred |
|
||||
Lines of Credit: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
RLOC |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
WCLC |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Lines of Credit |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Future maturities of long-term debt and lines of credit as of September 30, 2022 are as follows:
(in thousands) |
|
September 30, 2022 |
|
|
Due within one year |
|
$ |
|
|
Due between one and two years |
|
|
|
|
Due between two and three years |
|
|
|
|
Due between three and four years |
|
|
|
|
Due between four and five years |
|
|
|
|
Due beyond five years |
|
|
|
|
Total future maturities |
|
$ |
|
|
67
Interest costs expensed and capitalized were as follows:
(in thousands) |
|
Fiscal Year Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Interest capitalized |
|
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Debt
The Company’s credit facilities consist of fixed interest rate term loans originally in the amount of $
The term loans and RLOC are secured by real property. The security for the term loans and RLOC consists of approximately
Initially, the Met Fixed-Rate Term Loans were subject to quarterly principal payments of $
The Met Variable-Rate Term Loans are subject to quarterly principal payments of $
With respect to the RLOC, for the fiscal year ended September 30, 2022, the LIBOR-based rate was effective from October 1, 2021 through July 31, 2022 and bears interest at a floating rate equal to 90-day LIBOR plus
The WCLC is a revolving credit facility and is available for funding working capital and general corporate requirements. The interest rate on the WCLC was based on the one-month LIBOR, plus a spread, which is adjusted quarterly, based on the Company’s debt service coverage ratio for the preceding quarter and can vary from
The WCLC is subject to a quarterly commitment fee on the daily unused availability under the line computed as the commitment amount less the aggregate of the outstanding loans and outstanding letters of credit. The commitment fee is adjusted quarterly based on Alico’s debt service
68
coverage ratio for the preceding quarter and can vary from a minimum of
There was approximately $
In 2014, the Company capitalized approximately $
These credit facilities noted above are subject to various covenants including the following financial covenants: (i) minimum debt service coverage ratio of
Credit facilities also include a Met Life term loan collateralized by
Transition from LIBOR
On July 27, 2017, the United Kingdom’s Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that it intended to phase out LIBOR. On November 30, 2020, ICE Benchmark Administration (“IBA”), the administrator of LIBOR, with the support of the United States Federal Reserve and the Financial Conduct Authority of the United Kingdom, announced plans to consult on ceasing publication of LIBOR on December 31, 2021 for only the one week and two-month LIBOR tenors, and on June 30, 2023 for all other LIBOR tenors. On March 5, 2021, the FCA confirmed that all LIBOR settings will either cease to be provided by any administrator or no longer be representative: (a) immediately after December 31, 2021, in the case of the one week and two-month U.S. dollar settings; and (b) immediately after June 30, 2023, in the case of the remaining U.S. dollar settings. The Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has proposed an alternative rate to replace U.S. Dollar LIBOR: the Secured Overnight Financing Rate (SOFR). On March 15, 2022, President Biden signed the Consolidated Appropriations Act, 2022, which contains as part of its many provisions the Adjustable Interest Rate (LIBOR) Act providing for a transition from LIBOR to a SOFR based rate for certain legacy contracts which lack adequate fallback provisions. However, the LIBOR Act does not affect the Company because the Company has amended its LIBOR based loan documents to include benchmark replacement provisions (i.e., provisions based on SOFR).
Silver Nip Citrus Debt
There are
Silver Nip Citrus entered into two additional fixed-rate term loans with Prudential to finance the acquisition of a
The remaining Silver Nip Citrus fixed-rate term loans are subject to a financial covenant whereby the consolidated current ratio requirement is
69
The unamortized balance of deferred financing costs related to the Silver Nip Citrus debt was approximately $
Note 8. Accrued Liabilities
Accrued liabilities consist of the following at September 30, 2022 and September 30, 2021:
(in thousands) |
|
September 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Ad valorem taxes |
|
$ |
|
|
$ |
|
||
Accrued interest |
|
|
|
|
|
|
||
Accrued employee wages and benefits |
|
|
|
|
|
|
||
Accrued dividends |
|
|
|
|
|
|
||
Accrued insurance |
|
|
|
|
|
|
||
Professional fees |
|
|
|
|
|
|
||
Other accrued liabilities |
|
|
|
|
|
|
||
Total accrued liabilities |
|
$ |
|
|
$ |
|
||
Note 9. Fair Value Measurements
The Company complies with the provisions of FASB ASC 820 “Fair Value Measurements” for its financial and non-financial assets and liabilities. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis.
ASC 820 clarifies that fair value is an exit price representing the amount that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
As of September 30, 2022 and 2021, the Company did
Management Security Plan
During August 2020, the Company paid out a lump sum of approximately $
Note 10. Common Stock and Options
Effective January 27, 2015, the Company’s Board of Directors adopted the 2015 Stock Incentive Plan (the “2015 Plan”) which provides for up to
70
Awards are discretionary and are determined by the Compensation Committee of the Board of Directors. Awards vest based upon service conditions. Non-vested restricted shares generally vest over requisite service periods of to
Stock Compensation – Board of Directors
The Board of Directors can either elect to receive stock compensation or cash for their fees for services provided. Stock-based compensation expense relating to the Board of Directors fees was approximately $
Restricted Stock
On September 6, 2022, the Company awarded
On May 18, 2022, the Company awarded
On April 1, 2022, the Company awarded
On January 26, 2022, the Company awarded
On November 5, 2021, the Company awarded
On October 15, 2021, the Company awarded
On November 10, 2020, the Company awarded
71
The following table represents a summary of the status of the Company’s non-vested shares:
Nonvested Shares |
|
Shares |
|
|
Weighted- |
|
||
Nonvested Shares at September 30, 2019 |
|
|
|
|
$ |
|
||
Vested during fiscal year 2020 |
|
|
( |
) |
|
|
|
|
Nonvested Shares at September 30, 2020 |
|
|
|
|
|
|
||
Granted during fiscal year 2021 |
|
|
|
|
|
|
||
Nonvested Shares at September 30, 2021 |
|
|
|
|
|
|
||
Granted during fiscal year 2022 |
|
|
|
|
|
|
||
Vested during fiscal year 2022 |
|
|
( |
) |
|
|
|
|
Forfeited during fiscal year 2022 |
|
|
( |
) |
|
|
|
|
Nonvested Shares at September 30, 2022 |
|
|
|
|
$ |
|
||
Stock compensation expense related to the Restricted Stock totaled approximately $
For the fiscal year ended September 30, 2022,
For the fiscal year ended September 30, 2021,
For the fiscal year ended September 30, 2020,
Stock Option Grant
Stock option grants of
Stock option grants of
72
Stock option grants of
A stock option grant of
Pursuant to an Alico Settlement Agreement dated February 11, 2019 (described in Note 15. “Related Party Transactions”), which was unanimously approved by the Board of Directors, Mr. Trafelet agreed to voluntarily resign from his roles as President and Chief Executive Officer and a director of the Company. Under the Settlement Agreement, Mr. Trafelet forfeited (i) all of the 2016 Option Grants granted to him and (ii) all of the 2018 Option Grants granted to him in September 2018, other than
Forfeitures of all stock options were recognized as incurred.
73
The following table represents a summary of the Company’s stock option activity:
|
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|
Aggregate |
|
||||
Balance – September 30, 2020 |
|
|
|
|
$ |
|
|
|
|
|
|
— |
|
|||
Forfeitures/expired during fiscal year 2021 |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
Balance – September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Exercised during fiscal year 2022 |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Forfeitures/expired during fiscal year 2022 |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
Balance – September 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
|
— |
|
|||
Stock compensation expense related to the options totaled approximately $
At September 30, 2022 and September 30, 2021, there was approximately $
The fair value of the 2020, 2019, and 2018 Option Grants was estimated on the date of grant using a Monte Carlo valuation model that uses the assumptions noted in the following table.
2020 Option Grant
Expected Volatility |
|
|
% |
|
Expected Term (in years) |
|
|
|
|
Risk Free Rate |
|
|
% |
The weighted-average grant-date fair value of the 2020 Option Grant was $
2019 Modified Option Grant
Expected Volatility |
|
|
% |
|
Expected Term (in years) |
|
|
||
Risk Free Rate |
|
|
% |
|
The weighted-average grant-date fair value of the 2019 Modified Option Grant was $
2019 Option Grants
Expected Volatility |
|
|
% |
|
Expected Term (in years) |
|
|
||
Risk Free Rate |
|
|
% |
|
The weighted-average grant-date fair value of the 2019 Option Grants was $
As of September 30, 2022, there remained
74
Note 11. Treasury Stock
The following table illustrates the Company’s treasury stock purchases for the fiscal years ended September 30, 2022, 2021 and 2020:
(in thousands, except share amounts) |
|
Total |
|
|
Average |
|
|
Total Shares |
|
|
Total Dollar |
|
||||
Fiscal Year Ended September 30,: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
2022 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
2021 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
2020 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The following table outlines the Company’s treasury stock transactions during the past three fiscal years:
(in thousands, except share amounts) |
|
Shares |
|
|
Cost |
|
||
Balance at September 30, 2019 |
|
|
|
|
$ |
|
||
Purchased |
|
|
|
|
|
|
||
Issued to Employees and Directors |
|
|
( |
) |
|
|
( |
) |
Balance at September 30, 2020 |
|
|
|
|
|
|
||
Purchased |
|
|
— |
|
|
|
— |
|
Issued to Employees and Directors |
|
|
( |
) |
|
|
( |
) |
Balance at September 30, 2021 |
|
|
|
|
|
|
||
Purchased |
|
|
— |
|
|
|
— |
|
Issued to Employees and Directors |
|
|
( |
) |
|
|
( |
) |
Balance at September 30, 2022 |
|
|
|
|
$ |
|
||
Note 12. Income Taxes
On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act contains significant changes to corporate taxes, including a permanent reduction of the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. The 21% U.S. corporate tax rate is fully applicable to the fiscal year ended September 30, 2019 and each year thereafter.
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (H.R. 748) (the “CARES Act”). Among the changes to the U.S. federal income tax rules, the CARES Act restored net operating loss carryback rules that were eliminated by the 2017 Tax Cuts and Jobs Act, modified the limit on the deduction for net interest expense, and accelerated the timeframe for refunds of AMT credit carryovers. From a federal tax reporting standpoint, the Company had a federal tax net operating loss (“NOL”) in the amount of $
In October 2019, the Internal Revenue Service concluded their audit of the September 30, 2015 tax year with no changes. The Federal and State filings remain subject to examination by tax authorities for tax periods ending after September 30, 2017.
75
The income tax provision for the years ended September 30, 2022, 2021 and 2020 consists of the following:
(in thousands) |
|
Fiscal Year Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Current: |
|
|
|
|
|
|
|
|
|
|||
Federal income tax |
|
$ |
|
|
$ |
|
|
$ |
|
|||
State income tax |
|
|
|
|
|
|
|
|
( |
) |
||
Total current |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Deferred: |
|
|
|
|
|
|
|
|
|
|||
Federal income tax |
|
|
( |
) |
|
|
|
|
|
|
||
State income tax |
|
|
( |
) |
|
|
|
|
|
|
||
Valuation allowance |
|
|
|
|
|
— |
|
|
|
— |
|
|
Total deferred |
|
|
( |
) |
|
|
|
|
|
|
||
Income tax provision |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Income tax provision attributable to income before income taxes differed from the amount computed by applying the statutory federal income tax rate of
(in thousands) |
|
Fiscal Year Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Income tax at the statutory federal rate |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Increase (decrease) resulting from: |
|
|
|
|
|
|
|
|
|
|||
State income taxes, net of federal benefit |
|
|
|
|
|
|
|
|
|
|||
Permanent and other reconciling items, net |
|
|
|
|
|
|
|
|
|
|||
State rate change |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Land Donation – Bargain Sale |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
Valuation allowance |
|
|
|
|
|
— |
|
|
|
— |
|
|
Other |
|
|
|
|
|
|
|
|
( |
) |
||
Income tax provision |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of September 30, 2022, and 2021 are presented below:
(in thousands) |
|
September 30, |
|
|||||
|
|
|
|
|
2021 |
|
||
|
|
2022 |
|
|
Restated |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Goodwill |
|
$ |
|
|
$ |
|
||
Inventories |
|
|
|
|
|
|
||
Stock compensation |
|
|
|
|
|
|
||
Intangibles |
|
|
|
|
|
|
||
Charitable contribution carryforward |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
— |
|
|
Total deferred tax assets |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Deferred tax liabilities: |
|
|
|
|
|
|
||
Property and equipment |
|
|
|
|
|
|
||
Investment in Citree |
|
|
|
|
|
|
||
Prepaid insurance |
|
|
|
|
|
|
||
Total deferred tax liabilities |
|
|
|
|
|
|
||
Valuation allowance |
|
|
|
|
|
— |
|
|
Net deferred income tax liabilities |
|
$ |
( |
) |
|
$ |
( |
) |
76
Note 13. Segment Information
Segments
Operating segments are defined in the criteria established under the FASB ASC Topic 280 as components of public entities that engage in business activities from which they may earn revenues and incur expenses for which separate financial information is available and which is evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to assess performance and allocate resources. The Company’s CODM assesses performance and allocates resources based on
Total revenues represent sales to unaffiliated customers, as reported in the Consolidated Statements of Operations. Goods and services produced by these segments are sold to wholesalers and processors in the United States who prepare the products for consumption. The Company evaluates the segments’ performance based on direct margins (gross profit) from operations before general and administrative expenses, interest expense, other income (expense) and income taxes, not including nonrecurring gains and losses.
Information by operating segment is as follows:
(in thousands) |
|
Fiscal Year Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Revenues: |
|
|
|
|
|
|
|
|
|
|||
Alico Citrus |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Land Management and Other Operations |
|
|
|
|
|
|
|
|
|
|||
Total revenues |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Alico Citrus |
|
|
|
|
|
|
|
|
|
|||
Land Management and Other Operations |
|
|
|
|
|
|
|
|
|
|||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Gross profit: |
|
|
|
|
|
|
|
|
|
|||
Alico Citrus |
|
|
( |
) |
|
|
|
|
|
|
||
Land Management and Other Operations |
|
|
|
|
|
|
|
|
|
|||
Total gross profit |
|
|
( |
) |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|||
Capital expenditures: |
|
|
|
|
|
|
|
|
|
|||
Alico Citrus |
|
|
|
|
|
|
|
|
|
|||
Total capital expenditures |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Depreciation, depletion and amortization: |
|
|
|
|
|
|
|
|
|
|||
Alico Citrus |
|
|
|
|
|
|
|
|
|
|||
Land Management and Other Operations |
|
|
|
|
|
|
|
|
|
|||
Other Depreciation, Depletion and Amortization |
|
|
|
|
|
|
|
|
|
|||
Total depreciation, depletion and amortization |
|
$ |
|
|
$ |
|
|
$ |
|
|||
(in thousands) |
|
September 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Assets: |
|
|
|
|
|
|
||
Alico Citrus |
|
$ |
|
|
$ |
|
||
Land Management and Other Operations |
|
|
|
|
|
|
||
Other Corporate Assets |
|
|
|
|
|
|
||
Total Assets |
|
$ |
|
|
$ |
|
||
Note 14. Leases
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This guidance requires entities that sign leases as a lessee to recognize right-of-use assets and lease liabilities for those leases classified as operating leases under previous U.S. GAAP. The accounting applied by a lessor is largely unchanged from that applied under previous U.S. GAAP. The Company adopted ASU 2016-02 on October 1, 2019.
77
The Company determines whether an arrangement is a lease at inception. The Company’s leases consist of operating lease arrangements for certain office space, tractor leases and IT facilities. When these lease arrangements include lease and non-lease components, the Company accounts for lease components and non-lease components (e.g., common area maintenance) separately based on their relative standalone prices.
Any lease arrangements with an initial term of 12 months or less are not recorded on the Company’s Consolidated Balance Sheets, and it recognizes lease cost for these lease arrangements on a straight-line basis over the applicable lease term. Many lease arrangements provide the options to exercise one or more renewal terms or to terminate the lease arrangement. When the options are reasonably certain to be exercised the Company includes these options when it will be reasonably certain to exercise them in the lease term used to establish the right-of-use assets and lease liabilities. Generally, lease agreements do not include an option to purchase the leased asset, residual value guarantees or material restrictive covenants.
As most of our lease arrangements do not provide an implicit interest rate, the Company applies an incremental borrowing rate based on the information available at the commencement date of the lease arrangement to determine the present value of lease payments.
No lease costs associated with finance leases and sale-leaseback transactions occurred and our lease income associated with lessor and sublease arrangements are not material to our Consolidated Financial Statements.
Our operating leases are reported in our Consolidated Balance Sheets as follows:
(in thousands)
|
|
|
|
September 30, |
|
|
September 30, |
|
||
Operating lease components |
|
Classification |
|
2022 |
|
|
2021 |
|
||
Right-of-use assets – non-current |
|
|
$ |
|
|
$ |
|
|||
Current lease liabilities |
|
|
$ |
|
|
$ |
|
|||
Non-current lease liabilities |
|
|
$ |
|
|
$ |
|
|||
Our operating leases cost components are reported in our Consolidated Statements of Operations as follows:
(in thousands) |
|
|
|
|
|
|
|
|
||
|
|
|
|
September 30, |
|
|
September 30, |
|
||
Operating lease components |
|
Classification |
|
2022 |
|
|
2021 |
|
||
Grove management services revenue |
|
Operating revenue |
|
$ |
|
|
$ |
|
||
Grove management services cost-of-sales |
|
Operating expenses |
|
$ |
|
|
$ |
|
||
Operating lease costs |
|
General and administrative expenses |
|
$ |
|
|
$ |
|
||
Future maturities of our operating lease obligations as of September 30, 2022 by fiscal year are as follows:
(in thousands) |
|
|
|
|
|
|
2023 |
|
|
|
$ |
|
|
2024 |
|
|
|
|
|
|
2025 |
|
|
|
|
|
|
2026 |
|
|
|
|
|
|
2027 |
|
|
|
|
|
|
Total noncancelable future lease obligations |
|
|
|
$ |
|
|
Less: Interest |
|
|
|
|
( |
) |
Present value of |
|
|
|
$ |
|
|
|
|
|
|
September 30, |
|
Weighted-average remaining lease term |
|
|
|
||
Weighted-average discount rate |
|
|
|
% |
|
78
Cash flow information related to leases consists of the following:
(in thousands) |
|
|
|
|
|
|
|
|
||
|
|
|
|
September 30, |
|
|
September 30, |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
||
Operating cash flows from operating leases |
|
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
||
Right-of-use assets obtained in exchange for lease obligations: |
|
|
|
|
|
|
|
|
||
Operating leases |
|
|
|
$ |
— |
|
|
$ |
— |
|
Note 15. Employee Benefits Plans
Management Security Plan
The management security plan (“MSP”) was a nonqualified, noncontributory defined supplemental deferred retirement benefit plan for a select group of management personnel. The MSP was set up to provide a fixed supplemental retirement benefit for
The MSP benefit expense and the projected management security plan benefit obligation were determined using assumptions as of the end of the respective year. The weighted-average discount rate used to compute the obligation was
Actuarial gains or losses were recognized when incurred; therefore, the end of year benefit obligation was the same as the accrued benefit costs recognized in the Consolidated Balance Sheets.
The amount of MSP benefit expense charged to costs and expenses was as follows:
(in thousands) |
|
Fiscal Year Ended September 30, |
|
|||||
|
|
2020 |
|
|
2019 |
|
||
Service cost |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|||
MSP termination adjustments |
|
|
— |
|
|
|
|
|
Recognized actuarial gain adjustment |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
The following provides a roll-forward of the MSP benefit obligation for the fiscal year ended September 30, 2020, the year in which all termination benefits were paid:
(in thousands) |
|
September 30, |
|
|
|
|
2020 |
|
|
Change in projected benefit obligation: |
|
|
|
|
Benefit obligation at beginning of year |
|
$ |
|
|
Interest cost |
|
|
|
|
Benefits paid |
|
|
( |
) |
MSP termination benefits payment |
|
|
( |
) |
Recognized actuarial gain adjustment |
|
|
|
|
Benefit obligation at end of year |
|
$ |
— |
|
Funded status at end of year |
|
$ |
— |
|
Effective September 30, 2018, the Company terminated the MSP. Under the MSP termination, payout for benefits covered utilizing the applicable Internal Revenue Code regulations were not able to be commenced until at least twelve months following plan termination decision and needed to be fully paid out within twenty-four (24) months following plan termination. During August 2020, the Company caused the MSP to pay the lump sum termination benefits of approximately $
79
During the fiscal year ended September 30, 2019, the Company determined to pay out a lump sum under the equivalent annuity approach, whereby the payout under this approach was designed to mitigate participants tax burden. Under this approach, the Company would cover the amount needed to purchase an annuity providing the same after-tax benefit as if the plan was never terminated. As a result, the Company recorded an additional liability of approximately $
The Company had established a “Rabbi Trust” to provide for the potential funding of accrued benefits under the MSP. According to the terms of the Rabbi Trust, funding was voluntary until a change of control of the Company as defined in the Management Security Plan Trust Agreement occurs. Upon a change of control, funding would be triggered. As of September 30, 2018, date the Company terminated the MSP, the Rabbi Trust had no assets, and no change of control had occurred, and no funding had been triggered.
Profit Sharing and 401(k) Plans
The Company maintains a 401(k) employee savings plan for eligible employees, which provides up to a
The Company also maintains a Profit Sharing Plan (“Plan”) that is fully funded by contributions from the Company. Contributions to the Plan are discretionary and determined annually by the Company’s Board of Directors. Contributions to employee accounts are based on the participant’s compensation. The Company did
Note 16. Related Party Transactions
Remy W. Trafelet
As described above, on February 11, 2019 and as contemplated by the Alico Settlement Agreement, Mr. Trafelet submitted to the Board his resignation as President and Chief Executive Officer of the Company and a member of the Board, effective upon the execution of the Alico Settlement Agreement. Also, on February 11, 2019, as contemplated by the Settlement Agreement, the Company entered into a consulting agreement (the “Consulting Agreement”) with Mr. Trafelet and 3584 Inc., an entity controlled by Mr. Trafelet (the “Consultant”). Pursuant to the Consulting Agreement, Mr. Trafelet made himself available to provide consulting services to the Company through the Consultant for up to
Capital Contribution
On September 6, 2022, all operating partners of Citree received a funding notice relating to an additional Cash Capital Contribution (“Contribution”) requirement of approximately $
On September 10, 2020, all operating partners of Citree received a funding notice relating to an additional Cash Capital Contribution (“Contribution”) requirement of approximately $
Departure and Appointment of Chief Financial Officer
On May 17, 2022, Richard Rallo notified the Company of his decision to resign from his role as the Company’s Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) effective as of May 31, 2022. Mr. Rallo’s decision to resign was for personal reasons to eliminate extensive travel and/or avoid relocation to Florida and was not related to any disagreement with the Company or its independent registered public accountants on any matter relating to the Company’s financial or accounting operations, policies, or practices. Mr. Rallo has agreed to provide consulting services to the Company through December 31, 2022.
80
On September 6, 2022, the Company announced the appointment of Perry G. Del Vecchio, age 55, as the Chief Financial Officer (Principal Financial and Accounting Officer) of the Company, effective as of September 6, 2022. Mr. Del Vecchio is responsible for all corporate finance, treasury and accounting functions of the Company and reports directly to John Kiernan, the Company’s President and Chief Executive Officer.
Employment and Bonus Agreement
On April 1, 2022, the Company entered into an amended and restated employment agreement with John E. Kiernan (the “Employment Agreement”). At the same time, the Company and Mr. Kiernan entered into an annual performance and long-term bonus agreement (the “Bonus Agreement”). Pursuant to the Employment Agreement, Mr. Kiernan will remain President and Chief Executive Officer of the Company, for a term commencing on April 1, 2022, and ending on September 30, 2024, subject to extension and termination pursuant to the provisions of the Employment Agreement. The Bonus Agreement sets forth the terms under which Mr. Kiernan would be eligible and entitled to short-term and long-term incentive cash and equity bonuses. For further details of this Employment Agreement and the Bonus Agreement, please see the Form 8-K filed by the Company with the SEC on April 5, 2022.
Lease Agreement
On January 1, 2022, Mr. Kiernan, the Company’s President and CEO, entered into a Hunting Lease Agreement and Real Estate Purchase and Sale Option Agreement, with the Company (the “Kiernan Lease Agreement”). Under the Kiernan Lease Agreement, the Company leased approximately
Note 17. Commitments and Contingencies
Operating Leases
The Company has obligations under various non-cancelable long-term operating leases primarily for office space and equipment. In addition, the Company has various obligations under other equipment leases of less than one year.
Total rent expense was approximately $
The future minimum annual rental payments under non-cancelable operating leases are as follows:
(in thousands) |
|
|
|
|
2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Total |
|
$ |
|
|
Purchase Commitments
The Company enters into contracts for the purchase of citrus trees during the normal course of its business. As of September 30, 2022, the Company had approximately $
Letters of Credit
The Company had outstanding standby letters of credit in the total amount of approximately $
Legal Proceedings
81
From time to time, Alico may be involved in litigation relating to claims arising out of its operations in the normal course of business. There are no current legal proceedings to which the Company is a party or of which any of its property is subject that it believes will have a material adverse effect on its financial position, results of operations or cash flows.
Note 18. Selected Quarterly Financial Data (unaudited)
Summarized quarterly financial data for the fiscal years ended September 30, 2022, and 2021 are computed independently each quarter, therefore, the sum of the quarter amounts may not equal the total amount for the respective year due to rounding as follows:
(in thousands, except per share amounts) |
|
Fiscal Quarter Ended |
|
|||||||||||||||||||||||||||||
|
|
December 31, |
|
|
March 31, |
|
|
June 30, |
|
|
September 30, |
|
||||||||||||||||||||
|
|
2021 |
|
|
2020 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||||||
Total operating revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gross profit (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||||||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other income (expense), net |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||
Income (loss) before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||||||
Income tax (benefit) expense |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||||
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||||||
Net loss (income) attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
Net income (loss) attributable to Alico Inc. common stockholders |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
||||||
Earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
||||||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
||||||
Operating revenues and operating expenses for the fiscal quarter ended September 30, 2021 include approximately $
Note 19. Subsequent Events
On December 12, 2022, the Board of Directors of Alico, Inc. declared a first quarter of fiscal year 2023 cash dividend of $
82
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures.
Management, with the participation of our principal executive officer and principal financial officer, have evaluated the effectiveness of our disclosure controls and procedures as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective at the reasonable assurance level solely as a result of the material weakness management identified in our internal control over financial reporting described below.
(b) Changes in Internal Control over Financial Reporting.
During the fourth fiscal quarter ended September 30, 2022, there were no changes in our internal controls over financial reporting that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
(c) Management Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records, that in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2022. In making this assessment, management used the criteria described in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Based on our assessment and those criteria, management concluded that our internal control over financial reporting was not effective as of September 30, 2022 due to the material weakness in the Company’s internal control over financial reporting identified below. Management reviewed the results of this assessment with our Audit Committee.
A material weakness is a deficiency or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
Management identified the following material weakness in internal control over financial reporting as of September 30, 2022 arising from the following control deficiencies:
83
Management has concluded that these deficiencies together constitute a material weakness that resulted in misstatements of our previously reported consolidated audited and unaudited balance sheets, statements of changes in equity and related disclosures and resulted in the restatements described under “Explanatory Note” and “Restatement of Previously Issued Consolidated Financial Statements” in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K.
The conclusion regarding the effectiveness of our internal control over financial reporting as of September 30, 2022, has been audited by RSM US LLP, an independent registered public accounting firm, as stated in their attestation report which is included herein.
Remediation Plan
Management, with oversight by our Audit Committee, has begun implementing remediation steps to address the material weakness described above and to improve our internal control over financial reporting. We have begun implementing additional internal controls related to the completeness and accuracy of the information used in the preparation of our income tax provisions and the evaluation of the impact of errors in our financial statements. While we believe that these actions will remediate the identified material weakness, we have not completed all the corrective processes, procedures and related evaluation or remediation that we believe are necessary. As we continue to evaluate and work to remediate the material weakness, we may take additional measures to address the control deficiencies.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
84
PART III
Certain information required by Part III is omitted from this Annual Report on Form 10-K because we will file a definitive Proxy Statement for the 2023 Annual Meeting of Stockholders pursuant to Regulation 14A of the Securities Exchange Act of 1934, (the “Proxy Statement”), not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and the applicable information included in the Proxy Statement is incorporated herein by reference.
Item 10. Directors, Executive Officers and Corporate Governance
Information concerning our directors and nominees and other information as required by this Item 10 are hereby incorporated by reference from our Proxy Statement to be filed with the SEC pursuant to Regulation 14A.
Code of Ethics
We have adopted a Code of Business Conduct and Ethics that is intended to serve as a code of ethics for purposes of Item 406 of Regulation S-K. Our Code of Business Conduct and Ethics is posted on our website http://www.alicoinc.com (at the Investor homepage under "Corporate Governance") and we intend to disclose on our website any amendments to, or waivers from, such code.
Item 11. Executive Compensation
The information required by Item 11 regarding executive compensation is included under the headings “Compensation Discussion and Analysis,” “Compensation Committee Report” and “Compensation Committee Interlocks and Insider Participation” in the Proxy Statement to be filed with the SEC pursuant to Regulation 14A.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information concerning the ownership of certain beneficial owners and management and related stockholder matters as required by this Item 12 is hereby incorporated by reference to the Proxy Statement to be filed with the SEC pursuant to Regulation 14A.
Equity Compensation Arrangements
Effective January 27, 2015, the Board of Directors adopted the 2015 Stock Incentive Plan (the “2015 Plan”) which provides for up to 1,250,000 shares of the Company’s common stock to be available for issuance to provide a long-term incentive plan for officers, employees, directors and/or consultants to directly link incentives to stockholders' value. The 2015 Plan was approved by stockholders in February 2015.
The following table illustrates the common shares remaining available for future issuance under the 2015 Plan as of September 30, 2022:
|
|
Number of securities to |
|
|
Weighted-average |
|
|
Number of securities |
|
|||
Plan Category: |
|
|
|
|
|
|||||||
Equity compensation plans approved by security holders |
|
|
218,000 |
|
|
$ |
33.78 |
|
|
|
1,092,000 |
|
Equity compensation plans not approved by security holders |
|
— |
|
|
N/A |
|
|
— |
|
|||
Total |
|
|
218,000 |
|
|
$ |
33.78 |
|
|
|
1,092,000 |
|
In October 2018, the Company awarded 10,000 stock options to one senior executive under the 2015 Plan.
In October 2019, the Company awarded 118,000 stock options to senior managers and certain other managers under the 2015 Plan. Additionally, in each of February 2020 and August 2020, one former senior executive forfeited 26,250 stock options, aggregating 52,500 in total, which were originally issued under the 2015 Plan and no replacement options were granted.
In February 2019, pursuant to a settlement agreement, a senior executive of the Company forfeited an aggregate of 457,500 stock options, which were originally issued under the 2015 Plan and no replacement options were granted.
85
On November 10, 2020, the Company awarded 5,885 restricted shares of the Company’s common stock to certain executives and senior managers under the 2015 Plan at a weighted average fair value of $31.20 per common share, vesting on January 1, 2022.
On October 15 and November 5, 2021, the Company awarded 2,500 and 2,224 restricted shares of the Company’s common stock to certain executives and senior managers under the 2015 Plan at a weighted average fair value of $35.77 per common share, with 2,500 vesting on January 1, 2022 and the remaining shares vesting on January 1, 2023.
On December 31, 2021, one senior executive forfeited 77,500 stock options, which were originally issued under the 2015 Plan, and no replacement options were granted.
On January 26, 2022, the Company awarded 7,256 restricted shares of the Company’s common stock to certain non-executive employees, with more than one year of service, under the 2015 Plan at a weighted average fair value of $35.50 per common share, vesting on January 1, 2023.
During the third quarter of fiscal year 2022, several employees were dismissed in connection with the wind down of a certain property management agreement dated as of July 16, 2020, with third-party grove owners. As part of the wind down, 1,144 shares of the 7,256 restricted shares referenced above vested upon the dates such employees were terminated.
On April 1, 2022 and May 18, 2022 the Company awarded 5,000 restricted shares and 12,500 restricted shares, respectively, of the Company’s common stock under the 2015 Plan to one senior executive. The weighted average fair value was $37.98 for the April 1, 2022 award and $40.17 for the May 18, 2022 award, with one half of each award scheduled to vest on January 1, 2025, and the remaining shares of each award are scheduled to vest on January 1, 2026.
On September 6, 2022 the Company awarded 747 restricted shares of the Company’s common stock to one senior executive under the 2015 Plan at a fair value of $33.50 per common share, with all shares scheduled to vest on January 1, 2024.
The information concerning relationships and related transactions as required by this Item 13 is hereby incorporated by reference to our Proxy Statement to be filed with the SEC pursuant to Regulation 14A.
Item 14. Principal Accountants Fees and Services
Information concerning principal accounting fees and services as required by this Item 14 is hereby incorporated by reference to the Proxy Statement to be filed with the SEC pursuant to Regulation 14A.
86
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) Documents filed as part of this report
(1) Financial Statements:
Our Consolidated Financial Statements are included in Part II, Item 8 of this Annual Report on Form 10-K.
(2) Financial Statement Schedules:
Financial statement schedules are omitted as the required information is either inapplicable or the information is presented in our Consolidated Financial Statements or notes thereto.
(3) Exhibits
The exhibits listed in the Exhibit Index in (b) below are filed or incorporated by reference as part of this Annual Report on Form 10-K.
(b) Exhibit Index
Exhibit Number |
|
Exhibit Index |
2.1*** |
|
|
2.2*** |
|
|
3.1 |
|
|
3.2 |
|
|
3.3 |
|
|
3.4 |
|
|
3.5 |
|
|
4.1 |
|
|
10.1 |
|
|
10.2 |
|
|
10.3* |
|
|
10.4* |
|
|
10.5 |
|
|
10.6*** |
|
|
10.7*** |
|
87
10.8 |
|
|
10.9 |
|
|
10.10 |
|
|
10.11 |
|
|
10.12 |
|
|
10.13 |
|
|
10.14 |
|
|
10.15 |
|
|
10.16 |
|
|
10.17 |
|
|
10.18 |
|
|
10.19 |
|
|
10.20 |
|
|
10.21 |
|
|
10.22 |
|
|
10.23 |
|
|
10.24 |
|
|
10.25 |
|
|
10.26*** |
|
|
10.27 |
|
|
10.28 |
|
|
10.29 |
|
88
10.30 |
|
|
10.31 |
|
|
10.32 |
|
|
10.33 |
|
|
10.34* |
|
|
10.35* |
|
|
10.36* |
|
|
10.37 |
|
|
10.38 |
|
|
10.39 |
|
|
10.40 |
|
|
10.41 |
|
|
10.42 |
|
|
10.43 |
|
|
10.44 |
|
|
10.45 |
|
|
10.46 |
|
|
10.47 |
|
89
10.48 |
|
|
10.49 |
|
|
10.50 |
|
|
10.51 |
|
|
10.52* |
|
|
10.53* |
|
|
10.54* |
|
|
10.55* |
|
|
10.56+ |
|
|
10.57+ |
|
|
10.58 |
|
|
10.59 |
|
|
10.60 |
|
|
10.61 |
|
|
10.62 |
|
|
10.63 |
|
|
10.64 |
|
|
10.65 |
|
|
10.66* |
|
|
21.0 |
|
|
23.0 |
|
|
31.1 |
|
|
31.2 |
|
|
32.1 |
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 |
32.2 |
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 |
99.1 |
|
Select Balance Sheet Data (Restated) for the eight quarters in fiscal year 2022 and 2021 |
101.INS** |
|
Inline XBRL Instance Document |
101.SCH** |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL** |
|
Inline XBRL Taxonomy Calculation Linkbase Document |
101.DEF** |
|
Inline XBRL Taxonomy Definition Linkbase Document |
101.LAB |
|
Inline XBRL Taxonomy Label Linkbase Document |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
The cover page for the Company’s Annual Report on Form 10-K for the year ended September 30, 2022, has been formatted in Inline XBRL |
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* Denotes a management contract or compensatory plan, contract or arrangement.
** In accordance with Rule 406T of Regulation S-T, these XBRL (eXtensible Business Reporting Language) documents are furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under these sections.
*** Certain schedules and exhibits have been omitted from this filing pursuant to Item 601(b) (2) of Regulation S-K. The Company will furnish supplemental copies of any such schedules or exhibits to the SEC upon request.
+ Pursuant to Item 601(b)(10)(iv) of Regulation S-K promulgated by the SEC, certain portions of this exhibit have been redacted. The Company hereby agrees to furnish, supplementally to the SEC, upon its request, an unredacted copy of this exhibit.
Item 16. Form 10-K Summary
Not applicable.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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ALICO, INC. (Registrant) |
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December 13, 2022 |
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By: |
/s/ John E. Kiernan |
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John E. Kiernan |
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President and Chief Executive Officer (Principal Executive Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated:
December 13, 2022 |
President and Chief Executive Officer (Principal Executive Officer) |
/s/ John E. Kiernan |
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John E. Kiernan |
December 13, 2022 |
Chief Financial Officer (Principal Financial and Accounting Officer) |
/s/ Perry Del Vecchio |
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Perry Del Vecchio |
December 13, 2022 |
Director: Executive Chairman |
/s/ George R. Brokaw |
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George R. Brokaw |
December 13, 2022 |
Director |
/s/ Benjamin D. Fishman |
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Benjamin D. Fishman |
December 13, 2022 |
Director |
/s/ R. Greg Eisner |
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R. Greg Eisner |
December 13, 2022 |
Director |
/s/ Henry R. Slack |
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Henry R. Slack |
December 13, 2022 |
Director |
/s/ W. Andrew Krusen |
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W. Andrew Krusen |
December 13, 2022 |
Director |
/s/ Toby K. Purse |
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Toby K. Purse |
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December 13, 2022 |
Director |
/s/ Katherine English |
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Katherine English |
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December 13, 2022 |
Director |
/s/ Adam Putnam |
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Adam Putnam |
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