alco-10q_20201231.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the Quarterly Period Ended December 31, 2020

	or

☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


For the transition period
	from____________________	to_________________________

Commission File Number: 0-261

ALICO, INC.

(Exact name of registrant as specified in its charter)


Florida			59-0906081
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
10070 Daniels Interstate Court
10070 Daniels Interstate Court
Suite 100	Fort Myers	FL	33913
(Address of principal executive offices)			(Zip Code)


(239)	226-2000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	ALCO	Nasdaq Global Select Market

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. ☑Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑Yes ☐ No

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” and “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	☐	Accelerated Filer	☑
Non-accelerated filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

There were 7,513,413 shares of common stock outstanding at February 2, 2021.

ALICO, INC.

FORM 10-Q

For the three months ended December 31, 2020 and 2019

Table of Contents

Part I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3. Quantitative and Qualitative Disclosures About Market Risk	30
Item 4. Controls and Procedures	30
Part II - OTHER INFORMATION	31
Item 1. Legal Proceedings	31
Item 1A. Risk Factors	31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3. Defaults Upon Senior Securities	31
Item 4. Mine Safety Disclosure	31
Item 5. Other Information	31
Item 6. Exhibits	32
Signatures	33

PART I

Item 1. Condensed Consolidated Financial Statements

Index to Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of December 31, 2020 (Unaudited) and September 30, 2020	1
Condensed Consolidated Statements of Operations for the three months ended December 31, 2020 and 2019 (Unaudited)	2
Condensed Consolidated Statements of Changes in Equity for the three months ended December 31, 2020 and 2019 (Unaudited)	3
Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2020 and 2019 (Unaudited)	4
Notes to Condensed Consolidated Financial Statements (Unaudited)	5

ALICO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

	December 31,			September 30,
	2020			2020
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,601		$	3,163
Accounts receivable, net		5,598			4,347
Inventories		46,430			40,855
Income tax receivable	—				781
Assets held for sale		1,410			1,366
Prepaid expenses and other current assets		1,755			1,387
Total current assets		57,794			51,899

Restricted cash		—			16,524
Property and equipment, net		367,221			350,061
Goodwill		2,246			2,246
Other non-current assets		2,921			3,207
Total assets	$	430,182		$	423,937

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,950		$	3,533
Accrued liabilities		5,473			7,095
Long-term debt, current portion		9,090			9,145
Income taxes payable		469			—
Other current liabilities		1,031			1,385
Total current liabilities		18,013			21,158

Long-term debt:
Principal amount, net of current portion		136,472			139,106
Less: deferred financing costs, net		(1,109	)		(1,151	)
Long-term debt less current portion and deferred financing costs, net		135,363			137,955
Lines of credit		12,204			2,942
Deferred income tax liabilities, net		39,728			39,728
Other liabilities		332			372
Total liabilities		205,640			202,155
Commitments and Contingencies (Note 12)
Stockholders' equity:
Preferred stock, no par value, 1,000,000 shares authorized; none issued		—			—
Common stock, $1.00 par value, 15,000,000 shares authorized; 8,416,145 shares issued and 7,506,160 and 7,492,524 shares outstanding at December 31, 2020 and September 30, 2020, respectively		8,416			8,416
Additional paid in capital		19,634			19,685
Treasury stock, at cost, 909,985 and 923,621 shares held at December 31, 2020 and September 30, 2020, respectively		(30,421	)		(30,779	)
Retained earnings		221,513			219,019
Total Alico stockholders' equity		219,142			216,341
Noncontrolling interest		5,400			5,441
Total stockholders' equity		224,542			221,782
Total liabilities and stockholders' equity	$	430,182		$	423,937

See accompanying notes to the condensed consolidated financial statements.

ALICO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share amounts)

	Three Months Ended December 31,
	2020			2019
Operating revenues:
Alico Citrus	$	12,926		$	10,175
Land Management and Other Operations		806			830
Total operating revenues		13,732			11,005
Operating expenses:
Alico Citrus		8,147			4,840
Land Management and Other Operations	188				551
Total operating expenses		8,335			5,391
Gross profit		5,397			5,614
General and administrative expenses		2,528			2,760
Income from operations		2,869			2,854
Other income (expense), net:
Interest expense		(1,189	)		(1,544	)
Gain on sale of real estate, property and equipment and assets held for sale		3,364			25
Other income (expense)		10			(76	)
Total other income (expense), net		2,185			(1,595	)
Income before income taxes		5,054			1,259
Income tax provision		1,250			361
Net income		3,804			898
Net loss (income) attributable to noncontrolling interests		41			(107	)
Net income attributable to Alico, Inc. common stockholders	$	3,845		$	791
Per share information attributable to Alico, Inc. common stockholders:
Earnings per common share:
Basic	$	0.51		$	0.11
Diluted	$	0.51		$	0.11
Weighted-average number of common shares outstanding:
Basic		7,503			7,477
Diluted		7,503			7,491

Cash dividends declared per common share	$	0.18		$	0.09

See accompanying notes to the condensed consolidated financial statements.

ALICO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

(in thousands)

For the Three Months Ended December 31, 2020

					Additional									Total			Non-
	Common stock				Paid In			Treasury			Retained			Alico, Inc.			controlling			Total
	Shares		Amount		Capital			Stock			Earnings			Equity			Interest			Equity
Balance at September 30, 2020		8,416	$	8,416	$	19,685		$	(30,779	)	$	219,019		$	216,341		$	5,441		$	221,782
Net income (loss)		—		—		—			—			3,845			3,845			(41	)		3,804
Dividends ($0.18/share)		—		—		—			—			(1,351	)		(1,351	)		—			(1,351	)
Stock-based compensation:
Directors		—		—		20			202			—			222			—			222
Executives and Managers		—		—		(71	)		156			—			85			—			85
Balance at December 31, 2020		8,416	$	8,416	$	19,634		$	(30,421	)	$	221,513		$	219,142		$	5,400		$	224,542

For the Three Months Ended December 31, 2019

					Additional									Total			Non-
	Common stock				Paid In			Treasury			Retained			Alico, Inc.			controlling		Total
	Shares		Amount		Capital			Stock			Earnings			Equity			Interest		Equity
Balance at September 30, 2019		8,416	$	8,416	$	19,781		$	(31,943	)	$	198,049		$	194,303		$	5,095	$	199,398
Net income		—		—		—			—			791			791			107		898
Dividends ($0.09/share)		—		—		—			—			(671	)		(671	)		—		(671	)
Treasure stock purchases		—		—		—			(238	)		—			(238	)		—		(238	)
Stock-based compensation:
Directors		—		—		(32	)		225			—			193			—		193
Executives and Managers		—		—		108			—			—			108			—		108
Balance at December 31, 2019		8,416	$	8,416	$	19,857		$	(31,956	)	$	198,169		$	194,486		$	5,202	$	199,688

See accompanying notes to the condensed consolidated financial statements.

ALICO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Three Months Ended December 31,
	2020			2019
Net cash used in operating activities:
Net income	$	3,804		$	898
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation, depletion, and amortization		3,851			3,609
Gain on sale of real estate, property and equipment and assets held for sale		(3,364	)		(25	)
Loss on disposal of long-lived assets		443			88
Impairment of right-of-use asset	—				87
Stock-based compensation expense		307			301
Changes in operating assets and liabilities:
Accounts receivable		(1,251	)		(1,139	)
Inventories		(5,575	)		(3,145	)
Prepaid expenses		(432	)		(477	)
Income tax receivable		781			—
Other assets		134			(457	)
Accounts payable and accrued liabilities		(3,882	)		(6,213	)
Income taxes payable		469			361
Other liabilities		(394	)		69
Net cash used in operating activities		(5,109	)		(6,043	)

Cash flows from investing activities:
Purchases of property and equipment		(5,062	)		(3,541	)
Acquisition of citrus grove		(16,450	)		—
Net proceeds from sale of real estate, property and equipment and assets held for sale		3,425			42
Change in deposits on purchase of citrus trees		64			(194	)
Advances on notes receivables, net		122			4
Other		25			—
Net cash used in investing activities		(17,876	)		(3,689	)

Cash flows from financing activities:
Repayments on revolving lines of credit		(14,187	)		—
Borrowings on revolving lines of credit		23,449			—
Principal payments on term loans		(2,689	)		(7,132	)
Treasury stock purchases	—				(238	)
Dividends paid		(674	)		(448	)
Deferred financing costs	—				(23	)
Net cash provided by (used in) financing activities		5,899			(7,841	)

Net decrease in cash and cash equivalents and restricted cash		(17,086	)		(17,573	)
Cash and cash equivalents and restricted cash at beginning of the period		19,687			23,838

Cash and cash equivalents and restricted cash at end of the period	$	2,601		$	6,265

See accompanying notes to the condensed consolidated financial statements.

ALICO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 103,000 acres of land throughout Florida, holding mineral rights on approximately 90,000 of those owned acres. The Company manages its land based upon its primary usage, and reviews its performance based upon two primary classifications: (i) Alico Citrus and (ii) Land Management and Other Operations. Financial results are presented based upon these two business segments.

Basis of Presentation

The Company has prepared the accompanying financial statements on a condensed consolidated basis. These accompanying unaudited condensed consolidated interim financial statements, which are referred to herein as the “Financial Statements", have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to Article 10-01 of Regulation S-X of the U.S. Securities and Exchange Commission ("SEC") for interim financial information. These Financial Statements do not include all of the disclosures required for complete annual financial statements and, accordingly, certain information, footnotes and disclosures normally included in annual financial statements, prepared in accordance with U.S. GAAP, have been condensed or omitted in accordance with SEC rules and regulations. Accordingly, the Financial Statements should be read in conjunction with the Company's audited Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020, as filed with the SEC on December 8, 2020.

The Financial Statements presented in this Quarterly Report on Form 10-Q are unaudited. However, in the opinion of management, such Financial Statements include all adjustments, consisting solely of normal recurring adjustments, necessary to present fairly the financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP applicable to interim periods.

Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the current fiscal year ending September 30, 2021.

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.

Restricted Cash

Restricted cash is comprised of cash receipts from the sale of property which was being held specifically for the purpose of deferring a tax impact on the gain on sale of the property.

In September 2020, the Company sold certain sections of the West Ranch, from which a portion of the net cash proceeds amounting to $16,524,000 were being held by a qualified intermediary in anticipation of purchasing a like-kind asset and in order to defer a portion of the gain on sale of the ranch land. Such funds were included in restricted cash at September 30, 2020. In October 2020, the Company closed on a purchase of a like-kind asset and used all of these net cash proceeds which were being held by the intermediary.

Revenue Recognition

Revenues are derived from the sale of processed fruit, fresh fruit, other citrus revenue, leasing revenue and other resource revenues. The majority of the revenue is generated from the sale of citrus fruit to processing facilities, fresh fruit sales and grove management services. The Company recognizes revenue in the amount it expects it will 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, including 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 of 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 collected or paid thirty to sixty days after final market pricing is published. Receivables under contracts, whereby pricing is based off a cost-plus structure methodology, are paid at the final prior year rate. Any adjustments to pricing as a result of the cost-plus calculation are collected or paid upon finalization of the calculation and agreement by both parties. As of December 31, 2020, and September 30, 2020, the Company had total receivables relating to sales of citrus of approximately $4,328,000 and $584,000, respectively, recorded in Accounts Receivable, net, in the Condensed Consolidated Balance Sheets.

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 grove management services are rendered and consumed.

Disaggregated Revenue

Revenues disaggregated by significant products and services for the three months ended December 31, 2020 and 2019 are as follows:

(in thousands)
	Three Months Ended December 31,
	2020		2019
Alico Citrus
Early and Mid-Season	$	9,315	$	9,066
Fresh Fruit		409		735
Grove Management Services		3,092		305
Other		110		69
Total	$	12,926	$	10,175

Land Management and Other Operations
Land and Other Leasing	$	727	$	663
Other		79		167
Total	$