Note 4. 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 $6,676,000 for adjustments to reduce inventory to net realizable value, as a result of the impact of Hurricane Ian, which impacted the Company’s unharvested citrus crop for the fiscal year ended September 30, 2022. We anticipate future fruit production to be impacted in the 2022-2023 harvest season and, potentially, the 2023-2024 harvest season. The Company undertook a process to estimate the amount of inventory casualty loss as of the date of Hurricane Ian. Such process included a number of factors including touring all of the citrus groves by operational personnel to assess the estimated fruit drop by grove and the impact of damage to the citrus trees, and an estimate of fruit the Company expects to produce for the 2022-2023 harvest season after Hurricane Ian. As a result, the Company recorded a casualty loss to reduce the carrying value of unharvested fruit crop on trees inventory by approximately $14,900,000. While the Company believes the recorded loss to be its best estimate at this time, additional impairment could result based on the actual results of the 2022-2023 harvest season. The Company maintains crop insurance and is working closely with its insurers and adjusters to evaluate and determine the amount of insurance recoveries, if any, to which the Company may be entitled. The amount of insurance recoveries, if any, will be recorded in the period in which such recoveries are both probable and reasonably able to be estimated.

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 $1,123,000, $4,299,000 and $4,629,000, respectively, under the Florida Citrus Recovery Block Grant (“CRBG”) program. The Company anticipates receiving the remaining portion during fiscal year 2023. These federal relief proceeds are included as a reduction to operating expenses in the Consolidated Statements of Operations.