Alico, Inc. Form 10-K Summary
Reporting period: Fiscal year ended September 30, 2023. The request metadata references “2022 Q4,” but the provided filing is Alico’s fiscal 2023 Form 10-K, filed December 6, 2023.
Business Context
Alico is a Florida agribusiness and land-management company owning approximately 72,000 acres across eight Florida counties. Its two reportable segments are Alico Citrus, which produces and manages citrus groves, and Land Management and Other Operations, which includes leasing, conservation, mining royalties and related activities. Citrus generated 95.7% of fiscal 2023 revenue.
- Approximately 48,949 gross acres were devoted to citrus operations and 22,854 acres to land management and other operations.
- Tropicana accounted for 81.3% of consolidated revenue, compared with 79.7% in fiscal 2022.
- The business is seasonal, with most revenue generally generated in the second and third fiscal quarters.
Financial Performance and Liquidity
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Operating revenue | $39.8 million | $91.9 million | Down 56.7% |
| Gross profit | $6.4 million | $(14.8) million | Improved $21.2 million |
| Loss from operations | $(4.2) million | $(24.8) million | Improved $20.6 million |
| Net income | $1.7 million | $11.9 million | Down 86.1% |
| Net income attributable to common stockholders | $1.8 million | $12.5 million | Down 85.3% |
| Basic and diluted EPS | $0.24 | $1.65 | Down $1.41 |
| Net cash used in operating activities | $(6.3) million | $6.5 million | Declined $12.8 million |
| Capital expenditures | $16.7 million | $20.9 million | Down $4.1 million |
| Interest expense | $4.9 million | $3.3 million | Up $1.6 million |
Revenue and citrus production were materially affected by Hurricane Ian, which increased fruit drop and reduced the harvest. Total citrus boxes harvested declined 51.5% to 2.7 million, while pound solids produced declined 53.8% to 13.3 million. Higher prices per pound solids partially offset the lower volume.
- Cash and cash equivalents were $1.1 million at September 30, 2023; cash, including restricted cash, was $3.7 million.
- Working capital was $43.7 million, compared with $15.1 million in fiscal 2022; the current ratio improved to 3.90 from 1.91.
- Principal debt outstanding was $129.3 million, including $24.7 million drawn under lines of credit. The company reported $70.0 million of additional borrowing availability under its facilities, before consideration of outstanding letters of credit.
- Total assets were $428.4 million and total stockholders’ equity was $250.4 million.
- Management stated that cash on hand, operating cash flow, asset-sale proceeds and available credit are expected to provide liquidity for at least the next twelve months and over the long term.
Material Changes Versus the Prior Comparable Period
- Hurricane Ian: Approximately 48,900 gross citrus acres experienced hurricane or tropical-storm-force winds. Management expects recovery to pre-storm production levels could take two full seasons or more.
- Insurance proceeds: The company received $27.4 million for crop claims and $0.8 million for property and casualty damage, recorded as reductions of operating expenses.
- Grove management revenue: Revenue declined to $1.2 million from $11.9 million after third-party grove owners terminated a management agreement in June 2022.
- Land sales: Alico sold approximately 2,255 acres for $12.0 million and recognized an $11.4 million gain, compared with a $39.1 million gain on larger land sales in fiscal 2022.
- Debt and interest: Debt increased by $17.7 million, while interest expense increased to $4.9 million. Variable-rate debt was converted from LIBOR-based pricing to SOFR-based pricing.
- Dividend: The annual dividend was reduced to $0.20 per share from $2.00 per share, including a fourth-quarter fiscal 2023 dividend of $0.05 per share.
- Internal controls: Previously reported material weaknesses related to income-tax controls and evaluation of financial-statement misstatements were remediated. Management and the auditor concluded that internal control over financial reporting was effective as of September 30, 2023.
Outlook, Commentary, Risks and Unusual Items
- Alico entered into an agreement to sell 17,229 acres of the Alico Ranch to the State of Florida under the Florida Forever Program for approximately $77.6 million. Closing was expected between December 2023 and February 2024, with proceeds intended primarily for repayment of variable-rate debt and general corporate purposes.
- The company began applying Oxytetracycline treatments for citrus greening and had treated more than 35% of its trees by September 30, 2023. The benefit was not expected to be measurable until the fiscal 2024 harvest was completed.
- On October 30, 2023, Alico entered into a new grove-management agreement covering approximately 3,300 acres. The agreement provides for reimbursement of costs and a management fee.
- Management expects continued inflationary pressure on transportation, fertilizer, chemicals, labor and fuel costs through fiscal 2024.
- Key risks include hurricanes and other weather events, citrus greening and citrus canker, concentrated dependence on Tropicana, commodity-price volatility, labor availability, water restrictions, variable interest rates, debt covenants, climate and environmental regulation, and cybersecurity.
- A one-percentage-point increase in prevailing interest rates would have increased fiscal 2023 interest expense by approximately $0.4 million.
- The company had $4.4 million of outstanding commitments for citrus-tree purchases and $0.2 million of standby letters of credit at September 30, 2023.
- Two shareholder-related lawsuits concerning prior financial reporting and the December 2022 restatement were voluntarily dismissed without prejudice. The filing states that no current legal proceedings are expected to have a material adverse effect.
- The filing does not provide formal quantitative earnings or revenue guidance.
Most Important Facts for Investors to Verify
- Whether the approximately $77.6 million Florida Forever land sale closed on expected terms and how much debt was repaid.
- The pace and magnitude of citrus-grove recovery after Hurricane Ian, including future box production and pound solids per box.
- Whether citrus-greening treatments improve fruit retention and quality during the fiscal 2024 harvest.
- The renewal, volume and pricing terms of Tropicana contracts, most of which expire in 2024, with another agreement expiring in 2025.
- Compliance with debt covenants and the effect of higher SOFR-based borrowing costs on cash flow and profitability.
- Whether operating cash flow returns to positive levels after the fiscal 2023 use of $6.3 million.
- The sustainability of the reduced $0.20 annual dividend given leverage, capital expenditures and variable agricultural cash flows.
- Continued effectiveness of the remediated internal controls and any developments related to prior restatements or shareholder claims.