Alico, Inc. Fiscal 2022 Form 10-K Summary
Reporting period: Fiscal year ended September 30, 2022. The supplied metadata references “2021 Q4,” but the filing is Alico’s fiscal 2022 Form 10-K. Results for fiscal 2021 and 2020 are presented for comparison, with certain balance sheet and equity data restated.
Business Context
Alico is a Florida agribusiness and land management company owning approximately 74,000 acres of land and approximately 90,000 acres of mineral rights. It operates through Alico Citrus and Land Management and Other Operations. Citrus generated 97.5% of fiscal 2022 operating revenue, and Tropicana represented 79.7% of consolidated revenue.
Key Financial Metrics
| Metric | Fiscal 2022 | Fiscal 2021 | Change |
|---|---|---|---|
| Operating revenue | $91.947 million | $108.564 million | Down 15.3% |
| Gross profit | $(14.765) million | $23.893 million | Down $38.658 million |
| Loss from operations | $(24.844) million | $14.440 million | Down $39.284 million |
| Net income | $11.886 million | $34.820 million | Down 65.9% |
| Net income attributable to common stockholders | $12.459 million | $34.859 million | Down 64.3% |
| Diluted EPS | $1.65 | $4.64 | Down 64.4% |
| Cash flow from operating activities | $6.523 million | $16.504 million | Down $9.981 million |
| Capital expenditures | $20.867 million | $41.785 million | Down $20.918 million |
Other income was $37.799 million, including $41.102 million of gains on sales of real estate and other assets. Interest expense declined to $3.324 million from $3.987 million. The effective tax rate was 8.25%, compared with 24.94% in fiscal 2021, substantially affected by a charitable deduction related to a land sale and a $4.3 million valuation allowance.
At September 30, 2022, cash was $0.865 million, working capital was $15.091 million, total assets were $409.255 million and total stockholders’ equity was $248.865 million. Principal debt and lines of credit totaled approximately $111.624 million, including $4.928 million drawn on the working capital line. Approximately $89.762 million remained available under working capital and revolving credit facilities, subject to borrowing conditions and covenants.
The current ratio was 1.91 to 1. The Company reported compliance with all financial covenants, including minimum debt service coverage, tangible net worth, current ratio and debt-to-total-assets requirements.
Material Changes Versus Fiscal 2021
- Citrus revenue declined 15.2% to $89.681 million. Processed box production fell 13.5%, total boxes harvested fell 12.9%, and pound solids declined 19.2%, partly due to disease, weather and a January 2022 freeze.
- Higher citrus pricing partially offset lower production. Price per pound solids increased approximately 7.2% overall.
- Hurricane Ian caused significant fruit drop and resulted in a $14.900 million inventory casualty loss and a $6.676 million inventory net-realizable-value adjustment in the fourth quarter. Additional production impacts are expected for up to two full seasons or more.
- A third-party grove management relationship terminated effective June 10, 2022 after the grove owners exited the citrus business. Related revenue was approximately $10.598 million in fiscal 2022 versus $15.752 million in fiscal 2021; the agreement generated no fourth-quarter 2022 revenue or expenses.
- Land Management and Other Operations revenue declined 18.1% to $2.266 million, primarily because acreage subject to grazing and hunting leases was sold.
- The Company sold approximately 9,400 acres of ranch land for net proceeds of $43.159 million and recognized approximately $41.102 million of gains on asset sales.
- Debt declined from $126.294 million of principal term loans and lines of credit at September 30, 2021 to $111.624 million at September 30, 2022. A $15.625 million prepayment fully satisfied one Met variable-rate term loan.
- Dividends paid increased to $15.101 million from $7.138 million, reflecting the previously approved annual dividend of $2.00 per share. No shares were repurchased during fiscal 2022.
Liquidity, Debt and Outlook
Management stated that cash on hand, operating cash flow, asset sales and available credit facilities should provide sufficient liquidity for working capital, capital expenditures and debt service for at least the next 12 months and over the long term. The $70 million working capital line was amended on October 27, 2022, extending maturity to November 2025 and changing the reference rate from LIBOR to SOFR.
The Company expects higher inflationary pressure in fiscal 2023, particularly for transportation, fuel, fertilizer and other commodities. Management expects pricing actions and productivity initiatives to offset only part of the cost increases.
The Company declared a first-quarter fiscal 2023 dividend of $0.05 per share on December 12, 2022. The filing does not provide formal revenue or earnings guidance.
Risks, Contingencies and Unusual Items
- Hurricane Ian, freezes, disease, citrus greening, citrus canker, water availability and other weather conditions may reduce production and earnings for multiple seasons. Crop insurance recoveries remain uncertain.
- The Company is highly concentrated in citrus and has substantial customer concentration. Tropicana accounted for $73.791 million, or 79.7%, of fiscal 2022 revenue. Most citrus supply contracts expire in 2023 or 2024.
- Variable-rate debt exposes the Company to higher interest expense; management estimated that a one-percentage-point rate increase would increase annual interest expense by approximately $0.3 million.
- The Company had $5.891 million of commitments for citrus tree purchases, $0.822 million of undiscounted operating lease obligations and $0.310 million of outstanding letters of credit at September 30, 2022.
- The financial statements include a restatement correcting deferred tax liability calculations for fiscal years 2015 through 2019. The cumulative effect reduced deferred tax liabilities and increased retained earnings by approximately $2.512 million, with no effect on reported operating results or cash flows for the periods presented.
- Management and the auditor concluded that internal control over financial reporting was not effective because of a material weakness involving income tax provision controls and evaluation of financial statement misstatements. Remediation had begun but was not complete as of the filing date.
- The Company has not identified any current legal proceedings expected to have a material adverse effect, but it cannot predict whether regulatory investigations could arise from the restatement.
- Fiscal 2022 results include significant nonrecurring gains from land sales and significant Hurricane Ian casualty and inventory charges; reported net income therefore does not represent recurring citrus operating profitability.
Facts Investors Should Verify
- Actual Hurricane Ian insurance recoveries, federal relief eligibility and the effect on the 2022-2023 and 2023-2024 harvests.
- Restated balance sheet and equity figures, remediation of the material weakness and any SEC or other regulatory response.
- Renewal, pricing and volume terms for the Tropicana contracts and the potential loss of the terminated grove management relationship.
- Fiscal 2023 citrus yields, pound solids per box, fruit prices and cost inflation relative to the assumptions used in inventory valuation.
- Availability and covenant compliance under the working capital and revolving credit facilities, including the impact of SOFR-based pricing.
- Sustainability of the $2.00 annual dividend policy given low cash balances, debt obligations, capital expenditures and expected hurricane-related cash needs.
- The extent to which future results depend on additional ranch land sales rather than recurring citrus and land-management operations.