Alico, Inc. Form 10-K Summary
Reporting period: Fiscal year ended September 30, 2021. The provided filing is the fiscal 2021 Form 10-K, rather than a 2020 fourth-quarter filing. Alico is a Florida agribusiness and land-management company operating primarily through Alico Citrus and Land Management and Other Operations. It owned approximately 83,000 acres of Florida land and held approximately 90,000 acres of mineral rights at year-end.
Financial performance and position
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Operating revenue | $108.6 million | $92.5 million | 17.4% increase |
| Gross profit | $23.9 million | $17.9 million | 33.3% increase |
| Income from operations | $14.4 million | $6.9 million | 108.6% increase |
| Net income attributable to common stockholders | $34.9 million | $23.7 million | 47.3% increase |
| Basic/diluted EPS | $4.64 | $3.16 | 47% increase |
| Cash flow from operations | $16.5 million | $1.0 million | Increase of $15.5 million |
- FY2021 gross margin was approximately 22.0%, operating margin approximately 13.3%, and net margin approximately 32.1%. Net margin was substantially influenced by real-estate gains.
- Alico Citrus generated $105.8 million, or 97.5% of total operating revenue, and gross profit of $21.9 million. Land Management and Other Operations generated $2.8 million of revenue and $2.0 million of gross profit.
- Other income, net was $31.9 million, including $35.9 million of gains on real-estate, property and equipment sales. The filing therefore indicates that reported earnings were materially supported by land dispositions and were not solely generated by recurring operations.
- Cash and cash equivalents plus restricted cash declined to $0.9 million from $19.7 million. Working capital increased to $32.6 million from $30.7 million, and the current ratio was 2.46 to 1.
- Principal debt declined to $126.3 million from $152.0 million. No amounts were outstanding on revolving credit lines at September 30, 2021, with approximately $94.7 million of availability, subject to borrowing conditions and covenants.
- Total assets were $433.2 million and total stockholders’ equity was $247.6 million at September 30, 2021.
Material changes versus the prior comparable period
- Citrus revenue increased 18.4%, primarily from a large increase in grove-management services and higher Valencia pricing. Grove-management revenue rose to $17.0 million from $4.6 million and included reimbursement of costs, which also increased operating expenses.
- Total processed boxes harvested declined 13.9%, and total pound solids declined 18.2%. Lower volume and lower solids per box were offset by higher prices, supported by strong demand for not-from-concentrate orange juice and tighter citrus supplies.
- G&A expense decreased 14.0% to $9.5 million, reflecting lower legal, stock compensation, payroll and pension-related expenses, partly offset by corporate advisory fees.
- Land Management gross profit increased 139.5% because the Company no longer incurred expenses for the discontinued dispersed water-storage project.
- The Company purchased approximately 3,280 citrus acres in October 2020 for $18.2 million and acquired additional smaller citrus properties.
- The Company sold approximately 19,776 acres during FY2021, generating approximately $35.9 million of gains. Most net proceeds were used for debt repayment, acquisitions and other corporate purposes.
- In April 2021, Alico prepaid $10.3 million of Met fixed-rate term debt. Effective May 1, 2021, the remaining $70.0 million was converted to interest-only payments at 3.85%, with a balloon maturity on November 1, 2029. The prior prepayment option was eliminated.
- The annual dividend was increased to $2.00 per common share in June 2021; dividends paid during FY2021 were $7.1 million. No common-stock repurchases occurred during the year.
Outlook, risks and unusual items
- Management cited a USDA forecast for an approximately 11% decline in Florida orange production for the 2021-22 crop year, to approximately 47.0 million boxes. Management expected market prices to remain consistent with or slightly above FY2021 levels, but this is not a formal earnings forecast.
- Management expects inflationary pressures to continue into 2022. Pricing and supply-chain initiatives were expected to offset only part of higher costs.
- The business is seasonal, weather-sensitive and concentrated in Florida. Key risks include hurricanes, freezes, drought, flooding, citrus greening, citrus canker, water restrictions, labor availability, immigration policy, commodity pricing and inflation.
- Tropicana represented 77.5% of consolidated FY2021 revenue. Including the indirect relationship from managed groves, the filing states that Tropicana-related exposure was approximately 90.1% of total revenue excluding grove-management service revenue. Most citrus supply contracts expire in 2023 or 2024, creating significant customer-concentration and renewal risk.
- The Company reported no material adverse impact from COVID-19 through the filing date, but disclosed potential labor, supply-chain, workplace, regulatory and litigation effects related to the pandemic and conflicting federal and Florida vaccination requirements.
- Alico had approximately $159.2 million of contractual obligations, including $126.3 million of debt, $30.2 million of future debt interest, $2.4 million of citrus-tree purchase commitments and $0.4 million of operating leases.
- Variable-rate debt references LIBOR. The Company was evaluating replacement rates and noted uncertainty around the transition to an alternative benchmark, expected to occur during fiscal 2023.
- The Company expected to receive approximately $2.0 million of remaining Hurricane Irma relief reimbursements, including $1.0 million received in October 2021 and the balance expected in fiscal 2023.
- Subsequent to year-end, Florida purchased approximately 1,638 acres for approximately $5.7 million. The Board also declared a $0.50-per-share first-quarter FY2022 dividend.
- Management stated that liquidity from cash flows, asset sales and credit facilities should be sufficient for at least the next twelve months. The Company was in compliance with its financial covenants at September 30, 2021.
Most important facts for investors to verify
- Reconcile recurring citrus operating profitability with the $35.9 million of FY2021 real-estate gains and assess the sustainability of earnings without land sales.
- Review the concentration of revenue in Tropicana and the expiration, pricing and renewal terms of the principal citrus supply contracts.
- Assess crop-health trends, including citrus greening, production volumes, pound solids per box and the effect of Florida’s expected lower crop.
- Verify liquidity after the year-end cash balance of only $0.9 million, including seasonal working-capital needs and access to the $94.7 million of revolving availability.
- Review debt maturities, covenant headroom, variable-rate exposure, the $70.0 million balloon maturity in 2029 and the LIBOR transition provisions.
- Evaluate whether the increased $2.00 annual dividend is supported by recurring operating cash flow rather than asset-sale proceeds.
- Confirm the timing and collectability of remaining Hurricane Irma reimbursements and the tax consequences of land sales and like-kind exchanges.
- Monitor labor availability, inflation, water access, weather, disease, COVID-19 mandates and regulatory developments affecting Florida agricultural operations.