Alico, Inc. Form 10-K Summary
Reporting period: Fiscal year ended September 30, 2020. The request metadata references “2019 Q4,” but the provided filing is Alico’s fiscal 2020 Form 10-K, filed December 8, 2020.
Business Context
Alico is a Florida agribusiness and land-management company operating approximately 99,760 acres across eight Florida counties. Its two reportable segments are Alico Citrus and Land Management and Other Operations. Citrus generated 96.6% of fiscal 2020 operating revenue. Tropicana accounted for 86.9% of consolidated revenue.
- Alico owned approximately 45,507 gross citrus acres and managed approximately 7,200 additional third-party citrus acres.
- The company also generates leasing, conservation, mining, and other land-management income.
- As of September 30, 2020, Alico had 251 full-time employees.
Key Financial Metrics
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Operating revenue | $92.5 million | $122.3 million | Down 24.3% |
| Gross profit | $17.9 million | $60.4 million | Down 70.3% |
| Income from operations | $6.9 million | $45.2 million | Down 84.7% |
| Net income attributable to common stockholders | $23.7 million | $37.8 million | Down 37.5% |
| Basic/diluted EPS | $3.16 | $5.06/$5.05 | Lower |
| Cash dividends declared per share | $0.36 | $0.24 | Increased |
| Net cash from operating activities | $1.0 million | $48.8 million | Down $47.8 million |
| Capital expenditures | $21.7 million | $20.0 million | Increased $1.7 million |
| Cash and restricted cash | $19.7 million | $23.8 million | Down $4.2 million |
| Principal debt and lines of credit | $151.2 million | $163.4 million | Down $12.3 million |
Approximate consolidated operating margin declined to 7.5% from 37.0%, while net margin attributable to common stockholders was approximately 25.6% versus 30.9%. Net income benefited materially from a $30.4 million gain on asset sales, including the sale of ranch land.
Operating Performance and Material Changes
- Alico Citrus revenue declined 24.9% to $89.4 million. Processed boxes harvested declined 7.5% to 7.3 million, pound solids declined 6.7% to 43.6 million, and prices per pound solids fell 20.7% for Valencias and 26.0% for Early and Mid-Season fruit.
- Excess domestic and international citrus supply pressured pricing. Valencia fruit drop and smaller fruit size also reduced production.
- Citrus gross profit fell 71.3% to $17.1 million. The decline was partly offset by lower harvesting and hauling costs and $4.6 million of Hurricane Irma relief proceeds.
- Grove management revenue increased to $4.6 million from $1.3 million. A new agreement covering approximately 7,000 third-party acres contributed approximately $3.3 million of fourth-quarter revenue and approximately $3.0 million of related expenses.
- Land Management and Other Operations revenue declined slightly to $3.1 million, with gross profit declining 10.0% to $0.8 million.
- General and administrative expense declined 27.4% to $11.0 million, primarily because fiscal 2019 included corporate litigation, consulting, separation, and pension-related costs.
- The company sold approximately 10,700 ranch acres to the State of Florida for $28.5 million and recognized an approximately $27.5 million gain. It discontinued permitting activities for the related dispersed water storage project and recorded a $0.6 million project write-down.
- In October 2020, Alico purchased approximately 3,280 gross citrus acres for $16.5 million, using proceeds from the land sale in a transaction intended to defer approximately $4.0 million of income taxes.
Cash Flow, Debt, and Liquidity
- Operating cash flow fell sharply to $1.0 million, primarily due to lower citrus earnings, income-tax payments, working-capital investment in grove management services, and the effect of the larger asset-sale gain.
- Investing activities provided $9.5 million, reflecting $31.5 million of asset-sale proceeds offset by $21.7 million of capital expenditures.
- Financing activities used $14.7 million, including $15.2 million of term-loan principal payments and $2.5 million of dividends, partially offset by net revolving-credit borrowings.
- At September 30, 2020, principal debt totaled approximately $148.3 million and revolving-line borrowings totaled $2.9 million. Approximately $91.7 million remained available under revolving facilities, subject to borrowing conditions.
- The company drew $70.0 million on revolving facilities in March 2020 as a COVID-19 liquidity precaution and repaid the majority by year-end.
- Management stated that cash on hand, operating cash flow, asset sales, and credit availability should cover working capital, capital expenditures, and debt service for at least the next 12 months.
- The company was in compliance with its financial covenants, including minimum debt-service coverage, current-ratio, tangible-net-worth, debt-to-assets, and capital-expenditure requirements.
Outlook, Commentary, Risks, and Unusual Items
- Management expected 2020–21 citrus prices to improve because of increased demand for not-from-concentrate orange juice and lower anticipated Florida production. The USDA forecast cited in the filing projected a 15.3% decline in Florida orange production.
- New Tropicana supply agreements became effective October 1, 2020 and run through July 31, 2024. Customer concentration remains substantial and creates exposure to contract renewal, pricing, and customer-loss risk.
- The company reported no material adverse COVID-19 impact through the filing date, but identified risks involving demand, financing access, workforce availability, supply-chain disruption, cybersecurity, and workplace claims.
- Major operating risks include hurricanes and other weather events, citrus greening and citrus canker, water availability, labor and immigration restrictions, commodity pricing, foreign competition, and transportation disruptions. Most crops remain uninsured against hurricane risk.
- Variable-rate debt creates interest-rate exposure; a one-percentage-point increase in applicable rates would have increased fiscal 2020 interest expense by approximately $0.4 million.
- The company has approximately $186.3 million of contractual obligations, including $148.3 million of debt, $34.0 million of projected debt interest, $3.0 million of citrus-tree purchase commitments, and $0.9 million of operating leases.
- The company received $4.6 million of Hurricane Irma Citrus Recovery Block Grant proceeds in fiscal 2020; the timing and amount of any remaining Part 3 proceeds had not been finalized.
- RSM US LLP issued unqualified opinions on the consolidated financial statements and internal control over financial reporting.
Important Facts to Verify
- Whether expected citrus pricing improvement in fiscal 2021 offsets lower projected Florida production and ongoing disease-related costs.
- The durability and economics of the Tropicana contracts, which represent approximately 87% of consolidated revenue.
- Actual cash generation after capital expenditures, dividends, scheduled debt amortization, and the October 2020 citrus-acre acquisition.
- Remaining availability, covenant headroom, maturity terms, and interest-rate exposure under the company’s secured credit facilities.
- The timing and amount of any remaining Hurricane Irma relief proceeds and the tax treatment of the ranch-land sale and replacement acquisition.
- The impact of citrus greening, weather events, water restrictions, labor availability, and crop insurance coverage on future yields and margins.
- Whether the company can maintain its increased dividend of $0.09 per share per quarter; a $0.18 per-share dividend was declared for the first quarter of fiscal 2021.