Alico, Inc. Form 10-Q Summary
Business Context and Reporting Period
Alico, Inc. is a Florida agribusiness and land management company owning approximately 54,000 acres and related mineral rights. Its two segments are Alico Citrus and Land Management and Other Operations. This unaudited filing covers the three months ended December 31, 2023, compared with the three months ended December 31, 2022. Results are seasonal, with the second and third fiscal quarters typically generating most annual revenue.
Key Financial Metrics
| Metric | Q1 FY2024 | Q1 FY2023 | Change |
|---|---|---|---|
| Total revenue | $14.0 million | $10.6 million | Up 32.1% |
| Gross profit | $(14.3) million | $(3.8) million | Declined $10.5 million |
| Loss from operations | $(17.5) million | $(6.3) million | Declined $11.2 million |
| Net income attributable to Alico common stockholders | $42.9 million | $(3.2) million | Improved $46.1 million |
| Diluted EPS | $5.64 | $(0.41) | Improved |
| Net cash used in operating activities | $(13.2) million | $(9.7) million | Use increased $3.5 million |
| Cash and restricted cash at period-end | $21.3 million | $0.3 million | Increased $21.0 million |
Alico Citrus generated $13.6 million of revenue and a $14.5 million gross loss. Land Management and Other Operations generated $0.4 million of revenue and $0.3 million of gross profit. Consolidated gross margin was approximately negative 102% and operating margin was approximately negative 125%; these margins were heavily affected by a $10.8 million inventory write-down.
Net income was principally driven by a $77.0 million gain on the sale of real estate, property and equipment and assets held for sale. The effective tax rate was 26.8%, compared with 24.3% in the prior-year quarter. The company declared a $0.05 per-share dividend.
Liquidity, Debt, and Cash Flow
- Working capital was $43.3 million at December 31, 2023, compared with $43.7 million at September 30, 2023.
- Principal term debt and lines of credit totaled $85.2 million, down from $129.3 million at September 30, 2023.
- The company used proceeds from land sales to repay its $24.7 million working capital line of credit and $19.1 million of variable-rate term debt. No revolving-line borrowings were outstanding at December 31, 2023.
- Available capacity was $69.8 million under the working capital line and $25.0 million under the revolving line, subject to borrowing conditions and outstanding letters of credit.
- At December 31, 2023, the company was in compliance with its debt covenants. The company reported no variable-rate debt outstanding at quarter-end.
- Investing activities provided $75.2 million, primarily from land-sale proceeds, while financing activities used $44.5 million, principally for debt repayments.
- Management stated that cash on hand, operating cash flow, asset sales, and available credit are expected to provide sufficient liquidity for at least the next twelve months, subject to economic, industry, and other conditions.
Material Changes Versus the Prior Comparable Period
- Revenue increased 32.1%, primarily from a 30.1% increase in processed boxes and a 24.9% increase in pound solids as groves began recovering from Hurricane Ian. Pricing per pound solids increased 3.4%.
- Operating expenses increased 96.3%, primarily because of the $10.8 million inventory net-realizable-value adjustment, higher harvesting and hauling costs, and the absence of approximately $1.3 million of prior-year federal citrus recovery grant proceeds.
- Early and Mid-Season citrus revenue increased 29.3% to $12.4 million. Grove management services revenue increased to $0.7 million from $0.2 million following a new agreement covering approximately 3,300 acres of third-party groves.
- The company sold approximately 17,556 acres for $79.1 million and recognized a $77.0 million gain, including the sale of approximately 17,229 acres of the Alico Ranch to the State of Florida for $77.6 million in gross proceeds.
- Accounts receivable increased to $7.9 million from $0.7 million at September 30, 2023, including $5.0 million due from Tropicana. Tropicana represented 77.8% of quarterly revenue, compared with 75.8% in the prior-year quarter.
- Total assets increased to $441.2 million from $428.4 million, while total equity increased to $292.6 million from $250.4 million, primarily due to reported net income.
Outlook, Risks, Contingencies, and Unusual Items
Management expects citrus production may require another season or more to return to pre-Hurricane Ian levels. The $10.8 million inventory write-down was based on estimates of harvest conditions, tree health, weather, and treatment effects; further adjustments may occur.
- Major risks include hurricanes and other weather events, citrus greening and citrus canker, water restrictions, labor and input-cost inflation, transportation and market-price volatility, climate-related risks, and the seasonal nature of citrus production.
- The company depends substantially on Tropicana and other processors; Tropicana accounted for 77.8% of quarterly revenue.
- The company recognized $1.8 million of CRAFT grant funds related to Oxytetracycline treatments, including $0.4 million recognized as a reduction of operating expenses and $1.4 million remaining in inventory at December 31, 2023. The funds were collected in January 2024.
- Outstanding citrus-tree purchase commitments were $3.7 million, and standby letters of credit totaled $0.2 million.
- The filing reports no material pending legal proceedings, no material changes to previously disclosed risk factors, and no material changes to internal control over financial reporting. Disclosure controls were considered effective at the reasonable-assurance level.
Important Facts for Investors to Verify
- Whether citrus production and inventory values recover as anticipated following Hurricane Ian and whether additional write-downs are required.
- The sustainability of reported earnings excluding the $77.0 million land-sale gain.
- Future citrus pricing, production volumes, pound solids, and harvesting costs.
- Revenue concentration and counterparty dependence related to Tropicana.
- Availability and terms of revolving credit facilities, debt-covenant compliance, and future debt maturities.
- Management’s continued ability to fund seasonal working-capital needs while maintaining dividends and pursuing growth or asset-sale plans.