Alico, Inc. Form 10-Q Summary
Reporting period: Three and six months ended March 31, 2021, compared with the corresponding 2020 periods. The request metadata identifies “2020 Q2,” but the filing is for fiscal 2021 second quarter. The unaudited results cover Alico’s Florida agribusiness and land-management operations across approximately 103,000 acres, primarily through the Alico Citrus and Land Management and Other Operations segments.
Financial Performance and Position
| Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | Six months ended March 31, 2021 | Six months ended March 31, 2020 |
|---|---|---|---|---|
| Revenue | $55.9 million | $50.5 million | $69.7 million | $61.5 million |
| Gross profit | $10.2 million | $6.6 million | $15.6 million | $12.2 million |
| Gross margin | 18.3% | 13.1% | 22.4% | 19.9% |
| Income from operations | $7.6 million | $3.7 million | $10.4 million | $6.5 million |
| Operating margin | 13.5% | 7.3% | 15.0% | 10.6% |
| Net income attributable to Alico stockholders | $4.9 million | $3.6 million | $8.7 million | $4.4 million |
| Diluted EPS | $0.65 | $0.48 | $1.16 | $0.58 |
- Alico Citrus generated $55.3 million of second-quarter revenue and $68.2 million for the six-month period. Land Management and Other Operations generated $0.7 million and $1.5 million, respectively.
- Net cash provided by operating activities was $25.6 million for the six months ended March 31, 2021, versus $11.7 million in the prior-year period.
- Investing cash outflows were $24.6 million, including $18.2 million for the acquisition of approximately 3,280 gross acres in Hendry County and $10.3 million of capital expenditures.
- Financing cash outflows were $10.3 million. The company repaid $45.2 million of revolving borrowings, drew $42.3 million, paid $5.4 million of term-loan principal, and paid $2.0 million of dividends.
- Cash and cash equivalents were $10.4 million at March 31, 2021, compared with $3.2 million at September 30, 2020. Cash plus restricted cash declined by $9.3 million from the beginning of the fiscal year because restricted cash of $16.5 million was used in a like-kind asset acquisition.
- Total assets were $428.8 million and total stockholders’ equity was $228.4 million at March 31, 2021. Working capital was $27.9 million and the current ratio was 2.03 to 1.
- Principal debt outstanding was $142.9 million, down from $151.2 million at September 30, 2020. No amounts were outstanding under the revolving lines of credit at March 31, 2021.
Material Changes Versus Prior Comparable Period
- Revenue increased 10.7% in the quarter and 13.3% year to date, primarily from higher Valencia citrus pricing and a new third-party grove-management agreement covering approximately 7,000 acres.
- Gross profit increased 54.5% in the quarter and 27.7% year to date. Citrus gross profit rose 55.2% in the quarter and 25.1% year to date.
- Despite higher revenue and profit, production volumes declined. Total boxes harvested decreased 18.3% in the quarter and 17.6% year to date; pound solids produced decreased 21.0% and 20.1%, respectively. Higher prices per pound solids substantially offset lower volume and lower solids per box.
- General and administrative expense declined 10.2% in the quarter and 9.3% year to date, reflecting lower stock-compensation, legal, payroll, and pension costs, partly offset by $0.2 million of corporate advisory fees.
- Second-quarter other income shifted to net expense of $1.1 million from net income of $1.4 million, mainly because the prior-year quarter included approximately $2.9 million of real-estate and asset-sale gains. Year-to-date other income improved to $1.1 million, including $3.3 million of gains on asset sales.
- The quarterly dividend increased to $0.18 per share from $0.09; the six-month dividend was $0.36 per share versus $0.18 in the prior-year period.
Guidance, Outlook, Risks, and Unusual Items
- Management expects the 2020–21 Florida orange crop to decline approximately 15% to 20% for Alico, compared with the USDA’s estimated 23.3% decline for the Florida industry. The company stated that the harvest season had not been materially affected by COVID-19.
- Management cautions that grove-management services carry lower gross margins than citrus production, so the overall Alico Citrus gross margin is expected to be lower in fiscal 2021 and future periods than before the new services agreement.
- Alico received approximately $4.3 million of Hurricane Irma Florida Citrus Recovery Block Grant proceeds during the six months. Approximately $2.0 million of additional proceeds are estimated to remain, with receipt expected partly in fiscal 2021 and partly in fiscal 2022.
- On April 15, 2021, after quarter-end, Florida purchased approximately 5,734 acres for $14.4 million. Alico expects to recognize an approximately $14.0 million gain and used a majority of the proceeds to prepay fixed-rate debt.
- In April 2021, Alico prepaid $10.3 million of fixed-rate term loans. Effective May 1, 2021, the remaining $70.0 million balance was converted to interest-only payments with a balloon due November 1, 2029; the interest rate was reduced from 4.15% to 3.85%.
- Management believes cash, operating cash flow, asset-sale proceeds, and available credit facilities will fund debt service, working capital, and capital expenditures for at least the next twelve months. Available credit at March 31, 2021 included approximately $69.8 million under the working-capital line and $25.0 million under the revolving line, subject to approximately $0.2 million of letters of credit.
- The company was in compliance with its debt covenants at March 31, 2021. Key risks include weather, citrus greening and other pests, water availability, citrus prices and yields, labor and supply-chain disruptions, seasonality, leverage, refinancing availability, land values, regulatory changes, and the eventual transition from LIBOR.
- Outstanding commitments included approximately $2.6 million for citrus-tree purchases. The filing reports no material adverse litigation and no material changes to previously disclosed risk factors.
Important Facts for Investors to Verify
- Whether higher citrus prices can offset continuing declines in boxes harvested and pound solids per box.
- The sustainability and margin impact of the third-party grove-management agreement, including its revenue and cost pass-through characteristics.
- The timing, tax impact, and cash deployment of the $14.4 million post-quarter-end Florida land sale and expected $14.0 million gain.
- The effect of the revised fixed-rate debt structure, including reduced near-term principal payments and the $70.0 million balloon maturity in 2029.
- Receipt and timing of the remaining estimated Citrus Recovery Block Grant proceeds.
- Compliance with debt covenants and availability under revolving facilities, particularly as the company considers acquisitions, debt repayment, share repurchases, or increased dividends.
- Exposure to seasonal production, citrus disease, weather, water restrictions, market pricing, customer concentration, and LIBOR replacement terms.