Alico, Inc. Form 10-Q Summary
Reporting period: Fiscal quarter and six months ended March 31, 2013, filed May 6, 2013. The request metadata identifies “2012 Q2,” but the filing itself reports fiscal 2013 second-quarter results and compares them with the periods ended March 31, 2012.
Business Context
Alico is a Florida agribusiness and land-management company owning approximately 130,400 acres across five Florida counties. Its principal activities are citrus groves, agricultural supply-chain management, improved farmland and sugarcane, cattle and conservation, land leasing, and other operations including mining.
Financial Performance
| Metric | Three months ended March 31, 2013 | Three months ended March 31, 2012 | Six months ended March 31, 2013 | Six months ended March 31, 2012 |
|---|---|---|---|---|
| Operating revenue | $38.410 million | $54.097 million | $59.766 million | $80.144 million |
| Gross profit | $7.014 million | $14.238 million | $10.800 million | $19.752 million |
| Income from operations | $4.550 million | $12.431 million | $6.528 million | $15.955 million |
| Net income | $2.773 million | $7.414 million | $3.811 million | $9.347 million |
| Diluted EPS | $0.38 | $1.01 | $0.52 | $1.27 |
| Cash dividends declared per share | $0.08 | $0.04 | $0.08 | $0.08 |
Gross margin was approximately 18.3% for the quarter and 18.1% for the six-month period, compared with approximately 26.3% and 24.6%, respectively, in the prior-year periods. Net margin was approximately 7.2% for the quarter and 6.4% for the six months, compared with 13.7% and 11.7% in the prior-year periods.
- Revenue decline: Quarterly revenue decreased 29.0%; six-month revenue decreased 25.5%.
- Profit decline: Quarterly net income decreased 62.6%; six-month net income decreased 59.3%.
- Segment trends: Six-month citrus-grove revenue decreased 27.0% and Alico Fruit revenue decreased 44.3%, while sugarcane revenue increased 20.6%. Citrus gross profit declined 60.3% for the six months.
- Corporate costs: Quarterly general and administrative expense increased 36.4%, primarily due to approximately $628,000 of Special Committee advisory expenses related to strategic alternatives.
- Other items: Investment income improved, including $245,000 of Magnolia investment income in the quarter versus an $87,000 loss in the prior-year quarter. Interest expense declined because of lower debt and the payoff of a mortgage note, partly offset by a $66,000 prepayment penalty.
Cash Flow, Liquidity and Debt
| Metric | March 31, 2013 | September 30, 2012 |
|---|---|---|
| Cash and cash equivalents | $3.513 million | $13.328 million |
| Total current assets | $36.640 million | $51.467 million |
| Total current liabilities | $11.447 million | $17.148 million |
| Working capital | $25.193 million | $34.319 million |
| Total debt | $37.000 million | $39.900 million |
| Current ratio | 3.20:1 | 3.00:1 |
- Six-month operating cash flow was $6.942 million, down from $13.600 million.
- Investing activities used $10.166 million, including $12.973 million of capital expenditures.
- Financing activities used $6.591 million, including $2.810 million for treasury-stock purchases, $2.900 million of debt principal payments and $881,000 of dividends.
- The company had no balance drawn on its $60 million revolving credit line and reported $60 million of remaining availability. Its $37 million term loan bears interest at one-month LIBOR plus 250 basis points and matures in October 2020, with $2 million due within one year.
- Management stated that cash, the revolving facility and expected operating cash flow should satisfy foreseeable working-capital and capital-expenditure needs.
Material Changes, Outlook and Risks
- Citrus pressure: Lower prices, smaller crops, premature fruit drop, drought, unfavorable weather and citrus greening materially reduced citrus results. Management expected citrus boxes produced and handled to decline from the prior season.
- USDA outlook: The filing cites the USDA’s April 10, 2013 forecast for a 6% decline in Florida’s orange crop versus the prior year, after cumulative downward revisions of approximately 10%.
- Management estimates: Valencia production was expected to decline approximately 9%, with expected average pricing of $1.78 to $1.80 per pound solids for the 2012-2013 crop. Fresh-fruit production was expected to decline approximately 6.3%.
- Sugarcane: Acreage and harvested tons increased, but lower pricing partially offset volume gains.
- Strategic alternatives: Atlanticblue, which owns approximately 50.6% of Alico, announced its intention to explore selling substantially all of its assets and actively pursue a sale of its Alico equity position. Alico’s Special Committee retained Deutsche Bank Securities and Greenberg Traurig to evaluate potential transactions.
- Potential conservation-easement transaction: Alico expected to complete a sale of an approximately 11,600-acre conservation easement for approximately $20.7 million and expected a gain of approximately $19.5 million. The filing does not state that the transaction had closed by March 31, 2013.
- Commitments: Citrus purchase obligations totaled approximately $19.03 million through fiscal 2016 and were covered by corresponding sales agreements.
- Contingencies: The company reported routine legal matters and stated that it did not expect them to have a material adverse effect. No material changes to previously disclosed risk factors were reported.
- Controls: Management concluded that disclosure controls were effective and reported no material changes in internal control over financial reporting.
Most Important Facts to Verify
- Whether Atlanticblue’s proposed sale of its controlling stake leads to a merger, change in control, strategic transaction or related executive change-in-control payments.
- Whether the conservation easement closes and whether the expected $19.5 million gain is recognized.
- Subsequent citrus crop volumes, pricing, citrus-greening effects and the sustainability of sugarcane production gains.
- Liquidity after capital expenditures, treasury-stock purchases, dividends and seasonal working-capital needs.
- Compliance with debt covenants, floating-rate exposure and the October 2020 term-loan maturity structure.
- The effect of approximately $19.03 million in citrus purchase commitments if market prices or sales volumes weaken.