Business Context and Reporting Period
Alico, Inc. is a Florida agribusiness and land-management company owning approximately 54,500 acres. Its two segments are Alico Citrus and Land Management and Other Operations. This Form 10-Q covers the three and six months ended March 31, 2024, compared with the corresponding 2023 periods; it is not a 2023 second-quarter filing. Results are seasonal, with most annual revenue historically generated in the second and third fiscal quarters.
Financial Performance and Position
- Three-month revenue: $18.1 million, down 14.9% from $21.3 million. Alico Citrus revenue declined 15.2% to $17.8 million, while Land Management revenue was broadly flat at $0.4 million.
- Six-month revenue: $32.1 million, up 0.7% from $31.9 million.
- Profitability: Three-month gross loss was $18.2 million versus $6.3 million; operating loss was $20.5 million versus $9.0 million; and net loss attributable to Alico common stockholders was $15.8 million, or $2.07 per diluted share, versus a $7.8 million loss, or $1.02 per share.
- Six-month profitability: Gross loss was $32.4 million and operating loss was $38.0 million. Net income attributable to common stockholders was $27.1 million, or $3.56 per diluted share, compared with a $10.9 million loss in the prior-year period. The result was dominated by a $77.0 million gain on property and equipment from land sales.
- Margins: Consolidated gross margin was approximately negative 100.7% for the quarter and negative 101.0% for the six-month period. Operating margin was approximately negative 113.1% and negative 118.4%, respectively.
- Cash flow: Six-month operating cash flow was negative $19.7 million versus negative $7.1 million. Investing cash flow was positive $67.2 million, primarily from land-sale proceeds. Financing cash flow was negative $45.2 million due primarily to debt repayments and dividends.
- Liquidity: March 31 cash was $6.0 million, compared with $1.1 million at September 30, 2023. Working capital was $31.4 million, down from $43.7 million. The current ratio was 2.55 to 1.
- Debt: Principal term loans and lines of credit totaled $84.9 million at March 31, down $44.5 million from September 30. The Company had no outstanding borrowings under its revolving lines of credit, with $25.0 million available under the RLOC and $69.8 million available under the WCLC, subject to a $0.2 million letter of credit. No variable-rate debt was outstanding at quarter-end.
- Dividends: The Company declared $0.05 per common share for the quarter and $0.10 per share for the six-month period.
Material Changes Versus the Prior Comparable Period
- Quarterly citrus revenue fell primarily because the Valencia harvest began later than in the prior year and the prior year included accelerated harvesting after Hurricane Ian. Pound solids produced declined 22.1% and processed boxes declined 18.8% for the quarter.
- For six months, citrus revenue was slightly higher despite a 6.4% decline in pound solids, supported by improved pricing under a Tropicana contract and higher grove-management revenue.
- Six-month operating expenses increased substantially, including a $28.5 million inventory write-down to net realizable value. Management attributed the adjustment primarily to lower-than-anticipated harvests and continued recovery from Hurricane Ian.
- The prior-year period benefited from approximately $4.8 million of crop-insurance proceeds and $1.3 million of Florida Citrus Recovery Block Grant proceeds; comparable benefits were not received in the current six-month period.
- Grove-management revenue increased to $1.4 million for six months from $0.6 million, reflecting an October 2023 agreement covering approximately 3,300 acres owned by third parties.
- 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. Proceeds were used partly to repay the WCLC and $19.1 million of variable-rate term loans.
- Income taxes changed from a $1.6 million benefit in the prior-year six-month period to a $10.6 million provision in the current period, principally because of the land-sale gain. The six-month effective tax rate was 28.6%.
Guidance, Outlook, Risks, Contingencies and Unusual Items
- Management did not provide quantitative earnings or revenue guidance. It expects citrus groves may require another season or more to recover to pre-Hurricane Ian production levels.
- Management believes cash on hand, operating cash flow, asset sales and available credit facilities will provide sufficient liquidity for at least the next twelve months, but this depends on economic, market, regulatory and operating conditions.
- Key risks include hurricanes and adverse weather, citrus greening and other disease, water restrictions, harvest yields, citrus prices, customer concentration, labor and input costs, inflation, variable interest rates, debt-service requirements and the ability to maintain dividends.
- Tropicana represented 89.9% of six-month revenue and had $8.1 million of receivables outstanding at March 31, 2024, creating significant customer concentration.
- The Company was in compliance with its debt covenants at March 31, 2024. It had $3.6 million of commitments for citrus-tree purchases and $0.2 million of standby letters of credit.
- On April 19, 2024, the Company agreed to sell approximately 780 acres of underperforming citrus land for approximately $7.0 million, with an option for the buyer to acquire an additional 680 acres at the same per-acre price. Closing was expected at the end of July 2024.
- There were no material legal proceedings, no issuer share repurchases, and no material changes to previously disclosed risk factors. Management reported effective disclosure controls as of March 31, 2024.
Important Facts for Investors to Verify
- Whether citrus yields, pound solids per box and grove productivity recover as expected following Hurricane Ian.
- The sustainability of operating cash flow given seasonal working-capital needs and the $19.7 million six-month operating cash outflow.
- The extent to which future results depend on additional land sales and whether the April 2024 transaction closes on expected terms.
- Tropicana contract terms, pricing adjustments and the effect of customer concentration on revenue and receivables.
- Debt covenant compliance, availability under revolving facilities, interest-rate exposure and future principal maturities.
- The effect of the $28.5 million inventory write-down and whether further valuation adjustments or insurance and government-relief proceeds may arise.
- The Company’s ability to maintain its dividend while citrus operations remain unprofitable and operating cash flow is negative.