Alico, Inc. Form 10-Q Summary
Reporting period: Three and nine months ended June 30, 2021, compared with the same periods in 2020. The request metadata identifies “2020 Q3,” but the filing itself is the quarter ended June 30, 2021. Amounts are in thousands unless otherwise stated and financial statements are unaudited.
Business Context
Alico is a Florida agribusiness and land management company owning approximately 84,000 acres and approximately 90,000 acres of mineral rights. Its two segments are Alico Citrus and Land Management and Other Operations. Revenue is primarily generated from citrus sales, citrus grove management services, leasing and other land-related activities.
Key Financial Metrics
| Metric | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Nine months ended June 30, 2021 | Nine months ended June 30, 2020 |
|---|---|---|---|---|
| Total revenue | $34,888 | $26,122 | $104,564 | $87,642 |
| Gross profit | $8,510 | $6,220 | $24,133 | $18,451 |
| Gross margin | 24.4% | 23.8% | 23.1% | 21.1% |
| Income from operations | $6,599 | $3,664 | $17,041 | $10,182 |
| Operating margin | 18.9% | 14.0% | 16.3% | 11.6% |
| Net income attributable to Alico common stockholders | $27,119 | $2,096 | $35,831 | $6,458 |
| Diluted EPS | $3.61 | $0.28 | $4.77 | $0.86 |
| Cash dividends declared per share | $0.50 | $0.09 | $0.86 | $0.27 |
- Alico Citrus revenue increased 35.1% in the quarter and 20.1% year to date. Land Management and Other Operations revenue declined 17.8% in the quarter and 8.6% year to date.
- Net income included gains on sales of real estate, property and equipment of $30,288 in the quarter and $33,635 year to date, compared with $154 and $3,017, respectively, in the prior-year periods.
- Cash provided by operating activities was $33,608 year to date, compared with $21,121 in 2020.
- Capital expenditures were $15,760 year to date. The company also paid $18,230 for a citrus grove acquisition and $453 for mineral rights, while receiving $34,901 in net proceeds from asset sales.
- Cash and cash equivalents were $31,410 at June 30, 2021, compared with cash and restricted cash of $19,687 at September 30, 2020. Restricted cash of $16,524 at September 30, 2020 was used in October 2020 for a like-kind asset purchase.
- Working capital was $39,041, compared with $30,741 at September 30, 2020. The current ratio was 2.19 to 1, compared with 2.45 to 1.
Debt and Liquidity
- Total term-loan principal and lines of credit declined to $131,435 at June 30, 2021 from $151,193 at September 30, 2020. No revolving credit balances were outstanding at quarter-end.
- Long-term debt, net of current maturities and deferred financing costs, was $122,053, with $8,355 due within one year.
- The working capital line had approximately $69,764 available, and the $25,000 revolving line of credit was fully available, subject to approximately $236 in outstanding letters of credit under the working capital facility.
- In April 2021, Alico prepaid $10,312.5 on fixed-rate term loans. Effective May 1, 2021, the remaining $70,000 balance was converted to interest-only payments at 3.85%, with a balloon maturity on November 1, 2029. The modification eliminated the prior prepayment option.
- Management believes cash on hand, operating cash flow, asset-sale proceeds and available credit will fund debt service, working capital and capital expenditures for at least the next twelve months. The company was in compliance with its financial covenants at June 30, 2021.
Material Changes Versus the Prior Comparable Period
- Revenue growth was driven primarily by higher Valencia pricing and substantially higher grove management services revenue under a contract covering approximately 7,000 third-party acres. Grove management revenue was $5,587 in the quarter and $13,658 year to date, versus $367 and $1,045, respectively, in 2020.
- Citrus production declined: total boxes harvested decreased 10.8% in the quarter and 15.9% year to date, while pound solids produced declined 13.4% and 18.2%, respectively. Higher prices more than offset lower volume and lower pound solids per box.
- General and administrative expense declined 25.2% in the quarter and 14.2% year to date, including a $658 insurance reimbursement for legal fees, lower payroll and stock compensation costs, and the elimination of pension expense after the deferred retirement plan was terminated.
- The company sold approximately 18,500 acres of ranch land during the nine months, including approximately 5,734 acres to the State of Florida for $14,445 and approximately 11,700 acres to a third party for $12,219. These transactions generated significant gains.
- The company acquired approximately 3,280 citrus acres in October 2020 for $18,230 and made additional investments in citrus properties and mineral rights.
- Cash used in financing activities was $23,136, compared with $49,817 of cash provided in 2020, primarily because 2020 included substantial precautionary revolver borrowings and 2021 included larger debt repayments.
Outlook, Risks and Unusual Items
- Management reported no material adverse impact from COVID-19 to date, but identified potential risks involving labor availability, supply chains, product demand and broader economic conditions.
- The 2020-21 Florida orange crop was forecast by the USDA to decline approximately 21.7% from the prior crop year. Alico’s harvest-season crop declined approximately 15.9%, reflecting higher fruit drop and weaker fruit quality.
- Management expects gross margin in fiscal 2021 and future periods to be lower than before the new grove management agreement because those services generate lower margins than citrus production.
- The business is seasonal, with most revenue historically generated in the second and third fiscal quarters. Weather, citrus disease, pests, water availability, market prices, production costs and international competition may materially affect results.
- Approximately $4,299 was received under the Hurricane Irma Florida Citrus Recovery Block Grant program during the nine months. Approximately $2,000 remains estimated to be receivable, with expected payments in fiscal 2022 and fiscal 2023.
- Outstanding citrus-tree purchase commitments were approximately $2,110. No material adverse legal proceedings were reported.
- Debt facilities reference one-month and three-month LIBOR. Management expects the transition to an alternative benchmark, potentially SOFR, to occur by fiscal 2023 and is assessing the impact.
- Management provided no formal quantitative revenue or earnings guidance in the filing.
Important Facts for Investors to Verify
- Separate recurring operating performance from the $33,635 year-to-date real-estate and asset-sale gains.
- Assess the sustainability and margin contribution of the new third-party grove management contract.
- Monitor citrus yields, fruit-drop rates, pound solids per box and market pricing.
- Review the fixed-rate debt modification, balloon maturity in 2029, variable-rate exposure and LIBOR replacement terms.
- Evaluate whether the increased dividend policy can be sustained alongside citrus acquisitions, capital expenditures, debt repayment and possible share repurchases.
- Confirm receipt and timing of remaining Hurricane Irma relief proceeds and the tax effects of land sales and like-kind exchanges.
- Consider seasonality and the possibility that quarterly results are not indicative of full-year performance.