EDGAR 10-K Filing

Company CIK: 3545
Filing Year: 2021
Filename: 3545_10-K_2021_0001564590-21-059499.json

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ITEM 1. BUSINESS
Item 1. Business
Alico, Inc. (“Alico”) was incorporated under the laws of the state of Florida in 1960. Collectively with its subsidiaries (the "Company", "we", "us" or "our"), our business and operations are described below. For detailed financial information with respect to our business and our operations, see Management’s Discussion and Analysis of Financial Condition and Results of Operations which is included in Item 7 in this Annual Report on Form 10-K, and the accompanying Consolidated Financial Statements and the related Notes, which are included in Item 8. In addition, general information concerning our Company can be found on our website, the internet address of which is http://www.alicoinc.com. All of our filings with the U.S. Securities and Exchange Commission (the "SEC") including, but not limited to, the Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments thereto, are available free of charge on our website as soon as reasonably practicable after such material is electronically filed or furnished with the SEC. Our recent press releases and information regarding corporate governance, including the charters of our audit, compensation, nominating and governance, and sustainability and corporate responsibility committees, as well as our code of business conduct and ethics are also available to be viewed or downloaded electronically at http://www.alicoinc.com. Unless explicitly stated herein, the information on our website is not incorporated by reference into this Annual Report on Form 10-K and the Company disclaims any such incorporation by reference.
Overview
Alico is an agribusiness with a legacy of achievement and innovation in citrus and conservation. The Company owns approximately 83,000 acres of land in eight Florida counties (Charlotte, Collier, DeSoto, Glades, Hardee, Hendry, Highlands and Polk), and approximately 90,000 acres of mineral rights throughout Florida. Alico holds these mineral rights on substantially all its owned acres, with additional mineral rights on other acres. Our principal lines of business are citrus groves and conservation.
Alico is one of the largest citrus producers in the United States of America.
Alico, Inc. operates two divisions: Alico Citrus, a citrus producer on its own land and as a manager of citrus groves for third parties, and Land Management and Other Operations, which includes land conservation, encompassing environmental services, land leasing and related support operations.
The Company manages its land based upon its primary usage and reviews its performance based upon two primary classifications - Alico Citrus and Land Management and Other Operations. The Alico Citrus division includes the production, cultivation and sale of citrus on its owned lands and as a manager of citrus groves for third parties. Land Management and Other Operations include leases for grazing rights, hunting leases, a farm lease, a lease to a third party of an aggregate mine, leases of oil extraction rights to third parties, and other miscellaneous operations generating income. Alico presents its financial results and the related discussion based upon its two business segments: (i) Alico Citrus and (ii) Land Management and Other Operations.
Recent Developments
The COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the current novel coronavirus outbreak (“COVID-19”) to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country have imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures have had a significant adverse impact upon many sectors of the economy, including certain agriculture businesses.
On November 4, 2021, the Occupational Safety and Health Administration (“OSHA”) posted an Emergency Temporary Standard (“ETS”) on mandating that all private employers with 100 or more employees ensure their employees are COVID-19 fully vaccinated before entering the employer’s worksite or, at the employer’s option, require employees who remain unvaccinated and want to come to the worksite to wear an approved face covering and produce a negative COVID-19 test at least weekly. Pursuant to the ETS, employers must offer up to four hours of additional paid time off, including travel time, per vaccine dose to allow employees to be vaccinated and reasonable time and paid sick leave to recover from side effects experienced after each vaccine dose. Pursuant to the ETS, the ETS remains in effect for a maximum of six months. This ETS implements President Biden’s COVID-19 Action Plan, which aims to accelerate the pace of COVID-19 vaccinations in the United States.
Pursuant to the ETS, the ETS is effective immediately upon its publication in the Federal Register. Pursuant to the ETS, employers must comply with most requirements within 30 days of publication (December 5th) and with optional testing requirements within 60 days of publication (January 4th). Employees who have completed their vaccination by that date do not have to be tested, even if they have not yet completed the 2-week waiting period. On November 6, 2021, the Fifth Circuit Court of Appeals granted an emergency motion to stay enforcement of the ETS, subject to the resolution of ongoing litigation challenging the constitutionality of the ETS. The order enjoins the federal government from taking any action to enforce the ETS while it is in effect. On November 12, 2021, the Fifth Circuit Court of Appeals reaffirmed its suspension of the ETS and, on November 16, 2021, OSHA announced it suspended its activities related to the implementation and enforcement of the ETS pending future developments in the litigation. It is unknown how long the Fifth Circuit’s stay will remain in place. The Sixth Circuit Court of Appeals was selected through the lottery system on November 16, 2021, to hear a consolidated action concerning multiple challenges to the ETS and is authorized to uphold or lift the Fifth Circuit Court of Appeals order.
Also, a number of state governments have considered legislation related to employer vaccine mandates during the pandemic. OSHA maintains that its ETS preempts these laws, but states such as the State of Florida disagree. On November 17, 2021, the Florida legislature passed legislation, which was signed into law on November 18, 2021 and codified at section 381.00317, Florida Statutes, prohibiting private-sector employers from implementing a COVID-19 vaccination mandate for full-time, part-time, or contract employees without providing at least five individual exemptions, including, but not limited to, pregnancy or anticipated pregnancy; religious reasons; COVID-19 immunity; periodic testing; and the use of employer-provided personal protective equipment. If an employer fails to comply with the new law and terminates an employee based on a COVID-19 vaccination mandate, then the employer will be subject to a fine of up to $50,000 per violation.
The Company plans to monitor conflicting guidance from the State of Florida and the federal government and adjust its policies in accordance with the resolution of the ongoing litigation in the federal courts.
Since the commencement of COVID-19 in March 2020, the Company took steps to allow and encourage greater separation for our employed and contracted field workers and has worked with its harvesters, haulers and suppliers to minimize interactions. For the continued protection of our employees and in accordance with the OSHA mandate, the Company intends to comply with all requirements as outlined in the ETS that was published on November 4, 2021, to the extent consistent with applicable law.
To date, the Company has experienced no material adverse impacts from this pandemic.
Prepayment and Restructure of Fixed-Rate Term Loans
In April 2021, the Company made a prepayment of $10,312,500 on the Met Fixed-Rate Term Loans and, effective May 1, 2021, the Company modified its Met Fixed-Rate Term Loans, which in the aggregate, after the prepayment, had a balance of $70,000,000 to be interest only with a balloon payment to be paid at maturity, which is November 1, 2029. As part of this modification, the interest rate on these Met Fixed-Rate Term Loans, which were bearing interest at 4.15%, has been adjusted to 3.85% and the Company no longer has the prepayment option previously allowed under the arrangement.
Sales and Purchase of Land
On December 3, 2021, the State of Florida purchased, under the Florida Forever program, approximately 1,638 acres of the Alico Ranch for approximately $5,675,000 pursuant to an option agreement entered into on September 21, 2021 between the State of Florida and the Company.
On June 3, 2021, the Company sold approximately 11,700 acres, which were encumbered by an easement, to a third-party for approximately $12,219,000. In 2013, these acres were enrolled in the Wetlands Reserve Program (“WRP”), which calls for the restoration and maintenance of the property for the duration of the WRP easement. As part of that enrollment in 2013, Alico received approximately $1,800 per acre.
On April 15, 2021, the State of Florida purchased, under the Florida Forever program, approximately 5,734 acres of Alico Ranch for approximately $14,445,000, pursuant to an option agreement between the State of Florida and Alico dated December 15, 2020. This is the third sales transaction we have completed with the State of Florida within the last three years, aggregating over 22,000 acres. Alico used most of the net sales proceeds to prepay a portion of its fixed-rate term debt.
On October 30, 2020, the Company purchased approximately 3,280 gross acres located in Hendry County for a purchase price of $18,230,000. This acquisition allows the Company to add additional scale to its existing 46,000 gross acres of citrus properties. Strategically, with these acquired groves neighboring existing Alico groves, Alico has continued to realize economy of scale which has allowed Alico to continue to operate as a low-cost, high producing citrus grower.
Federal Relief Program
The Company was eligible for Hurricane Irma federal relief programs for block grants that were being administered through the State of Florida. During the fiscal years ended September 30, 2020 and 2019, the Company received approximately $4,629,000 and $15,597,000, respectively, under the Florida Citrus Recovery Block Grant (“CRBG”) program. These federal relief proceeds represented Part 1 and Part 2 reimbursement under the program. In the fiscal year ended September 30, 2021, the Company received approximately $4,299,000, representing reimbursement under Part 3 of the program. The remaining portion of the funds that are due to Alico under the Florida CRBG program relates to certain crop insurance expenses incurred by the Company, which is estimated to be approximately $2,000,000. In October 2021, the Company received its first portion of this crop insurance expense reimbursement in an amount equal to $1,000,000 and expects to receive the remaining portion in fiscal year 2023.
The Land We Manage
We regularly review our land holdings to determine the best use of each parcel based upon our management expertise. Our total return profile is a combination of operating income potential and long-term appreciation. Land holdings not meeting our total return criteria are considered surplus to our operations and efforts are being made to sell such land holdings or to exchange such land holdings for land considered to be more compatible with our business objectives and total return profile, or to lease such land holdings.
Our land holdings and the operating activities in which we engage are categorized in the following table:
Gross Acreage
Operating Activities
Alico Citrus
Citrus Groves
48,830
Citrus Cultivation
Citrus Nursery
Citrus Tree Development
48,852
Land Management and Other Operations
Ranch
32,979
Leasing and Conservation
Other Land
1,446
Mining Lease and Office
34,425
Total
83,277
Alico Citrus
We own and manage citrus land in DeSoto, Polk, Collier, Hendry, Charlotte, Highlands, and Hardee Counties in the State of Florida and engage in the cultivation of citrus trees to produce citrus for delivery to the fresh and processed citrus markets. Alico citrus groves total approximately 48,852 gross acres or 58.7% of our land holdings. The Company manages approximately 7,400 acres of citrus land on behalf of third-party grove owners in addition to the 48,852 gross acres owned by Alico.
Our citrus acreage is further detailed in the following table:
Net Plantable
Producing
Developing
Fallow
Total Net
Plantable
Support
& Other
Gross
DeSoto County
16,185
16,822
4,650
21,472
Polk County
4,870
-
-
4,870
2,237
7,107
Collier County
4,261
-
-
4,261
2,905
7,166
Hendry County
5,735
5,967
2,799
8,766
Charlotte County
1,729
-
1,867
2,543
Highlands County
1,063
-
-
1,063
1,224
Hardee County
-
-
Total
34,246
35,253
13,599
48,852
Of the 48,852 gross acres of citrus land we own and manage 13,599 acres are classified as support and other acreage. Support and other acreage include acres used for roads, barns, water detention, water retention and drainage ditches integral to the cultivation of citrus trees, but which are not capable of directly producing fruit. In addition, we own a small citrus tree nursery of approximately 22 acres and utilize the trees produced in our own operations. The 35,253 remaining acres are classified as net plantable acres. Net plantable acres are those that are capable of directly
producing fruit. These include acres that are currently producing, acres that are developing (i.e., acres that are planted with trees too young to commercially produce fruit) and acres that are fallow.
In an effort to replace trees lost in Hurricane Irma and increase the density of our citrus groves, Alico has planted approximately 1,500,000 new trees over the past four years. This level of planting has been substantially higher than the normal level of tree attrition. We will continue to evaluate the density throughout our groves and determine the appropriate tree plantings moving forward. Typically, citrus trees become fruit bearing approximately four years after planting and peak around seven to eight years after planting.
Our Alico Citrus business segment cultivates citrus trees to produce citrus for delivery to the processed and fresh citrus markets. Our sales to the processed market were approximately 82.7%, 91.0%, and 95.0% of Alico Citrus revenues for the fiscal years ended September 30, 2021, 2020 and 2019, respectively. The overall decrease in sales to processed markets as a percentage of citrus revenues was due to an agreement entered into on July 16, 2020 with an affiliated group of third parties to provide citrus grove caretaking and harvest and haul management services (“Grove Management Services”) for approximately 7,000 acres owned by such third parties. Under the terms of this agreement, the Company is reimbursed by the third parties for all its costs incurred related to providing these Grove Management Services and receives a management fee based on acres covered under this agreement. The Company records both an increase in revenues and expenses as and when the Company provides these Grove Management Services. For the fiscal year ended September 30, 2021, under this agreement, the Company recorded approximately $15,752,000 of operating revenue relating to these Grove Management Services, including the management fee. Excluding these revenues for these citrus grove caretaking and harvest and haul management services, revenue to processed markets represents approximately 97.1% of total citrus revenues.
The average pound solids per box was 5.66, 5.96, and 5.91, for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.
We generally use multi-year contracts with citrus processors that include pricing structures based on a floor and ceiling price. Therefore, if pricing in the market is favorable relative to our floor price, we benefit from the incremental difference between the floor and the final market price to the extent it does not exceed the ceiling price.
Our citrus produced for the processed citrus market in fiscal year 2021 under our largest agreement was subject to floor prices and ceiling prices. Under this agreement, if the market price was below the floor prices or exceeded the ceiling prices, then 50% of the shortfall or excess was deducted from the floor price or added to the ceiling price. Under our next largest agreement, our citrus produced is subject to a minimum floor price and maximum ceiling price and is based on a cost-plus structure.
On each of May 18, 2020 and May 20, 2020, the Company entered into two new agreements to supply Tropicana, its largest customer, with citrus fruit. These new agreements were effective October 1, 2020, expire on July 31, 2024, and succeeded our existing largest agreement with this customer which expired at the end of September 2020.
Although we believe other markets and customers are available for our citrus products, we also believe that new arrangements in these other markets or with other customers may be less favorable than our current contracts.
Our sales to the fresh citrus market constituted approximately 0.6%, 2.6%, and 3.0% of our Alico Citrus revenues for the fiscal years ended September 30, 2021, 2020 and 2019, respectively. We produce numerous varieties for the fresh fruit market including grapefruit, navel and other fresh varieties. Generally, our fresh fruit is sold to packing houses by the box and the packing houses are responsible for the harvest and haul of these boxes. We produced approximately 61,000, 267,000, and 210,000 fresh fruit boxes for each of the fiscal years ended September 30, 2021, 2020 and 2019, respectively.
On July 16, 2020, the Company executed an agreement with an affiliated group of third parties to provide citrus grove caretaking and harvest and haul management services (“Grove Management Services”) for approximately 7,000 acres owned by such third parties. Under the terms of the agreement, the Company is reimbursed by the third parties for all of its costs incurred related to providing these services and also is to receive a management fee based on acres covered under this agreement. In August 2021, the third party purchased approximately 900 acres, which will be in addition to the acres currently receiving Grove Management Services. The Company, prior to this agreement, was already providing Grove Management Services to several small third-party grove owners on acres within the Company’s groves and continues to provide such services. Revenues generated from our Grove Management Services were approximately 16.1%, 5.1%, and 1.1% of our total citrus revenues for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.
On October 30, 2020, the Company purchased approximately 3,280 gross acres located in Hendry County for a purchase price of $18,230,000. This acquisition allows the Company to add additional scale to its existing 46,000 gross acres of citrus properties. Strategically, with these acquired groves neighboring existing Alico groves, Alico believes that this acquisition will help Alico with its operation designed to be a low-cost, high producing citrus grower.
Revenues from our Alico Citrus operations were approximately 97.5%, 96.6%, and 97.4% of our total operating revenues for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.
Land Management and Other Operations
We own and manage land in Collier, Glades, and Hendry Counties and are engaged in land leasing for recreational and grazing purposes, conservation, and mining activities. Our Land Management and Other Operations land holdings total 34,425 gross acres, or 41.3% of our total acreage.
Our Land Management and Other Operations acreage is detailed in the following table as of September 30, 2021:
Acreage
Hendry County
29,877
Glades County
Collier County
4,022
Total
34,425
On June 3, 2021, the Company sold approximately 11,700 acres, which were encumbered by an easement, to a third-party for approximately $12,219,000. In 2013, these acres were enrolled in the Wetlands Reserve Program (“WRP”), which calls for the restoration and maintenance of the property for the duration of the WRP easement. As part of that enrollment in 2013, Alico received approximately $1,800 per acre.
On April 15, 2021, the State of Florida purchased, under the Florida Forever program, approximately 5,734 acres of Alico Ranch for approximately $14,445,000, pursuant to an option agreement between the State of Florida and Alico dated December 15, 2020. This is the third sales transaction we have completed with the State of Florida within the last three years, aggregating over 22,000 acres, including the September 2020 sale described below. Alico used most of the net sales proceeds to prepay a portion of its fixed-rate term debt.
On September 10, 2020, the Company sold approximately 10,700 acres on the western part of Alico Ranch to the State of Florida. Because the acres involved in the sale would have been critical to our planned dispersed water storage project, the Company has decided to no longer pursue permit approval activities for this project from that point forward. As a result of this decision to no longer pursue permit approval activities for this project, the Company has renamed this segment Land Management and Other Operations to better reflect the components of this segment. The Company did not ever get to the point where it was generating any revenue from the dispersed water storage project and incurred expenses of $0, $1,346,000, and $1,206,000 for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.
On March 27, 2020, the Company sold certain sections at the East Ranch for approximately $2,980,000 and realized a gain of approximately $2,748,000. The Company subsequently used substantially all of the net cash proceeds to purchase a like-kind asset in May 2020, which has allowed the Company to defer substantially all of the tax impact of the gain on sale of this ranch land.
Revenues from Land Management and Other Operations were approximately 2.5%, 3.4%, and 2.6% of total operating revenues for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.
Our Strategy
Our core business strategy is to maximize stockholder value through continuously improving the return on our invested capital, either by holding and managing our existing land through skilled agricultural production, leasing, or other opportunistic means of monetization, disposing of under productive land or business units and acquiring new land or operations with appreciation potential.
Our objectives are to produce the highest quality agricultural products, create innovative land uses, opportunistically acquire and convert undervalued assets, sell under-productive land and other assets not meeting our total return profile, generate recurring and sustainable profit with the appropriate balance of risk and reward, and exceed the expectations of stockholder, customers, clients and partners.
Our strategy is based on best management practices of our agricultural operations and the environmental and conservation stewardship of our land and natural resources. We try to manage our land in a sustainable manner and evaluate the effect of changing land uses while considering new opportunities. Our commitment to environmental stewardship is fundamental to the Company’s core beliefs.
Intellectual Property
While we consider our various intellectual property to be valued assets, we do not believe that our competitive position or our operations are dependent upon or would be materially impacted by any single piece of intellectual property or group of related intellectual property registrations or rights.
Seasonal Nature of Business
As with any agribusiness enterprise, our agribusiness operations and revenues are predominantly seasonal in nature. The following table illustrates the seasonality of our agribusiness revenues:
Fiscal Year
Q1
Q2
Q3
Q4
Ending 12/31
Ending 3/31
Ending 6/30
Ending 9/30
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Harvest Fresh and Early/Mid Varieties of Oranges
X
X
X
X
Harvest Valencia Oranges
X
X
X
X
Significant Customers
Revenue from Tropicana represented approximately 77.5%, 86.9%, and 88.6% of our consolidated revenue for the fiscal years ended September 30, 2021, 2020 and 2019, respectively. The revenue in fiscal year 2021 from Tropicana was generated primarily from two separate contracts. This revenue was generated from the sale of our citrus product in the processed market. No other single customer provided more than 10% of our consolidated revenue in fiscal years 2021, 2020 or 2019.
The overall decrease in Tropicana revenue as a percentage of sales was expected, attributable to an increase in overall sales generated from an agreement entered into in July 2020 with an affiliated group of third parties to provide citrus grove caretaking and harvest and haul management services for approximately 7,000 acres owned by such third parties. Under the terms of this agreement, the Company is reimbursed by the third parties for all its costs incurred related to providing these services and receives a management fee based on acres covered under this agreement. The Company records both an increase in sales revenue and an increase in expenses as and when the Company provides these citrus grove caretaking management services. Revenue from Tropicana represents approximately 90.1% of total revenues for the fiscal year ended September 30, 2021.
Competition
The orange and specialty citrus markets are intensely competitive, but no single producer has any significant market power over any market segments, as is consistent with the production of most agricultural commodities. Citrus is grown domestically in several states including Florida, California, Arizona and Texas, as well as foreign countries, most notably Brazil and Mexico. Competition is impacted by several factors including quality, production, demand, brand recognition, market prices, weather, disease, export/import restrictions and foreign currency exchange rates.
Environmental, Social and Governance (“ESG”)
Alico is an agricultural company which, based upon its rich heritage and traditions, seeks not only to maximize value for its customers and stockholders, but also to enhance its legacy by employing sustainable practices in all aspects of operations including stewardship of both its natural and human resources. The Company recognizes the increased emphasis by stockholders, business partners and other key constituents in recent years on ESG programs that are embedded into day-to-day business policies and practices. The Company is proud of its commitment to doing the right thing for communities, the environment, and its employees.
Governmental Regulations
Our operations are subject to various federal, state and local laws regulating the discharge of materials into the environment. Management believes we are in material compliance with all such rules including permitting and reporting requirements. Historically, compliance with environmental regulations has not had a material impact on our financial position, results of operations or cash flows.
Management monitors environmental legislation and requirements and makes every reasonable effort to remain in compliance with such regulations. In addition, we require in our leases that lessees of our property comply with environmental regulations as a condition of leasing.
We are subject to other laws of the United States and the rules and regulations of various governing bodies within the United States, which may differ among jurisdictions. Compliance with these laws, rules and regulation has not had, and is not expected to have, a material effect on our capital expenditures, results of operations and competitive position as compared to prior periods.
Human Capital Management
Purpose and Company Values
Supporting our people is a fundamental value for Alico. We believe the Company’s success depends on its ability to attract, develop and retain key personnel. The skills, experience and industry knowledge of our employees and the employees of our independent contractors significantly benefit our operations and performance. The Company's management oversees various employee initiatives and also monitors the effectiveness of the personnel provided by independent contractors with which we contract for certain harvesting and hauling services.
Employees
We believe in a culture of equity, diversity and inclusion. We are also committed to advancing safe and respectful work environments where our employees are invited to bring their talents, backgrounds and expertise to bear on the success of our business and where every person has the opportunity to thrive personally and professionally.
Hiring, Development and Retention
Employee levels are managed to align with the pace of business and takes into account the services that are performed for us by our independent contractors. We rely on our independent contractors to manage their respective employee levels so that the harvesting and hauling services they are obligated to perform for us are consistent with the contractual obligations of these independent contractors and enable us to satisfy our harvesting and hauling needs. Management believes that through its own employees, coupled with the human capital supplied by its independent contractors, it has sufficient human capital to operate its business successfully. Management believes that the Company's employee relations are favorable, that its relations with its independent contractors is favorable, and that the relations that the independent contractors and the Company have with the employees of the independent contractors is favorable.
Employee Safety and Well-Being
Health and safety in the workplace for our employees and personnel provided by independent contractors with which we contract is one of the Company’s core values. Hazards in the workplace are actively identified and management tracks incidents so remedial actions can be taken to improve workplace safety. In order to support and enhance health and safety practices, the Company routinely conducts safety training with employees to emphasize safety when conducting grove caretaking, general employee health, proper equipment operating techniques, office ergonomics and other important safety topics. The COVID-19 pandemic has underscored for us the importance of keeping our employees and the personnel provided by independent contractors safe and healthy. In response to the pandemic, the Company has taken actions aligned with the Centers for Disease Control and Prevention to protect its workforce so that its workforce can more safely and effectively perform their work.
Inclusion and Diversity
People are critical to our efforts to drive growth and deliver value for stockholders. One of the ways we have put people at the center is by continuing to work toward a more inclusive and diverse workplace where each person feels respected, valued and seen and can be the best version of themselves - from women and ethnic employees to veterans, among others. With employees, management and directors representing the diversity around the world, the Company can access stronger insights into different cultures and backgrounds, which ultimately helps the Company to better operate the business.
As of September 30, 2021, ethnically diverse employees represent 69% of the Company’s Citrus operations, 27% of Corporate, General, Administrative and Other. Women made up 50% of the Company’s Corporate, General, Administrative and Other and 16% of the Company’s Citrus operations. On August 6, 2020, the Board of Directors of the Company increased the size of the Board to nine and appointed Ms. Katherine English as a director to serve on (i) the Compensation Committee and (ii) the Nominating and Governance Committee. Ms. English’s appointment is part of the Company’s commitment to promote diversity and inclusion.
Based on our Inclusion and Diversity strategy, the Company promotes a greater sense of inclusion through a variety of initiatives, which includes a Company-wide women’s group to promote mentoring, career advancement, training, comradery, and empowerment.
Compensation and Benefits
Our compensation and benefits are designed to support the financial, mental, and physical well-being of our employees. We are committed to equal pay for equal work, regardless of gender, race, ethnicity, or other personal characteristics. We believe our base wages and salaries, which we review annually, are fair and competitive with the external labor markets in which our employees work. We also regularly review our compensation practices to promote fair and equitable pay. We also offer competitive benefit programs, in line with local practices and with the flexibility to accommodate the needs of a diverse workforce. The benefit programs include, among others, paid holidays, family leave, disability insurance, life insurance, healthcare, and a 401(k) plan with a company match. As of September 30, 2021, we had 222 full-time employees. Our employees work in the following divisions:
Alico Citrus
Land Management and Other Operations (1)
Corporate, General, Administrative and Other
Total employees
(1)
There is one employee who is included in Corporate, General, Administrative and Other who oversees the Land Management and Other Operations.
None of our employees are subject to a collective bargaining agreement. We believe that our relations with our employees are good.
Workforce Housing
We own and maintain 37 residential housing units located in various counties in Florida that we lease to employees and former employees. Our residential units provide affordable housing to many of our employees, including our agribusiness employees. Employees live close to their work, which reduces traffic and commuting times. This unique employment benefit helps us maintain a dependable, long-term employee base.
Capital Resources and Raw Materials
Management believes that the Company will be able to meet its working capital requirements for at least the next 12 months, and over the long term, through internally generated funds, cash flows from operations, the sale of under-productive land and other assets, our existing lines of credit and access to capital markets. The Company has commitments that provide for lines of revolving credit that are available for our general and corporate use.
Raw materials needed to cultivate the various crops grown by the Company consist primarily of fertilizers, herbicides, insecticides and fuel and are readily available from local suppliers.
Societal Well-Being
The Company remains committed to a healthy and equitable society to ensure our collective well-being for future generations. In the past year, we provided cash grants and supporting donations to support our communities and promote health and safety, education, and justice.
Available Information
We will provide electronic copies of our SEC filings free of charge upon request. Additionally, our reports, amendments thereto, proxy statements and other information are also made available, free of charge, on our investor relations website at ir.alicoinc.com as soon as reasonably practicable after we electronically file or furnish such information with the SEC. Any information posted on or linked from our website is not incorporated by reference in this Annual Report on Form 10-K. The SEC also maintains a website at http://www.sec.gov, which contains annual, quarterly and current reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
Our business and results of operations are subject to numerous risks and uncertainties, many of which are beyond our control. The following is a description of key known factors that we believe may materially affect our business, financial condition, results of operations or cash flows. They should be considered carefully, in addition to the information set forth elsewhere in this Annual Report on Form 10-K, including Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8, Financial Statements and Supplementary Data, including the related Notes to the Consolidated Financial Statements in making any investment decisions with respect to our securities. Additional risks or uncertainties that are not currently known to us that we currently deem to be immaterial or that could apply to any company could also materially adversely affect our business, financial condition, results of operations or cash flows.
Risks Related to our Business
The currently evolving situation related to the COVID-19 pandemic could adversely affect the Company’s business, financial condition, results of operations and cash flows.
The ongoing COVID-19 pandemic, including the emergence of variants for which vaccines may not be effective, may negatively affect our business by causing or contributing to, among other things:
Potential negative impacts of the pandemic include, but are not limited to, the following:
•
Reduction in customer demand for citrus products and decreased consumer spending levels, which could materially and adversely affect our results of operations;
•
Potential disruption of services and deliveries of equipment and supplies on which we rely to produce and deliver our harvested citrus to producers and fulfilling deliveries to production plants, any of which could materially and adversely affect our business or reputation;
•
We may be unable to obtain financing in the current economic environment on terms that are favorable or acceptable to us, or at all, which could impair our cash flows and restrict our ability to execute on our strategic initiatives and react to changes in our business or the environment;
•
There could be increased volatility in our stock price related to the pandemic, which could result in the loss of some or all of the value of an investment in the Company;
•
Our ability to maintain our workforce during these uncertain times, which could materially and adversely affect our results of operations;
•
Increase in employee absenteeism of employees of the Company and of our independent contractor service providers (such as contracted field workers) due to fear of infection, which could materially and adversely affect our results of operations;
•
Increase in possible lawsuits or regulatory actions due to COVID-19 spread in the workplace which could materially and adversely affect our results of operations;
•
Spread of COVID-19 in our workplace, which could materially and adversely affect our business and reputation;
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Increase in the possibility of cybersecurity-related events such as COVID-19 themed phishing attacks and other security challenges, particularly as attributable to a substantial number of our employees and suppliers working remotely, which could materially and adversely affect our business and reputation; and
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Adverse impact on the productivity of management and our employees that are working remotely, including an impact on our ability to maintain our financial reporting processes and related controls and our ability to manage complex accounting issues presented by the COVID-19 pandemic which could materially and adversely affect our business and reputation.
Our business operations could be affected by government mandates, including the Emergency Temporary Standard (“ETS”) posted by the Occupational Safety and Health Administration (“OSHA”) on November 4, 2021.
The ETS requires employers such as the Company to offer up to four hours of additional paid time off, including travel time, per vaccine dose to allow employees to be vaccinated and reasonable time and paid sick leave to recover from side effects experienced after each vaccine dose. As noted above, the Fifth Circuit Court of Appeals granted an emergency motion to stay the enforcement of the ETS, subject to the resolution of ongoing litigation challenging the constitutionality of the ETS, and, shortly thereafter, OSHA announced it suspended its activities related to the implementation and enforcement of the ETS pending future developments in the litigation. Also, Florida, and other states have passed laws that may conflict with the ETS. For instance, section 381.00317, Florida Statutes, (i) prohibits private-sector employers from implementing a COVID-19 vaccination mandate without providing certain exemptions and (ii) fines employers who improperly discharge employees up to $50,000 per violation. As a company with more than 100 employees, the vaccination and testing requirements will likely be applicable to us and our workforce, and we will be forced to navigate between any conflicts between state and federal law. These requirements could result in increased costs and legal fees. Additionally, our efforts to comply with these mandates, including requiring that some or all of our employees be fully vaccinated against COVID-19, could result in increased labor attrition and disruption, as well as difficulty securing future labor needs. Similarly, the efforts of our independent contractor service providers to comply with these mandates, including requiring that some or all of their employees be fully vaccinated against COVID-19, could result in them experiencing increased labor attrition and disruption, as well as difficulty securing future labor needs. If we or our independent contractor service providers were to lose employees (such as contracted field workers in the case of our independent contractor service providers) and not be able to replace them, it could adversely affect our business operations. The legality and effects of the ETS and any future mandates by state and federal governmental authorities related to COVID-19 are currently uncertain, and we cannot predict the extent to which it could adversely affect our results of operations, financial condition or prospects.
Our business operations could be significantly harmed by natural disasters or global epidemics.
Our business could be adversely affected by natural disasters such as pandemics, epidemics, outbreaks or other health crisis. An outbreak of avian flu or H1N1 flu in the human population, or another similar health crisis, such as the current COVID-19 pandemic referred to above, could adversely affect economies and financial markets, particularly those in the United States. Moreover, any related disruptions to transportation or the free movement of persons could hamper our operations and force us to close our offices temporarily.
The occurrence of any of the foregoing or other natural or man-made disasters could cause damage or disruption to us, our employees, operations, markets and customers, which could result in significant delays in deliveries or substantial shortages of our products and adversely affect our business results of operations, financial condition or prospects.
Adverse weather conditions, natural disasters and other natural conditions, including the effects of climate change, could impose significant costs and losses on our business.
Fresh produce is vulnerable to adverse weather conditions, including windstorms, floods, drought and temperature extremes, which are quite common and may occur with higher frequency or be less predictable in the future due to the effects of climate change. Unfavorable growing conditions can reduce both crop size and crop quality. In extreme cases, entire harvests may be lost in some geographic areas. Citrus groves are subject to damage from frost and freezes, and this has happened periodically in the recent past, including most recently the impact from Hurricane Irma. In some cases, the fruit is damaged or ruined; in the case of extended periods of cold, the trees can also be damaged or killed. These factors can increase costs, decrease revenues and lead to additional charges to earnings, which may have a material adverse effect on our business, results of operations, financial condition and cash flows.
Our citrus groves are subject to damage and loss from disease including but not limited to citrus greening and citrus canker which could negatively impact our business, financial condition, results of operations and cash flows.
Our citrus groves are subject to damage and loss from diseases such as citrus greening and citrus canker. Each of these diseases is widespread in Florida and exists in our citrus groves and in the areas where our citrus groves are located. The success of our citrus business is directly related to the viability and health of our citrus groves.
Citrus greening is one of the most serious citrus plant diseases in the world. Once a tree is infected, its productivity generally decreases. While the disease poses no threat to humans or animals, it has devastated citrus crops throughout the United States and abroad. Named for its green, misshapen fruit, citrus greening disease has now killed millions of citrus plants in the southeastern United States and has spread across the entire country. Infected trees produce fruits that are green, misshapen and bitter, unsuitable for sale as fresh fruit or for juice. Infected trees can die within a few years. At the present time, there is no known cure for citrus greening once trees have become infected. Primarily, as a result of citrus greening, orange production in the State of Florida has continued to drop.
Citrus canker is a disease affecting citrus species and is caused by a bacterium which is spread by contact with infected trees or by windblown transmission. There is no known cure for citrus canker at present although some management practices, including the use of copper-based bactericides, can mitigate its spread and lessen its effect on infected trees; however, there is no assurance that currently available technologies will control such disease effectively.
Both of these diseases pose a significant threat to the Florida citrus industry and to our citrus groves. While we try to use best management practices to attempt to control diseases and their spread, there can be no assurance that our mitigation efforts will be successful. These diseases can significantly increase our costs which could materially adversely affect our business, financial condition, results of operations and cash flows. Our citrus groves produce the significant majority of our annual operating revenues. A significant reduction in available citrus from our citrus groves could decrease our operating revenues and materially adversely affect our business, financial condition, results of operations and cash flows.
Our citrus groves are geographically concentrated in Florida and the effects of adverse weather conditions including hurricanes and tropical storms could adversely affect our results of operations, financial position and cash flows.
Our citrus operations are concentrated in central and south Florida with our groves located in parcels in DeSoto, Polk, Collier, Hendry, Charlotte, Highlands, and Hardee Counties. Because our groves are located in close proximity to each other, the impact of adverse weather conditions may be material to our results of operations, financial position and cash flows. Florida is particularly susceptible to the occurrence of hurricanes and tropical storms. Depending on where any particular hurricane or tropical storm makes landfall, our properties could experience significant, if not catastrophic damage. Hurricanes and tropical storms have the potential to destroy crops and impact citrus production through the loss of fruit and destruction of trees and/or plants either as a result of high winds or through the spread of windblown disease. Such damage could materially affect our citrus operations and could result in a loss of operating revenues from those products for a multi-year period. We seek to minimize hurricane risk by the purchase of insurance contracts, but the majority of our crops remain uninsured. In addition to hurricanes and tropical storms, the occurrence of other natural disasters and climate conditions in Florida, such as tornadoes, floods, freezes, unusually heavy or prolonged rain, droughts and heat waves, could have a material adverse effect on our operations and our ability to realize income from our crops or properties.
A significant portion of our revenues are derived from our citrus business and any adverse event affecting such business could disproportionately harm our business.
Our revenues from our citrus business were approximately 97.5%, 96.6%, and 97.4% of our operating revenues in fiscal years 2021, 2020 and 2019, respectively. Our citrus division is one of the largest citrus producers in the United States and because of the significance of the revenues derived from this business, we are more vulnerable to adverse events or market conditions affecting our citrus business, in particular, or the citrus business, generally, which could have a significant adversely impact on our overall results of operations, financial condition and cash flows.
Our failure to effectively perform grove management functions or to effectively manage an expanded portfolio of groves could materially and adversely affect our business, financial condition, and results of operations.
Recently, we have significantly expanded the number of grove acres that we are managing for third parties. If we are unable to effectively perform grove management services for both our own groves and the groves owned by third parties at the level and/or the cost that we expect, or if we were to fail to allocate sufficient resources to meet the grove management of our own groves and the groves owned by these third parties, it could adversely affect our performance and reputation. Our ability to perform the grove management services will be affected by various factors, including, among other things, our ability to maintain sufficient personnel and retain key personnel, the ability of the independent contractors whom we engage to assist in providing these services to maintain sufficient personnel and retain key personnel, and the number of acres and groves that we will manage. Increases in the number of acres and groves we are managing have required us to hire a greater number of additional qualified personnel and have required the independent contractors whom we engage to assist in providing these services to maintain a greater number of additional qualified personnel to provide those services. No assurance can be made that we will continue to be successful in attracting and retaining skilled personnel or in integrating any new personnel into our organization or that the independent contractors whom we engage to assist in providing these services will continue to be successful in attracting and retaining skilled personnel or in integrating any new personnel into their respective organizations.
Our business is highly competitive and we cannot assure you that we will maintain our current market share.
Many companies compete in our different businesses and offer products that are similar to our products or are direct competitors to our products. We face strong competition from these and other companies engaged in the agricultural product business.
Important factors with respect to our competitors include the following:
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Some of our competitors may have greater operating flexibility and, in certain cases, this may permit them
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to respond better or more quickly to changes in the industry.
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We cannot predict the pricing or promotional actions of our competitors or whether those actions will have a negative effect on us.
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Our competitors may have access to substantially greater financial resources, deeper management and agricultural resources, regional, national or global areas that offer agricultural advantages, and enhanced public visibility or reputations.
There can be no assurance that we will continue to compete effectively with our present and future competitors, and our ability to compete could be materially adversely affected by our debt levels and debt service requirements.
We depend on our relationship with Tropicana and Tropicana’s relationship with certain third parties for a significant portion of our business. Any disruption in these relationships could harm our revenue. Additionally, if certain criteria are not met under one of our contracts with Tropicana, we could experience a significant reduction in revenues and cash flows.
The Company's contracts with Tropicana accounted for 77.5%, 86.9%, and 88.6% of the Company's revenues in fiscal years 2021, 2020 and 2019, respectively. The revenue for Tropicana is primarily generated from two contracts. Should there be any change in our current relationship structure, whereby they do not buy our oranges, we would need to find replacement buyers to purchase our remaining crop, which could take time and expense and may result in less favorable terms of sale. The loss of Tropicana as a customer or significant reduction in business with Tropicana may cause a material adverse impact to our financial position, results of operations and cash flows. Additionally, the affiliated group of third parties for whom the Company provides grove caretaking and harvest and haul management services sells a significant portion of its crop to Tropicana. If there was a change in that group’s relationship with Tropicana, whereby Tropicana did not buy their oranges, then that group would need to find replacement buyers of its citrus, and, if that group was unable to find replacement buyers, then the group might be challenged in satisfying its obligations to the Company, which might have a material adverse impact on our financial position, results of operations and cash flows.
With the sale of a majority of ownership of Tropicana to a French private equity firm, there is some heightened risk and uncertainty in our current relationship with Tropicana, which potentially could result in a significant reduction in revenues and cash flows if that relationship were to be changed as a result.
With the sale of a majority ownership of Tropicana by PepsiCo to a French private equity firm (the “Firm”), there is some heightened risk and uncertainty in our current relationship with Tropicana, which potentially could result in a significant reduction in revenues and cash flows if that relationship were to be changed as a result. The Company currently has citrus supply contracts with Tropicana that expire in both 2023 and 2024, with the majority expiring in 2024. If the Firm caused Tropicana to reduce the volume of oranges purchased from us and/or purchased from owners of groves that we manage, we would need to find, and/or the owners of groves that we manage would need to find or work with us to find, replacement buyers to purchase any remaining crop of our and/or of the owners of the groves we manage, which could take time and expense and may result in less favorable terms of sale. The loss of Tropicana as a customer or significant reduction in business with Tropicana for us and/or for the owners of the groves we manage may cause a material adverse impact to our financial position, results of operations and cash flows.
Our agricultural products are subject to supply and demand pricing which is not predictable.
Agricultural operations traditionally provide almost all of our operating revenues with citrus being the largest portion and are subject to supply and demand pricing. Prior to the COVID-19 pandemic, according to Nielsen data, consumer demand for orange juice had decreased significantly to its lowest level in almost a decade; however, we have been able to offset the impact of such decline with higher prices based on a lower supply of available oranges. Although the demand for orange juice has increased during the COVID-19 pandemic, it is uncertain as to whether such increased demand can be maintained, whether we will see a return to a decline in the future and whether, if there were to be such a decline, the impact could be again offset by higher prices. In particular, although our processed citrus is subject to minimum pricing, we are unable to predict with certainty the final price we will receive for our products. In some instances, the harvest and growth cycle will dictate when such products must be marketed which may or may not be advantageous in obtaining the best price. Excessive supplies tend to cause severe price competition and lower prices for the commodity affected. Limited supply of certain agricultural commodities due to world and domestic market conditions can cause commodity prices to rise in certain situations.
If we are unable to successfully develop and execute our strategic growth initiatives, or if they do not adequately address the challenges or opportunities we face, our business, financial condition and prospects may be adversely affected.
Our success is dependent, in part, on our ability to identify, develop and execute appropriate strategic growth initiatives that will enable us to achieve sustainable growth in the long term. The implementation of our strategic initiatives is subject to both the risks affecting our business generally and the inherent risks associated with implementing new strategies. These strategic initiatives may not be successful in generating revenues or improving operating profit and, if they are, it may take longer than anticipated. As a result, and depending on evolving conditions and opportunities, we may need to adjust our strategic initiatives and such changes could be substantial, including modifying or terminating one or more of such initiatives. Termination of such initiatives may require us to write down or write off the value of our investments in them. Transition and changes in our strategic initiatives may also create uncertainty in our employees, customers and partners that could adversely affect our business and revenues. In addition, we may incur higher than expected or unanticipated costs in implementing our strategic initiatives, attempting to attract revenue opportunities or changing our strategies. There can be no assurance that the implementation of any strategic growth initiative will be successful, and we may not realize anticipated benefits at levels we project or at all, which would adversely affect our business, financial condition and prospects.
We are subject to the risk of product contamination and product liability claims.
The sale of agricultural products for human consumption involves the risk of injury to consumers. Such injuries may result from tampering by unauthorized third parties, product contamination or spoilage, including the presence of foreign objects, substances, chemicals, other agents, or residues introduced during the growing, storage, handling or transportation phases. While we are subject to governmental inspection and regulations and believe our facilities comply in all material respects with all applicable laws and regulations, we cannot be sure that our agricultural products will not cause a health-related illness in the future or that we will not be subject to claims or lawsuits relating to such matters. Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness or injury could adversely affect our reputation with existing and potential customers and our corporate and brand image. Moreover, claims or liabilities of this sort might not be covered or fully covered by our insurance or by any rights of indemnity or contribution that we may have against others. We maintain product liability insurance; however, we cannot be sure that we will not incur claims or liabilities for which we are not insured or that exceed the amount of our insurance coverage.
Our agricultural operations are subject to water use regulations restricting our access to water.
Our operations are dependent upon the availability of adequate surface and underground water. The availability of water is regulated by the state of Florida through water management districts which have jurisdiction over various geographic regions in which our lands are located. Currently, we have permits in place for the next 15 to 20 years for the use of underground and surface water which are believed to be adequate for our agricultural needs.
Surface water in Hendry County, where much of our agricultural land is located, comes from Lake Okeechobee via the Caloosahatchee River and a system of canals used to irrigate such land. The Army Corps of Engineers controls the level of Lake Okeechobee and ultimately determines the availability of surface water even though the use of water has been permitted by the state of Florida through the water management district. The Army Corps of Engineers decided in 2010 to lower the permissible level of Lake Okeechobee in response to concerns about the ability of the levee surrounding the lake to restrain rising waters which could result from hurricanes. Changes in availability of surface water use may result during times of drought, because of lower lake levels and could materially adversely affect our agricultural operations, financial condition, results of operations and cash flows.
Changes in immigration laws could impact our ability to harvest our crops.
We engage third parties to provide personnel for our harvesting operations. The availability and number of such workers is subject to decrease if there are changes in the U.S. immigration laws. Immigration reform and enforcement has been attracting significant attention from the U.S. Government (particularly in the current U.S. administration and U.S. Congress), with enforcement operations taking place across the country, resulting in arrests and detentions of unauthorized workers. It remains unclear how the next U.S. administration will approach immigration reform and enforcement. However, if new immigration legislation is enacted in the U.S. and/or if enforcement actions are taken against available personnel, such legislation and/or enforcement activities may contain provisions that could significantly reduce the number and availability of workers. Termination of a significant number of personnel who might be found to be unauthorized workers or the scarcity of other available personnel to harvest our agricultural products could cause harvesting costs to increase or could lead to the loss of product that is not timely harvested which could have a material adverse effect to our citrus grove business, financial condition, results of operations and cash flows.
Our acquisition of additional agricultural assets and other businesses could pose risks.
We seek to opportunistically acquire new agricultural assets from time to time that we believe would complement our business. For example, (i) in fiscal year 2015, we acquired three Florida citrus properties, including Orange-Co and Silver Nip Citrus, which resulted in our citrus division being one of the largest citrus producers in the United States, and (ii) in October 2020 we acquired another Florida citrus property. While we expect that our past and future acquisitions will successfully complement our business, we may fail to realize all of the anticipated benefits of these acquisitions, which could reduce our anticipated results. We cannot assure that we will be able to successfully identify suitable acquisition opportunities, negotiate appropriate acquisition terms, or obtain any financing that may be needed to consummate such acquisitions or complete proposed acquisitions. Acquisitions by us could result in accounting changes, potentially dilutive issuances of equity securities, increased debt and contingent liabilities, reduce the amount of cash available for dividends, debt service payments, integration issues and diversion of management’s attention, any of which could adversely affect our business, results of operations, financial condition, and cash flows. We may be unable to successfully realize the financial, operational, and other benefits we anticipate from our acquisitions and our failure to do so could adversely affect our business, results of operations, financial condition and cash flows.
Dispositions of our assets may adversely affect our future results of operations.
We also routinely evaluate the benefits of disposing of certain of our assets which could include the exit from lines of business. For example, in November of 2014, we sold significant sugarcane assets and we are no longer involved in the sugarcane business and, in January of 2018, we sold our breeding herd and no longer engage in cattle operations. Most recently, we sold certain ranch acres to the State of Florida and because these acres would have been critically important for carrying out the Company’s planned dispersed water storage project, the Company is no longer pursuing permit approval relating to this dispersed water storage project. While such dispositions increase the amount of cash available to us, it could also (i) result in a potential loss of significant operating revenues and income streams that we might not be able to replace, (ii) make our business less diversified and (iii) could ultimately have a negative impact on our results of operations, financial condition and cash flows.
Harm to the Company’s reputation could have an adverse effect on the business, financial condition and results of operations.
Maintaining a strong reputation with fruit processors and third-party partners is critical to the success of the Company’s business. The Company devotes significant time and resources to training programs, relating to, among other things, ethics, compliance and product safety and quality, as well as sustainability goals, and has published ESG goals (i.e., environmental, sustainability and governance), including relating to environmental impact and sustainability and inclusion and diversity, as part of its ESG Strategy. Despite these efforts, the Company may not be successful in achieving its goals, might provide materially inaccurate information, or might receive negative publicity about the Company, including relating to product safety, quality, efficacy, ESG or similar issues, whether real or perceived, and reputational damage could occur. In addition, the Company’s products could face withdrawal, recall or other quality issues, which could lead to decreased demand for the Company’s products or services and reputational damage.
Widespread use of social media and networking sites by consumers has greatly increased the accessibility and speed of dissemination of information. Negative publicity, posts or comments about the Company, whether accurate or inaccurate, or disclosure of non-public sensitive information about the Company, could be widely disseminated through the use of social media or in other formats.
If a transaction intended to qualify as a Section 1031 Exchange is later determined to be taxable, we may face adverse consequences, and if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of properties in the future on a tax deferred basis.
From time to time we dispose of properties in transactions that are intended to qualify as Section 1031 Exchanges under the federal income tax law. It is possible that the qualification of a transaction as a Section 1031 Exchange could be successfully challenged and determined to be currently taxable and we could also be required to pay interest and penalties. As a result, we may be required to borrow funds in order to pay additional income taxes, and the payment of such taxes could cause us to have less cash available. Moreover, it is possible that legislation could be enacted that could modify or repeal the laws with respect to Section 1031 Exchanges, which could make it more difficult or not possible for us to dispose of properties in the future on a tax deferred basis.
We may undertake one or more significant corporate transactions that may not achieve their intended results, may adversely affect our financial condition and our results of operations or result in unforeseeable risks to our business.
We continuously evaluate the acquisition or disposition of operating businesses and assets and may in the future undertake one or more significant transactions. Any such acquisitive transaction could be material to our business and could take any number of forms, including mergers, acquisitions, joint ventures and the purchase of equity interests. The consideration for such acquisitive transactions may include, among other things, cash, common stock or equity interests in the Company or our subsidiaries, or a contribution of property or equipment to obtain equity interests, and in conjunction with a transaction we might incur additional indebtedness. We also routinely evaluate the benefits of disposing of certain assets. Such dispositions could take the form of asset sales, mergers or sales of equity interests.
These transactions may present significant risks such as insufficient assets to offset liabilities assumed, potential loss of significant operating revenues and income streams, increased or unexpected expenses, inadequate return of capital, regulatory or compliance issues, the triggering of certain financial covenants in our debt instruments (including accelerated repayment) and unidentified issues not discovered in due diligence. In addition, such transactions could distract management from current operations. As a result of the risks inherent in such transactions, we cannot guarantee that any such transaction will ultimately result in the realization of its anticipated benefits or that it will not have a material adverse impact on our business, financial condition, results of operations or cash flows. If we were to complete such an acquisition, disposition, investment or other strategic transaction, we may require additional debt or equity financing that could result in a significant increase in our amount of debt and our debt service obligations or the number of outstanding shares of our common stock, thereby diluting holders of our common stock outstanding prior to such acquisition.
Our citrus business is seasonal.
Our citrus groves produce the majority of our annual operating revenues and the citrus business is seasonal because it is tied to the growing and picking seasons. Historically, the second and third quarters of our fiscal year generally produce the majority of our annual revenues, and our working capital requirements are typically greater in the first and fourth quarters of our fiscal year coinciding with our planting cycles. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year or in future quarters. If our operating revenues in the second and third quarters are lower than expected, it would have a disproportionately large adverse impact on our annual operating results.
We face significant competition in our agricultural operations.
We face significant competition in our agricultural operations both from domestic and foreign producers and do not have any branded products. Foreign growers generally have an equal or lower cost of production, less environmental regulation and in some instances, greater resources and market flexibility than us. Because foreign growers have greater flexibility as to when they enter the U.S. market, we cannot always predict the impact these competitors will have on our business and results of operations. The competition we face from certain foreign suppliers of orange juice is mitigated by a governmentally imposed tariff on orange imports. Accordingly, a reduction in the government’s orange juice tariff could adversely impact our results of operations.
Our earnings are sensitive to fluctuations in market supply and prices and demand for our products.
Excess supplies often cause severe price competition in our industry. Growing conditions in various parts of the world, particularly weather conditions such as windstorms, floods, droughts and freezes, as well as diseases and pests, are primary factors affecting market prices because of their influence on the supply and quality of product.
Fresh produce is highly perishable and generally must be brought to market and sold soon after harvest. Many of the items involved in our business, such as oranges, must be sold more quickly than other produce our competitors may produce, such as lemons. As such, our competitors may be able to maintain certain items they produce in inventory for longer periods than we are able to maintain our inventory which may offer our competitors strategic advantages when they respond to fluctuations in market supply and demand that are not available to us.
In addition, general public perceptions regarding the quality, safety or health risks associated with particular food products could reduce demand and prices for some of our products. To the extent that consumer preferences evolve away from products that we produce for health or other reasons, and we are unable to modify our products or to develop products that satisfy new consumer preferences, there will be a decreased demand for our products. If excess supplies do exist, this could result in reduced pricing or unusable inventory which could adversely impact our results of operations.
Climate change, or legal, regulatory, or market measures to address climate change, may negatively affect our business and operations.
There is growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters. In the event that such climate change has a negative effect on the productivity of our citrus groves, it could have an adverse impact on our business and results of operations. The increasing concern over climate change also may result in more regional, federal, and/or global legal and regulatory requirements to reduce or mitigate the effects of greenhouse gases or climate change. In the event that such regulation is enacted, we may experience significant increases in our costs of operations, including but not limited to increased energy, environmental, and other costs and capital expenditures. In particular, increasing regulation of fuel emissions could substantially increase the distribution and supply chain costs associated with our products. As a result, climate change could negatively affect our financial condition and results of operations.
ESG issues, including those related to climate change and sustainability, may have an adverse effect on our business, financial condition, results of operations, and cash flows and damage our reputation.
Companies across all industries are facing increasing scrutiny relating to their ESG policies. Increased focus and activism related to ESG may hinder the Company’s access to capital, as investors may reconsider their capital investment as a result of their assessment of the Company’s ESG practices. In particular, customers, investors and other stakeholders are increasingly focusing on environmental issues, including climate change, water use, deforestation, plastic waste, and other sustainability concerns. There have also been changing consumer preferences for natural or organic products and ingredients and increased consumer concerns or perceptions (whether accurate or inaccurate) regarding the effects of substances present in certain consumer products. Responding to and complying with these preferences, concerns and demands could cause us to incur additional costs or to make changes to our operations that could negatively affect our business, financial condition and results of operations.
If the Company does not adapt to or comply with new regulations or fails to meet its ESG goals or meet the evolving investor, industry or stakeholder expectations and standards, or if the Company is perceived to have not responded appropriately to the growing concern for ESG issues, fruit processors and consumers may choose to stop purchasing our products or purchase products from another company or a competitor, and the Company’s reputation, business, financial condition, results of operations and cash flows may be adversely affected.
Increases in labor, personnel and benefits costs could adversely affect our operating results.
We primarily utilize labor contractors to harvest and deliver our fruit to outside packing facilities. Our employees and contractors are in demand by other agribusinesses and other industries. Shortages of labor, particularly as a result of the recent low unemployment rate in the United States and in Florida in particular, could delay our harvesting or orange processing activities or could result in increases in labor costs.
We and our labor contractors are subject to government mandated wage and benefit laws and regulations. In addition, current or future federal or state healthcare legislation and regulation, including the Affordable Care Act, may increase our medical costs or the medical costs of our labor contractors that could be passed on to us.
Increases in commodity or raw product costs, such as fuel and chemical costs, could adversely affect our operating results.
Many factors may affect the cost and supply of citrus, including external conditions, commodity market fluctuations, changes in governmental laws and regulations, tariffs, agricultural programs, severe and prolonged weather conditions and natural disasters. Increased costs for products can negatively impact our operating results and there can be no assurance that they will not adversely affect our operating results in the future.
We are subject to transportation risks.
We depend on third party providers of transportation and have no control over such third parties. An extended interruption in our ability to harvest and haul our products could have a material adverse effect on our business, financial condition and results of operations. Similarly, any extended disruption in the distribution of our products could have a material adverse effect on our business, financial condition and results of operations. While we believe we are adequately insured and would attempt to transport our products by alternative means if we were to experience an interruption due to strike, natural disasters or otherwise, we cannot be sure that we would be able to do so or be successful in doing so in a timely and cost-effective manner.
We benefit from reduced real estate taxes due to the agricultural classification of a majority of our land. Changes in the classification or valuation methods employed by county property appraisers could cause significant changes in our real estate property tax liabilities.
For the fiscal years ended September 30, 2021, 2020 and 2019, we paid approximately $2,570,000, $2,714,000, and $2,755,000 in real estate taxes, respectively. These taxes were based upon the agricultural use (“Green Belt”) values determined by the county property appraisers in which counties we own land, of approximately $82,790,000, $87,976,000, and $91,312,000 for the fiscal years ended September 30, 2021, 2020 and 2019, respectively, which differs significantly from the fair values determined by the county property appraisers of approximately $467,948,000, $463,799,000, and $514,330,000, respectively. Changes in state law or county policy regarding the granting of agricultural classification or calculation of "Green Belt" values or average millage rates could significantly and adversely impact our results of operations, cash flows and/or financial position.
Liability for the use of fertilizers, pesticides, herbicides and other potentially hazardous substances could increase our costs.
Our agricultural business involves the use of herbicides, fertilizers and pesticides, some of which may be considered hazardous or toxic substances. We may be deemed liable and have to pay for the costs or damages associated with the improper application, accidental release or the use or misuse of such substances. Our insurance may not be adequate to cover such costs or damages, or may not continue to be available at a price or under terms that are satisfactory to us. In such cases, if we are required to pay significant costs or damages, it could materially adversely affect our business, results of operations, financial condition and cash flows.
Compliance with applicable environmental laws may substantially increase our costs of doing business which could reduce our profits.
We are subject to various laws and regulations relating to the operation of our properties, which are administered by numerous federal, state and local governmental agencies. We face a potential for environmental liability by virtue of our ownership of real estate property. If hazardous substances (including herbicides and pesticides used by us or by any persons leasing our lands) are discovered emanating from any of our lands and the release of such substances presents a threat of harm to the public health or the environment, we may be held strictly liable for the cost of remediation of these hazardous substances. In addition, environmental laws that apply to a given site can vary greatly according to the site’s location, its present and former uses, and other factors such as the presence of wetlands or endangered species on the site. Management monitors environmental legislation and requirements and makes every effort to remain in compliance with such regulations. Furthermore, we require lessees of our properties to comply with environmental regulations as a condition of leasing. We also purchase insurance for environmental liability when it is available; however, these insurance contracts may not be adequate to cover such costs or damages or may not continue to be available at prices and terms that would be satisfactory. It is possible that in some cases the cost of compliance with these environmental laws could exceed the value of a particular tract of land, make it unsuitable for use in what would otherwise be its highest and best use, and/or be significant enough that it would materially adversely affect us.
Our business may be adversely affected if we lose key employees.
We depend to a large extent on the services of certain key management personnel. These individuals have extensive experience and expertise in the business lines and segments in which they work. The loss of any of these individuals could have a material adverse effect on our businesses. We do not maintain key-man life insurance with respect to any of our employees. Our success will be dependent on our ability to continue to attract, employ and retain skilled personnel in our business lines and segments.
If our internal controls are ineffective, our operating results could be adversely affected.
Our internal controls over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls or fraud. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results could be harmed, and we could fail to meet our financial reporting obligations.
Inflation can have a significant adverse effect on our operations.
Inflation can have a major adverse impact on our citrus operations and there has been significant recent inflationary developments in the United States. It is uncertain as to whether these recent inflationary pressures will continue, will increase or will be brought under control. Our citrus operations are most affected by escalating costs and unpredictable revenues and high irrigation water costs. High fixed water costs related to our citrus lands will continue to adversely affect earnings. Prices received for many of our products are dependent upon prevailing market conditions and commodity prices. Therefore, in addition to making it difficult to accurately predict revenue, we are unable to pass on cost increases caused by general inflation, except to the extent reflected in market conditions and commodity prices. As a result, if market conditions and commodity prices do not enable us to pass along such costs increases, these recent and future inflationary pressures would likely negatively affect our results of operations, cash flows and/or financial position.
We incur increased costs as a result of being a publicly traded company.
As a company with publicly traded securities, we have incurred, and will continue to incur, significant legal, accounting and other expenses. In addition, the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as well as rules promulgated by the SEC and Nasdaq, requires us to adopt corporate governance practices applicable to U.S. public companies. These laws, rules and regulations may increase our legal and financial compliance costs, which could adversely affect the trading price of our common stock.
System security risks, data protection breaches, cyber-attacks and systems integration issues could disrupt our internal operations or services provided to customers, and any such disruption could reduce our expected revenues, increase our expenses, damage our reputation and adversely affect our stock price.
Computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our confidential information or that of third parties, create system disruptions or cause shutdowns. Computer programmers and hackers also may be able to develop and deploy viruses, worms, and other malicious software programs that attack our systems and databases or otherwise exploit any security vulnerabilities of our systems and databases. In addition, sophisticated hardware and operating system software and applications that we develop internally or procure from third parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of the system. The costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be
successful and could result in interruptions, delays, cessation of service and loss of existing or potential customers that may impede our sales, distribution or other critical functions.
Portions of our information technology infrastructure also may experience interruptions, delays or cessations of service or produce errors in connection with systems integration or migration work that takes place from time to time. We may not be successful in implementing new systems and transitioning data, which could cause business disruptions and be more expensive, time consuming, disruptive and resource-intensive. Such disruptions could adversely impact our ability to track sales and could interrupt other operational or financial processes, which in turn could adversely affect our financial results, stock price and reputation.
Risks Related to Our Indebtedness
We maintain a significant amount of indebtedness which could adversely affect our financial condition, results of operations or cash flows and may limit our operational and financing flexibility and negatively impact our business.
As of September 30, 2021, we had approximately $126,294,000 in principal amount of indebtedness outstanding under our secured credit facilities and an additional availability of approximately $94,664,000 is available under our working capital and revolving lines of credit. Our loan agreements, as well as other debt instruments we may enter into in the future, may have negative consequences to us and could limit our business because we will use a substantial portion of our cash flows from operations to pay debt service costs which will reduce the funds available to us for corporate and general expenses and it may make us more vulnerable to economic downturns and adverse developments in our business. Our loan agreements require us to comply with various restrictive covenants and some contain financial covenants that require us to comply with specified financial ratios and tests. Our failure to meet these covenants could result in default under these loan agreements and would result in a cross-default under other loan agreements. In the event of a default and our inability to obtain a waiver of the default, all amounts outstanding under loan agreements could be declared immediately due and payable. Our loan agreements also contain various covenants that limit our ability to engage in specified types of transactions. We expect that we will depend primarily upon our citrus operations to provide funds to pay our corporate and general expenses and to pay any amounts that may become due under any credit facilities and any other indebtedness we may incur. In addition, there are factors beyond our control that could negatively affect our citrus business revenue stream. Our ability to make these payments depends on our future performance, which will be affected by various financial, business, macroeconomic and other factors, many of which we cannot control.
We may be unable to generate sufficient cash flow to service our debt obligations.
To service our debt, we require a significant amount of cash. Our ability to generate cash, make scheduled payments or refinance our obligations depends on our successful financial and operating performance. Our financial and operating performance, cash flow and capital resources depend upon prevailing economic conditions and various financial, business and other factors, many of which are beyond our control. These factors include among others:
•
economic and competitive conditions
•
changes in laws and regulations
•
operating difficulties, increased operating costs or pricing pressures we may experience; and
•
delays in implementing any strategic projects
If our cash flow and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell material assets or operations, obtain additional capital or restructure our debt. If we are required to take any actions referred to above, it could have a material adverse effect on our business, financial condition and results of operations. In addition, we cannot assure investors that we would be able to take any of these actions on terms acceptable to us, or at all, or that these actions would enable us to continue to satisfy our capital requirements or that these actions would be permitted under the terms of our various debt agreements.
Some of our debt is based on variable rates of interest, which could result in higher interest expenses in the event of an increase in the interest rates.
Our credit facility and certain of our term loans that we have currently bear interest at variable rates, which will generally change as interest rates change. We bear the risk that the rates we are charged by our lenders will increase faster than the earnings and cash flow of our business, which could reduce profitability, adversely affect our ability to service our debt, cause us to breach covenants contained in our credit facility and term loans, any of which could materially adversely affect our business, financial condition, results of operations and cash flows.
Risks Related to our Common Stock
We may not be able to continue to pay or maintain our cash dividends on our common stock and the failure to do so may negatively affect our share price.
We have historically paid regular quarterly dividends to the holders of our common stock and in June 2021 announced an increase in our quarterly dividend to $0.50 per common share, from $0.18 per common share. Our ability to pay cash dividends depends on, among other things, our cash flows from operations, our cash requirements, our financial condition, the degree to which we are/or become leveraged, contractual restrictions binding on us, provisions of applicable law and other factors that our Board of Directors may deem relevant. There can be no assurance that we will generate sufficient cash from continuing operations in the future or have sufficient cash surplus or net profits to pay dividends on our common stock. Our dividend policy is based upon our directors’ current assessment of our business and the environment in which we operate, and that assessment could change based on business developments (which could, for example, increase our need for capital expenditures) or new growth opportunities. Our Board of Directors may, in its discretion, decrease the level of cash dividends or entirely discontinue the payment of cash dividends. The reduction or elimination of cash dividends may negatively affect the market price of our common stock.
There can be no assurance that we will resume the repurchase of shares of our common stock.
In March 2017, our Board of Directors authorized the repurchase of up to $5,000,000 of the Company’s common stock beginning March 9, 2017 and continued through March 9, 2019. In May 2017, our Board of Directors authorized the repurchase of up to an additional $2,000,000 of the Company’s common stock beginning May 24, 2017 and continued through May 24, 2019. There can be no assurance that we will repurchase shares in the future in any particular amounts or at all. A reduction in, or elimination of, share repurchases could have a negative effect on our share price.
If we were to conduct another tender offer or engage in an additional share repurchase program, holders of our securities would be subject to certain risks associated with a decrease in the outstanding number of shares of our common stock.
In September 2018 the Company announced the commencement of the Tender Offer. During the Tender Offer the Company repurchased an aggregate of 752,234 shares at a price of $34.00 per share aggregating $25,575,956. These shares represented approximately 9.2% of the total number of shares of the Company’s common stock issued and outstanding as of October 2, 2018. While we have no plans to conduct another tender offer at this time, we may conduct another tender offer or engage in the repurchase of our shares in the future. Stockholders could be adversely affected by a reduction in our “public float,” that is, the number of shares owned by outside stockholders and available for trading in the securities markets, if the Company makes future tender offers or private or open market repurchases of its shares. Although the Company is not currently pursuing a tender offer or repurchase program, there are no assurances that our Board of Directors will not authorize the Company to do so in the future. Engaging in a tender offer or repurchase program in the future could have a negative effect on our share price.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None.

---

ITEM 2. PROPERTIES
Item 2. Properties
As of September 30, 2021, Alico owned approximately 83,000 acres of land located in eight counties in Florida. Acreage in each county and the primary classification with respect to the present use of these properties is shown in the following table:
Total (1)
Hendry
Polk
Collier
DeSoto
Glades
Charlotte
Hardee
Highlands
Alico Citrus:
Citrus Groves
48,830
8,766
7,107
7,166
21,450
-
2,543
1,224
Citrus Nursery
-
-
-
-
-
-
-
Total Citrus Groves
48,852
8,766
7,107
7,166
21,472
-
2,543
1,224
Land Management and Other Operations
32,979
28,957
-
4,022
-
-
-
-
-
Mining
-
-
-
-
-
-
-
Other
-
-
-
-
-
-
-
Total
83,277
38,643
7,107
11,188
21,472
2,543
1,224
(1) Subsequent to September 30, 2021, the Company sold approximately 1,638 acres located in Hendry County (see “Recent Developments” above for further detail).
Approximately 54,614 acres of the properties listed are encumbered by credit agreements totaling approximately $216,500,000, of which there was approximately $126,294,000 outstanding at September 30, 2021. For a more detailed description of the credit agreements and collateral please see Note 6. “Long-Term Debt and Lines of Credit” to the Company’s fiscal year 2021 consolidated financial statements.
Although the Company has mineral rights on approximately 90,000 acres, the Company currently collects mining royalties on only approximately 526 acres of the land included in the table above located in Glades County, Florida and on none of the non-owned lands with respect to which it holds mineral rights. These royalties do not represent a significant portion of operating revenues or gross profits.

---

ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
From time to time, Alico may be involved in litigation relating to claims arising out of its operations in the normal course of business. There are no current legal proceedings to which the Company is a party or of which any of its property is subject that it believes will have a material adverse effect on its financial position, results of operations or cash flows.

---

ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not Applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Common Stock
Our common stock is traded on the Nasdaq Global Select Market under the symbol ALCO.
Holders
On December 3, 2021, our stock transfer records indicated there were 218 holders of record of our common stock. A greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers and other financial institutions.
Dividend Policy
The declaration and amount of any actual cash dividend are in the sole discretion of our Board of Directors and are subject to numerous factors that ordinarily affect dividend policy, including the results of our operations and financial position, as well as general economic and business conditions.
•
The Board of Directors approved the increase of our annual dividend to $2.00 per common share in June 2021.
•
The Board of Directors approved the increase of our annual dividend to $0.72 per common share in December 2020.
•
The Board of Directors approved the increase of our annual dividend to $0.36 per common share in December 2019.
Stock Performance Graph
The graph below represents our common stock performance, comparing the value of $100 invested on September 30, 2016 in our common stock, the S&P 500 Index, the S&P Agricultural Products Index and a Company-constructed peer group, which includes Forestar Group, Inc., Limoneira Company, The St. Joe Company, Tejon Ranch Co. and Texas Pacific Land Trust.
INDEXED RETURNS
Base
Period
Years Ending
Company Name / Index
Sept 16
Sept 17
Sept 18
Sept 19
Sept 20
Sept 21
Alico, Inc.
128.17
127.85
129.71
110.42
137.59
S&P 500 Index
118.61
139.85
145.80
167.89
218.26
S&P Agricultural Products Index
102.41
115.38
97.59
116.03
164.19
Peer Group
134.85
220.05
175.08
143.17
317.43
(Includes reinvestment of dividends)
Recent Sale of Unregistered Securities
None.
Issuer Repurchases of Equity Securities
We adopted Rule 10b5-1 share repurchase plan under the Securities Exchange Act of 1934 (the “Plan”) in connection with share repurchase authorizations. The Plan allows us to repurchase our shares of common stock at times when it otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods. Because repurchases under the Plan are subject to certain pricing parameters, there is no guarantee as to the exact number of common shares that will be repurchased under the Plan or that there will be any repurchases pursuant to the Plan. We did not repurchase any of our common stock under our Plan during the year ended September 30, 2021.

---

ITEM 6. SELECTED FINANCIAL DATA
Item 6. [Reserved]

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the accompanying Consolidated Financial Statements and related Notes thereto.
Cautionary Statement Regarding Forward-Looking Information
We provide forward-looking information in this Annual Report on Form 10-K, particularly in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any statements in this Annual Report on Form 10-K that are not historical facts are forward-looking statements. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on our current expectations, estimates and projections about our business based, in part, on assumptions made by our management and can be identified by terms such as “plans,” “expect,” “may,” "anticipate,” “intend,” “should be,” “will be” “is likely to,” “believes,” and similar expressions referring to future periods. Alico believes the expectations reflected in the forward-looking statements are reasonable but cannot guarantee future results, level of activity, performance or achievements. Actual results may differ materially from those expressed or implied in the forward-looking statements. Therefore, Alico cautions you against relying on any of these forward-looking statements. Factors which may cause future outcomes to differ materially from those foreseen in forward-looking statements include, but are not limited to: changes in laws, regulation and rules, including tax laws and tax rates; climate change; weather conditions that affect production, transportation, storage, demand, import and export of fresh product and their by-products; increased pressure from diseases including citrus greening and citrus canker, as well as insects and other pests; disruption of water supplies or changes in water allocations; market pricing of citrus; pricing and supply of raw materials and products; market responses to industry volume pressures; pricing and supply of energy; changes in interest rates; availability of refinancing; availability of financing for land development activities and other growth and corporate opportunities; onetime events; acquisitions and divestitures; ability to make strategic acquisitions or divestitures; ability to redeploy proceeds from divestitures; ability to consummate selected land acquisitions; ability to take advantage of tax deferral options; seasonality; labor disruptions; inability to pay debt obligations; inability to engage in certain transactions due to restrictive covenants in debt instruments; government restrictions on land use; changes in agricultural land values; impact of the COVID-19 outbreak and coronavirus pandemic on our agriculture operations, including without limitation demand for product, supply chain, health and availability of our labor force, the labor force of contractors we engage, and the labor force of our competitors; other risks related to the duration and severity of the COVID-19 outbreak and coronavirus pandemic and its impact on Alico’s business; the impact of the COVID-19 outbreak and coronavirus pandemic on the U.S. and global economies and financial markets, including without limitation related legislative and regulatory initiatives; access to governmental loans and incentives; any reduction in the public float resulting from repurchases of common stock by Alico; changes in equity awards to employees; whether the Company's dividend policy, including its recent increased dividend amounts, is continued; expressed desire of certain of our stockholders to liquidate their shareholdings by virtue of past market sales of common stock, by sales of common stock or by way of future transactions designed to consummate such expressed desire; political changes and economic crises; ability to implement ESG initiatives; competitive actions by other companies; increased competition from international companies; changes in environmental regulations and their impact on farming practices; the land ownership policies of governments; changes in government farm programs and policies and international reaction to such programs; changes in pricing calculations with our customers; fluctuations in the value of the U.S. dollar, interest rates, inflation and deflation rates; length of terms of contracts with customers; impact of concentration of sales to one customer; and changes in and effects of crop insurance programs, global trade agreements, trade restrictions and tariffs; and soil conditions, harvest yields, prices for commodities, and crop production expenses. These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those Risks Factors included in Part I, Item 1A and elsewhere in this Annual Report on Form 10-K.
Introduction
Alico, Inc. (“Alico”), together with its subsidiaries (collectively, the “Company", "we", "us" or "our”), is a holding company with assets and related operations in agriculture, land management and natural resources. We are a Florida agribusiness and land management company with a legacy of achievement and innovation in citrus, cattle and resource conservation. We own approximately 83,000 acres of land and approximately 90,000 acres of mineral rights throughout Florida. Alico holds these mineral rights on substantially all its owned acres, with additional mineral rights on other acres. Our principal lines of business are now citrus groves and land management and other operations, which include land conservation, encompassing environmental services, land leasing and related support operations. Prior to the sale of certain ranch land to the State of Florida in September 2020, the Company’s business line also included Water Resources. Our mission is to create value for our customers and stockholders by managing existing lands to their optimal current income and total returns. Alico opportunistically acquires new agricultural assets and produces high quality agricultural products while exercising responsible environmental stewardship. Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help provide an understanding of results of operations, financial condition and changes in financial condition for the periods presented. This MD&A is organized as follows:
•
Business Overview. This section provides a general description of our business, as well as other matters that we believe are important in understanding our results of operations and financial condition.
•
Consolidated Results of Operations. This section provides an analysis of our results of operations for each of the three fiscal years in the period ended September 30, 2021. Our discussion is presented on a consolidated basis and includes certain discussions on future trends by segment.
•
Liquidity and Capital Resources. This section provides an analysis of our cash flows for each of the three fiscal years in the period ended September 30, 2021 and our outstanding debt, commitments and cash resources as of September 30, 2021.
•
Critical Accounting Policies. This section identifies those accounting policies that we consider important to our results of operations and financial condition, require significant judgment and involve significant management estimates. Our significant accounting policies, including those considered to be critical accounting policies, are summarized in Note 2, “Summary of Significant Accounting Policies,” to the accompanying Consolidated Financial Statements.
Business Overview
Business Description
Alico, Inc., together with its subsidiaries (collectively, “Alico”, the “Company”, “we”, “us” or “our”) generates operating revenues primarily from the sale of its citrus products, caretaking management services, and grazing and hunting leasing. The Company operates as two business segments and all of its operating revenues are generated in the United States. For the fiscal year ended September 30, 2021, the Company generated operating revenues of approximately $108,564,000, income from operations of approximately $14,440,000, and net income attributable to common stockholders of approximately $34,859,000. Cash provided by operating activities was approximately $16,504,000 for the fiscal year ended September 30, 2021.
Fiscal Year Highlights and Other Developments
The COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the current novel coronavirus outbreak (“COVID-19”) to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country have imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures have had a significant adverse impact upon many sectors of the economy, including certain agriculture businesses.
On November 4, 2021, the Occupational Safety and Health Administration (“OSHA”) posted an Emergency Temporary Standard (“ETS”) on mandating that all private employers with 100 or more employees ensure their employees are COVID-19 fully vaccinated before entering the employer’s worksite or, at the employer’s option, require employees who remain unvaccinated and want to come to the worksite to wear an approved face covering and produce a negative COVID-19 test at least weekly. Pursuant to the ETS, employers must offer up to four hours of additional paid time off, including travel time, per vaccine dose to allow employees to be vaccinated and reasonable time and paid sick leave to recover from side effects experienced after each vaccine dose. Pursuant to the ETS, the ETS remains in effect for a maximum of six months. This ETS implements President Biden’s COVID-19 Action Plan, which aims to accelerate the pace of COVID-19 vaccinations in the United States.
The ETS is effective immediately upon its publication in the Federal Register. Pursuant to the ETS, employers must comply with most requirements within 30 days of publication (December 5th) and with optional testing requirements within 60 days of publication (January 4th). Employees who have completed their vaccination by that date do not have to be tested, even if they have not yet completed the 2-week waiting period. On November 6, 2021, the Fifth Circuit Court of Appeals granted an emergency motion to stay enforcement of the ETS, subject to the resolution of ongoing litigation challenging the constitutionality of the ETS. The order enjoins the federal government from taking any action to enforce the ETS while it is in effect. On November 12, 2021, the Fifth Circuit Court of Appeals reaffirmed its suspension of the ETS and, on November 16, 2021, OSHA announced it suspended its activities related to the implementation and enforcement of the ETS pending future developments in the litigation. It is unknown how long the Fifth Circuit’s stay will remain in place. The Sixth Circuit Court of Appeals was selected through the lottery system on November 16, 2021, to hear a consolidated action concerning multiple challenges to the ETS and is authorized to uphold or lift the Fifth Circuit Court of Appeals order.
Also, a number of state governments have considered legislation related to employer vaccine mandates during the pandemic. OSHA maintains that its ETS preempts these laws, but states such as the State of Florida disagree. On November 17, 2021, the Florida legislature passed legislation, which was signed into law on November 18, 2021 and codified at section 381.00317, Florida Statutes, prohibiting private-sector employers from implementing a COVID-19 vaccination mandate for full-time, part-time, or contract employees without providing at least five individual exemptions, including, but not limited to, pregnancy or anticipated pregnancy; religious reasons; COVID-19 immunity; periodic testing; and the use of employer-provided personal protective equipment. If an employer fails to comply with the new law and terminates an employee based on a COVID-19 vaccination mandate, then the employer will be subject to a fine of up to $50,000 per violation.
The Company plans to monitor conflicting guidance from the State of Florida and the federal government and adjust its policies in accordance with the resolution of the ongoing litigation in the federal courts.
Since the commencement of COVID-19 in March 2020, the Company took steps to allow and encourage greater separation for our employed and contracted field workers and has worked with its harvesters, haulers and suppliers to minimize interactions. For the continued protection of our employees and in accordance with the OSHA mandate, the Company intends to comply with all requirements as outlined in the ETS that was published on November 4, 2021, to the extent consistent with applicable law.
To date, the Company has experienced no material adverse impacts from this pandemic.
Prepayment and Restructure of Fixed-Rate Term Loans
In April 2021, the Company made a prepayment of $10,312,500 on the Met Fixed-Rate Term Loans and, effective May 1, 2021, the Company modified its Met Fixed-Rate Term Loans, which in the aggregate, after the prepayment, had a balance of $70,000,000 to be interest only with a balloon payment to be paid at maturity, which is November 1, 2029. As part of this modification, the interest rate on these Met Fixed-Rate Term Loans, which were bearing interest at 4.15%, has been adjusted to 3.85% and the Company will no longer have the prepayment option previously allowed under the arrangement.
Sales and Purchase of Land
On December 3, 2021, the State of Florida purchased, under the Florida Forever program, approximately 1,638 acres of the Alico Ranch for approximately $5,675,000 pursuant to an option agreement entered into on September 21, 2021 between the State of Florida and the Company.
On June 3, 2021, the Company sold approximately 11,700 acres, which were encumbered by an easement, to a third-party for approximately $12,219,000. In 2013, these acres were enrolled in the Wetlands Reserve Program (“WRP”), which calls for the restoration and maintenance of the property for the duration of the WRP easement. As part of that enrollment in 2013, Alico received approximately $1,800 per acre.
On April 15, 2021, the State of Florida purchased, under the Florida Forever program, approximately 5,734 acres of Alico Ranch for approximately $14,445,000, pursuant to an option agreement between the State of Florida and Alico dated December 15, 2020. This is the third sales transaction Alico has completed with the State of Florida within the last three years, aggregating over 22,000 acres. Alico used most of the net sales proceeds to prepay a portion of its fixed-rate term debt.
On October 30, 2020, the Company purchased approximately 3,280 gross acres located in Hendry County for a purchase price of $18,230,000. This acquisition allows the Company to add additional scale to its existing 45,000 gross acres of citrus properties. Strategically, with these acquired groves neighboring existing Alico groves, Alico believes that this acquisition will help Alico with its operation as a low-cost, high producing citrus grower.
Federal Relief Program
The Company was eligible for Hurricane Irma federal relief programs for block grants that were being administered through the State of Florida. During the fiscal years ended September 30, 2021, 2020, and 2019, the Company received approximately $4,299,000, $4,629,000, and $15,597,000, respectively, under the Florida Citrus Recovery Block Grant (“CRBG”) program. The remaining portion of the funds that are due to Alico under the Florida CRBG program relates to certain crop insurance expenses incurred by the Company, which is estimated to be approximately $2,000,000. In October 2021, the Company received its first portion of this crop insurance expense reimbursement in an amount equal to approximately $1,000,000 and expects to receive the remaining portion in fiscal year 2023.
Consolidated Results of Operations
The following discussion provides an analysis of Alico's results of operations and should be read in conjunction with the accompanying Consolidated Statements of Operations for the fiscal years ended September 30, 2021, 2020 and 2019:
(in thousands)
Fiscal Year Ended
Fiscal Year Ended
September 30,
Change
September 30,
Change
$
%
$
%
Operating revenues:
Alico Citrus
$
105,796
$
89,369
$
16,427
18.4
%
$
89,369
$
119,031
$
(29,662
)
(24.9
)%
Land Management and Other Operations
2,768
3,138
(370
)
(11.8
)%
3,138
3,220
(82
)
(2.5
)%
Total operating revenues
108,564
92,507
16,057
17.4
%
92,507
122,251
(29,744
)
(24.3
)%
Gross profit:
Alico Citrus
21,903
17,088
4,815
28.2
%
17,088
59,437
(42,349
)
(71.3
)%
Land Management and Other Operations
1,990
1,159
139.5
%
(92
)
(10.0
)%
Total gross profit
23,893
17,919
5,974
33.3
%
17,919
60,360
(42,441
)
(70.3
)%
General and administrative expenses
9,453
10,998
(1,545
)
(14.0
)%
10,998
15,146
(4,148
)
(27.4
)%
Income from operations
14,440
6,921
7,519
108.6
%
6,921
45,214
(38,293
)
(84.7
)%
Total other income, net
31,947
24,456
7,491
30.6
%
24,456
5,019
19,437
NM
Income before income taxes
46,387
31,377
15,010
47.8
%
31,377
50,233
(18,856
)
(37.5
)%
Income tax provision
11,567
7,663
3,904
50.9
%
7,663
12,783
(5,120
)
(40.1
)%
Net income
34,820
23,714
11,106
46.8
%
23,714
37,450
(13,736
)
(36.7
)%
Net loss (income) attributable to noncontrolling interests
(52
)
NM
(52
)
(435
)
NM
Net income attributable to Alico, Inc. common stockholders
$
34,859
$
23,662
$
11,197
47.3
%
$
23,662
$
37,833
$
(14,171
)
(37.5
)%
NM - Not meaningful
The following table presents our operating revenues, by segment, as a percentage of total operating revenues for the fiscal years ended September 30, 2021, 2020 and 2019:
Fiscal Year Ended
September 30,
Operating revenues:
Alico Citrus
97.5
%
96.6
%
97.4
%
Land Management and Other Operations
2.5
%
3.4
%
2.6
%
Total operating revenues
100.0
%
100.0
%
100.0
%
The following discussion provides an analysis of the Company's operating segments:
Alico Citrus
(in thousands, except per box and per pound solids data)
Fiscal Year Ended
Fiscal Year Ended
September 30,
Change
September 30,
Change
Unit
%
Unit
%
Operating Revenues:
Early and Mid-Season
$
31,525
$
31,303
$
0.7
%
$
31,303
$
39,574
$
(8,271
)
(20.9
)%
Valencias
55,918
50,060
5,858
11.7
%
50,060
73,480
(23,420
)
(31.9
)%
Fresh Fruit
2,321
(1,713
)
(73.8
)%
2,321
3,629
(1,308
)
(36.0
)%
Grove Management Services
16,983
4,599
12,384
NM
4,599
1,342
3,257
NM
Purchase and Resale of Fruit
(227
)
(26.7
)%
(93
)
(9.9
)%
Other
(97
)
(41.1
)%
NM
Total
$
105,796
$
89,369
$
16,427
18.4
%
$
89,369
$
119,031
$
(29,662
)
(24.9
)%
Boxes Harvested:
Early and Mid-Season
2,519
3,146
(627
)
(19.9
)%
3,146
3,114
1.0
%
Valencias
3,779
4,165
(386
)
(9.3
)%
4,165
4,790
(625
)
(13.0
)%
Total Processed
6,298
7,311
(1,013
)
(13.9
)%
7,311
7,904
(593
)
(7.5
)%
Fresh Fruit
(206
)
(77.2
)%
27.1
%
Total
6,359
7,578
(1,219
)
(16.1
)%
7,578
8,114
(536
)
(6.6
)%
Pound Solids Produced:
Early and Mid- Season
13,598
17,947
(4,349
)
(24.2
)%
17,947
16,873
1,074
6.4
%
Valencias
22,042
25,631
(3,589
)
(14.0
)%
25,631
29,854
(4,223
)
(14.1
)%
Total
35,640
43,578
(7,938
)
(18.2
)%
43,578
46,727
(3,149
)
(6.7
)%
Pound Solids per Box:
Early and Mid-Season
5.40
5.70
(0.30
)
(5.3
)%
5.70
5.42
0.28
5.2
%
Valencias
5.83
6.15
(0.32
)
(5.2
)%
6.15
6.23
(0.08
)
(1.3
)%
Price per Pound Solids:
Early and Mid-Season
$
2.32
$
1.74
$
0.58
33.3
%
$
1.74
$
2.35
$
(0.61
)
(26.0
)%
Valencias
$
2.54
$
1.95
$
0.59
30.3
%
$
1.95
$
2.46
$
(0.51
)
(20.7
)%
Price per Box:
Fresh Fruit
$
9.97
$
8.69
$
1.28
14.7
%
$
8.69
$
17.28
$
(8.59
)
(49.7
)%
Operating Expenses:
Cost of Sales
$
55,660
$
52,492
$
3,168
6.0
%
$
52,492
$
52,037
$
0.9
%
Harvesting and Hauling
16,922
19,897
(2,975
)
(15.0
)%
19,897
22,079
(2,182
)
(9.9
)%
Grove Management Services
15,084
3,817
11,267
NM
3,817
3,043
NM
Purchase and Resale of Fruit
(178
)
(25.3
)%
(84
)
(10.7
)%
Other
(4,299
)
(4,629
)
(7.1
)%
(4,629
)
(16,084
)
11,455
(71.2
)%
Total
$
83,893
$
72,281
$
11,612
16.1
%
$
72,281
$
59,594
$
12,687
21.3
%
Gross Profit
$
21,903
$
17,088
$
4,815
28.2
%
$
17,088
$
59,437
$
(42,349
)
(71.3
)%
NM - Not meaningful
Our citrus groves produce the majority of our annual operating revenues and the citrus grove business is seasonal because it is tied to the growing and harvest season. Historically, the second and third quarters of Alico's fiscal year produce the majority of the annual revenues and working capital requirements are typically greater in the first and fourth quarters of the fiscal year, coinciding with the growing cycles.
The Company sells its Early and Mid-Season and Valencia oranges to processors that convert the majority of the citrus crop into orange juice. The processors generally buy the citrus crop on a pound solids basis, which is the measure of the soluble solids (sugars and acids) contained in one box of fruit. The Company’s fresh fruit is generally sold to packing houses that purchase the citrus on a per box basis. The Company also provides citrus grove caretaking and harvest and haul management services to third parties from which revenues are generated, including a management fee. Other revenues consist of the purchase and reselling of fruit.
Alico's operating expenses consist primarily of cost of sales, harvesting and hauling costs and grove management service costs. Cost of sales represents the cost of maintaining the citrus groves for the preceding calendar year and does not vary in relation to production. Harvesting and hauling costs represent the costs of bringing citrus product to processors and varies based upon the number of boxes produced. Grove management services include those costs associated with citrus grove caretaking and harvest and haul management services provided to third parties. Other expenses include the period costs of reselling of third-party fruit.
The increase in revenue for the fiscal year ended September 30, 2021, compared to the fiscal year ended September 30, 2020 was primarily due to an increase in the revenue generated from grove management services and the Valencia fruit harvested.
On July 16, 2020, the Company executed an agreement with an affiliated group of third parties to provide citrus grove caretaking and harvest and haul management services for approximately 7,000 acres owned by such third parties. Under the terms of this agreement, the Company is reimbursed by the third parties for all its costs incurred related to providing these services and receives a management fee based on acres covered under this agreement. The Company records both an increase in revenues and expenses as and when the Company provides these citrus grove caretaking management services. For the fiscal year ended September 30, 2021, under this agreement, the Company recorded approximately $15,752,000 of operating revenue relating to these grove management services, including the management fee, as compared to approximately $3,311,000 in the fiscal year ended September 30, 2020.
The increase from the Valencia fruit harvest was driven by an increase in the market price per pound solids as compared to the prior year. The increase in the price per pound solids was due to increased consumption of Not-from-Concentrate Orange Juice (“NFC”) as well as tighter supplies of citrus fruit from Florida, Brazil and Mexico, which, in turn, led to reduced inventory levels. Largely offsetting this increase in pricing was the effect of fewer Valencia boxes being harvested and lower pound solids per box for the fiscal year ended September 30, 2021, compared to the fiscal year ended September 30, 2020. The Company, along with the Florida industry in general, recorded a smaller number of boxes harvested as a result of greater fruit drop rate during the current harvest season as compared to the previous year. In addition, the internal quality of the fruit was not as strong as in the previous year resulting in lower pound solids per box.
The decrease in revenue for the fiscal year ended September 30, 2020, when compared to the fiscal year ended September 30, 2019, was due to a decrease in the price per pound solids as well as a decrease in aggregate processed box production. The decrease in the price per pound solids in the market-place was a result of excess supply from domestic and international growers. The decrease in aggregate processed box production was the result of greater fruit drop and smaller fruit size of Valencias in the then-current harvest season as compared to the prior harvest season, offset in part by an increase in processed box production of the Early and Mid-season fruit.
The Company completed its harvest season in early May 2021 and was able to complete the harvest without any negative impact from the COVID-19 pandemic.
Total processed boxes harvested in fiscal year 2021 decreased by approximately 13.9%, as compared to fiscal year 2020. Pound solids decreased by approximately 24.2% for the Early and Mid-Season crop and decreased by approximately 14.0% for the Valencia crop. The combination of these items resulted in approximately 7,938,000 fewer pound solids sold in fiscal year 2021, as compared to fiscal year 2020.
Total processed boxes harvested in fiscal year 2020 decreased by approximately 7.5%, as compared to fiscal year 2019. Pound solids increased by approximately 6.4% and decreased by approximately 14.1% for the Early and Mid-Season and Valencia oranges, respectively. The combination of these items resulted in approximately 3,149,000 fewer pound solids sold in fiscal year 2020, as compared to fiscal year 2019.
The USDA, in its October 12, 2021 Citrus Crop Forecast for the 2021-22 harvest season, indicated its expectation that the Florida orange crop will decrease from approximately 52,800,000 boxes for the 2020-21 crop year to approximately 47,000,000 boxes for the 2021-22 crop year, a decrease of approximately 11.0%. While the USDA box production is estimated to be lower than in the prior year, the Company anticipates that market prices will remain consistent with or slightly above the 2020-21 harvest season market price levels, which is being driven by continued strong demand for NFC orange juice, along with anticipated declines in both Brazil and Florida box production.
The increase in operating expenses for the fiscal year 2021, as compared to the fiscal year 2020, primarily relates to grove management services it provides to third parties. As mentioned above, the Company executed an agreement with an affiliated group of third parties to provide citrus grove caretaking and harvest and haul management services for approximately 7,000 acres owned by such third parties. Under this agreement, for the fiscal years ended September 30, 2021 and 2020, the Company recorded approximately $14,342,000 and $3,016,000, respectively, of operating expenses relating to these grove management services. Additionally, the increase in operating expenses is attributable to the Company
purchasing additional citrus acres in May and October 2020, which resulted in cost of sales relating to these groves in the current fiscal year. Partially offsetting these increases was a reduction in harvest and haul expenses attributable to a decrease in Early and Mid-season and Valencia boxes harvested.
The increase in operating expenses for the fiscal year 2020, as compared to the fiscal year 2019, primarily relates to the Company receiving less federal relief proceeds through the Florida CRBG program relating to Hurricane Irma, which are recorded as a reduction of operating expenses, during fiscal year 2020, as compared to fiscal year 2019. The Company received proceeds of approximately $4,629,000 and $15,597,000 through the Florida CRBG program relating to Hurricane Irma during the fiscal years ended September 30, 2020 and 2019, respectively. Additionally, the Company recorded additional grove management services expense of approximately $3,016,000. Partially offsetting this increase in operating expenses was a reduction in harvesting and hauling costs experienced by the Company as a result of fewer processed boxes being harvested during the fiscal year ended September 30, 2020 as compared to the same period in the prior year.
As a result of a lower gross profit percentage generated from grove caretaking management services, as compared to citrus sales generated from groves, the overall gross profit percentage within the Alico Citrus segment was lower in fiscal year 2021 and 2020 and is expected to be lower in future fiscal years than prior fiscal years due to the execution of the above-mentioned new caretaking services agreement.
The credit amounts shown in “Other” in operating expenses above, for the most part, represent federal relief proceeds received under the CRBG program for the fiscal years ended September 30, 2021, 2020, and 2019.
Land Management and Other Operations
The table below presents key operating measures for the fiscal years ended September 30, 2021, 2020 and 2019:
(in thousands)
Fiscal Year Ended
Fiscal Year Ended
September 30,
Change
September 30,
Change
$
%
$
%
Revenue From:
Land and other leasing
$
2,404
$
2,683
$
(279
)
(10.4
)%
$
2,683
$
2,787
$
(104
)
(3.7
)%
Other
(91
)
(20.0
)%
5.1
%
Total
$
2,768
$
3,138
$
(370
)
(11.8
)%
$
3,138
$
3,220
$
(82
)
(2.5
)%
Operating Expenses:
Land and other leasing
$
$
$
(193
)
(20.2
)%
$
$
1,047
$
(92
)
(8.8
)%
Water conservation
-
1,346
(1,346
)
(100.0
)%
1,346
1,206
11.6
%
Other
166.7
%
(38
)
(86.4
)%
Total
$
$
2,307
$
(1,529
)
(66.3
)%
$
2,307
$
2,297
$
0.4
%
Gross Profit
$
1,990
$
$
1,159
139.5
%
$
$
$
(92
)
(10.0
)%
Land and other leasing include lease income from leases for grazing rights, hunting leases, a farm lease, a lease to a third party of an aggregate mine, leases of oil extraction rights to third parties, and other miscellaneous income.
The decrease in revenues from Land Management and Other Operations for the fiscal year ended September 30, 2021, compared to the fiscal year ended September 30, 2020, was primarily due to a reduction in the leased acreage relating to grazing and hunting leases. The reduction in the leased acreage was due to the sale of certain acres, which were previously included under these lease arrangements, thus resulting in fewer acres now being leased under these grazing and hunting leases.
The decrease in operating expenses from Land Management and Other Operations for the fiscal year ended September 30, 2021, compared to the fiscal year ended September 30, 2020, was primarily due to the Company no longer pursuing its dispersed water storage project and, therefore, incurring no water conservation expenses for the fiscal year ended September 30, 2021. On September 10, 2020, the Company sold approximately 10,700 acres on the western part of Alico Ranch to the State of Florida. Since the acres involved in the sale would have been critical to its planned dispersed water storage project, the Company decided to no longer pursue the related permit approval activities. Accordingly, the Company anticipates it will have no future expenses incurred relating to the dispersed water storage project. Additionally, the Company has seen a decrease in ad valorem taxes due to certain ranch land sales.
The slight decrease in revenues from Land Management and Other Operations for the fiscal year ended September 30, 2020, compared to the fiscal year ended September 30, 2019, was primarily due to a reduction in the leased acreage relating to a cattle grazing lease.
Upon the Company selling approximately 10,700 acres on the western part of Alico Ranch to the State of Florida, as mentioned above, and deciding to no longer pursue permit approval activities for this particular project, the Company wrote-down approximately $598,000 of assets relating to this project during the fourth quarter of the fiscal year ended September 30, 2020.
General and Administrative
General and administrative expenses for the fiscal year ended September 30, 2021 were approximately $9,453,000, compared to approximately $10,998,000 for the fiscal year ended September 30, 2020.
The decrease in general and administrative expenses for the fiscal year ended September 30, 2021, as compared to the fiscal year ended September 30, 2020, was attributable to (i) a reduction in legal expense of approximately $805,000, primarily resulting from the receipt of insurance proceeds for the reimbursement of legal fees in the amount of approximately $658,000 during the fiscal year ended September 30, 2021 relating to corporate legal matters, (ii) a reduction in stock compensation expense of approximately $241,000 in light of the fact that in the prior fiscal year, in January 2020 certain stock options had vested, which in turn resulted in an acceleration of expense in that prior fiscal year, (iii) a reduction in payroll expenses for the fiscal year ended September 30, 2021 of approximately $259,000 relating to the resignation of a senior manager in December 2019 and the reduction in other administrative personnel made during fiscal year ended September 30, 2021 and (iv) a reduction in pension expense related to the Company’s deferred retirement benefit plan of approximately $207,000 as a result of the Company terminating such plan and paying out each of the plan participants in August 2020. Partially offsetting this decrease was the Company’s incurring of approximately $200,000 in corporate advisory fees in the fiscal year ended September 30, 2021.
General and administrative expenses for the fiscal year ended September 30, 2020 were approximately $10,998,000, compared to approximately $15,146,000 for the fiscal year ended September 30, 2019.
The decrease in general and administrative expenses for the fiscal year ended September 30, 2020, as compared to the fiscal year ended September 30, 2019, was primarily due to professional fees, relating to a corporate litigation matter, of approximately $2,300,000 being incurred for the fiscal year ended September 30, 2019. This litigation was settled, and no further expenses were incurred relating to this matter during the fiscal year ended September 30, 2020. Additionally, as part of this settlement, the Company recorded consulting and separation fees of $800,000 during the fiscal year ended September 30, 2019. The Company also experienced a reduction due to (i) a one-time pension expense related to its deferred retirement benefit plan of approximately $965,000 in fiscal year 2019, (ii) a reduction in payroll expenses for the fiscal year ended September 30, 2020 of approximately $331,000 relating to one of the senior managers resigning in December 2019 and a reduction in bonuses granted to senior management, (iii) a decrease in stock compensation expense of approximately $204,000 as a result of certain stock options expense being accelerated in fiscal year ended September 30, 2020 and (iv) other smaller decreases in rent, consulting and Board of Director fees aggregating approximately $445,000. Partially offsetting these decreases was a lower amount of stock compensation expense of $823,000 recognized in fiscal year ended September 30, 2019 as a result of a former senior executive forfeiting his stock options as part of the settled litigation and an increase in Directors and Officers insurance of approximately $247,000.
Other Income, net
Other income, net, for the fiscal years ended September 30, 2021 and 2020 was approximately $31,947,000 and approximately $24,456,000, respectively. The increase in other income, net was primarily due to the Company recognizing significant gains on sales of real estate, property and equipment and assets held for sale in both fiscal years. For the fiscal year ended September 30, 2021, the Company recorded gains on sale of real estate, property and equipment and assets held for sale of approximately $35,898,000 relating primarily to the sale of approximately 19,776 acres from the Alico Ranch to several third parties. For the fiscal year ended September 30, 2020, the Company recognized a gain on sale of real estate, property and equipment and assets held for sale of approximately $30,424,000. Additionally, a decrease in interest expense of approximately $1,994,000 for the fiscal year ended September 30, 2021, as compared to the fiscal year ended September 30, 2020, was primarily due to the reduction of the Company’s long-term debt from the making of mandatory principal payments and certain prepayments. In addition, the Company maintained lower balances on both its working capital line of credit and revolving line of credit, which also resulted in reduced interest expense.
Other income, net, for the fiscal years ended September 30, 2020 and 2019 was approximately $24,456,000 and approximately $5,019,000, respectively. The increase in other income, net was primarily due to the Company recording a higher gain on sale of real estate, property and equipment and assets held for sale in fiscal year 2020, as compared to fiscal year 2019. In fiscal year 2020, the Company recorded a gain of approximately $30,424,000, which was generated primarily from the sale of land on its West Ranch in September 2020 to the State of Florida. For the fiscal year ended September 30, 2019, the Company recorded a gain of approximately $13,166,000, which was generated primarily for the sale of land on its West Ranch in September 2019. Additionally, the Company recognized a reduction of approximately $1,199,000 in interest expense in fiscal year 2020 as a result of (i) the reduction of its long-term debt attributable to making its mandatory principal payments, (ii) the Company prepaying approximately $4,455,000 on its debt obligations and (iii) a reduction in interest rates.
Income Taxes
For the fiscal years ended September 30, 2021, 2020 and 2019, the provision for income taxes was approximately $11,567,000, $7,663,000 and $12,783,000, respectively, and the related effective income tax rates were approximately 24.94%, 24.42% and 25.45%, respectively. The increase in the dollar amount of the tax provision for the fiscal year ended September 30, 2021 is the result of the Company generating greater net income during the current fiscal year as compared to the prior fiscal year. The decrease in the dollar amount of the tax provision for the fiscal year ended September 30, 2020 was the result of the Company generating less net income during fiscal year 2020, as compared to the prior fiscal year.
Seasonality
The Company is primarily engaged in the production of fruit for sale to citrus markets, which is of a seasonal nature, and subject to the influence of natural phenomena and wide price fluctuations. Historically, the second and third quarters of Alico's fiscal year produce the majority of the Company's annual revenue. Working capital requirements are typically greater in the first and fourth quarters of the fiscal year, coinciding with harvesting cycles. Because of the seasonality of the business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.
Liquidity and Capital Resources
A comparative balance sheet summary is presented in the following table:
(in thousands)
September 30,
Change
Cash and cash equivalents and restricted cash
$
$
19,687
$
(18,801
)
Total current assets
$
54,913
$
51,899
$
3,014
Total current liabilities
$
22,306
$
21,158
$
1,148
Working capital
$
32,607
$
30,741
$
1,866
Total assets
$
433,217
$
423,937
$
9,280
Principal amount of term loans and lines of credit
$
126,294
$
151,983
$
(25,689
)
Current ratio
2.46 to 1
2.45 to 1
Sources and Uses of Liquidity and Capital
Alico's business has historically generated positive net cash flows from operating activities. Sources of cash primarily include cash flows from operations, sales of under-performing land and other assets, amounts available under the Company's credit facilities and access to capital markets. Access to additional borrowings under revolving lines of credit is subject to the satisfaction of customary borrowing conditions. As a public company, Alico may have access to other sources of capital. However, access to, and availability of, financing on acceptable terms in the future will be affected by many factors, including (i) financial condition, prospects, and credit rating, (ii) liquidity of the overall capital markets and (iii) the state of the economy. There can be no assurance that the Company will continue to have access to the capital markets on acceptable terms, or at all.
The principal uses of cash that affect Alico's liquidity position include the following: operating expenses including employee costs, the cost of maintaining the citrus groves, harvesting and hauling of citrus products, capital expenditures, stock repurchases, dividends, debt service costs including interest and principal payments on term loans and other credit facilities and acquisitions.
Management believes that a combination of cash-on-hand, cash generated from operations, asset sales and availability under the Company's lines of credit will provide sufficient liquidity to service the principal and interest payments on its indebtedness and will satisfy working capital requirements and capital expenditures for at least the next twelve months and over the long term.
Borrowing Facilities and Long-term Debt
Alico has a $70,000,000 working capital line of credit, of which approximately $69,664,000 is available for general use as of September 30, 2021, and a $25,000,000 revolving line of credit, all of which is available for general use as of September 30, 2021 (see Note 6. “Long-Term Debt and Lines of Credit" to the accompanying Consolidated Financial Statements). Additionally, effective May 1, 2021, the Company converted its Met Fixed-Rate Term Loans into interest bearing only loans with a balloon payment of the balance due at maturity, which is November 1, 2029. Such conversion has increased available cash and can be expected to continue to increase the available cash for the foreseeable future. With the increase in available cash, the Company could utilize the available cash for other possible uses such as paying down indebtedness, citrus grove acquisitions, share repurchases, and additional increased dividends. If the Company chooses to pursue significant growth and other corporate opportunities, such as the transaction whereby it acquired 3,280 citrus grove acres on October 30, 2020 for $18,230,000, pay down of
indebtedness, engaging in share repurchases or paying increased dividends, these actions could have a material adverse impact on its cash balances and may require the Company to finance such activities by drawing down on its lines of credit or by obtaining additional debt or equity financing. There can be no assurance that additional financing will be available to the Company when needed or, if available, that it can be obtained on commercially reasonable terms. Any inability to obtain additional financing could adversely impact Alico's ability to pursue different growth and other corporate opportunities.
The level of debt could have important consequences on Alico's business, including, but not limited to, increasing its vulnerability to general adverse economic and industry conditions, limiting the availability of cash flow to fund future investments, capital expenditures, working capital, business activities and other general corporate requirements, and limiting flexibility in planning for, or reacting to, changes in its business and industry.
Alico debt covenants under its credit facilities are subject to various covenants including the following financial covenants: (i) minimum debt service coverage ratio of 1.10 to 1.00, (ii) tangible net worth of at least $160,000,000 increased annually by 10% of consolidated net income for the preceding years, or approximately $169,730,000 applicable for the year ended September 30, 2021, (iii) minimum current ratio of 1.50 to 1.00, (iv) debt to total assets ratio not greater than .625 to 1.00, and, (v) solely in the case of the WCLC, a limit on capital expenditures of $30,000,000 per fiscal year. As of September 30, 2021, the Company was in compliance with all of the financial covenants.
Cash Management Impacts
Cash and cash equivalents and restricted cash decreased from approximately $19,687,000 as of September 30, 2020 to approximately $886,000 as of September 30, 2021. Cash and cash equivalents and restricted cash decreased from approximately $23,838,000 as of September 30, 2019 to approximately $19,687,000 as of September 30, 2020. The components of these changes are discussed below.
Consolidated Statements of Cash Flows
The following table details the items contributing to the changes in cash and cash equivalents and restricted cash for fiscal years ended September 30, 2021, 2020 and 2019:
(in thousands)
Fiscal Year Ended September 30,
Net cash provided by operating activities
$
16,504
$
1,049
$
48,832
Net cash (used in) provided by investing activities
(3,268
)
9,489
(4,960
)
Net cash used in financing activities
(32,037
)
(14,689
)
(52,294
)
Net decrease in cash and cash equivalents and restricted cash
$
(18,801
)
$
(4,151
)
$
(8,422
)
Net Cash Provided By Operating Activities
(in thousands)
Fiscal Year Ended
September 30,
Fiscal Year Ended
September 30,
Change
Change
Net income
$
34,820
$
23,714
$
11,106
$
23,714
$
37,450
$
(13,736
)
Depreciation, depletion and amortization
15,122
14,282
14,282
13,603
Debt issue costs expense
(59
)
(83
)
Deferred income tax expense
2,249
7,603
(5,354
)
7,603
3,267
4,336
Cash surrender value
(14
)
(10
)
(4
)
(10
)
(21
)
Deferred retirement benefits
-
(5,226
)
5,226
(5,226
)
(6,055
)
Gain on sale of real estate, property and equipment and assets held for sale
(35,898
)
(30,424
)
(5,474
)
(30,424
)
(13,166
)
(17,258
)
Inventory net realizable value adjustment
-
-
-
-
(808
)
Loss on disposal of property and equipment
2,338
1,382
1,382
1,138
Change in fair value of derivatives
-
-
-
-
(989
)
Impairment of long-lived assets
-
(598
)
Impairment of right-of-use asset
-
(87
)
-
Insurance proceeds received for damage to property and equipment
(103
)
-
(103
)
-
(486
)
Stock-based compensation expense
1,230
1,306
(76
)
1,306
Change in working capital
(3,419
)
(12,501
)
9,082
(12,501
)
3,986
(16,487
)
Net cash provided by operating activities
$
16,504
$
1,049
$
15,455
$
1,049
$
48,832
$
(47,783
)
The increase in net cash provided by operating activities for the fiscal year ended September 30, 2021, as compared to the fiscal year ended September 30, 2020, was primarily due to an increase in net income and an increase in working capital which was primarily driven by an increase in accounts payable and timing of income tax payments. The increase in accounts payable relates to the timing and billing of fertilizer and chemical applications in the citrus groves. Offsetting a significant portion of this increase was the amount of gain on sale of real estate, property and equipment and assets held for sale being greater in the fiscal year ended September 30, 2021 as compared to the prior year, primarily resulting from a greater number of acres being sold in the current fiscal year.
The decrease in net cash provided by operating activities for the fiscal year ended September 30, 2020, as compared to the same period in fiscal year 2019, was primarily due to (i) an increase in gain on sale of real estate, property and equipment and assets held for sale in the fiscal year ended September 30, 2020, relating to the sale of certain sections of the West Ranch, (ii) a decrease in net income, which was primarily driven by decreased citrus sales, (iii) a decrease in the deferred retirement benefit as a result of the Company terminating its pension plan and paying all participants on August 30, 2020 and (iv) a decrease in working capital as a result of the payment of income taxes and an increase in accounts receivable related to the Company’s grove management services whereby the Company pays all growing costs and then is reimbursed in the future from proceeds of fruit sales of the third-party.
Due to the seasonal nature of Alico's business, working capital requirements are typically greater in the first and fourth quarters of its fiscal year. Cash flows from operating activities typically improve in the second and third fiscal quarters, as sales of its harvested citrus are made.
Net Cash (Used In) Provided By Investing Activities
The following table details the items contributing to Net Cash (Used In) Provided By Investing Activities for the fiscal years ended September 30, 2021, 2020 and 2019:
(in thousands)
Fiscal Year Ended
September 30,
Fiscal Year Ended
September 30,
Change
Change
Purchases of property and equipment
$
(22,258
)
$
(18,785
)
$
(3,473
)
$
(18,785
)
$
(18,050
)
$
(735
)
Purchases of citrus groves
(18,527
)
(2,920
)
(15,607
)
(2,920
)
(1,950
)
(970
)
Net proceeds from sale of real estate, property and equipment and assets held for sale
37,266
31,541
5,725
31,541
14,602
16,939
Insurance proceeds received for damage to property and equipment
-
-
(486
)
Change in deposits on purchase of citrus trees
(458
)
(458
)
(108
)
(350
)
Advances on notes receivables, net
Purchases of mineral rights
(453
)
-
(453
)
-
-
-
Other
(25
)
(25
)
-
(25
)
Net cash (used in) provided by investing activities
$
(3,268
)
$
9,489
$
(12,757
)
$
9,489
$
(4,960
)
$
14,449
The shift from net cash provided by investing activities for the fiscal year ended September 30, 2020 to net cash used in investing activities for the fiscal year ended September 30, 2021 was primarily due to the use of funds to purchase approximately 3,280 gross acres located in Hendry County for a purchase price of approximately $18,230,000 in October 2020 and the acquisition of additional smaller citrus groves. Partially offsetting this shift was net proceeds received for the sale of real estate, property and equipment and assets held for sale being greater in the fiscal year ended September 30, 2021 as compared to the same period in the prior year (see Note 4. “Assets Held for Sale” and Note 5. “Property & Equipment, Net” to the accompanying Consolidated Financial Statements), including the Company’s receipt of approximately $5,725,000 more proceeds from the sale of ranch land to various third parties than the proceeds received in the fiscal year ended September 30, 2020.
The shift from net cash used in investing activities for the fiscal year ended September 30, 2019 to net cash provided by investing activities for the fiscal year ended September 30, 2020 was primarily due to an increase in proceeds received on the sale of certain assets sold during fiscal year 2020, as compared to fiscal year 2019. This is due to the Company divesting of more acres of land in fiscal year 2020, as compared to fiscal year 2019 (see Note 4. “Assets Held for Sale” and Note 5. “Property & Equipment, Net” to the accompanying Consolidated Financial Statements).
Net Cash Used In Financing Activities
The following table details the items contributing to Net Cash Used In Financing Activities for the fiscal years ended September 30, 2021, 2020 and 2019:
(in thousands)
Fiscal Year Ended
September 30,
Fiscal Year Ended
September 30,
Change
Change
Repayments on revolving lines of credit
$
(50,735
)
$
(114,581
)
$
63,846
$
(114,581
)
$
(89,231
)
$
(25,350
)
Borrowings on revolving lines of credit
47,793
117,523
(69,730
)
117,523
86,546
30,977
Principal payments on term loans
(21,957
)
(15,198
)
(6,759
)
(15,198
)
(10,900
)
(4,298
)
Treasury stock purchases
-
(238
)
(238
)
(25,576
)
25,338
Payment on termination of sugarcane agreement
-
-
-
-
(11,300
)
11,300
Dividends paid
(7,138
)
(2,466
)
(4,672
)
(2,466
)
(1,833
)
(633
)
Deferred financing costs
-
(23
)
(23
)
-
(23
)
Capital contribution received from noncontrolling interest
-
(294
)
-
Net cash used in financing activities
$
(32,037
)
$
(14,689
)
$
(17,348
)
$
(14,689
)
$
(52,294
)
$
37,605
The increase in net cash used in financing activities for the fiscal year ended September 30, 2021, as compared to the fiscal year ended September 30, 2020, was primarily due to the Company paying down a greater amount on its long-term debt during the fiscal year ended September 30, 2021, as compared to the prior year. During fiscal year ended September 30, 2021, the Company prepaid approximately $10,312,000 of principal on its fixed rate term loans with MetLife and also paid approximately $4,070,000 of principal on one of its loans
outstanding with Prudential which matured in September 2021. Partially offsetting these increased payments was the conversion of the Company’s Met Fixed-Rate Term Loans into interest bearing only loans with a balloon payment of the balance due on November 1, 2029. Additionally, the Company paid a greater amount of dividends to stockholders of the Company’s common stock during the current fiscal year, as compared to the prior year, as a result of the Company increasing its annual dividend to $2.00 per common share in June 2021. The Company also paid down, net of borrowings, its revolving line of credit during the current fiscal year.
The decrease in net cash used in financing activities for the fiscal year ended September 30, 2020, as compared to the fiscal year ended September 30, 2019, was primarily due to the Company repurchasing its common shares through a tender offer in October 2018 for an aggregate approximate amount of $25,576,000 and the termination of its 2014 Post-Closing Agreement in March 2019 pursuant to which the Company paid $11,300,000. Partially offsetting this shift was a prepayment of one of its long-term debt obligations in November 2019 in the amount of $4,455,000.
Alico had $0 outstanding on its revolving lines of credit as of September 30, 2021 and approximately $94,664,000 remaining availability.
The WCLC line of credit agreement provides for Rabo Agrifinance, Inc. to issue up to $2,000,000 in letters of credit on the Company’s behalf. As of September 30, 2021, there was approximately $336,000 in outstanding letters of credit, which correspondingly reduced Alico's availability under the line of credit.
Contractual Obligations
Alico has various contractual obligations which are fixed and determinable. The following table presents the Company's significant contractual obligations and commercial commitments on an undiscounted basis as of September 30, 2021 and the future periods in which such obligations are expected to be settled in cash.
(in thousands)
Payments Due by Period
Total
<1 Year
1-3 Years
3-5 Years
5+ Years
Long-Term Debt
$
126,294
$
4,285
$
8,570
$
8,570
$
104,869
Interest on Long-Term Debt
30,176
4,281
8,182
7,676
10,037
Operating Leases
-
-
Tree Purchase Commitments
2,405
2,405
-
-
-
Total
$
159,246
$
11,295
$
16,799
$
16,246
$
114,906
Purchase Commitments
The Company enters into contracts for the purchase of citrus trees during the normal course of its business. As of September 30, 2021, the Company had approximately $2,405,000 relating to outstanding commitments for these purchases, which will be paid upon delivery.
Impact of Inflation and Changing Prices
Our financial statements included in this Annual Report on Form 10-K have been prepared in accordance with U.S. GAAP, which requires us to measure financial position and operating results primarily in terms of historic dollars. Changes in the relative value of money due to inflation or recession generally are not considered. We are exposed to the impact of inflation on our cost of products sold. We use a number of strategies to mitigate the effects of cost inflation including commodity hedging and pursuing cost productivity initiatives. We experienced higher inflation in 2021 and expect to experience increased inflation in 2022. Pricing actions and supply chain productivity initiatives introduced at the end of 2021 will mitigate a portion of this inflationary pressure, but we do not expect such benefits will fully offset the incremental costs in 2022.
Critical Accounting Policies and Estimates
Alico's Consolidated Financial Statements are prepared in accordance with U.S. GAAP, which requires management to make estimates, judgments and assumptions that affect the amounts reported in those financial statements and accompanying notes. Management considers an accounting policy to be critical if it is important to the Company's financial condition and results of operations and if it requires significant judgment and estimates on the part of management in its application. Management considers an accounting estimate to be critical if it is made in accordance with generally accepted accounting principles, involves a significant level of estimation uncertainty, and has had or is reasonably likely to have a material impact on the Company’s financial condition or results of operations. Alico considers policies and estimates relating to the following matters to be critical accounting policies:
Revenue Recognition
The Company recognizes revenue at the amount it expects to be entitled to be paid, determined when control of the products or services is transferred to its customers, which occurs upon delivery of and acceptance of the fruit by the customer and the Company has a right to payment.
For grove management services, the Company recognizes operating revenue, including a management fee, when services are rendered and consumed. Management reviews the reasonableness of the revenue accruals quarterly based on buyers’ and processors’ advances to growers, cash and futures markets and experience in the industry. Adjustments are made throughout the fiscal year to these estimates as more current relevant industry information becomes available. Differences between the estimates and the final realization of revenues can be significant and can be either positive or negative. During the periods presented in this Annual Report on Form 10-K, no material adjustments were made to the reported revenues from our crops.
Inventories
The costs of growing crops, including but not limited to labor, fertilization, fuel, crop nutrition and irrigation, are capitalized into inventory throughout the respective crop year. Such costs are expensed as cost of sales when the crops are harvested and are recorded as operating expenses in the Consolidated Statements of Operations. Inventories are stated at the lower of cost or net realizable value. The cost for unharvested citrus crops is based on accumulated production costs incurred during the period from January 1 through the balance sheet date.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Major improvements are capitalized while maintenance and repairs are expensed in the period the cost is incurred. Costs related to the development of citrus groves, through planting of trees, are capitalized. Such costs include land clearing, excavation and construction of ditches, dikes, roads and reservoirs among other costs. After the planting, caretaking costs or pre-productive maintenance costs are capitalized for four years. After four years, a grove is considered to have reached maturity and the accumulated costs are depreciated over 25 years, except for land clearing and excavation, which are considered costs of land and not depreciated.
Income Taxes
The Company uses the asset and liability method of accounting for deferred income taxes. The provision for income taxes includes income taxes currently payable and those deferred as a result of temporary differences between the financial statements and the income tax basis of assets and liabilities. Deferred income tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in income tax rates on deferred income tax assets and liabilities is recognized in income or loss in the period that includes the enactment date. A valuation allowance is provided to reduce deferred tax assets to the amount of future tax benefit when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Projected future taxable income and ongoing tax planning strategies are considered and evaluated when assessing the need for a valuation allowance. Any increase or decrease in a valuation allowance could have a material adverse or beneficial impact on the Company’s income tax provision and net income or loss in the period the determination is made. For the fiscal years ended September 30, 2021, 2020 and 2019, the Company did not record any valuation allowances. The Company recognizes interest and/or penalties related to income tax matters in income tax expense.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which a change in judgment occurs. The Company records interest related to unrecognized tax benefits in income tax expense.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The Company records impairment losses on long-lived assets used in operations, other than goodwill, when events and circumstances indicate that the asset or asset group might be impaired and the estimated cash flows (undiscounted and without interest charges) to be generated by those assets or asset group over the remaining lives of the assets are less than the carrying amounts of those assets. In calculating impairments and the estimated cash flows, the Company assigns its asset groups by determining the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of the other Company assets. The net carrying values of assets or asset groups not recoverable are reduced to their fair values. Our cash flow estimates are based on historical results adjusted to reflect our best estimates of future market conditions and operating conditions. As of September 30, 2021 and 2020, long-lived assets were comprised of property and equipment.
Fair Value Measurements
The carrying amounts in the balance sheets for operating accounts receivable, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term maturity of these items. The carrying amounts reported for our long-term debt approximates fair value as
our borrowings with commercial lenders are at interest rates that vary with market conditions and fixed rates that approximate market rates for comparable loans.
Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation. Assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The fair value hierarchy is defined as follows:
Level 1- Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2- Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.
Level 3- Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date.
Impact of Accounting Pronouncements
See Item 8. "Financial Statements and Supplementary Data" - Note 1. "Description of Business and Basis of Presentation" for additional information about the impact of accounting pronouncements.
Subsequent Events
On October 15, 2021 and November 5, 2021, the Company awarded 2,500 and 2,224 restricted shares of the Company’s common stock to certain executives and senior managers under the 2015 Plan at a weighted average fair value of $35.77 per common share, with 2,500 vesting on January 1, 2022 and the remaining shares vesting on January 1, 2023.
On December 2, 2021, the Board of Directors of the Company declared a cash dividend for the first quarter of fiscal year 2022 of $0.50 per share on its outstanding common stock to be paid to stockholders of record as of December 31, 2021, with payment expected on January 14, 2022.
On December 3, 2021, the State of Florida purchased, under the Florida Forever program, approximately 1,638 acres of the Alico Ranch for approximately $5,675,000 pursuant to an option agreement entered into on September 21, 2021 between the State of Florida and the Company.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Market Risk - Market risk represents the potential loss resulting from adverse changes in the value of financial instruments, either derivative or non-derivative, caused by fluctuations in interest rates, foreign exchange rates, commodity prices, and equity security prices. The Company handles market risks in accordance with its established policies; however, Alico does not enter into derivatives or other financial instruments for trading or speculative purposes. The Company does consider, on occasion, the need to enter into financial instruments to manage and reduce the impact of changes in interest rates; however, the Company entered into no such instruments during the three-year period ended September 30, 2021. The Company held various financial instruments as of September 30, 2021 and 2020, consisting of financial assets and liabilities reported in the Company’s Consolidated Balance Sheets and off-balance sheet exposures resulting from letters of credit issued for the benefit of Alico.
Interest Rate Risk - The Company is subject to interest rate risk from the utilization of financial instruments such as term loan debt and other borrowings. The Company’s primary long-term obligations are fixed rate debts subject to fair value risk due to interest rate fluctuations. The Company believes that the carrying value of our long-term debt approximates fair value given the stability of market interest rates.
The Company is also subject to interest rate risk on its variable rate debt. A one-percentage-point increase in prevailing interest rates would have increased interest expense on our variable rate debt obligations by approximately $395,000 for the fiscal year ended September 30, 2021.
Foreign-Exchange Rate Risk - The Company currently has no exposure to foreign-exchange rate risk because all of its financial transactions are denominated in U.S. dollars.
Commodity Price Risk - The Company has no financial instruments subject to commodity price risk.
Equity Security Price Risk - None of the Company’s financial instruments have potential exposure to equity security price risk.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
All schedules are omitted for the reason that they are not applicable or the required information is included in the financial statements or notes.
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Alico, Inc.
Opinions on the Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Alico, Inc. and its subsidiaries (the Company) as of September 30, 2021 and 2020, the related consolidated statements of operations, changes in equity and cash flows for each of the years in the three-year period ended September 30, 2021, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. We determined that there are no critical audit matters.
/s/ RSM US LLP
We have served as the Company's auditor since 2007.
Orlando, Florida
December 7, 2021
ALICO, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
September 30,
ASSETS
Current assets:
Cash and cash equivalents
$
$
3,163
Accounts receivable, net
6,105
4,347
Inventories
43,377
40,855
Income tax receivable
3,233
Assets held for sale
1,366
Prepaid expenses and other current assets
1,152
1,387
Total current assets
54,913
51,899
Restricted cash
-
16,524
Property and equipment, net
373,231
350,061
Goodwill
2,246
2,246
Other non-current assets
2,827
3,207
Total assets
$
433,217
$
423,937
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
7,274
$
3,533
Accrued liabilities
9,872
7,095
Long-term debt, current portion
4,285
9,145
Other current liabilities
1,385
Total current liabilities
22,306
21,158
Long-term debt:
Principal amount, net of current portion
122,009
139,106
Less: deferred financing costs, net
(986
)
(1,151
)
Long-term debt less current portion and deferred financing costs, net
121,023
137,955
Lines of credit
-
2,942
Deferred income tax liabilities, net
41,977
39,728
Other liabilities
Total liabilities
185,612
202,155
Commitments and Contingencies (Note 16)
Stockholders' equity:
Preferred stock, no par value, 1,000,000 shares authorized; none issued
-
-
Common stock, $1.00 par value, 15,000,000 shares authorized; 8,416,145 shares issued and 7,526,004 and 7,492,524 shares outstanding at September 30, 2021 and September 30, 2020, respectively
8,416
8,416
Additional paid in capital
19,989
19,685
Treasury stock, at cost, 890,141 and 923,621 shares held at September 30, 2021 and September 30, 2020, respectively
(29,853
)
(30,779
)
Retained earnings
243,651
219,019
Total Alico stockholders' equity
242,203
216,341
Noncontrolling interest
5,402
5,441
Total stockholders' equity
247,605
221,782
Total liabilities and stockholders' equity
$
433,217
$
423,937
See accompanying notes to the consolidated financial statements.
ALICO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Fiscal Year Ended September 30,
Operating revenues:
Alico Citrus
$
105,796
$
89,369
$
119,031
Land Management and Other Operations
2,768
3,138
3,220
Total operating revenues
108,564
92,507
122,251
Operating expenses:
Alico Citrus
83,893
72,281
59,594
Land Management and Other Operations
2,307
2,297
Total operating expenses
84,671
74,588
61,891
Gross profit
23,893
17,919
60,360
General and administrative expenses
9,453
10,998
15,146
Income from operations
14,440
6,921
45,214
Other income (expense):
Investment and interest income, net
Interest expense
(3,987
)
(5,981
)
(7,180
)
Gains on sale of real estate, property and equipment and assets held for sale
35,898
30,424
13,166
Change in fair value of derivatives
-
-
(989
)
Other income (expense), net
(85
)
(27
)
Total other income, net
31,947
24,456
5,019
Income before income taxes
46,387
31,377
50,233
Income tax provision
11,567
7,663
12,783
Net income
34,820
23,714
37,450
Net loss (income) attributable to noncontrolling interests
(52
)
Net income attributable to Alico, Inc. common stockholders
$
34,859
$
23,662
$
37,833
Per share information attributable to Alico, Inc. common stockholders:
Earnings per common share:
Basic
$
4.64
$
3.16
$
5.06
Diluted
$
4.64
$
3.16
$
5.05
Weighted-average number of common shares outstanding:
Basic
7,516
7,484
7,472
Diluted
7,519
7,496
7,493
Cash dividends declared per common share
$
1.36
$
0.36
$
0.24
See accompanying notes to the consolidated financial statements.
ALICO, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands)
Common stock
Additional
Paid-In
Treasury
Retained
Total
Alico, Inc.
Non-
controlling
Total
Shares
Amount
Capital
Stock
Earnings
Equity
Interest
Equity
September 30, 2018
8,416
$
8,416
$
20,126
$
(7,536
)
$
151,111
$
172,117
$
5,478
$
177,595
Net income (loss)
-
-
-
-
37,833
37,833
(383
)
37,450
Dividends
-
-
-
-
(1,792
)
(1,792
)
-
(1,792
)
Treasury stock purchases
-
-
-
(25,576
)
-
(25,576
)
-
(25,576
)
ASC 610-20 adoption
-
-
-
-
10,897
10,897
-
10,897
Stock-based compensation:
Directors
-
-
(300
)
1,169
-
-
Executives
-
-
-
-
-
Executive forfeiture
-
-
(823
)
-
-
(823
)
-
(823
)
September 30, 2019
8,416
8,416
19,781
(31,943
)
198,049
194,303
5,095
199,398
Net income
-
-
-
-
23,662
23,662
23,714
Dividends
-
-
-
-
(2,692
)
(2,692
)
-
(2,692
)
Treasury stock purchases
-
-
-
(238
)
-
(238
)
-
(238
)
Capital contribution received from noncontrolling interest
-
-
-
-
-
-
Stock-based compensation:
Directors
-
-
(669
)
1,402
-
-
Executives and managers
-
-
-
-
-
September 30, 2020
8,416
8,416
19,685
(30,779
)
219,019
216,341
5,441
221,782
Net income (loss)
-
-
-
-
34,859
34,859
(39
)
34,820
Dividends
-
-
-
-
(10,227
)
(10,227
)
-
(10,227
)
Stock-based compensation:
Directors
-
-
-
-
Executives and managers
-
-
-
-
September 30, 2021
8,416
$
8,416
$
19,989
$
(29,853
)
$
243,651
$
242,203
$
5,402
$
247,605
See accompanying notes to the consolidated financial statements.
ALICO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Fiscal Year Ended September 30,
Net cash provided by operating activities:
Net income
$
34,820
$
23,714
$
37,450
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization
15,122
14,282
13,603
Debt issue costs expense
Deferred income tax expense
2,249
7,603
3,267
Cash surrender value
(14
)
(10
)
Deferred retirement (expense) benefit
-
(5,226
)
Gain on sale of real estate, property and equipment and assets held for sale
(35,898
)
(30,424
)
(13,166
)
Inventory net realizable value adjustment
-
-
Loss on disposal of property and equipment
2,338
1,382
Change in fair value of derivatives
-
-
Impairment of long-lived assets
-
Impairment of right-of-use-asset
-
-
Insurance proceeds received for damage to property and equipment
(103
)
-
(486
)
Stock-based compensation expense
1,230
1,306
Changes in operating assets and liabilities:
Accounts receivable
(1,758
)
(3,634
)
1,531
Inventories
(2,522
)
(712
)
Prepaid expenses
(115
)
(135
)
(211
)
Income tax receivable
(2,452
)
(781
)
Other assets
(839
)
Accounts payable and accrued liabilities
3,429
(1,530
)
(1,113
)
Income tax payable
-
(5,536
)
3,216
Other liabilities
(576
)
Net cash provided by operating activities
16,504
1,049
48,832
Cash flows from investing activities:
Purchases of property and equipment
(22,258
)
(18,785
)
(18,050
)
Purchases of citrus groves
(18,527
)
(2,920
)
(1,950
)
Net proceeds from sale of real estate, property and equipment and assets held for sale
37,266
31,541
14,602
Insurance proceeds received for damage to property and equipment
-
Change in deposits on purchase of citrus trees
(458
)
(108
)
Advances on notes receivables, net
Purchases of mineral rights
(453
)
-
-
Other
(25
)
-
Net cash (used in) provided by investing activities
(3,268
)
9,489
(4,960
)
Cash flows from financing activities:
Repayments on revolving lines of credit
(50,735
)
(114,581
)
(89,231
)
Borrowings on revolving lines of credit
47,793
117,523
86,546
Principal payments on term loans
(21,957
)
(15,198
)
(10,900
)
Treasury stock purchases
-
(238
)
(25,576
)
Payment on termination of sugarcane agreement
-
-
(11,300
)
Dividends paid
(7,138
)
(2,466
)
(1,833
)
Deferred financing costs
-
(23
)
-
Capital contribution received from noncontrolling interest
-
-
Net cash used in financing activities
(32,037
)
(14,689
)
(52,294
)
Net decrease in cash and cash equivalents and restricted cash
(18,801
)
(4,151
)
(8,422
)
Cash and cash equivalents and restricted cash at beginning of the period
19,687
23,838
32,260
Cash and cash equivalents and restricted cash at end of the period
$
$
19,687
$
23,838
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amount capitalized
$
3,940
$
5,832
$
6,940
Cash paid for income taxes
$
11,770
$
6,403
$
6,285
Supplemental disclosure of non-cash investing and financing activities:
Dividends declared but unpaid
$
3,763
$
$
See accompanying notes to the consolidated financial statements.
ALICO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Description of Business and Basis of Presentation
Description of Business
Alico, Inc., together with its subsidiaries (collectively, “Alico”, the “Company", "we", "us" or "our”), is a Florida agribusiness and land management company owning approximately 83,000 acres of land and approximately 90,000 acres of mineral rights throughout Florida. Alico holds these mineral rights on substantially all its owned acres, with additional mineral rights on other acres. The Company manages its land based upon its primary usage, and reviews its performance based upon two primary classifications: (i) Alico Citrus and (ii) Land Management and Other Operations. Financial results are presented based upon its two business segments (Alico Citrus and Land Management and Other Operations).
Basis of Presentation
The Company has prepared the accompanying financial statements on a consolidated basis. These accompanying Consolidated Financial Statements, which are referred to herein as the “Financial Statements”, have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). All significant intercompany transactions and account balances between the consolidated businesses have been eliminated.
Segments
Operating segments are defined in the criteria established under the Financial Accounting Standards Board - Accounting Standards Codification (“FASB ASC”) Topic 280 as components of public entities that engage in business activities from which they may earn revenues and incur expenses for which separate financial information is available and which is evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to assess performance and allocate resources. The Company’s CODM assesses performance and allocates resources based on two operating segments: (i) Alico Citrus and (ii) Land Management and Other Operations.
Principles of Consolidation
The Financial Statements include the accounts of Alico and the accounts of all the subsidiaries in which a controlling interest is held by the Company. Under U.S. GAAP, consolidation is generally required for investments of more than 50% of the outstanding voting stock of an investee, except when control is not held by the majority owner. The Company’s subsidiaries include: Alico Land Development, Inc., Alico-Agri, Ltd., Alico Plant World, LLC, Alico Fruit Company, LLC, Alico Citrus Nursery, LLC, Alico Chemical Sales, LLC, 734 Citrus Holdings, LLC and subsidiaries, Alico Skink Mitigation, LLC and Citree Holdings 1, LLC (“Citree”). The Company considers the criteria established under FASB ASC Topic 810, “Consolidations” in its consolidation process. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the accompanying Financial Statements, the disclosure of contingent assets and liabilities in the Financial Statements and the accompanying Notes, and the reported amounts of revenues and expenses and cash flows during the periods presented. Actual results could differ from those estimates. The Company evaluates estimates on an ongoing basis. The estimates are based on current and expected economic conditions, historical experience, the experience and judgment of the Company’s management and various other specific assumptions that the Company believes to be reasonable.
Noncontrolling Interest in Consolidated Subsidiary
The Financial Statements include all assets and liabilities of the less-than-100%-owned subsidiary the Company controls, Citree. Accordingly, the Company has recorded a noncontrolling interest in the equity of such entity. Citree had net loss of $79,479 for the fiscal year ended September 30, 2021, net income of $107,051 for the fiscal year ended September 30, 2020, and a net loss of $781,783 for the fiscal year ended September 30, 2019, respectively, of which a net loss of $40,535, a net income of $54,596, and a net loss of $398,709 were attributable to the Company for the fiscal years ended September 30, 2021, 2020 and 2019, respectively. The shift to net income for the fiscal year ended September 30, 2020 was the result of reimbursements received under the federal relief program relating to Hurricane Irma, aggregating approximately $493,000.
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in the existing guidance for income taxes and making other minor improvements. The amendments in the ASU are effective for the Company on October 1, 2021. The Company does not expect the adoption of ASU 2019-12 will have a material impact on its consolidated financial statements and will adopt the standard effective October 1, 2021.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform. The Company’s floating rate notes and variable funding notes bear interest at fluctuating interest rates based on LIBOR. Because LIBOR will cease to exist, the Company will need to renegotiate its loan agreements but the Company cannot predict what alternative index would be negotiated with its lenders. ASU 2020-04 is currently effective on or before December 31, 2022 and upon adoption may be applied prospectively to contract modifications made. The Company is currently assessing the impact of adopting this standard and the impact on its consolidated financial statements.
The Company has reviewed other recently issued accounting standards which have not yet been adopted in order to determine their potential effect, if any, on the results of operations or financial condition. Based on the review of these other recently issued standards, the Company does not currently believe that any of those accounting pronouncements will have a significant effect on its current or future financial position, results of operations, cash flows or disclosures.
Recently Adopted Accounting Pronouncements
In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-04, “Intangibles-Goodwill and Other” (Topic 350), which simplifies the accounting for goodwill impairment. The updated guidance eliminates Step 2 of the impairment test, which requires entities to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value, determined in Step 1. The Company adopted ASU 2017-04 effective October 1, 2020, using the prospective approach, and will apply this standard in future impairment tests.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements” (“ASU 2018-13”), which aims to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies when preparing fair value measurement disclosures. ASU 2018-13 became effective for annual and interim periods in the fiscal years beginning after December 15, 2019. Retrospective adoption is required, except for certain disclosures, which will be required to be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. The Company adopted ASU 2018-13 effective October 1, 2020, and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Leases (Topic 842). The standard is effective for the Company on October 1, 2020, with early adoption permitted. The Company adopted ASU 2018-19 effective October 1, 2020, and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
The COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the current novel coronavirus outbreak (“COVID-19”) to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country have imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures have had a significant adverse impact upon many sectors of the economy, including certain agriculture businesses. To date, the Company has experienced no material adverse impact from this pandemic.
On November 4, 2021, the Occupational Safety and Health Administration (“OSHA”) posted an Emergency Temporary Standard (“ETS”) on mandating that all private employers with 100 or more employees ensure their employees are COVID-19 fully vaccinated before entering the employer’s worksite or, at the employer’s option, require employees who remain unvaccinated and want to come to the worksite to wear an approved face covering and produce a negative COVID-19 test at least weekly. Pursuant to the ETS, employers must offer up to four hours of additional paid time off, including travel time, per vaccine dose to allow employees to be vaccinated and reasonable time and paid sick leave to recover from side effects experienced after each vaccine dose. Pursuant to the ETS, the ETS remains in effect for a maximum of six months. This ETS implements President Biden’s COVID-19 Action Plan, which aims to accelerate the pace of COVID-19 vaccinations in the United States.
Pursuant to the ETS, the ETS is effective immediately upon its publication in the Federal Register. Pursuant to the ETS, employers must comply with most requirements within 30 days of publication (December 5th) and with optional testing requirements within 60 days of publication (January 4th). Employees who have completed their vaccination by that date do not have to be tested, even if they have not yet completed the 2-week waiting period. On November 6, 2021, the Fifth Circuit Court of Appeals granted an emergency motion to stay enforcement of the ETS, subject to the resolution of ongoing litigation challenging the constitutionality of the ETS. The order enjoins the federal government from taking any action to enforce the ETS while it is in effect. On November 12, 2021, the Fifth Circuit Court of Appeals reaffirmed its suspension of the ETS and, on November 16, 2021, OSHA announced it suspended its activities related to the implementation and enforcement of the ETS pending future developments in the litigation. It is unknown how long the Fifth Circuit’s stay will remain in place. The Sixth Circuit Court of Appeals was selected through the lottery system on November 16, 2021, to hear a consolidated action concerning multiple challenges to the ETS and is authorized to uphold or lift the Fifth Circuit Court of Appeals order.
Also, a number of state governments have considered legislation related to employer vaccine mandates during the pandemic. OSHA maintains that its ETS preempts these laws, but states such as the State of Florida disagree. On November 17, 2021, the Florida legislature passed legislation, which was signed into law on November 18, 2021 and codified at section 381.00317, Florida Statutes, prohibiting private-sector employers from implementing a COVID-19 vaccination mandate for full-time, part-time, or contract employees without providing at least five individual exemptions, including, but not limited to, pregnancy or anticipated pregnancy; religious reasons; COVID-19 immunity; periodic testing; and the use of employer-provided personal protective equipment. If an employer fails to comply with the new law and terminates an employee based on a COVID-19 vaccination mandate, then the employer will be subject to a fine of up to $50,000 per violation.
The Company plans to monitor conflicting guidance from the State of Florida and the federal government and adjust its policies in accordance with the resolution of the ongoing litigation in the federal courts.
Since the commencement of COVID-19 in March 2020, the Company took steps to allow and encourage greater separation for our employed and contracted field workers and has worked with its harvesters, haulers, and suppliers to minimize interactions. For the continued protection of our employees and in accordance with the OSHA mandate, the Company intends to comply with all requirements as outlined in the ETS that was published on November 4, 2021, to the extent consistent with applicable law.
Reclassifications
Certain prior year amounts have been reclassified in the accompanying Financial Statements for consistent presentation to the current period. These reclassifications had no impact on net income, equity, cash flows or working capital as previously reported.
Seasonality
The Company is primarily engaged in the production of fruit for sale to citrus markets, which is of a seasonal nature, and subject to the influence of natural phenomena and wide price fluctuations. Historically, the second and third quarters of Alico's fiscal year produce most of the Company's annual revenue. Working capital requirements are typically greater in the first and fourth quarters of the fiscal year, coinciding with harvesting cycles. Because of the seasonality of the business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.
Note 2. Summary of Significant Accounting Policies
Revenue Recognition
Revenues are derived from the sale of processed fruit, fresh fruit, other citrus revenue, leasing revenue and other resource revenues. The majority of the revenue is generated from the sale of citrus fruit to processing facilities, fresh fruit sales and grove management services.
For fruit sales, the Company recognizes revenue at the amount it expects to be entitled to be paid, determined when control of the products or services is transferred to its customers, which occurs upon delivery of and acceptance of the fruit by the customer and the Company has a right to payment.
For the sale of fruit, the Company has identified one performance obligation, which is the delivery of fruit to the processing facility of the customer (or harvesting of the citrus in the case of fresh fruit) for each separate variety of fruit identified in the respective contract with the respective customer. The Company initially recognizes revenue in an amount which is estimated based on contractual and market prices, if such market price falls within the range (known as “floor” and “ceiling” prices) identified in the specific respective contracts. Additionally, the Company also has a contractual agreement whereby revenue is determined based on applying a cost-plus structure methodology. As such, since all of these contracts contain elements of variable consideration, the Company recognizes this variable consideration by using the expected value method. On a quarterly basis, management reviews the reasonableness of the revenues accrued based on buyers’ and processors’ advances to growers, cash and futures markets and experience in the industry. Adjustments are made throughout the year to these estimates as more current
relevant industry information becomes available. Differences between the estimates and the final realization of revenues at the close of the harvesting season can result in either an increase or decrease to reported revenues. During the periods presented, no material adjustments were made to the reported citrus revenues.
Receivables under contracts, whereby pricing is based on contractual and market prices, are primarily paid at the floor amount and are collected within seven days after the harvest week. Any adjustments to pricing as a result of changes in market prices are collected or paid thirty to sixty days after final market pricing is published. Receivables under contracts, whereby pricing is based off a cost-plus structure methodology, are paid at the final prior year rate. Any adjustments to pricing as a result of the cost-plus calculation are collected or paid upon finalization of the calculation and agreement by both parties. As of September 30, 2021 and 2020, the Company had total receivables relating to sales of citrus of $3,161,000 and $584,000, respectively, recorded in Accounts Receivable, net, in the Consolidated Balance Sheets.
For grove management services, the Company has identified one performance obligation relating to the management of the third party’s groves. Grove management services include caretaking of the citrus groves, harvesting and hauling of citrus, management and coordination of citrus sales and other related activities. The Company is reimbursed for expenses incurred in the execution of its management duties and the Company receives a per acre management fee. The Company recognizes operating revenue, including a management fee, and corresponding operating expenses when services are rendered and consumed.
Disaggregated Revenue
Revenues disaggregated by significant products and services for the fiscal years ended September 30, 2021, 2020 and 2019 are as follows:
(in thousands)
Fiscal Year Ended September 30,
Alico Citrus
Early and Mid-Season
$
31,525
$
31,303
$
39,574
Valencias
55,918
50,060
73,480
Fresh fruit
2,321
3,629
Grove management services
16,983
4,599
1,342
Other
1,086
1,006
Total
$
105,796
$
89,369
$
119,031
Land Management and Other Operations
Land and other leasing
$
2,404
$
2,683
$
2,787
Other
Total
$
2,768
$
3,138
$
3,220
Total Revenues
$
108,564
$
92,507
$
122,251
Fair Value of Financial Instruments
The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to the short term and immediate nature of these financial instruments. The carrying amounts of the Company’s debt approximates fair value as the debt is with commercial lenders at interest rates that vary with market conditions or have fixed rates that approximate market rates for obligations with similar terms and maturities (see Note 8. “Fair Value Measurements”).
Cash and Cash Equivalents
The Company considers cash in banks and highly liquid instruments with an original maturity of three months or less to be cash and cash equivalents. At various times throughout the fiscal year, and as of September 30, 2021, some accounts held at financial institutions were in excess of the federally insured limit of $250,000. The Company has not experienced any losses on these accounts and believes credit risk to be minimal.
Restricted Cash
Restricted cash was comprised of certain cash receipts from the sale of property which was being held specifically for the purpose of deferring a tax impact on the gain on sale of the property and other cash received from the sale of certain assets in which the use of funds were restricted.
In September 2020, the Company sold certain sections of the West Ranch, from which a portion of the net cash proceeds amounting to $16,524,000 were being held by a qualified intermediary in coordination to purchase a like-kind asset and defer a portion of the gain on sale of the ranch land. Such funds were included in restricted cash as of September 30, 2020. In October 2020, the Company closed on a purchase of a like-kind asset and used all of these net cash proceeds which were being held by the intermediary.
Accounts receivable
Accounts receivable from customers are generated from revenues based on the sale of citrus, grove management, leasing and other transactions. The Company grants credit in the course of its operations to third party customers. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. The Company provides an allowance for doubtful accounts for amounts which are not probable of collection. The estimate, evaluated quarterly by the Company, is based on historical collection experience, current macroeconomic climate and market conditions and a review of the current status of each customer’s account. Changes in the financial viability of significant customers and worsening of economic conditions may require changes to its estimate of the recoverability of the receivables. Such changes in estimates are recorded in the period in which these changes become known. The bad debt expense is included in general and administrative expenses in the Consolidated Statements of Operations.
The following table presents accounts receivable, net, as of September 30, 2021 and 2020:
(in thousands)
September 30,
Accounts receivable
$
6,118
$
4,384
Allowance for doubtful accounts
(13
)
(37
)
Accounts receivable, net
$
6,105
$
4,347
Concentrations
Accounts receivable from the Company’s major customer as of September 30, 2021 and 2020 and revenue from such customer for the fiscal years ended September 30, 2021, 2020 and 2019, are as follows:
(in thousands)
Accounts Receivable
Revenue
% of Total Revenue
Tropicana
$
3,066
$
-
$
84,136
$
80,388
$
108,318
77.5
%
86.9
%
88.6
%
The citrus industry is subject to various factors over which growers have limited or no control, including weather conditions, disease, pestilence, water supply and market price fluctuations. Market prices are highly sensitive to aggregate domestic and foreign crop sizes, as well as factors including, but not limited to, weather and competition from foreign countries.
The overall decrease in Tropicana revenue as a percentage of sales was due to an agreement entered into in July 2020 with an affiliated group of third parties to provide citrus grove caretaking and harvest and haul management services for approximately 7,000 acres owned by such third parties. Under the terms of this agreement, the Company is reimbursed by the third parties for all its costs incurred related to providing these services and receives a management fee based on acres covered under this agreement. The Company records both an increase in revenues and expenses as and when the Company provides these citrus grove caretaking management services. For the fiscal year ended September 30, 2021, under this agreement, the Company recorded approximately $15,752,000 of operating revenue relating to these grove management services, including the management fee. Excluding these revenues for these citrus grove caretaking and harvest and haul management services, revenue from Tropicana represents approximately 90.1% of total revenues for the fiscal year ended September 30, 2021. In addition, most of the citrus from the managed groves is also sold to Tropicana, so the revenues from grove caretaking is indirectly related to payments received from Tropicana.
Real Estate
In February 2017, the FASB issued ASU 2017-05, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets” (ASC 610-20): This standard clarified the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets and clarified the scope and application of ASC 610-20 on the sale, transfer, and derecognition of nonfinancial assets and in substance nonfinancial assets to non-customers, including partial sales. The standard provided guidance on how gains and losses on transfers of nonfinancial assets and in substance nonfinancial assets to non-customers are recognized. The Company recognizes a gain on the sale of real estate as outlined by ASC 610-20.
Inventories
The costs of growing crops, including but not limited to labor, fertilization, fuel, crop nutrition, irrigation, and depreciation, are capitalized into inventory throughout the respective crop year. Such costs are expensed as cost of sales when the crops are harvested and are recorded as operating expenses in the Consolidated Statements of Operations. Inventories are stated at the lower of cost or net realizable value. The cost for unharvested citrus crops is based on accumulated production costs incurred during the period from January 1 through the balance sheet date.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation, depletion and amortization. Major improvements are capitalized while expenditures for maintenance and repairs are expensed when incurred. Costs related to the development of citrus groves through planting of trees are capitalized. Such costs include land clearing, excavation and construction of ditches, dikes, roads, and reservoirs, among other costs. After the planting, caretaking costs or pre-productive maintenance costs are capitalized for 4 years. After 4 years, a planting is considered to have reached maturity and the accumulated costs are depreciated over 25 years, except for land clearing and excavation, which are considered costs of land and not depreciated.
Real estate costs incurred for the acquisition, development and construction of real estate projects are capitalized.
Depreciation is provided on a straight-line basis over the estimated useful lives of the depreciable assets, with the exception of leasehold improvements and assets acquired through capital leases, which are depreciated over their estimated useful lives if the lease transfers ownership or contains a bargain purchase option, otherwise the term of the lease.
The estimated useful lives for property and equipment are primarily as follows:
Citrus trees
25 years
Equipment and other facilities
3-20 years
Buildings and improvements
25-39 years
Changes in circumstances, such as technological advances or changes to our business model or capital strategy could result in the actual useful lives differing from the original estimates. In those cases where the Company determines that the useful life of property and equipment should be shortened, Alico depreciates the asset over its revised estimated remaining useful life, thereby increasing depreciation expense (see Note 5. “Property and Equipment, Net”).
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The Company records impairment losses on long-lived assets used in operations, or asset group, when events and circumstances indicate that the assets might be impaired and the estimated cash flows (undiscounted and without interest charges) to be generated by those assets or asset group over the remaining lives of the assets or asset group are less than the carrying amounts of those assets. In calculating impairments and the estimated cash flows, the Company assigns its asset groups by determining the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of the other Company assets. The net carrying values of assets or asset group not recoverable are reduced to their fair values. Alico's cash flow estimates are based on historical results adjusted to reflect best estimates of future market conditions and operating conditions. For fiscal year ended September 30, 2021 the Company did not record impairments of its long-lived assets. For the fiscal years ended September 30, 2020 and 2019, the Company recorded impairments of its long-lived assets (see Note 5. “Property and Equipment, Net”). As of September 30, 2021 and 2020, long-lived assets were comprised of property and equipment.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price of acquired businesses over the fair value of the assets acquired less liabilities assumed in connection with such acquisition. In accordance with the provisions of ASC 350, Intangibles-Goodwill and Other, goodwill and intangible assets with indefinite useful lives acquired in an acquisition are not amortized, but instead are tested for impairment at least annually, on the same date, or more frequently should an event occur or circumstances indicate that the carrying amount may be impaired. Such events or circumstances may be a significant change in business climate, economic and industry trends, legal factors, negative operating performance indicators, significant competition, changes in strategy or disposition of a reporting unit or a portion thereof.
The carrying value of goodwill is tested for impairment annually as of September 30, and, additionally on an interim basis, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The accounting standards for goodwill allow for the assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company does not utilize a qualitative assessment approach, then the quantitative goodwill impairment test is utilized to identify potential impairments. The Company identifies any potential impairment by comparing the carrying value of a reporting unit to its fair value. The Company typically determines the fair value of its reporting units using a discounted cash flow valuation approach. If a potential impairment is identified, the Company will determine the amount of goodwill impairment by comparing the fair value of a reporting unit with its carrying amount. As of September 30, 2021 and 2020, no impairment was required.
Other Non-Current Assets
Other non-current assets primarily include intangible assets relating to mineral rights, water permits, right-of-use assets relating to lease obligations, investments owned in agricultural cooperatives, cash surrender value on life insurance, and deposits on the purchase of citrus trees. Investments in stock related to agricultural cooperatives are carried at cost.
Income Taxes
The Company uses the asset and liability method of accounting for deferred income taxes. The provision for income taxes includes income taxes currently payable and those deferred as a result of temporary differences between the financial statements and the income tax basis of assets and liabilities. Deferred income tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in income tax rates on deferred income tax assets and liabilities is recognized in income or loss in the period that includes the enactment date. A valuation allowance is provided to reduce deferred tax assets to the amount of future tax benefit when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Projected future taxable income and ongoing tax planning strategies are considered and evaluated when assessing the need for a valuation allowance. Any increase or decrease in a valuation allowance could have a material adverse or beneficial impact on the Company’s income tax provision and net income or loss in the period the determination is made. For the fiscal years ended September 30, 2021, 2020 and 2019, the Company did not record any valuation allowances. The Company recognizes interest and/or penalties related to income tax matters in income tax expense.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which a change in judgment occurs. The Company records interest related to unrecognized tax benefits in income tax expense.
Earnings per Share
Basic earnings per share for the Company’s common stock is calculated by dividing net income attributable to Alico common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per common share is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares of common stock issuable under equity-based compensation plans in accordance with the treasury stock method, or any other type of securities convertible into common stock, except where the inclusion of such common shares would have an anti-dilutive effect.
The following table presents a reconciliation of basic to diluted weighted average common shares outstanding for fiscal years ended September 30, 2021, 2020 and 2019:
(in thousands)
Fiscal Year Ended September 30,
Weighted Average Common Shares Outstanding - Basic
7,516
7,484
7,472
Effect of dilutive securities - stock options and unrestricted stock
Weighted Average Common Shares Outstanding - Diluted
7,519
7,496
7,493
For the fiscal years ended September 30, 2021, 2020 and 2019, respectively, the Company issued 0, 118,000, and 10,000, stock options to certain executives and managers of the Company. Non-vested restricted shares of common stock entitle the holder to receive non-forfeitable dividends upon issuance and are included in the calculation of diluted earnings per common share.
Stock-Based Compensation
Stock-based compensation is measured based on the fair value of the equity award at the grant date and is typically expensed on a straight-line basis over the vesting period. Upon the vesting of restricted stock, the Company issues common stock from common shares held in treasury.
Total stock-based compensation expense for the three years ended September 30, 2021, 2020 and 2019 in general and administrative expense was as follows:
(in thousands)
Fiscal Year Ended September 30,
Stock-based compensation expense:
Executives
$
$
$
Management
-
Executive forfeitures
-
-
(823
)
Board of Directors
Total stock-based compensation expense
$
1,230
$
1,306
$
Note 3. Inventories
Inventories consist of the following at September 30, 2021 and 2020:
(in thousands)
September 30,
Unharvested fruit crop on the trees
$
42,117
$
40,265
Other
1,260
Total inventories
$
43,377
$
40,855
The Company records its inventory at the lower of cost or net realizable value. For the fiscal year ended September 30, 2019, the Company recorded adjustments of approximately $808,000 to reduce inventory to net realizable value. This adjustment to inventory is included in operating expenses in the Consolidated Statements of Operations.
In September 2017, the State of Florida’s citrus business, including the Company’s unharvested citrus crop, was significantly impacted by Hurricane Irma. The impact of Hurricane Irma resulted in the premature drop of unharvested fruit and damage to citrus trees.
The Company was eligible for Hurricane Irma federal relief programs for block grants that were being administered through the State of Florida. During the fiscal years ended September 30, 2021, 2020, and 2019, the Company received approximately $4,299,000, $4,629,000, and $15,597,000, respectively, under the Florida Citrus Recovery Block Grant (“CRBG”) program. These federal relief proceeds are included as a reduction to operating expenses in the Consolidated Statements of Operations. The remaining portion of the funds that are due to Alico under the Florida CRBG program relates to certain crop insurance expenses incurred by the Company and is estimated to be approximately $2,000,000. In October 2021, the Company received its first portion of this crop insurance expense reimbursement in an amount equal to approximately $1,000,000 and is expected to receive the remaining portion in fiscal 2023.
Note 4. Assets Held for Sale
In accordance with its strategy to dispose of non-core and under-performing assets, the following assets have been classified as assets held for sale as of September 30, 2021 and September 30, 2020:
(in thousands)
Carrying Value
Fiscal Year Ended September 30,
Ranch
$
$
1,366
Total Assets Held for Sale
$
$
1,366
On June 3, 2021, the Company sold approximately 11,700 acres of the Alico ranch, which were encumbered by an easement, to a third-party for approximately $12,219,000. The Company recognized a gain of approximately $11,351,000. In 2013, these acres were enrolled in the Wetlands Reserve Program (“WRP”), which calls for the restoration and maintenance of the property for the duration of the WRP easement. As part of that enrollment in 2013, Alico received approximately $1,800 per acre.
On April 15, 2021, the State of Florida purchased, under the Florida Forever program, approximately 5,734 acres of the Alico ranch for approximately $14,445,000 pursuant to an option agreement entered between the State of Florida and the Company. The Company recognized a gain of approximately $13,921,000.
On December 18, 2020, the Company sold approximately 600 acres of the Alico Ranch for approximately $2,630,000 and recognized a gain of approximately $2,550,000.
Additionally, during fiscal year 2021, the Company sold an aggregate of approximately 1,742 acres of the Alico Ranch to various third parties for approximately $8,286,000 and recognized a gain of approximately $7,697,000. One of these sales transactions, consisting of approximately 97 acres, was sold to an employee of the Company for approximately $392,000.
On September 10, 2020, the State of Florida purchased, under the Florida Forever program, approximately 10,700 acres of the Alico Ranch for approximately $28,500,000 pursuant to an option agreement entered between the State of Florida and the Company. The Company recognized a gain of approximately $27,470,000, which is included in Gain on sale of real estate, property and equipment and assets held for sale in the Consolidated Statements of Operations. The Company subsequently used a portion of the net cash proceeds to purchase a like-kind asset in October 2020, which allowed the Company to defer a portion of the tax impact of the gain on sale of the ranch lands.
On March 27, 2020, the Company sold certain sections at the East Ranch for approximately $2,980,000 and realized a gain of approximately $2,748,000. The Company subsequently used substantially all of the net cash proceeds to purchase a like-kind asset in May 2020, which will allow the Company to defer substantially all of the tax impact of the gain on sale of the ranch land.
The Company recorded no impairment loss during the fiscal year ended September 30, 2021 and 2020. The Company recorded an impairment loss on assets held for sale of approximately $152,000 for the fiscal year ended September 30, 2019. These impairment losses were included in operating expenses on the Consolidated Statements of Operations.
The Company has used a portion of the proceeds from these various asset sales to pay down debt (see Note 6. "Long-Term Debt and Lines of Credit"), purchase citrus groves and fund the increased dividend and plans to use the remaining cash proceeds from the sale of these assets to purchase other citrus groves, pay down other debt and to fund future working capital requirements and for other corporate purposes.
Note 5. Property and Equipment, Net
Property and equipment, net consists of the following at September 30, 2021 and September 30, 2020:
(in thousands)
September 30,
Citrus trees
$
320,245
$
296,012
Equipment and other facilities
57,584
55,593
Buildings and improvements
8,494
8,128
Total depreciable properties
386,323
359,733
Less: accumulated depreciation and depletion
(127,046
)
(115,440
)
Net depreciable properties
259,277
244,293
Land and land improvements
113,954
105,768
Property and equipment, net
$
373,231
$
350,061
For the fiscal years ended September 30, 2021 and 2019, the Company did not record any impairments and for the fiscal year ended September 30, 2020, the Company recorded approximately $598,000 of impairments on property and equipment. This impairment resulted from the sale of a portion of the Alico Ranch to the State of Florida comprising approximately 10,700 acres on the western part of the ranch (see Note 4. Assets Held For Sale) and because the sale of those acres affected the proposed dispersed water management project, the Company decided to suspend all permit approval activities for its dispersed water management project and the Company wrote-down the assets relating to this project during the fourth quarter of the fiscal year ended September 30, 2020. This impairment relates to the Company’s Land Management and Other Operations segment and was recorded in Operating Expenses in the Consolidated Statement of Operations.
On October 30, 2020, the Company purchased approximately 3,280 gross citrus acres located in Hendry County for a purchase price of approximately $18,230,000. This acquisition complements the Company’s existing citrus acres as these acres are located adjacent to existing groves in Hendry County. This purchase was part of a like-kind exchange transaction, which allowed the Company to defer taxes relating to the sale of certain sections of the West Ranch.
On June 1, 2020, the Company sold approximately 30 ranch acres to an employee for approximately $122,000 and recognized a gain of approximately $83,000.
On May 4, 2020, the Company purchased 334 citrus acres for approximately $2,850,000. This acquisition complements the Company’s existing citrus acres as these acres are located adjacent to existing groves in the Frostproof area. Additionally, this purchase was part of a like-kind exchange transaction, which allowed the Company to defer taxes relating to the sale of certain sections of the Alico Ranch.
On September 27, 2019, the Company sold approximately 5,500 acres from its West Ranch for approximately $14,775,000 and realized a gain on sale of approximately $13,033,000. Upon the sale of these acres, the lease rate pertaining to the grazing and other rights was adjusted from $98,750 to $80,000 per month, as space on these acres was previously being leased to a third party.
Note 6. Long-Term Debt and Lines of Credit
The following table summarizes long-term debt and related deferred financing costs, net of accumulated amortization at September 30, 2021 and September 30, 2020:
September 30, 2021
September 30, 2020
(in thousands)
Principal
Deferred
Financing
Costs, Net
Principal
Deferred
Financing
Costs, Net
Long-term debt, net of current portion:
Met Fixed-Rate Term Loans
$
70,000
$
$
83,438
$
Met Variable-Rate Term Loans
38,094
40,969
Met Citree Term Loan
4,263
4,512
Pru Loans A & B
13,937
15,097
Pru Loan E
-
-
4,235
126,294
148,251
1,151
Less current portion
4,285
-
9,145
-
Long-term debt
$
122,009
$
$
139,106
$
1,151
The following table summarizes amounts outstanding under lines of credit and related deferred financing costs, net of accumulated amortization at September 30, 2021 and September 30, 2020:
September 30, 2021
September 30, 2020
(in thousands)
Principal
Deferred
Financing
Costs, Net
Principal
Deferred
Financing
Costs, Net
Lines of Credit:
RLOC
$
-
$
$
-
$
WCLC
-
-
2,942
-
Lines of Credit
$
-
$
$
2,942
$
Future maturities of long-term debt and lines of credit as of September 30, 2021 are as follows:
(in thousands)
September 30, 2021
Due within one year
$
4,285
Due between one and two years
4,285
Due between two and three years
4,285
Due between three and four years
4,285
Due between four and five years
4,285
Due beyond five years
104,869
Total future maturities
$
126,294
Interest costs expensed and capitalized were as follows:
(in thousands)
Fiscal Year Ended September 30,
Interest expense
$
3,987
$
5,981
$
7,180
Interest capitalized
1,431
1,228
1,019
Total
$
5,418
$
7,209
$
8,199
Debt
The Company's credit facilities consist of fixed interest rate term loans originally in the amount of $125,000,000 (“Met Fixed-Rate Term Loans”), variable interest rate term loans originally in the amount of, $57,500,000 (“Met Variable-Rate Term Loans”), a $25,000,000 revolving line of credit (“RLOC”) with Metropolitan Life Insurance Company and New England Life Insurance Company (collectively “Met”), and a $70,000,000 working capital line of credit (“WCLC”) with Rabo Agrifinance, Inc. (“Rabo”).
The term loans and RLOC are secured by real property. The security for the term loans and RLOC consists of approximately 38,200 gross acres of citrus groves and originally included 5,800 gross acres of ranch land. In April 2021, the 5,800 gross acres of ranch land was released as security against the term loans and RLOC and only the 38,200 gross acres of citrus groves remain as security for the term loans and RLOC. The WCLC is collateralized by the Company’s current assets and certain other personal property owned by the Company.
Initially, the Met Fixed-Rate Term Loans were subject to quarterly principal payments of $1,562,500 and bore interest at 4.15% per annum. Effective May 1, 2021, the Company modified its Met Fixed-Rate Term Loans, which, in the aggregate have a balance of $70,000,000 after the prepayment of $10,312,500 made in April 2021, have a balance of $70,000,000 to be interest only with a balloon payment to be paid at maturity on November 1, 2029. The interest rate on these Met Fixed-Rate Term Loans, which were bearing interest at 4.15%, was adjusted to 3.85%. As part of this modification, the Company no longer has the prepayment option previously allowed under the arrangement.
The Met Variable-Rate Term Loans are subject to quarterly principal payments of $718,750 and bear interest at a rate equal to 90-day LIBOR plus 165 basis points (the “LIBOR spread”). The LIBOR spread is subject to adjustment by Met beginning May 1, 2017 and is subject to further adjustment every two years thereafter until maturity. No adjustment was made at May 1, 2019 or at May 1, 2021. Interest on the term loans is payable quarterly. The interest rates on the Met Variable-Rate Term Loans were 1.78% per annum and 1.91% per annum as of September 30, 2021 and September 30, 2020, respectively. The Met Variable-Rate Term Loans mature on November 1, 2029.
The RLOC bears interest at a floating rate equal to 90-day LIBOR plus 165 basis points, payable quarterly. The LIBOR spread was adjusted by Met on May 1, 2017 and is subject to further adjustment every two years thereafter. No adjustment was made on May 1, 2019 or on May 1, 2021. In October 2019, the RLOC agreement was modified to extend the maturity to November 1, 2029. The RLOC is subject to an annual commitment fee of 25 basis points on the unused portion of the line of credit. The RLOC is available for funding general corporate needs. The variable interest rate was 1.78% per annum and 1.91% per annum as of September 30, 2021 and September 30, 2020, respectively. Availability under the RLOC was $25,000,000 as of September 30, 2021.
The WCLC is a revolving credit facility and is available for funding working capital and general corporate requirements. The interest rate on the WCLC is based on the one-month LIBOR, plus a spread, which is adjusted quarterly, based on the Company's debt service coverage ratio for the preceding quarter and can vary from 175 to 250 basis points. The rate is currently at LIBOR plus 175 basis points. The variable interest rate was 1.83% per annum and 1.90% per annum as of September 30, 2021 and September 30, 2020, respectively. The WCLC agreement was amended on August 25, 2020, and the primary terms of the amendment were an extension of the maturity to November 1, 2023. There were no changes to the commitment amount or interest rate. The WCLC agreement provides for Rabo to issue up to $2,000,000 in letters of credit on the Company’s behalf, of which $336,000 was issued as of September 30, 2021. Availability under the WCLC was approximately $69,664,000 and $66,659,000 as of September 30, 2021 and September 30, 2020, respectively.
The WCLC is subject to a quarterly commitment fee on the daily unused availability under the line computed as the commitment amount less the aggregate of the outstanding loans and outstanding letters of credit. The commitment fee is adjusted quarterly based on Alico's debt service coverage ratio for the preceding quarter and can vary from a minimum of 20 basis points to a maximum of 30 basis points. Commitment fees to date have been charged at 20 basis points.
There were no amounts outstanding on the WCLC on September 30, 2021 and approximately $2,942,000 outstanding on the WCLC on September 30, 2020.
In March 2020, as a precautionary measure, the Company drew down an aggregate of $70,000,000 on its revolving credit facilities; $20,000,000 on its RLOC and $50,000,000 on its WCLC. This decision was made to safeguard the Company’s liquidity and to increase available cash on hand in the event of a more protracted COVID-19 outbreak. As of September 30, 2021, the Company had repaid all of the balances on these credit facilities.
In 2014, the Company capitalized approximately $2,834,000 of debt financing costs related to the refinancing and approximately $339,000 of costs related to the retired debt. Additionally, financing costs of approximately $23,000 were incurred for the fiscal years ended September 30, 2020 in connection with letters of credit. All costs are included in deferred financing costs and being amortized to interest expense over the applicable terms of the obligations. The unamortized balance of deferred financing costs related to the financing above was approximately $891,000 and approximately $1,048,000 at September 30, 2021 and September 30, 2020, respectively.
These credit facilities noted above are subject to various covenants including the following financial covenants: (i) minimum debt service coverage ratio of 1.10 to 1.00, (ii) tangible net worth of at least $160,000,000 increased annually by 10% of consolidated net income for the preceding years, or approximately $169,730,000 applicable for the year ended September 30, 2021, (iii) minimum current ratio of 1.50 to 1.00, (iv) debt to total assets ratio not greater than .625 to 1.00, and, (v) solely in the case of the WCLC, a limit on capital expenditures of $30,000,000 per fiscal year. As of September 30, 2021, the Company was in compliance with all of the financial covenants.
Credit facilities also include a Met Life term loan collateralized by 1,200 gross acres of citrus grove owned by Citree ("Met Citree Loan"). This is a $5,000,000 credit facility that bears interest at a fixed rate of 5.28% per annum. Principal and interest payments are made on a quarterly basis. On September 30, 2021 and 2020, there was an outstanding balance of $4,263,000 and $4,512,000, respectively. The loan matures in February 2029. The unamortized balance of deferred financing costs related to this loan was approximately $31,000 and $36,000 on September 30, 2021 and 2020, respectively.
Transition from LIBOR
On July 27, 2017, the United Kingdom's Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that it intends to phase out LIBOR. On November 30, 2020, ICE Benchmark Administration (“IBA”), the administrator of LIBOR, with the support of the United States Federal Reserve and the Financial Conduct Authority of the United Kingdom, announced plans to consult on ceasing publication of LIBOR on December 31, 2021 for only the one week and two-month LIBOR tenors, and on June 30, 2023 for all other LIBOR tenors. On March 5, 2021, the FCA confirmed that all LIBOR settings will either cease to be provided by any administrator or no longer be representative: (a) immediately after December 31, 2021, in the case of the one week and two-month U.S. dollar settings; and (b) immediately after June 30, 2023, in the case of the remaining U.S. dollar settings. The Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has proposed an alternative rate to replace U.S. Dollar LIBOR: the Secured Overnight Financing Rate (SOFR). The outcome of these reforms is uncertain and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phaseout could cause LIBOR to perform differently than in the past.
The Company is continuing to evaluate the impact of the transition from LIBOR as an interest rate benchmark to other potential alternative reference rates. Currently, the Company has debt instruments in place that reference one-month and three-month LIBOR-based rates. The transition from LIBOR, as mentioned above is estimated to take place in fiscal 2023 and management will continue to actively assess the related opportunities and risks involved in this transition.
Silver Nip Citrus Debt
There are two fixed-rate term loans, with an original combined balance of $27,550,000, bearing interest at 5.35% per annum (“Pru Loans A & B”). Principal of $290,000 is payable quarterly, together with accrued interest. On February 15, 2015, 734 Citrus Holdings, LLC d/b/a Silver Nip Citrus (“Silver Nip Citrus”) made a prepayment of $750,000. In addition, the Company made prepayments of approximately $4,453,000 in the second fiscal quarter of 2018 with proceeds from the sale of certain properties, which were collateralized under these loans. The Company may prepay up to $5,000,000 of principal without penalty. As such, the Company exceeded the allowed $5,000,000 prepayment by approximately $203,000 and was required to make a premium payment of approximately $22,000. The loans are collateralized by approximately 5,700 of citrus groves in Collier, Hardee, Highlands and Polk Counties, Florida and mature on June 1, 2029 and June 1, 2033, respectively.
Silver Nip Citrus entered into two additional fixed-rate term loans with Prudential to finance the acquisition of a 1,500 acre citrus grove on September 4, 2014. Each loan was in the original amount of $5,500,000 with principal of $55,000 per loan being payable quarterly, together with accrued interest. In November 2019, the Company prepaid Pru Loan F in full in the amount of $4,455,000. As a result of this prepayment, the Company’s required annual principal payments on its Pru Loans was reduced by $220,000 per annum. Pru Loan E, which matured September 1, 2021, was satisfied in full. After this payment, the two additional loans have been paid and the Company has no further obligation under either of these loans. The loans were collateralized by approximately 1,500 gross acres of citrus groves in Charlotte County, Florida.
The remaining Silver Nip Citrus credit agreements are subject to a financial covenant whereby the consolidated current ratio requirement is 1.00 to 1.00. Silver Nip Citrus was in compliance with the current ratio covenant as of September 30, 2021.
The unamortized balance of deferred financing costs related to the Silver Nip Citrus debt was approximately $190,000 and $208,000 at September 30, 2021 and 2020, respectively.
Note 7. Accrued Liabilities
Accrued liabilities consist of the following at September 30, 2021 and September 30, 2020:
(in thousands)
September 30,
Ad valorem taxes
$
2,018
$
2,057
Accrued interest
1,020
Accrued employee wages and benefits
2,105
2,214
Accrued dividends
3,763
Consulting and separation charges
-
Accrued insurance
Professional fees
Other accrued liabilities
Total accrued liabilities
$
9,872
$
7,095
Note 8. Fair Value Measurements
The Company complies with the provisions of FASB ASC 820 “Fair Value Measurements” for its financial and non-financial assets and liabilities. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis.
ASC 820 clarifies that fair value is an exit price representing the amount that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
•
Level 1- Observable inputs such as quoted prices in active markets;
•
Level 2- Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
•
Level 3- Unobservable inputs in which there is little or no market data, such as internally developed valuation models which require the reporting entity to develop its own assumptions.
As of September 30, 2021 and 2020, the Company did not have any assets held for sale that had been measured at fair value on a non-recurring basis.
Management Security Plan
During August 2020, the Company paid out a lump sum of approximately $5,175,000 to all beneficiaries in the Management Security Plan, following the equivalent annuity approach. The Company used a third-party service provider to assist in the evaluation of investments in this plan. For prior year investment valuations, the Company used current market interest rates, quality estimates by rating agencies and valuation estimates by active market participants in order to determine values. As of September 30, 2021, due to the lump sum payment made in August 2020, the deferred retirements benefit was zero.
Note 9. Common Stock and Options
Effective January 27, 2015, the Company’s Board of Directors adopted the 2015 Stock Incentive Plan (the “2015 Plan”) which provides for up to 1,250,000 common shares available for issuance to provide a long-term incentive plan for officers, employees, directors and/or consultants to directly link incentives to stockholder value. The 2015 Plan was approved by the Company’s stockholders in February 2015. The Company’s 2015 Plan provides for grants to executives in various forms including restricted shares of the Company’s common stock and stock options. Awards are discretionary and are determined by the Compensation Committee of the Board of Directors. Awards vest based upon service conditions. Non-vested restricted shares generally vest over requisite service periods of one to six years from the date of grant.
Stock Compensation - Board of Directors
The Board of Directors can either elect to receive stock compensation or cash for their fees for services provided. Stock-based compensation expense relating to the Board of Directors fees was approximately $844,000, $733,000 and $869,000 for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.
Restricted Stock
In November 2017, a senior executive was awarded 5,000 restricted shares of the Company’s common stock (“Restricted Stock”) under the 2015 Plan at a weighted average fair value of $31.95 per common share, vesting over 2.5 years.
On November 10, 2020, the Company awarded 5,885 restricted shares of the Company’s common stock to certain executives and senior managers under the 2015 Plan at a weighted average fair value of $31.20 per common share, vesting on January 1, 2022.
The following table represents a summary of the status of the Company’s nonvested shares:
Nonvested Shares
Shares
Weighted-
Average
Grant Date
Fair Value
Nonvested Shares at September 30, 2018
7,333
$
41.46
Vested during fiscal year 2019
(1,667
)
31.95
Nonvested Shares at September 30, 2019
5,666
44.26
Vested during fiscal year 2020
(5,666
)
44.26
Nonvested Shares at September 30, 2020
-
-
Granted during fiscal year 2021
5,885
31.20
Nonvested Shares at September 30, 2021
5,885
$
31.20
Stock compensation expense related to the Restricted Stock totaled approximately $144,000, $69,000, and $104,000 for the fiscal years ended September 30, 2021, 2020 and 2019, respectively. There was approximately $40,000 and $0 of total unrecognized stock compensation costs related to unvested stock compensation for the Restricted Stock grants at September 30, 2021 and September 30, 2020, respectively.
For the fiscal year ended September 30, 2021, no shares vested.
For the fiscal year ended September 30, 2020, 5,666 shares with a grant date fair value of approximately $251,000 became fully vested.
For the fiscal year ended September 30, 2019, 1,667 shares with a grant date fair value of approximately $53,000 became fully vested.
Stock Option Grant
Stock option grants of 118,000 options to certain Officers and Managers of the Company (collectively the “2020 Option Grants”) were granted on October 11, 2019. The option exercise price was set at $33.96, the closing price on October 11, 2019. The 2020 Option Grants will vest as follows: (i) 25% of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $35.00; (ii) 25% of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $40.00; (iii) 25% of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $45.00; and (iv) 25% of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $50.00. If the applicable stock price hurdles have not been achieved by (A) the date that is 18 months following the termination of employment, if the employment is terminated due to death or disability, (B) the date that is 12 months following the termination of employment, if the employment is terminated by the Company without cause, by the employee with good reason, or due to the employee’s retirement, or (C) the date of the
termination of employment for any other reason, then any unvested options will be forfeited. In addition, if the applicable stock price hurdles have not been achieved by December 31, 2022, then any unvested options will be forfeited. The 2020 Option Grants will also become vested to the extent that the applicable stock price hurdles are satisfied in connection with a change in control of the Company. During the fiscal year ended September 30, 2021, the stock did not trade above $40.00 per share for twenty consecutive days (the $35.00 per share threshold was met during fiscal year 2020 and thus 25% was previously vested); accordingly, no additional amounts of the 2020 Option Grants vested at September 30, 2021.
Stock option grants of 10,000 options to Mr. John Kiernan (the “2019 Option Grants”) were granted on October 25, 2018. The option exercise price for these options was set at $33.34, the closing price on October 25, 2018. The 2019 Option Grants will vest as follows: (i) 3,333 of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $40.00; (ii) 3,333 of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $45.00; and (iii) 3,334 of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $50.00. If the applicable stock price hurdles have not been achieved by (A) the date that is 18 months following Mr. Kiernan’s termination of employment, if Mr. Kiernan’s employment is terminated due to death or disability, (B) the date that is 12 months following Mr. Kiernan’s termination of employment, if Mr. Kiernan’s employment is terminated by the Company without cause, by Mr. Kiernan with good reason, or due to Mr. Kiernan’s retirement, or (C) the date of the termination of Mr. Kiernan’s employment for any other reason, then any unvested options will be forfeited. In addition, if the applicable stock price hurdles have not been achieved by December 31, 2021, then any unvested options will be forfeited. The 2019 Option Grants will also become vested to the extent that the applicable stock price hurdles are satisfied in connection with a change in control of the Company. Since the date of grant the stock did not trade above $40.00 per share for twenty consecutive days; accordingly, none of the 2019 Option Grants are vested at September 30, 2021.
Stock option grants of 210,000 options to Mr. Remy Trafelet and 90,000 options to Mr. John Kiernan (collectively, the “2018 Option Grants”) were granted on September 7, 2018. The option exercise price for these options was set at $33.60, the closing price on September 7, 2018. The 2018 Option Grants will vest as follows: (i) 25% of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $35.00; (ii) 25% of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $40.00; (iii) 25% of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $45.00; and (iv) 25% of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $50.00. If the applicable stock price hurdles have not been achieved by (A) the date that is 18 months following the respective Executive’s termination of employment, if the respective Executive’s employment is terminated due to death or disability, (B) the date that is 12 months following the respective Executive’s termination of employment, if the respective Executive’s employment is terminated by the Company without cause, by the respective Executive with good reason, or due to the respective Executive’s retirement, or (C) the date of the termination of the respective Executive’s employment for any other reason, then any unvested options will be forfeited. In addition, if the applicable stock price hurdles have not been achieved by December 31, 2021, then any unvested options will be forfeited. The 2018 Option Grants will also become vested to the extent that the applicable stock price hurdles are satisfied in connection with a change in control of the Company. During the fiscal year ended September 30, 2021, the stock did not trade above $40.00 per share for a consecutive twenty days (the $35.00 per share threshold was met during fiscal year 2020 and thus 25% was previously vested); accordingly, no additional stock options of Mr. Kiernan's 2018 Option Grants vested at September 30, 2021. As set forth below, more than a majority of the 2018 Option Grants issued to Mr. Trafelet were forfeited, vesting conditions of the remainder were modified, all pursuant to the Alico Settlement Agreement, and as noted below, such Option Grants issued to Mr. Trafelet have subsequently all been forfeited.
A stock option grant of 300,000 options in the case of Mr. Trafelet and 225,000 options in the case of each of Mr. Henry Slack and Mr. George Brokaw (collectively, the “2016 Option Grants”) were granted on December 31, 2016. The option price was set at $27.15, the closing price on December 31, 2016. The 2016 Option Grants will vest as follows: (i) 25% of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $60.00; (ii) 25% of the options will vest if such price during a consecutive 20-trading day period exceeds $75.00; (iii) 25% of the options will vest if such price during a consecutive 20-trading day period exceeds $90.00; and (iv) 25% of the options will vest if such price during a consecutive 20-trading day period exceeds $105.00. If the applicable stock price hurdles have not been achieved by (A) the second anniversary of the Executive’s termination of employment, if the Executive’s employment is terminated due to death or disability, (B) the date that is 18 months following the Executive’s termination of employment, if the Executive’s employment is terminated by the Company without cause, by the Executive with good reason, or due to the Executive’s retirement, or (C) the date of the termination of the Executive’s employment for any other reason, then any unvested options will be forfeited. In addition, if the applicable stock price hurdles have not been achieved by the fifth anniversary of the grant date (or the fourth anniversary of the grant date, in the case of the tranche described in clause (i) above), then any unvested options will be forfeited. The 2016 Option Grants will also become vested to the extent that the applicable stock price hurdles are satisfied in connection with a change in control of the Company. Since the date of grant the stock did not trade above $60.00 per share for twenty consecutive days; accordingly, none of the 2016 Option Grants are vested at September 30, 2021. All the 2016 Option Grants issued to Mr. Trafelet were forfeited pursuant to the Alico Settlement Agreement, as defined below.
Pursuant to an Alico Settlement Agreement dated February 11, 2019 (described in Note 15. “Related Party Transactions”), which was unanimously approved by the Board of Directors, Mr. Trafelet agreed to voluntarily resign from his roles as President and Chief Executive Officer and a director of the Company. Under the Settlement Agreement, Mr. Trafelet forfeited (i) all of the 2016 Option Grants granted to him
and (ii) all of the 2018 Option Grants granted to him in September 2018, other than 26,250 stock options that were to vest if the minimum price of Alico's common stock over 20 consecutive trading days exceeded $35.00 per share and 26,250 stock options that were to vest if the minimum price of Alico's common stock over 20 consecutive trading days exceeded $40.00 per share (“2019 Modified Option Grant”), in each case, by the first anniversary of the date of the Alico Settlement Agreement (collectively, the "Retained Options"). Any Retained Options that vest in accordance with their terms were to expire on the date that is six months following the date on which the Retained Option vests, and any Retained Options that do not vest by the first anniversary of the Alico Settlement Agreement were to be forfeited as of such first anniversary. Although, by the first anniversary of the Alico Settlement Agreement, the Company’s common stock traded above $35.00 per share for a consecutive twenty days and thus 26,250 stock options from the 2019 Modified Options Grant vested, such Retained Options were not exercised within six months following the date on which such Retained Options vested, and accordingly they were forfeited. Additionally, since the stock did not trade above $40.00 per share for a consecutive twenty days by the first anniversary of the date of the Alico Settlement Agreement, the other 26,250 stock options from the 2019 Modified Option Grants never vested and were forfeited.
Forfeitures of all stock options were recognized as incurred.
The following table represents a summary of the Company’s stock option activity:
Number of
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
(years)
Aggregate
Intrinsic
Value
Balance - September 30, 2019
227,500
$
31.46
1.22
-
Granted during fiscal year 2020
118,000
33.96
2.25
-
Forfeitures/expired during fiscal year 2020
(52,500
)
33.60
-
-
Balance - September 30, 2020
293,000
32.09
1.79
-
Forfeitures/expired during fiscal year 2021
(75,000
)
27.15
-
-
Balance - September 30, 2021
218,000
$
33.78
0.79
-
Stock compensation expense related to the options totaled approximately $242,000, $504,000, and $674,000 for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.
At September 30, 2021 and September 30, 2020, there was approximately $134,000 and $376,000, respectively, of total unrecognized stock compensation costs related to unvested share-based compensation for the option grants. The total unrecognized compensation cost as of September 30, 2021 is expected to be recognized over a weighted-average period of 0.72 years.
The fair value of the 2020, 2019, and 2018 Option Grants was estimated on the date of grant using a Monte Carlo valuation model that uses the assumptions noted in the following table. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding; the range given below results from different timeframes for the various market conditions being met.
2020 Option Grant
Expected Volatility
26.0
%
Expected Term (in years)
3.61
Risk Free Rate
1.60
%
The weighted-average grant-date fair value of the 2020 Option Grant was $3.20.
2019 Modified Option Grant
Expected Volatility
25.0
%
Expected Term (in years)
1.50
Risk Free Rate
2.52
%
The weighted-average grant-date fair value of the 2019 Modified Option Grant was $1.40.
2019 Option Grants
Expected Volatility
30.0
%
Expected Term (in years)
4.09
Risk Free Rate
2.95
%
The weighted-average grant-date fair value of the 2019 Option Grants was $7.10.
As of September 30, 2021, there remained 1,014,500 common shares available for issuance under the 2015 Plan.
Note 10. Treasury Stock
In March 2017, the Board of Directors authorized the repurchase of up to $5,000,000 of the Company’s common stock beginning March 9, 2017 and continuing through March 9, 2019. In May 2017, the Board of Directors authorized the repurchase of up to an additional $2,000,000 of the Company’s common stock beginning May 24, 2017 and continuing through May 24, 2019. The stock repurchases made under this repurchase were made through open market transactions at times and in such amounts as the Company’s broker determined subject to the provisions of SEC Rule 10b-18.
On October 3, 2018, the Company completed a tender offer of 752,234 shares at a price of $34.00 per share aggregating $25,575,956. 734 Investors, Alico's largest stockholder from 2013 until November 12, 2019, participated in the tender offer by selling a small percentage of its holdings.
On October 10, 2019, the Board of Directors authorized the repurchase of up to 7,000 shares of the Company’s common stock from 734 Investors in a privately negotiated repurchase of shares. On October 15, 2019, the Company entered into a repurchase agreement to repurchase a total of 7,000 shares of the Company’s common stock from 734 Investors, effective October 15, 2019.
The following table illustrates the Company’s treasury stock purchases for the fiscal years ended September 30, 2021, 2020 and 2019:
(in thousands, except share amounts)
Total
Number of
Shares
Purchased
Average
Price
Paid
Per Share
Total Shares
Purchased
as Part of
Publicly
Announced
Plan or
Program
Total Dollar
Value of
Shares
Purchased
Fiscal Year Ended September 30,:
-
$
-
-
$
-
7,000
$
33.95
1,481,640
$
752,234
$
34.00
1,474,640
$
25,576
The following table outlines the Company’s treasury stock transactions during the past three fiscal years:
(in thousands, except share amounts)
Shares
Cost
Balance at September 30, 2018
216,188
$
7,536
Purchased
752,234
25,576
Issued to Employees and Directors
(28,790
)
(1,169
)
Balance at September 30, 2019
939,632
31,943
Purchased
7,000
Issued to Employees and Directors
(23,011
)
(1,402
)
Balance at September 30, 2020
923,621
30,779
Purchased
-
-
Issued to Employees and Directors
(33,480
)
(926
)
Balance at September 30, 2021
890,141
$
29,853
Note 11. Income Taxes
On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act contains significant changes to corporate taxes, including a permanent reduction of the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. The 21% U.S. corporate tax rate is fully applicable to the fiscal year ended September 30, 2019 and each year thereafter.
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (H.R. 748) (the “CARES Act”). Among the changes to the U.S. federal income tax rules, the CARES Act restored net operating loss carryback rules that were eliminated by the 2017 Tax Cuts and Jobs Act, modified the limit on the deduction for net interest expense, and accelerated the timeframe for refunds of AMT credit carryovers. From a federal tax reporting standpoint, the Company had a federal tax net operating loss (“NOL”) in the amount of $2,390,415 for the fiscal year ended September 30, 2020 and, pursuant to the provisions of the CARES Act, Form 1139 was filed for the NOL carryback during fiscal year ended September 30, 2021, resulting in a refund due of $580,314.
In October 2019, the Internal Revenue Service concluded their audit of the September 30, 2015 tax year with no changes. The Federal and State filings remain subject to examination by tax authorities for tax periods ending after September 30, 2017.
The income tax provision for the years ended September 30, 2021, 2020 and 2019 consists of the following:
(in thousands)
Fiscal Year Ended September 30,
Current:
Federal income tax
$
7,347
$
$
7,314
State income tax
1,971
(71
)
2,202
Total current
9,318
9,516
Deferred:
Federal income tax
2,144
6,151
2,995
State income tax
1,452
Total deferred
2,249
7,603
3,267
Income tax provision
$
11,567
$
7,663
$
12,783
Income tax provision attributable to income before income taxes differed from the amount computed by applying the statutory federal income tax rate of 21% to income before income taxes for each of the fiscal years ended September 30, 2021, September 30, 2020 and September 30, 2019, respectively, as a result of the following:
(in thousands)
Fiscal Year Ended September 30,
Income tax at the statutory federal rate
$
9,741
$
6,568
$
10,587
Increase (decrease) resulting from:
State income taxes, net of federal benefit
1,645
1,217
1,947
Permanent and other reconciling items, net
State rate change
-
(156
)
-
Other
(136
)
Income tax provision
$
11,567
$
7,663
$
12,783
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of September 30, 2021, and 2020 are presented below:
(in thousands)
September 30,
Deferred tax assets:
Goodwill
$
14,463
$
16,304
Inventories
Stock compensation
Intangibles
Other
Total deferred tax assets
16,019
18,142
Deferred tax liabilities:
Property and equipment
56,842
56,707
Investment in Citree
1,016
Prepaid insurance
Total deferred tax liabilities
57,996
57,870
Net deferred income tax liabilities
$
(41,977
)
$
(39,728
)
Note 12. Segment Information
Segments
Operating segments are defined in the criteria established under the FASB ASC Topic 280 as components of public entities that engage in business activities from which they may earn revenues and incur expenses for which separate financial information is available and which is evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to assess performance and allocate resources. The Company’s CODM assesses performance and allocates resources based on two operating segments: Alico Citrus and Land Management and Other Operations.
Total revenues represent sales to unaffiliated customers, as reported in the Consolidated Statements of Operations. Goods and services produced by these segments are sold to wholesalers and processors in the United States who prepare the products for consumption. The Company evaluates the segments’ performance based on direct margins (gross profit) from operations before general and administrative expenses, interest expense, other income (expense) and income taxes, not including nonrecurring gains and losses.
Information by operating segment is as follows:
(in thousands)
Fiscal Year Ended September 30,
Revenues:
Alico Citrus
$
105,796
$
89,369
$
119,031
Land Management and Other Operations
2,768
3,138
3,220
Total revenues
108,564
92,507
122,251
Operating expenses:
Alico Citrus
83,893
72,281
59,594
Land Management and Other Operations
2,307
2,297
Total operating expenses
84,671
74,588
61,891
Gross profit:
Alico Citrus
21,903
17,088
59,437
Land Management and Other Operations
1,990
Total gross profit
23,893
17,919
60,360
Capital expenditures:
Alico Citrus
41,785
21,705
20,000
Total capital expenditures
41,785
21,705
20,000
Depreciation, depletion and amortization:
Alico Citrus
14,523
13,584
12,614
Land Management and Other Operations
Other Depreciation, Depletion and Amortization
Total depreciation, depletion and amortization
$
15,122
$
14,282
$
13,603
(in thousands)
September 30,
Assets:
Alico Citrus
$
418,633
$
406,763
Land Management and Other Operations
13,230
15,367
Other Corporate Assets
1,354
1,807
Total Assets
$
433,217
$
423,937
Note 13. Leases
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This guidance requires entities that sign leases as a lessee to recognize right-of-use assets and lease liabilities for those leases classified as operating leases under previous U.S. GAAP. The accounting applied by a lessor is largely unchanged from that applied under previous U.S. GAAP. The Company adopted ASU 2016-02 on October 1, 2019.
The Company determines whether an arrangement is a lease at inception. The Company’s leases consist of operating lease arrangements for certain office space, tractor leases and IT facilities. When these lease arrangements include lease and non-lease components, the Company accounts for lease components and non-lease components (e.g., common area maintenance) separately based on their relative standalone prices.
Any lease arrangements with an initial term of 12 months or less are not recorded on the Company’s Consolidated Balance Sheets, and it recognizes lease cost for these lease arrangements on a straight-line basis over the lease term. Many lease arrangements provide the options to exercise one or more renewal terms or to terminate the lease arrangement. The Company includes these options when it will be reasonably certain to exercise them in the lease term used to establish the right-of-use assets and lease liabilities. Generally, lease agreements do not include an option to purchase the leased asset, residual value guarantees or material restrictive covenants.
As most of our lease arrangements do not provide an implicit interest rate, the Company applies an incremental borrowing rate based on the information available at the commencement date of the lease arrangement to determine the present value of lease payments.
No lease costs associated with finance leases and sale-leaseback transactions occurred and our lease income associated with lessor and sublease arrangements are not material to our Consolidated Financial Statements.
Our operating leases are reported in our Consolidated Balance Sheets as follows:
(in thousands)
September 30,
September 30,
Operating lease components
Classification
Right-of-use assets - non-current
Other non-current assets
$
$
Current lease liabilities
Other current liabilities
$
$
Non-current lease liabilities
Other liabilities
$
$
Our operating leases cost components are reported in our Consolidated Statements of Operations as follows:
(in thousands)
September 30,
September 30,
Operating lease components
Classification
Operating lease costs
General and administrative expenses
$
$
Operating lease right-of-use asset impairment
Other expense
$
-
$
Future maturities of our operating lease obligations as of September 30, 2021 by fiscal year are as follows:
(in thousands)
$
Total noncancelable future lease obligations
$
Less: Interest
(6
)
Present value of lease obligations
$
September 30,
Weighted-average remaining lease term
0.66 years
Weighted-average discount rate
3.30
%
Cash flow information related to leases consists of the following:
(in thousands)
September 30,
September 30,
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
$
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
$
-
$
1,095
Note 14. Employee Benefits Plans
Management Security Plan
The management security plan (“MSP”) was a nonqualified, noncontributory defined supplemental deferred retirement benefit plan for a select group of management personnel. The MSP was set up to provide a fixed supplemental retirement benefit for 180 months. The MSP was frozen as of September 30, 2017. As a result, no new participants were being added to the MSP and no further benefits were accumulating.
The MSP benefit expense and the projected management security plan benefit obligation were determined using assumptions as of the end of the respective year. The weighted-average discount rate used to compute the obligation was 4.08% in fiscal year 2019.
Actuarial gains or losses were recognized when incurred; therefore, the end of year benefit obligation was the same as the accrued benefit costs recognized in the Consolidated Balance Sheets.
The amount of MSP benefit expense charged to costs and expenses was as follows:
(in thousands)
Fiscal Year Ended September 30,
Service cost
$
-
$
-
Interest cost
MSP termination adjustments
-
Recognized actuarial gain adjustment
Total
$
$
1,169
The following provides a roll-forward of the MSP benefit obligation for the fiscal year ended September 30, 2020, the year in which all termination benefits were paid:
(in thousands)
September 30,
Change in projected benefit obligation:
Benefit obligation at beginning of year
$
5,226
Interest cost
Benefits paid
(258
)
MSP termination benefits payment
(5,175
)
Recognized actuarial gain adjustment
Benefit obligation at end of year
$
-
Funded status at end of year
$
-
Effective September 30, 2018, the Company terminated the MSP. Under the MSP termination, payout for benefits covered utilizing the applicable Internal Revenue Code regulations were not able to be commenced until at least twelve months following plan termination decision and needed to be fully paid out within twenty-four (24) months following plan termination. During August 2020, the Company caused the MSP to pay the lump sum termination benefits of approximately $5,175,000 to all MSP beneficiaries.
During the fiscal year ended September 30, 2019, the Company determined to pay out a lump sum under the equivalent annuity approach, whereby the payout under this approach was designed to mitigate participants tax burden. Under this approach, the Company would cover the amount needed to purchase an annuity providing the same after-tax benefit as if the plan was never terminated. As a result, the Company recorded an additional liability of approximately $720,000.
The Company had established a “Rabbi Trust” to provide for the potential funding of accrued benefits under the MSP. According to the terms of the Rabbi Trust, funding was voluntary until a change of control of the Company as defined in the Management Security Plan Trust Agreement occurs. Upon a change of control, funding would be triggered. As of September 30, 2018, date the Company terminated the MSP, the Rabbi Trust had no assets, and no change of control had occurred, and no funding had been triggered.
Profit Sharing and 401(k) Plans
The Company maintains a 401(k) employee savings plan for eligible employees, which provides up to a 4% matching contribution payable on employee payroll deferrals. The Company’s matching funds vest to the employee immediately, pursuant to a safe harbor election effective in October 2012. The Company’s contribution to the plan was approximately $401,000, $397,000 and $380,000 for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.
The Company also maintains a Profit Sharing Plan (“Plan”) that is fully funded by contributions from the Company. Contributions to the Plan are discretionary and determined annually by the Company’s Board of Directors. Contributions to employee accounts are based on the participant’s compensation. The Company did not contribute to the Plan for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.
Note 15. Related Party Transactions
Henry R. Slack and George R. Brokaw
On December 31, 2016, the Company entered into new employment agreements (collectively, the “Employment Agreements”) with Henry R. Slack, and George R. Brokaw. Mr. Slack previously served as the Executive Chairman of the Company, and Mr. Brokaw previously served as the Executive Vice Chairman of the Company. The Employment Agreements provided for an annual base salary of $250,000 in the case of Mr. Slack and provides for an annual base salary of $250,000 in the case of Mr. Brokaw.
Beginning June 26, 2017, both Messrs. Slack and Brokaw agreed to waive payment of their salaries.
Effective July 1, 2019, Mr. Slack resigned his employment with the Company as Executive Chairman. Effective December 31, 2019, Mr. Brokaw resigned his employment with the Company as Executive Vice Chairman. Mr. Slack and Mr. Brokaw continue to serve on the Board of the Company.
Remy W. Trafelet
As described above, on February 11, 2019 and as contemplated by the Alico Settlement Agreement, Mr. Trafelet submitted to the Board his resignation as President and Chief Executive Officer of the Company and a member of the Board, effective upon the execution of the Alico Settlement Agreement. Also, on February 11, 2019, as contemplated by the Settlement Agreement, the Company entered into a consulting agreement (the "Consulting Agreement") with Mr. Trafelet and 3584 Inc., an entity controlled by Mr. Trafelet (the "Consultant"). Pursuant to the Consulting Agreement, Mr. Trafelet made himself available to provide consulting services to the Company through the Consultant for up to 24 months. In exchange for the consulting services, the Consultant received an annual consulting fee of $400,000. The Company recorded an expense of $800,000, representing the full amount due under the agreement, in fiscal year 2019 upon the execution of the agreement. As of September 30, 2021, the Company has paid $800,000 in consulting fees and no further payments are due under this Consulting Agreement.
Shared Services Agreement
The Company had a shared services agreement with Trafelet Brokaw Capital Management, L.P. (“TBCM”), whereby the Company reimbursed TBCM for use of office space and various administrative and support services. The agreement expired December 31, 2018 and was not extended or renewed. The Company expensed approximately $0, $0 and $155,000 for the fiscal years ended September 30, 2021, 2020 and 2019, respectively. As of September 30, 2021 and 2020, the Company did not have any outstanding amounts with TBCM.
Capital Contribution
On September 10, 2020, all operating partners of Citree received a funding notice relating to an additional Cash Capital Contribution (“Contribution”) requirement of approximately $600,000 as a result of trees producing limited revenue because they are still in early-stage development, a reduction in market price for citrus fruit for the 2019/20 harvest season due to excess inventories and the adoption of a more extensive caretaking plan focused on limiting the impact of citrus greening. The Company’s portion of the Contribution was approximately $306,000 and was funded on September 24, 2020. The remaining portion of the Contribution of $294,000 was funded by the noncontrolling parties.
Distribution of Shares by Alico’s Largest Stockholder
On November 12, 2019, 734 Investors, the Company’s largest stockholder at the time, distributed the 3,173,405 shares of Company common stock held by it, on a pro rata basis, to its members. The Company understands that this share distribution was made in anticipation of a subsequent dissolution of 734 Investors. Transfers of these shares are not registered on any current Alico registration statement, but the shares are potentially transferable pursuant to Rule 144, subject to certain customary restrictions.
Note 16. Commitments and Contingencies
Operating Leases
The Company has obligations under various non-cancelable long-term operating leases primarily for office space and equipment. In addition, the Company has various obligations under other equipment leases of less than one year.
Total rent expense was approximately $304,000, $308,000 and $450,000 for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.
The future minimum annual rental payments under non-cancelable operating leases are as follows:
(in thousands)
$
Total
$
Purchase Commitments
The Company enters into contracts for the purchase of citrus trees during the normal course of its business. As of September 30, 2021, the Company had approximately $2,405,000 relating to outstanding commitments for these purchases that will be paid upon delivery of the remaining citrus trees.
Letters of Credit
The Company had outstanding standby letters of credit in the total amount of approximately $336,000 and $399,000 at September 30, 2021 and September 30, 2020, respectively, to secure its various contractual obligations.
Legal Proceedings
From time to time, Alico may be involved in litigation relating to claims arising out of its operations in the normal course of business. There are no current legal proceedings to which the Company is a party or of which any of its property is subject that it believes will have a material adverse effect on its financial position, results of operations or cash flows.
Note 17. Selected Quarterly Financial Data (unaudited)
Summarized quarterly financial data for the fiscal years ended September 30, 2021, and 2020 are computed independently each quarter, therefore, the sum of the quarter amounts may not equal the total amount for the respective year due to rounding as follows:
(in thousands, except per share amounts)
Fiscal Quarter Ended
December 31,
March 31,
June 30,
September 30,
Total operating revenues
$
13,732
$
11,005
$
55,944
$
50,515
$
34,888
$
26,122
$
4,000
$
4,865
Total operating expenses
8,335
5,391
45,718
43,898
26,378
19,902
4,240
5,397
Gross profit (loss)
5,397
5,614
10,226
6,617
8,510
6,220
(240
)
(532
)
General and administrative expenses
2,528
2,760
2,653
2,953
1,911
2,556
2,361
2,729
Other income (expense), net
2,185
(1,595
)
(1,104
)
1,398
29,387
(1,405
)
1,479
26,058
Income (loss) before income taxes
5,054
1,259
6,469
5,062
35,986
2,259
(1,122
)
22,797
Income tax (benefit) expense
1,250
1,579
1,496
8,853
(115
)
5,635
Net income (loss)
3,804
4,890
3,566
27,133
2,088
(1,007
)
17,162
Net loss (income) attributable to noncontrolling interests
(107
)
(23
)
(14
)
Net income (loss) attributable to Alico Inc. common stockholders
$
3,845
$
$
4,867
$
3,571
$
27,119
$
2,096
$
(972
)
$
17,204
Earnings (loss) per share:
Basic
$
0.51
$
0.11
$
0.65
$
0.48
$
3.61
$
0.28
$
(0.13
)
$
2.29
Diluted
$
0.51
$
0.11
$
0.65
$
0.48
$
3.61
$
0.28
$
(0.13
)
$
2.29
Operating revenues and operating expenses for the fiscal quarter ended September 30, 2020 include approximately $3,246,000 and approximately $2,951,000, respectively, relating to the grove management services being provided to a third-party. Other income for the fiscal quarter ended September 30, 2020 includes a gain on sale of assets of approximately $27,470,000 (see Note 4. “Assets Held for Sale” and Note 5. “Property and Equipment, Net” for further information). Operating revenues and operating expenses for the fiscal quarter ended December 31, 2020 include approximately $2,869,000 and approximately $2,631,000, respectively, relating to the grove management services being provided to a third-party. Operating revenues and operating expenses for the fiscal quarter ended March 31, 2021 include approximately $4,685,000 and approximately $4,150,000, respectively, relating to the grove management services being provided to a third-party. Operating revenues and operating expenses for the fiscal quarter ended June 30, 2021 include approximately $5,114,000 and approximately $4,545,000, respectively, relating to the grove management services being provided to a third-party. Other income for the fiscal quarter ended June 30, 2021 includes a gain on sale of assets of approximately $30,288,000 (see Note 4. “Assets Held for Sale” and Note 5. “Property and Equipment, Net” for further information). General and administrative expenses for the fiscal quarter ended June 30, 2021 include the receipt of insurance proceeds for the reimbursement of legal fees in the amount of approximately $658,000 relating to corporate legal matters. Operating revenues and operating expenses for the fiscal quarter ended September 30, 2021 include approximately $3,083,000 and approximately $3,015,000, respectively, relating to the grove management services being provided to a third-party.
Note 18. Subsequent Events
On October 15, 2021 and November 5, 2021, the Company awarded 2,500 and 2,224 restricted shares of the Company’s common stock to certain executives and senior managers under the 2015 Plan at a weighted average fair value of $35.77 per common share, with 2,500 vesting on January 1, 2022 and the remaining shares vesting on January 1, 2023.
On December 2, 2021, the Board of Directors of the Company declared a cash dividend for the first quarter of fiscal year 2022 of $0.50 per share on its outstanding common stock to be paid to stockholders of record as of December 31, 2021, with payment expected on January 14, 2022.
On December 3, 2021, the State of Florida purchased, under the Florida Forever program, approximately 1,638 acres of the Alico Ranch for approximately $5,675,000 pursuant to an option agreement entered into on September 21, 2021 between the State of Florida and the Company.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
(a)
Evaluation of Disclosure Controls and Procedures.
Our Principal Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) as of the end of the period covered by this report. Based on this evaluation, our Principal Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.
(b)
Changes in Internal Control over Financial Reporting.
During the fourth fiscal quarter ended September 30, 2021, there were no changes in our internal controls over financial reporting that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
(c)
Management Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:
(i)
pertain to the maintenance of records, that in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
(iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2021. In making this assessment, management used the criteria described in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Based on our assessment and those criteria, management concluded that our internal control over financial reporting was effective as of September 30, 2021. Management reviewed the results of their assessment with our Audit Committee.

---

ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None.
PART III
Certain information required by Part III is omitted from this Annual Report on Form 10-K because we will file a definitive Proxy Statement for the 2021 Annual Meeting of Stockholders pursuant to Regulation 14A of the Securities Exchange Act of 1934, (the “Proxy Statement”), not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and the applicable information included in the Proxy Statement is incorporated herein by reference.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
Information concerning our directors and nominees and other information as required by this Item 10 are hereby incorporated by reference from our Proxy Statement to be filed with the SEC pursuant to Regulation 14A.
Code of Ethics
We have adopted a Code of Business Conduct and Ethics that is intended to serve as a code of ethics for purposes of Item 406 of Regulation S-K. Our Code of Business Conduct and Ethics is posted on our website http://www.alicoinc.com (at the Investor homepage under "Corporate Governance") and we intend to disclose on our website any amendments to, or waiver from, such code.

---

ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The information required by Item 11 regarding executive compensation is included under the headings “Compensation Discussion and Analysis,” “Compensation Committee Report” and “Compensation Committee Interlocks and Insider Participation” in the Proxy Statement to be filed with the SEC pursuant to Regulation 14A.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information concerning the ownership of certain beneficial owners and management and related stockholder matters as required by this Item 12 is hereby incorporated by reference to the Proxy Statement to be filed with the SEC pursuant to Regulation 14A.
Equity Compensation Arrangements
Effective January 27, 2015, the Board of Directors adopted the 2015 Stock Incentive Plan (the “2015 Plan”) which provides for up to 1,250,000 shares of the Company’s common stock to be available for issuance to provide a long-term incentive plan for officers, employees, directors and/or consultants to directly link incentives to stockholders' value. The 2015 Plan was approved by stockholders in February 2015.
The following table illustrates the common shares remaining available for future issuance under the 2015 Plan as of September 30, 2021:
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available for
future issuance under
equity plans
Plan Category:
Equity compensation plans approved by security holders
218,000
$
33.78
1,014,500
Equity compensation plans not approved by security holders
-
N/A
-
Total
218,000
$
33.78
1,014,500
In October 2018, the Company awarded 10,000 stock options to one senior executive under the 2015 Plan.
In October 2019, the Company awarded 118,000 stock options to senior managers and certain other managers under the 2015 Plan. Additionally, in each of February 2020 and August 2020, one former senior executive forfeited 26,250 stock options, aggregating 52,500 in total, which were originally issued under the 2015 Plan and no replacement options were granted.
In February 2019, pursuant to a settlement agreement, a senior executive of the Company forfeited an aggregate of 457,500 stock options, which were originally issued under the 2015 Plan and no replacement options were granted.
On November 10, 2020, the Company awarded 5,885 restricted shares of the Company’s common stock to certain executives and senior managers under the 2015 Plan at a weighted average fair value of $31.20 per common share, vesting on January 1, 2022.
On October 15 and November 5, 2021, the Company awarded 2,500 and 2,224 restricted shares of the Company’s common stock to certain executives and senior managers under the 2015 Plan at a weighted average fair value of $35.77 per common share, with 2,500 vesting on January 1, 2022 and the remaining shares vesting on January 1, 2023.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions and Director Independence
The information concerning relationships and related transactions as required by this Item 13 is hereby incorporated by reference to our Proxy Statement to be filed with the SEC pursuant to Regulation 14A.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountants Fees and Services
Information concerning principal accounting fees and services as required by this Item 14 is hereby incorporated by reference to the Proxy Statement to be filed with the SEC pursuant to Regulation 14A.
PART IV

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules
(a)
Documents filed as part of this report
(1)
Financial Statements:
Our Consolidated Financial Statements are included in Part II, Item 8 of this Annual Report on Form 10-K.
(2)
Financial Statement Schedules:
Financial statement schedules are omitted as the required information is either inapplicable or the information is presented in our Consolidated Financial Statements or notes thereto.
(3)
Exhibits
The exhibits listed in the Exhibit Index in (b) below are filed or incorporated by reference as part of this Annual Report on Form 10-K.
(b)
Exhibit Index
Exhibit
Number
Exhibit Index
2.1***
Asset Purchase Agreement, dated as of December 1, 2014, by and among Alico, Inc., Orange-Co, LP, and, solely with respect to certain sections thereof, Orange-Co, LLC and Tamiami Citrus, LLC. (incorporated by reference to Exhibit 2.1 of Alico’s filing on Form 8-K dated December 5, 2014)
2.2***
Agreement and Plan of Merger, dated as of December 2, 2014, by and among Alico, Inc., 734 Sub, LLC, 734 Citrus Holdings, LLC, and, solely with respect to certain sections thereof, 734 Agriculture, LLC, Rio Verde Ventures, LLC and Clayton G. Wilson (incorporated by reference to Exhibit 2.2 of Alico’s filing on Form 8-K dated December 5, 2014)
3.1
Restated Certificate of Incorporation, dated February 17, 1972 (incorporated by reference to Exhibit 3.1 of Alico's filing on Form 10-K dated December 11, 2017)
3.2
Certificate of Amendment to Certificate of Incorporation, dated January 14, 1974 (incorporated by reference to Alico’s Registration Statement on Form S-8, dated December 21, 2005, Registration No. 333-130575)
3.3
Amendment to Articles of Incorporation, dated January 14, 1987 (incorporated by reference to Alico’s Registration Statement on Form S-8, dated December 21, 2005, Registration No. 333-130575)
3.4
Amendment to Articles of Incorporation, dated December 27, 1988 (incorporated by reference to Alico’s Registration Statement on Form S-8, dated December 21, 2005, Registration No. 333-130575)
3.5
By-Laws of Alico, Inc., amended and restated (incorporated by reference to Exhibit 3.6 of Alico’s filing on Form 8-K dated January 15, 2021
4.1
Description of Securities
10.1
Credit Agreement dated as of December 1, 2014, by and between Alico, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, L.L.C., Alico Land Development, Inc., and Alico Citrus Nursery, L.L.C., as Borrowers and Rabo Agrifinance, Inc., as Lender (incorporated by reference to Exhibit 10.2 of Alico's filing on Form 8-K dated December 5, 2014)
10.2
Purchase and Sale Agreement dated August 7, 2014 (incorporated by reference to Exhibit 10.10 of Alico’s filing on Form 10-K dated December 12, 2014)
10.3*
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.5 of the Company’s quarterly report on Form 10-Q filed with the SEC on May 6, 2013)
10.4*
Management Security Plan(s) Trust Agreement (incorporated by reference to Exhibit 10.6 of the Company’s quarterly report on Form 10-Q filed with the SEC on May 6, 2013)
10.5
Agricultural Lease Agreement dated May 19, 2014 between Alico, Inc. and United States Sugar Corporation. (incorporated by reference to Exhibit 10.1 of the Company’s quarterly report on Form 10-Q filed with the SEC on August 11, 2014)
10.6***
First Amended and Restated Credit Agreement, dated as of December 1, 2014, by and among Alico, Inc., Alico Land Development, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC, Metropolitan Life Insurance Company, and New England Life Insurance Company (incorporated by reference to Exhibit 10.1 of Alico’s filing on Form 8-K dated December 5, 2014)
10.7***
Credit Agreement dated as of December 1, 2014, by and between Alico, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC, Alico Land Development, Inc., and Alico Citrus Nursery, LLC, as Borrowers and Rabo Agrifinance, Inc., as Lender (incorporated by reference to Exhibit 10.2 of Alico’s filing on Form 8-K dated December 5, 2014)
10.8
Shared Services Agreement by and between Alico, Inc. and Trafelet Brokaw Capital Management, L.P. dated July 23, 2018 (incorporated by reference to Exhibit 10.1 of Alico's filing on Form 10-Q dated August 6, 2018)
10.9
Loan Agreement, dated December 31, 2012, by and among 734 Citrus Holdings, LLC, 734 LMC Groves, LLC, 734 Co-Op Groves, LLC, 734 BLP Groves, LLC, 734 Harvest LLC and Prudential Mortgage Capital Company, LLC (the "Prudential Loan Agreement") (incorporated by reference to Exhibit 10.16 of Alico’s filing on Form 10-K dated December 10, 2015)
10.10
Promissory Note A, dated December 31, 2012, by and among 734 Citrus Holdings, LLC, 734 LMC Groves, LLC, 734 Co-Op Groves, LLC, 734 BLP Groves, LLC, 734 Harvest LLC and Prudential Mortgage Capital Company, LLC (incorporated by reference to Exhibit 10.17 of Alico’s filing on Form 10-K dated December 10, 2015)
10.11
Promissory Note B, dated December 31, 2012, by and among 734 Citrus Holdings, LLC, 734 LMC Groves, LLC, 734 Co-Op Groves, LLC, 734 BLP Groves, LLC, 734 Harvest LLC and Prudential Mortgage Capital Company, LLC (incorporated by reference to Exhibit 10.18 of Alico’s filing on Form 10-K dated December 10, 2015)
10.12
Promissory Note C, dated December 31, 2012, by and among 734 Citrus Holdings, LLC, 734 LMC Groves, LLC, 734 Co-Op Groves, LLC, 734 BLP Groves, LLC, 734 Harvest LLC and Prudential Mortgage Capital Company, LLC (incorporated by reference to Exhibit 10.19 of Alico’s filing on Form 10-K dated December 10, 2015)
10.13
First Amendment to Loan Agreement, dated March 26, 2013 (Prudential Loan Agreement) (incorporated by reference to Exhibit 10.20 of Alico’s filing on Form 10-K dated December 10, 2015)
10.14
Promissory Note D, dated March 26, 2013, by and among 734 Citrus Holdings, LLC, 734 LMC Groves, LLC, 734 Co-Op Groves, LLC, 734 BLP Groves, LLC, 734 Harvest LLC and Prudential Mortgage Capital Company, LLC (incorporated by reference to Exhibit 10.21 of Alico’s filing on Form 10-K dated December 10, 2015)
10.15
Loan Agreement, dated September 4, 2014, by and among 734 Citrus Holdings, LLC, 734 LMC Groves, LLC, 734 Co-Op Groves, LLC, 734 BLP Groves, LLC, 734 Harvest LLC and Prudential Mortgage Capital Company, LLC ("Loan E and F") (incorporated by reference to Exhibit 10.22 of Alico’s filing on Form 10-K dated December 10, 2015)
10.16
Promissory Note E, dated September 4, 2014, by and among 734 Citrus Holdings, LLC, 734 LMC Groves, LLC, 734 Co-Op Groves, LLC, 734 BLP Groves, LLC, 734 Harvest LLC and Prudential Mortgage Capital Company, LLC (incorporated by reference to Exhibit 10.23 of Alico’s filing on Form 10-K dated December 10, 2015)
10.17
Promissory Note F, dated September 4, 2014, by and among 734 Citrus Holdings, LLC, 734 LMC Groves, LLC, 734 Co-Op Groves, LLC, 734 BLP Groves, LLC, 734 Harvest LLC and Prudential Mortgage Capital Company, LLC (incorporated by reference to Exhibit 10.24 of Alico’s filing on Form 10-K dated December 10, 2015)
10.18
First Amendment to Loan Agreement, dated April 23, 2015 (Loan E and F) (incorporated by reference to Exhibit 10.25 of Alico’s filing on Form 10-K dated December 10, 2015)
10.19
Second Amendment to the Loan Agreement, dated September 4, 2014 (Prudential Loan Agreement) (incorporated by reference to Exhibit 10.26 of Alico’s filing on Form 10-K dated December 10, 2015)
10.20
Third Amendment to the Loan Agreement, dated April 23, 2015 (Prudential Loan Agreement) (incorporated by reference to Exhibit 10.27 of Alico’s filing on Form 10-K dated December 10, 2015)
10.21
Cancellation and Termination of Note D, dated April 23, 2015, by and among 734 Citrus Holdings, LLC, 734 LMC Groves, LLC, 734 Co-Op Groves, LLC, 734 BLP Groves, LLC, 734 Harvest LLC and Prudential Mortgage Capital Company, LLC (incorporated by reference to Exhibit 10.28 of Alico’s filing on Form 10-K dated December 10, 2015)
10.22
First Amendment to Credit Agreement and Consent with Rabo Agrifinance, Inc. dated February 26, 2015 (incorporated by reference to Exhibit 10.29 of Alico’s filing on Form 10-K dated December 10, 2015)
10.23
Second Amendment to Credit Agreement with Rabo Agrifinance, Inc. dated July 16, 2015 (incorporated by reference to Exhibit 10.30 of Alico’s filing on Form 10-K dated December 10, 2015)
10.24
Amendment to First Amended and Restated Credit Agreement with Metropolitan Life Insurance Company and New England Life Insurance Company, dated February 1, 2015 (incorporated by reference to Exhibit 10.31 of Alico’s filing on Form 10-K dated December 10, 2015)
10.25
Second Amendment to First Amended and Restated Credit Agreement with Metropolitan Life Insurance Company and New England Life Insurance Company dated August 12, 2015 (incorporated by reference to Exhibit 10.32 of Alico’s filing on Form 10-K dated December 10, 2015)
10.26***
Third Amendment to First Amended and Restated Credit Agreement with Metropolitan Life Insurance Company and New England Life Insurance Company dated November 4, 2019 (incorporated by reference to Exhibit 10.26 of Alico’s filing on Form 10-K dated December 5, 2019)
10.27
Fourth Amendment to First Amended and Restated Credit Agreement with Metropolitan Life Insurance Company and New England Life Insurance Company dated October 2, 2019 (incorporated by reference to Exhibit 10.27 of Alico’s filing on Form 10-K dated December 5, 2019)
10.28
Fifth Amendment to Amended and Restated Credit Agreement and Amended and Restated Notes. (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed with the SEC on May 5, 2021)
10.29
Renewal Promissory Note by Alico, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC, Alico Land Development Inc., and Alico Citrus Nursery, LLC in favor of Rabo Agrifinance, LLC (f/k/a Rabo Agrifinance, Inc.) dated September 30, 2016 (incorporated by reference to Exhibit 10.34 of Alico's filing on Form 10-K dated December 6, 2016)
10.30
Second Renewal Promissory Note by Alico, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC, Alico Land Development Inc., and Alico Citrus Nursery, LLC in favor of Rabo Agrifinance, LLC (f/k/a Rabo Agrifinance, Inc.) dated September 6, 2017 (incorporated by reference to Exhibit 10.39 of Alico's filing on Form 10-K dated December 11, 2017)
10.31
Third Renewal Promissory Note by Alico, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC, Alico Land Development Inc., and Alico Citrus Nursery, LLC in favor of Rabo Agrifinance, LLC (f/k/a Rabo Agrifinance, Inc.) dated September 26, 2018 (incorporated by reference to Exhibit 10.40 of Alico’s filing on Form 10-K dated December 6, 2018)
10.32*
Employment Agreement dated June 1, 2015 between Alico, Inc. and John Kiernan (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed with the SEC on June 1, 2015)
10.33*
Employment Agreement dated December 31, 2016 between Alico, Inc. and Remy W. Trafelet (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed with the SEC on January 4, 2017)
10.34*
Employment Agreement dated December 31, 2016 between Alico, Inc. and Henry R. Slack (incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K filed with the SEC on January 4, 2017)
10.35*
Employment Agreement dated March 27, 2013 between Alico, Inc. and George R. Brokaw (incorporated by reference to Exhibit 10.4 of the Company’s Form 8-K filed with the SEC on January 4, 2017)
10.36*
Employment Agreement dated December 2, 2019 between Alico, Inc. and Richard Rallo (incorporated by reference to Exhibit 10.37 of Alico’s filing on Form 10-K dated December 5, 2019)
10.37
Supplement No. 1 dated as of September 30, 2016, to the Security Agreement dated as of December 1, 2014 by and among Alico, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC, Alico Land Development Inc., Alico Citrus Nursery, LLC and Rabo Agrifinance, LLC (f/k/a Rabo Agrifinance, Inc.) (incorporated by reference to Exhibit 10.35 of Alico's filing on Form 10-K dated December 6, 2016)
10.38
Third Amendment to Credit Agreement by and among Alico, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC, Alico Land Development Inc., Alico Citrus Nursery, LLC and Rabo Agrifinance, LLC (f/k/a Rabo Agrifinance, Inc.) dated September 30, 2016 (incorporated by reference to Exhibit 10.33 of Alico's filing on Form 10-K dated December 6, 2016)
10.39
Fourth Amendment to Credit Agreement by and among Alico, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC, Alico Land Development Inc., Alico Citrus Nursery, LLC and Rabo Agrifinance, LLC (f/k/a Rabo Agrifinance, Inc.) dated September 6, 2017 (incorporated by reference to Exhibit 10.38 of Alico's filing on Form 10-K dated December 11, 2017)
10.40
Fifth Amendment to Credit Agreement by and among Alico, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC, Alico Land Development Inc., Alico Citrus Nursery, LLC and Rabo Agrifinance, LLC (f/k/a Rabo Agrifinance, Inc.) dated October 30, 2017 (incorporated by reference to Exhibit 10.37 of Alico’s filing on Form 10-K dated December 6, 2018)
10.41
Sixth Amendment to Credit Agreement by and among Alico, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC, Alico Land Development Inc., Alico Citrus Nursery, LLC and Rabo Agrifinance, LLC (f/k/a Rabo Agrifinance, Inc.) dated July 18, 2018 (incorporated by reference to Exhibit 10.38 of Alico’s filing on Form 10-K dated December 6, 2018)
10.42
Seventh Amendment to Credit Agreement by and among Alico, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC, Alico Land Development Inc., Alico Citrus Nursery, LLC and Rabo Agrifinance, LLC (f/k/a Rabo Agrifinance, Inc.) dated September 26, 2018 (incorporated by reference to Exhibit 10.39 of Alico’s filing on Form 10-K dated December 6, 2018)
10.43
Eighth Amendment to Credit Agreement by and among Alico, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC, Alico Land Development Inc., Alico Citrus Nursery, LLC and Rabo Agrifinance, LLC (f/k/a Rabo Agrifinance, Inc.) dated August 29, 2019 (incorporated by reference to Exhibit 10.44 of Alico’s filing on Form 10-K dated December 5, 2019)
10.44
Ninth Amendment and Waiver to Credit Agreement by and among Alico, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC, Alico Land Development Inc., Alico Citrus Nursery, LLC and Rabo Agrifinance, LLC (f/k/a Rabo Agrifinance, Inc.) dated June 26, 2020 (incorporated by reference to Exhibit 10.1 of Alico’s filing on Form 10-Q dated August 6, 2020)
10.45
Tenth Amendment and Waiver to Credit Agreement by and among Alico, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC, Alico Land Development Inc., Alico Citrus Nursery, LLC and Rabo Agrifinance, LLC (f/k/a Rabo Agrifinance, Inc.) dated August 25, 2020
10.46
Eleventh Amendment and Waiver to Credit Agreement by and among Alico, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC, Alico Land Development Inc., Alico Citrus Nursery, LLC and Rabo Agrifinance LLC (f/k/a Rabo Agrifinance, Inc.) dated January 7, 2021 (incorporated by reference to Exhibit 10.1 of Alico’s filing on Form 10-Q dated February 4, 2021)
10.47
Twelfth Amendment and Waiver to Credit Agreement by and among Alico, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC, Alico Land Development Inc., Alico Citrus Nursery, LLC and Rabo Agrifinance LLC (f/k/a Rabo Agrifinance, Inc.) dated November 17, 2021
10.48
Settlement Agreement and Release, dated as of February 11, 2019, by and among Alico, Inc., George R. Brokaw, R. Greg Eisner, Benjamin D. Fishman, W. Andrew Krusen, Henry R. Slack, Remy W. Trafelet , 734 Agriculture, LLC, RCF 2014 Legacy LLC and Delta Offshore Master II, LTD (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on February 11, 2019.)
10.49
Registration Rights Agreement, dated as of February 11, 2019, by and between Alico, Inc. and Remy W. Trafelet (incorporated by reference from Exhibit C to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on February 11, 2019).
10.50
Consulting Agreement, dated as of February 11, 2019, by and among Alico, Inc., 3584 Inc., and Remy W. Trafelet (incorporated by reference from Exhibit B to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on February 11, 2019).
10.51*
Alico, Inc. Stock Incentive Plan of 2015 (incorporated by reference from Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on January 28, 2015).
10.52*
Form of Nonqualified Stock Option Agreement
10.53*
Form of Incentive Stock Option Agreement
10.54*
Form of Restricted Stock Agreement
10.55+
Alico, Inc. Orange Purchase Agreement R512 - May 20, 2020 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on May 21, 2019)
10.56+
Alico, Inc. Orange Purchase Agreement R514 - May 18, 2020 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on May 21, 2019)
10.57
Option Agreement for Sale and Purchase (incorporated by reference to Exhibit 10.4 of Alico’s filing on Form 10-Q dated August 6, 2020)
10.58
Option Agreement for Sale and Purchase (incorporated by reference to Alico's Current Report on Form 8-K filed with the SEC on April 15, 2021)
10.59
First Amendment to Option Agreement for Sale and Purchase (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on April 15, 2021)
10.60
Purchase Option Agreement dated August 13, 2021, between Alico, Inc., and 734 LMC Groves LLC
10.61
Option Agreement for Sale and Purchase dated September 21, 2021, between Alico, Inc., and the Board of Trustees of the Internal Improvement Trust Fund of the State of Florida
21.0
Subsidiaries of the Registrant
23.0
Consent of Independent Registered Public Accounting Firm
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Rule 13a-14(a) certification
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Rule 13a-14(a) certification
32.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
101.INS**
Inline XBRL Instance Document
101.SCH**
Inline XBRL Taxonomy Extension Schema Document
101.CAL**
Inline XBRL Taxonomy Calculation Linkbase Document
101.DEF**
Inline XBRL Taxonomy Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
The cover page for the Company’s Annual Report on Form 10-K for the year ended September 30, 2021, has been formatted in Inline XBRL
*
Denotes a management contract or compensatory plan, contract or arrangement.
**
In accordance with Rule 406T of Regulation S-T, these XBRL (eXtensible Business Reporting Language) documents are furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under these sections.
***
Certain schedules and exhibits have been omitted from this filing pursuant to Item 601(b) (2) of Regulation S-K. The Company will furnish supplemental copies of any such schedules or exhibits to the SEC upon request.
+
Pursuant to Item 601(b)(10)(iv) of Regulation S-K promulgated by the SEC, certain portions of this exhibit have been redacted. The Company hereby agrees to furnish supplementally to the SEC, upon its request, an unredacted copy of this exhibit.