UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended September 30, 2013
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission File Number: 0-261
Alico, Inc.
(Exact name of registrant as specified in its charter)
Florida
(State or other jurisdiction of
incorporation or organization)
10070 Daniels Interstate Court Suite 100 Fort Myers, FL
(Address of principal executive offices)
59-0906081
(I.R.S. Employer
Identification No.)
33913
(Zip Code)
Registrant’s telephone number, including area code: 239-226-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of class:
Name of each exchange on which registered:
COMMON CAPITAL STOCK, $1.00 Par value,
Non-cumulative
NASDAQ
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as define in Rule 405 of the Securities Act. Yes ¨ No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that such registrant was required to file such reports), and (2) has been subject to such
filings requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). Yes þ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 or Regulation S-K (§229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See definition of “accelerated filer” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
Smaller Reporting Company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ¨ No þ
The aggregate market value of the voting and nonvoting common equity held by non-affiliates based on the closing price, as quoted on the
NASDAQ as of March 31, 2013 (the last business day of Alico’s most recently completed second fiscal quarter) was $105,650,817.50. Solely for the
purposes of this calculation, the registrant has elected to treat all executives, officers and greater than 10% shareholders as affiliates of the registrant.
There were 7,274,339 shares of stock outstanding at December 2, 2013.
þ
¨
Documents Incorporated by Reference:
Portions of the Proxy Statement of Registrant to be dated on or before January 28, 2014, are incorporated by reference in Part III of this report.
ALICO, INC.
FORM 10-K
For the fiscal year ended September 30, 2013
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountants’ Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
1
11
15
16
17
17
18
21
22
36
37
64
64
64
65
65
65
65
65
66
Cautionary Statement
This annual report on Form 10-K contains statements which, to the extent that they do not recite historical fact, constitute forward-looking
statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts and may include the words
“may,” “will,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan” or other words or expressions of
similar meaning. We have based these forward-looking statements on our current expectations about future events. The forward-looking
statements include statements that reflect management’s beliefs, plans, objectives, goals, expectations, anticipations and intentions with respect
to our financial condition, results of operations, future performance and business, including statements relating to our business strategy and
our current and future development plans.
In addition, this annual report on Form 10-K contains industry data related to our business and the markets in which we operate. This data
includes projections that are based on a number of assumptions. If these assumptions turn out to be incorrect, actual results could differ from
the projections. We urge you to carefully review this annual report on Form 10-K, particularly the section “Risk Factors,” for a complete
discussion of the risks of an investment in our common stock.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level
of activity, performance or achievements. Many factors discussed in this annual report, some of which are beyond our control, will be
important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from
forward-looking statements. In light of these and other uncertainties, you should not regard the inclusion of a forward-looking statement in
this annual report as a representation by us that our plans and objectives will be achieved, and you should not place undue reliance on such
forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by law.
As used throughout this Annual Report on Form 10-K, the terms “Alico,” the “Company,” “we,” “our,” or “us” include Alico, Inc.
and its consolidated subsidiaries unless the context indicates otherwise.
Item 1. Business.
Part 1
Alico, Inc. (“Alico”) is a Florida agribusiness and land management company built for today and backed by a legacy of achievement and
innovation in citrus, sugar, cattle and resource conservation.
We own approximately 130,800 acres of land in six Florida counties (Alachua, Collier, Glades, Hendry, Lee and Polk) and, in addition to our
principal lines of business in citrus groves, improved farmland including sugar cane, cattle ranching and conservation, and related support
operations. We also receive royalties from rock mining and oil production.
Our mission is to create value for our customers, clients and shareholders by managing existing lands to their optimal current income and total
returns, opportunistically acquiring new agricultural assets and producing high quality agricultural products while exercising responsible
environmental stewardship.
We manage our land based upon its primary usage and review its performance based upon three primary classifications – Citrus Groves,
Improved Farmland and Ranch and Conservation. In addition, we operate an Agricultural Supply Chain Management business that is not tied
directly to our land holdings and Other Operations that include leasing mines and oil extraction rights to third parties. We present our financial
results and the related discussions based upon these five segments (Citrus Groves, Improved Farmland, Ranch and Conservation, Agricultural
Supply Chain Management and Other Operations). In the fourth quarter of fiscal year 2013, we changed our internal operations to align with
the way we manage our business operations. As a result, we have realigned our financial reporting segments to match our internal operations.
We have reclassified prior years to conform to the fiscal year 2013 presentation. None of these changes affect our previously reported
consolidated results. The only change to previously reported segment results is to reclassify the former Land Leasing and Rentals segment’s
revenues and expenses to the related land classifications.
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 will be sold or exchanged for land considered to be more compatible with our business objectives and total
return profile.
We operate and manage Citrus Groves, Improved Farmland, Ranch and Conservation and Other Land. Our holdings and the operating
activities in which we engage are categorized in the following table:
Gross
Acreage
17,400
44,100
67,400
1,900
130,800
Operating Activities
Citrus Cultivation
Farming; Leasing
Cattle Grazing; Sod and Native Plant Sales; Leasing; Conservation
Mining; Citrus Nursery
Citrus Groves
Improved Farmland
Ranch and Conservation
Other Land
Total
Citrus Groves
We own and manage Citrus Groves in Collier, Hendry and Polk Counties and engage in the cultivation of citrus trees to produce citrus for
delivery to the fresh and processed citrus markets. Citrus Groves total approximately 17,400 gross acres or 13.3% of our land holdings. Our
Citrus acreage is detailed in the following table:
1
Hendry County
Polk County
Collier County
Total
Net Plantable
Producing Developing
Fallow
Total
Plantable
Support
Gross
3,400
3,100
4,100
100
100
-
100
100
-
3,600
3,300
4,100
1,600
2,000
2,800
5,200
5,300
6,900
10,600
200
200
11,000
6,400
17,400
Of the approximately 17,400 gross acres of citrus groves we own and manage, approximately 6,400 acres are classified as support acreage.
Support acreage includes 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. The approximately 11,000 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
(acres that are planted in trees too young to commercially produce fruit) and acres that are fallow.
Our Citrus Groves segment cultivates citrus trees to produce citrus for delivery to the processed and fresh citrus markets. Our sales to the
processed market constitute approximately 95% of our citrus sales annually. We produce Early and Mid-Season varieties, primarily Hamlin
oranges, as well as a Valencia variety for the processed market. We deliver our fruit to the processors in boxes which contain 90 pounds of
oranges. Because the processors convert the majority of the citrus crop into orange juice, they generally do not buy their citrus on a per box
basis but rather on a pound solids basis, which is the measure of the soluble solids (sugars and acids) contained in one box of fruit. We have
produced 24,746,000, 29,069,000, and 23,976,000 pound solids for each of the years ended September 30, 2013, 2012, and 2011, on boxes
delivered to processing plants of 3,867,000, 4,357,000, and 3,773,000, respectively. The average pound solids per box was 6.40, 6.68, and
6.34 for each of the years ended September 30, 2013, 2012, and 2011, respectively.
We generally use multi-year contracts with citrus processors that include pricing structures based on a minimum (“floor”) price with a price
increase (“rise”) based on market conditions. Therefore, if pricing in the market is favorable relative to our floored price, we benefit from the
incremental difference between the floor and the final market price.
All citrus to be produced for the processed citrus market in fiscal year 2013-2014 is under minimum price contracts with a floor price of
approximately $1.60 per pound solids. We believe that other markets are available for our citrus products; however, new arrangements may be
less favorable than our current contracts.
Our sales to the fresh market constitute approximately 5% of our citrus sales annually. We produce numerous varieties to 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 have produced 251,000, 278,000, and 289,000 boxes for each of the years ended
September 30, 2013, 2012, and 2011, respectively. The majority of our citrus to be produced for the fresh citrus market in fiscal year 2013-
2014 is under fixed price contracts.
Revenue from Citrus Groves operations was approximately 43.0%, 43.6%, and 47.8% of our total operating revenues for the fiscal years
ended September 30, 2013, 2012, and 2011, respectively.
Improved Farmland
We own and manage Improved Farmland in Hendry County and engage in farming the land and leasing some of the acreage to others to farm.
Of our land holdings, Improved Farmland totals approximately 44,100 gross acres or 33.7% of our total acreage. Our Improved Farmland
acreage is detailed in the following table:
2
Sugarcane
Leaseable
Permitted but undeveloped
Total improved farmland
Gross Acres
30,600
5,800
7,700
44,100
Our Improved Farmland includes approximately 30,600 gross acres currently used for Sugarcane farming, approximately 5,800 gross acres of
irrigated farmland currently used for farm leasing and other purposes and approximately 7,700 gross acres of permitted but undeveloped land
(acres that are permitted for farming but that have not yet been cleared, leveled and irrigated for commercial farming).
The approximately 30,600 gross acres currently used for Sugarcane farming are detailed in the table below:
Net Plantable
Developing
Plant
Cane
First
Stubble
Second
Stubble
Third
Stubble
Total
Plantable Support Gross
Hendry County
2,200
5,300
5,300
4,500
1,600
18,900
11,700
30,600
The sugarcane farmland we own and manage, approximately 11,700 acres are classified as support acreage. Support acreage includes acres
used for roads, barns, water detention and drainage ditches integral to the cultivation of sugarcane but which are not capable of directly
producing sugarcane. The remaining approximately 18,900 acres are classified as net plantable acres. Net plantable acres are those that are
capable of directly producing sugarcane.
Our sugarcane crops are planted in the sandy soils of Hendry County and are generally replanted every four years. On average, three annual
crops are harvested from one field before production and sugar concentration declines to an unacceptable level and the sugarcane crop is
plowed under. The first crop that emerges from the planted cane is called plant cane and the subsequent crops are termed first stubble and
second stubble. The sugarcane fields are generally fallow in the fourth year and are leased to other farmers to plant seasonal crops such as
sweet corn, peanuts and watermelons. Approximately 2,200 acres of second stubble was harvested and plowed under in fiscal year 2013.
Developing acres are sugarcane acres that are being planted and cultivated in fiscal year 2014 and which will produce plant cane in fiscal year
2015. The 4,500 acres that are classified as second stubble for fiscal year 2013 and the 1,600 acres that are classified as third stubble will be
harvested in the first quarter of fiscal year 2014. Portions of the 4,500 acres may be cultivated for an additional year to create a third stubble
crop in fiscal year 2015, while the remainder and all of the 1,600 acres of third stubble will be plowed under and become leaseable fallow land.
We have sold 100% of our sugarcane to United States Sugar Corporation (“USSC”), a local Florida sugar processor, since the inception of
our sugarcane program in 1988. The location of our sugarcane fields relative to the USSC processing plant is favorable and allows for
efficient and cost effective delivery of our sugarcane. Alternative plant locations are less favorable, and, as a result, the loss of USSC as a
customer could have a material adverse effect on our sugarcane operations; however, we do have a purchase agreement with USSC through
March 31, 2014 that includes a minimum pricing clause. On March 31, 2014, the purchase agreement will automatically extend for one
additional year, unless either party gives written notice of termination by the preceding January 1. If written notice of termination is provided
by either party, the planted sugarcane, including any subsequent stubble years will continue to be subject to the purchase agreement.
During fiscal years ended September 30, 2013, 2012, and 2011, revenue from improved farmland operations was 21.6%, 12.0% and 8.8% of
our total operating revenue, respectively.
3
Of our approximately 44,100 gross acres of Improved Farmland, approximately 5,800 gross acres are classified as irrigated farmland that is
currently used for leasing and other purposes and 7,700 gross acres are classified as permitted but undeveloped. The detail of our irrigated
farmland and permitted but undeveloped farmland is presented in the following table:
Leaseable
Permitted but undeveloped
Gross Acres
Net
Leaseable
Estimated
Net
Leaseable
5,800
7,700
2,300
N/A
N/A
4,000 to 5,000
Of our approximately 5,800 gross acres of irrigated farmland, approximately 2,300 acres are leaseable. Of our 7,700 gross acres of permitted
but undeveloped land, we estimate that with proper clearing and development we could yield four to five thousand net leaseable acres.
Ranch and Conservation
We own and manage Ranch and Conservation land in Collier, Hendry and Polk Counties and engage in Cattle Production, Sod and Native
Plant Sales, Land Leasing for recreational and grazing purposes and conservation activities. Of our land holdings, Ranch and Conservation
totals approximately 67,400 gross acres or 51.5% of our total acreage. Our Ranch and Conservation acreage is detailed in the following table:
Hendry County
Polk County
Collier County
Total
Acreage
60,500
2,900
4,000
67,400
We frequently lease the same acreage for more than one purpose. The portion of our Ranch and Conservation acreage that is leased for each
purpose is detailed in the table below:
Hendry County
Polk County
Collier County
Grazing
Recreational
1,900
2,300
4,000
57,500
1,300
3,500
Our Cattle operation is engaged in the production of beef cattle. It is located in Hendry and Collier Counties. The breeding herd consisted of an
average of 8,700 cows and bulls. We primarily sell our calves to feed yards and yearling grazing operations in the United States. We also sell
cattle through local livestock auction markets and to contract cattle buyers in the United States. These buyers provide ready markets for our
cattle. We believe that the loss of any one or a few of these buyers would not have a material effect on our Cattle operations. Revenue from
ranch and conservation operations was approximately 6.6%, 5.8%, and 6.1% of total operating revenue for each of the years ended
September 30, 2013, 2012, and 2011, respectively.
In the fourth quarter of fiscal year 2013 we granted an easement to the United States Department of Agriculture (“USDA”), through its
administering agency, The Natural Resources Conservation Service, on approximately 11,600 acres of our Ranch and Conservation land
located in Hendry County resulting in a gain of $20.3 million, which was recorded in Other Income on the Statement of Comprehensive
Income.
Our Other Segments
In addition to owning and managing approximately 130,800 gross acres of land in Central and Southwest Florida, Alico also engages in
complimentary lines of business. Our Agricultural Supply Chain Management and Support
4
lines of business include activities related to value-added services provided which include agricultural contracting for harvesting hauling and
marketing and the purchase and resale of fruit while our Other Operations line of business includes activities related to rock and sand mining,
oil exploration and other insignificant lines of business. A summary of the Agricultural Supply Chain Management and Support line of
business follows:
· Alico Fruit Company is a wholly owned subsidiary purchased in February 2006 to provide additional citrus marketing expertise
and the ability to manage the delivery of our own citrus crop. Its operations include supply chain management (contracting for
harvest, hauling and marketing) for Alico’s citrus crop and for other growers. The operation also includes the purchase and
resale of citrus fruit. During the fiscal years ended September 30, 2013, 2012, and 2011, Alico Fruit Company’s revenue was
27.9%, 38.0% and 36.6% of our total operating revenue, respectively.
·
In the third quarter of fiscal year 2013, we acquired approximately 400 acres of land in Alachua County on which we are
constructing a citrus tree nursery which will be included in the Agricultural Supply Chain Management line of business.
Segment Financial Results
We create value for our customers, clients and investors by managing our land holdings to their highest and best returns and by producing the
highest quality agricultural products, implementing innovative land management and responsible environmental stewardship in the
communities where we operate.
The following table presents the operating revenues and gross profit of the segments:
(in thousands)
Revenues:
2013
Fiscal Year Ended September 30,
2012
2011
Citrus Groves
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
Intersegment Revenues
Eliminations
$
$
43,689
28,412
21,917
6,755
888
10,981
(10,981)
$
55,423
48,334
15,316
7,348
766
11,820
(11,820)
Total revenue
101,661
127,187
Operating expenses:
Citrus Groves
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
Total operating expenses
Gross profit:
Citrus Groves
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
31,533
27,949
16,202
3,798
505
79,987
12,156
463
5,715
2,957
383
30,995
47,693
11,574
3,497
1,196
94,955
24,428
641
3,742
3,851
(430)
47,088
36,115
8,642
6,015
732
9,679
(9,679)
98,592
27,764
35,109
7,343
3,640
1,303
75,159
19,324
1,006
1,299
2,375
(571)
Total gross profit
$
21,674
$
32,232
$
23,433
5
Highlights
Change in Majority Owner
On November 19, 2013, 734 Investors, LLC (the “Buyer”), an investment fund affiliated with 734 Agriculture, LLC (“734 Agriculture”) and
George R. Brokaw, a Member of 734 Agriculture and the Buyer’s designee (the “Designee”), completed the previously announced purchase
from Alico Holding, LLC (the “Seller”), a company wholly owned by Atlantic Blue Group, Inc., of 3,725,457 shares of common stock, par
value $1 per share, of Alico owned by the Seller for $37.00 per share, for an aggregate purchase price of approximately $137,841,909 in cash
(the “Share Purchase”). The Buyer used equity investments from its members of approximately $123,410,000 and debt financing of
$13,691,909 to fund its portion of the purchase price. The Designee used cash on hand to fund his portion of the purchase price.
The common stock acquired by the Buyer and the Designee represents approximately 51% of our outstanding voting securities. On November
15, 2013, the Buyer amended and restated its LLC operating agreement (the “LLC Agreement”) to admit new members and to designate 734
Agriculture as the managing member, with authority to administer the affairs of the Buyer, including the voting and disposition of shares of
Common Stock, subject to certain restrictions set forth therein. The Buyer also entered into an agreement with the Designee (the “Designee
Agreement”), dated as of November 15, 2013, providing that the Designee will vote the shares of our common stock acquired in the Share
Purchase as directed by the Buyer and will not transfer, sell or otherwise dispose of those shares except pro rata with the Buyer’s disposition
of its shares of our common stock. As a result, upon the consummation of the Share Purchase, the Buyer and 734 Agriculture will have the
voting power to control the election of our directors and any other matter requiring the affirmative vote or consent of our shareholders.
The LLC Agreement also provides that the Buyer and 734 Agriculture will cause one of our directors so elected (or two, if our Board of
Directors (the “Board”) is comprised of eleven or more members) to be an individual or individuals nominated by an affiliate of Arlon Group,
so long as such nominee(s) satisfies certain conditions set forth in the LLC Agreement, including compliance with director independence and
other criteria of the Company, the Nasdaq Global Select Stock Market (“Nasdaq”) and the Securities and Exchange Commission (the “SEC”)
and applicable provisions of the Securities Exchange Act of 1934 (the “Exchange Act”), and qualification to serve as a director under the laws
of the State of Florida.
We are not a party to the LLC Agreement or the Designee Agreement. The foregoing information concerning the LLC Agreement and the
Designee Agreement has been furnished to us by the Buyer and 734 Agriculture, and we assume no responsibility for the accuracy of any
such information.
Appointment of Directors; Resignation of Directors
With the closing of the Share Purchase, the previously announced election of the following individuals to our board of directors (the “Board”)
became effective: Mr. Brokaw, Member of 734 Agriculture; Remy W. Trafelet, Manager of 734 Agriculture; W. Andrew Krusen, Chairman
and CEO of Dominion Financial Group; Benjamin D. Fishman, Managing Principal of Arlon Group; Henry R. Slack, former Chairman of the
Board of Terra Industries, Inc. and Senior Partner of Quarterwatch, LLC; Clayton G. Wilson, former CEO of 734 Citrus Holdings, LLC d/b/a
Silver Nip Citrus (“Silver Nip”) and Chairman of the Board of Latt Maxcy Corporation; and R. Greg Eisner, Head of Strategy of Dubin &
Company, LLC. In accordance with the LLC Agreement, Arlon Group proposed that Mr. Fishman be included in the slate of new directors to
be elected to the Board. Biographical information on each of the directors elected to the Board can be found in the Company’s Schedule 14f-1
filed with the SEC on November 8, 2013 (the “Schedule 14f-1”), under the section entitled “Directors Designated by 734 Investors—734
Investors’ Designees.”
Ramon A. Rodriguez remained on the Board and will continue to serve as director of the Company following the Share Purchase. In addition,
Adam D. Compton, who previously resigned subject to and effective upon the closing of the Share Purchase, was reelected to the Board on
November 22, 2013. Biographical information on Messrs. Rodriguez and Compton can be found in the Schedule 14f-1 under the section
entitled “Board of Directors.”
6
Upon the Closing of the Share Purchase, the following individuals ceased to be directors pursuant to their previously disclosed resignations:
JD Alexander, Dykes Everett, Thomas H. McAuley, Charles L. Palmer, John D. Rood, and Gordon Walker, PhD. Mr. Robert J. Viguet, Jr.
resigned from the Board on November 21, 2013.
In connection with the change in the membership of the Board:
· Mr. Slack was appointed to serve as Chairman of the Board;
· Messrs. Trafelet (Chair), Brokaw, Fishman and Slack were appointed to serve as members of the Executive Committee of the Board;
· Messrs. Rodriguez (Chair), Compton and Krusen were appointed to serve as members of the Audit Committee of the Board;
· Messrs. Eisner (Chair), Brokaw and Krusen were appointed to serve as members of the Compensation Committee of the Board; and
· Messrs. Brokaw (Chair), Compton, Eisner and Fishman were appointed to serve as members of the Nominations and Governance
Committee of the Board.
Appointment of Mr. Wilson as the Company’s Chief Executive Officer
Upon the closing of the Share Purchase, Mr. Alexander ceased to be our CEO pursuant to his previously disclosed resignation. On November
22, 2013, the Board appointed Mr. Wilson to serve as our Chief Executive Officer (“CEO”), effective immediately. Mr. Wilson also resigned
from his position as CEO of Silver Nip effective the same date. Biographical information on Mr. Wilson can be found in our Schedule 14f-1
under the section entitled “Directors Designated by 734 Investors—734 Investors’ Designees—Mr. Clayton G. Wilson.” We expect to
negotiate and enter into an employment agreement with Mr. Wilson, which will provide for compensation and other terms of employment
appropriate for his position. During the interim period beginning on November 22, 2013 and ending when a definitive employment agreement
with Mr. Wilson becomes effective, Mr. Wilson’s compensation will be equivalent to the compensation he previously received as CEO of
Silver Nip, which is expected to consist of an annual base salary of $150,000 and customary fringe benefits (including employee welfare and
retirement benefits) provided to our executive officers.
Silver Nip Agreement
On November 22, 2013, we entered into an employee lease agreement with Mr. Wilson and Silver Nip (the “Silver Nip Agreement”). Silver
Nip is owned and controlled by Messrs. Brokaw, Trafelet and Wilson.
The Silver Nip Agreement provides, subject to the terms and conditions set forth therein, for us to furnish Mr. Wilson’s services to Silver Nip
to perform the functions and services that Mr. Wilson has previously performed for Silver Nip prior to his resignation as CEO (the
“Resignation Date”). The Silver Nip Agreement provides that Mr. Wilson will spend a majority of his working time performing functions and
services for us and that in no event will Mr. Wilson be required to take any action that he or Alico determines could conflict with Mr. Wilson’s
exercise of his fiduciary duties under applicable law owed to us or could interfere with the performance of his duties as an executive officer of
the Company. In exchange for furnishing Mr. Wilson’s services, Silver Nip has agreed to pay us the cash salary that would have been paid to
Mr. Wilson pursuant to his previous employment arrangement with Silver Nip, had that arrangement continued to be in force.
The Silver Nip Agreement continues through December 31, 2013. If neither party has provided the other with written notice of an intention to
terminate the Silver Nip Agreement at least three business days before December 31, 2013 (or any subsequent renewal period), the Silver Nip
Agreement will automatically renew for a one month period. In addition, Silver Nip may terminate the Silver Nip Agreement at any time upon
10 business days’ prior written notice to us.
7
Sale of Easement
In July, 2013, we granted a warranty easement deed to the United States Department of Agriculture, through its administering agency, The
Natural Resources Conservation Service, granting a conservation easement on approximately 11,600 acres located in Hendry County, FL (the
“Property”) for $20,678,000. The easement agreement states the Property will be enrolled in perpetuity in the Wetlands Reserve Program
designed to restore, protect and enhance the values of the wetlands and for the conservation of natural resources. We will retain title to the
Property and the right to various recreational uses including hunting, fishing and leasing of such rights. Additionally, we reserve the right to
subsurface resources including oil, gas, minerals and geothermal resources underlying the easement area and the right to water uses and water
rights identified as reserved to us.
Supplemental Information
Information regarding the revenues, earnings and total assets of each of our operating segments can be found in Item 8. Financial Statements
and Supplementary Data, Note 15. Segment Information in Notes to our Consolidated Financial Statements included in this Annual Report.
Substantially all of our revenues are generated from domestic customers. All of our assets are located in the United States.
Strategy
Our core business strategy is to maximize shareholder 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/or 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 not meeting our total return profile, generate recurring and sustainable profit with the
appropriate balance of risk and reward, and exceed the expectations of shareholders, customers, clients and partners.
Our strategy is based on best management practices of our agricultural operations, environmental and conservation stewardship of our land
and natural resources. We 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 Alico's core beliefs.
We position our three categories of land based upon their suitability for a particular purpose and their potential to generate value:
· We position our Citrus Groves to efficiently utilize capital to consistently generate high-quality commercially viable citrus fruit
for the processed or fresh markets while managing the weather and disease related risks inherent in the citrus business.
· We position our Improved Farmlands to generate returns on permitted and farmable acreage. Based upon our interpretation of
industry information and the potential for returns, we plant and cultivate sugarcane on our improved farmlands, lease our
improved farmlands to third parties, allow our improved farmland to remain fallow, and/or convert our improved farmlands to
other crops.
· We position our Ranch and Conservation lands to opportunistically generate returns based largely upon the size of the parcels
and their location relative to the important wetlands of southern Florida. We consistently raise cattle for sale on our Ranch and
Conservation lands and lease our lands for grazing and recreational purposes to maintain our agricultural property tax
classifications as well as to generate minimal returns on the lands while we investigate and execute on opportunities to monetize
these lands through conservation programs.
· We position our Agricultural Supply Chain Management business to manage the harvesting and hauling of the fruit produced by
our Citrus Groves segment as well as to provide for returns on its
8
invested capital by purchasing, selling, harvesting and hauling citrus fruit for other producers in the state of Florida. The
services provided by, and the relationships and industry information generated through, operating our Agricultural Supply Chain
Management segment are complimentary to the operation and strategic positioning of our Citrus Groves Segment.
· Where appropriate, we engage in other operations. These operations include leasing mineral and oil rights to third parties where
resource supplies are sufficient and other uses of our land holdings do not currently provide for returns greater than those
provided by these leases.
Competition
Alico is engaged in a variety of agricultural and nonagricultural activities, all of which are in highly competitive markets. Citrus is grown
domestically in several states including Florida, California, Arizona and Texas, as well as foreign countries, most notably Brazil. Competition
is impacted by several factors including production, market prices, weather, disease, export /import restrictions and currency exchange rates.
Sugarcane products compete with sugar beets in the United States as well as imported sugar and sugar products from Brazil and Mexico. Beef
cattle are produced throughout the United States and domestic beef sales also compete with imported beef. Forest and rock products are
produced in many parts of the United States.
The sale and leasing of land is very competitive in the counties where we own land. The degree of competition has increased due to the current
economic climate, which has caused an oversupply of comparable real estate available for sale or lease due to the decline in demand as a result
of the continuing underperforming economy.
Environmental 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 compliance with all such rules including permitting and reporting requirements. Compliance has not had a material effect
upon our financial position, results of operations or cash flows.
Management monitors environmental legislation and requirements and makes every effort to remain in compliance with such regulations. In
addition, we require lessees of our property to comply with environmental regulations as a condition of leasing.
9
Employees
As of September 30, 2013, we had 154 full-time employees. Our employees work in the following divisions:
Agricultural Supply Chain Management
Citrus Groves
Improved Farmland
Ranch and Conservation
Heavy Equipment
Other Operations
General and Administrative
Total
Seasonal Nature of Business
26
73
17
3
16
2
17
154
Revenues from Alico’s agri-business operations are seasonal in nature. The following table illustrates the seasonality of our agri-business
revenues:
Capital resources and raw materials
Management believes that Alico will be able to meet its working capital requirements for the foreseeable future through internally generated
funds and our existing credit line. Alico has credit commitments that provide for revolving credit that is available for our general use. Raw
materials needed to cultivate the various crops grown by Alico consist primarily of fertilizers, herbicides and fuel and are readily available
from local suppliers.
Available Information
Our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to
those reports may be viewed or downloaded electronically, free of charge, from our website http://www.alicoinc.com as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”). In addition, you
may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. To
obtain information on the operation of the Public Reference room, you may call the SEC at 1-800-SEC-0330. Our recent press releases are
also available to be viewed or downloaded electronically at http://www.alicoinc.com.
We will also provide electronic copies of our SEC filings free of charge upon request. Any information posted on or linked from our website
is not incorporated by reference into this Annual Report on Form 10-K. The SEC also maintains a website at http://sec.gov, which contains
reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
10
Item 1A. Risk Factors.
The following are what we believe to be the principal risks known to us that could cause a material adverse effect on our business, financial
condition, results of operations, cash flows, strategies and prospects.
General
We have a 51% shareholder that has effective control over the election of our Board of Directors and a limited public float which could
affect the price of our stock.
In November 2013, 734 Investors, LLC ("734 Investors"), acquired approximately 51% of Alico's common stock from Atlantic Blue Group,
Inc. ("Atlanticblue"). In connection with that transaction, eight of our directors resigned, and our Board of Directors elected seven nominees
proposed by 734 Investors to fill the vacancies. Alico does not have cumulative voting for directors. Accordingly, by virtue of its ownership
percentage, 734 Investors is able to elect all of our directors and effectively controls Alico. Our shareholders other than 734 Investors have no
control over who our directors or management will be. Our Board of Directors has determined that a majority of our current directors are
independent within the meaning of Nasdaq listing standards, but these standards do not require that a majority of our directors be independent
because we are a "controlled company." In addition, because we have a majority shareholder we have a limited public float, and our common
stock is more thinly traded and its market price may fluctuate more than stocks with a larger public float.
We have a major customer that purchases 100% of our sugarcane production.
We have sold 100% of our sugarcane to USSC since the inception of our sugarcane program in 1988 and which revenue accounted for 20.6%
of our total operating revenues in fiscal year 2013. The location of our sugarcane fields relative to the USSC processing plant is favorable and
allows for efficient and cost effective delivery of our sugarcane. Alternative plant locations are less favorable, and, as a result, the loss of
USSC as a customer could have a material adverse effect on our sugarcane operations. We have a purchase agreement with USSC through
March 31, 2014, that includes a minimum pricing clause. On March 31, 2014, the purchase agreement will automatically extend for one
additional year, unless either party gives written notice of termination by January 1, 2014. If written notice of termination is provided by either
party, the existing planted cane and any subsequent stubble cuts will be subject to the purchase agreement.
Alico benefits from reduced real estate taxes due to the agricultural classification of a majority of its land. Changes in the classification
or valuation methods employed by county property appraisers could cause significant changes in our real estate tax liabilities.
In each of the fiscal years ended September 30, 2013, 2012, and 2011, we paid $2,196,0000, $2,275,000, and $2,458,000 in real estate taxes,
respectively. These taxes were based upon the agricultural use (“Green Belt”) values determined by the county property appraiser in which
counties we own land, of $69,687,000, $82,975,000, and $92,038,000 for each of the years ended September 30, 2013, 2012, and 2011,
respectively, which differs significantly from the fair values determined by the county property appraisers of $516,919,000, $529,542,000,
and $540,168,000, 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 impact our results of operations, cash flow and financial position.
11
Alico manages its properties in an attempt to capture their highest and best use and customarily does not sell property until it no longer
meets our total return profile.
The goal for our land management program is to manage and selectively improve our lands for their most profitable use. We continually
evaluate our properties focusing on location, soil capabilities, subsurface composition, topography, transportation, availability of markets for
our crops, the climatic characteristics of each of the tracts, long-term capital appreciation and operating income potential. While we are
primarily engaged in agricultural activities, when land does not meet our total return profile, we may determine that the property is surplus to
our activities and place the property for sale or exchange.
Alico is subject to environmental regulations. 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 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,
Alico requires lessees of its 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 have a materially adverse effect on 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
our business lines and segments in which they work. The loss of any of these individuals could have a material adverse effect on our
operations. 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 employ and retain skilled personnel in our business lines and segments.
Agricultural Risks — General
Agricultural operations traditionally provide almost all of our operating revenues. Agriculture operations are subject to a wide variety of risks
including product pricing due to variations in supply and demand, weather, disease, input costs and product liability.
12
Agricultural products are subject to supply and demand pricing which is not predictable.
Although our processed citrus and sugarcane are 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. Alico attempts to mitigate these risks by using contracts with citrus and sugarcane processors that include pricing
structures based on a minimum (“floor”) price and with a price increase (“rise”) if market prices exceed the floor price. As a result, our
profitability may be subject to significant variability.
Alico’s agricultural assets are concentrated and the effects of adverse weather conditions could adversely affect our results of operations
and financial position.
Our agricultural operations are concentrated in south Florida with more than 35% of our agricultural lands located in a contiguous parcel in
Hendry County. Because our agricultural properties are located in close proximity to each other, the impact of adverse weather conditions may
be material to Alico’s results of operations. Florida is particularly susceptible to the occurrence of hurricanes. Depending on where any
particular hurricane makes landfall, our properties could experience significant, if not catastrophic damage. Hurricanes have the potential to
destroy crops, affect cattle breeding and impact citrus and sugarcane 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, sugarcane and
cattle operations and could result in a loss of revenue from those products for a multi-year period. Alico seeks to minimize hurricane risk by
the purchase of insurance contracts, but the majority of our crops remain uninsured. In addition to hurricanes, 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 cattle.
Alico’s agricultural earnings comprise substantially all of its revenues and are subject to wide volatility which could result in breaches of
loan covenants.
Borrowing capacity represents a major source of our working capital. We currently have a credit facility with Rabo AgriFinance, Inc. that
includes a Revolving Line of Credit and a Term Loan. These loans are subject to covenants requiring Alico to maintain a minimum current
ratio of 1.5:1, a debt to assets ratio no greater than 60%, tangible net worth of at least $80 million, and a minimum debt coverage ratio of
1.15:1. While we currently expect to remain in compliance with these covenants, because of the volatility of our earnings stream and the
factors causing this volatility, we are unable to directly control compliance. We believe that, based on factors currently known, we will
continue to remain in compliance with our Revolving Line of Credit and Term Loan. We negotiated a less restrictive debt coverage ratio
covenant to provide that the covenant must be breached in two consecutive years in order to be considered an event of default. Nevertheless,
due to earnings volatility and factors unknown to us at this time, it is possible that a loan covenant could be breached, a default occur, and the
major portion of our borrowings become due which could have a material adverse impact on our financial position, results of operations and
cash flows.
Water Use Regulation restricts Alico’s access to water for agricultural use.
Our agricultural 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
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
13
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 have a materially adverse effect on our agricultural operations, financial
position, results of operations and cash flows.
Alico’s citrus groves are subject to damage and loss from disease including but not limited to Citrus Canker and Citrus Greening
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 groves and in the areas where our groves are located.
Citrus greening is one of the most serious citrus plant diseases in the world. It is also known as Huanglongbing (HLB) or yellow dragon
disease. Once a tree is infected, it decreases the productivity of infected trees. While the disease poses no threat to humans or animals, it has
devastated citrus crops throughout the United States and abroad. The disease is spread by insects known as Asian citrus psyllids. The infected
insect spreads the disease as it feeds on the leaves and stems of citrus trees.
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.
Alico uses a pesticide program to control these psyillids and an enhanced foliar nutritional program to mitigate the damage to infected trees. At
the present time, there is no known cure for Citrus Greening once trees are infected.
Citrus canker is a disease affecting citrus species and is caused by a bacterium and is spread by contact with infected trees or by windblown
transmission. There is no known cure for Citrus Canker at the present time 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 available technologies to
control such disease will be effective.
We use best management practices to attempt to control diseases and their spread. Both of these diseases pose a significant threat to the Florida
Citrus industry and to our citrus groves. We are managing the affects and the spread of these diseases in our groves which, left unmanaged,
could cause a material adverse effect to our citrus grove operations, financial position, results of operations and cash flows.
Use of pesticides and herbicides and other materials by Alico or its lessees could create liability for Alico.
Alico and some of the parties to whom we lease land for agricultural purposes use herbicides, pesticides and other hazardous substances in the
operation of their businesses. All pesticides and herbicides used by us have been approved for use by the proper governmental agencies with
the hazards attributable to each substance appropriately labeled and described. We maintain policies requiring our employees to apply such
chemicals strictly in accordance with the labeling. As a condition of our leasing agreements, we require that third parties also adhere to proper
handling and disposal of such materials; however, we do not have full knowledge or control over the chemicals used by third parties who
lease our lands for cultivation. It is possible that some of these herbicides and pesticides could be harmful to humans if used improperly or that
there may be unknown hazards associated with such chemicals despite any contrary government or manufacturer labels. We might have to pay
the costs or damages associated with the improper application, accidental release or the use or misuse of such substances, which could have a
materially adverse effect.
Changes in immigration laws could impact the ability of Alico to harvest its 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. The scarcity of available personnel to harvest our agricultural products could cause
harvesting costs to increase or could lead to the loss of product that
14
is not timely harvested which could have a material adverse effect to our citrus grove operations, financial position, results of operations and
cash flows.
Changes in demand for Alico’s agricultural products can affect demand and pricing of such products.
The general public’s demand for particular food crops we grow and sell could reduce prices for some of our products. To the extent that
consumer preferences evolve away from products we produce and we are unable to modify our products or develop products that satisfy new
customer preferences, there could be a decrease in prices for our products. Even if market prices are unfavorable, produce items which are
ready to be or have been harvested must be brought to market. Additionally, we have significant investments in our citrus groves and
sugarcane fields and cannot easily shift to alternative crops for this land. A decrease in the selling price received for our products due to the
factors described above could have a materially adverse effect on Alico.
We face significant competition in its 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 Alico. 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 foreign
suppliers of sugar and orange juice is mitigated by quota restrictions on sugar imports imposed by the U.S. government and by a
governmentally imposed tariff on orange imports. A change in the government’s sugar policy allowing more imports or a reduction in the
orange juice tariff could adversely impact our results of operations.
Item 1B. Unresolved Staff Comments.
None.
15
Item 2. Properties
At September 30, 2013, Alico owned approximately 130,800 acres of land located in six 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
Hendry
Polk Collier Glades
Lee
Alachua
Citrus Groves
Improved Farmland:
Sugarcane
Irrigated
Permitted by undeveloped
Total Improved Farmland
Ranch Land and Conservation
Commercial and Residential
Mining
Other
17,400
5,200
5,300
6,900
30,600
5,800
7,700
30,600
5,800
7,700
-
-
-
-
-
-
44,100
67,400
400
1,400
100
44,100
60,500
-
900
100
-
2,900
-
-
-
-
4,000
-
-
-
-
-
-
-
-
-
-
500
-
Total
130,800
110,800
8,200
10,900
500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
400
-
-
400
Approximately 43,277 acres of the properties listed are encumbered by credit agreements totaling $96,000,000 at September 30, 2013. For a
more detailed description of the agreements and collateral please see Item 8. Financial Statements, Note 10. Long-Term Debt in the Notes to
the Consolidated Financial Statements.
Citrus Groves acreage is as follows:
Hendry County
Polk County
Collier County
Total
Sugarcane acreage is as follows:
Net Plantable
Producing Developing
Fallow
Total
Plantable
Support
Gross
3,400
3,100
4,100
100
100
-
100
100
-
3,600
3,300
4,100
1,600
2,000
2,800
5,200
5,300
6,900
10,600
200
200
11,000
6,400
17,400
Net Plantable
First
Stubble
Plant
Cane
Developing
Second
Stubble
Third
Stubble
Total
Plantable
Support
Gross
Hendry County
2,200
5,300
5,300
4,500
1,600
18,900
11,700
30,600
Land lease acreage is included in the total acres of Improved Farmlands, Ranch Lands and Other and as follows:
Farming
Grazing
Recreational
Oil and Other
Total
Hendry
Polk
Collier
Glades
Lee
Total
1,500
1,900
57,500
-
-
2,300
1,300
-
-
4,000
3,500
-
-
100
-
-
60,900
3,600
7,500
100
-
-
-
-
-
1,500
8,300
62,300
-
72,100
We currently collect mining royalties on a 526 acre parcel of land located in Glades County, Florida. These royalties do not represent a
significant portion of our revenue or operating profits. We are seeking permits to develop an additional mine on an 886 acre parcel in Hendry
County to be used as a sand mine. Approximately 1,382 acres in Collier County are suitable for a rock mine. We are not currently pursuing
permits for the Collier County mine
16
given the low level of demand in the current market. The Hendry County parcel is currently classified as ranch land, while the Collier County
parcel is classified as citrus. Based on initial estimates by third party engineering firms, the aggregate reserve of the Glades County parcel is
approximately 26 million tons, the sand reserve of the Hendry County parcel is approximately 53 million tons and the aggregate reserve of the
Collier County parcel is approximately 140 million tons.
Item 3. Legal Proceedings.
From time to time, we establish estimated accruals for litigation matters which meet the requirements of ASC 450—Contingencies. There are
no current matters that we believe will have a material adverse effect on our financial position or results of operations.
Shareholder Derivative Action
On October 29, 2008, Alico was served with a shareholder derivative complaint filed by Baxter Troutman against JD Alexander, our former
Chief Executive Officer and Director, and John R. Alexander, our former Chairman of the Board, which named Alico as a nominal defendant.
Mr. Troutman is the cousin and nephew of the two defendants, respectively, and is a shareholder in Atlantic Blue Group, Inc. (formerly
Atlantic Blue Trust, Inc.) (“Atlanticblue”), a 51% shareholder of Alico. From February 26, 2004 until January 18, 2008, Mr. Troutman was a
director of Alico. The complaint alleged that JD Alexander and John R. Alexander committed breaches of fiduciary duty in connection with a
proposed merger of Atlanticblue into Alico which was proposed in 2004 and withdrawn by Atlanticblue in 2005. The suit also alleges, among
other things, that the merger proposal was wrongly requested by defendants JD Alexander and John R. Alexander (“the Alexanders”) and
improperly included a proposed special dividend; and that the Alexanders sought to circumvent the Board’s nominating process to ensure that
they constituted a substantial part of Alico’s senior management team and these actions were contrary to the position of Alico’s independent
directors at the time causing a waste of Alico’s funds and the resignations of the independent directors in 2005.
On May 16, 2012 the Circuit Court of the 10th Judicial Circuit in Polk County, FL approved an agreement thereby settling the shareholder
derivative action complaint. As a condition of the agreement, Mr. Troutman was required to file a notice of voluntary dismissal of the civil
action against the Alexanders with prejudice. The Company, by determination of the Special Litigation Committee comprised of four
independent directors of its Board of Directors, filed a motion against Mr. Troutman seeking recovery of attorney fees and costs incurred in its
defense. In response, Mr. Troutman has filed motions seeking recovery of his attorney’s fees from Alico.
Internal Revenue Service
The IRS examined the returns of Alico, Agri-Insurance and Alico-Agri for the tax years 2005 through 2007. Based on their examinations, the
IRS claimed we owed taxes and penalties of $31,100,000, consisting of $14,500,000 in taxes and $16,600,000 in penalties. We contested the
issues raised by the IRS during the examinations and pursued resolution through the IRS Appeals process.
On May 16, 2012, the Company reached a settlement with the IRS related to its examination of the returns of Alico, Agri-Insurance, Ltd., (a
former subsidiary of the Company) and Alico-Agri for the tax years 2005 through 2007. As a result of the settlement, the Company paid
Federal taxes of $613,000 and interest of $225,000. On October 9, 2012, the Company paid the State of Florida $318,000 for taxes and
$5,000 for interest as a result of the IRS settlement. The Company accrued $149,000 at September 30, 2012, for additional state interest and
penalties. The actual amount paid was $135,000 for state interest. No amount was due for state penalties, and the remaining accrual was
reversed during the second quarter of fiscal year 2013.
Item 4. Mine Safety Disclosure
None.
17
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Common Stock Prices
Our common stock is traded on the NASDAQ Stock Market, LLC (“NASDAQ”) under the symbol ALCO. The high and low sales prices in
each quarter in the fiscal years 2013 and 2012 are presented below:
2013 Price
2012 Price
High
Low
High
Low
Quarter Ended:
December 31
March 31
June 30
September 30
$
$
$
$
Holders
38.78
47.00
46.48
47.60
$
$
$
$
30.27
36.93
39.61
39.19
$
$
$
$
23.56
24.85
30.81
32.80
$
$
$
$
17.85
19.02
21.06
26.37
On October 31, 2012, our stock transfer records indicate there were approximately 305 holders of record of our common stock. The number
of registered holders includes banks and brokers who act as nominee, each of whom may represent more than one shareholder.
Dividends
The following table presents cash dividends per common share declared in fiscal years 2013, 2012, and 2011 and paid in fiscal years 2014,
2013, and 2012.
Record Date
Payment Date
Amount Paid
Per Share
Declaration Date:
September 29, 2011
December 15, 2011
February 17, 2012
April 27, 2012
July 27, 2012
September 27, 2012
January 8, 2013
May 2, 2013
July 18, 2013
September 25, 2013
October 31, 2011
December 30, 2011
March 30, 2012
June 29, 2012
September 28, 2012
December 28, 2012
March 28, 2013
June 28, 2013
September 30, 2013
December 31, 2013
November 15, 2011
January 16, 2012
April 16, 2012
July 16, 2012
October 15, 2012
January 14, 2013
April 15, 2013
July 15, 2013
October 15, 2013
January 14, 2014
$
$
$
$
$
$
$
$
$
$
0.12
0.04
0.04
0.04
0.04
0.08
0.08
0.08
0.08
0.12
The Board of Directors reinstated a quarterly dividend policy during fiscal year 2012.
18
Stock Performance Graph
The graph below represents our common stock performance, comparing the value of $100 invested on September 30, 2008 in our common
stock, the S&P 500 and a Company-constructed peer group, which included Forestar Group, Inc., Limoneira Company, The St. Joe
Company, Tejon Ranch Co. and Texas Pacific Land Trust.
(Includes reinvestment of dividends)
Base
Period
Sep-08
Indexed Returns for Years Ending
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Company Name/Index:
Alico, Inc.
S&P 500 Index
Peer Group
$ 100.00 $
$ 100.00 $
$ 100.00 $
63.57 $
90.63 $
77.41 $
50.51 $
97.84 $
81.91 $
68.96 $
42.86 $
91.61
97.00 $ 123.52 $ 144.17
92.69 $ 122.16
66.45 $
19
Equity Compensation Arrangements
The 2008 Incentive Equity Plan was effective from November 2008 through March 2013. It provided for the issuance of up to 350,000 shares
of the Company’s stock to Directors and Officers. The 2008 Incentive Equity Plan was superseded by the 2013 Incentive Equity Plan in April
2013. It provides for the issuance of up to 350,000 shares of the Company’s stock to Directors and Officers through March 2018. All shares
issued or to be issued under either of the two equity incentive plans must be shares previously repurchased by the Company.
The following table illustrates the shares remaining available for future issuance under the 2013 Incentive Equity Plan:
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
Total
-
-
-
-
334,126
334,126
Issuer Repurchases of Equity Securities
The Board of Directors previously authorized the repurchase of up to 350,000 shares of our common stock from shareholders beginning in
November 2008 and ending in November 2013 (the “2008 Authorization”). In September 2013, the Board of Directors authorized the
repurchase of 105,000 shares of stock from shareholders beginning in November 2013 and continuing through April 2018 (the “2013
Authorization”). Stock repurchases under these authorizations will be made on a quarterly basis until April 2018, through open market
transactions, at times and in such amounts as the Company’s broker determines, or through other transactions subject to the provisions of SEC
Rule 10b-18.
Through September 30, 2013, the Company had purchased 165,495 shares and had available to purchase an additional 184,505 in accordance
with the 2008 Authorization. The following table describes our purchases of our common stock during the fourth quarter of 2013.
Total Number of Shares
Purchased
Average Price Paid Per
Share
Total Shares Purchased As
Part of Publicly
Announced Plan or
Program
Maximum Number of
Shares that May Yet Be
Purchased Under the Plan
or Program
Date:
Month of July 2013
Month of August 2013
Month of September 2013
-
-
439
$
$
$
-
-
40.00
-
-
439
184,944
184,944
184,505
We do not anticipate that any purchases under the Board of Directors’ authorizations will be made from any officer, director or control person.
We had various arrangements with UBS Investment Bank (“UBS”) between September 27, 2012 and November 1, 2013 to purchase
securities under an authorization in accordance with the timing, price and volume restrictions contained in sections (b)(2)-(4) of Rule 10b-18.
During the period from September 27 through November 1, 2013, UBS agreed to purchase securities
20
according to the various authorizations. The limit prices ranged from less than or equal to $31.00 per share to less than or equal to $40.00 per
share at various times.
We purchased 38,547, 35,221, 1,680, and 439 shares in the open market during the first, second, third and fourth quarters of fiscal year 2013,
respectively, at a weighted average price of $38.14 per share.
We purchased zero, 12,026, zero, and 306 shares in the open market during the first, second, third and fourth quarters of fiscal year 2012,
respectively, at a weighted average price of $24.12 per share.
We purchased 7,534, 32,268, 768 and 7,710 shares in the open market during the first, second, third and fourth quarters of fiscal year 2011,
respectively, at a weighted average price of $24.96 per share.
Item 6. Selected Financial Data.
(in thousands, except per share amounts)
September 30,
2013
2012
2011
2010
2009
Operating revenue
Net income (loss) from continuing operations
Income (loss) from continuing operations per weighted
average common share
Weighted average number of shares outstanding
Cash dividends declared per share
Total assets
Long-term obligations
$
$
$
$
$
$
101,661
19,646
2.67
7,357
0.36
198,840
36,000
$
$
$
$
$
$
127,187
18,489
2.51
7,355
0.20
185,083
39,900
$
$
$
$
$
$
98,592
7,097
0.96
7,363
0.12
180,035
57,158
$
$
$
$
$
$
79,792
(623)
(0.08)
7,374
0.10
188,817
75,668
$
$
$
$
$
$
89,528
(3,649)
(0.49)
7,377
0.69
200,235
80,715
Notes regarding selected financial data:
During the year ended September 30, 2009, we utilized cash to reduce our outstanding debt by $59,524,000, resulting in a reduction in total
assets and long-term obligations.
During the year ended September 30, 2011, we utilized cash to reduce our outstanding debt by $18,510,000 resulting in a reduction in total
assets and long-term obligations.
Net income from continuing operations includes the gain on the sale of real estate totaling $9,113,000 on land sold during fiscal year 2012 and
impairment charges of $1,918,000 on assets held for sale in the consolidated balance sheet as of September 30, 2012.
During the year ended September 30, 2012, we utilized cash from operations and investing activities to reduce our outstanding debt by
approximately $17,258,000, resulting in a reduction in long-term obligations. See Item 8. Financial Statements and Schedules, Note 10. Long
Term Debt in the Notes to the Consolidated Financial Statements.
Net income from continuing operations includes the gain on the sale of real estate totaling $20,299,000 on easements sold during fiscal year
2013.
21
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Statement Regarding Forward-Looking Information
We make forward-looking statements in this Annual Report, particularly in this Management’s Discussion and Analysis, 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 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. The words
“anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would,” and similar expression are
intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These
statements are based on our current expectations, estimates and projections about our business based, in part, on assumptions made by our
management. These assumptions 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.
Overview
We manage our land based upon its primary usage and review its performance based upon three primary classifications – Citrus Groves,
Improved Farmland and Ranch and Conservation. In addition, we operate an Agricultural Supply Chain Management business that is not tied
directly to our land holdings and Other Operations that include leasing mines and oil extraction rights to third parties. We present our financial
results and the related discussions based upon these five segments (Citrus Groves, Improved Farmland, Ranch and Conservation, Agricultural
Supply Chain Management and Other Operations). In the fourth quarter of fiscal year 2013, we changed our internal operations to align with
the way we manage our business operations. As a result, we have realigned our financial reporting segments to match our internal operations.
We have reclassified prior years to conform to the fiscal year 2013 presentation. None of these changes affect our previously report
consolidated results. The primary change in previously reported segment results is to reclassify the former Land Leasing and Rentals
segment’s revenues and expenses to the related land classifications.
We own approximately 130,800 acres of land in six Florida counties (Alachua, Collier, Glades, Hendry, Lee and Polk), and operate five
segments.
Segments
We operate five segments related to our various land holdings.
· Citrus Groves include activities related to planting, owning, cultivating and/or managing citrus groves in order to produce fruit for sale
to fresh and processed citrus markets.
· Agricultural Supply Chain Management and Support includes activities related to the purchase and resale of fruit, as well as, to value-
added services which include contracting for the harvesting, marketing and hauling of citrus.
·
Improved Farmland includes activities related to planting, owning, cultivating, managing and/or leasing improved farmland. Improved
farmland is acreage that has been converted, or is permitted to be converted, from native pasture and which may have various
improvements including irrigation, drainage and roads.
· Ranch and Conservation includes activities related to cattle grazing, sod, native plant and animal sales, leasing, management and/or
conservation of unimproved native pasture land.
22
· Other Operations include activities related to rock mining royalties, oil exploration and other insignificant lines of business.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States
of America (“GAAP”) requires management to make estimates and judgments that affect the reported amounts of assets and liabilities,
revenues and expenses, and related disclosures of contingent assets and liabilities. Management evaluates the estimates and assumptions on an
on-going basis, based upon historical experience and various other factors and circumstances. Management believes that the estimates and
assumptions are reasonable in the circumstances; however, actual results may vary from these estimates and assumptions under different
future circumstances. The following critical accounting policies have been identified that affect the more significant judgments and estimates
used in the preparation of the consolidated financial statements.
Revenue Recognition - Revenue from agricultural crops is recognized at the time the crop is harvested and delivered to the customer. Alico
recognizes revenue from cattle sales at the time the cattle are delivered. 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 year to these estimates as more current relevant information regarding the specific markets become available. Differences
between the estimates and the final realization of revenue can be significant and can be either positive or negative. During the periods presented
in this report on Form 10-K, no material adjustments were made to the reported revenues from Alico’s crops.
Alico Fruit’s operations primarily consist of providing supply chain management services to Alico, as well as to other citrus growers and
processors in the State of Florida. Alico Fruit also purchases and resells citrus fruit; in these transactions, Alico Fruit (i) acts as a principal;
(ii) takes title to the products; and (iii) has the risks and rewards of ownership, including the risk of loss for collection, delivery or returns.
Therefore, Alico Fruit recognizes revenue based on the gross amounts due from customers for its marketing activities. Supply chain
management service revenues are recognized when the services are performed.
Variable Interest and Equity Method Investments - We evaluate investments for which we do not hold an equity interest of at least 50% based
on the amount of control we exercise over the operations of the investee, our exposure to losses in excess of our investment, our ability to
significantly influence the investee and whether we are the primary beneficiary of the investee. In May 2010, we invested $12,150,000 to
obtain a 39% equity interest in Magnolia TC 2, LLC (“Magnolia”), a Florida limited liability company whose primary business activity is
acquiring tax certificates issued by various counties in the State of Florida on properties which have been declared delinquent. Based on the
criteria above, we are accounting for our investment in Magnolia in accordance with the equity method, whereby the investment in Magnolia is
recorded as the line item, Investment in Magnolia, on our consolidated balance sheets, and changes in the account resulting from Magnolia’s
prorated earnings or losses up to our initial investment are recognized as income or loss to us.
Inventory - We capitalize the cost of growing crops into inventory until the time of harvest. Once a given crop is harvested, the related
inventoried costs are recognized as a cost of sale to provide an appropriate matching of costs incurred with the related revenue recognized. We
record inventory at the lower of cost or net realizable value. Management regularly assesses estimated inventory valuations based on current
and forecasted usage of the related commodity, observable prices, estimated completion costs and other relevant factors that may affect the net
realizable value.
Property, Buildings and Equipment - Property, buildings and equipment are stated at cost, net of accumulated depreciation or 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
23
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.
Costs related to the development of sugarcane are capitalized in a similar manner as citrus groves. However, sugarcane matures in one year
and, we will typically harvest an average of three crops (one per year) from one planting. As a result, cultivation and caretaking costs are
expensed as the crop is harvested, while the development and planting costs are depreciated over three years.
The breeding herd consists of purchased animals and replacement breeding animals raised on our ranch. Purchased animals are stated at the
cost of acquisition. The cost of animals raised on the ranch is based on the accumulated cost of developing such animals for productive use.
Breeding animals are depreciated over 6-7 years.
Impairment of Long-Lived Assets - We evaluate property, buildings, cattle, equipment and other long-lived assets for impairment when events
or changes in circumstances (triggering events) indicate that the carrying value of assets contained in our financial statements may not be
recoverable. Depending on the asset under review, we use varying methods to determine fair value, such as discounting expected future cash
flows, determining resale values by market or applying a capitalization rate to net operating income using prevailing rates for a given market.
Unfavorable changes in economic conditions and net operating income for a specific property will change our estimates. If an impairment loss
is recognized, the adjusted carrying amount of the asset becomes its cost basis. For a depreciable long-lived asset, the new cost basis will be
depreciated or amortized over the remaining useful life of that asset.
Income Taxes - In preparing our consolidated financial statements, significant judgment is required to estimate our income taxes. Our estimates
are based on our interpretations of federal and state laws. Deferred income taxes are recognized for the income tax effect of temporary
differences between financial statement carrying amounts and the income tax bases of assets and liabilities. We regularly review our deferred
income tax assets to determine whether future taxable income will be sufficient to realize the benefits of these assets. A valuation allowance is
provided for deferred income tax assets for which it is deemed, more likely than not, that future taxable income will not be sufficient to realize
the related income tax benefits from these assets. The amount of the net deferred income tax asset that is considered realizable could be
adjusted if estimates of future taxable income are adjusted. We apply a “more likely than not” threshold to the recognition and non-recognition
of tax positions. A change in judgment related to prior years’ tax positions is recognized in the quarter of such change. Adjustments to
temporary differences, permanent differences or uncertain tax positions could materially impact our financial position, cash flows and results
of operations.
Fair Value Measurements - The carrying amounts in the balance sheets for accounts receivable, mortgages and notes receivable, accounts
payable and accrued expenses approximate fair value because of the immediate or short term maturity of these items. When stated interest rates
are below market, we discount mortgage notes receivable to reflect their estimated fair value. We carry our investments at fair value. 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.
24
Recent Accounting Pronouncements
Title
Update No. 2013-11—Income Taxes (Topic
740): Presentation of an Unrecognized Tax Benefit
When a Net Operating Loss Carryforward, a Similar
Tax Loss, or a Tax Credit Carryforward Exists (a
consensus of the FASB Emerging Issues Task Force)
Update 2013-02—Comprehensive Income (Topic
220): Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income
Update 2013-01—Balance Sheet (Topic 210):
Clarifying the Scope of Disclosures about Offsetting
Assets and Liabilities
Prescribed
Effective Date
1/1/2013
(Q2 2014)
1/1/2013
(Q2 2014)
10/1/2014
(Q1 2015)
Alico's Status
Unadopted
Commentary
The Company does not believe that adoption of the
standard will have a material impact on its results of
operations or financial position upon adoption.
Unadopted
Unadopted
The Company does not believe that adoption of the
standard will have a material impact on its results of
operations or financial position upon adoption.
The Company does not believe that adoption of the
standard will have a material impact on its results of
operations or financial position upon adoption.
25
Recent Events
Conservation Easement Closing
In July, 2013, we granted a warranty easement deed to the United States Department of Agriculture, through its administering agency, The
Natural Resources Conservation Service, granting a conservation easement on approximately 11,600 acres located in Hendry County (the
“Property”) for $20,678,000. The easement agreement states the Property will be enrolled in perpetuity in the Wetlands Reserve Program
designed to restore, protect and enhance the values of the wetlands and for the conservation of natural resources. We will retain title to the
Property and the right to various recreational uses including hunting, fishing and leasing of such rights. Additionally, we reserve the right to
subsurface resources including oil, gas, minerals and geothermal resources underlying the easement area and the right to water uses and water
rights identified as reserved to us.
2014 Outlook:
The discussion below of the fiscal year 2014 outlook for Results of Operations and Liquidity and Capital Resources reflects management’s
estimates and expectations as of the date of this filing. There can be no assurance that the events or related outcomes presented below will
occur.
Results of Operations:
· Citrus Groves – For fiscal year 2013, we produced 3,867,000 boxes of processed fruit and 24,746,000 pound solids and received
$1.66 per pound solid. The USDA, in its November 8, 2013 Citrus Crop Forecast indicated that it believes the Florida orange crop
will decline from 133,600,000 boxes for the 2012/2013 crop year to 125,000,000 boxes for the 2013/2014 crop year, a decline of
6.4%. However, we expect our 2014 processed boxes to be not materially less than our 2013 processed boxes. We expect that the
forecasted decline in the size of the statewide crop could cause the price per pound solids for fiscal year 2014 to increase versus the
price for fiscal year 2013. We expect that operating expenses for fiscal year 2014 will remain in-line with fiscal year 2013. Under
these assumptions, we would expect that fiscal year 2014 Citrus Groves revenues and gross profit would remain approximately in-line
with fiscal year 2013 Citrus Groves revenues and gross profit, and that both revenues and gross profit could increase over fiscal year
2013 based upon fluctuations in the pound solid pricing and the ultimate size of the statewide 2013/2014 crop.
·
·
Improved Farmland – For fiscal year 2013, we produced 546,000 net standard tons of sugarcane on 13,272 net acres of farmland and
received $36.86 per net standard ton plus a molasses bonus of $1.47 per net standard ton. For fiscal year 2014, we expect that we will
harvest approximately 16,700 net acres of sugarcane and expect that production per acre will decrease by approximately 5%. USSC,
our sole sugarcane customer, has indicated that sugarcane prices for fiscal year 2014 will be in the range of $28.00 to $30.00 per net
standard ton and that the molasses bonus should remain in-line with fiscal year 2013. Despite an anticipated increase in production as
compared to fiscal year 2013, we expect that operating expenses will remain relatively in-line with fiscal year 2013. Under these
assumptions, we would expect that fiscal year 2014 Improved Farmland gross profit would decline by $1.0 million to $2.3 million.
Ranch and Conservation – For fiscal year 2013, we had a breeding herd of approximately 8,500 cows which produced calves and
culls and generated $5,546,000 of revenue at an average price of $1.32 per pound. For fiscal year 2014, we expect to have a breeding
herd of approximately 9,300 cows and expect that the price per pound of beef sold will remain in line with the price per pound for
fiscal year 2013. In addition, we expect to sell approximately 600 additional calves that were in inventory at September 30, 2013. We
expect operating expenses for fiscal year 2014 to remain relatively in-line with fiscal year 2013. Under these assumptions, we would
expect that fiscal year 2014 Ranch and Conservation gross profit would increase by approximately $0.6 million as compared to fiscal
year 2013.
26
·
Agricultural Supply Chain Management and Other Operations – For fiscal year 2014, we would expect gross profit for both
segments to remain relatively in-line with fiscal year 2013, while we expect revenue from the Agricultural Supply Chain Management
segment to decline at approximately the same rate as the statewide production of citrus described above.
· General and Administrative - Excluding costs related to the change in majority shareholder and other change in control related
expenses, General and Administrative expenses are expected to grow at a rate that approximates inflation versus fiscal year 2013.
· Other Income - Other Income is comprised of interest expense and investment income, both of which are expected to remain in line
with fiscal year 2013 for fiscal year 2014. Management does not currently anticipate any material property sales will occur in fiscal
year 2014.
Liquidity and Capital Resources:
·
Liquidity – We expect that we will continue to have sufficient liquidity to fund our operations and strategic initiatives at least through
fiscal year 2014.
· Cash from Operating Activities – To the extent that our Net Income is impacted by the expectations listed in Results of Operations
above, our cash flow from operations for fiscal year 2014 will also be directly impacted. We do not expect any out of the ordinary
changes in working capital for fiscal year 2014.
· Cash from Investing Activities – We completed the expansion of our sugarcane land in fiscal year 2013. Therefore, for fiscal year 2014
we expect that capital expenditures will decrease between $4.5 million and $6.0 million versus fiscal year 2013. We do not expect to
receive any out of the ordinary proceeds from the sale of fixed assets in fiscal year 2014. However, we do expect that the majority of
the balance of the investment in the Magnolia fund will be returned to us in fiscal year 2014.
· Cash from Financing Activities – Our stock repurchase program expired on November 1, 2013. Our Board of Directors approved a
50% increase in our quarterly cash dividend effective in the first quarter of fiscal year 2014. Dividends are evaluated and approved on
a quarterly basis.
27
Results of Operations
The following table sets forth a comparison of results of operations for the fiscal years ended September 30, 2013, 2012, and 2011:
(in thousands)
Operating revenues:
Fiscal Year Ended
September 30,
2013
2012
Change
$
%
Fiscal Year Ended
September 30,
2012
2011
Change
$
%
Citrus Groves
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
Total operating revenues
$ 43,689
28,412
21,917
6,755
888
101,661
$ 55,423
48,334
15,316
7,348
766
127,187
$ (11,734)
(19,922)
6,601
(593)
122
(25,526)
(21.2)%
(41.2)%
43.1%
(8.1)%
15.9%
(20.1)%
$ 55,423
48,334
15,316
7,348
766
127,187
$ 47,088
36,115
8,642
6,015
732
98,592
$
8,335
12,219
6,674
1,333
34
28,595
Gross Profit:
Citrus Groves
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
Total gross profit
Corporate, general and
administrative expenses
Income from operations
Other income (expense), net
Income before income taxes
Income taxes
Net income
12,156
463
5,715
2,957
383
21,674
24,428
641
3,742
3,851
(430)
32,232
(12,272)
(178)
1,973
(894)
813
(10,558)
(50.2)%
(27.8)%
52.7%
(23.2)%
(189.1)%
(32.8)%
24,428
641
3,742
3,851
(430)
32,232
19,324
1,006
1,299
2,375
(571)
23,433
5,104
(365)
2,443
1,476
141
8,799
9,739
8,490
1,249
14.7%
8,490
8,196
294
3.6%
11,935
19,740
23,742
5,720
(11,807)
14,020
(49.7)%
245.1%
23,742
5,720
15,237
(2,710)
8,505
8,430
55.8%
(311.1)%
31,675
(12,029)
29,462
(10,973)
2,213
(1,056)
7.5%
9.6%
29,462
(10,973)
12,527
(5,430)
16,935
(5,543)
135.2%
102.1%
$ 19,646
$ 18,489
$
1,157
6.3%
$ 18,489
$
7,097
$ 11,392
160.5%
17.7%
33.8%
77.2%
22.2%
4.6%
29.0%
26.4%
(36.3)%
188.1%
62.1%
(24.7)%
37.5%
A discussion of our segment results of operations follows.
28
Citrus Groves
The table below presents key operating measures for the fiscal years ended September 30, 2013, 2012 and 2011:
(in thousands, except per box and per pound solid data)
Revenue From:
Early and Mid Season
Valencias
Fresh Fruit
Other
Total
Boxes Harvested:
Early and Mid Season
Valencias
Total Processed
Fresh Fruit
Total
Pound Solids Produced:
Early and Mid Season
Valencias
Total
Pound Solids per Box:
Early and Mid Season
Valencias
Price per Pound Solid:
Early and Mid Season
Valencias
Price per Box:
Fresh Fruit
Operating Expenses:
Cost of Sales
Harvesting and Hauling
Other
Total
Fiscal Year Ended
September 30,
2013
2012
Change
$
%
Fiscal Year Ended
September 30,
2012
2011
Change
$
%
$ 17,923
23,216
2,451
99
$ 43,689
$ 24,376
28,331
2,582
134
$ 55,423
$
(6,453)
(5,115)
(131)
(35)
$ (11,734)
(26.5)%
(18.1)%
(5.1)%
(26.1)%
(21.2)%
$ 24,376
28,331
2,582
134
$ 55,423
$ 20,280
24,321
2,527
(40)
$ 47,088
$
$
4,096
4,010
55
174
8,335
20.2%
16.5%
2.2%
(435.0)%
17.7%
1,900
1,967
3,867
251
4,118
2,186
2,171
4,357
278
4,635
(286)
(204)
(490)
(27)
(517)
(13.1)%
(9.4)%
(11.2)%
(9.7)%
(11.2)%
2,186
2,171
4,357
278
4,635
1,982
1,791
3,773
289
4,062
204
380
584
(11)
573
11,612
13,134
24,746
14,030
15,039
29,069
(2,418)
(1,905)
(4,323)
(17.2)%
(12.7)%
(14.9)%
14,030
15,039
29,069
12,167
11,809
23,976
1,863
3,230
5,093
10.3%
21.2%
15.5%
(3.8)%
14.1%
15.3%
27.4%
21.2%
6.11
6.68
6.42
6.93
(0.31)
(0.25)
(4.8)%
(3.6)%
6.42
6.93
6.14
6.59
0.28
0.33
4.6%
5.1%
$
$
$
1.54
1.77
$
$
1.74
1.88
$
$
(0.19)
(0.12)
(11.2)%
(6.2)%
$
$
1.74
1.88
$
$
1.67
2.06
$
$
0.07
(0.18)
4.2%
(8.5)%
9.76
$
9.29
$
0.48
5.1%
$
9.29
$
8.74
$
0.54
6.2%
$ 19,803
11,473
257
$ 31,533
$ 17,822
13,173
-
$ 30,995
$
$
1,981
(1,700)
257
538
11.1%
(12.9)%
NM
1.7%
$ 17,822
13,173
-
$ 30,995
$ 16,587
11,171
6
$ 27,764
$
$
1,235
2,002
(6)
3,231
7.4%
17.9%
(100.0)%
11.6%
We sell our Early and Mid-Season and Valencia oranges to processors that convert the majority of the citrus crop into orange juice. They
generally buy their citrus on a pound solids basis, which is the measure of the soluble solids (sugars and acids) contained in one box of fruit.
Fresh Fruit is generally sold to packing houses that purchase their citrus on a per box basis. Our Operating Expenses consist primarily of Cost
of Sales and Harvesting and Hauling. Cost of Sales represents the cost of maintaining our citrus groves for the preceding calendar year and
does not vary in relation to production. Harvesting and Hauling represents the cost of bringing citrus product to processors and varies based
upon the number of boxes produced.
The declines for fiscal year 2013 versus fiscal year 2012 in boxes harvested, pound solids produced and pound solids per box are being
driven by growing season fluctuations in production which may be attributable to various factors, including changes in weather, horticultural
practices and the effects of diseases and pests, including Citrus Greening. The industry and the Company both experienced higher than normal
premature fruit drop in certain areas of our groves that also contributed to the smaller harvest.
The statewide environmental and horticultural factors described above have negatively impacted our crops and key operating measures
presented above. The Florida orange crop declined by 13,300,000 boxes or approximately 9% versus the prior year.
The decline in Citrus Groves gross profit for fiscal year 2013 versus fiscal year 2012 relates primarily to the changes in revenue discussed
above plus an increase of 11.1% in growing costs for the fiscal year 2013 crop to $19,803,000 from $17,822,000, primarily driven by
increases in the market price of fertilizer. Per box harvest and hauling costs remained relatively in line.
29
The increases for fiscal year 2012 versus fiscal year 2011 in boxes harvested, pound solids produced and pound solids per box were driven
by favorable weather conditions during the growing season, combined with improved foliar nutrition and horticultural programs in our groves.
Agricultural Supply Chain Management
The table below presents key operating measures for the fiscal years ended September 30, 2013, 2012 and 2011:
(in thousands, except per box and per pound solid data)
Purchase and Resale of Fruit:
Revenue
Boxes Sold
Pounds Solids Sold
Pounds Solids per Box
Price per Pound Solids
Value Added Services:
Revenue
Value Added Boxes
Other Revenue
Fiscal Year Ended
September 30,
2013
2012
Change
$
%
Fiscal Year Ended
September 30,
2012
2011
Change
$
%
$ 22,858
2,377
14,839
6.24
1.54
$
$ 41,319
3,235
21,097
6.52
1.96
$
$ (18,461)
(858)
(6,258)
(0.28)
(0.42)
$
(44.7)%
(26.5)%
(29.7)%
(4.3)%
(21.3)%
$ 41,319
3,235
21,097
6.52
1.96
$
$ 30,975
3,041
19,066
6.27
1.62
$
$ 10,344
194
2,031
0.25
0.33
$
33.4%
6.4%
10.7%
4.0%
20.6%
$
$
3,592
2,761
$
4,443
3,031
$
(851)
(270)
(19.2)%
(8.9)%
$
4,443
3,031
$
2,425
1,629
$
2,018
1,402
83.2%
86.1%
1,962
$
2,572
(610)
(23.7)%
$
2,572
$
2,715
(143)
(5.3)%
For fiscal year 2013 versus fiscal year 2012, the declines in Purchase and Resale of Fruit revenue, boxes sold, pound solids sold, pound
solids per box and price per pound solids as well as the declines in Value Added Services revenue and boxes, are all being driven primarily by
statewide harvest and market conditions as discussed under Citrus Groves above. The decline in Alico Fruit Company gross profit relates
primarily to the changes in revenue outlined above.
For fiscal year 2012 versus fiscal year 2011, the increases in Purchase and Resale of Fruit revenue, boxes sold, pound solids sold, pound
solids per box and price per pound solids were all driven primarily by statewide harvest and market conditions as discussed under Citrus
Groves above. The increase in Value Added Services revenue and boxes was driven primarily by the execution of a strategy to increase the
number of boxes grown or handled by Alico relative to the overall Florida citrus marketplace. The decrease in Alico Fruit Company gross
profit is primarily related to a one-time maintenance and improvement program implemented in fiscal year 2012 and continuing into the first
quarter of fiscal year 2013 that was intended to improve our fleet of citrus trailers, partially offset by the increase in revenues outlined above.
30
Improved Farmland
The table below presents key operating measures for the fiscal years ended September 30, 2013, 2012 and 2011:
(in thousands, except per net standard ton and per acre data)
Fiscal Year Ended
September 30,
2013
2012
Change
$
%
Fiscal Year Ended
September 30,
2012
2011
Change
$
%
Revenue From:
Sale of Sugarcane
Molasses Bonus
Land Leasing
Other
Total
$ 20,125
800
779
213
$ 21,917
$ 13,931
512
873
-
$ 15,316
Net Standard Tons Sold
546
339
Price Per Net Standard Ton:
Sale of Sugarcane
Molasses
$
$
36.86
1.47
$
$
41.09
1.51
Net Standard Tons/Acre
41.14
35.19
Operating Expenses:
Cost of Sales
Harvesting and Hauling
Land Leasing Expenses
Total
NM - Not Meaningful
$ 11,580
4,298
324
$ 16,202
$
8,626
2,501
447
$ 11,574
$
$
$
$
$
$
6,194
288
(94)
213
6,601
44.5%
56.3%
(10.8)%
NM
43.1%
$ 13,931
512
873
-
$ 15,316
$
$
7,567
207
846
22
8,642
$
$
6,364
305
27
(22)
6,674
84.1%
147.3%
3.2%
(100.0)%
77.2%
207
61.1%
339
205
134
65.4%
(4.24)
(0.05)
(10.3)%
(3.0)%
$
$
41.09
1.51
$
$
36.91
1.01
$
$
4.18
0.50
11.3%
49.6%
5.95
16.9%
35.19
31.87
3.32
10.4%
2,954
1,797
(123)
4,628
34.2%
71.9%
(27.5)%
40.0%
$
8,626
2,501
447
$ 11,574
$
$
5,194
1,643
506
7,343
$
$
3,432
858
(59)
4,231
66.1%
52.2%
(11.7)%
57.6%
For fiscal year 2013 versus fiscal year 2012, the increases in revenues and net standard tons sold relate primarily to the increase in producing
acres to 13,272 in fiscal year 2013 from 9,634 in fiscal year 2012 as well as a 16.9% increase in net standard tons per acre. The increase in
production is partially offset by the decrease in price per net standard ton that has resulted from changes in market conditions in fiscal year
2013 versus fiscal year 2012. Our Operating Expenses consist primarily of Cost of Sales and Harvesting and Hauling. Cost of Sales
represents the cost of maintaining our sugarcane land for the preceding calendar year and does not vary in relation to production. Harvesting
and Hauling represents the cost of bringing sugarcane product to our processor and varies based upon the number of net standard tons
produced.
The increase in gross profit for fiscal year 2013 versus fiscal year 2012 is related primarily to the increase in revenues discussed above and a
2.3% decrease in growing costs per acre versus fiscal year 2012. This increase is partially offset by a 5% increase in per net standard ton
harvest and hauling costs versus of the prior year.
Our sugarcane processor has informed us that the expected price of sugarcane for the 2013/2014 crop year will be in the range of $28.00 to
$30.00 per net standard ton.
For fiscal year 2012 versus fiscal year 2011, the increases in revenues and net standard tons sold relate primarily to the increase in producing
acres to 9,634 in fiscal year 2012 from 6,432 in fiscal year 2011 as well as a 10.4% increase in net standard tons per acre. The increase in
production is aided by the increase in price per net standard ton that resulted from changes in market conditions in fiscal year 2012 versus
fiscal year 2011.
The increase in gross profit for fiscal year 2012 versus fiscal year 2011 is related primarily to the increase in revenues discussed above,
partially offset by a 10.9% increase in growing costs per acre versus fiscal year 2011.
31
Ranch and Conservation
The table below presents key operating measures for the fiscal years ended September 30, 2013, 2012 and 2011:
(in thousands, except per pound data)
Fiscal Year Ended
September 30,
2013
2012
Change
$
%
Fiscal Year Ended
September 30,
2013
2012
Change
$
%
$
$
$
$
$
$
4,797
560
983
415
6,755
3,229
680
1.49
0.82
3,274
280
239
5
3,798
$
$
$
$
$
$
5,181
713
1,067
387
7,348
3,182
933
1.63
0.76
2,818
370
309
-
3,497
$
$
$
$
$
$
(384)
(153)
(84)
28
(593)
(7.4)%
(21.5)%
(7.9)%
7.2%
(8.1)%
47
(253)
1.5%
(27.1)%
(0.14)
0.06
(8.8)%
7.8%
456
(90)
(70)
5
301
16.2%
(24.3)%
(22.7)%
NM
8.6%
$
$
$
$
$
$
5,181
713
1,067
387
7,348
3,182
933
1.63
0.76
2,818
370
309
-
3,497
$
$
$
$
$
$
4,074
513
1,096
332
6,015
3,091
856
1.32
0.60
2,865
314
378
83
3,640
$
$
$
$
$
$
1,107
200
(29)
(1,307)
1,333
27.2%
39.0%
(2.6)%
(393.7)%
22.2%
91
77
2.9%
9.0%
0.31
0.16
23.5%
27.5%
(47)
56
(69)
(9)
(143)
(1.6)%
17.8%
(18.3)%
(10.8)%
(3.9)%
Revenue From:
Sale of Calves
Sale of Culls
Land Leasing
Other
Total
Pounds Sold:
Calves
Culls
Price Per Pound:
Calves
Culls
Operating Expenses:
Cost of Calves Sold
Cost of Culls Sold
Land Leasing Expenses
Other
Total
NM - Not Meaningful
The decrease in revenues from the sale of calves in fiscal year 2013 versus fiscal year 2012 results primarily from the decrease in price per
pound, partially offset by a small increase in pounds sold. We have approximately 600 additional calves (approximately 290,000 pounds) that
are expected to be sold in the first quarter of fiscal year 2014 that were raised during the 2012/2013 crop year and which were expected to be
sold in the fourth quarter of fiscal year 2013. The decrease in revenues from the sale of culls for fiscal year 2013 versus fiscal year 2012
results primarily from the decrease in the number of pounds of culls sold, partially offset by the increase in the price per pound for culls. The
number of head culled from our herd decreased versus fiscal year 2012 as the quality of our breeding herd was improved by culls sold in
fiscal year 2012.
The increase in revenues from the sale of calves in fiscal year 2012 versus fiscal year 2011 results primarily from the increase in price per
pound and a small increase in the number of pounds sold. The increase in revenues from sale of culls in fiscal year 2012 versus fiscal year
2011 results from a combination of the increase in the number of pounds sold and the increase in the price per pound for culls. The number of
head culled from our herd increased versus fiscal year 2011 in order to improve the quality of our breeding herd for the future.
Other Operations
Other Operations includes leasing revenue of $445,000, $480,000, and $490,000 for fiscal years 2013, 2012 and 2011, respectively and gross
profit of $155,000, $179,000, and $157,000 for fiscal years 2013, 2012 and 2011, respectively.
General and Administrative
The increase in general and administrative expenses for fiscal year 2013 versus fiscal year 2012 relates primarily to costs incurred related to
the pursuit of a transaction as described in “Recent Events,” which totaled $1,816,000 in fiscal year 2013. Excluding those costs, general and
administrative expenses decreased due primarily to a decrease in professional fees related to the settlement of the shareholder derivative lawsuit
and the IRS appeal.
The increase in general and administrative expenses for fiscal year 2012 versus fiscal year 2011 relates primarily to the change in the status of
our Chief Executive Officer from part-time to full-time, partially offset by a decrease in professional fees and other costs.
32
Income Tax Expense
Our effective tax rates were 38.0%, 37.2% and 43.3% for the fiscal years ended September 30, 2013, 2012 and 2011, respectively. The
change in rate in fiscal year 2013 versus fiscal year 2012 relates primarily to changes in the relative magnitude of various permanent book-tax
differences. The change in rate in fiscal year 2012 versus fiscal year 2011 relates primarily to the IRS settlement which occurred in fiscal year
2011 and increased the effective tax rate.
At September 30, 2013, we had $54,205,000 of gross deferred tax assets comprised primarily of $27,224,000 of capital loss carry-forwards
expiring in fiscal year 2018, $13,457,000 of state bonus depreciation disallowance, $8,286,000 of outside basis difference related to our
investment in Alico-Agri, Ltd., and $4,371,000 of accrued pension costs. No valuation allowance was recorded on any of our deferred tax
assets. We expect to realize all of our deferred tax assets prior to their expiration, if any.
Liquidity and Capital Resources
A comparative balance sheet summary is presented in the following table:
(in thousands)
Cash and cash equivalents
Restricted cash
Investments
Total current assets
Total current liabilities
Working capital
Total assets
Notes payable
Current ratio
September 30,
2013
2012
Change
$
$
$
$
$
$
$
$
24,583
-
260
59,795
11,491
48,304
198,840
36,000
5.20 to 1
$
$
$
$
$
$
$
$
13,328
2,500
257
51,467
17,148
34,319
185,083
39,900
3.00 to 1
$
$
$
$
$
$
$
$
11,255
(2,500)
3
8,328
(5,657)
13,985
13,757
(3,900)
We believe that our current cash position, revolving credit facility and the cash we expect to generate from operating activities will provide us
with sufficient liquidity to satisfy our working capital requirements and capital expenditures for the foreseeable future. We have a $60,000,000
revolving line of credit (“RLOC”) which was available for our general use at September 30, 2013 (see “Note 10. Long-Term Debt” in the
Notes to Consolidated Financial Statements).
The net increase in cash and cash equivalents was primarily due to the following factors:
· Closing of the Conservation Easement for $20,678,000,
· Cash provided by operations of $13,426,000,
· Capital expenditures of $18,924,000,
·
·
· Dividends paid of $2,048,000
Principal payments on debt of $3,900,000,
Treasury stock purchases of $2,894,000, and
In July, 2013, we closed a warranty easement deed with the United States Department of Agriculture, through its administering agency, The
Natural Resources Conservation Service, granting a conservation easement on approximately 11,600 acres located in Hendry County, FL (the
“Property”) for $20,678,000. The easement agreement states the Property will be enrolled in perpetuity in the Wetlands Reserve Program
designed to restore, protect and enhance the values of the wetlands and for the conservation of natural resources. We generated an approximate
$20,343,000 pre-tax gain which was booked in our fourth quarter results. Additionally, an approximately $20,400,000 capital gain for tax
purposes will to be utilized against the $48 million capital loss carryforward generated by the Lee County property transactions in fiscal years
2012 and 2013.
33
Net Cash Provided By Operating Activities
The following table details the items contributing to Net Cash Provided by Operating Activities for fiscal years 2013, 2012: and 2011:
(in thousands)
Net Income
Depreciation and Amortization
Net Gain Loss on Sale of Property
and Equipment
Other Non-Cash Income Expenses
Change in Working Capital
Fiscal Year Ended
September 30,
Fiscal Year Ended
September 30,
2013
2012
Change
2012
2011
Change
$ 19,646 $ 18,489 $
9,675
8,429
1,157 $ 18,489 $
1,246
(20,894)
9,907
(4,908)
(8,800)
6,205
(688)
(12,094)
3,702
(4,220)
8,429
-
(8,800)
6,205
(688)
7,097 $ 11,392
1,102
7,327
-
1,028
1,295
(8,800)
5,177
(1,983)
Cash from operations
$ 13,426 $ 23,635 $ (10,209) $ 23,635 $ 16,747 $
6,888
The factors contributing to the decrease in net income for fiscal year 2013 versus fiscal year 2012 are discussed in “Results of Operations.”
Depreciation and Amortization increased versus fiscal year 2012 due to purchases of depreciable property and equipment during the last
twelve months as well as additional capitalized sugarcane planting costs. The net gain on the sale of property and equipment increased from
fiscal year 2012 due to the closing of the Conservation Easement in fiscal year 2013.
The factors contributing to the increase in net income for fiscal year 2012 versus fiscal year 2011 are discussed in “Results of Operations.”
Depreciation and Amortization increased versus fiscal year 2011 due to purchases of depreciable property and equipment during the prior
twelve months as well as additional capitalized sugarcane planting costs. The net gain on the sale of property and equipment increased from
fiscal year 2011 due to the Lee County Land Sales discussed above.
Due to the seasonal nature of our business, working capital requirements are typically greater in the first and fourth quarters of our fiscal year
coinciding with our planting and harvest cycles. Cash flows from operating activities typically improve in our second and third fiscal quarters
as we harvest our crops.
Net Cash Used In Investing Activities
The following table details the items contributing to Net Cash Used in Investing Activities for fiscal years 2013, 2012 and 2011:
(in thousands)
Purchases of property and equipment:
Sugarcane planting
Improvements to farmland
Citrus nursery
Citrus tree development
Breeding herd purchases
Purchase of corporate headquarters
Rolling stock, equipment and other
Fiscal Year Ended
September 30,
Fiscal Year Ended
September 30,
2013
2012
Change
2012
2011
Change
$ (3,430) $ (4,444) $
1,014 $ (4,444) $ (4,299) $
(4,365)
(1,973)
(977)
(3,804)
-
(4,375)
(5,153)
-
(895)
(807)
-
(4,622)
788
(1,973)
(82)
(2,997)
-
247
(5,153)
-
(895)
(807)
-
(4,622)
-
-
(1,527)
(1,230)
(2,869)
(2,340)
(145)
(5,153)
-
632
423
2,869
(2,282)
Total
(18,924)
(15,921)
(3,003)
(15,921)
(12,265)
(3,656)
Disposal of property and equipment
Return on investment in Magnolia
Other
24,381
1,179
35
18,095
4,735
769
6,286
(3,556)
(734)
18,095
4,735
769
1,221
2,484
467
16,874
2,251
302
Cash from investing activities
$
6,671 $
7,678 $ (4,010) $
7,678 $ (8,093) $ 12,115
For fiscal year 2013 versus fiscal year 2012, Net Cash Provided by Investing Activities decreased slightly. The factors contributing to the
decrease include an increase in purchases of property and equipment related primarily to
34
completing the conversion of undeveloped and permitted land to approximately 4,000 producing acres of improved farmland in the current
year period. Also included in purchases of property and equipment are the costs associated with planting the additional 4,000 acres of
sugarcane as well as approximately 1,200 acres of fallow sugarcane land, the purchase of 396 acres of land in Alachua County for use as a
citrus nursery and the purchase of approximately 2,200 additional heifers. The increase in disposal of property and equipment relates to the
timing of the closings of the various sales recorded in the Statement of Comprehensive Income for fiscal year 2013 and 2012. The decrease in
the return on investment in Magnolia versus fiscal year 2012 relates primarily to the suspension of cash distributions by Magnolia during the
first three quarters of fiscal year 2013 while it converted a large portion of its tax certificate portfolio to tax deeds. Cash distributions re-
commenced in the fourth quarter of fiscal year 2013 and are expected to continue until the investment is repaid in full.
For fiscal year 2012 versus fiscal year 2011, Net Cash Provided by Investing Activities increased significantly. Contributing to the increase
were the Lee and Polk County Land Sales discussed above. Also contributing to the increase was an increase in distributions from the
Magnolia fund versus the prior fiscal year. These positive factors were partially offset by an increase in capital expenditures related primarily
to the preparation of land for and the planting of additional sugarcane.
Net Cash Used In Financing Activities
The following table details the items contributing to Net Cash Used in Financing Activities for fiscal year 2013 and 2012:
(in thousands)
Fiscal Year Ended
September 30,
Fiscal Year Ended
September 30,
2013
2012
Change
2012
2011
Change
Principal payments on notes payable
Net repayments on revolving line of credit
Treasury stock purchases
Dividends paid
$ (3,900) $ (3,279) $
-
(2,894)
(2,048)
(13,979)
(298)
(1,765)
(621) $ (3,279) $ (1,281) $ (1,998)
1,042
907
(1,028)
(15,021)
(1,205)
(737)
(13,979)
(298)
(1,765)
13,979
(2,596)
(283)
Cash from financing activities
$ (8,842) $ (19,321) $ 10,479 $ (19,321) $ (18,244) $ (1,077)
The increase in principal payments on notes payable for fiscal year 2013 relates to the payoff of the Farm Credit Mortgage (see “Note 10.
Long-Term Debt” in the Notes to Consolidated Financial Statements). During fiscal year 2012, we paid down the revolving line of credit as
shown above. No net repayments were made in fiscal year 2013. We increased our repurchases of stock for fiscal year 2013 subject to the
provisions of SEC rule 10b-18 in order to fund grants under the 2008 and 2013 incentive equity plans (see “Note 11. Treasury Stock” in the
Notes to Consolidated Financial Statements).
The increase in principal payments on notes payable for fiscal year 2012 relates to the commencement of payments under the Rabo Term Loan
(see “Note 10. Long-Term Debt” in the Notes to Consolidated Financial Statements). During fiscal years 2012 and 2011, we used excess cash
to pay down our revolving line of credit as shown above.
Contractual Obligations and Off Balance Sheet Arrangements
We have various contractual obligations which are recorded as liabilities in our consolidated financial statements. The following table presents
our significant contractual obligations and commercial commitments on an undiscounted basis at September 30, 2013 and the future periods in
which such obligations are expected to be settled in cash.
35
(in thousands)
Total
<1 Year
Payments Due by Period
1-3 Years
3-5 Years
5+ Years
Long-Term Debt
Interest on Long-Term Debt
Citrus Purchase Contracts
Retirement Benefits
Consulting/Non-Compete Agreement
Leases
$
36,000 $
8,370
24,238
15,005
2,000
1,827
2,000 $
1,337
10,474
342
833
600
4,000 $
2,494
13,764
697
1,167
1,102
4,000 $
2,254
-
713
-
125
26,000
2,285
-
13,253
-
-
Total
$
87,440 $
15,586 $
23,224 $
7,092 $
41,538
Interest is estimated on our long-term debt at 2.76% for the Rabo term loan and revolving line of credit. See Item 8. Financial Statements and
Schedules, Note 10. Long Term Debt in the Notes to Consolidated Financial Statements.
Purchase Commitments
Alico, through its wholly owned subsidiary Alico Fruit, enters into contracts for the purchase of citrus fruit during the normal course of its
business. The remaining obligations under these purchase agreements totaled approximately $24,238,000 at September 30, 2013 for delivery
in fiscal years 2014 through 2016. All of these obligations are covered by sales agreements. Alico’s management currently believes that all
committed purchase volume will be sold at cost or higher.
Item 7A. Quantitative and Qualitative Disclosure 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, 2013. Alico held various financial instruments at September 30, 2013 and 2012, 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 debt and other
borrowings. The fair market value of long-term, fixed-interest rate debt is subject to interest rate risk. The Company’s primary long-term
obligations are floating rate debt and are not subject to fair value risk. A one percentage-point increase in prevailing interest rates would have
resulted in an increase in interest expense of $370,000 before income taxes for the year ended September 30, 2013.
Foreign-Exchange Rate Risk - The Company currently has no exposure to foreign-exchange rate risk because all of its financial instruments
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.
36
Item 8. Financial Statements and Supplementary Data.
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements of Alico, Inc.
Consolidated Balance Sheets at September 30, 2013 and 2012
Consolidated Statements of Comprehensive Income for the fiscal years ended September 30, 2013, 2012 and 2011
Consolidated Statements of Stockholders’ Equity for the fiscal years ended September 30, 2013, 2012 and 2011
Consolidated Statements of Cash Flows for the fiscal years ended September 30, 2013, 2012 and 2011
Notes to Consolidated Financial Statements
Page
38
39
40
41
42
43
44
All schedules are omitted for the reason that they are not applicable or the required information is included in the financial statements or
notes.
37
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Alico, Inc.
We have audited the accompanying consolidated balance sheets of Alico, Inc. and Subsidiaries as of September 30, 2013 and 2012, and
the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period
ended September 30, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Alico, Inc. and Subsidiaries as of September 30, 2013 and 2012, and the results of their operations and their cash flows for each of the three
years in the period ended September 30, 2013, in conformity with U.S. generally accepted accounting principles.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Alico, Inc.
and Subsidiaries’ internal control over financial reporting as of September 30, 2013, based on criteria established in Internal Control —
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 1992, and our report dated
December 9, 2013, expressed an unqualified opinion on the effectiveness of Alico, Inc. and Subsidiaries’ internal control over financial
reporting.
/s/ McGladrey LLP
Charlotte, North Carolina
December 9, 2013
38
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Alico, Inc.
We have audited Alico, Inc. and Subsidiaries’ internal control over financial reporting as of September 30, 2013, based on criteria
established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
in 1992. Alico, Inc. and Subsidiaries’ management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based
on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process 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. A company’s internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (b) 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 (c) 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.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Alico, Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of
September 30, 2013, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission in 1992.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Alico, Inc. and Subsidiaries as of September 30, 2013 and 2012, and the related consolidated statements of
comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2013, and our
report dated December 9, 2013 expressed an unqualified opinion.
/s/ McGladrey LLP
Charlotte, North Carolina
December 9, 2013
39
ALICO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share and per share amounts)
September 30,
2013
2012
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Investments
Accounts receivable, net
Income tax receivable
Inventories
Assets held for sale
Other current assets
Total current assets
Investment in Magnolia Fund
Investments, deposits and other non-current assets
Deferred income taxes
Cash surrender value of life insurance
Property, buildings and equipment, net
Total assets
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Long-term debt, current portion
Accrued expenses
Income taxes payable
Dividend payable
Accrued ad valorem taxes
Other current liabilities
Total current liabilities
Long-term debt, net of current portion
Deferred income taxes
Deferred retirement benefits, net of current portion
Total liabilities
Commitments and contingencies
Stockholders’ equity:
Preferred stock, no par value. Authorized 1,000,000 shares; issued and
outstanding, none
Common stock, $1 par value; 15,000,000 shares authorized; 7,377,106 shares
issued and 7,303,568 and 7,353,871 shares outstanding at September 30, 2013
and September 30, 2012, respectively
Additional paid in capital
Treasury stock at cost, 73,538 and 23,235 shares held at September 30, 2013 and
September 30, 2012, respectively
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
$
$
$
24,583
-
260
4,266
-
29,403
-
1,283
59,795
5,086
1,991
-
897
131,071
198,840
1,729
2,000
2,354
1,171
1,461
1,634
1,142
11,491
34,000
6,584
4,029
56,104
-
7,377
9,496
(2,816)
128,679
142,736
198,840
$
$
$
$
13,328
2,500
257
3,071
1,327
27,290
2,475
1,219
51,467
5,607
2,145
2,168
862
122,834
185,083
4,929
3,267
2,488
484
883
1,685
3,412
17,148
36,633
-
3,756
57,537
-
7,377
9,053
(543)
111,659
127,546
185,083
See accompanying notes to consolidated financial statements.
40
ALICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share amounts)
Fiscal Year Ended September 30,
2012
2013
2011
Operating revenues:
Citrus Groves
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
Total operating revenue
Operating expenses:
Citrus Groves
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
Total operating expenses
Gross profit
Corporate general and administrative
Income from operations
Other (expense) income:
Interest and investment income, net
Interest expense
Gain on sale of real estate
Impairment of assets held for sale
Other (loss) income, net
Total other (expense) income, net
Income before income taxes
Income tax expense
Net income attributable to common shareholders
Comprehensive income, net of tax effect
Comprehensive income attributable to common
shareholders
Weighted-average number of shares outstanding:
Basic
Diluted
Earnings per common share:
Basic
Diluted
Cash dividends declared per common share
$
$
$
$
$
$
43,689
28,412
21,917
6,755
888
101,661
$
55,423
48,334
15,316
7,348
766
127,187
31,533
27,949
16,202
3,798
505
79,987
21,674
9,739
11,935
704
(1,257)
20,299
-
(6)
19,740
31,675
12,029
19,646
-
30,995
47,693
11,574
3,497
1,196
94,955
32,232
8,490
23,742
97
(1,616)
9,113
(1,918)
44
5,720
29,462
10,973
18,489
-
47,088
36,115
8,642
6,015
732
98,592
27,764
35,109
7,343
3,640
1,303
75,159
23,433
8,196
15,237
(1,375)
(2,020)
-
-
685
(2,710)
12,527
5,430
7,097
-
19,646
$
18,489
$
7,097
7,313
7,357
2.69
2.67
0.36
$
$
$
7,355
7,355
2.51
2.51
0.20
$
$
$
7,363
7,363
0.96
0.96
0.12
See accompanying notes to consolidated financial statements.
41
ALICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
Common Stock
Shares Issued Amount
Additional Paid In Capital
Treasury Stock at Cost
Retained Earnings
Total
Balance at September 30, 2010
7,379
$ 7,379 $
9,310
$
(172)
$
88,720 $ 105,237
Net income
Stock retirements
Dividends
Treasury stock purchases
Stock-based compensation:
Directors
Employees
-
(2)
-
-
-
-
-
(2)
-
-
-
-
Balance at September 30, 2011
7,377
7,377
Net income
Dividends
Treasury stock purchases
Stock-based compensation:
Directors
Employees
-
-
-
-
-
-
-
-
-
-
Balance at September 30, 2012
7,377
7,377
Net income
Dividends
Treasury stock purchases
Stock-based compensation:
Directors
Employees
-
-
-
-
-
-
-
-
-
-
-
(48)
-
-
(7)
(43)
9,212
-
-
-
(104)
(55)
9,053
-
-
-
392
51
-
50
-
(1,205)
441
24
(862)
-
-
(298)
589
28
(543)
-
-
(2,894)
591
30
7,097
-
(882)
-
7,097
-
(882)
(1,205)
-
-
434
(19)
94,935 110,662
18,489
(1,765)
-
18,489
(1,765)
(298)
-
-
485
(27)
111,659 127,546
19,646
(2,626)
-
19,646
(2,626)
(2,894)
983
81
Balance at September 30, 2013
7,377
$ 7,377 $
9,496
$
(2,816)
$
128,679 $ 142,736
See accompanying notes to consolidated financial statements.
42
ALICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by
$
19,646
$
18,489
$
7,097
Fiscal Year Ended September 30,
2012
2013
2011
operating activities:
Depreciation and amortization
Allowance for cooperative allocated surplus
Non-cash gains and losses
Magnolia fund undistributed earnings
Deferred income tax expense, net
Deferred retirement benefits
Gain on sale of property and equipment, net
Asset impairments
Stock based compensation
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Accounts payable and accrued expenses
Income tax payable/receivable
Other
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment
Decrease (increase) in restricted cash
(Decrease) increase in real estate deposits
Proceeds from disposals of property and equipment
Return on investment in Magnolia
Purchases of investments
Proceeds from sales of investments
Collections of mortgages and notes receivable
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Principal payments on notes payable
Borrowings on revolving line of credit
Repayments on revolving line of credit
Treasury stock purchases
Dividends paid
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental cash flow information:
Cash paid for interest, net of amount capitalized
Cash paid for income taxes
$
$
$
9,675
-
(35)
(658)
9,062
615
(20,894)
-
923
(1,195)
(2,113)
(3,727)
2,014
113
13,426
(18,924)
2,500
(2,500)
24,381
1,179
-
-
35
6,671
(3,900)
5,661
(5,661)
(2,894)
(2,048)
(8,842)
11,255
13,328
24,583
1,048
952
$
$
$
8,429
-
(288)
(59)
6,005
89
(8,800)
1,918
458
(143)
(4,917)
2,499
(144)
99
23,635
(15,921)
(2,500)
2,500
18,095
4,735
-
732
37
7,678
(3,279)
127,319
(141,298)
(298)
(1,765)
(19,321)
11,992
1,336
13,328
1,685
5,142
$
$
$
7,327
1,685
(60)
(68)
563
178
-
-
415
1,230
(3,772)
1,772
373
7
16,747
(12,265)
-
-
1,221
2,484
(32)
450
49
(8,093)
(1,281)
15,083
(30,104)
(1,205)
(737)
(18,244)
(9,590)
10,926
1,336
1,925
4,495
See accompanying notes to consolidated financial statements.
43
ALICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013, 2012 and 2011
Note 1. Nature of Operations
Alico Inc. (“Alico”) and its wholly owned subsidiaries (collectively, the “Company”) are an agribusiness and land management company. The
Company owns approximately 130,800 acres of land in six Florida Counties (Alachua, Collier, Glades, Hendry, Lee and Polk); and in
addition to principal lines of business in citrus groves, improved farmland including sugar cane, cattle ranching and conservation, and related
support operations, we also receive royalties from rock mining and oil production.
Note 2. Basis of Presentation and Significant Accounting Policies
Principles of Consolidations
The audited consolidated financial statements include the accounts of Alico, Inc., and its wholly owned subsidiaries. The audited consolidated
financial statements represent the consolidated balance sheets, consolidated statements of operations, consolidated statements of stockholders’
equity and comprehensive income (loss) and consolidated statements of cash flows of Alico, Inc. and its wholly-owned subsidiaries. The
Company’s subsidiaries include: Alico Land Development, Inc. (“ALDI”), Agri-Insurance Company, Ltd. (“Agri-Insurance”), Alico-Agri,
Ltd., Alico Plant World, LLC, Alico Fruit Company, LLC (“Alico Fruit”)(formerly Bowen Brothers Fruit Company, LLC”) and Alico Citrus
Nursery, LLC. Agri-Insurance was liquidated in September 2010. All significant intercompany accounts and transactions have been eliminated
in consolidation. The Company considers the criteria established under FASB ASC 810, Consolidations in its consolidation process. These
audited consolidated financial statements should be read in conjunction with the notes thereto included in this Annual Report.
Reclassifications
Certain reclassifications have been made to the prior years’ consolidated financial statements to conform to the fiscal year 2013 presentation.
These reclassifications had no impact on working capital, net income, stockholders’ equity or cash flows as previously reported.
The Company manages its land based upon its primary usage and reviews its performance based upon three primary classifications – Citrus
Groves, Improved Farmland and Ranch and Conservation. In addition, it operates an Agricultural Supply Chain Management business that is
not tied directly to its land holdings and Other Operations that include leasing mines and oil extraction rights to third parties. The Company
presents its financial results and the related discussions based upon these five segments (Citrus Groves, Improved Farmland, Ranch and
Conservation, Agricultural Supply Chain Management and Other Operations). In the fourth quarter of fiscal year 2013, the Company
changed its internal operations to align with the way it manages its business operations. As a result, the Company has realigned its financial
reporting segments to match its internal operations. The Company has reclassified prior years to conform to the fiscal year 2013 presentation.
None of these changes affect the Company’s previously report consolidated results. The primary change in previously reported segment
results is to reclassify the former Land Leasing and Rentals segment’s revenues and expenses to the related land classifications.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires
management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of
contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates based upon future events. The Company periodically evaluates the estimates. The
estimates are based on current and expected economic conditions, historical experience and various other specific assumptions that the
Company believes to be reasonable.
44
Revenue Recognition
Revenue from agricultural crops is recognized at the time the crop is harvested and delivered to the customer. 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 year to these estimates as more current relevant information regarding the
specific markets become available. Differences between the estimates and the final realization of revenue can be significant and can be either
positive or negative. During the periods presented in this report, no material adjustments were made to the reported revenues of Alico’s crops.
Alico recognizes revenue from cattle sales at the time the cattle are delivered.
Alico Fruit’s operations primarily consist of providing supply chain management services to Alico, as well as to other citrus growers and
processors in the State of Florida. Alico Fruit also purchases and resells citrus fruit; in these transactions, Alico Fruit (i) acts as a principal;
(ii) takes title to the products; and (iii) has the risks and rewards of ownership, including the risk of loss for collection, delivery or returns.
Therefore, Alico Fruit recognizes revenue based on the gross amounts due from customers for its marketing activities. Supply chain
management services revenues are recognized when the services are performed.
Cash and Cash Equivalents
Cash includes cash on hand, bank demand accounts and money market accounts having original maturities at acquisition date of 90 days or
less. At various times throughout the year and at September 30, 2013, some deposits held at financial institutions were in excess of federally
insured limits. The Company has not experienced any losses related to these balances and believes credit risk to be minimal.
Restricted cash
Restricted cash of $2,500,000 as of September 30, 2012 related to a deposit for a contract for the sale of land. Restricted cash is included in
current assets based on the contractual term for the release of the restriction. The closing of the sale of the property was on October 3, 2012,
and the cash was released from restricted cash to cash and equivalents at closing. See Note 7. Property, Buildings and Equipment, Net.
Accounts receivable
Accounts receivable are generated from the sale of citrus, sugarcane, cattle, leasing and other transactions. The Company provides an
allowance for doubtful trade receivables equal to the estimated uncollectible amounts. That estimate is based on historical collection experience,
current economic and market conditions and a review of the current status of each customer’s account.
Fair Value of Financial Instruments
The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, certificates of deposit, accounts receivable,
mortgages and notes receivable, accounts payable and accrued expenses approximate their fair value because of the immediate or short term
nature of these assets and liabilities. The carrying amounts of long-term debt approximates fair value because the transactions are with
commercial lenders at interest rates that vary with market conditions and fixed rates that approximate market rates for similar obligations. See
Note 3, Fair Value Measurements.
Major Customers
Since the inception of its sugarcane program in 1988, the Company has sold 100% of its product to United States Sugar Corporation
(“USSC”), a local Florida sugar mill. Due to the location of the Company’s sugarcane fields relative to the location of alternative processing
plants, the loss of USSC as a customer would have a material adverse effect on the Company’s sugarcane operations. Alico sold citrus
products to USSC affiliate Southern
45
Gardens during fiscal year 2011, however; the Company did not sell citrus products to them in fiscal years 2013 or 2012.
Revenues and receivables from the Company’s major customers are as follows for the years ended September 30, 2013, 2012 and 2011:
(in thousands)
USSC
Southern Gardens
Florida Orange Marketers, Inc.
Citrosuco North America, Inc.
Louis Dreyfus
Cutrale Citrus Juice
Real Estate
Accounts Receivable
2012
2013
2013
Revenue
2012
2011
2013
% of Total Revenue
2012
2011
$
$
$
$
$
$
3,004
-
-
-
-
-
$
$
$
$
$
$
1,970
-
-
-
-
-
$ 21,056
$
-
$ 15,689
$ 11,092
$ 26,246
6,300
$
$ 14,442
$
-
$ 22,219
$ 18,895
$ 29,344
$ 13,156
7,796
$
$ 19,950
$ 17,743
$ 17,416
$ 12,069
3,507
$
20.7%
0.0%
15.4%
10.9%
25.8%
6.2%
11.4%
0.0%
17.5%
14.9%
23.1%
10.3%
7.9%
20.2%
18.0%
17.7%
12.2%
3.6%
In recognizing revenue from land sales, Alico applies specific sales recognition criteria to determine when land sales revenue can be recorded.
For example, in order to fully recognize a gain resulting from a real estate transaction, the sale must be consummated with a sufficient down
payment of at least 20% to 25% of the sales price depending upon the type and timeframe for development of the property sold, and any
receivable from the sale cannot be subject to future subordination. In addition, the seller cannot retain any material continuing involvement in
the property sold. When these criteria are not met the Company recognizes gain proportionate to collections utilizing either the installment
method or deposit method as appropriate.
Investments
Investments are carried at their fair value. Net unrealized investment gains and losses that are considered to be temporary are recorded net of
related deferred taxes in accumulated other comprehensive income in stockholders’ equity until realized. Unrealized losses determined to be
other than temporary are recognized in the Statement of Comprehensive Income in the period the determination is made. The cost of all
investments is determined on the specific identification method.
Inventories
The costs of growing crops are capitalized into inventory throughout the Company’s crop year. Such costs are expensed when the crops are
harvested and are recorded in citrus groves management and improved farmland management operating expenses in the Statement of
Comprehensive Income. Inventories are stated at the lower of cost or net realizable value. The cost for unharvested citrus and sugarcane crops
is based on accumulated production costs incurred during the period from January 1 through the balance sheet date. The cost of the beef cattle
inventory is based on the accumulated cost of developing such animals for sale from July 1 through the Balance Sheet date. See Note 5.
Inventories.
Property, Buildings and Equipment
Property, buildings and equipment are stated at cost, net of accumulated depreciation or 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.
Costs related to the development of sugarcane are capitalized in a similar manner as citrus groves. However, sugarcane matures in one year
and typically the Company will harvest an average of three crops (one per year) from
46
one planting. As a result, cultivation and caretaking costs are expensed as the crop is harvested, while the development and planting costs are
depreciated over three years.
The breeding herd consists of purchased animals and animals raised on the Company’s ranch. Purchased animals are stated at the cost of
acquisition. The cost of animals raised on the ranch is based on the accumulated cost of developing such animals for productive use.
Real estate costs incurred for the acquisition, development and construction of real estate projects are capitalized.
Depreciation is computed using the straight-line method over the estimated useful lives of the various classes of depreciable assets.
The estimated useful life for property, buildings and equipment is as follows:
Breeding herd
Buildings
Citrus trees
Sugarcane plantings
Equipment and other facilities
Impairment of Long-Lived Assets
6-7 years
10-40 years
25 years
3 years
3-20 years
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset 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 assets might be impaired and the estimated cash flows (undiscounted and without interest charges)
to be generated by those assets over the remaining lives of the assets are less than the carrying amounts of those items. Our cash flow
estimates are based on historical results adjusted to reflect our best estimates of future market conditions and operating conditions. The net
carrying value of assets not recoverable is reduced to fair value. See Note 7. Property, Building and Equipment, Net for further discussion.
Investments, Deposits and Other Non-Current Assets
Investments, deposits and other non-current assets primarily include stock owned in agricultural cooperatives and loan origination fees.
Investments in stock related to agricultural co-ops and deposits are carried at cost, as are deferred loan fees related to the issuance of bank
facilities, net of amortization. The Company uses a cooperative to harvest its sugarcane. The cooperatives require members to acquire stock
ownership as a condition for the use of its services.
Income Taxes
The Company follows the asset and liability method of accounting for deferred 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 tax bases of assets and liabilities.
Deferred tax assets and liabilities are measured using enacted 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 tax rates on deferred 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 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. 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
47
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 is calculated by dividing net income by the weighted average number of common shares outstanding for the period.
Diluted earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding for the period,
including all potentially dilutive shares issuable under outstanding stock options and restricted stock unless the effect is anti-dilutive. There
were no stock options outstanding at September 30, 2013, 2012 and 2011. Non-vested restricted shares entitle the holder to receive non-
forfeitable dividends upon issuance and are included in the calculation of basic earnings per share.
The following table presents a reconciliation of basic to dilute weighted average shares outstanding for fiscal years ended September 30, 2013,
2012 and 2011:
(in thousands)
2013
Fiscal Year Ended September 30,
2012
2011
Weighted Average Shares Outstanding - Basic
Unvested Restricted Stock Awards
Weighted Average Shares Outstanding - Diluted
7,313
44
7,357
7,355
-
7,355
7,363
-
7,363
Stock-Based Compensation
Stock-based compensation cost is measured at the grant date based on the fair value of the award and is typically recognized as expense on a
straight-line basis over the vesting period. Upon the vesting of restricted stock, the Company issues common stock from shares held in
treasury.
The 2008 Incentive Equity Plan was approved by shareholders on February 20, 2009. It provided for the issuance of up to 350,000 shares to
Directors and Officers through November 2013. Effective April 1, 2013, the Board of Directors adopted the 2013 Incentive Equity Plan (the
“2013 Plan”) which supersedes the 2008 Plan. The 2013 Plan was approved by shareholders at the February 22, 2013 shareholders meeting.
Under the terms of the 2013 Plan, 350,000 shares of the Company’s common stock may be awarded to recipients. Shares issued pursuant to
awards under both the 2008 Plan and the 2013 Plan, if any, must be outstanding shares which have been repurchased by the Company.
Alico measures the cost of employee services on the grant-date fair value of the award. The cost is recognized over the period during which an
employee is required to provide service in exchange for the award (usually the vesting period). The grant date fair value of employee share
options and similar instruments are estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless
observable market prices for the same or similar instruments are available).
The Company’s incentive equity plans provide for grants to executives in various forms including restricted shares of the Company’s common
stock. 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.
48
Total stock-based compensation expense recognized on the Consolidated Statements of Operations for the three years ended September 30,
2013 in other operations and general and administrative expense was as follows:
(in thousands)
Stock compensation expense:
Executives
Board of Directors
Total stock compensation expense
2013
Fiscal Year Ended September 30,
2012
2011
$
$
81
842
923
$
$
(27)
485
458
$
$
(19)
434
415
The Company is recognizing compensation cost equal to the fair value of the stock at the grant dates prorated over the vesting period of each
award.
For the year ended September 30, 2013, the Company issued 25,584 shares to Directors under the 2008 and 2013 Plans at a weighted average
fair value of $38.41 per share that vested immediately. Stock-based compensation expense recognized in the Consolidated Statement of
Comprehensive Income in general and administrative expense was $923,000, $485,000 and $434,000 for the years ended September 30,
2013, 2012 and 2011. There are 334,126 shares eligible for grant under the 2013 Plan. There are 152,403 non-vested restricted shares
awarded at September 30, 2013.
No stock options were granted in fiscal 2013, 2012 or 2011.
Variable Interest and Equity Method Investments
The Company evaluates the method of accounting for investments in which it does not hold an equity interest of at least 50% based on the
amount of control it exercises over the operations of the investee, exposure to losses in excess of its investment, the ability to significantly
influence the investee and whether Alico is the primary beneficiary of the investee. Investments not qualifying for consolidation are accounted
for under the equity method whereby the ongoing investment in the entity, consisting of its initial investment adjusted for distributions, gains
and losses of the entity are classified as a single line in the balance sheet and as a non-operating item in the income statement. The Company
accounts for its investment in Magnolia in accordance with the equity method. See Note 6. Investment in Magnolia Fund.
Recent Accounting Pronouncement
Title
Update No. 2013-11—Income Taxes (Topic
740): Presentation of an Unrecognized Tax Benefit
When a Net Operating Loss Carryforward, a Similar
Tax Loss, or a Tax Credit Carryforward Exists (a
consensus of the FASB Emerging Issues Task Force)
Update 2013-02—Comprehensive Income (Topic
220): Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income
Update 2013-01—Balance Sheet (Topic 210):
Clarifying the Scope of Disclosures about Offsetting
Assets and Liabilities
Note 3. Fair Value Measurements
Prescribed Effective
Date
1/1/2013
(Q2 2014)
Alico's Status
Unadopted
Commentary
The Company does not believe that adoption of the
standard will have a material impact on its results of
operations or financial position upon adoption.
1/1/2013
(Q2 2014)
10/1/2014
(Q1 2015)
Unadopted
Unadopted
The Company does not believe that adoption of the
standard will have a material impact on its results of
operations or financial position upon adoption.
The Company does not believe that adoption of the
standard will have a material impact on its results of
operations or financial position upon adoption.
The Company follows the provisions of ASC 820 Fair Value Measurements and Disclosure Topic for its financial and non-financial assets
and liabilities. ASC 820, among other things, 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. The majority of the carrying amounts
of the Company’s assets and liabilities including cash, certificates of deposits, accounts receivable, accounts payable and accrued expenses at
September 30, 2013 and 2012, approximate fair value because of the immediate or short term maturity of these
49
items. In the event that stated interest rates are below market, Alico discounts mortgage notes receivable to reflect their estimated fair value.
The carrying amounts reported for long-term debt approximates fair value as the Company’s borrowings with commercial lenders are at
interest rates that vary with market conditions and fixed rates that approximate market rates for comparable loans.
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.
There were no gains or losses included in earnings attributable to changes in unrealized gains or losses relating to assets held at 2013, 2012
and 2011.
Alico uses third party service providers to assist in the evaluation of its investments. For investment valuations, current market interest rates,
quality estimates by rating agencies and valuation estimates by active market participants were used to determine values. Deferred retirement
benefits were valued based on actuarial data, contracted payment schedules and an estimated discount rate of 4.2% and 4.5% at September 30,
2013 and 2012, respectively.
The Company evaluates its properties for impairment using the three-tier fair value hierarchy. During the year ended September 30, 2012, the
Company recorded an impairment charge of $1,918,000 for property that was held for sale in Lee County, Florida. The impairment was based
on the negotiated sales price with a third party for the property, a Level 2 input. See Note 7. Property, Buildings and Equipment, Net.
Note 4. Investments, deposits and other assets
Investments, deposits and other assets consist of the following:
(in thousands)
Certificates of deposit
Loan origination fees
Stock in agricultural cooperatives
Deposits
Water permits
Other
September 30, 2013
Non-
Current
Current
Total
September 30, 2012
Non-
Current
Current
Total
$
260 $
-
-
-
-
-
- $
836
516
326
259
54
260 $
836
516
326
259
54
257 $
-
-
-
-
-
- $
956
517
352
243
77
257
956
517
352
243
77
Total
$
260 $
1,991 $
2,251 $
257 $
2,145 $
2,402
Realized gains and losses on the disposition of securities and recognition of the full reserve of the patronage allocation with Farm Credit were
charged to interest and investment income for fiscal year 2011 and include $139,000 of realized gains and $1,685,000 of realized losses.
During the second quarter of 2011, the Company fully reserved $1,685,000 in cooperative allocated surplus it had recorded based on its
patronage allocation with Farm Credit.
As an agricultural credit cooperative, Farm Credit is owned by the member-borrowers who purchase stock and earn participation certificates
which represent each members-borrowers respective share of the allocated surplus in the
50
cooperative. Allocations of the surplus are made to members on an annual basis according to the proportionate amount of interest paid by each
member. Allocations are made in cash and non-cash participation certificates. Farm Credit announced in 2011 the indefinite suspension of any
future distributions of members’ allocated surplus; therefore, the Company determined that the entire amount was uncollectible as no future
revolvement plan has been established.
Note 5. Inventories
Inventories consist of the following at September 30, 2013 and 2012:
(in thousands)
Unharvested fruit crop on the trees
Unharvested sugarcane
Beef cattle
Other
Total Inventories
September 30,
2013
2012
$
$
16,329
11,728
1,200
146
29,403
$
$
16,176
10,185
768
161
27,290
The Company records its inventory at the lower of cost or net realizable value. For the years ended September 30, 2013, 2012 and 2011, the
Company did not record any adjustments to reduce inventory to net realizable value.
Note 6. Investment in Magnolia Fund
In May 2010, Alico invested $12,150,000 to obtain a 39% limited partner equity interest in Magnolia TC 2, LLC (“Magnolia”), a Florida
limited liability company whose primary business activity is acquiring tax certificates issued by various counties in the State of Florida on
properties which have property tax delinquencies. In Florida, such certificates are sold at general auction based on a bid interest rate. If the
property owner does not redeem such certificate within two years, which requires the payment of delinquent taxes plus the bid interest, a tax
deed can be obtained by the winning bidder who can then force an auctioned sale of the property. Tax certificates hold a first priority lien
position. Magnolia began the tax deed application process in July 2012 as the two year time frame on certain certificates had been reached. The
tax deed application requires all other outstanding liens to be redeemed as well.
Revenue is recognized by Magnolia when the interest obligation under the tax certificates it holds becomes a fixed amount. In order to redeem
a tax certificate in Florida, a minimum of 5% of the face amount of the certificate (delinquent taxes) must be paid to the certificate holder
regardless of the amount of time the certificate has been outstanding. Magnolia recognized the minimum 5% earnings on its tax certificate
portfolio in fiscal 2010. Expenses of Magnolia include an acquisition fee of 1%, interest expense, a monthly management fee and other
administrative costs.
The investment in Magnolia is accounted for in accordance with the equity method of accounting, whereby the Company records its 39%
interest in the reported income or loss of the fund each quarter. Based on the August 31, 2013, unaudited internal financial statements of
Magnolia, Alico recorded net investment income of $658,000 for the year ended September 30, 2013. The Company recorded net investment
income of $59,000 for the year ended September 30, 2012, and $68,000 for the year ended September 30, 2011. Magnolia made certain
distributions during the year ended September 30, 2013, 2012 and 2011; the Company’s share of those distributions was approximately
$1,179,000, $4,735,000 and $2,485,000, respectively.
The Company anticipates that the remainder of the outstanding balance of the investment to be returned within the next 18 months and that no
losses will be incurred from the investment over than period.
51
Note 7. Property, Buildings and Equipment, Net
Property, buildings and equipment, net consist of the following at September 30, 2013 and 2012:
(in thousands)
Breeding herd
Buildings
Citrus trees
Sugarcane
Equipment and other facilities
Total depreciable properties
Less accumulated depreciation and depletion
Net depreciable properties
Land and land improvements
September 30,
2013
2012
$
12,234
11,587
34,188
16,199
47,278
121,486
(71,857)
49,629
81,442
$
10,062
10,975
33,164
12,617
42,043
108,861
(65,220)
43,641
79,193
Net property, buildings and equipment
$
131,071
$
122,834
Due to the continued pressure on market prices of real estate in Florida, the Company evaluated several of its properties for impairment at
September 30, 2013, 2012 and 2011. In conducting its evaluation, the Company reviewed the estimated non-discounted cash flows from each
of the properties or obtained independent third party appraisals from a qualified real estate appraiser.
Lee County, Florida Properties
The Company’s management committed to a plan to sell the Lee County Properties and actively locate a buyer, thereby meeting the criteria for
assets held for sale. The Company’s plan to sell the Lee County Properties triggered the impairment evaluation. The fair value was determined
based upon a Level 2 input in accordance with the fair value three-tier hierarchy, specifically on a negotiated sales price with a third party. The
Company recorded an impairment of $1,918,000 on the property as the carrying value exceeded the market value, and the impairment charge is
included in the Consolidated Statement of Comprehensive Income for the fiscal year ended September 30, 2012.
The sale was finalized in separate closings on July 25, 2012 and October 3, 2012. The two parcels which closed on October 3, 2012 are
included in assets held for sale on the Consolidated Balance Sheet at September 30, 2012 totaling $2,475,000. The Company received a
deposit for the parcels of $2,500,000 which is included in restricted cash and other current liabilities on the Consolidated Balance Sheet at
September 30, 2012.
Polk County, Florida Properties
The sales contracts for two parcels of land in Polk County, Florida closed during June 2012. The sale of the Polk County parcels totaled
$10,122,000. The Company received cash of $9,768,000, of which $8,747,000 was held in an escrow account by a third party in accordance
with an assignment agreement while potential like kind exchange transactions were considered which would qualify for tax-deferral treatment
in accordance with Internal Revenue Code §1031. No properties were identified for a like kind exchange, and the funds were remitted to the
Company on July 31, 2012. The sale of the two parcels resulted in pre-tax gains totaling $9,113,000 which is included in the gain on sale of
real estate in the Consolidated Statement of Comprehensive Income for fiscal year 2012.
The first parcel of land totaled 3,630 acres. The sales price was $9,077,000 or $2,500 per acre. The sales contract closed on June 14, 2012,
with the deed and possession delivered to Ben Hill Griffin III Family Limited Partnership, LLLP. We received $8,747,000 in cash for the sale.
The second parcel of land totaled 380 acres for which we received $1,020,000 in cash. The sales price was $1,045,000 or $2,750 per acre. The
sales contract closed on June 20, 2012, with deed and possession delivered to Ben Hill Griffin Inc. See Note 13. Related Party Transactions.
52
Alachua County Property
In June 2013, the Company purchased 396 acres in Alachua County, Florida for $1,175,000. The Company intends to build a citrus tree
nursery on the property and utilize the trees produced in its own operations and to sell excess trees to citrus growers in the state of Florida.
Sale of Easement
In July, 2013, the Company closed a warranty easement deed with the United States Department of Agriculture, through its administering
agency, The Natural Resources Conservation Service, granting a conservation easement on approximately 11,600 acres located in Hendry
County, FL (the “Property”) for $20,678,000. The easement agreement states the Property will be enrolled in perpetuity in the Wetlands
Reserve Program designed to restore, protect and enhance the values of the wetlands and for the conservation of natural resources. The
Company will retain title to the Property and the right to various recreational uses including hunting, fishing and leasing of such rights.
Additionally, the Company reserves the right to subsurface resources including oil, gas, minerals and geothermal resources underlying the
easement area and the right to water uses and water rights identified as reserved to us. As a result of the transaction, the Company recorded a
gain of $20,343,000 in its Statement of Comprehensive Income for the fiscal year ended September 30, 2013.
Note 8. Accrued Expenses
Accrued expenses consist of the following at September 30, 2013 and 2012:
(in thousands)
Accrued employee wages and benefits
Accrued interest
Current portion of retirement benefits payable
Fertilizer and chemicals received but not invoiced
Other
Total accrued expenses
Note 9. Other Current Liabilities
Other current liabilities consist of the following at September 30, 2013 and 2012:
(in thousands)
Deposits - Property sales
Deposits - Farm land leases
Deposits - Recreation land leases
Deposits - Other
Total other current liabilities
53
September 30,
2013
2012
687
307
342
885
133
2,354
$
$
September 30,
2013
2012
-
481
621
40
1,142
$
$
1,513
333
342
-
300
2,488
2,500
249
580
83
3,412
$
$
$
$
Note 10. Long-Term Debt
Outstanding debt under the Company’s various loan agreements is presented in the table below:
(in thousands)
September 30, 2013
Principal balance outstanding
Remaining available credit
Effective interest rate
Scheduled maturity date
Collateral
September 30, 2012
Principal balance outstanding
Remaining available credit
Effective interest rate
Scheduled maturity date
Collateral
Revolving Line
of Credit
Term Loan Mortgage Note
Total Credit
Facility
$
$
$
$
-
60,000
2.43%
October 2020
Real Estate
$
$
36,000
-
2.68%
October 2020
Real Estate
-
60,000
2.48%
October 2020
Real Estate
$
$
38,000
-
2.73%
October 2020
Real Estate
$
$
$
$
-
-
$
$
36,000
60,000
$
$
39,900
60,000
1,900
-
6.68%
March 2014
Real Estate
The Company has a revolving line of credit (“RLOC”) and term loan with Rabo AgriFinance, Inc. (“Rabo”) totaling $96,000,000. The
revolving line of credit and term note are collateralized by 43,991 acres of farmland and 12,280 acres of additional property containing
approximately 8,600 acres of producing citrus groves.
The term loan requires quarterly payments of interest at a floating rate of one month LIBOR plus 250 basis points beginning October 1, 2010.
Quarterly principal payments of $500,000 began on October 1, 2011 and continue through October 1, 2020 when the remaining principal
balance and accrued interest will be due and payable.
The Rabo credit facility includes a ten year $60,000,000 RLOC bearing interest at a floating rate on the outstanding balance payable quarterly
beginning October 1, 2010. Thereafter, quarterly interest is payable on the first day of January, April, July and October until the revolving line
of credit matures on October 1, 2020 and the remaining principal balance and accrued interest shall be due and payable. Proceeds from the
revolving line of credit may be used for general corporate purposes including: (i) the normal operating needs of Alico and its operating
divisions, (ii) the purchase of capital assets; and (iii) the payment of dividends.
The interest rate on the revolving line of credit was initially established at one month LIBOR plus 250 basis points. Beginning on February 1,
2011, and on each subsequent January 1 through 2020, the interest rate spread over LIBOR is adjusted pursuant to a pricing grid based on our
debt service coverage ratio for the immediately preceding fiscal year. The spreads may range from 225 to 275 basis points over one month
LIBOR. The rate was not adjusted during fiscal year 2011 and remained at LIBOR plus 250 basis points through December 31, 2011, but was
adjusted to LIBOR plus 225 basis points on January 1, 2012. On October 1, 2015, Rabo may adjust the interest rate spread to any percentage.
Rabo must provide a 30 day notice of the new spreads; at that time the Company has the right to prepay the outstanding balance.
Loan origination fees incurred as a result of entry into the Rabo credit facility loan agreement, including appraisal fees, document stamps, legal
fees and lender fees of approximately $1,202,000 were capitalized in fiscal year 2010 and are being amortized over the term of the loan
agreement.
At September 30, 2013, and 2012, the Company was in compliance with the debt covenants and terms of the Rabo loan agreement. The Rabo
credit facility contains the following significant covenants: (i) minimum current ratio of 1.50:1, (ii) debt to assets ratio no greater than 60%,
(iii) tangible net worth of at least $80 million, and (iv) minimum debt coverage of 1.15:1.
The Company uses a cash management program with Rabobank designed to minimize the outstanding balance on the RLOC. Our various
Rabobank accounts are swept daily into a concentration account. Funds in excess of a target balance are automatically applied to pay down the
RLOC, if there is an outstanding balance.
54
Maturities of the Company’s debt were as follows at September 30, 2013:
(in thousands)
Due within one year
Due between one and two years
Due between two and three years
Due between three and four years
Due between four and five years
Due beyond five years
Total
Interest costs expensed and capitalized to property, buildings and equipment were as follows:
$
$
2,000
2,000
2,000
2,000
2,000
26,000
36,000
(in thousands)
Interest expense
Interest capitalized
Total
Note 11. Treasury Stock
2013
Fiscal Year Ended September 30,
2012
2011
$
$
1,257
79
1,336
$
$
1,616
100
1,716
$
$
2,020
127
2,147
Effective November 1, 2008, the Company’s Board of Directors authorized the repurchase of up to 350,000 shares of the Company’s
common stock through November 2013 for the purpose of funding awards under its 2008 Incentive Equity Plan. In September 2013, the
Board of Directors authorized the repurchase of up to 105,000 shares of the Company’s common stock beginning in November 2013 and
continuing through April 2018. The stock repurchases began in November 2008 and were made on a quarterly basis 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. The following
table illustrates the Company’s treasury stock purchases for the years ended September 30, 2013, 2012 and 2011:
(in thousands, except share amounts and per 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,:
2013
2012
2011
75,887
12,332
48,280
$
$
$
38.14
24.12
24.96
257,203
181,316
168,984
$
$
$
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, 2010
Purchased
Issued to Directors
Retired
Balance at September 30, 2011
Purchased
Issued to Directors
Balance at September 30, 2012
Purchased
Issued to Employees and Directors
Balance at September 30, 2013
$
7,466
48,280
(19,030)
(2,123)
34,593
12,332
(23,690)
23,235
75,887
(25,584)
73,538
$
2,894
298
1,205
172
1,205
(465)
(50)
862
298
(617)
543
2,894
(621)
2,816
55
Note 12. Income Taxes
The provision for income taxes (benefit) for the years ended September 30, 2013, 2012 and 2011 consists of the following:
(in thousands)
Current:
Federal income tax
State income tax
Total current
Deferred:
Federal income tax
State income tax
Total deferred
Fiscal Year Ended September 30,
2012
2013
2011
$
$
2,508
458
2,966
7,921
1,142
9,063
$
3,696
1,298
4,994
5,617
362
5,979
4,141
726
4,867
608
(45)
563
Total provision for income taxes
$
12,029
$
10,973
$
5,430
Income tax provision (benefit) attributable to income from continuing operations differed from the amount computed by applying the statutory
federal income tax rate of 35% to pre-tax income as a result of the following:
(in thousands)
Tax at the statutory federal rate
Increase (decrease) resulting from:
Fiscal Year Ended September 30,
2012
2013
2011
$
11,086
$
10,312
$
4,259
State income taxes, net of federal benefit
Federal impacts from IRS exam and tax return amendments
Deferred rate adjustment
Permanent and other reconciling items, net
1,067
19
-
(143)
1,051
(444)
(313)
367
460
713
-
(2)
Total provision for income taxes
$
12,029
$
10,973
$
5,430
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, 2013 and 2012 are presented below:
(in thousands)
Deferred tax assets:
Deferred retirement benefits
Inventories
Restricted stock compensation
Alico-Agri, Ltd. outside basis differences
Capital loss carry forward
Other
Total deferred tax assets
Deferred tax liabilities:
Revenue recognized from citrus and sugarcane
Property and Equipment
Investment in Magnolia
Total deferred tax liabilities
September 30,
2013
2012
$
1,686
144
31
3,196
10,502
159
15,718
302
21,550
450
22,302
$
1,581
144
-
20,857
1,037
357
23,976
286
20,826
385
21,497
Net deferred income tax (liability) asset
$
(6,584)
$
2,479
The Company applies a “more likely than not” threshold to the recognition and non-recognition of tax positions. A change in judgment related
to prior years’ tax positions is recognized in the quarter of such change. The Company
56
had no reserve for uncertain tax positions at September 30, 2013 or September 30, 2012. The Company recognizes interest and penalties
related to uncertain tax positions in income tax expense and in the liability for uncertain tax positions.
On May 16, 2012, the Company reached a settlement with the IRS related to its examination of the returns of Alico, Agri-Insurance, Ltd., (a
former subsidiary of the Company) and Alico-Agri for the tax years 2005 through 2007. As a result of the settlement, the Company paid
Federal taxes of $613,000 and interest of $225,000. On October 9, 2012, the Company paid the State of Florida $318,000 for taxes and
$5,000 for interest as a result of the IRS settlement. The Company accrued $149,000 at September 30, 2012, for additional state interest and
penalties. The actual amount paid was $135,000 for state interest. No amount was due for state penalties, and the remaining accrual was
reversed during the second quarter of fiscal year 2013.
Note 13. Related Party Transactions
Atlantic Blue Group, Inc.
Atlantic Blue Group, Inc. (“Atlanticblue” or “ABG”) owned approximately 50.6% of Alico’s common stock, until it sold its stock in the
Company to 734 Investors, LLC in November 2013 (see Note 18. Subsequent Events). By virtue of its ownership percentage, Atlanticblue
was able to elect all of the directors and, consequently, control Alico. Directors which also served on Atlanticblue’s board were referred to as
“affiliated directors”.
John R. Alexander, a shareholder in Atlanticblue and a director on the Atlanticblue Board of Directors, retired as the Company’s Chairman of
the Board at the February 2013 shareholders meeting. Mr. Alexander’s son, JD Alexander, resigned March 31, 2012 as the President and
Chief Executive Officer of Atlanticblue and did not stand for re-election as a director at the June 2012 Atlanticblue shareholders meeting. In
February 2010, JD Alexander was appointed Alico’s President and Chief Executive Officer, and he serves on Alico’s Board of Directors,
until the sale by Atlanticblue of its stock in the Company to 734 Investors, LLC. Robert E. Lee Caswell, John R. Alexander’s son-in-law,
served as a director on Alico’s Board of Directors until its February 2013 shareholders meeting; he did not stand for re-election. Robert J.
Viguet, Jr., an Alico director, did not stand for re-election as a director of Atlanticblue at its June 2012 shareholders meeting. Dykes Everett
was elected to the Alico Board of Directors at the February 2013 shareholders meeting; he was proposed for nomination by Atlanticblue
where he serves as a director.
On April 1, 2012 a settlement agreement was executed in the derivative shareholder suit filed by former director Baxter Troutman against John
R. Alexander and JD Alexander (the “Agreement”). On May 16, 2012 the Circuit Court of the 10th Judicial Circuit in Polk County, FL
approved the Agreement thereby settling the shareholder derivative action complaint. As a condition of the Agreement, Mr. Troutman was
required to file a notice of voluntary dismissal of the civil action against the Alexanders with prejudice. The Company, by determination of the
Special Litigation Committee comprised of four independent directors of its Board of Directors, filed a motion against Mr. Troutman seeking
recovery of attorney fees and costs incurred in its defense. In response, Mr. Troutman has filed motions seeking recovery of his attorney’s
fees from Alico. The Company has reimbursed Messrs.’ Alexander for legal fees used to defend themselves against the suit in accordance
with the Board of Directors indemnification agreements. Reimbursements pursuant to the litigation were $118,000 and $68,000 on behalf of
John R. Alexander and, $222,000 and $60,000 on behalf of JD Alexander during the years ended September 30, 2012 and 2011, respectively.
Alico Fruit is currently marketing and/or purchasing citrus fruit from Tri County Groves, LLC, a wholly owned subsidiary of Atlanticblue.
During the years ended September 30, 2013, 2012 and 2011, Alico Fruit marketed 201,802, 237,626, and 222,856 boxes of fruit for
approximately $1,907,000, $2,900,000, and $2,100,000.
Ben Hill Griffin, Inc.
Citrus revenues of approximately $598,000 and $900,000 were recognized for a portion of citrus crops sold under a marketing agreement with
Ben Hill Griffin, Inc. (“Griffin”) for the years ended September 30, 2012 and 2011, respectively. Griffin and its subsidiaries are controlled by
Ben Hill Griffin, III, the brother-in-law of John R. Alexander, Alico’s former Chairman and Chief Executive Officer and was deemed a
related party until John R. Alexander retired as Chairman of Alico on February 22, 2013. Accounts receivable include amounts due from
57
Griffin of $94,000 at September 30, 2012. These amounts represent revenues to be received periodically under pooling agreements as the sale
of pooled products is completed.
Harvesting, marketing and processing costs for fruit sold to Griffin totaled $141,000 and $300,000 for the years ended September 30, 2012
and 2011.
Alico purchased fertilizer and other miscellaneous supplies, and services, and operating equipment from Griffin, on a competitive bid basis,
for use in its cattle, sugarcane, sod and citrus operations. Such purchases totaled $ 969,000 and $2,359,000 for the years ended September 30,
2012 and 2011, respectively. The Consolidated Balance Sheets include accounts payable to Griffin for fertilizer and other crop supplies
totaling $9,000 at September 30, 2012.
Other
Mr. Charles Palmer, an independent Board Member, held a recreational lease with the Company during the fiscal years ended September 30,
2013, 2012 and 2011, for which he paid approximately $33,000 annually at the customary terms and rates the Company extends to third
parties.
Note 14. Employee Benefits Plans
Management Security Plan
The management security plan (“MSP”) is a nonqualified, noncontributory defined supplemental deferred retirement benefit plan for a select
group of management personnel. The MSP plan provides a fixed supplemental retirement benefit for 180 months certain. The MSP is frozen;
no new participants are being added and no benefit increases are being granted. The MSP benefit expense and the projected management
security plan benefit obligation are determined using assumptions as of the end of the year. The weighted-average discount rate used to
compute the obligation was 4.2% and 4.5% in 2013 and 2012, respectively. During fiscal year 2012, the Company changed its approach in
determining the discount rate from the Pension Benefit Guaranty Corp rate which was used during fiscal year 2011, to the Moody’s Corporate
Bond Curve (Moody’s). Management believes that the Moody’s rate is a more appropriate estimate of the settlement of the pension benefits.
The effect of this change was not significant to net income and earnings per share.
Actuarial gains or losses are recognized when incurred, therefore; the end of year benefit obligation is the same as the accrued benefit costs
recognized in the consolidated balance sheet.
The amount of MSP benefit expense charged to costs and expenses was as follows:
(in thousands)
Service cost
Interest cost
Recognized actuarial loss adjustment
Total
Fiscal Year Ended September 30,
2012
2013
2011
221
368
-
589
251
178
2
431
233
181
66
480
The following provides a roll-forward of the MSP benefit obligation.
58
(in thousands)
2013
2012
Change in projected benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Recognized actuarial loss adjustment
Benefits paid
Benefit obligation at end of year
Funded status at end of year
$
$
$
4,098
221
368
-
(316)
4,371
(4,371)
$
$
$
3,970
251
178
2
(303)
4,098
(4,098)
The MSP is unfunded and benefits are paid as they become due. The estimated future benefit payments under the plan for each of the five
succeeding years are approximately $342,000, $346,000, $351,000, $367,000 and $348,000 and for the five-year period thereafter an
aggregate of $1,199,000.
The Company has established a “Rabbi Trust” to provide for the funding of accrued benefits under the MSP. According to the terms of the
Rabbi Trust, funding is 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 is triggered. As of September 30, 2013, the Rabbi Trust had no assets, and no change of control
had occurred.
Profit Sharing and 401(k)
The Company maintains a 401(k) employee savings plan for eligible employees, which provides for a 4% matching contribution 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 $157,000, $81,000 and $59,000 for the fiscal years 2013, 2012 and 2011,
respectively.
The Profit Sharing Plan (“Plan”) 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’s contribution to the Profit Sharing Plan was $210,000, $245,000 and $162,000 for the years ended September 30, 2013, 2012
and 2011, respectively.
Note 15. Segment Information
Segments
The Company manages its land based upon its primary usage and reviews its performance based upon three primary classifications – Citrus
Groves, Improved Farmland and Ranch and Conservation. In addition, it operates an Agricultural Supply Chain Management business that is
not tied directly to its land holdings and Other Operations that include leasing mines and oil extraction rights to third parties. The Company
presents its financial results and the related discussions based upon these five segments (Citrus Groves, Improved Farmland, Ranch and
Conservation, Agricultural Supply Chain Management and Other Operations). In the fourth quarter of fiscal year 2013, the Company
changed its internal operations to align with the way it manages its business operations. As a result, the Company has realigned its financial
reporting segments to match its internal operations. The Company has reclassified prior years to conform to the fiscal year 2013 presentation.
None of these changes affect the Company’s previously report consolidated results. The primary change in previously reported segment
results is to reclassify the former Land Leasing and Rentals segment’s revenues and expenses to the related land classifications. A description
of the Company’s business segments is as follows:
· Citrus Groves include activities related to planting, owning, cultivating and/or managing citrus groves in order to produce fruit for sale
to fresh and processed citrus markets.
· Agricultural Supply Chain Management and Support includes activities related to the purchase and resale of fruit, as well as, to value-
added services which include contracting for the harvesting, marketing and hauling of citrus.
59
·
Improved Farmland includes activities related to planting, owning, cultivating, managing and/or leasing improved farmland. Improved
farmland is acreage that has been converted, or is permitted to be converted, from native pasture and which has various improvements
including irrigation, drainage and roads.
· Ranch and Conservation includes activities related to cattle grazing, sod, native plant and animal sales, leasing, management and/or
conservation of unimproved native pasture land.
· Other Operations include activities related to rock mining royalties, oil exploration and other insignificant lines of business.
Intersegment sales and transfers are accounted by the Company as if the sales or transfers were to third parties at current market prices. 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 from operations before general and administrative
costs, interest expense and income taxes not including nonrecurring gains and losses.
The accounting policies of the segments are the same as those described in Note 2, Basis of Presentation and Summary of Significant
Accounting Policies. Total revenues represent sales to unaffiliated customers, as reported in the Company’s Consolidated Statements of
Operations. All intercompany transactions have been eliminated.
60
Information by business segment is as follows:
(in thousands)
Revenues:
Citrus Groves
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
Intersegment Revenues
Eliminations
Total revenue
Operating expenses:
Citrus Groves
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
Total operating expenses
Gross profit:
Citrus Groves
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
Total gross profit
Capital expenditures:
Citrus Groves
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
Other capital expenditures
Total capital expenditures
Depreciation, depletion and amortization:
Citrus Groves
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
Other depreciation, depletion and amortization
Total depreciation, depletion and amortization
(in thousands)
Assets:
$
$
$
$
$
$
2013
Fiscal Year Ended September 30,
2012
2011
$
$
$
$
$
$
43,689
28,412
21,917
6,755
888
10,981
(10,981)
55,423
48,334
15,316
7,348
766
11,820
(11,820)
101,661
127,187
31,533
27,949
16,202
3,798
505
79,987
12,156
463
5,715
2,957
383
21,674
3,942
81
9,468
3,475
27
1,931
18,924
2,114
169
5,131
1,250
347
664
$
$
$
$
30,995
47,693
11,574
3,497
1,196
94,955
24,428
641
3,742
3,851
(430)
32,232
1,562
388
10,482
741
-
2,748
15,921
2,088
223
4,051
992
427
648
47,088
36,115
8,642
6,015
732
9,679
(9,679)
98,592
27,764
35,109
7,343
3,640
1,303
75,159
19,324
1,006
1,299
2,375
(571)
23,433
2,102
65
4,633
1,214
16
4,235
12,265
1,977
213
2,873
937
481
846
9,675
$
8,429
$
7,327
September 30,
2013
2012
Citrus Groves
Agricultural Supply Chain Management
$
52,592
994
$
47,154
2,066
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
Other Corporate Assets
994
75,348
14,696
15,094
40,116
2,066
63,916
11,274
4,905
55,768
Total Assets
$
198,840
$
185,083
61
Other operations include the former real estate segment. During the fourth quarter of fiscal year 2012, management changed its business
strategy in regards to Alico Land Development Co., which operated the real estate segment.
Note 16. Commitments and Contingencies
Operating Leases
The Company has obligations under various noncancelable long-term operating leases for equipment. In addition, the Company has various
obligations under other equipment leases of less than one year.
Total rent expense was approximately $1,182,000, $1,256,000 and $856,000 for the years ended September 30, 2013, 2012 and 2011,
respectively.
The future minimum rental payments under non-cancelable operating leases are as follows:
(in thousands)
2014
2015
2016
2017
2018
Total
$
$
600
573
529
124
-
1,826
The Company has entered into Change in Control Agreements (“CIC Agreements”) with its executive officers and 22 other key employees
(“CIC Recipients”). The CIC Agreements provide for cash payments to CIC Recipients in the event of a change in control as defined in the
CIC Agreements followed by the termination of a CIC Recipient within 18 months of the change in control. The estimated total potential
payments required by CIC Agreements are $1,071,000 for executive officers and $1,600,000 for other key employees. See Note 18.
Subsequent Events.
Letters of Credit
The Company has retained certain self-insurance risks with respect to losses for workers’ compensation and has standby letters of credit in the
amounts of $200,000 for each of the years ended September 30, 2013 and 2012, to secure its insurance obligations.
62
Note 17. Selected Quarterly Financial Data (unaudited)
Summarized quarterly financial data (in thousands except for per share amounts) for the fiscal years ended September 30, 2013 and 2012 were
as follows:
(in thousands)
Fiscal Quarter Ended
December 31,
March 31,
June 30,
September 30,
2012
2011
2013
2012
2013
2012
2013
2012
Total operating revenue
Total operating expenses
Gross profit
Corporate, general and
administrative
Other (expense) income
Income (loss) before income taxes
Income tax expense (benefit)
Net (loss) income
Earnings per share:
Basic
Diluted
$ 21,356
17,570
$ 26,047
20,533
$ 38,410
31,396
$ 54,097
39,859
$ 35,229
26,164
$ 40,401
29,892
$
6,666
4,857
$
6,642
4,671
3,786
5,514
7,014
14,238
9,065
10,509
1,809
1,971
1,808
(304)
1,674
636
1,990
(360)
3,164
1,231
2,464
23
4,573
1,800
1,807
(502)
11,929
4,515
2,253
(167)
6,645
2,566
1,871
6,888
15,526
5,919
3,214
20,188
18,783
7,027
2,822
(306)
(1,157)
(692)
$
1,038
$
1,933
$
2,773
$
7,414
$
4,079
$
9,607
$
11,756
$
(465)
$
$
0.14
0.14
$
$
0.26
0.26
$
$
0.38
0.38
$
$
1.01
1.01
$
$
0.56
0.55
$
$
1.31
1.31
$
$
1.61
1.60
$
$
(0.07)
(0.07)
During the fiscal year 2012, the Company recorded a gain on the sale of the Polk County, Florida properties totaling $9,113,000 and an
impairment charge of $1,918,000. Impairment was recorded on assets held for sale on the Consolidated Balance Sheet as of September 30,
2012, which were subsequently sold on October 3, 2012. See Note 7. Property, Buildings and Equipment, Net.
During fiscal year 2013, the Company recorded a gain on the sale of a Conservation Easement on 11,600 acres of property in Hendry County
totaling $20,343,000.
Note 18. Subsequent Events
Change in Majority Owner
On November 19, 2013, 734 Investors, LLC (the “Buyer”), an investment fund affiliated with 734 Agriculture, LLC (“734 Agriculture”) and
George R. Brokaw, a Member of 734 Agriculture and the Buyer’s designee (the “Designee”), completed the previously announced purchase
from Alico Holding, LLC (the “Seller”), a company wholly owned by Atlantic Blue Group, Inc., of 3,725,457 shares of common stock, par
value $1 per share, of Alico, Inc. (the “Company” and the “Common Stock”), owned by the Seller for $37.00 per share, for an aggregate
purchase price of approximately $137,841,909 in cash (the “Share Purchase”). The Buyer used equity investments from its members of
approximately $123,410,000 and debt financing of $13,691,909 to fund its portion of the purchase price. The Designee used cash on hand to
fund his portion of the purchase price.
Waiver of Debt Maturity Acceleration
The Company’s loan agreements with Rabo prohibit the sale or conveyance of a controlling interest in Alico without Rabo’s prior consent.
The loan agreements also provide that any sale or conveyance of an interest in Alico will not be considered an event of default as long as the
Chief Executive Officer of the Company is not removed or replaced within two years of such sale or conveyance.
The Company advised Rabo that Atlanticblue entered into an agreement with 734 Investors, LLC whereby Atlanticblue agreed to sell to 734
Investors, LLC approximately 51% of the issued and outstanding voting stock of the Company (the "Purchase and Sale"), which Purchase
and Sale constitutes the sale of a controlling interest as defined in the loan documents. The Company further advised Rabo that Clayton G.
Wilson would replace JD Alexander as the Company’s Chief Executive Officer subsequent to the Purchase and Sale.
Rabo executed an agreement dated November 15, 2013 whereby they consented to the Purchase and Sale and the Chief Executive Officer
replacement as required by the loan documents. Rabo further confirmed that these transactions will not be deemed an event of default under
any of the loan documents.
Incentive Equity Plans, Employee Benefit Plans and Management Consulting Agreement
The change in majority owner discussed above triggered the change in control provisions of the grants under the 2008 Incentive Equity Plans.
As a result, the Company will be required to issue 152,403 shares of treasury stock, before withholdings for income taxes, to the Named
Executive Officers who were recipients of the grants on or before January 19, 2014. The change in majority owner discussed above did not,
however, trigger a change in control under the Rabbi Trust funding mechanism for the Company’s Management Security Plan, and no funding
will be required.
Concurrent with his resignation from the Board of Directors and his resignation as Chief Executive Officer, JD Alexander entered into a
consulting agreement with the Company that provides for monthly payments totaling $2 million over two years beginning one month from his
resignation date. In addition, Mr. Alexander and the Company agreed to terminate Mr. Alexander’s change in control agreement with the
Company, which relieved the Company of any obligation to make payments to Mr. Alexander under that agreement.
63
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures.
Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the 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 Chief 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 quarter ended September 30, 2013, 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)
(ii)
(iii)
pertain to the maintenance of records, that in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the Company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation 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
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, 2013. In making
this assessment, management used the criteria described in Internal Control — Integrated Framework 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, 2013. Management reviewed the results of their assessment with our Audit Committee. The effectiveness of our internal
control over financial reporting as of September 30, 2013 has been audited by McGladrey LLP, and independent registered public accounting
firm, as stated in their attestation report which is included herein.
Item 9B. Other Information.
None.
64
PART III
Certain information required by Part III is omitted from this Annual Report because we will file a definitive Proxy Statement for the
Annual Meeting of Stockholders pursuant to Regulation 14A of the Securities Exchange Act of 1934, (“Proxy Statement”), not later than 120
days after the end of the fiscal year covered by this Annual Report, and the applicable information included in the Proxy Statement is
incorporated herein by reference.
Item 10. Directors, Executive Officers and Corporate Governance.
Information concerning our directors and nominees and other information as required by this item are hereby incorporated by reference
from our Proxy Statement to be filed with the SEC pursuant to Regulation 14A.
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 our Proxy Statement to
be filed with the SEC pursuant to Regulation 14A.
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 is hereby
incorporated by reference to our Proxy Statement to be filed with the SEC pursuant to Regulation 14A.
Item 13. Certain Relationships, Related Transactions and Director Independence.
The information concerning relationships and related transactions 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.
Information concerning principal accounting fees and services is hereby incorporated by reference to our Proxy Statement to be filed
with the SEC pursuant to Regulation 14A.
65
Item 15. Exhibits and Financial Statement Schedules
(a)
Documents filed as part of this report
(1) Financial Statements
PART IV
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
66
Exhibit
Number
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
10
10.1
10.2
Exhibit Index
Restated Certificate of Incorporation, Dated February 17, 1972 (incorporated by reference to Alico’s Registration Statement on
Form S-1 dated February 24, 1972, Registration No. 2-43156).
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)
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)
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)
Bylaws of Alico, Inc., amended and restated (incorporated by reference to Alico’s filing on Form 10-K, dated December
14, 2010)
By-Laws of Alico, Inc., amended and restated (incorporated by reference to Alico’s filing on Form 8-K dated October
4, 2007)
By-Laws of Alico, Inc. amended and restated (incorporated by reference to Alico’s filing on Form 8-K dated November
21, 2008)
By-Laws of Alico, Inc. amended and restated (incorporated by reference to Alico’s filing on Form 8-K dated October 5, 2010)
By-Laws of Alico, Inc. , amended and restated (Incorporated by reference to Exhibit 3.1 of the Company’s current report on
Form 8-K, filed with the Commission on January 25, 2013).
Material Contracts
Credit agreement with Rabobank Agri-Finance (incorporated by reference to Alico’s filing on Form 8-K dated September
8, 2010)
* Change in Control Agreement dated March 27, 2013 between Alico, Inc. and JD Alexander (Incorporated by reference to
Exhibit 10.1 of the Company’s quarterly report on Form 10-Q filed with the Commission on May 6, 2013)
10.3
* Change in Control Agreement dated March 27, 2013 between Alico, Inc. and Kenneth Smith, Ph.D. (Incorporated by
reference to Exhibit 10.2 of the Company’s quarterly report on Form 10-Q filed with the Commission on May 6, 2013)
10.4
* Change in Control Agreement dated March 27, 2013 between Alico, Inc. and W. Mark Humphrey (Incorporated by reference
to Exhibit 10.3 of the Company’s quarterly report on Form 10-Q filed with the Commission on May 6, 2013)
10.5
* Change in Control Agreement dated March 27, 2013 between Alico, Inc. and Steven C. Lewis (Incorporated by reference to
Exhibit 10.4 of the Company’s quarterly report on Form 10-Q filed with the Commission on May 6, 2013)
10.6
* Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.5 of the Company’s quarterly report on Form
10-Q filed with the Commission on May 6, 2013)
10.7
* 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 Commission on May 6, 2013)
67
10.8
Fourth Amendment to Credit Agreement with Rabo Agrifinance, Inc. dated April 1, 2013 (Incorporated by reference to
Exhibit 10.7 of the Company’s quarterly report on Form 10-Q filed with the Commission on May 6, 2013)
14.1
14.2
21
Code of Ethics (incorporated by reference to Alico’s filing on Form 8-K dated February 24, 2009)
Whistleblower Policy (incorporated by reference to Alico’s filing on Form 8-K dated February 24, 2009)
Subsidiaries of the Registrant — Alico Land Development Company, Inc. [(formerly Saddlebag Lake Resorts, Inc. (a Florida
corporation incorporated in 1971)]; Alico-Agri, Ltd (a Florida limited partnership formed in 2003), Alico Plant World, LLC (a
Florida limited liability company organized in 2004), Bowen Brothers Fruit, LLC (a Florida limited liability company
organized in 2005) incorporated by reference to Alico’s filing on Form 10-K dated November 28, 2006
31.1
Certification of Chief 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
32.2
101
101.INS
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
** XBRL Instance Document
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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.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
ALICO, INC. (Registrant)
December 9, 2013
By:
/s/ Clayton G. Wilson
Clayton G. Wilson
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the date indicated:
December 9, 2013
Director and Chief Executive Officer
December 9, 2013
Chief Financial Officer and Senior Vice President
December 9, 2013
Chairman of the Board, Director
December 9, 2013
Director
December 9, 2013
Director
December 9, 2013
Director
December 9, 2013
Director
December 9, 2013
Director
December 9, 2013
Director
69
/s/ Clayton G. Wilson
Clayton G. Wilson
/s/ W. Mark Humphrey
W. Mark Humphrey
/s/ Henry R. Slack
Henry R. Slack
/s/ George R. Brokaw
George R. Brokaw
/s/ Adam D. Compton
Adam D. Compton
/s/ R. Greg Eisner
R. Greg Eisner
/s/ Benjamin D. Fishman
Benjamin D. Fishman
/s/ W. Andrew Krusen
W. Andrew Krusen
/s/ Remy W. Trafelet
Remy W. Trafelet
Exhibit 31.1
I, Clayton G. Wilson, certify that:
1. I have reviewed this annual report on Form 10-K of Alico, Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, 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;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent
functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: December 9, 2013
By:
/s/ Clayton G. Wilson
Clayton G. Wilson
Chief Executive Officer
Exhibit 31.2
I, W. Mark Humphrey, certify that:
1. I have reviewed this annual report on Form 10-K of Alico, Inc.;
CERTIFICATIONS
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, 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;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent
functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: December 9, 2013
By:
/s/ W. Mark Humphrey
W. Mark Humphrey
Chief Financial Officer and Senior Vice President
Certification of Chief Executive Officer
Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Exhibit 32.1
In connection with the Annual Report on Form 10-K for the year ended September 30, 2013 (the “Report”) of Alico, Inc. (the
“Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Clayton G. Wilson, President and Chief Executive
Officer of the Registrant, hereby certify, pursuant to Section 906 of the Sarbanes Oxley Act of 2002 that:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Registrant.
Date: December 9, 2013
By:
/s/ Clayton G. Wilson
Clayton G. Wilson
Chief Executive Officer
Certification of Chief Financial Officer
Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Exhibit 32.2
In connection with the Annual Report on Form 10-K for the year ended September 30, 2013 (the “Report”) of Alico, Inc. (the
“Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, W. Mark Humphrey, Chief Financial Officer and
Senior Vice President of the Registrant, hereby certify, pursuant to Section 906 of the Sarbanes Oxley Act of 2002 that:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Registrant.
Date: December 9, 2013
By:
/s/ W. Mark Humphrey
W. Mark Humphrey
Chief Financial Officer and Senior Vice President