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, 2014
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:
COMMON CAPITAL STOCK, $1.00 Par value,
Non-cumulative
Name of each exchange on which registered:
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 defined 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
Non-accelerated filer
¨
¨
Accelerated filer
Smaller Reporting Company
þ
¨
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, 2014 (the last business day of Alico’s most recently completed second fiscal quarter) was $112,809,559.20. 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 7,366,738 shares of stock outstanding at December 5, 2014.
Documents Incorporated by Reference:
Portions of the Proxy Statement of Registrant to be dated on or before January 25, 2015, are incorporated by reference in Part III of this report.
ALICO, INC.
FORM 10-K
For the fiscal year ended September 30, 2014
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 Disclosures 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, Financial Statement Schedules
1
10
16
17
17
17
18
21
22
37
38
69
69
69
70
70
70
70
70
71
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”) was incorporated under the laws of the State of Florida on February 2, 1960. We are a Florida agribusiness and land
management company built for today and backed by a legacy of achievement and innovation in citrus, cattle and resource conservation.
We own approximately 129,200 acres of land in seven Florida counties (Alachua, Collier, DeSoto, Glades, Hendry, Lee and Polk) and our
principal lines of business are citrus groves, improved farmland, cattle ranching and conservation, and related support operations.
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 a citrus nursery and 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).
Highlights
Sugarcane Disposition
On May 19, 2014, we entered into a triple net agricultural lease (the “USSC Lease”) with our sole sugarcane customer, United States Sugar
Corporation (“USSC”) of approximately 30,600 gross acres of land in Hendry County, Florida historically used for sugarcane farming. As a
result of this lease we were no longer directly engaged in sugarcane farming as of May 19, 2014.
On November 21, 2014, we sold approximately 36,000 acres of sugarcane land to Global Ag Properties USA LLC (“Global”), including the
land leased to USSC above, for approximately $97,900,000 in cash and assigned the USSC Lease to the purchaser. As result of this
disposition, we are no longer involved in sugarcane, and the Improved Farmland segment is no longer material to our business. The proceeds
from the sale were reinvested on December 2, 2014 (see Orange-Co Acquisition) via a tax deferred like-kind exchange pursuant to Internal
Revenue Code Section §1031.
Orange-Co Acquisition
On December 2, 2014, we completed the acquisition of certain citrus and related assets of Orange-Co, LP (“Orange-Co”) pursuant to an Asset
Purchase Agreement (the “Orange-Co Purchase Agreement”), dated as of December 1, 2014. The assets we purchased include approximately
20,263 acres of citrus groves in DeSoto and Charlotte counties, Florida, which comprises one of the largest contiguous citrus grove properties
in the state of Florida. The purchase prices was approximately $274,000,000 including: (1) $147,500,000 in initial cash consideration, subject
to adjustment as set forth in the Orange-Co Purchase Agreement; (2) up to $7,500,000 in additional cash consideration to be released from
escrow in equal parts, subject to certain limitations, on the 12- and 18-month anniversaries of the Closing Date; (3) the assumption and
refinancing of Orange-Co’s outstanding debt including approximately $91,200,000 in term debt and a working capital facility of
approximately $27,800,000; and (4) the assumption of certain other liabilities. On the Closing Date, the Company deposited an irrevocable
standby letter of credit issued by Rabo Agrifinance, Inc. (“Rabo”) in the aggregate amount of $7,500,000 into an escrow account to fund the
additional cash consideration.
1
We concurrently entered into arrangements to finance the Orange-Co acquisition as follows:
Metlife Credit Agreement
We entered into a First Amended and Restated Credit Agreement with Metropolitan Life Insurance Company and New England Life
Insurance Company under which they provided term loans in the aggregate principal amount of $182,500,000 and $25,000,000 in revolving
credit commitments.
The Metlife Agreement amends and restates existing credit facilities, dated as of September 8, 2010 (as amended from time to time, the “Prior
Credit Agreement”) between the Company and Rabo. Under the Prior Credit Agreement, we had a term loan in the initial principal amount of
$40,000,000, of which $33,500,000 was outstanding at the date of refinancing and $60,000,000 in undrawn revolving credit commitments.
Rabo Credit Agreement
We entered into a Credit Agreement with Rabo under which they have provided a $70,000,000 revolving working capital line of credit for the
Company.
Silver Nip Merger Agreement
On December 2, 2014, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with 734 Sub, LLC, a wholly owned
subsidiary of the Company (“Merger Sub”), 734 Citrus Holdings, LLC (“Silver Nip Citrus”) and, solely with respect to certain sections
thereof, the equity holders of Silver Nip Citrus (see “Note 14. Related Party Transactions” in the Notes to Consolidated Financial Statements).
The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into
Silver Nip Citrus (the “Merger”), with Silver Nip Citrus surviving the Merger as a wholly owned subsidiary of the Company. Subject to the
terms and conditions set forth in the Merger Agreement, the Company will issue shares of the Company’s common stock to the equity holders
of Silver Nip Citrus as follows:
at the effective time of the Merger, up to 1,463,544 shares of Common Stock, subject to certain adjustments set forth in the Merger
Agreement for Silver Nip Citrus’s net indebtedness at the closing of the Merger, amounts related to certain groves specified in the
Merger Agreement, certain Silver Nip Citrus transaction expenses and the trading price of the Common Stock; and
thirty (30) days after the end of Silver Nip Citrus’s 2014-2015 citrus harvest season, an additional amount of shares of Common
Stock, with the number of shares issued to be based on the net proceeds received by the Company from the sale of citrus fruit
harvested on certain Silver Nip Citrus groves after the closing of the Merger, subject to certain adjustments set forth in the Merger
Agreement for the cost to harvest the citrus fruit and the trading price of the Common Stock.
Completion of the Merger is conditioned, among other things, on: (1) approval of the Stock Issuance by a majority of the holders of the
Company’s common stock voting at a special meeting or acting by written consent to approve the Stock Issuance and, if such approval is
obtained through action by written consent, the expiration of a twenty (20)-day waiting period after the date an information statement of the
Company prepared in accordance with Regulation 14C of the Exchange Act and such information statement, is delivered to the Company’s
shareholders; (2) receipt of a final appraisal of the Silver Nip Citrus groves; (3) receipt of certain third-party consents; (4) completion of an
audit of Silver Nip Citrus’s 2014 consolidated financials and receipt of an unqualified audit opinion; (5) material compliance by the other party
with all of its obligations under the Merger Agreement; and (6) subject to certain exceptions, the accuracy of the representations and warranties
of the other party subject to a material adverse effect standard (as defined in the Merger Agreement).
734 Investors, LLC (“734 Investors”), the Company’s majority shareholder, will seek the consent of a majority of its disinterested members to
direct 734 Investors to approve the Stock Issuance by a written consent of its shares of Common Stock.
Water Storage Contract Approval
In December 2012, the South Florida Water Management District (“SFWMD”) issued a solicitation request for projects to be considered for
the Northern Everglades Payment for Environmental Services Program. In March 2013, the Company submitted its response proposing a
dispersed water management project on its ranch land.
On December 11, 2014, the SFWMD approved a contract, based on the submitted response, with the Company. The contract term is eleven
years and allows up to one year for implementation (design, permitting, construction and construction completion certification) and ten years
of operation whereby the Company will provide water retention services. Payment for these services includes an amount not to exceed
$4,000,000 of reimbursement for implementation. In addition it provides for an annual fixed payment of $12,000,000 for operations and
maintenance costs as long as the project is in compliance with the contract and subject to annual SFWMD Governing Board (“Board”)
approval of funding. The contract specifies that the Board has to approve the payments annually and there can be no assurance that it will
approve the annual fixed payments.
Other Transactions
On July 1, 2014, we sold a 2,800 acre parcel of land in Polk County, Florida for $5,623,000. This parcel was surplus to our operations and
was classified as held for sale. This sale was part of a like-kind exchange transaction intended to qualify for tax-deferral treatment in
accordance with Internal Revenue Code §1031.
On September 23, 2014, we purchased a 1,241 acre citrus grove (867 net tree acres) in DeSoto County, FL for a purchase price of
approximately $16,500,000. The purchase price was funded from our cash and cash equivalents and $5,300,000 in funds from a 2014 like-
kind exchange transaction in Polk County pursuant to Internal Revenue Code §1031.
kind exchange transaction in Polk County pursuant to Internal Revenue Code §1031.
2
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.
Our holdings and the operating activities in which we engage are categorized in the following table:
Gross
Acreage
18,400
300
18,700
1,800
6,300
36,000
44,100
64,500
1,900
129,200
Citrus Groves
Citrus Groves
Available for Sale
Improved Farmland
Leasable
Permitted but Undeveloped
Available for Sale
Ranch and Conservation
Other Land
Total
Citrus Groves
Operating Activities
Citrus Cultivation
Citrus Cultivation and Undeveloped Land
Leasing
None
Sugarcane Farming and Leasing
Cattle Grazing; Sod and Native Plant Sales; Leasing; Conservation
Mining; Citrus Nursery
We own and manage Citrus Groves in Collier, DeSoto, 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 18,700 gross acres or 14.5% of our land
holdings.
Our Citrus acreage is detailed in the following table:
Net Plantable
Producing Developing
Fallow
Total
Plantable
Support
Available
for Sale
Gross
Hendry County
Polk County
Collier County
DeSoto County
Total
3,500
3,100
4,100
900
100
100
-
-
-
-
-
-
3,600
3,200
4,100
900
1,600
1,800
2,800
400
-
300
-
-
5,200
5,300
6,900
1,300
11,600
200
-
11,800
6,600
300
18,700
Of the approximately 18,700 gross acres of citrus groves we own and manage, approximately 6,600 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. We have classified approximately 300 acres in Polk County as Available for Sale,
as this land does not meet our return criteria and is being actively marketed. The approximately 11,800 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 21,048,000, 24,746,000, and 29,069,000 pound solids for each of the years ended September 30, 2014, 2013, and 2012, on boxes
delivered to processing plants of 3,259,000, 3,867,000, and 4,357,000, respectively.
3
The average pound solids per box was 6.46, 6.40, and 6.68 for each of the years ended September 30, 2014, 2013, and 2012, 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 2014-2015 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 185,000, 251,000, and 278,000 boxes for each of the years ended
September 30, 2014, 2013, and 2012, respectively. The majority of our citrus to be produced for the fresh citrus market in fiscal year 2014-
2015 is under fixed price contracts.
Revenue from Citrus Groves operations was approximately 53.1%, 43.0%, and 43.6% of our total operating revenues for the fiscal years
ended September 30, 2014, 2013, and 2012, respectively.
Improved Farmland
We own Improved Farmland in Hendry County and have historically engaged in farming the land and leasing some of the acreage for farming.
Of our land holdings, Improved Farmland totals approximately 44,100 gross acres or 34.1% of our total acreage. Our Improved Farmland
acreage is detailed in the following table:
Leaseable
Permitted but Undeveloped
Available for Sale
Total improved farmland
Gross Acres
1,800
6,300
36,000
44,100
On May 19, 2014, the Company entered into a triple net agricultural lease with its sole sugarcane customer, United States Sugar Corporation
(the “Tenant”) of approximately 30,600 gross acres of land in Hendry County, Florida historically used for sugarcane farming. This land
includes 19,181 acres planted or plantable to sugar (“Net Cane Acres”). As a result of the Lease, the Company was no longer directly engaged
in sugarcane farming.
The term of the Lease is ten (10) years which may be extended by either party for three (3) additional one (1) year periods, except with respect
to a specific portion of the leased premises (4,561 planted or plantable acres) which has a five (5) year term which may be extended by either
party for an additional year but can be terminated by the Company at any time after one (1) year. The Lease includes various covenants,
indemnities, defaults, termination rights and other provisions customary for lease transactions of this nature. The leased land, together with
other adjacent land, has subsequently been classified as Available for Sale (see Available for Sale and Subsequent Disposition below).
Our Improved Farmland also includes approximately, 1,800 gross acres of irrigated farmland currently used for farm leasing and other
purposes and approximately 6,300 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).
4
During fiscal years ended September 30, 2014, 2013, and 2012, revenue from improved farmland operations was 23.0%, 21.6%, and 12.0%,
of our total operating revenue, respectively.
Available for Sale and Subsequent Disposition
On August 8, 2014, we entered into a Purchase and Sale Agreement, (the “Purchase Agreement”) with Terra Land Company (“Terra”) to sell
approximately 30,959 gross acres of land located in Hendry County, Florida used for sugarcane production for a base purchase price of
$91,436,000. The base purchase price was subject to a valuation adjustment in the event that either the net farmable acres or net support acres
of the land were more or less than the amounts in the Purchase Agreement by one percent (1%) or greater.
On November 21, 2014, via various amendments to the Purchase Agreement, we completed the sale to Global of approximately 36,000 gross
acres of land located in Henry County, Florida used for sugarcane production for a purchase price of $97,900,000. Global is a wholly-owned
subsidiary of Terra. We have also assigned our interest in the USSC Lease to Global in conjunction with the sale. The parties have made
customary representations, warranties, covenants and agreements in the Purchase Agreement.
As a result of the disposition of our sugarcane land, we are no longer involved in sugarcane and, as of November 21, 2014 the Improved
Farmland segment was no longer material to our business.
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 64,500 gross acres or 49.9% of our total acreage. Our Ranch and Conservation acreage is detailed in the following table:
Hendry County
Collier County
Total
Acreage
60,500
4,000
64,500
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
Collier County
Grazing
Recreational
1,900
4,000
46,000
3,500
Our Cattle operation is engaged in the production of beef cattle and is located in Hendry and Collier Counties. The breeding herd consisted of
approximately 8,600 cows and bulls and we plan to increase the size of our herd in the near future to the extent practicable. 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
9.2%, 6.6%, and 5.8% of total operating revenue for each of the years ended September 30, 2014, 2013, and 2012, respectively.
5
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 $20,300,000, which was recorded in Other Income on the Statement of Comprehensive
Income.
Our Other Segments
In addition to owning and managing approximately 129,200 gross acres of land in Central and Southwest Florida, Alico also engages in
complimentary lines of business. Our Agricultural Supply Chain Management line of business includes activities related to value-added
services provided to Alico and other Florida growers including agricultural contracting for harvesting, hauling and marketing and the purchase
and resale of fruit. Our Other Operations line of business includes activities related to rock and sand mining, oil exploration, a citrus nursery
and other insignificant lines of business. A summary of the Agricultural Supply Chain Management and Other Operations line of business
follows:
· Alico Fruit Company is a wholly owned subsidiary providing 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, 2014, 2013, and 2012, Alico Fruit Company’s revenue was 14.0%, 27.9% and 38.0% of our
total operating revenue, respectively.
·
In fiscal year 2013, we acquired approximately 400 acres of land in Alachua County on which we constructed a citrus tree
nursery and will utilize the trees produced in our own operations and sell excess trees to citrus growers in the state of Florida.
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.
6
The following table presents the operating revenues and gross profit of the segments:
(in thousands)
Revenues:
Citrus Groves
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
Intersegment Revenues
Eliminations
Fiscal Year Ended September 30,
2014
2013
2012
$
$
47,069
12,376
20,429
8,172
634
9,621
(9,621)
$
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
88,680
101,661
127,187
Operating expenses:
Citrus Groves
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
30,213
12,317
21,356
4,330
374
31,533
27,949
16,202
3,798
505
Total operating expenses
68,590
79,987
Gross profit:
Citrus Groves
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
16,856
59
(927)
3,842
260
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)
Total gross profit
$
20,090
$
21,674
$
32,232
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 16. 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.
7
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 lease our improved farmlands to third parties.
· 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 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 minimal 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 quality, production, demand, brand recognition, market prices, weather, disease, export/import
restrictions and currency exchange rates. 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.
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.
8
Employees
As of September 30, 2014, we had 128 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
19
69
2
3
9
11
15
128
Revenues from Alico’s agri-business operations are seasonal in nature. The following table illustrates the seasonality of our agri-business
revenues:
Fiscal Year
Q1
Q2
Q3
Q4
Ending 12/31
Oct Nov Dec
Ending 3/31
Ending 6/30
Jan Feb Mar Apr May
Jun
Ending 9/30
Jul Aug Sep
Harvest Early/Mid Varieties of Oranges
Harvest Valencia Oranges
Deliver Beef Cattle
Deliver Citrus Trees
Capital resources and raw materials
Management believes that Alico will be able to meet its working capital requirements for at least the next 12 months 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.
9
Item 1A. Risk Factors.
Our business and results of operations are subject to numerous risks and uncertainties, many of which are beyond our control. The
following is a description of the known factors that we believe may materially affect our business, financial condition or results of
operations. They should be considered carefully, in addition to the information set forth elsewhere in this Annual Report on Form 10-K,
including Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 8, Financial
Statements and Supplementary Data, including the related Notes to Consolidated Financial Statements in making any investment decisions
with respect to our securities. Additional risks or uncertainties that are not currently known to us that we currently deem to be immaterial or
that could apply to any company could also materially adversely affect our business, financial condition or results of operations.
Risks related to our Business
Our citrus groves are subject to damage and loss from disease including but not limited to citrus greening and citrus canker which could
negatively impact our business, financial condition, results of operations and cash flows.
Our citrus groves are subject to damage and loss from diseases such as citrus greening and citrus canker. Each of these diseases is widespread
in Florida and exists in our groves and in the areas where our groves are located. The success of our citrus business is directly related to the
viability and health of our citrus groves.
Citrus greening is one of the most serious citrus plant diseases in the world. Once a tree is infected, 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. Named
for its green, misshapen fruit, citrus greening disease has now killed millions of citrus plants in the southeastern United States and has spread
across the entire country. Infected trees produce fruits that are green, misshapen and bitter, unsuitable for sale as fresh fruit or for juice.
Infected trees can die within a few years. At the present time, there is no known cure for citrus greening once trees are infected. Primarily as a
result of citrus greening, Florida is expected to have its smallest orange harvest in nearly 30 years.
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.
Both of these diseases pose a significant threat to the Florida Citrus industry and to our citrus groves. While we use best management practices
to attempt to control diseases and their spread, there can be no assurance that our mitigation efforts will be successful. These diseases can
significantly increase our costs which could materially adversely affect our business, financial condition, results of operations and cash flows.
Our citrus groves produce the majority of our annual revenue and a significant reduction in available citrus from our groves could decrease our
revenues and materially adversely affect our business, financial condition, results of operations and cash flows.
Our agricultural products are subject to supply and demand pricing which is not predictable.
Agricultural operations traditionally provide almost all of our operating revenues with citrus being the largest portion and are subject to supply
and demand pricing. While according to Nielsen data consumer demand for orange juice has decreased significantly to its lowest level in
almost a decade, we have been able to offset the impact of such decline with higher prices based on a lower supply of available oranges.
However, there can be no assurance that we will be able to continue to do so if demand continues to decline. Although our processed citrus is
subject to minimum pricing we are unable to predict with certainty the final price we will receive for our products. In some instances the
harvest and growth cycle will dictate when such products must be marketed which may or may not be advantageous in obtaining the best
price. Excessive supplies tend to cause severe price competition and lower prices for the commodity affected.
10
Limited supply of certain agricultural commodities due to world and domestic market conditions can cause commodity prices to rise in certain
situations. We attempts to mitigate these risks by using contracts with citrus 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.
Our citrus groves are geographically concentrated and the effects of adverse weather conditions could adversely affect our results of
operations and financial position.
Our citrus operations are concentrated in central and south Florida with our groves located in parcels in Hendry, Collier, Polk, Charlotte and
DeSoto Counties. Because our groves are located in close proximity to each other, the impact of adverse weather conditions may be material to
our results of operations. 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 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 and cattle operations and could result in a loss of
revenue from those products for a multi-year period. We seek to minimize hurricane risk by the purchase of insurance contracts, but the
majority of our crops remain uninsured. In addition to hurricanes, 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.
A significant and increasing portion of our revenues are derived from our citrus business and any adverse event affecting such business
could disproportionately harm our business.
Our revenues from our citrus business were approximately 53%, 43% and 43%, of our revenues in fiscal years 2014, 2013 and 2012,
respectively. As a result of our recently announced acquisitions of three Florida citrus producers and the disposition of our sugarcane lands,
the percentage of our revenues derived from our citrus business will increase significantly. These acquisitions will result in our citrus division
being the largest citrus producer in the United States and since we will not be as diversified as we have been previously, we will be more
vulnerable to adverse events or market conditions affecting our citrus business which could have a significant impact on our overall business
results.
We maintain a significant amount of indebtedness which could adversely affect our financial condition, results of operations, limit our
operational and financing flexibility and negatively impact our business.
We recently obtained $182,500,000 in aggregate principal amount of term loans and $25,000,000 in revolving credit commitments from
Metropolitan Life Insurance Company and New England Life Insurance Company as well as $70,000,000 in aggregate principal amount of
revolving credit commitments from Rabobank which we used in part to finance our recent Orange-Co acquisition. Our new loan agreements,
and other debt instruments we may enter into in the future, may have negative consequences to us and could limit our business because we
will use a substantial portion of our cash flows from operations to pay interest which will reduce the funds available to us for operations and it
may make us more vulnerable to economic downturns and adverse developments in our business. Our loan agreements require us to comply
with various restrictive covenants and some contain financial covenants that require us to comply with specified financial ratios and tests. Our
failure to meet these covenants could result in default under these loan agreements and would result in a cross-default under other loan
agreements. In the event of a default and our inability to obtain a waiver of the default, all amounts outstanding under loan agreements could be
declared immediately due and payable. Our new loan agreements also contain various covenants that limit our ability to engage in specified
types of transactions We expect that we will depend primarily upon our citrus operations to provide funds to pay our expenses and to pay any
amounts that may become due under any credit facilities and any other indebtedness we may incur and there are factors beyond our control that
could negatively affect our citrus business revenue stream. Our ability to make these payments depends on our future performance, which will
be affected by various financial, business, economic and other factors, many of which we cannot control.
Our agricultural operations are subject to water use regulations restricting our access to water.
Our operations are dependent upon the availability of adequate surface and underground water. The availability of water is regulated by the
State of Florida through water management districts which have jurisdiction over various geographic regions in which our lands are located.
Currently, we have permits in place for the next 15 to 20 years for the use of underground and surface water which are 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.
11
The Army Corps of Engineers decided in 2010 to lower the permissible level of Lake Okeechobee in response to concerns about the ability of
the levee surrounding the lake to restrain rising waters which could result from hurricanes. Changes in availability of surface water use may
result during times of drought, because of lower lake levels and could materially adversely affect our agricultural operations, financial position,
results of operations and cash flows.
Our recent acquisitions of three Florida citrus producers and the acquisition of additional agricultural assets and other businesses
could pose risks.
We seek to opportunistically acquire new agricultural assets from time to time that we believe would complement our business. We recently
announced our acquisitions of three Florida citrus producers that are expected to result in our citrus division being the largest citrus producer
in the United States. We cannot assure you that we will be able to successfully identify suitable acquisition opportunities, negotiate appropriate
acquisition terms, obtain any financing that may be needed to consummate such acquisitions, or complete proposed acquisitions. Acquisitions
by us could result in accounting charges, potentially dilutive issuances of equity securities, increased debt and contingent liabilities, reduce the
amount of cash available for dividends and diversion of management’s attention, any of which could adversely affect our business, results of
operations and financial condition. We may be unable to successfully realize the financial, operational, and other benefits we anticipate from
our acquisitions and our failure to do so could adversely affect our business, results of operation and financial condition.
Dispositions of our assets may adversely affect our future results of operations.
We also routinely evaluate the benefits of disposing of certain of our assets and we recently sold significant sugar cane assets and we are no
longer involved in the sugarcane business. While such dispositions increase the amount of cash available to us, it could also result in a
potential loss of significant revenues and income streams that we might not be able to replace, makes our business less diversified and could
ultimately have a negative impact on our results of operations.
If a transaction intended to qualify as a Section §1031 Exchange is later determined to be taxable, we may face adverse consequences,
and if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of properties on a tax deferred
basis.
From time to time we dispose of properties in transactions that are intended to qualify as Section §1031 Exchanges. It is possible that the
qualification of a transaction as a Section §1031 Exchange could be successfully challenged and determined to be currently taxable and we
could also be required to pay interest and penalties. As a result, we may be required to borrow funds in order to pay additional taxes, and the
payment of such taxes could cause us to have less cash available. Moreover, it is possible that legislation could be enacted that could modify or
repeal the laws with respect to Section §1031 Exchanges, which could make it more difficult or not possible for us to dispose of properties on
a tax deferred basis.
We may undertake one or more significant corporate transactions that may not achieve their intended results, may adversely affect our
financial condition and our results of operations or result in unforeseeable risks to our business.
We continuously evaluate the acquisition or disposition of operating businesses and assets and may in the future undertake one or more
significant transactions. Any such acquisitive transaction could be material to our business and could take any number of forms, including
mergers, joint ventures and the purchase of equity interests. The consideration for such acquisitive transactions may include, among other
things, cash, common stock or equity interests in us or our subsidiaries, or a contribution of equipment to obtain equity interests, and in
conjunction with a transaction we might incur additional indebtedness. We also routinely evaluate the benefits of disposing of certain of our
assets. Such dispositions could take the form of asset sales, mergers or sales of equity interests.
These transactions may present significant risks such as insufficient revenues to offset liabilities assumed, potential loss of significant
revenues and income streams, increased or unexpected expenses, inadequate return of capital, regulatory or compliance issues, the triggering
of certain covenants in our debt instruments (including accelerated repayment) and unidentified issues not discovered in due diligence. In
addition, such transactions could distract management from current operations. As a result of the risks inherent in such transactions, we cannot
guarantee that any such transaction will ultimately result in the realization of its anticipated benefits or that it will not have a material adverse
impact on our business, financial condition or results of operations.
12
If we were to complete such an acquisition, disposition, investment or other strategic transaction, we may require additional debt or equity
financing that could result in a significant increase in our amount of debt and our debt service obligations or the number of outstanding shares
of our common stock, thereby diluting holders of our common stock outstanding prior to such acquisition.
We are subject to the risk of product contamination and product liability claims.
The sale of agricultural products for human consumption involves the risk of injury to consumers. Such injuries may result from tampering by
unauthorized third parties, product contamination or spoilage, including the presence of foreign objects, substances, chemicals, other agents, or
residues introduced during the growing, storage, handling or transportation phases. While we are subject to governmental inspection and
regulations and believe our facilities comply in all material respects with all applicable laws and regulations, we cannot be sure that our
agricultural products will not cause a health-related illness in the future or that we will not be subject to claims or lawsuits relating to such
matters. Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our
products caused illness or injury could adversely affect our reputation with existing and potential customers and our corporate and brand
image. Moreover, claims or liabilities of this sort might not be covered by our insurance or by any rights of indemnity or contribution that we
may have against others. We maintain product liability insurance, however, we cannot be sure that we will not incur claims or liabilities for
which we are not insured or that exceed the amount of our insurance coverage.
Changes in immigration laws could impact our ability to harvest our crops.
We engage third parties to provide personnel for our harvesting operations. The availability and number of such workers is subject to decrease
if there are changes in the U.S. immigration laws. 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 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 our 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 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 material adverse effect on us.
Our citrus grove business is seasonal.
Our citrus groves produce the majority of our annual revenue and the citrus grove business is seasonal because it is tied to the growing and
picking seasons. Historically, the second and third quarters of our fiscal year generally produce the majority of our annual revenue, and our
working capital requirements are typically greater in the first and fourth quarters of our fiscal year coinciding with our planting cycles. Because
of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal
year or in future quarters. If our revenues in the second and third quarters are lower than expected, it would have a disproportionately large
adverse impact on our annual operating results.
We face significant competition in our agricultural operations.
We face significant competition in our agricultural operations both from domestic and foreign producers and do not have any branded
products. Foreign growers generally have an equal or lower cost of production, less environmental regulation and in some instances, greater
resources and market flexibility than us. Because foreign growers have greater flexibility as to when they enter the U.S. market, we cannot
always predict the impact these competitors will have on our business and results of operations.
13
The competition we face from foreign suppliers of orange juice is mitigated by a governmentally imposed tariff on orange imports. A change
in the government’s reduction in the orange juice tariff could adversely impact our results of operations.
Climate change, or legal, regulatory, or market measures to address climate change, may negatively affect our business and operations.
There is growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global
temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters. In the event that such climate change
has a negative effect on the productivity of our citrus groves, it could have an adverse impact on our business and results of operations. The
increasing concern over climate change also may result in more regional, federal, and/or global legal and regulatory requirements to reduce or
mitigate the effects of greenhouse gases. In the event that such regulation is enacted, we may experience significant increases in our costs of
operation. In particular, increasing regulation of fuel emissions could substantially increase the distribution and supply chain costs associated
with our products. As a result, climate change could negatively affect our business and operations.
We benefit from reduced real estate taxes due to the agricultural classification of a majority of our land. Changes in the classification or
valuation methods employed by county property appraisers could cause significant changes in our real estate tax liabilities.
In each of the fiscal years ended September 30, 2014, 2013, and 2012, we paid $2,291,000, $2,196,000, and $2,275,000 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 $74,105,000, $69,687,000, and $82,975,000 for each of the years ended September 30, 2014, 2013, and 2012,
respectively, which differs significantly from the fair values determined by the county property appraisers of $518,112,000, $516,919,000,
and $529,542,000, 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.
We manage our properties in an attempt to capture their highest and best use and customarily do 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, and 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.
Liability for the use of pesticides, herbicides and other potentially hazardous substances could increase our costs.
Our agricultural business involves the use of herbicides, fertilizers and pesticides, some of which may be considered hazardous or toxic
substances. We may be deemed liable and have to pay for the costs or damages associated with the improper application, accidental release or
the use or misuse of such substances. Our insurance may not be adequate to cover such costs or damages, or may not continue to be available
at a price or under terms that are satisfactory to us. In such cases, if we are required to pay significant costs or damages, it could materially
adversely affect our business, results of operations and financial condition.
14
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, we
require lessees of our properties to comply with environmental regulations as a condition of leasing. We also purchase insurance for
environmental liability when it is available; however, these insurance contracts may not be adequate to cover such costs or damages or may not
continue to be available at prices and terms that would be satisfactory. It is possible that in some cases the cost of compliance with these
environmental laws could exceed the value of a particular tract of land, make it unsuitable for use in what would otherwise be its highest and
best use, and/or be significant enough that it would materially adversely affect us.
Our business may be adversely affected if we lose key employees.
We depend to a large extent on the services of certain key management personnel. These individuals have extensive experience and expertise in
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.
Risks Related to our Common Stock
Our largest shareholder has effective control over the election of our Board of Directors and other matters.
734 Investors, LLC (“734 Investors”), beneficially owns approximately 51% of our common stock. Accordingly, by virtue of its ownership
percentage, 734 Investors is able to elect all of our directors and officers, and has the ability to exert significant influence over our business
and may make decisions with which other shareholders may disagree, including, among other things, changes in our business plan, delaying,
discouraging or preventing a change of control of our Company or a potential merger, consolidation, tender offer, takeover or other business
combination. Additionally, potential conflicts of interest could exist when we enter into related party transactions with 734 Investors such as
the recent Silver Nip merger agreement we entered into on December 1, 2014.
We are a “Controlled Company” under the NASDAQ Listing Rules and therefore are exempt from certain corporate governance
requirements, which could reduce the influence of independent directors.
We are a “Controlled Company” under NASDAQ listing rules, because more than 50% of the voting power of our outstanding stock is
controlled by 734 Investors. As a consequence, we are exempt from certain NASDAQ requirements including the requirement that:
· Our Board of Directors be composed of a majority of independent directors;
·
The compensation of our officers be determined by a majority of the independent directors or a compensation committee
composed solely of independent directors; and
· Nominations to the Board of Directors be made by a majority of the independent directors or a nominations committee composed
solely of independent directors.
However, NASDAQ does require that our independent directors have regularly scheduled meetings at which only independent directors are
present. In addition, Internal Revenue Code Section 162(m) requires that a compensation committee of outside directors (within the meaning
of Section 162(m)) approve stock option grants to executive officers in order for us to be able to claim deductions for the compensation
expense attributable to such stock options.
15
Notwithstanding the foregoing exemptions, we do have a majority of independent directors on our Board of Directors and we do have an
Audit Committee, a Compensation Committee and a Nominating and Governance Committee composed entirely of independent directors.
Although we currently comply with certain of the NASDAQ listing rules that do not apply to controlled companies, our compliance is
voluntary, and there can be no assurance that we will continue to comply with these standards in the future. If in the future our Board of
Directors elects to rely on the exemptions permitted by the NASDAQ listing standards and reduce the number or proportion of independent
directors on our Board and its committees, the influence of independent directors would be reduced.
Sales of substantial amounts of our common stock by our largest shareholder could adversely affect the market price of our common
stock.
Our largest shareholder 734 Investors beneficially owns approximately 51% of our common stock. Our stock is not heavily traded and our
stock prices can fluctuate significantly. As such, sales of substantial amounts of our common stock into the public market by 734 Investors or
perceptions that significant sales could occur, could adversely affect the market price of our common stock.
Our stock has low trading volume.
Although our stock trades on the NASDAQ Global Market, it is thinly traded and our average daily trading volume is low compared to the
number of shares of common stock we had outstanding. The low trading volume of our stock can cause our stock price to fluctuate
significantly as well as make it difficult for you to sell your shares quickly. As a result of our stock being thinly traded and/or our low stock
price, institutional investors might not be interested in owning our stock.
We may not be able to continue to pay or maintain dividends and the failure to do so may negatively affect our share price.
We have historically paid regular quarterly dividends to the holders of our common stock which dividends were reduced beginning in the third
fiscal quarter of 2014 in order to retain cash which increases our flexibility to reinvest in our business and pursue growth opportunities
consistent with our mission. Our ability to pay dividends depends on, among other things, our cash flows, our cash requirements, our
financial condition, the degree to which we are/or become leveraged, contractual restrictions binding on us, provisions of applicable law and
other factors that our board of directors may deem relevant. There can be no assurance that we will generate sufficient cash from continuing
operations in the future, or have sufficient surplus or net profits to pay dividends on our common stock. Our dividend policy is based upon
our directors’ current assessment of our business and the environment in which we operate and that assessment could change based on
business developments (which could, for example, increase our need for capital expenditures) or new growth opportunities. Our board of
directors may, in its discretion, decrease the level of dividends or entirely discontinue the payment of dividends. The reduction or elimination
of dividends may negatively affect the market price of our common stock.
Item 1B. Unresolved Staff Comments.
None.
16
Item 2. Properties.
At September 30, 2014, Alico owned approximately 129,200 acres of land located in seven 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 DeSoto Glades
Lee
Alachua
Citrus Groves
Citrus Groves
Available for Sale
Total Citrus Groves
Improved Farmland:
Irrigated
Permitted but undeveloped
Available for Sale
Total Improved Farmland
Ranch Land and Conservation
Commercial
Mining
Other
18,400
300
18,700
5,200
-
5,200
5,000
300
5,300
6,900
-
6,900
1,300
-
1,300
1,800
6,300
36,000
44,100
64,500
400
1,400
100
1,800
6,300
36,000
44,100
60,500
-
900
100
-
-
-
-
-
-
-
-
-
-
-
-
4,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500
-
Total
129,200
110,800
5,300
10,900
1,300
500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
400
-
-
400
Approximately 43,277 acres of the properties listed are encumbered by credit agreements totaling $94,000,000 at September 30, 2014. For a
more detailed description of the agreements and collateral please see “Item 8. Financial Statements”, “Note 11. Long-Term Debt” in Notes to
Consolidated Financial Statements.
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 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 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.
Item 3. Legal Proceedings.
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. There are
no current legal proceedings to which we are a party to or of which any of our property is subject to that we believe will have a material
adverse effect on our business financial position or results of operations.
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 2014 and 2013 are presented below:
2014 Price
2013 Price
High
Low
High
Low
Quarter Ended:
December 31
March 31
June 30
September 30
Holders
$
$
$
$
39.15
38.48
37.68
38.30
$
$
$
$
38.10
37.61
37.15
37.94
$
$
$
$
38.78
47.00
46.48
47.60
$
$
$
$
30.27
36.93
39.61
39.19
On October 31, 2014, our stock transfer records indicate there were approximately 288 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 2014, 2013, and 2012 and paid in fiscal years 2015,
2014, and 2013:
Declaration Date
July 27, 2012
September 27, 2012
January 8, 2013
May 2, 2013
July 18, 2013
September 25, 2013
December 18, 2013
April 10, 2014
July 10, 2014
October 02, 2014
Record Date
September 28, 2012
December 28, 2012
March 28, 2013
June 28, 2013
September 30, 2013
December 31, 2013
March 31, 2014
June 30, 2014
September 30, 2014
December 31, 2014
Payment Date
October 15, 2012
January 14, 2013
April 15, 2013
July 15, 2013
October 15, 2013
January 14, 2014
April 14, 2014
July 14, 2014
October 15, 2014
January 15, 2015
$
$
$
$
$
$
$
$
$
$
The Board of Directors reinstated a quarterly dividend policy during fiscal year 2012.
18
Amount
Paid Per
Share
0.04
0.08
0.08
0.08
0.08
0.12
0.12
0.06
0.06
0.06
Stock Performance Graph
The graph below represents our common stock performance, comparing the value of $100 invested on September 30, 2009 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 09
100
100
100
100
INDEXED RETURNS
Years Ending
Sep 10
79.45
110.16
113.77
92.84
Sep 11
67.40
111.42
96.58
64.88
Sep 12
108.43
145.08
114.82
87.73
Sep 13
144.07
173.14
153.79
100.82
Sep 14
134.59
207.30
203.80
118.65
Company Name / Index
Alico, Inc.
S&P 500 Index
S&P Agricultural Products Index
Peer Group
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.
19
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
-
-
-
-
311,053
311,053
Plan Category:
Equity compensation plans approved by security holders
Total
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, 2014, the Company had purchased 29,305 shares and had available to purchase an additional 75,695 in accordance
with the 2013 Authorization. The following table describes our purchases of our common stock during the fourth quarter of 2014.
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 2014
Month of August 2014
Month of September 2014
-
-
-
$
$
$
-
-
-
-
-
-
75,695
75,695
75,695
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 according to 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. The Company
purchased 35,333 shares under this arrangement.
We purchased 35,333, 29,305, zero, and zero shares in the open market during the first, second, third and fourth quarters of fiscal year 2014,
respectively, at a weighted average price of $38.47 per share.
20
Item 6. Selected Financial Data.
(in thousands, except per share amounts)
2014
2013
September 30,
2012
2011
2010
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
$
$
$
$
$
$
88,680
8,050
1.09
7,354
0.24
203,567
34,000
$
$
$
$
$
$
101,661
19,646
2.67
7,357
0.36
198,840
36,000
$
$
$
$
$
$
127,187 $
18,489 $
98,592 $
7,097 $
2.51 $
7,355
0.20 $
185,083 $
39,900 $
0.96 $
7,363
0.12 $
180,035 $
57,158 $
79,792
(623)
(0.08)
7,374
0.10
188,817
75,668
Notes regarding selected financial data:
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.
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. Net income from continuing operations includes a gain on sale
of real estate totaling $9,113,000 on land sold and impairment charges of $1,918,000 on assets held for sale on the consolidated balance sheet
as of September 30, 2012.
During the year ended September 30, 2013, net income from continuing operations includes the gain on the sale of real estate totaling
$20,300,000 on easements sold.
During the year ended September 30, 2014, net income from continuing operations includes the gain on the sale of real estate totaling
$4,820,000 on land sold.
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 a citrus nursery, 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 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 129,200 acres of land in seven Florida counties (Alachua, Collier, DeSoto, 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 owning 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 a citrus nursery, 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 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 years.
23
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.
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 basis 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
Update No. 2014-08—Presentation of Financial Statements (Topic 205) and
Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations
and Disclosures of Disposals of Components of an Entity
Title
Update No. 2014-09—Revenue from Contracts with Customers (Topic 606)
Prescribed
Effective
Date
12/15/2015
(Q1 2015)
Commentary
The Company is still evaluating the impact
of the adoption of the standard will have on
its results of operations and financial
position.
12/15/2016
(Q1 2017)
The Company is still evaluating the impact
of the adoption of the standard will have on
its results of operations and financial
position.
Recent Events
Sugarcane Disposition
On May 19, 2014, we entered into a triple net agricultural lease (the “USSC Lease”) with our sole sugarcane customer, United States Sugar
Corporation (“USSC”) of approximately 30,600 gross acres of land in Hendry County, Florida historically used for sugarcane farming. As a
result of this lease we were no longer directly engaged in sugarcane farming as of May 19, 2014.
On November 21, 2014, we sold approximately 36,000 acres of sugarcane land to Global Ag Properties USA LLC (“Global”), including the
land leased to USSC above, for approximately $97,900,000 in cash and assigned the USSC Lease to the purchaser. As result of this
disposition, we are no longer involved in sugarcane, and the Improved Farmland segment is no longer material to our business. The proceeds
from the sale were reinvested on December 2, 2014 (see Orange-Co Acquisition) via a tax deferred like-kind exchange pursuant to Internal
Revenue Code Section §1031.
Orange-Co Acquisition
On December 2, 2014, we completed the acquisition of certain citrus and related assets of Orange-Co, LP (“Orange-Co”) pursuant to an Asset
Purchase Agreement (the “Orange-Co Purchase Agreement”), dated as of December 1, 2014. The assets we purchased include approximately
20,263 acres of citrus groves in DeSoto and Charlotte counties, Florida, which comprises one of the largest contiguous citrus grove properties
in the state of Florida. The purchase price was approximately $274,000,000 including: (1) $147,500,000 in initial cash consideration, subject
to adjustment as set forth in the Orange-Co Purchase Agreement; (2) up to $7,500,000 in additional cash consideration to be released from
escrow in equal parts, subject to certain limitations, on the 12- and 18-month anniversaries of the Closing Date; (3) the assumption and
refinancing of Orange-Co’s outstanding debt including approximately $91,200,000 in term debt and a working capital facility of
approximately $27,800,000; and (4) the assumption of certain other liabilities. On the Closing Date, the Company deposited an irrevocable
standby letter of credit issued by Rabo Agrifinance, Inc. (“Rabo”) in the aggregate amount of $7,500,000 into an escrow account to fund the
additional cash consideration.
We concurrently entered into arrangements to finance the Orange-Co acquisition as follows:
Metlife Credit Agreement
We entered into a First Amended and Restated Credit Agreement with Metropolitan Life Insurance Company and New England Life
Insurance Company under which they provided term loans in the aggregate principal amount of $182,500,000 and $25,000,000 in revolving
credit commitments.
25
The Metlife Agreement amends and restates existing credit facilities, dated as of September 8, 2010 (as amended from time to time, the “Prior
Credit Agreement”) between the Company and Rabo. Under the Prior Credit Agreement, we had a term loan in the initial principal amount of
$40,000,000, of which $33,500,000 was outstanding at the date of refinancing and $60,000,000 in undrawn revolving credit commitments.
Rabo Credit Agreement
We entered into a Credit Agreement with Rabo under which they have provided a $70,000,000 revolving working capital line of credit for the
Company.
Silver Nip Merger Agreement
On December 2, 2014, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with 734 Sub, LLC, a wholly owned
subsidiary of the Company (“Merger Sub”), 734 Citrus Holdings, LLC (“Silver Nip Citrus”) and, solely with respect to certain sections
thereof, the equity holders of Silver Nip Citrus (see “Note 14. Related Party Transactions” in the Notes to Consolidated Financial Statements).
The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into
Silver Nip Citrus (the “Merger”), with Silver Nip Citrus surviving the Merger as a wholly owned subsidiary of the Company. Subject to the
terms and conditions set forth in the Merger Agreement, the Company will issue shares of the Company’s common stock to the equity holders
of Silver Nip Citrus as follows:
at the effective time of the Merger, up to 1,463,544 shares of Common Stock, subject to certain adjustments set forth in the Merger
Agreement for Silver Nip Citrus’s net indebtedness at the closing of the Merger, amounts related to certain groves specified in the
Merger Agreement, certain Silver Nip Citrus transaction expenses and the trading price of the Common Stock; and
thirty (30) days after the end of Silver Nip Citrus’s 2014-2015 citrus harvest season, an additional amount of shares of Common
Stock, with the number of shares issued to be based on the net proceeds received by the Company from the sale of citrus fruit
harvested on certain Silver Nip Citrus groves after the closing of the Merger, subject to certain adjustments set forth in the Merger
Agreement for the cost to harvest the citrus fruit and the trading price of the Common Stock.
Completion of the Merger is conditioned, among other things, on: (1) approval of the Stock Issuance by a majority of the holders of the
Company’s common stock voting at a special meeting or acting by written consent to approve the Stock Issuance and, if such approval is
obtained through action by written consent, the expiration of a twenty (20)-day waiting period after the date an information statement of the
Company prepared in accordance with Regulation 14C of the Exchange Act and such information statement, is delivered to the Company’s
shareholders; (2) receipt of a final appraisal of the Silver Nip Citrus groves; (3) receipt of certain third-party consents; (4) completion of an
audit of Silver Nip Citrus’s 2014 consolidated financials and receipt of an unqualified audit opinion; (5) material compliance by the other party
with all of its obligations under the Merger Agreement; and (6) subject to certain exceptions, the accuracy of the representations and warranties
of the other party subject to a material adverse effect standard (as defined in the Merger Agreement).
734 Investors, LLC (“734 Investors”), the Company’s majority shareholder, will seek the consent of a majority of its disinterested members to
direct 734 Investors to approve the Stock Issuance by a written consent of its shares of Common Stock.
Water Storage Contract Approval
In December 2012, the South Florida Water Management District (“SFWMD”) issued a solicitation request for projects to be considered for
the Northern Everglades Payment for Environmental Services Program. In March 2013, the Company submitted its response proposing a
dispersed water management project on its ranch land.
On December 11, 2014, the SFWMD approved a contract, based on the submitted response, with the Company. The contract term is eleven
years and allows up to one year for implementation (design, permitting, construction and construction completion certification) and ten years
of operation whereby the Company will provide water retention services. Payment for these services includes an amount not to exceed
$4,000,000 of reimbursement for implementation. In addition it provides for an annual fixed payment of $12,000,000 for operations and
maintenance costs as long as the project is in compliance with the contract and subject to annual SFWMD Governing Board (“Board”)
approval of funding. The contract specifies that the Board has to approve the payments annually and there can be no assurance that it will
approve the annual fixed payments.
Other Transactions
On July 1, 2014, we sold a 2,800 acre parcel of land in Polk County, Florida for $5,623,000. This parcel was surplus to our operations and
was classified as held for sale. This sale was part of a like-kind exchange transaction intended to qualify for tax-deferral treatment in
accordance with Internal Revenue Code §1031.
On September 23, 2014, we purchased a 1,241 acre citrus grove (867 net tree acres) in DeSoto County, FL for a purchase price of
approximately $16,500,000. The purchase price was funded from our cash and cash equivalents and $5,300,000 in funds from a 2014 like-
kind exchange transaction in Polk County pursuant to Internal Revenue Code §1031.
26
Results of Operations
The following table sets forth a comparison of results of operations for the fiscal years ended September 30, 2014, 2013, and 2012:
(in thousands)
Fiscal Year Ended
September 30,
2014
2013
Change
$
%
Fiscal Year Ended
September 30,
2013
2012
Change
$
%
Operating revenues:
Citrus Groves
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
Total operating
revenues
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
$ 47,069
12,376
20,429
8,172
634
$ 43,689
28,412
21,917
6,755
888
$
3,380
(16,036)
(1,488)
1,417
(254)
7.7%
(56.4)%
(6.8)%
21.0%
(28.6)%
$ 43,689
28,412
21,917
6,755
888
$ 55,423
48,334
15,316
7,348
766
$ (11,734)
(19,922)
6,601
(593)
122
(21.2)%
(41.2)%
43.1%
(8.1)%
15.9%
88,680
101,661
(12,981)
(12.8)%
101,661
127,187
(25,526)
(20.1)%
16,856
59
(927)
3,842
260
20,090
12,156
463
5,715
2,957
383
21,674
4,700
(404)
(6,642)
885
(123)
(1,584)
38.7%
(87.3)%
(116.2)%
29.9%
(32.1)%
(7.3)%
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)%
12,234
9,739
2,495
25.6%
9,739
8,490
1,249
14.7%
7,856
3,927
11,935
19,740
(4,079)
(15,813)
(34.2)%
(80.1)%
11,935
19,740
23,742
5,720
(11,807)
14,020
(49.7)%
245.1%
11,783
(3,733)
31,675
(12,029)
(19,892)
8,296
(62.8)%
(69.0)%
31,675
(12,029)
29,462
(10,973)
2,213
(1,056)
Net income
$
8,050
$ 19,646
$ (11,596)
(59.0)%
$ 19,646
$ 18,489
$
1,157
A discussion of our segment results of operations follows.
27
7.5%
9.6%
6.3%
Citrus Groves
The table below presents key operating measures for the fiscal years ended September 30, 2014, 2013 and 2012:
Fiscal Year Ended
September 30,
Change
Fiscal Year Ended
September 30,
Change
2014
2013
$
%
2013
2012
$
%
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
- -
NM - Not Meaningful
$ 19,281 $17,923 $ 1,358
1,877
(397)
542
$ 47,069 $43,689 $ 3,380
25,093
2,054
641
23,216
2,451
99
7.6% $17,923 $24,376 $ (6,453)
(5,115)
8.1%
(131)
(16.2)%
(35)
NM
7.7% $43,689 $55,423 $(11,734)
28,331
2,582
134
23,216
2,451
99
(26.5)%
(18.1)%
(5.1)%
(26.1)%
(21.2)%
1,645
1,614
3,259
1,900
1,967
3,867
185
3,444
251
4,118
(255)
(353)
(608)
(66)
(674)
(13.4)%
(18.0)%
(15.7)%
1,900
1,967
3,867
2,186
2,171
4,357
(286)
(204)
(490)
(13.1)%
(9.4)%
(11.2)%
(26.3)%
(16.4)%
251
4,118
278
4,635
(27)
(517)
(9.7)%
(11.2)%
10,222
10,826
21,048
11,612
13,134
24,746
(1,390)
(2,308)
(3,698)
(12.0)%
(17.6)%
(14.9)%
11,612
13,134
24,746
14,030
15,039
29,069
(2,418)
(1,905)
(4,323)
(17.2)%
(12.7)%
(14.9)%
6.21
6.71
6.11
6.68
0.10
0.03
1.6%
0.4%
6.11
6.68
6.42
6.93
(0.31)
(0.25)
(4.8)%
(3.6)%
$
$
1.89 $ 1.54 $ 0.35
2.32 $ 1.77 $ 0.55
22.7% $ 1.54 $ 1.74 $ (0.20)
31.1% $ 1.77 $ 1.88 $ (0.11)
(11.5)%
(5.9)%
$ 11.10 $ 9.76 $ 1.34
13.7% $ 9.76 $ 9.29 $
0.47
5.0%
$ 20,233 $19,803 $
430
(1,495)
(255)
$ 30,213 $31,533 $ (1,320)
9,978
2
11,473
257
2.2% $19,803 $17,822 $ 1,981
(1,700)
257
538
11,473
(13.0)%
257
(99.2)%
(4.2)% $31,533 $30,995 $
13,173
-
11.1%
(12.9)%
NM
1.7%
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.
28
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 2014 versus fiscal year 2013 in boxes harvested and pound solids produced 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 and smaller sized fruit that contributed to the 16.4% smaller box harvest than prior year. Although our total pounds
solid produced for fiscal year 2014 declined 14.9% versus the same period of the prior year, our total revenue increased 7.7% due to the
significant increase in the price per pound solid for both the Early and Mid-Season and Valencia oranges.
The statewide environmental and horticultural factors described above have negatively impacted our citrus crops and certain key operating
measures presented above. The Florida orange crop declined by 29,000,000 boxes or approximately 22% versus the prior year, and therefore
our per acre production continues to significantly outpace the average production in the state of Florida.
The USDA, in its October 10, 2014 Citrus Crop Forecast indicated that it believes the Florida orange crop will increase from 104,600,000
boxes for the 2013/2014 crop year to 108,000,000 boxes for the 2014/2015 crop year, an increase of 3.3%. However, we expect our 2015
processed boxes to be not materially less than our 2014 processed boxes on a per acre basis. For fiscal year 2015, we expect that the
forecasted slight increase in the size of the statewide crop could cause the price per pound solids for fiscal year 2015 to remain at or above the
price for fiscal year 2014. We expect that operating expenses for fiscal year 2015 will remain in-line with fiscal year 2014 on a per acre basis.
The increase in Citrus Groves gross profit for fiscal year 2014 versus fiscal year 2013 relates primarily to the increased prices and revenue
discussed above offset by an increase of 2.2% in growing costs for the 2013/2014 harvesting season crop to $20,233,000 from $19,803,000.
Per box harvest and hauling costs remained in line.
The decline in Citrus Groves gross profit for fiscal year 2013 versus fiscal year 2012 relates primarily to the change in revenue shown above
plus an increase of 11.1% in growing costs for the fiscal year 2013 crop, primarily driven by increases in the market price of fertilizer.
29
Agricultural Supply Chain Management
The table below presents key operating measures for the fiscal years ended September 30, 2014, 2013 and 2012:
(in thousands, except per box and per pound solid data)
Fiscal Year Ended
September 30,
2014
2013
Change
$
%
Fiscal Year Ended
September 30,
2013
2012
Change
$
%
Purchase and Resale of Fruit:
Revenue
Boxes Sold
Pound Solids Sold
Pound Solids per Box
Price per Pound Solids
Value Added Services:
Revenue
Value Added Boxes
$10,096 $22,858 $(12,762)
(1,541)
2,377
(9,644)
14,839
(0.03)
6.24
0.40
836
5,195
6.21
$ 1.94 $ 1.54 $
$ 1,891 $ 3,592 $ (1,701)
(2,109)
2,761
652
(55.8)% $22,858 $41,319 $(18,461)
(858)
(64.8)%
(65.0)%
(6,258)
(0.28)
(0.5)%
26.0% $ 1.54 $ 1.96 $ (0.42)
3,235
21,097
6.52
2,377
14,839
6.24
(44.7)%
(26.5)%
(29.7)%
(4.3)%
(21.4)%
(47.4)% $ 3,592 $ 4,443 $
(76.4)%
3,031
2,761
(851)
(270)
(19.2)%
(8.9)%
Other Revenue
$
389 $ 1,962
(1,573)
(80.2)% $ 1,962 $ 2,572
(610)
(23.7)%
For fiscal year 2014 versus fiscal year 2013, the declines in Purchase and Resale of Fruit revenue, boxes sold and pound solids sold, as well
as the declines in Value Added Services revenue and boxes, are all being primarily driven by a management decision to reduce the number of
external boxes handled by Alico Fruit Company in fiscal year 2014 and to a lesser extent declines in Florida citrus production. The decline in
Alico Fruit Company gross profit relates primarily to the changes in revenue outlined above.
For fiscal year 2015, we would expect gross profit for both segments to remain relatively in-line with fiscal year 2014.
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.
30
Improved Farmland
The table below presents key operating measures for the fiscal years ended September 30, 2014, 2013 and 2012:
(in thousands, except per net standard ton and per acre data)
Fiscal Year Ended
September 30,
Change
Fiscal Year Ended
September 30,
Change
2014
2013
$
%
2013
2012
$
%
Revenue From:
Sale of Sugarcane
Molasses Bonus
Land Leasing
Other
Total
$ 17,428 $ 20,125 $ (2,697)
17
610
582
$ 20,429 $ 21,917 $ (1,488)
817
1,389
795
800
779
213
2.1%
78.3%
NM
(13.4)% $20,125 $13,931 $ 6,194
288
(94)
213
(6.8)% $21,917 $15,316 $ 6,601
512
873
-
800
779
213
44.5%
56.3%
(10.8)%
NM
43.1%
Net Standard Tons Sold
590
546
44
8.1%
546
339
207
61.1%
Price Per Net Standard Ton:
Sale of Sugarcane
Molasses
$ 29.54 $ 36.86 $ (7.32)
1.47 $ (0.09)
$
1.38 $
(19.9)% $ 36.86 $ 41.09 $ (4.23)
(6.1)% $ 1.47 $ 1.51 $ (0.04)
(10.3)%
(2.6)%
Net Standard Tons/Acre
35.20
41.14
(5.94)
(14.4)%
41.14
35.19
5.95
16.9%
Operating Expenses:
Cost of Sales
Harvesting and Hauling
Land Leasing Expenses
Total
$ 14,368 $ 11,580 $ 2,788
(539)
2,905
$ 21,356 $ 16,202 $ 5,154
3,759
3,229
4,298
324
24.1% $11,580 $ 8,626 $ 2,954
1,797
(12.5)%
(123)
NM
31.8% $16,202 $11,574 $ 4,628
4,298
324
2,501
447
34.2%
71.9%
(27.5)%
40.0%
NM - Not Meaningful
For fiscal year 2014, the amount of acres used to produce sugarcane increased to 16,728 from 13,272 in fiscal year 2013. The increase in net
standard tons sold is related to the increased acreage in production for fiscal year 2014 versus fiscal year 2013. The increase in production for
fiscal year 2014 versus fiscal year 2013 is more than offset by the 19.9% decrease in price per net standard ton that has resulted from changes
in market conditions. 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 decrease in gross profit for fiscal year 2014 versus fiscal year 2013 is related primarily to the 19.9% decrease in price per standard ton
discussed above, partially offset by a 1.6% decrease in growing costs per acre and a 19.1% decrease in harvest and hauling costs per net
standard ton versus fiscal year 2013 which relates primarily to the elimination of long-haul charges related to the transportation of sugarcane
via truck.
Additionally, the gross profit of the Improved Farmland segment was negatively impacted by a charge of approximately $2,300,000 in May
2014 recorded as an operating expense related to the reimbursement to the Company, at less than book value, for certain of our costs to
develop and plant sugarcane, cultivate and care take sugarcane and purchase certain rolling stock used in our sugarcane operation. The charge
relates to the triple net agricultural lease entered into with our sole sugarcane customer, USSC.
31
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 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.
On November 21, 2014, we sold approximately 36,000 acres of sugarcane land to Global, including the land leased to USSC above, for
approximately $97,900,000 in cash and assigned the USSC Lease to the purchaser. As result of this disposition, we are no longer involved in
sugarcane, and the Improved Farmland segment is no longer material to our business.
Ranch and Conservation
The table below presents key operating measures for the fiscal years ended September 30, 2014, 2013 and 2012:
(in thousands, except per pound data)
Fiscal Year Ended
September 30,
Change
Fiscal Year Ended
September 30,
Change
2014
2013
$
%
2013
2012
$
%
Revenue From:
Sale of Calves
Sale of Culls
Land Leasing
Other
Total
Pounds Sold:
Calves
Culls
Price Per Pound:
Calves
Culls
$ 5,735 $ 4,797 $
938
558
(2)
(77)
$ 8,172 $ 6,755 $ 1,417
1,118
981
338
560
983
415
19.6% $ 4,797 $ 5,181 $ (384)
(153)
99.6%
(84)
(0.2)%
(18.6)%
28
21.0% $ 6,755 $ 7,348 $ (593)
713
1,067
387
560
983
415
(7.4)%
(21.5)%
(7.9)%
7.2%
(8.1)%
2,964
1,181
3,229
680
(265)
501
(8.2)%
73.7%
3,229
680
3,182
933
47
(253)
1.5%
(27.1)%
$
$
1.93 $
0.95 $
1.49 $ 0.44
0.82 $ 0.13
29.5% $ 1.49 $ 1.63 $ (0.14)
15.9% $ 0.82 $ 0.76 $ 0.06
(8.6)%
7.9%
Operating Expenses:
Cost of Calves Sold
Cost of Culls Sold
Land Leasing Expenses
Other
Total
$ 3,569 $ 3,274 $
456
274
31
280
239
5
$ 4,330 $ 3,798 $
295
176
35
26
532
NM - Not Meaningful
9.0% $ 3,274 $ 2,818 $
62.9%
14.6%
NM
280
239
5
14.0% $ 3,798 $ 3,497 $
370
309
-
456
(90)
(70)
5
301
16.2%
(24.3)%
(22.7)%
NM
8.6%
The increase in revenue from the sale of calves in fiscal year 2014 versus fiscal year 2013 results primarily from the increase in price per
pound, partially offset by a slight decrease in pounds sold. The increase in cull revenue for fiscal year 2014 versus 2013 results from an
increase in pounds sold and an increase in price per pound. The increase in gross profit for fiscal year 2014 versus 2013 relates primarily to
the increased price per pound of beef.
For fiscal year 2015, 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 2014. We expect operating expenses for fiscal year 2015 to remain relatively in-line with
fiscal year 2014.
32
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.
Other Operations
Other Operations includes leasing revenue of $321,00, $445,000, and $480,000 for fiscal years 2014, 2013 and 2012, respectively and gross
profit of $131,000, $155,000, and 179,000 for fiscal years 2014, 2013 and 2012, respectively.
General and Administrative
The increase in general and administrative expenses for fiscal year 2014 versus the fiscal year 2013 relates primarily to costs incurred related
to the change in control described in “Recent Events,” which totaled $2,600,000 and a $1,800,000 increase in professional fees related to
business development.
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.
Income Tax Expense
Our effective tax rates were 31.9%, 38.0% and 37.2% for the fiscal years ended September 30, 2014, 2013 and 2012, respectively. The
change in rate in fiscal year 2014 versus fiscal year 2013 relates primarily to changes in the relative magnitude of various permanent book-tax
differences.
At September 30, 2014, we had $58,001,000 of gross deferred tax assets comprised primarily of $27,200,000 of capital loss carry-forwards
expiring in fiscal year 2018, $16,159,000 of state bonus depreciation disallowance, $8,284,000 of outside basis difference related to our
investment in Alico-Agri, Ltd., and $4,198,000 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
Investments
Total current assets
Total current liabilities
Working capital
Total assets
Notes payable
Current ratio
September 30,
2014
2013
Change
30,779
263
112,072
15,696
96,376
203,567
34,000
7.14 to 1
$
$
$
$
$
$
$
24,583
260
59,795
11,491
48,304
198,840
36,000
5.20 to 1
$
$
$
$
$
$
$
6,196
3
52,277
4,205
48,072
4,727
(2,000)
$
$
$
$
$
$
$
33
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 at least the next 12 months. We have a
$60,000,000 revolving line of credit (“RLOC”) which was available for our general use at September 30, 2014 (see “Note 11. 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:
· Cash provided by operations of $27,452,000,
· Capital expenditures of $13,108,000,
· Acquisition of Citrus Grove of $16,517,000,
· Disposal of property and equipment of $14,473,000,
·
·
· Dividends paid of $2,781,000
Principal payments on debt of $2,000,000,
Treasury stock purchases of $4,844,000, and
Net Cash Provided By Operating Activities
The following table details the items contributing to Net Cash Provided by Operating Activities for fiscal years 2014, 2013 and 2012:
(in thousands)
Net Income
Depreciation and Amortization
Net Gain 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,
2014
2013
Change
2013
2012
Change
$
8,050 $ 19,646 $ (11,596) $ 19,646 $ 18,489 $
7,880
(1,795)
9,675
9,675
8,429
1,157
1,246
(4,369)
278
15,613
(20,894)
9,907
(4,908)
16,525
(9,629)
20,521
(20,894)
9,907
(4,908)
(8,800)
6,205
(688)
(12,094)
3,702
(4,220)
Cash provided by operations
$ 27,452 $ 13,426 $ 14,026 $ 13,426 $ 23,635 $ (10,209)
The factors contributing to the decrease in net income for the fiscal year 2014 versus fiscal year 2013 are discussed in “Results of Operations.”
The net gain on the sale of property and equipment decreased from fiscal year 2013 due to the closing of the Conservation Easement offset by
the closing of the Polk County sale in in fiscal year 2014. Depreciation and Amortization decreased versus year ended 2013 due to the sale of
the property and equipment to USSC and the elimination of capitalized sugarcane planting costs. Change in Working Capital decreased due to
the elimination of sugarcane inventory and the increased income tax payable both due to the sale to USSC as well an increase in advance lease
payments and an increase in capital lease obligation in fiscal year 2014.
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.
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.
34
Net Cash Provided By (Used In) Investing Activities
The following table details the items contributing to Net Cash Used in Investing Activities for fiscal years 2014, 2013 and 2012:
(in thousands)
Purchases of property and equipment:
Sugarcane planting
Improvements to farmland
Citrus nursery
Citrus tree development
Breeding herd purchases
Rolling stock, equipment and other
Fiscal Year Ended
September 30,
Fiscal Year Ended
September 30,
2014
2013
Change
2013
2012
Change
$ (2,690) $ (3,430) $
740 $ (3,430) $ (4,444) $
(904)
(6,358)
(1,488)
(1,286)
(382)
(4,365)
(1,973)
(977)
(3,804)
(4,375)
3,461
(4,385)
(511)
2,518
3,993
(4,365)
(1,973)
(977)
(3,804)
(4,375)
(5,153)
-
(895)
(807)
(4,622)
1,014
788
(1,973)
(82)
(2,997)
247
Total
(13,108)
(18,924)
5,816
(18,924)
(15,921)
(3,003)
Acquisition of Citrus business
Disposal of property and equipment
Return on investment in Magnolia
Other
$ (16,517) $
14,473
3,814
10
-
24,381
1,179
35
(16,517) $
- $
(9,908)
2,635
(25)
24,381
1,179
35
-
18,095
4,735
769
-
6,286
(3,556)
(734)
Cash provided by (used in) investing activities
$ (11,328) $
6,671 $ (17,999) $
6,671 $
7,678 $ (1,007)
For fiscal year 2014 versus fiscal year 2013, Net Cash Used in Investing Activities increased by $17,999,000. The factors contributing to the
increase are related primarily to the acquisition of the Citrus business for $16,517,000 as well as the decrease in disposal of property and
equipment related to the Conservation Easement land sale in 2013 offset by the Polk County land sale and property and equipment sold to
USSC in fiscal year 2014. Purchases of property and equipment have decreased overall due to a decrease in the number of cows and bulls
purchased to augment our breeding herd, a decrease in purchases of rolling stock, equipment and other assets as well as improvement to
farmland related to the completion of the sugarcane expansion in fiscal year 2013, partially offset by capital expenditures related to the building
of our citrus tree nursery in fiscal year 2014. The increase in the return on investment in Magnolia versus fiscal year 2013 relates primarily to
the reinstatement of cash distributions by Magnolia after its conversion of a large portion of its tax certificate portfolio to tax deeds.
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 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
previously 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.
35
Net Cash Used In Financing Activities
The following table details the items contributing to Net Cash Used in Financing Activities for fiscal year 2014 and 2013:
(in thousands)
Fiscal Year Ended
September 30,
Fiscal Year Ended
September 30,
2014
2013
Change
2013
2012
Change
Principal payments on notes payable
Net repayments on revolving line of credit
Treasury stock purchases
Capital lease payment
Dividends paid
$ (2,000) $ (3,900) $
-
(4,844)
(303)
(2,781)
-
(2,894)
-
(2,048)
1,900 $ (3,900) $ (3,279) $
-
(2,894)
-
(2,048)
(13,979)
(298)
-
(1,765)
-
(1,950)
(303)
(733)
(621)
13,979
(2,596)
-
(283)
Cash used in financing activities
$ (9,928) $ (8,842) $ (1,086) $ (8,842) $ (19,321) $ 10,479
The decrease in principal payments on notes payable for fiscal year 2014 relates to the payoff of the Farm Credit Mortgage in fiscal year 2013
(see “Note 11. Long-Term Debt” in the Notes to Consolidated Financial Statements). Additionally, we increased our repurchases of stock for
fiscal year 2014 subject to the provisions of SEC rule 10b-18 in order to fund grants under the 2013 incentive equity plans (see “Note 12.
Treasury Stock” in the Notes to Consolidated Financial Statements).
The increase in principal payments on notes payable for fiscal year 2013 relates to the payoff of the Farm Credit Mortgage (see “Note 11.
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 12. Treasury Stock” in the
Notes to Consolidated Financial Statements).
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, 2014 and the future periods in
which such obligations are expected to be settled in cash.
(in thousands)
Payments Due by Period
Total
<1 Year
1-3 Years
3-5 Years
5+ Years
Long-Term Debt
Interest on Long-Term Debt
Citrus Purchase Contracts
Retirement Benefits
Consulting/Non-Compete Agreement
Operating Leases
Capital Leases
$
34,000 $
4,003
12,152
13,680
1,167
1,231
1,142
2,000 $
787
6,994
352
1,000
578
303
4,000 $
1,431
5,158
714
167
653
606
4,000 $
1,238
-
535
-
-
233
24,000
547
-
12,079
-
-
-
Total
$
67,375 $
12,014 $
12,729 $
6,006 $
36,626
Interest is estimated on our long-term debt at 2.40% for the Rabo term loan and revolving line of credit. See Item 8. Financial Statements and
Schedules, Note 11. 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 $12,152,000 at September 30, 2014 for delivery
in fiscal years 2015 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.
36
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Market Risk - Market risk represents the potential loss resulting from adverse changes in the value of financial instruments, either derivative or
non-derivative, caused by fluctuations in interest rates, foreign exchange rates, commodity prices, and equity security prices. The Company
handles market risks in accordance with its established policies; however, Alico does not enter into derivatives or other financial instruments
for trading or speculative purposes. The Company does consider, on occasion, the need to enter into financial instruments to manage and
reduce the impact of changes in interest rates; however, the Company entered into no such instruments during the three-year period ended
September 30, 2014. Alico held various financial instruments at September 30, 2014 and 2013, 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 $347,500 before income taxes for the year ended September 30, 2014.
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.
37
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, 2014 and 2013
Consolidated Statements of Comprehensive Income for the fiscal years ended September 30, 2014, 2013 and 2012
Consolidated Statements of Stockholders’ Equity for the fiscal years ended September 30, 2014, 2013 and 2012
Consolidated Statements of Cash Flows for the fiscal years ended September 30, 2014, 2013 and 2012
Notes to Consolidated Financial Statements
All schedules are omitted for the reason that they are not applicable or the required information is included in the financial
statements or notes.
Page
39
40
41
42
43
44
45
38
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, 2014 and 2013, 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, 2014. 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, 2014 and 2013, and the results of their operations and their cash flows for each of the three
years in the period ended September 30, 2014, 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, 2014, based on criteria established in Internal Control —
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated
December 12, 2014 expressed an unqualified opinion on the effectiveness of Alico, Inc. and Subsidiaries’ internal control over financial
reporting.
/s/ McGladrey LLP
Orlando, Florida
December 12, 2014
39
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, 2014, based on criteria
established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
in 2013. 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, 2014, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission in 2013.
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, 2014 and 2013, 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, 2014, and our
report dated December 12, 2014 expressed an unqualified opinion.
/s/ McGladrey LLP
Orlando, Florida
December 12, 2014
40
ALICO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Investments
Accounts receivable, net
Inventories
Assets held for sale
Other current assets
Total current assets
Investment in Magnolia Fund
Investments, deposits and other non-current assets
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
Capital lease obligation, noncurrent
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 7,361,340 and 7,303,568 shares outstanding at September 30, 2014 and
September 30, 2013, respectively
Additional paid in capital
Treasury stock at cost, 15,766 and 73,538 shares held at September 30, 2014 and
September 30, 2013, respectively
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
September 30,
2014
2013
30,779
263
3,847
19,929
56,681
573
112,072
1,435
1,933
695
87,432
203,567
1,729
2,000
1,618
4,572
442
1,850
3,485
15,696
32,000
839
5,739
3,856
58,130
$
$
$
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
3,742
(650)
134,968
145,437
203,567
7,377
9,496
(2,816)
128,679
142,736
198,840
$
$
$
$
$
See accompanying notes to consolidated financial statements.
41
ALICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share amounts)
2014
Fiscal Year Ended September 30,
2013
2012
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 income (loss), net
Total other income, net
Income before income taxes
Income taxes
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
$
$
$
$
$
47,069
12,376
20,429
8,172
634
88,680
30,213
12,317
21,356
4,330
374
68,590
20,090
12,234
7,856
131
(969)
4,820
-
(55)
3,927
11,783
3,733
8,050
-
$
$
43,689
28,412
21,917
6,755
888
101,661
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
-
55,423
48,334
15,316
7,348
766
127,187
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
-
8,050
$
19,646
$
18,489
7,336
7,354
1.10
1.09
0.24
$
$
$
7,313
7,357
2.69
2.67
0.36
$
$
$
7,355
7,355
2.51
2.51
0.20
See accompanying notes to consolidated financial statements.
42
ALICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
Common Stock
Additional
Shares
Issued
Amount
Paid In
Capital
Treasury
Stock at
Cost
Retained
Earnings
Total
Balance at September 30, 2011
7,377
7,377
9,212
(862)
94,935
110,662
Net income
Dividends
Treasury stock purchases
Stock-based compensation:
Directors
Employees
-
-
-
-
-
-
-
-
-
-
-
-
-
(104)
(55)
-
-
(298)
589
28
18,489
(1,765)
-
-
-
18,489
(1,765)
(298)
485
(27)
Balance at September 30, 2012
7,377
7,377
9,053
(543)
111,659
127,546
Net income
Dividends
Treasury stock purchases
Stock-based compensation:
Directors
Employees
-
-
-
-
-
-
-
-
-
-
-
-
-
392
51
-
-
(2,894)
591
30
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
Net income
Dividends
Treasury stock purchases
Stock-based compensation:
Directors
Employees
-
-
-
-
-
-
-
-
-
-
-
-
-
(26)
(5,728)
-
-
(4,844)
1,087
5,923
8,050
(1,761)
-
-
-
8,050
(1,761)
(4,844)
1,061
195
Balance at September 30, 2014
7,377 $
7,377 $
3,742 $
(650) $ 134,968 $ 145,437
See accompanying notes to consolidated financial statements.
43
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
operating activities:
Depreciation and amortization
Non-cash gains and losses
Magnolia fund undistributed earnings
Deferred income tax (benefit) 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
Acquisition of Citrus business
Decrease (increase) in restricted cash
(Decrease) increase in real estate deposits
Proceeds from disposals of property and equipment
Return on investment in Magnolia
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
Capital lease payments
Dividends paid
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amount capitalized
Cash paid for income taxes
Supplemental disclosure of non-cash activities:
Capital leases for purchase of equipment
2014
Fiscal Year Ended September 30,
2013
2012
$
8,050
$
19,646
$
18,489
7,880
202
(163)
(845)
(173)
(4,369)
-
1,256
419
9,474
1,253
3,401
1,067
27,452
(13,108)
(16,517)
-
-
14,473
3,814
-
10
(11,328)
(2,000)
-
-
(4,844)
(303)
(2,781)
(9,928)
6,196
24,583
30,779
954
1,177
1,400
$
$
$
$
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
-
$
$
$
$
See accompanying notes to consolidated financial statements.
44
ALICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014, 2013 and 2012
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 129,200 acres of land in seven Florida Counties (Alachua, Collier, DeSoto, Glades, Hendry, Lee and Polk);
and in addition to principal lines of business in citrus groves, improved farmland land leasing, 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 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.
45
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, 2014, 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.
Accounts receivable
Accounts receivable are generated from the sale of citrus, 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” in the Notes to Consolidated Financial Statements).
Major Customers
Revenues and receivables from the Company’s major customers are as follows for the years ended September 30, 2014, 2013 and 2012:
(in thousands)
Accounts Receivable
2014
2013
2014
Revenue
2013
2012
% of Total Revenue
2013
2014
2012
USSC
Florida Orange Marketers, Inc.
Citrosuco North America, Inc.
Louis Dreyfus
Cutrale Citrus Juice
$
$
$
$
$
2,962
-
-
-
-
$
$
$
$
$
3,004
-
-
-
-
$ 19,633
$ 23,826
$
804
$ 24,135
3,984
$
$ 21,056 $ 14,442
$ 15,689 $ 22,219
$ 11,092 $ 18,895
$ 26,246 $ 29,344
6,300 $ 13,156
$
22.1%
26.9%
0.9%
27.2%
4.5%
20.7%
15.4%
10.9%
25.8%
6.2%
11.4%
17.5%
14.9%
23.1%
10.3%
46
Real Estate
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 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” in
the Notes to Consolidated Financial Statements).
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.
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
47
6-7 years
10-40 years
25 years
3 years
3-20 years
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset 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” in the Notes to
Consolidated Financial Statements 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 utilized a cooperative to harvest its sugarcane. The cooperatives require members to acquire stock
ownership as a condition for the use of its services. Due to the Company’s cessation of sugarcane farming in May, the company expects the
return of the stock value in November following the conclusion of the harvesting season.
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 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, 2014, 2013 and 2012. 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.
48
The following table presents a reconciliation of basic to diluted weighted average shares outstanding for fiscal years ended September 30,
2014, 2013 and 2012:
(in thousands)
Weighted Average Shares Outstanding - Basic
Unvested Restricted Stock Awards
Weighted Average Shares Outstanding - Diluted
Stock-Based Compensation
2014
Fiscal Year Ended September 30,
2013
2012
7,336
18
7,354
7,313
44
7,357
7,355
-
7,355
Stock-based compensation cost is measured based on the fair value of the award at the grant date 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 is 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.
Total stock-based compensation expense recognized on the Consolidated Statements of Comprehensive Income for the three years ended
September 30, 2014 in other operations and general and administrative expense was as follows:
(in thousands)
Stock compensation expense:
Executives
Board of Directors
Total stock compensation expense
2014
Fiscal Year Ended September 30,
2013
2012
$
$
195
1,061
1,256
$
$
81
842
923
$
$
(27)
485
458
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.
49
For the year ended September 30, 2014, the Company issued 24,161 shares to Directors under the 2008 and 2013 Plans at a weighted average
fair value of $37.61 per share that vested immediately. Stock-based compensation expense recognized in the Consolidated Statement of
Comprehensive Income in general and administrative expense was $1,256,000, $923,000 and $458,000 for the years ended September 30,
2014, 2013 and 2012. There are 311,053 shares eligible for grant under the 2013 Plan.
On May 26, 2011, the Company’s Board of Directors approved the Long-Term Incentive Program as part of the 2008 Equity Incentive Plan.
The Company approved the contingent award of 152,403 shares of common stock to Named Executive Officers (the “NEOs”) of the
Company. On May 26, 2011, 58,610 shares were granted to the NEOs other than the Chief Executive Officer (“CEO”) and on April 19,
2012, 93,793 shares were awarded to the CEO under restricted stock award agreements.
All of the shares of restricted stock awarded under the Long-Term Incentive Program vested automatically upon the acquisition by 734
Investors, LLC of a controlling interest in the Company. As a result, the Company issued 152,403 shares of treasury stock in January 2014,
before withholdings for income taxes. The Company has recognized $195,000 of stock-based compensation expense related to the acceleration
of vesting of these grants during fiscal year 2014. In December 2013, the Company determined that it would repurchase half of the gross
shares awarded to NEOs other than the CEO totaling 58,610 shares immediately upon their issuance for the purpose of retaining treasury
shares for future issuance.
No stock options were granted in fiscal 2014, 2013 or 2012.
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” in the Notes to
Consolidated Financial Statements).
Recent Accounting Pronouncement
Update No. 2014-08—Presentation of Financial Statements (Topic 205) and
Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and
Disclosures of Disposals of Components of an Entity
Title
Update No. 2014-09—Revenue from Contracts with Customers (Topic 606)
Prescribed
Effective
Date
12/15/2015
(Q1 2015)
Commentary
The Company is still evaluating the impact
of the adoption of the standard will have on
its results of operations and financial
position.
12/15/2016
(Q1 2017)
The Company is still evaluating the impact
of the adoption of the standard will have on
its results of operations and financial
position.
50
Note 3. Fair Value Measurements
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, 2014 and 2013, approximate fair value because of the immediate or short term maturity of these 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 2014, 2013
and 2012.
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 4.7% and 4.2% at September 30,
2014 and 2013, respectively.
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
Total
September 30, 2014
Non-
Current
Current
Total
Current
September 30, 2013
Non-
Current
Total
$
$
263
-
-
-
-
-
$
-
762
772
34
240
125
$
263
762
772
34
240
125
260 $
-
-
-
-
-
- $
836
516
326
259
54
260
836
516
326
259
54
$
263
$
1,933
$
2,196
$
260 $
1,991 $
2,251
51
Note 5. Inventories
Inventories consist of the following at September 30, 2014 and 2013:
(in thousands)
Unharvested fruit crop on the trees
Unharvested sugarcane
Beef cattle
Other
Total Inventories
September 30,
2014
2013
$
$
18,305
-
1,022
602
19,929
$
$
16,329
11,728
1,200
146
29,403
The Company records its inventory at the lower of cost or net realizable value. For the years ended September 30, 2014, 2013 and 2012, 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, 2014, unaudited internal financial statements of
Magnolia, Alico recorded net investment income of $163,000 for the year ended September 30, 2014. The Company recorded net investment
income of $658,000 for the year ended September 30, 2013, and $59,000 for the year ended September 30, 2012. Magnolia made certain
distributions during the year ended September 30, 2014, 2013 and 2012; the Company’s share of those distributions was approximately
$3,814,000, $1,179,000 and $4,735,000, respectively.
52
Note 7. Property, Buildings and Equipment, Net
Property, buildings and equipment, net consist of the following at September 30, 2014 and 2013:
(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,
2014
2013
11,558
15,220
45,257
-
50,499
122,534
(63,031)
59,503
27,929
$
12,234
11,587
34,188
16,199
47,278
121,486
(71,857)
49,629
81,442
Net property, buildings and equipment
$
87,432
$
131,071
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, 2014, 2013 and 2012. 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 and determined there were no impairments
except for $1,918,000 in 2012 related to certain Lee County land.
Sugarcane Lease
On May 19, 2014, the Company entered into a triple net agricultural lease with its sole sugarcane customer, United States Sugar Corporation,
of approximately 30,600 gross acres of land in Hendry County, Florida used for sugarcane farming which includes 19,181 acres planted or
plantable to sugar. As a result of the Lease, the Company is no longer directly engaged in sugarcane farming.
The term of the Lease is ten (10) years which may be extended by either party for three (3) additional one (1) year periods, except with respect
to a specific portion of the leased premises (4,561 planted or plantable acres) which has a five (5) year term which may be extended by either
party for an additional year but can be terminated by the Company at any time after one (1) year.
The Lease includes various covenants, indemnities, defaults, termination rights and other provisions customary for lease transactions of this
nature.
The annual base rent under the Lease is approximately $3,548,000 is payable to the Company on or before the first day of each lease year
(May 1). The Tenant is obligated to pay additional rent per net cane acre annually if the year-end average net selling price per hundred weight
is greater than or equal to $28.00. This effectively increases the rent in the event sugar prices rise in the future. During fiscal year 2014, the
Company has recognized $1,389,000 under this lease agreement, respectively.
The Lease also provided for a one-time reimbursement to the Company, at book value, for certain of our costs to develop and plant sugarcane
(Property, Buildings and Equipment), cultivate and care take sugarcane (Inventory) and for the purchase of certain rolling stock (Property,
Buildings and Equipment) used in our sugarcane operation. We had a combined book value of approximately $11,100,000 in planting and
caretaking costs and approximately $2,200,000 net book value for the rolling stock. After negotiation with USSC, we agreed to a one time
reimbursement of approximately $8,800,000 in plant cane and caretaking costs and a sales price of approximately $2,200,000 for the rolling
stock. Therefore, the Company recorded a one-time charge of approximately $2,300,000 in the quarter ended June 30, 2014 as an operating
expense in the Improved Farmland segment. In addition, we also received the annual base rent payment of approximately $3,548,000 for a
total payment of approximately $14,600,000 from USSC on July 1, 2014.
53
Polk County property sale
On July 1, 2014, the Company sold a 2,800 acre parcel of land in Polk County, Florida for $5,623,000. This parcel was surplus to our
operations and was classified as held for sale. This sale was part of a like-kind exchange transaction that qualifies for tax-deferral treatment in
accordance with Internal Revenue Code §1031.
Acquisition of Citrus Grove
On August 8, 2014, the Company and Premiere Agricultural Properties, LLC entered into a Purchase and Sale Agreement pursuant to which
the Company purchased all of the assets on a 1,241 acre citrus grove (867 net tree acres) in DeSoto County, FL for a purchase price of
approximately $16,517,000. The transaction was closed on September 23, 2014. The purchase price was funded from the Company’s cash
and cash equivalents and $5,300,000 in funds from a 2014 like-kind exchange transaction in Polk County pursuant to Internal Revenue Code
§1031. We acquired the citrus acres to increase the size of our citrus groves which we believe strengthens our market position.
The total cost of the acquisition was allocated to the assets acquired based on their estimated respective fair values in accordance with ASC
805, Business Combinations and was accounted for using the acquisition method of accounting.
The assets acquired in the acquisition were recorded in the quarter ended September 30, 2014. The results of operations have been included in
our consolidated statements of income since September 23, 2014, the date of closing. Pro-forma operating results, as if the Company had
completed the acquisition at the beginning of the periods presented, are not significant to the Company’s consolidated financial statements and
are not presented.
Assets acquired in the acquisition are as follows:
(in thousands)
Inventories
Property, Buildings and Equipment:
Equipment and other facilities
Land
Citrus Trees
Total cash paid
Alachua County Property
Amount
1,148
1,834
3,902
9,633
16,517
$
$
In fiscal year 2013, the Company purchased 396 acres in Alachua County, Florida for $1,175,000. The Company is currently building a citrus
tree nursery on the property and will utilize the trees produced in its own operations and sell excess trees to citrus growers in the state of
Florida.
54
Sale of Easement
In fiscal year 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. Assets held for sale
At September 30, 2014 the assets held for sale comprised of the following:
(in thousands)
Citrus, land and land improvements
Sugarcane, land and land improvements
Assets held for sale
Purchase and Sale Agreement
September 30,
2014
$
$
2,700
53,981
56,681
On August 8, 2014, we entered into a Purchase and Sale Agreement, (the “Purchase Agreement”) with Terra Land Company (“Terra”) to sell
approximately 30,959 gross acres of land located in Hendry County, Florida used for sugarcane production for a base purchase price of
$91,436,000. The base purchase price was subject to a valuation adjustment in the event that either the net farmable acres or net support acres
of the land were more or less than the amounts in the Purchase Agreement by one percent (1%) or greater.
On November 21, 2014, via various amendments to the Purchase Agreement, we completed the sale to Global Ag Properties USA LLC of
approximately 36,000 gross acres of land located in Henry County, Florida used for sugarcane production for a purchase price of $97,900,000
pursuant to the Purchase and Sale Agreement dated August 8, 2014. Global is a wholly-owned subsidiary of Terra. We have also assigned
our interest in the USSC Lease to Global in conjunction with the sale. The parties have made customary representations, warranties, covenants
and agreements in the Purchase Agreement.
As a result of the disposition of our sugarcane land, we are no longer involved in sugarcane and, as of November 21, 2014 the Improved
Farmland segment was no longer material to our business.
Our sugarcane land has been classified as assets held for sale as of September 30, 2014, however the sugarcane operation has not been
classified as a discontinued operation due to the Company’s continuing involvement and continuing cash outflows in the operation pursuant to
a Post-Closing Agreement in association with the Global land sale.
55
Note 9. Accrued Expenses
Accrued expenses consist of the following at September 30, 2014 and 2013:
(in thousands)
Accrued employee wages and benefits
Accrued interest
Current portion of retirement benefits payable
Inventory received but not invoiced
Other
Total accrued expenses
Note 10. Other Current Liabilities
Other current liabilities consist of the following at September 30, 2014 and 2013:
(in thousands)
Deposits - Farm land leases
Deposits - Recreation land leases
Deposits - Other
Capital Lease
Total other current liabilities
Note 11. Long-Term Debt
September 30,
2014
2013
442
270
342
197
367
1,618
$
$
September 30,
2014
2013
2,641
572
14
258
3,485
$
$
687
307
342
885
133
2,354
481
621
40
-
1,142
$
$
$
$
Outstanding debt under the Company’s various loan agreements is presented in the table below:
(in thousands)
September 30, 2014
Principal balance outstanding
Remaining available credit
Effective interest rate
Scheduled maturity date
Collateral
September 30, 2013
Principal balance outstanding
Remaining available credit
Effective interest rate
Scheduled maturity date
Collateral
Revolving Line of
Credit
Term Loan
Total Credit
Facility
$
$
$
$
-
60,000
2.10%
October 2020
Real Estate
-
60,000
2.43%
October 2020
Real Estate
$
$
$
$
34,000
-
2.40%
October 2020
Real Estate
36,000
-
2.68%
October 2020
Real Estate
$
$
$
$
34,000
60,000
36,000
60,000
The Company has a revolving line of credit (“RLOC”) and term loan with Rabo AgriFinance, Inc. (“Rabo”) totaling $94,000,000. 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.
56
The Rabo credit facility was amended effective July 1, 2014. Terms as amended are summarized below.
The term loan requires quarterly payments of interest at a floating rate of one month LIBOR plus 225 basis points. On July 15, 2016 and
every two years thereafter, Rabo may adjust the interest rate to a maximum spread of LIBOR plus 5%. Rabo must provide a 30 day notice of
the new spread. The Company has the right to prepay the outstanding balance without penalty. It also requires quarterly principal payments of
$500,000 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 RLOC is based on the one month LIBOR plus a spread. The spread is determined based upon our debt service
coverage ratio for the preceding fiscal year and can vary from 195 to 295 basis points. The rate is currently at LIBOR plus 195 basis points.
On July 1, 2015 and every two years thereafter, Rabo may adjust the interest rate spread, and the spread adjustment on the RLOC is not
limited. Rabo must provide a 30 day notice of the new spread. The Company has the right to prepay the outstanding balance without penalty.
The RLOC is subject to an unused commitment fee of 20 basis points on the annual average unused portion of the RLOC.
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, 2014, and 2013, the Company was in compliance with the financial 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 $80,000,000, 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.
Maturities of the Company’s debt were as follows at September 30, 2014:
(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
$
$
2,000
2,000
2,000
2,000
2,000
24,000
34,000
57
Interest costs expensed and capitalized to property, buildings and equipment were as follows:
(in thousands)
Interest expense
Interest capitalized
Total
Note 12. Treasury Stock
2014
Fiscal Year Ended September 30,
2013
2012
$
$
969
204
1,173
$
$
1,257
79
1,336
$
$
1,616
100
1,716
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, 2014, 2013 and 2012:
(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,:
2014
2013
2012
118,792
75,887
12,332
$
$
$
40.78
38.14
24.12
375,995
257,203
181,316
$
$
$
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, 2011
Purchased
Issued to Directors
Balance at September 30, 2012
Purchased
Issued to Employees and Directors
Balance at September 30, 2013
Purchased
Issued to Employees and Directors
Balance at September 30, 2014
$
34,593
12,332
(23,690)
23,235
75,887
(25,584)
73,538
118,792
(176,564)
15,766
$
58
4,844
2,894
298
862
298
(617)
543
2,894
(621)
2,816
4,844
(7,010)
650
Note 13. Income Taxes
The provision for income tax (benefit) for the years ended September 30, 2014, 2013 and 2012 consists of the following:
(in thousands)
Current:
Federal income tax
State income tax
Total current
Deferred:
Federal income tax
State income tax
Total deferred
2014
Fiscal Year Ended September 30,
2013
2012
$
$
4,035
543
4,578
(590)
(255)
(845)
$
2,508
458
2,966
7,921
1,142
9,063
3,696
1,298
4,994
5,617
362
5,979
Total provision for income taxes
$
3,733
$
12,029
$
10,973
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:
State income taxes, net of federal benefit
Federal impacts from IRS exam and tax return amendments
Permanent and other reconciling items, net
Total provision for income taxes
2014
Fiscal Year Ended September 30,
2013
2012
4,099
$
11,086
$
10,312
183
-
(549)
1,067
19
(143)
1,051
(444)
54
3,733
$
12,029
$
10,973
$
$
59
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, 2014 and 2013 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
Other
Total deferred tax liabilities
Net deferred income tax (liability)
$
September 30,
2014
2013
$
1,619
95
-
3,196
10,492
1,118
16,520
99
21,535
415
210
22,259
1,686
144
31
3,196
10,502
159
15,718
302
21,550
450
-
22,302
$
(5,739)
$
(6,584)
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 had no reserve for uncertain tax positions at
September 30, 2014 or September 30, 2013. 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 14. Related Party Transactions
Change in Control Transaction
On November 19, 2013, 734 Agriculture, LLC (“734 Agriculture”) and its affiliates, including 734 Investors, LLC (“734 Investors”),
completed the previously announced purchase from Alico Holding, LLC, a company wholly owned by Atlantic Blue Group, Inc.
(“Atlanticblue”), of 3,725,457 shares of our common stock (the “Share Purchase”).
The common stock acquired by 734 Agriculture and its affiliates, including 734 Investors, represents approximately 51% of the Company’s
outstanding voting securities. On November 15, 2013, 734 Investors 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 734
Investors, including the voting and disposition of shares of common stock, subject to certain restrictions set forth therein.
60
As a result, upon the consummation of the Share Purchase, 734 Agriculture and its affiliates, including 734 Investors, acquired the voting
power to control the election of the Company’s Directors and any other matter requiring the affirmative vote or consent of the Company’s
shareholders.
Appointment of Directors; Resignation of Directors
With the Closing of the Share Purchase, the previously announced election of the following individuals to the Board of Directors became
effective: Mr. George R. Brokaw, Member of 734 Agriculture; Remy W. Trafelet, Manager of 734 Agriculture; W. Andrew Krusen, Jr.,
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.
Ramon A. Rodriguez remained on, and continues to serve as a member, of the Board of Directors. In addition, Adam D. Compton, who
previously resigned subject to and effective upon the Closing of the Share Purchase, was re-elected to the Board of Directors on November
22, 2013.
Upon the Closing of the Share Purchase, the following individuals ceased to be Directors of the Company 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.
Appointment of Mr. Wilson as the Company’s Chief Executive Officer
Upon the Closing of the Share Purchase, Mr. Alexander ceased to be the Company’s CEO pursuant to his previously disclosed resignation.
On November 22, 2013, the Board appointed Mr. Wilson to serve as the CEO, effective immediately.
734 Investors and 734 Agriculture
On November 19, 2013, 734 Agriculture and its affiliates, including 734 Investors, acquired all of the approximately 51% of Alico’s common
stock then owned by Atlanticblue. 734 Investors now beneficially owns, directly or indirectly, approximately 51% of the outstanding shares of
the Company’s common stock and possesses the voting power to control the election of the Company’s Directors and any other matter
requiring the affirmative vote or consent of the Company’s shareholders. 734 Agriculture is the sole managing member of 734 Investors. By
virtue of their ownership percentage, 734 Investors and 734 Agriculture are able to elect all of the Directors and, consequently, control
Alico. Messrs. Brokaw and Trafelet are the two controlling persons of 734 Agriculture.
734 Citrus Holdings, LLC, d/b/a Silver Nip
On November 22, 2013, the Company 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 the Company 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 of
Silver Nip. The Silver Nip Agreement provides that Mr. Wilson will spend a majority of his working time performing functions and services
for the Company and that in no event will Mr. Wilson be required to take any action that he or the Company determines could conflict with
Mr. Wilson’s exercise of his fiduciary duties under applicable law owed to the Company 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 to the Company 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 provides that if neither the Company nor Silver Nip has provided the other with written notice of an intention to
terminate the Silver Nip Agreement at least three business days before the month’s end (or any subsequent renewal period), the Silver Nip
Agreement will automatically renew for a one-month period.
61
In addition, Silver Nip may terminate the Silver Nip Agreement at any time upon 10 business days’ prior written notice to the Company. As of
September 30, 2014 neither the Company nor Silver Nip has provided written notice to terminate the Silver Nip Agreement. The description of
the Silver Nip Agreement is qualified in its entirety by reference to the complete terms and conditions of the agreement, which is listed as an
exhibit to the Company’s Current Report on Form 8-K filed on November 25, 2013. In the fiscal year ended September 30, 2014, the
Company has received $128,000 under this agreement.
Atlanticblue
Prior to the Share Purchase transaction on November 19, 2013, Atlanticblue owned approximately 51% of Alico’s common stock. By virtue
of its ownership percentage, Atlanticblue was able to elect all of the Directors and, consequently, control Alico. 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
served on Alico’s Board of Directors. Robert J. Viguet, Jr., a former 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 Alico’s February 2013 shareholders
meeting; he was nominated by Atlanticblue.
Alico Fruit Company (“Alico Fruit”) marketed citrus fruit for TRI-County Grove, LLC at the customary terms and rates the Company extends
to third parties. During the three and nine months ended June 30, 2013, Alico Fruit marketed 55,948 and 201,802 boxes of fruit, for
approximately $600,000 and $1,907,000, respectively. Alico Fruit no longer provides marketing and/or purchases citrus fruit from TRI-
County Grove, LLC, a wholly owned subsidiary of Atlanticblue.
JD Alexander
On November 6, 2013, JD Alexander tendered his resignation as Chief Executive Officer and as an employee of the Company, subject to and
effective immediately after the Closing of the Share Purchase transaction on November 19, 2013. Mr. Alexander’s resignation includes a
waiver of any rights to any payments under his Change-in-Control Agreement with the Company. On November 6, 2013, the Company and
Mr. Alexander also entered into a Consulting and Non-Competition Agreement under which (i) Mr. Alexander will provide consulting
services to the Company during the two-year period after the Closing, (ii) Mr. Alexander agreed to be bound by certain non-competition
covenants relating to the Company’s citrus operations and non-solicitation and non-interference covenants for a period of two years after the
Closing, and (iii) the Company will pay Mr. Alexander for such services and covenants $2,000,000 in twenty-four monthly installments. Mr.
Alexander also agreed, in a separate side letter with the Company, not to sell or transfer the shares that were awarded pursuant to his
Restricted Stock Award Agreement (other than to a family trust) for a period of two years after the Closing. Mr. Alexander also executed a
general release in favor of the Company.
Other
Mr. Charles Palmer, who served as a member of the Board until his resignation became effective on November 19, 2013, leases approximately
2,300 acres from the Company for recreational purposes. He pays approximately $33,000 annually at the customary terms and rates the
Company extends to third parties.
Note 15. 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 4.7% and 4.2% in 2014 and 2013, respectively.
62
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
2014
Fiscal Year Ended September 30,
2013
2012
195
(23)
-
172
221
368
-
589
The following provides a roll-forward of the MSP benefit obligation.
(in thousands)
2014
2013
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
$
$
$
4,371
195
(23)
-
(345)
4,198
(4,198)
$
$
$
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 $352,000, $367,000, $348,000, $365,000 and $171,000 and for the five-year period thereafter an
aggregate of $1,190,000.
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 $192,000, $157,000 and $81,000 for the fiscal years 2014, 2013 and 2012,
respectively.
63
251
178
2
431
4,098
221
368
-
(316)
4,371
(4,371)
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 $165,000, $210,000 and $245,000 for the years ended September 30, 2014, 2013
and 2012, respectively.
Note 16. 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 a citrus nursery, 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.
·
Improved Farmland includes activities related to owning 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, a citrus nursery 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.
64
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
2014
Fiscal Year Ended September 30,
2013
2012
$
$
$
$
$
47,069
12,376
20,429
8,172
634
9,621
(9,621)
88,680
30,213
12,317
21,356
4,330
374
68,590
16,856
59
(927)
3,842
260
20,090
7,462
1,615
3,696
1,413
37
285
14,508
2,132
164
3,320
1,330
743
191
$
$
$
$
$
43,689
28,412
21,917
6,755
888
10,981
(10,981)
101,661
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
7,880
$
9,675
$
55,423
48,334
15,316
7,348
766
11,820
(11,820)
127,187
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
8,429
$
$
$
$
$
$
(a) Other Operations includes the former Real Estate segment as well as other operations.
65
(in thousands)
Assets:
Citrus Groves
Agricultural Supply Chain Management
Improved Farmland
Ranch and Conservation
Other Operations
Other Corporate Assets
Total Assets
September 30,
2014
2013
$
$
67,388
2,498
57,726
13,920
26,356
35,679
203,567
$
$
52,592
994
75,348
14,696
15,094
40,116
198,840
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 17. Commitments and Contingencies
Operating Leases
The Company has obligations under various non-cancelable 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 $2,015,000, $1,182,000 and $1,256,000 for the years ended September 30, 2014, 2013 and 2012,
respectively.
The future minimum rental payments under non-cancelable operating leases are as follows:
(in thousands)
2015
2016
2017
2018
2019
Total
Change in Control Agreements
$
$
578
529
124
-
-
1,231
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 total payments required by
CIC Agreements are $2,504,000 for executive officers and $1,417,000 for other key employees (see “Note 19. Subsequent Events” in the
Notes to Consolidated Financial Statements).
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
total amount of $254,000 for the year ended September 30, 2014 and $200,000 for the year ended September 30, 2013, to secure its insurance
obligations.
66
Note 18. Selected Quarterly Financial Data (unaudited)
Summarized quarterly financial data (in thousands except for per share amounts) for the fiscal years ended September 30, 2014 and 2013 were
as follows:
(in thousands)
Fiscal Quarter Ended
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
December 31,
March 31,
June 30,
September 30,
2013
2012
2014
2013
2014
2013
2014
2013
$ 14,989
12,152
$ 21,356
17,570
$ 37,475
27,616
$ 38,410
31,396
$ 28,675
24,416
$ 35,229
26,164
$
7,541
4,406
$
6,666
4,857
2,837
3,786
9,859
7,014
4,259
9,065
3,135
1,809
3,827
(261)
(1,251)
(547)
1,808
(304)
1,674
636
2,486
(311)
7,062
2,992
2,464
23
4,573
1,800
2,097
(252)
1,910
791
2,253
(167)
6,645
2,566
3,824
4,751
3,214
20,188
4,062
497
18,783
7,027
(704)
$
1,038
$
4,070
$
2,773
$
1,119
$
4,079
$
3,565
$ 11,756
(0.10)
(0.10)
$
$
0.14
0.14
$
$
0.55
0.55
$
$
0.38
0.38
$
$
0.15
0.15
$
$
0.56
0.55
$
$
0.50
0.49
$
$
1.61
1.60
$
$
$
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 19. Subsequent Events
Sugarcane Disposition
On May 19, 2014, we entered into a triple net agricultural lease (the “USSC Lease”) with our sole sugarcane customer, United States Sugar
Corporation (“USSC”), of approximately 30,600 gross acres of land in Hendry County, Florida historically used for sugarcane farming. As a
result of this lease we were no longer directly engaged in sugarcane farming as of May 19, 2014.
On November 21, 2014, we sold approximately 36,000 acres of sugarcane land to Global Ag Properties USA LLC (“Global”), including the
land leased to USSC above, for approximately $97,900,000 in cash and assigned the USSC Lease to the purchaser. As result of this
disposition, we are no longer involved in sugarcane, and the Improved Farmland segment is no longer material to our business. The proceeds
from the sale were reinvested on December 2, 2014 (see Orange-Co Acquisition) via a tax deferred like-kind exchange pursuant to Internal
Revenue Code Section §1031.
Orange-Co Acquisition
On December 2, 2014, we completed the acquisition of certain citrus and related assets of Orange-Co, LP (“Orange-Co”) pursuant to an Asset
Purchase Agreement (the “Orange-Co Purchase Agreement”), dated as of December 1, 2014. The assets we purchased include approximately
20,263 acres of citrus groves in DeSoto and Charlotte counties, Florida, which comprises one of the largest contiguous citrus grove properties
in the state of Florida. The purchase price was approximately $274,000,000 including: (1) $147,500,000 in initial cash consideration, subject
to adjustment as set forth in the Orange-Co Purchase Agreement; (2) up to $7,500,000 in additional cash consideration to be released from
escrow in equal parts, subject to certain limitations, on the 12- and 18-month anniversaries of the Closing Date; (3) the assumption and
refinancing of Orange-Co’s outstanding debt including approximately $91,200,000 in term debt and a working capital facility of
approximately $27,800,000; and (4) the assumption of certain other liabilities. On the Closing Date, the Company deposited an irrevocable
standby letter of credit issued by Rabo Agrifinance, Inc. (“Rabo”) in the aggregate amount of $7,500,000 into an escrow account to fund the
additional cash consideration.
We concurrently entered into arrangements to finance the Orange-Co acquisition as follows:
Metlife Credit Agreement
We entered into a First Amended and Restated Credit Agreement with Metropolitan Life Insurance Company and New England Life
Insurance Company under which they provided term loans in the aggregate principal amount of $182,500,000 and $25,000,000 in revolving
credit commitments.
The Metlife Agreement amends and restates existing credit facilities, dated as of September 8, 2010 (as amended from time to time, the “Prior
Credit Agreement”) between the Company and Rabo. Under the Prior Credit Agreement, we had a term loan in the initial principal amount of
$40,000,000, of which $33,500,000 was outstanding at the date of refinancing and $60,000,000 in undrawn revolving credit commitments.
67
Rabo Credit Agreement
We entered into a Credit Agreement with Rabo under which they have provided a $70,000,000 revolving working capital line of credit for the
Company.
Silver Nip Merger Agreement
On December 2, 2014, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with 734 Sub, LLC, a wholly owned
subsidiary of the Company (“Merger Sub”), 734 Citrus Holdings, LLC (“Silver Nip Citrus”) and, solely with respect to certain sections
thereof, the equity holders of Silver Nip Citrus. The Merger Agreement provides that, upon the terms and subject to the conditions set forth
therein, Merger Sub will merge with and into Silver Nip Citrus (the “Merger”), with Silver Nip Citrus surviving the Merger as a wholly
owned subsidiary of the Company. Subject to the terms and conditions set forth in the Merger Agreement, the Company will issue shares of
the Company’s common stock to the equity holders of Silver Nip Citrus as follows:
at the effective time of the Merger, up to 1,463,544 shares of Common Stock, subject to certain adjustments set forth in the Merger
Agreement for Silver Nip Citrus’s net indebtedness at the closing of the Merger, amounts related to certain groves specified in the
Merger Agreement, certain Silver Nip Citrus transaction expenses and the trading price of the Common Stock; and
thirty (30) days after the end of Silver Nip Citrus’s 2014-2015 citrus harvest season, an additional amount of shares of Common
Stock, with the number of shares issued to be based on the net proceeds received by the Company from the sale of citrus fruit
harvested on certain Silver Nip Citrus groves after the closing of the Merger, subject to certain adjustments set forth in the Merger
Agreement for the cost to harvest the citrus fruit and the trading price of the Common Stock.
Completion of the Merger is conditioned, among other things, on: (1) approval of the Stock Issuance by a majority of the holders of the
Company’s common stock voting at a special meeting or acting by written consent to approve the Stock Issuance and, if such approval is
obtained through action by written consent, the expiration of a twenty (20)-day waiting period after the date an information statement of the
Company prepared in accordance with Regulation 14C of the Exchange Act and such information statement, is delivered to the Company’s
shareholders; (2) receipt of a final appraisal of the Silver Nip Citrus groves; (3) receipt of certain third-party consents; (4) completion of an
audit of Silver Nip Citrus’s 2014 consolidated financials and receipt of an unqualified audit opinion; (5) material compliance by the other party
with all of its obligations under the Merger Agreement; and (6) subject to certain exceptions, the accuracy of the representations and warranties
of the other party subject to a material adverse effect standard (as defined in the Merger Agreement).
734 Investors, LLC (“734 Investors”), the Company’s majority shareholder, will seek the consent of a majority of its disinterested members to
direct 734 Investors to approve the Stock Issuance by a written consent of its shares of Common Stock.
Water Storage Contract Approval
In December 2012, the South Florida Water Management District (“SFWMD”) issued a solicitation request for projects to be considered for
the Northern Everglades Payment for Environmental Services Program. In March 2013, the Company submitted its response proposing a
dispersed water management project on its ranch land.
On December 11, 2014, the SFWMD approved a contract, based on the submitted response, with the Company. The contract term is eleven
years and allows up to one year for implementation (design, permitting, construction and construction completion certification) and ten years
of operation whereby the Company will provide water retention services. Payment for these services includes an amount not to exceed
$4,000,000 of reimbursement for implementation. In addition it provides for an annual fixed payment of $12,000,000 for operations and
maintenance costs as long as the project is in compliance with the contract and subject to annual SFWMD Governing Board (“Board”)
approval of funding. The contract specifies that the Board has to approve the payments annually and there can be no assurance that it will
approve the annual fixed payments.
68
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, 2014, 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 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
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, 2014. In making
this assessment, management used the criteria described in Internal Control — Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”).
Based on our assessment and those criteria, management concluded that our internal control over financial reporting was effective as of
September 30, 2014. Management reviewed the results of their assessment with our Audit Committee. The effectiveness of our internal
control over financial reporting as of September 30, 2014 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.
Water Storage Contract Approval
In December 2012, the South Florida Water Management District (“SFWMD”) issued a solicitation request for projects to be considered for
the Northern Everglades Payment for Environmental Services Program. In March 2013, the Company submitted its response proposing a
dispersed water management project on its ranch land.
On December 11, 2014, the SFWMD approved a contract, based on the submitted response, with the Company. The contract term is eleven
years and allows up to one year for implementation (design, permitting, construction and construction completion certification) and ten years
of operation whereby the Company will provide water retention services. Payment for these services includes an amount not to exceed
$4,000,000 of reimbursement for implementation. In addition it provides for an annual fixed payment of $12,000,000 for operations and
maintenance costs as long as the project is in compliance with the contract and subject to annual SFWMD Governing Board (“Board”)
approval of funding. The contract specifies that the Board has to approve the payments annually and there can be no assurance that it will
approve the annual fixed payments.
The foregoing description of the contract does not purport to be complete and is qualified in its entirety by reference to the contract, a copy of
which will be filed in the Company’s next periodic report covering the period the contract was entered into.
69
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 and 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 Accountant 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.
70
Item 15. Exhibits, 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
71
Exhibit
Number
Exhibit Index
2.1
*** Asset Purchase Agreement, dated as of December 1, 2014, by and among Alico, Inc., Orange-Co, LP, and, solely with
respect to certain sections thereof, Orange-Co, LLC and Tamiami Citrus, LLC. (Incorporated by reference to Exhibit 2.1 of
Alico’s filing on Form 8-K dated December 5, 2014)
2.2
*** Agreement and Plan of Merger, dated as of December 2, 2014, by and among Alico, Inc., 734 Sub, LLC, 734 Citrus
Holdings, LLC, and, solely with respect to certain sections thereof, 734 Agriculture, LLC, Rio Verde Ventures, LLC and
Clayton G. Wilson. (Incorporated by reference to Exhibit 2.2 of Alico’s filing on Form 8-K dated December 5, 2014)
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
10
10.1
10.2
10.3
10.4
10.5
10.6
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)
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)
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)
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)
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)
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)
72
10.9
10.10
10.11
10.12
Agricultural Lease Agreement dated May 19, 2014 between Alico, Inc. and United States Sugar Corporation.
(Incorporated by reference to Exhibit 10.1 of the Company’s quarterly report on Form 10-Q filed with the Commission on
August 11, 2014)
Purchase and Sale Agreement dated August 7, 2014 between Alico, Inc. and Terra Land Company.
Fifth Amendment to Credit Agreement with Rabo Agrifinance, Inc. dated April 28, 2014
Sixth Amendment to Credit Agreement with Rabo Agrifinance, Inc. dated July 1, 2014
10.13
*** First Amended and Restated Credit Agreement, dated as of December 1, 2014, by and among Alico, Inc., Alico Land
Development, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC, Metropolitan Life Insurance
Company, and New England Life Insurance Company. (Incorporated by reference to Exhibit 10.1 of Alico’s filing on Form
8-K dated December 5, 2014)
10.14
*** Credit Agreement, by and between Alico, Inc., Alico-Agri, Ltd., Alico Plant World, L.L.C., Alico Fruit Company, LLC,
Alico Land Development, Inc., and Alico Citrus Nursery, LLC, as Borrowers and Rabo Agrifinance, Inc., as Lender.
(Incorporated by reference to Exhibit 10.2 of Alico’s filing on Form 8-K dated December 5, 2014)
14.1
14.2
21
31.1
31.2
32.1
32.2
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
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Rule 13a-14(a)
certification
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Rule 13a-14(a)
certification
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
101
101.INS
** XBRL Instance Document
101.SCH ** XBRL Taxonomy Extension Schema Document
101.CAL ** XBRL Taxonomy Calculation Linkbase Document
101.DEF
** XBRL Taxonomy Definition Linkbase Document
101.LAB
XBRL Taxonomy Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
* Denotes a management contract or compensatory plan, contract or arrangement.
** In accordance with Rule 406T of Regulation S-T, these XBRL (eXtensible Business Reporting Language) documents are furnished and not
filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the
Securities Exchange Act of 1934 and otherwise are not subject to liability under these sections.
*** Certain schedules and exhibits have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The Company will
furnish supplemental copies of any such schedules or exhibits to the SEC upon request.
73
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.
December 12, 2014
ALICO, INC. (Registrant)
By:
/s/ Clayton G. Wilson
Clayton G. Wilson
President and 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 12, 2014
Director and Chief Executive Officer
December 12, 2014
Chief Financial Officer and Senior Vice President
December 12, 2014
Chairman of the Board, Director
December 12, 2014
Director
December 12, 2014
Director
December 12, 2014
Director
December 12, 2014
Director
December 12, 2014
Director
December 12, 2014
Director
74
:
:
:
:
:
:
:
:
:
/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 10.10
PURCHASE AND SALE AGREEMENT
By and Between
ALICO, INC.
A FLORIDA CORPORATION
(“Seller”)
and
TERRA LAND COMPANY
AN ILLINOIS CORPORATION, OR ITS DESIGNEE
(“Buyer”)
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (“Agreement”) is made and entered into as of the Effective Date by and
between Seller and Buyer. The terms of this Agreement and the Escrow Agent's instructions are as follows:
ARTICLE 1
CERTAIN DEFINITIONS AND FUNDAMENTAL PROVISIONS
Set forth below are certain definitions and fundamental provisions for the purposes of this Agreement.
1.1. “Adjusted Purchase Price” means the Base Purchase Price minus (i) the
Railroad Tract Valuation minus (ii) the Railroad Tract Impaired Acreage Valuation
plus or minus, as appropriate, (iii) the Variance Valuation.
1.2. “Affiliate” means, with respect to a person or entity, all persons or
entities that, directly or indirectly, control, are controlled by or are under common
control with such person or entity, or, with respect to a person or entity, all persons
or entities that, directly or indirectly, own, are owned by or are under common
ownership with such person or entity.
1.3. “Agreement” means this Purchase and Sale Agreement.
1.4. “Authorities” means any governmental or quasi-governmental body or
agency having jurisdiction over the Property and/or Seller, including, without
limitation, the State, any city in which all or a portion of the Property is situated and
the County, and the agencies, authorities and districts of the foregoing.
1.5. “Appurtenances” means all rights, title, interest and privileges of Seller
in and to the Land, all rights, title, interest and privileges of Seller in and to any and
all streets, roads, rights-of-way, utilities, easements, canals and waterways adjacent,
contiguous or beneficial to the Land, all other appurtenances to the Land, any other
right, title, interest, estate or benefit of the Seller in or to the Land and all sand,
rock, gravel, soil, air, surface, subsurface, drainage, irrigation, water or riparian
rights appurtenant and incidental to the Land, including, but not limited to, all
2
well permits, consumptive use and surface water management permits, approvals,
licenses, consents, vested rights, exemptions, the right to explore for and extract
gravel and soil and all benefits appurtenant to or used in connection with the
beneficial use and enjoyment of the Land; provided however Seller shall reserve
ownership of all oil and gas rights below the surface of the Land. A Surface Use
Agreement (as hereinafter defined) shall be used to provide for oil and gas testing,
exploration, development, and operational access to the surface of the Land. Seller
shall not execute the Surface Use Agreement without the Buyer’s prior written
consent, which consent will not be unreasonably withheld, conditioned or delayed.
Seller shall deliver to Buyer at least twenty (20) days advance written notice of its
intent to access the Land and its intent to execute a Surface Use Agreement.
1.6. “Base Purchase Price” means Ninety-One Million Four-Hundred
Thirty-Six Thousand and NO/100 Dollars ($91,436,000).
1.7. “Buyer's Address” means the following:
with a copy to:
2004 Fox Drive, Suite L
Champaign, IL 61820
Attn: Legal Counsel
Telephone No.: (217) 352-6000
Larry B. Alexander, Esq.
Jones, Foster, Johnston & Stubbs, P.A.
Flagler Center Tower, Suite 1100
505 South Flagler Drive
West Palm Beach, Florida 33401
Facsimile No.: (561) 650-5300
Telephone No.: (561) 659-3000
E-Mail: lalexander@jonesfoster.com
1.8. “Closing” means the closing of the purchase and sale of the Property.
1.9. “Closing Date” means fifteen (15) days after the expiration of the
Inspection Period, as hereinafter defined.
3
1.10. “County” means Hendry County, Florida.
1.11. “Deposit” means Two Million Dollars ($2,000,000.00) delivered to
the Escrow Agent pursuant to the terms of this Agreement.
1.12. “Effective Date” means the date that both Seller and Buyer have
executed and delivered a copy of this Agreement to each other, whether by
facsimile or other method of delivery.
1.13. “Escrow Agent” means Jones, Foster, Johnston & Stubbs, P.A., as
agents for Chicago Title Insurance Company whose address is:
Flagler Center Tower, Suite 1100
505 South Flagler Drive
West Palm Beach, Florida 33401
Attn: Larry B. Alexander, Esq.
Facsimile No.: (561) 650-5300
Telephone No.: (561) 659-3000
E-Mail: lalexander@jonesfoster.com
1.14. “Excluded Crops” means (a) growing crops on the Land and (b) sugar
cane stubble located on the Land.
1.15. “Farmable Acres” means the planted or plantable acres included as
part of the Land.
1.16. “Governmental Regulations” means any laws, ordinances, rules,
requirements, resolutions, policy statements and regulations (including, without
limitation, those relating to land use, subdivision, zoning, environmental, toxic or
hazardous waste, occupational health and safety, water, earthquake hazard
reduction, and building and fire codes) of the Authorities bearing on the
construction, alteration, rehabilitation, maintenance, use, operation or sale of the
Property.
1.17. “Improvements” means all buildings, improvements and fixtures
located on or affixed to the Land, including all buildings, structures and
improvements of every kind and description erected or placed on the Land.
4
1.18. “Inspection Period” means the period commencing on the date of the
delivery of Exhibit A-1, Exhibit A-2 and Exhibit A-3 of this Agreement and
expiring at 5:00 p.m. Eastern Standard Time on the later of (a) 60th day thereafter,
or (b) the 30th day after Buyer’s receipt of (i) the Title Commitment (as hereinafter
defined) and legible copies of the exceptions and (ii) the Surveys (as defined in
Section 4.7 of this Agreement), but in no event will the expiration of the Inspection
Period exceed seventy five (75) days after the Effective Date.
1.19. “Intangible Property” means all of the right, title and interest of Seller
in and to all intangible personal property used in the operation of the Property or
maintenance of the Property, if any, including, without limitation, (a) to the extent
assignable, all warranties or guarantees from any contractors, subcontractors,
manufacturers, suppliers or materialmen pertaining to the Property and/or any
construction, repairs or alteration of the Property (all such items in this clause (a)
being collectively called the “Warranties and Guaranties”), (b) all licenses, permits,
development
rights, certificates of occupancy, authorizations, approvals,
dedications, subdivision maps and entitlements issued, approved or granted by
Authorities or otherwise in connection with the Property relating to the operation,
occupancy and use of the Property (all such items in this clause (b) being called the
“ Licenses and Permits”), specifically including all licenses and permits required to
be issued by any Authorities, (c) all goodwill generated by the Property, (d) all
Seller’s or any of its Affiliate’s stock and/or membership and/or voting rights in
any special district, any special drainage or improvement district or company which
provides any services or benefits to the Property, (e) all other rights, allocations,
crop acreage base and production rights resulting from or determined in accordance
with any state or federal agricultural program, and (f) all products and proceeds of
the foregoing.
1.20. “Irrigation and Drainage Easements” means irrigation and drainage
easement agreements to be negotiated between Seller and Buyer during the
Inspection Period to provide for irrigation and drainage necessary for the Water
Management Agreement and access to allow the applicable party to maintain and
repair the irrigation and
5
drainage facilities and system described in the Water Management Agreement.
1.21. “Land” means that certain parcel of land located in Hendry County,
Florida containing approximately 30,959 gross acres (the “Gross Acres”), which
can be further defined as the combination of 19,540 Farmable Acres (the “Gross
Farmable Acres”) and 11,419 Support Acres (the “Gross Support Acres”) and more
particularly described in Exhibit “A” which shall be provided by Seller to Buyer
subsequent to the execution of this Agreement but before the Inspection Period
begins, excluding the Excluded Crops; provided however the parties agree that the
Seller shall retain (i) that portion of the real estate described on Exhibit “A-RR”
relating to the Railroad Tract that is included in the foregoing gross acreage
calculations and (ii) ownership of all oil and gas located on and below the surface of
the Land. The Land is composed of three separate tracts, the Hillgrade Tract as
described on Schedule A-1 (the “Hillgrade Tract”), the Collins Slough Tract as
described on Schedule A-2 (the “Collins Slough Tract”), and the 2x6 Tract as
described on Schedule A-3 (the “2x6 Tract”).
1.22. “Lease” means that certain Lease Agreement between Seller, as
Tenant, and Buyer, as Landlord, in the form attached hereto as Exhibit “B”.
1.23. “Net Farmable Acres” means the Gross Farmable Acres minus any
Farmable Acres included in the Railroad Tract.
1.24. “Net Support Acres” means the Gross Support Acres minus any
Support Acres included in the Railroad Tract.
1.25. “Permitted Encumbrances” means the items described in Section
6.1.2, the Sublease, Real property taxes for the current year which are not yet due
and payable, and Rules, regulations and future assessments, if any, by South Florida
Water Management District, the Lease, the Water Management Agreement, the
reservation of oil and gas rights by the Seller, the Irrigation and Drainage
Easements, the Reciprocal Access Easement, the RR Easements, and other matters
that are deemed to be
6
included as Permitted Encumbrances pursuant to Section 4.8 hereof.
1.26. “Personal Property” means all fixtures attached to the Land and the
improvements, including but not limited to roads, wells, casings, pumps,
transformers, power lines, lift stations, power units, motors, water control
structures, fuel tanks, road material such as gravel, shell rock, etc. and all personal
property used in connection with the Land (other than rolling stock and farming
equipment), irrigation equipment and systems, drainage equipment and systems
located on the Land and/or used for the benefit of the Land and owned by Seller.
Seller shall prepare a list of the Personal Property and deliver it to Buyer for its
approval within fifteen (15) days after the Effective Date, which list (“Personal
Property List”) shall be modified at Buyer’s reasonable request to include
additional items which are used on or in connection with the Land.
1.27. “Property” means, collectively, all of Seller’s right, title and interest in
and to the Land, the Appurtenances, the Improvements, the Personal Property and
the Intangible Property.
1.28. “Official Records” means the Official Records of Hendry County,
Florida.
1.29. “Railroad Tract Impaired Acreage Valuation” means the adjustment to
the Base Purchase Price as outlined in Section 9.3 of this Agreement.
1.30. “Railroad Tract” means that land described on Exhibit A-RR
consisting of approximately 200 acres which will be retained by Seller subsequent
to Closing for the potential construction of a railroad line.
1.31. “Railroad Tract Valuation” means the adjustment to the Base Purchase
Price as outlined in Section 9.3 of this Agreement.
1.32. “Reciprocal Access Easement” means a reciprocal easement
agreement (or agreements) to be negotiated between the Buyer and Seller during
the Inspection Period to provide that the Buyer shall be granted a non-exclusive
ingress and egress easement over and upon a certain road located on real property
retained by the
7
Seller, and that the Seller shall have be granted a non-exclusive ingress and egress
easement over and upon a certain road located on the Land. Said roads are further
depicted on Exhibit “C” which shall be provided by Seller to Buyer within fifteen
(15) days after the Effective Date of this Agreement. The Reciprocal Access
Easement shall further provide that said easements shall be perpetual (unless
otherwise agreed by the Buyer and Seller) and shall constitute covenants running
with the land. Furthermore, the Reciprocal Access Easement shall provide for
mutually acceptable maintenance of such easement areas and other commercially
reasonable and mutually acceptable terms.
1.33. “Rental Account Escrow Agreement” means an agreement to be
executed by Buyer, as Landlord and Seller, as Tenant prior to the expiration of the
Inspection Period which shall provide for the payment of rent from United States
Sugar Corporation to a rental escrow agent upon Seller’s uncured default, as
Tenant, in the Master Lease.
1.34. “Reports” means all structural reviews, architectural drawings and
engineering, soils, seismic, environmental, geologic, water, drainage, and
architectural reports, tests, audits and studies pertaining to the Property which are
within the possession of, under the control of, or reasonably available to Seller.
1.35. “Seller's Address” means the following:
10070 Daniels Interstate Court
Fort Myers, FL 33913
Attn: Clayton G. Wilson, CEO
Facsimile No.: _________
Telephone No.: 239-226-2001
With a copy to:
David A. Miller, Esquire
Peterson & Myers, P.A.
225 East Lemon Street, Suite 300
Lakeland, FL 33801-4627
Facsimile No.: (863) 688-8099
Telephone No.: 863-683-6511
E-Mail: dmiller@petersonmyers.com
8
1.36. “State” means the State of Florida.
1.37. “Subordination and Consent Agreement” means an agreement to be
executed on or before the Closing Date by United States Sugar Corporation, as
Subtenant, Seller, as Tenant and Buyer, as Landlord, subordinating the Sublease to
the Lease in the form to be agreed upon by the parties prior to the expiration of the
Inspection Period.
1.38. “Sublease” means that certain lease between Seller, as Landlord, and
United States Sugar Corporation, as Tenant, encumbering all or part of the Land,
which lease will become a sublease under the Lease, pursuant to the Subordination
and Consent Agreement.
1.39. “Support Acres” means the support or non-productive acres included
as part of the Land.
1.40. “Surface Use Agreement” means an agreement executed by Seller and
any third party exploration or drilling company who intends to access the Land for
the exploration of oil and/or gas, prior to such access, which agreement shall
provide for seismic surveys, soil gas surveys and tellurics surveys, use of surface
water for test drilling, the location of such access, exploration and/or drilling,
operation and production processes for such access and/or drilling, operation and
production, including remediation, environmental protection and compensation to
Buyer and/or tenants for any impairment to its agricultural operations on the Land.
1.41. “Survival Period” means the period commencing on the Closing Date
and ending 5:00 p.m. Eastern Standard Time eighteen (18) months after the Closing
Date.
1.42. “Title Agent” means Jones, Foster, Johnston & Stubbs, P.A., as agents
for Chicago Title Insurance Company.
1.43. “Title Company” means Chicago Title Insurance Company.
9
1.44. “Variance Valuation” means the adjustment, either positive or
negative, to the Base Purchase Price as outlined in Section 3.2 of this Agreement.
1.45. “Water Management Agreement” means an agreement to be
negotiated between Seller and Buyer during the Inspection Period to provide for
the sharing of irrigation and/or drainage water and facilities serving jointly the
Property and the currently existing citrus grove located on the 2x6 Tract, with
Seller having priority to use water for purposes of irrigating and protecting citrus
crops on the currently existing citrus grove located on the 2x6 Tract during any
freezes that could be harmful to fruit crops located on the currently existing citrus
grove located on the 2x6 Tract.
In addition to those terms defined above, capitalized terms used in this Agreement shall have the meanings
following the use of such terms.
ARTICLE 2
PURCHASE AND SALE
Seller agrees to sell to Buyer, and Buyer agrees to purchase from Seller, the Property upon the terms and
conditions set forth in this Agreement.
ARTICLE 3
PURCHASE PRICE
3.1. Deposit. Within five (5) business days after the Effective Date, Buyer
shall deposit with Escrow Agent the Deposit, which shall be held in a non-interest
bearing account.
If this Agreement is terminated by either Seller or Buyer as provided in this Agreement, Escrow Agent shall
deliver the portion of the Deposit then held by Escrow Agent to the party entitled thereto pursuant to the applicable terms
of this Agreement.
If the transaction contemplated by this Agreement is consummated in accordance with the terms of this
Agreement, the Deposit shall be credited toward payment of the Purchase Price at Closing.
3.2. Variance in Acreage. In the event that either the Net Farmable Acres or
Net Support Acres of the Land as provided in Paragraphs 1.22 and 1.23 hereof are
more or
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less than the calculated amounts by one percent (1%) or greater, there will be an
adjustment to the Base Purchase Price by the amount of the Variance Valuation.
The Variance Valuation shall be calculated by adding (i) the product of any
variance of Net Farmable Acres by $4,000 and (ii) the product of any variance of
Net Support Acres by $1,163. There will be no adjustment to the Base Purchase
Price if the actual Net Farmable Acres and the actual Net Support Acres are less
than the one percent (1%) variance.
3.3. Balance of Adjusted Purchase Price. On or before the Closing Date,
Escrow Agent shall deliver the Deposit to the Title Agent and Buyer shall deliver to
Title Agent cash or a wire transfer of funds in the amount required to complete the
purchase (the “Cash Payment”). If the transaction contemplated by this Agreement
is consummated in accordance with the terms of this Agreement, the Deposit and
the Cash Payment shall be applied toward payment of the Adjusted Purchase Price
at the Closing.
3.4. Regulations§1.1031(k)-1(g)(6) Restrictions. Anything to the
contrary in Sections 3.1 or 3.3 or any other provision of the Agreement to the
contrary notwithstanding, Seller will not be entitled to receive any portion of the
Deposit held by the Escrow Agent or any interest thereon and will not be entitled to
receive, pledge, borrow, or otherwise obtain the benefits of money or other
property prior to the occurrence of those events specified in Regulations
§1.1031(k)-1(g)(6), except for payments authorized under Regulations §1.1031(k)-
1(g)(7)(ii). The provisions of this Section 3.4 will expire automatically, without
any further action by anyone, and will no longer be a term or condition of this
Agreement upon delivery by Seller to Buyer and Escrow Agent of a written notice
of assignment of Seller’s rights under this Agreement to a Qualified Intermediary.
Prorations and adjustments relating to the Property shall be computed in accordance with Paragraph 5.5 of this
Agreement. If such computation of apportionments shows that a net amount is owed by Buyer to Seller, such amount
shall be paid by Buyer to Seller on the Closing Date along with and in the same manner as the Cash Payment. If the
computation of apportionments shows that a net amount is owed by Seller to Buyer, such amount shall be credited against
the Purchase Price. The foregoing to the contrary notwithstanding, the Cash Payment and any other funds due to Seller
will be paid to the Qualified Intermediary instead of the Seller if the Seller
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has assigned its rights under this Agreement to a Qualified Intermediary in accordance with Section 14.18.
ARTICLE 4
ENTRY, INSPECTIONS AND EXAMINATION
4.1. Inspections, Tests and Studies. Seller shall permit Buyer and its
authorized agents and representatives to enter upon the Property at all reasonable
times during normal business hours to inspect and conduct reasonably necessary
tests and studies of the Property (“Inspections”). Buyer shall deliver advance
written notice to Seller (such written notice not to be delivered less than twenty
hours in advance) of its intention or the intention of its agents or representatives to
enter upon the Property. Buyer shall bear the cost of all such inspections, tests and
studies. In conducting any inspections, tests or studies, Buyer and its authorized
agents and representatives shall (a) not unreasonably interfere with the operation,
use and maintenance of the Property, (b) not damage any part of the Property or
any personal property owned or held by any Tenant or any third party, (c) not
injure or otherwise cause bodily harm to Seller or any of its respective agents,
contractors and employees or any Tenant or other third party, (d) promptly pay
when due the cost of all inspections, tests or studies, (e) not permit any liens to
attach to the Property by reason of the exercise of their rights under this Paragraph
and shall immediately pay and discharge any such liens that do attach to the
Property, and (f) fully restore the Property to the condition in which the same was
found before any such
tests or studies were undertaken.
Notwithstanding anything herein to the contrary, Buyer will not conduct any
invasive testing without first obtaining Seller’s prior written approval, which
approval will not be unreasonably withheld, conditioned or delayed.
inspections,
4.2. Buyer's Indemnity. Buyer hereby agrees to indemnify, defend, protect
and hold Seller and its agents, employees and contractors harmless from and against
any and all liens, claims, losses, liabilities, damages, costs, expenses, causes of action
(including reasonable attorney’s fees and court costs) arising solely out of Buyer’s,
or its agent’s, acts or omissions during Buyer's inspections, tests and studies, and not
the result of any existing condition or
12
defect. All of Buyer's Inspections shall be performed at Buyer's sole cost and
expense. Before any entry by Buyer or its agents, employees or contractors upon the
Land, Buyer shall obtain a policy of general liability insurance coverage of at least
One Million and No/100ths Dollars ($1,000,000.00) per person and per occurrence,
single limit coverage, listing Seller as an additional insured thereunder, which
insurance coverage shall remain in effect until Closing or until any earlier
termination of this Agreement, and shall furnish to Seller a certificate of insurance
confirming such coverage. Buyer’s obligations hereunder will survive the
termination of this Agreement.
4.3. Review of Due Diligence Materials. On or prior to the date that is ten
(10) days after the Effective Date, Seller shall deliver to Buyer for Buyer's review
and approval the documents and materials (the “Due Diligence Materials”) listed on
attached Exhibit “D” and relating to the Property that are in Seller’s possession,
custody or control. Seller shall likewise deliver updated Due Diligence Materials to
Buyer as to any information thereon which Seller becomes aware has changed.
Notwithstanding anything herein to the contrary, Seller disclaims any warranty or
representation concerning the accuracy of the Due Diligence Materials and the
information contained in the Due Diligence Materials and Buyer acknowledges the
Due Diligence Materials are being delivered by Seller to Buyer as a convenience
only and that any reliance on or use of such Due Diligence Materials by Buyer shall
be at the sole risk of the Buyer; provided however that Seller is obligated to advise
Buyer of any inaccuracies in the Due Diligence Materials known to it, and any
inaccuracies that it becomes aware of after the delivery of the Due Diligence
Materials.
4.4. No Negation of Representations and Warranties. The exercise or
undertaking by Buyer of an inspection, examination, test or study or the review by
Buyer of the Due Diligence Materials or any other act by Buyer shall not negate any
representation, warranty or covenant, of Seller or modify any of Buyer's rights or
Seller's obligations in the event of any breach by Seller of its representations,
warranties or covenants in this Agreement.
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4.5. Termination During Inspection Period. Buyer shall have the right, in its
sole discretion, on or before the expiration of the Inspection Period to notify Seller
in writing (the “Termination Notice”) that it has elected to terminate this
Agreement. Upon receipt by the Escrow Agent of a copy of the Termination
Notice, the Escrow Agent shall deliver the Deposit to Buyer, and except for any
obligations hereunder which survive the termination of this Agreement, all rights
and obligations of the parties under this Agreement shall terminate. Buyer's failure
to send the Termination Notice within the time required herein, shall constitute its
waiver of its right to terminate this Agreement as provided in this Paragraph 4.5.
4.6. As Is Sale. Except for warranties set forth in instruments delivered at
Closing, or as provided in this Agreement to the contrary, Buyer agrees that it will
accept the physical condition of the Property in its AS IS condition, as of the last
day of the Inspection Period; provided however, Seller shall cause the Personal
Property to be in good working condition on the Closing Date. Seller expressly
discloses and Buyer acknowledges that the Real Property has been used historically
for agricultural purposes, and is subject to environmental issues related to
agricultural uses, including without limitation agricultural chemicals and other
hazardous substances commonly used in agricultural operations. Seller shall be
obligated to remediate any of the aforementioned environmental issues up to the
maximum cost to Seller of $250,000 and Seller will be obligated to indemnify
Buyer for such environmental issues, up to the maximum amount of $250,000.
the Florida minimum
4.7. Survey. Within fifteen (15) days after the Effective Date, Buyer shall
advise Seller in writing as to whether it requires either new ALTA surveys or new
technical requirements
boundary surveys meeting
(“Surveys”) for the Land and if so, Buyer shall obtain the Surveys for the Land to
be prepared and delivered to Buyer, which shall: (i) show legal descriptions for the
Land; (ii) show the impact of the Permitted Encumbrances on the Land; and (iii)
certify the Surveys to Buyer and Seller. Buyer and Seller shall jointly direct the
surveyor providing the Surveys to bill each one-half of the cost of the Surveys, and
unless paid previously, Seller and Buyer shall each pay one-half of the cost of the
surveys at
14
Closing in accordance with the foregoing cost-share allocation. If Buyer sends the
Termination Notice, Buyer and Seller shall each pay one-half of the cost of the
Surveys to the surveyor in accordance with the foregoing cost-share allocation.
Notwithstanding the foregoing, (x) Seller shall obtain within fifty (50) days after
the Effective Date and pay all of the costs of the survey required to determine the
Railroad Tract and (y) with respect to surveys of the Collins Slough Tract, if the
Title Company requires a survey to delete the survey exception in order to issue the
Title Policy without a survey exception, the parties shall split the costs of the survey
for the Collins Slough Tract otherwise the costs of such survey shall be paid by
Buyer.
4.8. Title Insurance. On or prior to the 30th day after the Effective Date,
Buyer shall have received a title insurance commitment issued by the Title
Company with respect to the Property agreeing to issue to the Buyer upon the
recording of the Deed an owner’s marketability title insurance policy in the amount
of the Purchase Price and a copy of all title exceptions listed therein (the “Title
Commitment”). As of the Closing, the Title Company shall have issued or shall
have committed to issue to Buyer, upon payment of the premiums required
therefor, A.L.T.A. Owner's Policy of Title Insurance showing fee title to Property
vested in Buyer, subject only to the Permitted Encumbrances (the “Title Policy”).
The Title Policy shall be issued with liability in an amount equal to the Purchase
Price of the Property. Buyer shall give Seller written notice (the "Title Notice") on
or before the date that is thirty (30) days after Buyer receives the Title
Commitments that the condition of title as set forth in the Title Commitments and
the Surveys is or is not satisfactory in Buyer's sole and absolute discretion. If Buyer
fails to deliver to Seller the Title Notice within the time period set forth above,
Buyer shall be deemed to be satisfied with the status of title and survey matters and
to have waived the right to object to the same and the exceptions shown on the Title
Commitment shall be deemed to be included as Permitted Encumbrances.
Notwithstanding anything herein to the contrary, Seller shall use commercially
reasonable efforts and take such actions as are reasonably required to cure prior to
the Closing Date the objections to title and/or survey raised by Buyer in the Title
Notice (the “Title Defects”), subject however to the Seller not being required
expend any
15
monies or institute any legal or administrative proceedings to cure any title
objections. In addition, at the Closing, Seller shall be obligated to satisfy or transfer
to bond, from Seller's proceeds, any monetary encumbrances or liens affecting the
Property created or assumed by Seller or arising from Seller's acts or omissions, to
the extent of the Purchase Price, and to terminate any notices of commencement. If
all of the Title Defects shall not have been cured by the Closing Date, then on or
before the Closing Date Buyer shall have the right to either (a) agree to take title to
the Property as is without any reduction in the Purchase Price, or (b) terminate this
Agreement by giving written notice thereof to Seller, with a copy to Escrow Agent,
in which event Escrow Agent may immediately, without further authorization or
direction, refund the Deposit to the Buyer, and Buyer and Seller shall be released
from all further duties or obligations to one another under this Agreement, except
for any obligations which are specified to survive any termination of this
Agreement.
ARTICLE 5
ESCROW
5.1. Indemnification and Non-Liability of Escrow Agent. Escrow Agent
agrees to hold the Deposit pursuant to the provisions of this Agreement for
application in accordance with the provisions hereof, upon the following terms:
5.1.1 Duties. Escrow Agent shall have no duties or responsibilities other than those
expressly set forth in this Agreement. Escrow Agent shall have no duty to enforce any obligation of any
person to make any payment or delivery or to enforce any obligation of any person to perform any other
act. Escrow Agent shall be under no liability to Seller or Buyer or to anyone else by reason of any failure
on the part of Seller or Buyer or any maker, guarantor, endorser or other signatory of any document or
any other person to perform such person's obligations under any such document. Except for amendments
to this Agreement and except for joint instructions given to Escrow Agent by Seller and Buyer relating to
the Deposit, Escrow Agent shall not be obligated to recognize any agreement between any or all of the
persons referred to herein, notwithstanding that references thereto may be made herein and whether or
not it has knowledge thereof Escrow Agent shall have no responsibility or liability for any loss of
principal and/or interest on any
16
investment of the Deposit, except as a result of Escrow Agent’s gross negligence or misconduct.
5.1.2 Right to Interplead. In its capacity as Escrow Agent, Escrow Agent shall not be
responsible for the genuineness or validity of any security, instrument, document or item deposited with
it and shall have no responsibility other than to faithfully follow the instructions contained herein, and it
is fully protected in acting in accordance with any written instrument given to it hereunder by Seller or
Buyer and believed by Escrow Agent to have been signed by the proper person. Escrow Agent may
assume that any person purporting to give any notice hereunder has been duly authorized to do so. The
Escrow Agent is acting as a stakeholder only with respect to the Deposit. In the event that for any reason
there is any dispute or uncertainty concerning any action to be taken hereunder, Escrow Agent shall have
the right to take no action until it shall have received instructions in writing concurred to by Seller and
Buyer or until directed by a final order of judgment of a court of competent jurisdiction, whereupon
Escrow Agent shall take such action in accordance with such instructions or such order, provided that
Escrow Agent shall have the right in the event of a dispute between Buyer and Seller to interplead the
Deposit into the Registry of the Circuit Court in and for the County.
5.1.3 Ministerial Duties. The duties of Escrow Agent are purely ministerial in nature.
Escrow Agent shall not be liable to Seller or Buyer or to anyone else for any, action taken or omitted by
it, or any action suffered by it to be taken or omitted, in good faith and in the exercise of reasonable
judgment, except for acts of willful misconduct or gross negligence. Escrow Agent may rely conclusively
and shall be protected in acting upon any order, notice, demand, certificate, opinion or advice of counsel
(including counsel chosen by Escrow Agent), statement, instrument, report or other paper or document
(not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth
and acceptability of any information therein contained) which is reasonably believed by Escrow Agent to
be genuine and to be signed or presented by the proper person or persons. Escrow Agent shall not be
bound by any notice or demand, or any waiver, modification, termination or rescission of this Agreement
or any of the terms hereof, unless evidenced by a final judgment or decree of a court of competent
jurisdiction, or a writing delivered to Escrow Agent signed by the proper party or parties and, if the
duties or rights of Escrow Agent are affected, unless it shall give its prior written consent thereto.
5.1.4 Assumptions. Escrow Agent shall have the right to assume in the absence of written
notice to the contrary from the proper person or persons that a fact or an event by reason of which an
action would or might be taken by Escrow Agent does not exist or has not occurred, without incurring
liability to Seller or Buyer or to anyone else for any action taken or omitted if acting in good faith, or any
action suffered by it to be taken or omitted if acting
17
in good faith and in the exercise of reasonable judgment in reliance upon such assumption.
5.1.5 Demand for Deposit. If for any reason the Closing does not occur and either Seller
or Buyer makes a written demand upon Escrow Agent for payment or refund, as the case may be, of the
Deposit or any portion thereof, Escrow Agent shall give written notice to the other party of such demand.
If Escrow Agent does not receive a written objection from the other party to the proposed payment or
refund, as the case may be, within five (5) Business Days after the giving of such notice, Escrow Agent is
hereby authorized to and shall make such payment or refund, as the case may be; provided, however, if
for any reason Escrow Agent in good faith shall elect not to make such payment, Escrow Agent shall
continue to hold such amount until otherwise directed by written instructions from the parties to this
Agreement or a final judgment of a court of competent jurisdiction.
5.1.6 Resignation. Escrow Agent may resign at any time as Escrow Agent hereunder upon
giving five (5) days prior written notice to that effect to each of the Seller and Buyer. In such event, the
successor Escrow Agent shall be a nationally recognized title insurance company selected by Buyer with
offices within the State of Florida. Such party that will no longer be serving as Escrow Agent shall
deliver, against receipt, to such successor Escrow Agent, the Deposit held by such party, to be held by
such successor Escrow Agent pursuant to the terms and provisions of this Agreement. If no such
successor has been designated on or before such party ceases to be Escrow Agent hereunder, whether by
resignation or otherwise, its obligations as Escrow Agent shall continue until such successor is appointed;
provided, however, its sole obligation thereafter shall be to safely keep all monies then held by it and to
deliver the same to the person, firm or corporation designated as its successor or until directed by a final
order or judgment of a court of competent jurisdiction, whereupon Escrow Agent shall make disposition
thereof in accordance with such order. If no successor Escrow Agent is designated and qualified within
five (5) days after its resignation is effective, such party who will no longer be serving as Escrow Agent
may apply to a court of competent jurisdiction for the appointment of a successor Escrow Agent. Any
successor Escrow Agent shall agree to be bound by the terms of this Agreement.
5.1.7 Waiver of Conflict. Seller acknowledges that Escrow Agent is Buyer’s counsel,
waives all conflicts that may arise from such relationship and agrees that Escrow Agent may represent
Buyer with regard to this Agreement and any litigation that may arise under it, so long as the Escrow
Agent interpleads the Deposit into the Registry of the Circuit Court in and for the County following a
dispute between the Seller and Buyer, prior to representing the Buyer of record in such litigation.
18
5.2. Closing Date. The Closing shall occur at the offices of Title Agent on
the Closing Date; provided, however, Seller, Buyer and Title Agent agree to
cooperate with Buyer’s request for an escrow or “mail away” closing.
5.3. Seller's Deliveries. Seller hereby covenants and agrees to deliver or
cause to be delivered to Escrow Agent on or before 10:00 a.m. Eastern Standard
Time on the Closing Date the following instruments and documents for the
Property:
5.3.1 Deed. A Special Warranty Deed (the “Deed”), duly executed and acknowledged in
recordable form by Seller, conveying the Land, Improvements and the Appurtenances to Buyer, subject
only to the Permitted Encumbrances, and reserving the oil and gas rights below the surface of the Land.
5.3.2 Assignment of Intangible Property. Two (2) counterpart originals of an assignment
of the Intangible Property (the “Intangible Assignment”), duly executed by Seller assigning to Buyer all
of Seller’s right, title and interest in and to such Intangible Property. The Intangible Assignment shall be
in the form of and upon the terms reasonably satisfactory to Buyer.
5.3.3 Non-Foreign Certification. A certification duly executed by Seller under penalty of
perjury in the form of, and upon the terms reasonably satisfactory to Buyer (“Non-Foreign Certificate”).
5.3.4 Proof of Authority. Such proof of Seller's authority and authorization to enter into
this Agreement and consummate the transactions contemplated hereby, and such proof of the power and
authority of the individual(s) executing and/or delivering any instruments, documents or certificates on
behalf of Seller to act for and bind Seller as may be reasonably required by the Title Company and/or
Buyer.
5.3.5 Title/Lien Affidavits. Any title, possession and lien affidavits or mechanic's lien
indemnifications as may be reasonably requested by the Title Company in order to issue the Title Policy
(as defined in Section 6.1.2) without the standard exceptions being included therein.
5.3.6 Certificate Confirming Representations and Warranties. A certificate duly executed
by Seller confirming all representations and warranties of Seller set forth in Article 7 are true and correct
as of the date hereof or indicating any changes thereto.
5.3.7 Closing Statement. Four (4) counterpart originals of the closing statement for the
Property duly executed by Seller.
19
5.3.8 Lease. Two counterpart originals of the Lease, duly executed by Seller, as tenant and
witnessed by two (2) witnesses.
5.3.9 Lease Payments. All payments due to Buyer, as landlord, which are payable upon
execution of the Lease.
5.3.10 Bill of Sale. A general warranty bill of sale for the Personal Property, duly
executed by Seller.
5.3.11 Water Management Agreement. Two counterpart originals of the Water
Management Agreement duly executed by Seller in recordable form and witnessed by two witnesses.
5.3.12 Irrigation and Drainage Easements. Irrigation and Drainage Easements (if
applicable) duly executed by Seller in recordable form and witnessed by two witnesses.
5.3.13 Subordination and Consent Agreement. Three counterpart originals of the
Subordination and Consent Agreement executed by United States Sugar Corporation as Subtenant, Seller
as Tenant and Buyer as Landlord.
5.3.14 RR Easements. The RR Easements (as defined in Section 9.3), duly executed and
acknowledged in recordable form by Seller, granting the easement rights specified in Section 9.3.
5.3.15 Reciprocal Access Easement. The Reciprocal Access Easement duly executed by
Seller in recordable form and witnessed by two witnesses.
5.4. Buyer's Deliveries. Buyer hereby covenants and agrees to deliver or
cause to be delivered to Escrow Agent on or before 10:00 a.m. Eastern Standard
Time on the Closing Date the following instruments and documents for the
Property:
5.4.1 Cash Payment. The Cash Payment.
5.4.2 Assignment of Intangible Property. Two (2) counterpart originals of the Intangible
Assignment, duly executed by Buyer.
5.4.3 Closing Statement. Four (4) counterpart originals of the closing statement for the
Property duly executed by Buyer.
5.4.4 Lease. Two (2) counterpart originals of the Lease duly executed by Buyer, as
landlord and witnessed by two (2) witnesses.
20
5.4.5 Subordination and Consent Agreement. Three (3) counterpart originals of the
Subordination and Consent Agreement executed by United States Sugar Corporation as Subtenant, Seller
as Tenant and Buyer as Landlord.
5 .4 .6 Water Management Agreement. Two counterpart originals of the Water
Management Agreement duly executed by Buyer in recordable form and witnessed by two witnesses.
5 .4 .7 Irrigation and Drainage Easements. Irrigation and Drainage Easements (if
applicable) duly executed by Buyer in recordable form and witnessed by two witnesses
5.4.8 RR Easements. The RR Easements duly executed and acknowledged in recordable
form by Buyer.
5.4.9 Reciprocal Access Easement. The Reciprocal Access Easement duly executed by
Buyer in recordable form and witnessed by two witnesses.
5.5. Prorations.
5.5.1 General. All items to be prorated shall be prorated as of 11:59 P.M. on the day
preceding the Closing (the “Apportionment Date”) and shall constitute adjustments to the Adjusted
Purchase Price to be paid by Buyer to Seller at Closing. For purposes of calculating prorations, Seller
shall be deemed to be entitled to the Property and, therefore, entitled to the income and responsibility for
the expenses for the Apportionment Date (not including the Excluded Crops) and Buyer shall be deemed
to be in title to the Property, and therefore entitled to the income and responsible for the expenses (not
including the Excluded Crops), for the entire day upon which the Closing occurs unless expressly
provided otherwise in this Agreement. All proration items pertaining to the month in which the Closing
occurs shall be prorated based upon the actual number of days in such month.
5.5.2 Real Estate Taxes and Assessments. Real estate and personal property ad valorem
taxes and all special assessments for the year of the Closing shall not be prorated, as Seller shall, during
the term of the Lease, remain responsible for the payment for all such taxes and special assessments
pursuant to the Lease. Seller shall be obligated to and shall discharge prior to Closing all past due ad
valorem property taxes, both real and personal, against the Property and relating to current or prior years,
and assessments for improvements.
21
5.5.3 Utilities. Utilities will not be prorated for the year of the Closing and Seller shall,
during the term of the Lease, remain responsible for payment of all utilities for the Property, pursuant to
the Lease.
5.5.4 Other Expenses. All other expenses not otherwise specified herein in connection
with the Property accruing and relating to the period through and including the Apportionment Date will
be the responsibility of and paid by Seller.
5.6. Disbursements and Other Actions by Escrow Agent. Upon the Closing,
Title Agent shall promptly undertake all of the following in the manner
hereinbelow indicated:
5.6.1 Funds. Disburse all funds deposited with Title Agent as follows:
5.6.1.1. Closing Costs. Pay all closing costs which are required to be paid (e.g., recording
costs, documentary transfer taxes, and premium for the Title Policy and related fees and costs, and any other
charges set forth on the Closing Statement to the appropriate parties listed thereon).
obligations under this agreement related to the Property, including mortgages and liens.
5.6.1.2. Seller’s Debts and Obligations. Pay all of Seller’s payables, debts and
5.6.1.3. To Seller. After deducting therefrom the amounts expended by Title Agent
which are chargeable to the account of Seller and deducting therefrom or adding thereto (as appropriate) the net
amount of the prorations pursuant to Paragraph 5.5 above, disburse the balance of the Cash Payment to Seller.
with separate instructions to be delivered to Title Agent by Buyer.
5.6.1.4. To Buyer. If applicable, disburse any remaining funds to Buyer in accordance
5.6.2 Recordation. The Title Agent shall record in the Official Records the Deed (with
documentary transfer tax), the Irrigation and Drainage Easements, the RR Easements, the Reciprocal
Access Easement, and any other documents which Seller and Buyer hereto may mutually direct to be
recorded in the Official Records and obtain conformed copies thereof for distribution to Buyer and
Seller.
5.7. Closing Costs. Seller and Buyer shall pay the costs and expenses
incurred in connection with this transaction as hereafter set forth. Seller and Buyer
each shall pay its own attorneys' fees incurred in connection with the transaction
contemplated by this Agreement. Seller
22
shall pay the documentary and other transfer taxes incurred in connection with the
Closing of this transaction, including documentary stamp taxes on the Deed. Seller
and Buyer shall each pay one-half of the cost of recording the Water Management
Agreement and Irrigation and Drainage Easements and one-half of the premium for
(a) the Title Commitment and Policy at the Butler Rate (the minimum amount
required to be paid for title insurance pursuant to Florida law), and (b) abstract fees.
The cost of the Surveys shall be paid in accordance with the provisions of Section
4.7. The costs of recording the Deed and all third-party due diligence costs incurred
by Buyer in connection with the transaction contemplated by this Agreement shall
be paid by Buyer.
5.8. Seller's Deliveries to Buyer Upon Closing. Seller shall deliver to Buyer,
on or prior to the Closing, the following:
5.8.1 Property. Possession of the Property, subject to the Lease.
5.8.2 Licenses and Permits. Originals of all Licenses and Permits or, to the extent an
original of a License or Permit is unavailable, a duplicate original thereof with a certificate executed by
Seller warranting the authenticity of such duplicate original.
5.8.3 Warranties and Guaranties. Originals of all Warranties and Guaranties, if any, or, to
the extent an original of a Warranty or Guaranty is unavailable, a duplicate original thereof with a
certificate executed by Seller warranting the authenticity of such duplicate original.
5.8.4 Reports. Originals of the Reports.
ARTICLE 6
CONDITIONS TO CLOSING
6.1. Conditions Precedent to Buyer's Obligations. The Closing and Buyer's
obligations with respect to the transactions contemplated by this Agreement are
subject to the satisfaction, not later than the Closing (unless otherwise provided), of
the following conditions:
6.1.1 Representations, Warranties and Covenants of Seller. Seller shall have duly
performed each and every covenant to be performed by Seller under this Agreement and Seller's
representations and warranties set forth
23
in this Agreement shall be true and correct and recertified as of the Closing in all material respects.
6.1.2 No Material Changes; Endorsements to Title Commitments. At the Closing, there
shall have been no material adverse changes in the physical or financial condition of the Property. Within
three (3) business days prior to Closing, the Title Agent shall deliver to Buyer endorsements to the Title
Commitment which update the effective date thereof. If such endorsements add any exceptions to
Schedule B-II of the Title Commitment, then Buyer may object in a writing delivered to Seller prior to
the Closing and such objection shall be treated as a Title Notice under Paragraph 6.1.2 hereof. At the
Closing, the title commitment shall be endorsed to delete (a) any and all requirements or preconditions to
the issuance of an owner’s marketability title insurance policy to the Buyer, (b) the "Gap Exception," (c)
all standard exceptions (including the survey exception), and (d) any notices of commencement which
are shown as Schedule B-II exceptions.
6.1.3 Moratorium. At the Closing, there shall be no reclassification, rezoning or other
statute, law, judicial or administrative decision, proceeding, ordinance or regulation (including
amendments and modifications of any of the foregoing) pending or proposed to be imposed by the
Authorities or any public or private utility having jurisdiction over the Property which would adversely
affect, in Buyer's reasonable judgment, the acquisition, use or sale of the Property.
6.1.4 Lease. Seller, as tenant executes and delivers the Lease to Buyer, as landlord at
Closing.
6.1.5 Water Management Agreement and Irrigation and Drainage Easements. The Water
Management Agreement and the Irrigation and Drainage Easements must be mutually agreed upon in
writing by Seller and Buyer prior to the expiration of the Inspection Period.
6.2. Conditions Precedent to Seller's Obligations. The Closing and Seller's
obligations with respect to the transactions contemplated by this Agreement are
subject to (a) Buyer having performed each and every covenant to be performed by
Buyer under this Agreement (b) Buyer's representations and warranties set forth in
this Agreement being true and correct as of the Closing in all material respects, (c)
Buyer, as landlord, executes and delivers the Lease to Seller, as tenant, at Closing,
and (d) the Water Management Agreement, the Irrigation and Drainage Easements,
the Reciprocal Access Easement, and the RR Easements must be mutually agreed
upon in writing by
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Seller and Buyer prior to the expiration of the Inspection Period.
6.3. Failure of Condition to Closing. Except as otherwise set forth herein, in
the event any of the conditions set forth in Paragraph 6.1 or Paragraph 6.2 are not
timely satisfied or waived, for a reason other than the default of Buyer or Seller
under this Agreement:
6.3.1 This Agreement and the rights and obligations of Buyer and Seller shall terminate,
except as otherwise provided herein; provided, however, no such termination shall occur until (a) Buyer
has had the opportunity to waive any condition for Buyer's benefit within two (2) business days after
receipt of written notice from Seller, and (b) Buyer does not elect to waive such condition; and
6.3.2 Escrow Agent and/or the Title Agent are hereby instructed to promptly return to
Seller and Buyer all funds (including the Deposit) and documents deposited by them, respectively, which
are held by Escrow Agent and/or the Title Agent on the date of said termination.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
In addition to any express agreements of Seller contained herein, the following constitute representations,
warranties and/or covenants of Seller to Buyer.
7.1. Seller's Authority.
7.1.1 Power. Seller has the legal power, right and authority to enter into this Agreement
and the instruments referenced herein, and to consummate the transactions contemplated hereby.
7.1.2 Requisite Action. All requisite action (corporate, trust, partnership or otherwise) has
been taken by Seller in connection with the entering into this Agreement, the instruments referenced
herein, and the consummation of the transactions contemplated hereby. No consent of any partner,
shareholder, creditor, investor, judicial or administrative body, Authority or other party is required.
7.1.3 Authority. The individuals executing this Agreement and the instruments referenced
herein on behalf of Seller have the legal power, right, and actual authority to bind Seller to the terms and
conditions hereof and thereof.
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7.1.4 Validity. This Agreement and all documents required hereby to be executed by
Seller are and shall be valid, legally binding obligations of and enforceable against Seller in accordance
with their terms.
7.1.5 No Conflict. Neither the execution and delivery of this Agreement and documents
referenced herein, nor the incurrence of the obligations set forth herein, nor the consummation of the
transactions herein contemplated, nor compliance with the terms of this Agreement and the documents
referenced herein conflict with or result in the material breach of any terms, conditions or provisions of,
or constitute a default under, any bond, note, or other evidence of indebtedness or any contract, indenture,
mortgage, deed of trust, loan, partnership agreement, lease or other agreements or instruments to which
Seller is a party or affecting the Property.
7.2. Legal Nature.
7.2.1 Legal Actions. There are no pending, or to Seller’s actual knowledge without
further inquiry threatened or contemplated, actions, suits, arbitrations, claims or proceedings, at law or in
equity, affecting the Property or in which Seller is, or to the best of Seller's knowledge will be, a party by
reason of Seller's ownership of the Property.
7.2.2 Bankruptcy. Seller neither contemplates nor has (i) made a general assignment for
the benefit of creditors; (ii) filed any involuntary petition in bankruptcy or suffered the filing of an
involuntary petition by Seller's creditors; (iii) suffered the appointment of a receiver to take possession
of all or substantially all of Seller's assets; (iv) suffered the attachment or other judicial seizure of all, or
substantially all, or Seller's assets; (v) admitted in writing its inability to pay its debts as they come due;
or (vi) made an offer of settlement, extension or compromise to its creditors generally. Seller is solvent
and able to pay its debts as they come due in the usual and ordinary course of business.
7.2.3 Authorities. To Seller's actual knowledge without further inquiry, there is not any
plan, study or effort by any of the Authorities which in any way would materially affect the use of the
Property for its intended uses. To Seller’s actual knowledge without further inquiry, there are not any
intended public improvements which will result in any charge being levied against, or any lien being
assessed upon, the Property. To Seller's actual knowledge without further inquiry, there is not any
existing, proposed or contemplated plan to widen, modify or realign any street or highway contiguous to
the Property.
7.2.4 Governmental Regulations. To Seller's actual knowledge without further inquiry,
there are no violations of Governmental Regulations relating to the Property and the present uses of the
Improvements are permitted uses under applicable zoning and building laws and ordinances. To Seller's
26
actual knowledge without further inquiry, the conveyance of the Property does not violate any
Governmental Regulations.
7.2.5 Licenses and Permits. To the best of Seller’s knowledge, all licenses, approvals,
permits and certificates from the Authorities or private parties necessary for the use and operation of the
Property as it is currently being used and operated, were obtained and are currently possessed by Seller,
and the Property has been constructed, modified and used in accordance with (a) all applicable approvals,
licenses, permits and certificates, (b) all Governmental Regulations, and (c) all covenants, conditions,
restrictions, easements and agreements of any kind or nature affecting the Property. To the best of
Seller's knowledge, Seller has at all times operated in compliance with all requirements of each License
and Permit.
7.2.6 Taxes. Other than the amounts disclosed by the tax bills delivered to Buyer by
Seller, to the best of Seller’s knowledge no other real property or personal property taxes have been or
will be assessed against the Property for the previous tax year. To the best of Seller’s knowledge, there
are not any special assessments or charges which have been levied against the Property or which will
result from work, activities or improvements done to the Property by Seller. To the best of Seller's
knowledge, there are not any intended public improvements which will result in any charge being levied
against, or in the creation of any lien upon, the Property or any portion thereof. Seller has paid through
the date hereof and shall have paid through the Closing Date all occupancy, use and/or sales taxes
imposed on the operation of the Property. Seller has no knowledge of any special assessments or charges
which have been levied against the Property or which will results from work, activities or improvements
done to the Property.
7.2.7 Title. Seller is the legal fee simple title holder of the Property and has good,
marketable and insurable title to the Property, free and clear of all liens, encumbrances, claims,
covenants, conditions, restrictions, easements, rights of way, options, judgments or other matters, other
than the Permitted Encumbrances and mortgages which shall be discharged and satisfied at Closing.
There shall be no change in the ownership, operation or control of Seller from the date hereof until the
Closing.
7.2.8 Defects. To Seller's actual knowledge without further inquiry, there are no physical
or mechanical defects in the condition of the Property and ordinary wear and tear, including, but not
limited to, the roofs, exterior walls or structural components of any Improvements and the heating, air
conditioning, plumbing, ventilating, elevator, utility, sprinkler and other mechanical and electrical
systems, apparatus and appliances located in the Property, and all of the foregoing items are operational.
To Seller's actual knowledge without further inquiry, the Property is free from infestation by termites or
other pests, insects, disease or animals. To the best of Seller’s
27
knowledge, all Personal Property is in good working condition and Seller shall cause all Personal
Property to be in good working condition on the Closing Date.
7.2.9 Soil. To Seller's actual knowledge without further inquiry, there are no defects or
conditions of the soil which will impair the present use and operation of the Property. Seller has received
no written notice of any discharges of materials from the Property into any “waters of the United States”
as defined in 33 CFR § 328.3 (July 1, 2007 edition), and Seller has not received any written notice from
the United States Army Corps of Engineers that such "waters of the United States" exist on the Property.
7.2.10 Insurance Company Notices. Seller has not received any notices from any
insurance company of any defects or inadequacies in the Property which have not been corrected.
7.2.11 No Sales Contracts. Seller has not entered into any other contracts for the sale of
the Property, nor do there exist any rights of first refusal or options to purchase the Property or any
portion thereof, nor will Seller enter into any such agreements during the term of this Agreement.
7.2.12 Hazardous Materials. Notwithstanding anything herein to the contrary, Seller
expressly affirms and Buyer acknowledges that the Real Property has been used historically for
agricultural purposes, and is subject to environmental issues related to agricultural uses, including
without limitation agricultural chemicals and other hazardous substances commonly used in agricultural
operations. Subject to the foregoing disclosures, to Seller's actual knowledge without further inquiry, the
Property is free of all hazardous waste or substances and the Property is not in violation of any applicable
Governmental Regulations and any applicable regulatory levels. To Seller’s actual knowledge without
further inquiry, there are not currently any underground tanks located on or in the Property, and if
underground tanks have been located on or in the Property, such underground tanks have been removed
in accordance with all Governmental Regulations. The term hazardous waste or substances shall include
those substances included within the definitions of “hazardous substances,” hazardous materials,” “toxic
substances,” or “solid waste” in CERCLA, RCRA, and the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq., and in the regulations promulgated pursuant to said laws or any replacement
thereof and such other substances, materials and wastes which are or become regulated under applicable
Governmental Regulations or which are classified as hazardous or toxic under Governmental
Regulations. In the event Buyer determines prior to Closing that there are any hazardous wastes or
substances upon or within the Property, Seller shall be obligated to clean up and remediate such
hazardous wastes or substances either prior to Closing, or, if such work cannot be performed prior to
Closing, Seller shall escrow at Closing a sufficient amount of money with Escrow Agent as determined
by Buyer’s
28
environmental consultant, sufficient to clean up or remediate such hazardous wastes or substances in
accordance with all Governmental Regulations. The representations and warranties set forth in this
paragraph shall survive Closing for the Survival Period.
7.2.13 Storage Tanks. To Seller's actual knowledge without further inquiry, no storage
tank (whether above or below ground) has been located or used on any portion of the Property, excluding
only such above ground storage tanks that have been used to store fuel and quantities of farm chemicals
reasonably necessary for the growing and maintenance of crops, which above ground storage tanks, to
Seller's actual knowledge without further inquiry, at all times during Seller's ownership of the Property
have been stored and maintained in accordance with manufacturer recommendations and in accordance
with all federal, state and local laws, codes, regulations and ordinances.
7.2.14 Historical Sites. Seller has not received written notice that any portion of the
Property has been designated a site or area of archeological or historical significance.
7.2.15 Burial Plots. Seller has not received written notice that any portion of the Land has
been used as a human burial plot or site.
7.2.16 Habitat. Seller has not received written notice that any portion of the Property has
been designated as, or is eligible for designation as, a critical habitat for a threatened or endangered
species under the Endangered Species Act of 1973, 16 U.S.C. §§ 1531-1534, except that Seller discloses
to Buyer that Seller believes some portion of the Land may be located in secondary habitat for the
Florida panther; provided that if a portion of the Land is located in a secondary habitat for the Florida
panther, to the Seller’s knowledge such habitat does not materially adversely impact the use of the Land
for agricultural purposes, nor is Seller aware of any current or proposed regulations or restrictions that
would materially adversely impact the use of the Land for agricultural purposes as a result of a portion of
the Land being a secondary habitat for the Florida panther.
7.2.17 Contracts. Other than Permitted Encumbrances, there are no contracts or
agreements related to the marketing or processing of crops that may be grown on the Land (or any
portion thereof), nor the use, ownership or operation of the Property which would be binding upon Buyer
after the Closing, except as specified below. Seller has entered into the leases or agreements relating to
the Property identified on attached Exhibit “E” which will be provided by Seller to Buyer within fifteen
(15) days after the Effective Date of this Agreement and which will survive the closing of this
Agreement.
29
7.2.18 Eminent Domain. To the best of Seller’s knowledge, there are no pending or
threatened governmental proceedings in eminent domain with respect to any portion of the Property.
7.2.19 ERISA Compliance. (i) Seller is not an "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA"), which is subject to
Title I of ERISA, or a "plan" as defined in Section 4975(e)(1) of the Code, which is subject to Section
4975 of the Code; (ii) the Property and the assets of Seller do not constitute "plan assets" of one or more
such plans for purposes of Title I of ERISA or Section 4975 of the Code; (iii) for purposes of Section
3(14) of ERISA, Seller is not a party in interest with Buyer; and (iv) transactions by or with Seller are
not in violation of state statutes applicable to Seller that regulate investments of and fiduciary obligations
with respect to governmental plans.
of
the
Treasury
7.2.20 OFAC Compliance. Seller has not been designated as a "specifically designated
national and blocked person" on the most current list published by the Office of Foreign Asset Control of
official website
the U.S. Department
(http://www.treas.gov/ofac./t11sdn.pdf) or at any replacement website or other replacement official
publication of such list (collectively, the "List"); (ii) is currently in compliance with and will at all times
during the term of this Agreement (including any extension thereof) remain in compliance with the
regulations of OFAC and any statute, executive order (including the September 24, 2001 Executive
Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit,
or Support Terrorism), or other governmental action relating thereto; and (iii) will not transfer or permit
the transfer of any controlling interest in Seller to any person or entity who is, or any of whose beneficial
owners are, listed on the List.
("OFAC")
its
at
7.2.21 Foreign Person. Seller is not a "foreign person" within the meaning of Sections
1445(f)(3) and 7701(a)(3) of the Internal Revenue Code of 1986, as amended, and is not subject to any
federal, state or local withholding obligation of Buyer under the tax laws applicable to Seller or the
Property.
7.2.22 Recertification. From the Effective Date through the Closing Date, Seller shall be
obligated to notify Buyer of the existence of any condition or fact of which Seller becomes aware which
Seller would have been obligated to disclose to Buyer pursuant to this Agreement if it had knowledge of
such fact or condition on or prior to the Effective Date. Each of the disclosures shall, as to such
disclosure, reopen Buyer's Inspection Period for three (3) business days and shall be subject to the
provisions of Section 4.5.
7.3. Completeness.
30
7.3.1 Complete Information. All instruments, documents, lists, schedules and items
required to be delivered to Buyer hereunder will fairly present the information set forth in a manner that
is not misleading and will be true, complete and correct in all respects on the date of delivery and upon
the Closing, as they shall be updated, modified or supplemented in accordance with this Agreement,
including any information regarding the Reports, Licenses, Equipment and Warranties and Guaranties.
7.3.2 Contracts. There are no agreements, contracts or service agreements other than the
Permitted Encumbrances pertaining to the Property and Seller will not enter any agreements, contracts or
services agreements affecting the Property or its operation after the Effective Date of this Agreement
which is not cancelable without penalty at or prior to Closing, without Buyer’s written approval.
7.3.3 Leases. There are no leases, subleases, occupancies or tenancies in effect pertaining
to the Property, except for the Sublease.
7.3.4 Licenses and Permits. To the best of Seller's knowledge, there is no current default
or breach under the terms and provisions of any of the Licenses and Permits and the Licenses and Permits
have not been, and will not be, amended or modified except as disclosed in writing to Buyer and except as
necessary for renewal.
7.3.5 Employees. There are no employees of Seller who would become employees of
Buyer as a result of the purchase of the Property by Buyer.
7.3.6 Personal Property. All Personal Property owned by Seller that benefits the Property
only is located on the Property.
7.4. General.
7.4.1 General Representation. To the best of Seller's knowledge, no representation,
warranty or statement of Seller in this Agreement or in any document, certificate or schedule furnished
or to be furnished to Buyer pursuant hereto contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the statements or facts contained
therein not misleading. The foregoing representation shall survive Closing for a period of eighteen (18)
months.
Seller's representations and warranties made in this Article 7 shall be true and correct as of the Closing with the
same force and effect as if remade by Seller in a separate certificate at that time.
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ARTICLE 8
BUYER'S REPRESENTATIONS AND WARRANTIES
In addition to any express agreements of Buyer contained herein, the following constitute representations,
warranties and/or covenants of Buyer to Seller.
8.1. Power. Buyer has the legal power, right and authority to enter into this
Agreement and the instruments referenced herein, and to consummate the
transactions contemplated hereby.
8.2. Requisite Action. All requisite action (corporate, trust, partnership or
otherwise) has been taken by Buyer in connection with the entering into of this
Agreement and the instruments referenced herein, and the consummation of the
transactions contemplated hereby.
8 . 3 . Authority. The individuals executing this Agreement and the
instruments referenced herein on behalf of Buyer have the legal power, right and
actual authority to bind Buyer to the terms and conditions hereof and thereof.
8.4. Validity. This Agreement and all documents required hereby to be
executed by Buyer are and shall be valid, legally binding obligations of and
enforceable against Buyer in accordance with their terms.
8.5. No Conflicts. Neither the execution and delivery of this Agreement and
documents referenced herein, nor the incurrence of the obligations set forth herein,
nor the consummation of the transactions herein contemplated, nor compliance
with the terms of this Agreement and the documents referenced herein conflict with
or result in the material breach of any terms, conditions or provisions of, or
constitute a default under, any bond, note, or other evidence of indebtedness or any
contract, indenture, mortgage, deed of trust, loan, partnership agreement, lease or
other agreements or instruments to which Buyer is a party.
8.6. General Representation. No representation, warranty or statement of
Buyer in this Agreement or in any document, certificate or schedule furnished or to
be furnished to Seller pursuant hereto contains or will contain any untrue statement
or a material fact, omits or will omit
32
to state a material fact necessary to make the statements or facts contained therein
not misleading. Buyer's representations and warranties made in this Article 8 shall
be continuing and shall be true and correct as of the Closing with the same force and
effect as if remade by Buyer in a separate certificate at that time.
ARTICLE 9
COVENANTS OF BUYER AND SELLER
9.1. Operation of the Property Through the Closing.
9.1.1 Operation. Seller hereby agrees, through and including the Closing and at the
Seller's sole cost and expense, to (a) keep all existing insurance policies affecting the Property in full
force and effect, (b) provide all services and to continue to operate, manage and maintain the Property
and the crops growing thereon, including mechanical equipment of every kind used in the operation
thereof, which shall be in good working condition at Closing, (c) comply with all Governmental
Regulations, (d) keep Buyer timely advised of any repair or improvement required to keep the Property
in such condition as aforesaid and which costs in excess of Fifteen Thousand Dollars ($15,000.00), and
(e) furnish Buyer with copies of all notices, citations, letters, lawsuits or other correspondence or
memoranda from any Authority, employee, vendor, creditor, neighbor or party to any contract.
9.1.2 Leases. Seller hereby agrees that Seller will not enter into any leases of the Property,
except the Lease.
9.1.3 No Conveyance. Seller will not, without the prior written consent of Buyer, convey
any interest in the Property (or any portion thereof), and Seller will not subject the Property to any
additional liens, encumbrances, covenants, conditions, easements, rights of way or similar matters after
the date of this Agreement which will not be eliminated prior to the Closing.
9.1.4 No Alterations. Seller will not make any alterations to the Property except for
farming practices consistent with Seller’s normal business and farming operations and the normal
business and farming operations of United States Sugar Corporation.
9.1.5 Notice to Buyer. Seller shall promptly notify Buyer of any material change in any
condition with respect to the Property or of any event or circumstance which makes any information in
its Due Diligence Materials or any representation or warranty of Seller under this Agreement untrue or
misleading, or any covenant of Seller under this Agreement incapable or less
33
likely of being performed, it being understood that the Seller's obligation to provide notice to Buyer shall
in no way relieve Seller of any liability for a breach by Seller of any of its representations, warranties or
covenants under this Agreement.
9.1.6 Notice to Seller. Buyer shall promptly notify Seller of any change in any condition
with respect to the Property or of any event or circumstance which makes any representation or warranty
of Buyer under this Agreement untrue or misleading, or any covenant of Buyer under this Agreement
incapable or less likely of being, performed, it being understood that the Buyer's obligation to provide
notice to Seller shall in no way relieve Buyer of any liability for a breach by Buyer of any of its
representations, warranties or covenants under this Agreement.
9.2. Broker. Seller represents and warrants to Buyer, and Buyer represents
and warrants to Seller, that no broker or finder has been engaged by it, respectively,
in connection with any of the transactions contemplated by this Agreement, or to its
knowledge is in any way connected with any of such transactions. In the event of
any such claims for brokers' or finders' fees or commissions in connection with the
negotiation, execution or consummation of this Agreement, then Buyer shall
indemnify, save harmless and defend Seller from and against such claims if they
shall be based upon any action, statement, representation or agreement by Buyer,
and Seller shall indemnify, save harmless and defend Buyer if such claims shall be
based upon any actions, statement, representation or agreement made by Seller,
such indemnities to include all reasonable attorneys’ fees and costs incurred by the
party being indemnified. The indemnification provisions set forth in this paragraph
shall survive Closing for the Survival Period.
9.3. Railroad Tract. Seller shall retain 200 acres through the 2x6 and Collins
Slough tracts (identified on Exhibit A) in such configuration and having boundary
lines that are acceptable to Seller in its sole discretion for the use as a future railroad
site subject however to the following: (a) Buyer shall have the right of ingress and
egress over and across the Railroad Tract in such locations as identified on attached
Exhibit “F” and (b) Buyer shall have loading access to any new railroad
construction in one (1) location identified on attached Exhibit “G”. Both Exhibit F
and Exhibit G shall be provided by Seller to Buyer within fifteen (15) days after the
Effective Date of this Agreement.
34
Seller shall grant Buyer an easement specifying these ingress, egress and loading
rights, and furthermore Buyer shall grant to Seller a mutually acceptable ingress
and egress easement giving Seller access to the Railroad Tract. Such easements shall
be in such form as mutually agreed upon by the parties, shall be recorded in the
County real property records, and shall constitute covenants running with the land
(collectively the “RR Easements”).
The Base Purchase Price shall be adjusted downward by the Railroad Tract Valuation, which shall be
calculated by adding (a) the Farmable Acres included in the Railroad Tract multiplied by $4,000 and (b)
the Support Acres included in the Railroad Tract multiplied by $1,163.
In the event that the designation of the Railroad Tract results in the dissection of Farmable Acres outside
of the Railroad Tract that causes material impairment of production, irrigation, drainage or other
agricultural characteristics of said Farmable Acres, Seller shall either (a) agree to a remediation plan that
is reasonably satisfactory to Buyer, and Seller shall pay the estimated costs of said remediation plan to
Buyer at Closing or (b) accept an adjustment of the Base Purchase Price in an amount equal to the
Railroad Tract Impaired Acreage Valuation. The Railroad Tract Impaired Acreage Valuation shall be
calculated by multiplying the number of Farmable Acres that lie outside of the Railroad Tract that are
impaired by $4,000.
Both Seller and Buyer acknowledge that the permitting and engineering processes could result in the
need for a change in the location of the Railroad Tract at some undetermined point in the future. The
parties agree that if such determination is made, the parties will endeavor to negotiate an exchange of
properties (including the negotiation, execution and recordation of a new Easement), subject to the
following: (a) any tract identified by Seller as an exchange candidate for the Railroad Tract shall not be
greater than three hundred (300) acres in aggregate, (b) any potential property exchange will be
executed based on an independent appraisal of the value per acre for Farmable Acres and Support Acres
to be included in the new tract, and (c) any impairment to Farmable Acres outside of the proposed
exchange candidate for the Railroad Tract will be subject to remediation by Seller or a financial
adjustment analogous to the process outlined in the previous paragraph.
ARTICLE 10
REMEDIES
10.1. Liquidated Damages; Seller's Remedies. In the event the Closing and
the consummation of the
35
transaction herein contemplated do not occur as provided in this Agreement by
reason of any breach of Buyer, Buyer and Seller agree that it would be impractical
and extremely difficult to estimate the damages which Seller may suffer as a result
thereof. Therefore, Buyer and Seller agree that a reasonable estimate of the total net
detriment that Seller would suffer in the event that Buyer breaches this agreement
and fails to complete the purchase of the Property is and shall be, as Seller's sole and
exclusive remedy (whether at law or in equity), and as the full, agreed and
liquidated damages for such breach, an amount equal to the Deposit. Upon any such
breach by Buyer, unless otherwise specified, this Agreement shall be terminated and
neither party shall have any further rights or obligations hereunder, each to the
other, except for the right of Seller to collect such liquidated damages from Buyer
and Escrow Agent.
10.2. Buyer's Remedies. In the event Seller fails to perform its obligations
pursuant to this Agreement for any reason (except due to a failure of Seller to use
good faith efforts to cure any Title Defects or any failure by Buyer to perform
under this Agreement) then Buyer may: (a) terminate this Agreement by giving
Seller timely written notice of such election prior to or upon the Closing Date, and
Buyer shall be entitled to recover from Escrow Agent the entire portion of the
Deposit actually received by Escrow Agent and, in the event Seller fails to use good
faith efforts to perform its obligations pursuant to this Agreement or fails to use
good faith efforts to cause any condition herein to be satisfied after reasonable
notice, then Buyer shall also have the right to pursue any other rights available to
Buyer at law or equity; or (b) enforce specific performance of this Agreement,
without a claim for damages, notwithstanding such failure or breach by Seller.
Anything in this Agreement to the contrary notwithstanding, Buyer waives any
special, indirect or consequential damages for a pre-Closing breach by Seller.
10.3. Attorneys' Fees. If any action or proceeding is commenced by either
party to enforce its rights or remedies under this Agreement, the prevailing party in
such action or proceeding, including any bankruptcy, insolvency or appellate
proceedings, shall be entitled to recover its reasonable attorneys' fees and court
costs incurred therewith.
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ARTICLE 11
CONDEMNATION AND DESTRUCTION
11.1. Eminent Domain or Taking. If, prior to the Closing, any material
portion of the Land is taken by eminent domain or otherwise (or is the subject of a
pending, threatened or contemplated taking which has not been consummated),
Seller shall immediately notify Buyer thereof. In such event, Buyer shall have the
option, in its sole and absolute discretion, to terminate this Agreement upon written
notice to Seller given not later than thirty (30) days after receipt of Seller's notice.
For purposes hereof, “material” shall be deemed to be any taking where access to
any portion of the Land is reduced or restricted or where the Property cannot be
fully used for its intended purpose, or where the amount of compensation expected
to be paid is estimated to equal or exceed $50,000.00. If Buyer does not exercise this
option to terminate this Agreement, or if there has not been a material taking by
eminent domain or otherwise to give rise to such option, neither party shall have the
right to terminate this Agreement, but the Seller shall assign and turn over, and the
Buyer shall be entitled to receive and keep, all awards for the taking by eminent
domain which accrue to Seller and the Buyer and Seller shall proceed to the Closing
pursuant to the terms of this Agreement, without modification of the terms of this
Agreement and without any reduction in the Purchase Price. Unless or until this
Agreement is terminated, Seller shall take no action with respect to any eminent
domain proceeding without the prior written consent of Buyer.
11.2. Fire or Casualty. Prior to the Closing, and notwithstanding the
pendency of this Agreement, the entire risk of loss or damage by flood, fire or other
casualty shall be borne and assumed by Seller, except as otherwise provided in this
Paragraph 11.2. If, prior to the Closing, any part of the Property is damaged or
destroyed by flood, fire or other casualty, Seller shall repair such damage and
destruction and keep this Agreement in full force and effect so long as such repair
can be and is completed by Seller prior to the Closing Date. If such repairs are not
completed prior to the Closing Date, then Seller shall assign and turn over, and
Buyer shall be entitled to receive and keep, all insurance proceeds payable to it with
respect to such destruction (which shall then be repaired or not at Buyer's
37
option and cost), plus Seller shall pay over to Buyer at the Closing an amount equal
to the deductible and any co-insurance amount with respect to the insurance
together with the amount of all damages and costs not covered by insurance, Seller
shall pay at or prior to Closing all amounts owed to any third parties engaged to
repair such damage as of Closing, and Buyer and Seller shall proceed to the Closing
pursuant to the terms of this Agreement without modification of the terms of this
Agreement and without any reduction in the Purchase Price. Buyer shall have the
right to participate in any adjustment of the insurance claim.
ARTICLE 12
SALES AND USE TAXES
On or prior to the Closing Date, Seller shall pay all sales and use taxes arising from or attributable to the business
and operation of the Property as conducted by Seller prior to the Closing. Seller hereby agrees to indemnify, hold
harmless and defend Buyer for any loss, damage, liability, claim or expense (including, without limitation, reasonable
attorney fees and expenses) by reason of any breach of the foregoing covenants, representations or warranties. The
provisions of this paragraph shall survive Closing for a period of five (5) years.
ARTICLE 13
INDEMNITY
Seller shall and hereby agrees to indemnify, hold harmless and defend Buyer for any loss, damage, liability, claim
or expense (including, without limitation, reasonable attorneys’ fees and expenses) relating to, arising out of or on
account of claims of Seller's creditors or employees arising from Seller's failure to pay such creditors or employees for
services rendered prior to the Closing. The provisions of this paragraph shall survive Closing for the Survival Period.
ARTICLE 14
MISCELLANEOUS
14.1. Entire Agreement. This Agreement (including all Exhibits attached
hereto) is the final expression of and contains the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
understandings with respect thereto, except as provided in the Non-Disclosure
Agreement between the parties dated April 7. 2014. This Agreement may not be
modified, changed, supplemented or
38
terminated, nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized in
writing or as otherwise expressly permitted herein. Buyer and Seller do not intend
to confer any benefit hereunder on any person, firm or corporation other than the
parties hereto. Escrow Agent need not be a party to any modification of this
Agreement (or any waiver of any terms and conditions of this Agreement) unless
such modification (or waiver) affects the rights, duties or obligations of Escrow
Agent hereunder.
14.2. Agreement Binding on Parties; Assignment. This Agreement, and the
terms, covenants, and conditions herein contained, shall inure to the benefit of and
be binding upon the heirs, personal representatives, successors, and assigns of Buyer
and Seller. Buyer may not assign this Agreement to anyone without the Seller’s
prior written consent; provided however, Seller’s written consent shall not be
required for an assignment of this Agreement to an Affiliate of Buyer; on the
following conditions: (a) such assignment shall not constitute a release of Buyer’s
liability under this Agreement, and (b) Buyer provides written notice of such
assignment to its Affiliate at least five (5) business days prior to the Closing Date.
1 4 .3 . Notice. Any notice, communication, request, reply or advice
(collectively, “Notice”) provided for or permitted by this Agreement to be made or
accepted by Buyer or Seller must be in writing. Notice may, unless otherwise
provided herein, be given or served (a) by delivering the same to such party, or an
agent of such party, in person or by commercial courier, (b) by facsimile or
electronic transmission, evidenced by confirmed transmission and concurrently
followed by a “hard” copy of same delivered to the party by personal delivery or
overnight delivery pursuant to clauses (a) or (c) hereof, or (c) by depositing the
same into custody of a nationally recognized overnight delivery service such as
Federal Express, Overnight Express, United Parcel Service or Airborne Express.
Notice deposited in the manner described in (c) hereinabove shall be deemed timely
given on next business day. Notice given by facsimile or electronic transmission
shall be effective upon completion of transmission if between the hours of 8:00
A.M. and 5:00
39
P.M. (at the place of receipt) on any business day with delivery made after such
hours to be deemed delivered the following business day. Notice given in any other
manner shall be effective only if and when received by the party to be notified
between the hours of 8:00 A.M. and 5:00 P.M. of any business day with delivery
made after such hours to be deemed received the following business day. For the
purposes of Notice, the addresses of Seller, Buyer, Escrow Agent and Title Agent
shall, until changed as hereinafter provided, be as set forth in Article 1. Buyer and
Seller shall have the right from time to time to change their respective addresses,
and each shall have the right to specify as its address any other address within the
United States of America by at least five (5) days written Notice to the other party.
14.4. No Recordation. Without the prior written consent of Seller, there
shall be no recordation of either this Agreement or any memorandum hereof, or any
affidavit pertaining hereto.
14.5. Third Party Beneficiaries/Parties in Interest. This Agreement has been
entered into solely for the benefit of the parties to this Agreement and their
respective successors and assigns. Nothing in this Agreement is intended or shall be
construed to confer any rights or remedies under or by reason of this Agreement on
any persons or entities other than the parties to it and their respective successors and
assigns. Nothing in this Agreement is intended to relieve or discharge the obligation
or liability of any third person to any party to this Agreement.
14.6. Partial Invalidity. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement, or the application of such term or
provision to persons or circumstances other than those as to which it is held invalid
or unenforceable, shall not be affected thereby, and each such term and provision of
this Agreement shall be valid and be enforced to the fullest extent permitted by law.
14.7. Waivers. No waiver of any breach of any covenant or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach thereof,
or of
40
any other covenant or provision herein contained. No extension of time for
performance of any obligation or act shall be deemed an extension of the time for
performance of any other obligation or act.
1 4 . 8 . Survival of Representations. The
agreements,
representations and warranties made herein shall survive the Closing until the
expiration of the Survival Period or such later date as may be specifically set forth
herein, whereupon such covenants, agreements, representations and warranties shall
be of no further force or effect unless otherwise specifically provided herein.
covenants,
14.9. Time of Essence. Seller and Buyer hereby acknowledge and agree that
time is strictly of the essence with respect to each and every term, condition,
obligation and provision hereof and that failure to timely perform any of the terms,
conditions, obligations or provisions hereof by either party shall constitute a
material breach of and a non-curable (but waivable) default under this Agreement
by the party so failing to perform.
14.10. Construction. Headings at the beginning of each paragraph and
subparagraph are solely for the convenience of the parties and are not a part of the
Agreement. Whenever required by the context of this Agreement, the singular shall
include the plural and the masculine shall include the feminine and vice versa. This
Agreement shall not be construed as if it had been prepared by one of the parties,
but rather as if both parties had prepared the same. Unless otherwise indicated, all
references to paragraphs and subparagraphs are to this Agreement. All exhibits
referred to in this Agreement and the Glossary of Terms are attached and
incorporated by this reference.
14.11. Business Day. If any date or any period provided in this Agreement
shall end on a Saturday, Sunday or legal holiday, the applicable date or period shall
be extended to the first business day following such Saturday, Sunday or legal
holiday.
14.12. Currency. All dollar amounts are expressed in United States
currency.
41
14.13. Multiple Counterparts. This Agreement may be executed in multiple
counterparts (each of which is to be deemed original for all purposes). Facsimile or
electronic copies of this Agreement shall be deemed originals for all purposes.
14.14. Governing Law. Seller and Buyer acknowledge that this Agreement
has been negotiated and entered into in the State. Seller and Buyer expressly agree
that this Agreement shall be governed by, interpreted under, and construed and
enforced in accordance with the laws of the State.
14.15. Radon Gas. Radon is a naturally occurring radioactive gas that, when
it has accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed federal and
state guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit.
14.16. Waiver of Jury Trial. Buyer and Seller agree that any litigation
arising out of this Agreement or instituted by any party in interest to enforce any of
the terms of this Agreement shall be tried without jury, and no jury trial shall be
sought or maintained by either party or their respective successors and assigns, in
any lawsuit, proceeding, counterclaim, or any other litigation procedure based
upon, or arising out of this Agreement, or the dealings or the relationship among
Buyer and Seller.
14.17. Seller’s Knowledge Defined. When the term “knowledge” is used
herein in connection to Seller’s knowledge, and furthermore when a statement is
made as to what is or may be “known” by the Seller or what the seller is or may be
“aware of”, or similar such statements, said terms and statements mean only the
actual knowledge of Clayton G. Wilson and/or Kenneth J. Smith and shall not be
construed, by imputation or otherwise, to refer to the knowledge of any other
officer, agent, manager, representative or employee of Seller or any affiliate of
Seller. In no event will Buyer have any personal claim against the above-named
individuals as a result of the reference thereto in this Section 14.17 and Buyer
waives and releases all such claims which Buyer now has or may
42
later acquire against such individuals in connection with the transactions
contemplated in this Agreement.
14.18. Tax Free Exchange. Buyer acknowledges that Seller may engage in a
Section 1031 tax-free exchange in connection with this transaction. Buyer agrees to
cooperate with Seller and any exchange intermediary in effecting the exchange in
accordance with Section 1031 of the Internal Revenue Code of 1986, as amended,
including execution of any documents that may be reasonably necessary to effect
the exchange, provided, however, that Seller shall bear all additional costs incurred
in connection with such tax-free exchange
ARTICLE 15
NON DISCLOSURE
Prior to and after the Closing, any release to the public of information with respect to the sale contemplated herein, this
Agreement or any matters set forth in this Agreement, whether in press releases or otherwise will be made only after
written consent is obtained from Buyer and Seller; provided, however, Seller and Buyer after receipt of written consent
from the other shall be permitted to make such disclosures as may be required in order to comply with all financial
reporting and securities laws applicable to Buyer or Seller, responses to subpoenas and/or court orders, which consent to
such proposed disclosures shall not be unreasonably withheld, delayed or conditioned. However, Seller shall not refer to
any affiliates of Terra Land Company, other than any assignee of Buyer’s rights under this Agreement in any required
filings or otherwise. The provisions of this Article 15 shall survive the Closing or any termination of this Agreement for a
period of five (5) years.
ARTICLE 16
EXCLUSIVITY
Seller agrees that until the termination of this Agreement, it shall neither negotiate with anyone, nor enter into any
agreement, backup contract, understanding, memorandum or option agreement regarding the sale or the lease of the Land.
43
IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of the date and year written below.
Date: August 7, 2014
Date: August 7, 2014
SELLER:
ALICO, Inc.
a Florida corporation
By: /s/ Clayton G. Wilson
Clayton G. Wilson, CEO
BUYER:
TERRA LAND COMPANY,
an Illinois corporation
By: /s/ Kenny Traynon
Print Name: Kenny Traynon
Its: Vice President
44
JOINDER BY ESCROW AGENT
Jones, Foster, Johnston & Stubbs, P.A. referred to in this Agreement as the “Escrow Agent,” hereby acknowledges
that it received this Agreement executed by Seller and Buyer on the 8th day of August, 2014, and accepts the obligations
of and instructions for the Escrow Agent as set forth herein. It further acknowledges that upon receipt of the Deposit,
subject to clearance if the Deposit was delivered by check. The Escrow Agent hereby agrees to receive, hold and
distribute the Deposit in accordance with the terms and provisions of this Agreement.
DATE: August 8, 2014
JONES, FOSTER, JOHNSTON & STUBBS, P.A.
By: Larry B. Alexander
Larry B. Alexander, Chairman
45
EXHIBIT LIST
EXHIBIT “A”
LEGAL DESCRIPTION OF LAND
EXHIBIT “A-1”
LEGAL DESCRIPTION OF HILLGRADE TRACT
EXHIBIT “A-2
LEGAL DESCRIPTION OF COLLINS SLOUGH TRACT
EXHIBIT “A-3”
LEGAL DESCRIPTION OF 2X6 TRACT
EXHIBIT “A-RR”
RAILROAD –RIGHT-OF-WAY
EXHIBIT “B”
LEASE
EXHIBIT “C”
RECIPROCAL ACCESS EASEMENT DEPICTION
EXHIBIT “D”
DUE DILIGENCE MATERIALS
EXHIBIT “E”
CONTRACTS THAT SURVIVE CLOSING
EXHIBIT “F”
RAILROAD CROSSING LOCATION
EXHIBIT “G”
RAILROAD LOADING ACCESS LOCATION
46
LEGAL DESCRIPTION OF LAND, IS SET FORTH ON EXHIBITS A-1, A-2 AND A-3 AS FOLLOWS:
EXHIBIT “A”
EXHIBIT “A-1”
LEGAL DESCRIPTION OF HILL GRADE TRACT
EXHIBIT “A-2”
LEGAL DESCRIPTION OF COLLINS SLOUGH TRACT
EXHIBIT “A-3”
LEGAL DESCRIPTION OF 2X6 TRACT
EXHIBIT “A-RR”
RAILROAD RIGHT-OF-WAY
EXHIBIT “B”
LEASE
EXHIBIT “C”
RECIPROCAL ACCESS EASEMENT DEPICTION
EXHIBIT “D”
DUE DILIGENCE MATERIALS
Copy of Seller’s Incorporation documents, as amended since formation
Copy of Seller’s Bylaws as currently in effect
Good standing certificates from state of incorporation of Seller
List of the current officers and directors of the Seller
Copy of Current Deeds for Land
List of all buildings and improvements on the Land
Copy of Existing Title Policies relating to the Land, with legible copies of all exceptions, whether
recorded or unrecorded referenced in such title insurance policies
Copies of all existing surveys relating to the Land
Copies of all irrigation and soil tests, inspections and evaluation of the Land
1.
2.
3.
4.
5.
6.
7.
8.
9.
10. Copies of all written contracts, leases and subleases relating to the Land and summaries of the
material terms of any verbal leases or agreements related to the Land
11. Copies of all environmental reports or studies relating to the presence or absence of hazardous
substance relating to the Land
12. Copies of all reports or studies pertaining to geological, archaeological, physical or historical
conditions of the Land
13. Copies of all documents filed with the FSA offices and/or any other U.S. Department of
Agriculture office with respect to the Land or the crops grown thereon over the past three (3) years
14. List of all above ground or underground storage tanks located on the Land
15. Copies of the last three (3) years of tax bills for the Property
16. Copies of current assessment notices for the Property
17. Copies of all federal, state, county or local permits, licenses, etc. relating to the Property or the
operation thereof, and all amendments thereto
18. List of all personal property located on the Land and to be included in the transaction
19.
Information regarding to crop yields for the last 5 years
20. Copies of all tile and/or irrigation maps
21. Copies of all management agreements relating to the Property
22. Copies of all water and improvement district assessments and
information
23. Copies of all option agreements, purchase or sale contracts, leases, subleases and licenses
(including without limitation any agricultural leases and any leases of oil, gas or mineral rights,
and all leases or licenses to mine or extract sand, rock or gravel, or any portion thereof),
development agreements, or any other contracts (including amendments thereto) relating to the
Property, or to the actual or potential purchase, sale, lease, use, occupancy or development of the
Property
24. Copies of all reports, logs, maps, diagrams and other records used in connection with or otherwise
relating to the wells, soils, crop histories, and agricultural operations on or otherwise relating to the
Property
25. Copies of all easements or encumbrances relating the Property
26. List and status of all pending or threatened litigation relating to the Seller or the Property with a
brief description for each claim of basis for claim, remedies sought, etc., including name of court
or agency in which the proceeding is pending, the date instituted, and the principal parties thereto
and the name(s) of the attorney(s) representing the Seller. Also, a list of any governmental orders
or proceedings to which the Seller is subject.
27. List of any governmental orders or proceedings to which the Seller is subject and relates to the
Property or the operation thereof
28. Copies of material correspondence with regulatory bodies relating to the Property or the operation
thereof
29. Copies of any environmental or other regulatory reports and status of any investigations
30. Copies of all aerial photographs and soil map/information and/or description of soils
31. List of crops grown on the Land for the last five years and the production history
32. Description of all insurance policies currently carried with respect to the Property and the
operation thereof
33. Description of any insurance claims made with respect to the Property during the last five years
34. A list of all pumps, motors and other irrigation equipment at the Property, including serial
numbers, model and make, of such pumps, motors and equipment, where available
35. A list of all warranties and guaranties regarding the Improvements and Personal Property,
including copies thereof and all amendments
36. Copies of all contracts between Seller and United States Sugar Corporation currently in effect.
37. Copies of Seller’s railroad siding, loading and right-of-way agreements with United States Sugar
Corporation and/or its affiliated railroad, if any.
38. Any other documents or information which, in your judgment, are material to the Property or
Seller’s operation thereof or which should be considered and reviewed in making disclosures
regarding the Property
EXHIBIT E
CONTRACTS THAT SURVIVE CLOSING
EXHIBIT F
RAILROAD CROSSING LOCATION
EXHIBIT G
RAILROAD LOADING ACCESS LOCATION
Exhibit 10.11
Real Estate Tenn Loan: 10053500
Real Estate Line of Credit: 10053600
/jim
FIFTH AMENDMENT TO CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS
This FIFTH Amendment to Credit Agreement and other Loan Documents (“Amendment”) is entered into and is
dated and made effective as of April 28, 2014 between ALlCO, INC., a Florida corporation; ALICO-AGRI, LTD., a Florida
limited partnership; ALlCO PLANT WORLD, L.L.C., a Florida limited liability company; ALICO FRUIT COMPANY, LLC (f/k/a
Bowen Brothers Fruit, LLC, a Florida limited liability company); ALICO LAND DEVELOPMENT, INC., a Florida corporation;
and ALICO CITRUS NURSERY, LLC, a Florida limited liability company (individually and collectively, the “Borrower”) and
RABO AGRIFINANCE, INC., a Delaware corporation (the “Lender”). The Borrower and the Lender agree as follows:
PRELIMINARY STATEMENT. The Borrower and the Lender have entered into the Credit Agreement dated as of
September 8, 2010, as amended by (i) the First Amendment to Credit Agreement dated as of August 1, 2011, (ii) the
Second Amendment to Credit Agreement dated as of December 21, 2011, (iii) the Third Amendment to Credit Agreement
dated as of June 11, 2012 and (iv) the Fourth Amendment to Credit Agreement dated as of April 1, 2013 (said agreement
as amended by any and all modifications or amendments thereto is hereinafter referred to as the “Credit Agreement”. The
terms defined in the Credit Agreement are used herein as therein defined).
Borrower and Lender wish to amend certain provisions of the Credit Agreement.
NOW, THEREFORE, Borrower and Lender agree as follows:
1 . Assumption. ALICO CITRUS NURSERY, LLC, a Florida limited liability company (hereinafter, individually and
collectively, referred to as “Assumptor”) joins in, assumes and agrees, jointly and severally with all other existing
Borrowers, to pay the Obligations evidenced by the Credit Agreement and Note and be bound by and to perform all of the
covenants of any other Loan Documents executed by Borrower in connection with the Credit Agreement and Note at the
time and in the same manner provided. Assumptor hereby authorizes Lender, without obtaining the signature of
Assumptor, to file financing statements or amendments to existing financing statements in order to perfect the lien, if any,
granted by Assumptor under the Collateral Documents. The Assumptor will hereinafter be referred to as a Borrower along
with the existing Borrowers.
2. Representations and Warranties. Borrower represents and warrants that:
(a) All representations made by Borrower to Lender in the Credit Agreement are true and correct as if first made as
of the date of this agreement;
(b) the execution, delivery and performance by Borrower of this agreement and the Credit Agreement, as amended
by this agreement, are within Borrower’s powers, have been duly authorized by all necessary company action and do not
contravene Borrower’s articles of organization or operating agreement, as applicable, or any law or any contractual
restriction binding on or affecting Borrower, or result in, or require, the creation of any lien, security interest or other charge
or encumbrance upon or with respect to any of the Borrower’s properties, other than in favor of Lender;
(c) no authorization, approval or other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by Borrower of this agreement or the Credit
Agreement, as amended by this agreement;
(d) this agreement and the Credit Agreement, as amended by this agreement, constitute, legal, valid and binding
obligations of Borrower enforceable against Borrower in accordance with their respective terms; and
(e) no Event of Default or event which, with the giving of notice or the passage of time would be an Event of Default
has occurred, unless waived by the terms and conditions of this agreement.
3 . Modification Agreement. This agreement does not release or extinguish the Obligations under the Credit
Agreement. All Collateral granted to or for the benefit of Lender for purposes of securing the Obligations also secures the
Obligations under the Credit Agreement, as amended by this agreement; and Borrower reaffirms the terms and provisions
of all Collateral Documents.
4 . WAIVER OF PRIOR CLAIMS. BORROWER WAIVES AND RELEASES ANY AND ALL CLAIMS AGAINST
LENDER, ITS PARENT, SUBSIDIARIES, AFFILIATES AND ITS MERGED PREDECESSOR, AG SERVICES OF AMERICA,
INC., THE SUBSIDIARY OF SUCH PREDECESSOR, AG ACCEPTANCE CORPORATION, AND THE RESPECTIVE
SUCCESSORS, ASSIGNS, PARTICIPANTS, AGENTS AND EMPLOYEES OF EACH AND ALL OF THE FOREGOING,
RELATING OR PERTAINING TO OR AS A RESULT OF THE EXISTING LOANS, AND ANY OTHER ACT OR OMISSION
WHICH HAS OCCURRED PRIOR TO THE EXECUTION OF THIS AGREEMENT, INCLUDING ALL CLAIMS OF USURY,
FRAUD, DECEIT, MISREPRESENTATION, UNCONSCIONABILITY, DURESS, OR LENDER LIABILITY, ANY OTHER
CLAIM IN TORT OR IN CONTRACT, OR FOR VIOLATION OF ANY LAW, RULE OR REGULATION.
5. Reference to and Effect on the Credit Agreement.
(a) On and after the date hereof, each reference in the Credit Agreement to “this agreement”, “hereunder” “hereof”,
“herein” or words of like import shall mean and be a reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended by any prior amendments, the Credit Agreement shall remain in full force and
effect and is hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of Lender under the Credit Agreement, nor constitute a waiver of any
provision of the Credit Agreement.
6 . Execution in Counterparts. This Amendment may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one
and the same instrument.
7. Expenses. The Borrower shall pay on demand all costs and expenses incurred by the Lender in connection with
the preparation, execution, delivery, filing, and administration of this Amendment (including, without limitation, Legal Fees
incurred in connection with the preparation of this Amendment and advising the Lender as to its rights, and the cost of any
credit verification reports or field examinations of the Borrower’s properties or books and records). The Borrower’s
obligations to the Lender under this Section shall survive termination of this Agreement and repayment of the Borrower’s
obligations to the Lender under the Credit Agreement.
1
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date first above written.
BORROWER
ALICO, INC., a Florida corporation
By: /s/ Clayton G. Wilson
CLAYTON G. WILSON, President & Chief Executive
Officer
ALICO-AGRI, LTD., a Florida limited partnership
By: Alico, Inc., a Florida corporation, its General Partner
By: /s/ Clayton G. Wilson
CLAYTON G. WILSON, President & Chief Executive
Officer
ALICO PLANT WORLD, L.L.C., a Florida limited liability
company
By: Alico, Inc., a Florida corporation, its Manager
By: /s/ Clayton G. Wilson
CLAYTON G. WILSON, President & Chief Executive
Officer
ALICO FRUIT COMPANY, LLC, a Florida limited liability
company
By: Alico, Inc., a Florida corporation, its sole Member
By: /s/ Clayton G. Wilson
CLAYTON G. WILSON, President & Chief Executive
Officer
ALICO LAND DEVELOPMENT, INC., a Florida corporation
By: /s/ Clayton G. Wilson
CLAYTON G. WILSON, President
ALICO CITRUS NURSERY, LLC, a Florida limited liability
company
By: Alico, Inc., a Florida corporation, its sole Member
By: /s/ Clayton G. Wilson
CLAYTON G. WILSON, President & Chief Executive
Officer
2
LENDER
RABO AGRIFINANCE, INC., a Delaware corporation
By: /s/ Sue Harrison
SUE HARRISON
Assistant Vice President
3
Exhibit 10.12
Real Estate Term Loan: 10053500-gas
Real Estate Line of Credit: 10053600-gas
SIXTH AMENDMENT TO CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS
This Sixth Amendment to Credit Agreement and other Loan Documents ("Amendment") is entered into and is dated
and made effective as of July 1, 2014 between ALICO, INC., a Florida corporation; ALICO-AGRI, LTD., a Florida limited
partnership; ALICO PLANT WORLD, L.L.C., a Florida limited liability company; ALICO FRUIT COMPANY, LLC (f/k/a Bowen
Brothers Fruit, LLC, a Florida limited liability company); ALICO LAND DEVELOPMENT INC., a Florida corporation; and
ALICO CITRUS NURSERY, LLC, a Florida limited liability company (individually and collectively, the “Borrower”) and RABO
AGRIFINANCE, INC., a Delaware corporation (the “Lender"). The Borrower and the Lender agree as follows:
PRELIMINARY STATEMENT. The Borrower and the Lender have entered into the Credit Agreement dated as of
September 8, 2010, as amended by the First Amendment to Credit Agreement dated as of August 1, 2011, the Second
Amendment to Credit Agreement dated as of December 21, 2011, the Third Amendment to Credit Agreement dated as of
June 11, 2012 and the Fourth Amendment to Credit Agreement dated as of April 1, 2013 and as amended by the Fifth
Amendment to Credit agreement dated as of April 28, 2014 (said agreement as amended by any and all modifications or
amendments thereto is hereinafter referred to as the “Credit Agreement.” The terms defined in the Credit Agreement are
used herein as therein defined).
Borrower and Lender wish to amend certain provisions of the Credit Agreement.
NOW, THEREFORE, Borrower and Lender agree as follows effective as of July 1, 2014:
1. Interest – Term Loan. Section 1.02 Interest of the Credit Agreement is hereby amended in its entirety as follows:
The unpaid principal balance of the Term Loan will bear interest at a rate equal to the one month LIBOR plus
2.250% per annum, Adjusted on the first day of each Term Loan Month (the “Term Loan LIBOR Indexed Rate"). The term
“Term Loan Month” means the one month period beginning on the first day of the calendar month immediately following the
Closing Date, and each successive one month period.
2 . Interest Margin Adjustment – Term Loan. Section 1.03 Interest Margin Adjustment of the Credit Agreement is
hereby amended in its entirety as follows:
(a) On July 1, 2016 and every two (2) years thereafter (the “Term Loan Margin Adjustment Date"), Lender
may Adjust the Interest Rate Margin applicable to the Term Loan to any percent per annum (not to exceed five percent (5%))
determined by Lender.
(b) Lender shall notify Borrower of the new Interest Rate Margin applicable to the Term Loan not less than
30 days prior to the effective date of the Adjustment. The Adjusted Interest Rate Margin will become effective upon the
applicable date of Adjustment; except that Borrower may, at its option, irrevocably elect to Prepay the entire unpaid principal
balance of the Term Loan, all accrued interest and all other charges due under the Term Loan, by giving notice to Lender no
later than the effective date of the Adjustment (a “Notice of Election to Prepay"). If there is a Notice of Election to Prepay,
Borrower shall pay the entire unpaid principal balance of the Term Loan, all accrued interest and all other charges due
under this agreement with respect to the Term Loan, without prepayment fee or penalty, within 90 days after the effective
date of the Adjustment. If Lender does not receive a Notice of Election to Prepay Borrower will be deemed to have
acknowledged and accepted the Adjustment. A Notice of Election to Prepay will not affect the effective date of the
Adjustment of the Interest Rate Margin.
3 . Commitment Fee. Section 2.05 Commitment Fee of the Credit Agreement is hereby amended in its entirety as
follows:
During the Line of Credit Availability Period, Borrower shall pay an annual commitment fee equal to 0.200% of the
difference between the annual average unpaid balance and the Line of Credit Committed Amount. The commitment fee
shall be paid on February 1 of each year. The commitment fee with respect to any partial year will be prorated according to
the ratio of the number of days in that partial year period to the number of days in the entire year.
4. Interest – Line of Credit. Section 2.06 of the Credit agreement is hereby amended in its entirety as follows:
The unpaid principal balance of Loans under the Line of Credit will bear interest at a rate equal to the one month
LIBOR plus 1.950% per annum, Adjusted on the first day of each Line of Credit Month (the “Line of Credit LIBOR Indexed
Rate"). The term “Line of Credit Month” means the one month period beginning on the first day of the calendar month
immediately following the Closing Date, and each successive one month period.
5. Interest Margin Adjustment – Line of Credit. Section 2.07 Interest Margin Adjustment” of the Credit Agreement is
hereby amended in its entirety as follows:
(a) Commencing on January 1, 2015 and on each January 1 thereafter (each a “Line of Credit Margin
Adjustment Date”), Lender shall Adjust the Interest Rate Margin applicable to the Line of Credit to an Interest Rate Margin
determined pursuant to the Pricing Grid attached hereto as Exhibit A (that, and any replacement pricing grid, the “Pricing
Grid”) based on Borrower’s Debt Service Coverage Ratio for the immediately preceding fiscal year.
(b) On July 1, 2016, and every two (2) years thereafter, Lender may Adjust the Interest Rate Margins set forth
in the Pricing Grid applicable to the Line of Credit Loan to any percent per annum determined by Lender. Lender shall notify
Borrower of the new Interest Rate Margins (and Pricing Grid) not less than 30 days prior to the applicable date of
Adjustment. The Pricing Grid shall become effective upon the applicable date of Adjustment at the Debt Service Coverage
Ratio category then in effect; except that Borrower may, at its option, prior to the applicable date of adjustment, notify Lender
that Borrower will Prepay the entire unpaid principal balance of the Line of Credit Loan, all accrued interest and other
charges due under the Line of Credit Loan, and terminate its ability to draw under the Line of Credit. Upon giving such
notice, Borrower shall pay the entire unpaid principal balance of the Line of Credit Loan, without prepayment fee or penalty,
within 90 days after the applicable date of
Alico
Sixth Amendment to Credit Agreement
1
Adjustment. If Lender does not receive such notice, Borrower will be deemed to have acknowledged and accepted the new
Pricing Grid. A notice of election to prepay will not affect the effective date of the Adjustment of the Interest Rate Margins.
6. Exhibit A is hereby replaced in its entirety with the Exhibit A attached hereto.
7. While the name of Alico Land Development Inc. is set forth as Alico Land Development, Inc. in documentation
from time to time, the correct legal name of Alico Land Development, Inc. is Alico Land Development Inc.
8. Representations and Warranties. Borrower represents and warrants that:
(a) all representations made by Borrower to Lender in the Credit Agreement are true and correct as if first made as of
the date of this agreement:
(b) the execution, delivery and performance by Borrower of this agreement and the Credit Agreement, as amended
by this agreement, are within Borrower’s powers, have been duly authorized by all necessary company action and do not
contravene Borrower’s articles of organization or operating agreement, as applicable, or any law or any contractual
restriction binding on or affecting Borrower, or result in, or require, the creation of any lien, security interest or other charge or
encumbrance upon or with respect to any of the Borrower’s properties, other than in favor of Lender;
(c) no authorization, approval or other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by Borrower of this agreement or the Credit
Agreement, as amended by this agreement;
(d) this agreement and the Credit Agreement, as amended by this agreement, constitute, legal, valid and binding
obligations of Borrower enforceable against Borrower in accordance with their respective terms; and
(e) no Event of Default or event which, with the giving of notice or the passage of time would be an Event of Default
has occurred, unless waived by the terms and conditions of this agreement.
9 . Modification Agreement. This agreement does not release or extinguish the Obligations under the Credit
Agreement. All Collateral granted to or for the benefit of Lender for purposes of securing the Obligations also secures the
Obligations under the Credit Agreement, as amended by this agreement; and Borrower reaffirms the terms and provisions of
all Collateral Documents.
1 0 . WAIVER OF PRIOR CLAIMS. BORROWER WAIVES AND RELEASES ANY AND ALL CLAIMS AGAINST
LENDER, ITS PARENT, SUBSIDIARIES, AFFILIATES AND ITS MERGED PREDECESSOR, AG SERVICES OF AMERICA,
INC., THE SUBSIDIARY OF SUCH PREDECESSOR, AG ACCEPTANCE CORPORATION, AND THE RESPECTIVE
SUCCESSORS, ASSIGNS, PARTICIPANTS, AGENTS AND EMPLOYEES OF EACH AND ALL OF THE FOREGOING,
RELATING OR PERTAINING TO OR AS A RESULT OF THE EXISTING LOANS, AND ANY OTHER ACT OR OMISSION
WHICH HAS OCCURRED PRIOR TO THE EXECUTION OF THIS AGREEMENT, INCLUDING ALL CLAIMS OF USURY,
FRAUD, DECEIT, MISREPRESENTATION, UNCONSCIONABILITY, DURESS, OR LENDER LIABILITY, ANY OTHER CLAIM
IN TORT OR IN CONTRACT, OR FOR VIOLATION OF ANY LAW, RULE OR REGULATION.
11. Reference to and Effect on the Credit Agreement.
(a) On and after the date hereof, each reference in the Credit Agreement to “this agreement”, “hereunder” “hereof”,
“herein” or words of like import shall mean and be a reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended by any prior amendments, the Credit Agreement shall remain in full force and
effect and is hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of Lender under the Credit Agreement, nor constitute a waiver of any
provision of the Credit Agreement.
12. Execution in Counterparts. This Amendment may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one
and the same instrument.
13. Expenses. The Borrower shall pay on demand all costs and expenses incurred by the Lender in connection with
the preparation, execution, delivery, filing, and administration of this Amendment (including, without limitation, Legal Fees
incurred in connection with the preparation of this Amendment and advising the Lender as to its rights, and the cost of any
credit verification reports or field examinations of the Borrower’s properties or books and records). The Borrower’s
obligations to the Lender under this Section shall survive termination of this Agreement and repayment of the Borrower’s
obligations to the Lender under the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date first above
written.
BORROWER
ALICO, INC., a Florida corporation
By: /s/ Clayton G. Wilson
CLAYTON G. WILSON, President & Chief Executive
Officer
Alico
Sixth Amendment to Credit Agreement
2
ALICO-AGRI, LTD., a Florida limited partnership
By: Alico, Inc., a Florida corporation, its General Partner
By: /s/ Clayton G. Wilson
CLAYTON G. WILSON, President & Chief Executive
Officer
ALICO PLANT WORLD, L.L.C., a Florida limited liability
company
By: Alico, Inc., a Florida corporation, its Manager
By: /s/ Clayton G. Wilson
CLAYTON G. WILSON, President & Chief Executive
Officer
ALICO FRUIT COMPANY, LLC, a Florida limited liability
company
By: Alico, Inc., a Florida corporation, its Sole Member
By: /s/ Clayton G. Wilson
CLAYTON G. WILSON, President & Chief Executive
Officer
ALICO LAND DEVELOPMENT, INC., a Florida corporation
By: /s/ Clayton G. Wilson
CLAYTON G. WILSON, President
ALICO CITRUS NURSERY, LLC, a Florida limited liability
company
By: Alico, Inc., a Florida corporation, its sole Member
By: /s/ Clayton G. Wilson
CLAYTON G. WILSON, President & Chief Executive
Officer
LENDER
RABO AGRIFINANCE, INC.
By: /s/ Judy Cochran
JUDY COCHRAN
Assistant Vice President
Alico
Sixth Amendment to Credit Agreement
3
EXHIBIT A
PRICING GRID
The Percentage Margin will be adjusted annually, on the first of each January, based upon the Borrower’s
Debt Coverage Service Ratio for the immediately preceding fiscal year. Category 1 pricing will apply from
the date hereof until January 1, 2015, at which time the pricing grid specified below will apply.
Debt Service Coverage Ratio
Percentage Margin
Default Rate
Category 1
≥ 1.75x
Category 2
≥ 1.15x
and
< 1.75x
Category 3
< 1.15x
1.95%
Category 3 Pricing + 5.00%
2.45%
Category 3 Pricing + 5.00%
2.95%
Category 3 Pricing + 5.00%
In the event of default, the Default Rate shall apply regardless of the level of the Debt Service Coverage
Ratio. The Default Rate will be 5% in excess of Category 3 Pricing.
Alico
Sixth Amendment to Credit Agreement
4
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 12, 2014
By:
/s/ Clayton G. Wilson
Clayton G. Wilson
President and 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 12, 2014
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, 2014 (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 12, 2014
By:
/s/ Clayton G. Wilson
Clayton G. Wilson
President and 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, 2014 (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 12, 2014
By:
/s/ W. Mark Humphrey
W. Mark Humphrey
Chief Financial Officer and Senior Vice President