Alico(ALCO) - 2025 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Presents Alico, Inc.'s unaudited condensed consolidated financial statements and notes for Q2 and YTD 2025 and 2024, covering financial position, operations, equity, and cash flows Condensed Consolidated Balance Sheets | (in thousands) | June 30, 2025 | September 30, 2024 | | :--------------------------------- | :------------ | :----------------- | | Cash and cash equivalents | $42,073 | $3,150 | | Total current assets | $55,957 | $40,627 | | Property and equipment, net | $149,460 | $352,733 | | Total assets | $210,560 | $398,719 | | Total current liabilities | $5,969 | $10,651 | | Long-term debt, net | $81,320 | $82,313 | | Total liabilities | $93,860 | $142,424 | | Total stockholders' equity | $116,700 | $256,295 | Condensed Consolidated Statements of Operations | (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Total operating revenues | $8,390 | $13,610 | $43,264 | $45,708 | | Gross loss | $(28,056) | $(4,287) | $(185,991) | $(36,700) | | Loss from operations | $(30,923) | $(6,728) | $(194,832) | $(44,734) | | Net (loss) income attributable to Alico, Inc. common stockholders | $(18,289) | $(2,044) | $(138,841) | $25,097 | | Basic (Loss) earnings per common share | $(2.39) | $(0.27) | $(18.18) | $3.29 | | Diluted (Loss) earnings per common share | $(2.39) | $(0.27) | $(18.18) | $3.29 | | Cash dividends declared per common share | $0.05 | $0.05 | $0.15 | $0.15 | Condensed Consolidated Statements of Changes in Equity | (in thousands) | Balance at Sept 30, 2024 | Net income (loss) | Dividends ($0.15/share) | Stock-based compensation | Balance at June 30, 2025 | | :--------------- | :----------------------- | :---------------- | :---------------------- | :----------------------- | :----------------------- | | Common stock | $8,416 | — | — | — | $8,416 | | Paid In Capital | $20,184 | — | — | $149 | $20,333 | | Treasury Stock | $(26,694) | — | — | $410 | $(26,284) | | Retained Earnings| $249,253 | $(138,841) | $(1,146) | — | $109,266 | | Total Alico, Inc. Equity | $251,159 | $(138,841) | $(1,146) | $559 | $111,731 | | Noncontrolling Interest | $5,136 | $(167) | — | — | $4,969 | | Total Equity | $256,295 | $(139,008) | $(1,146) | $559 | $116,700 | Condensed Consolidated Statements of Cash Flows | (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | | Net cash provided by (used in) operating activities | $22,841 | $(18,720) | | Net cash provided by investing activities | $24,693 | $70,088 | | Net cash used in financing activities | $(8,097) | $(45,954) | | Net increase in cash and cash equivalents and restricted cash | $39,437 | $5,414 | | Cash and cash equivalents and restricted cash at end of the period | $42,835 | $9,106 | Notes to Condensed Consolidated Financial Statements Note 1. Description of Business and Basis of Presentation - Alico, Inc. is a Florida agribusiness and land management company owning approximately 50,570 acres of land and 46,200 acres of mineral rights, operating in two segments: Alico Citrus and Land Management and Other Operations[30] - On January 6, 2025, the Company announced a Strategic Transformation to wind down its Alico Citrus division due to financial challenges from citrus greening disease and environmental factors, focusing instead on diversified land usage and real estate development, involving a workforce reduction of up to 172 employees[31] - In May 2025, the Company terminated its agreement with Tropicana following the fulfillment of all obligations for the 2024/2025 Crop Year[31] - The Company's Board of Directors approved a stock repurchase program on March 25, 2025, authorizing repurchases of up to $50.0 million of common stock, expiring April 1, 2028[36] Note 2. Summary of Significant Accounting Policies - Revenue is primarily derived from the sale of processed fruit, fresh fruit, and grove management services, recognized when control is transferred to customers, typically upon delivery and acceptance[39][40] Disaggregated Revenue (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Alico Citrus | $7,805 | $13,237 | $41,384 | $44,591 | | Land Management and Other Operations | $585 | $373 | $1,880 | $1,117 | | Total Revenues | $8,390 | $13,610 | $43,264 | $45,708 | - The Company recognized $1,116 thousand and $2,911 thousand in grant monies from the CRAFT program for citrus greening combat for the nine months ended June 30, 2025 and 2024, respectively[54] - For the nine months ended June 30, 2025, the Company recognized an impairment of long-lived assets totaling $24,966 thousand, primarily affecting young trees and assets at one grove, due to the Strategic Transformation[56] Note 3. Inventories | (in thousands) | June 30, 2025 | September 30, 2024 | | :--------------- | :------------ | :----------------- | | Unharvested fruit crop on the trees | $2,428 | $28,921 | | Other | $567 | $1,163 | | Total inventories| $2,995 | $30,084 | - Inventory adjustments to net realizable value were $9,895 thousand for the nine months ended June 30, 2025, primarily due to a lower than anticipated harvest caused by Hurricane Milton, a significant decrease from $28,549 thousand in the prior year, which was impacted by Hurricane Ian[68] - The Company received $20,010 thousand in insurance proceeds related to Hurricane Milton for the nine months ended June 30, 2025[69] Note 4. Assets Held for Sale | (in thousands) | June 30, 2025 | September 30, 2024 | | :--------------- | :------------ | :----------------- | | Alico Citrus | $6,659 | $3,037 | | Total assets held for sale | $6,659 | $3,106 | - During the nine months ended June 30, 2025, the Company sold approximately 2,794 acres of land for $23,502 thousand[72] - In the prior year (nine months ended June 30, 2024), the Company sold approximately 18,354 acres of land for $86,217 thousand, including 17,229 acres of the Alico Ranch to the State of Florida, recognizing a gain of $81,246 thousand[73] Note 5. Property and Equipment, Net | (in thousands) | June 30, 2025 | September 30, 2024 | | :--------------- | :------------ | :----------------- | | Citrus trees | $54,364 | $319,149 | | Equipment and other facilities | $39,015 | $58,293 | | Buildings and improvements | $5,212 | $6,515 | | Land and land improvements | $112,896 | $114,862 | | Property and equipment, net | $149,460 | $352,733 | - Due to the Strategic Transformation, the Company recognized an impairment of young trees and long-lived assets at one grove totaling $24,966 thousand for the nine months ended June 30, 2025[75][76] - The estimated useful life of citrus trees was changed to 4-16 months, resulting in accelerated depreciation of approximately $160,526 thousand for the nine months ended June 30, 2025, impacting net income by $126,816 thousand and diluted EPS by a loss of $16.61[79] Note 6. Accrued Liabilities | (in thousands) | June 30, 2025 | September 30, 2024 | | :--------------- | :------------ | :----------------- | | Ad valorem taxes | $1,182 | $1,898 | | Accrued employee wages and benefits | $964 | $1,727 | | Accrued interest | $549 | $554 | | Accrued dividends| $382 | $381 | | Professional fees| $163 | $275 | | Accrued insurance| $73 | $124 | | Other accrued liabilities | — | $407 | | Total accrued liabilities | $3,313 | $5,366 | Note 7. Restructure and Other Charges - The Board approved a workforce reduction of up to 172 employees as part of the Strategic Transformation, with 135 employees affected by January 6, 2025, and 34 more between April 1 and May 30, 2025[81] | (in thousands) | Personnel | Other | Total | | :--------------- | :-------- | :---- | :---- | | Restructure expense | $2,261 | $313 | $2,574| | Restructure payments | $(2,121) | $(313) | $(2,434)| | Balance at June 30, 2025 | $140 | — | $140 | Note 8. Long-Term Debt and Lines of Credit | (in thousands) | June 30, 2025 | September 30, 2024 | | :--------------- | :------------ | :----------------- | | Met Fixed-Rate Term Loans | $70,000 | $70,000 | | Pru Loans A & B | $9,587 | $10,457 | | Met Citree Term Loan | $3,513 | $3,700 | | Long-term debt | $81,320 | $82,313 | | (in thousands) | June 30, 2025 | September 30, 2024 | | :--------------- | :------------ | :----------------- | | RLOC | $2,500 | $8,394 | | Line of Credit | $1,761 | $7,723 | - On March 31, 2025, the Company entered into a Seventh Amendment to its Credit Agreement with Met, removing previous restrictive covenants and replacing them with a Quarterly Liquidity Covenant requiring maintenance of cash and cash equivalents equal to 1.5 times the cumulative sum of scheduled principal and interest payments due to Met and Prudential, plus projected interest payments on the Amended RLOC, and maintaining Working Capital in excess of this Minimum Liquidity Requirement[88][169] - As of June 30, 2025, the Minimum Liquidity Requirement was $7,400 thousand, and the Company was in compliance with all financial covenants[88][92] Note 9. Income Taxes Effective Tax Rate | Period | Effective Tax Rate | | :----- | :----------------- | | Three Months Ended June 30, 2025 | 29.9% (benefit) | | Nine Months Ended June 30, 2025 | 21.0% (benefit) | | Three Months Ended June 30, 2024 | (31.1)% (benefit) | | Nine Months Ended June 30, 2024 | 28.4% (provision) | - The effective tax rate for the three and nine months ended June 30, 2025, differed from the federal statutory rate primarily due to a change in the valuation allowance, as management determined it was not 'more likely than not' that deferred tax assets would be realized, mainly due to anticipated cumulative three-year loss from accelerated book depreciation on citrus assets[97] - The H.R. 1 - One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, and the Company is evaluating its potential impact on financial position, results of operations, and cash flows[99] Note 10. Segment Information Segment Revenues (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Alico Citrus | $7,805 | $13,237 | $41,384 | $44,591 | | Land Management and Other Operations | $585 | $373 | $1,880 | $1,117 | | Total operating revenues | $8,390 | $13,610 | $43,264 | $45,708 | Segment Gross (Loss) Profit (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Alico Citrus | $(28,499) | $(4,576) | $(187,638) | $(37,471) | | Land Management and Other Operations | $443 | $289 | $1,647 | $771 | | Total gross (loss) profit | $(28,056) | $(4,287) | $(185,991) | $(36,700) | Segment Assets (in thousands) | Segment | June 30, 2025 | September 30, 2024 | | :-------------------------- | :------------ | :----------------- | | Alico Citrus | $196,596 | $383,777 | | Land Management and Other Operations | $12,491 | $13,134 | | Other Corporate Assets | $1,473 | $1,808 | | Total Assets | $210,560 | $398,719 | Note 11. Leases - The Company's leases primarily consist of operating lease arrangements for office space, tractor leases, and IT facilities, with lease costs recorded in general and administrative expenses of $37 thousand for both the three months ended June 30, 2025 and 2024, and $111 thousand for both the nine months ended June 30, 2025 and 2024[103][106] - The weighted-average remaining lease term for operating leases as of June 30, 2025, was 1.2 years, with a weighted-average discount rate of 5.34%[106] Note 12. Stock-based Compensation - Total stock-based compensation expense recognized in general and administrative expense was $195 thousand for the three months ended June 30, 2025 (vs. $175 thousand in 2024) and $559 thousand for the nine months ended June 30, 2025 (vs. $544 thousand in 2024)[117] - On December 23, 2024, the Company granted Market-based Restricted Stock Units (MRSUs) to an executive, eligible to be earned if the average 30-day closing stock price exceeds specified thresholds ($35, $40, $45 per share) by September 30, 2027[114] Market-based Restricted Stock Units (MRSUs) at June 30, 2025 | Metric | Value | | :-------------------------------- | :------ | | Shares Outstanding | 38,000 | | Weighted Average Grant Date Fair Value | $12.32 | | Weighted Average Remaining Contractual Term | 2.8 years | | Aggregate Intrinsic Value Expected to Vest | $1,134 | Note 13. Commitments and Contingencies - The Company is involved in litigation arising from normal business operations but believes no current legal proceedings will have a material adverse effect on its financial condition[118] Note 14. Related Party Transactions - On June 10, 2024, Citree operating partners received a funding notice for a $750 thousand Cash Capital Contribution due to limited revenue from hurricane-affected trees, with Alico's portion being $382 thousand, funded on July 11, 2024[119] Note 15. Subsequent Events - No additional events requiring disclosure were identified between June 30, 2025, and the financial statements' issuance date[120] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion of Alico, Inc.'s financial condition and results of operations for Q2 and YTD 2025 and 2024 Business Overview - Alico's operating revenues are primarily from citrus product sales, third-party grove management, and grazing/hunting leasing, with the Alico Citrus segment winding down operations post-2024/2025 harvest to focus on diversified land usage and real estate development[122] Key Financial Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Operating revenue | $8,390 | $13,610 | $43,264 | $45,708 | | Loss from operations | $(30,923) | $(6,728) | $(194,832) | $(44,734) | | Net loss attributable to common stockholders | $(18,289) | $(2,044) | $(138,841) | $25,097 | | Net cash provided by (used in) operating activities | N/A | N/A | $22,841 | $(18,720) | - For the three months ended June 30, 2025, Alico Citrus generated 93.0% of consolidated revenues, while Land Management and Other Operations generated 7.0%, with these figures being 95.7% and 4.3%, respectively, for the nine months[125][126] Recent Developments - The Corkscrew Grove Stewardship District was created on June 25, 2025, to finance infrastructure, manage natural areas, and oversee master-planned communities in eastern Collier County, assisting Alico's land development efforts[128] - During the quarter ended June 30, 2025, the Company sold approximately 694 acres of land for $6,247 thousand ($9,000 per acre)[129] - The Company received $15,970 thousand in crop insurance proceeds related to Hurricane Milton during the three months ended June 30, 2025, bringing the nine-month total to $20,010 thousand[130] - Grant monies of $1,116 thousand were received from the CRAFT Program during the three months ended June 30, 2025[131] Condensed Consolidated Results of Operations | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | Change ($) | Change (%) | | :--------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Total operating revenues | $8,390 | $13,610 | $(5,220) | (38.4)% | $43,264 | $45,708 | $(2,444) | (5.3)% | | Total gross (loss) profit | $(28,056) | $(4,287) | $(23,769) | 554.4% | $(185,991) | $(36,700) | $(149,291) | 406.8% | | Loss from operations | $(30,923) | $(6,728) | $(24,195) | 359.6% | $(194,832) | $(44,734) | $(150,098) | 335.5% | | Total other income, net | $4,799 | $3,958 | $841 | 21.2% | $18,950 | $78,969 | $(60,019) | (76.0)% | | (Loss) income before income taxes | $(26,124) | $(2,770) | $(23,354) | NM | $(175,882) | $34,235 | $(210,117) | NM | | Net loss attributable to Alico, Inc. common stockholders | $(18,289) | $(2,044) | $(16,245) | NM | $(138,841) | $25,097 | $(163,938) | NM | Operating Revenue - Total operating revenue decreased by 38.4% for the three months and 5.3% for the nine months ended June 30, 2025, primarily due to earlier citrus harvests and a 26.4% decrease in total pound solids produced (impacted by Hurricane Milton)[134][136] - These decreases were partially offset by a 28.5% increase in Valencia crop price per pound solids for the three months and a blended 30.2% increase for the nine months, driven by favorable Tropicana contract pricing[135][136] - Land Management and Other Operations revenue increased by 56.8% and 68.3% for the three and nine months, respectively, mainly due to higher rock and sand royalty income and sod sales, despite lower farm, grazing, and hunting lease revenues from the Alico Ranch sale[137] Operating Expenses - Operating expenses increased by $18,549 thousand for the three months and $146,847 thousand for the nine months ended June 30, 2025, primarily driven by accelerated depreciation of approximately $40,586 thousand and $159,941 thousand on citrus trees, respectively, due to the Strategic Transformation, and a $24,966 thousand impairment of young trees and long-lived assets[138] - Offsetting these increases were lower inventory adjustments ($9,895 thousand for nine months vs. $28,549 thousand prior year) and $20,010 thousand in crop insurance proceeds from Hurricane Milton for the nine months[138] General and Administrative Expense - General and administrative expense increased by $426 thousand for the three months and $807 thousand for the nine months ended June 30, 2025, due to accelerated depreciation on administrative assets, higher employee costs (bonus accruals), and increased legal fees related to the Strategic Transformation[139][140] Other Income (Expense), net - Other income (expense), net increased by $841 thousand for the three months ended June 30, 2025, driven by the sale of 694 acres of land and a $1,275 thousand gain from equipment and vehicle sales[141] - For the nine months, other income (expense), net decreased by $60,019 thousand, primarily due to fewer land sales compared to the prior year when the Alico Ranch was sold to the State of Florida[142] Income Taxes - The income tax benefit increased by $6,939 thousand for the three months ended June 30, 2025, due to a higher pre-tax loss from accelerated depreciation of citrus assets[143] - For the nine months, the change to a tax benefit from a tax provision (a $46,595 thousand shift) was driven by decreased earnings from accelerated depreciation, contrasting with the prior year's tax expense from the Alico Ranch sale[144][145] Alico Citrus Segment Alico Citrus Segment Operating Revenues (in thousands) | Operating Revenues | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | Change ($) | Change (%) | | :----------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Valencias | $7,795 | $12,183 | $(4,388) | (36.0)% | $24,088 | $26,915 | $(2,827) | (10.5)% | | Grove Management Services | $7 | $946 | $(939) | (99.3)% | $888 | $2,341 | $(1,453) | (62.1)% | | Total | $7,805 | $13,237 | $(5,432) | (41.0)% | $41,384 | $44,591 | $(3,207) | (7.2)% | Alico Citrus Segment Production Metrics | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | Change (%) | | :-------------------- | :------------------------------- | :------------------------------- | :--------- | :------------------------------ | :------------------------------ | :--------- | | Total Processed Boxes Harvested | 420 | 843 | (50.2)% | 2,249 | 3,049 | (26.2)% | | Total Pound Solids Produced | 2,134 | 4,294 | (50.3)% | 10,846 | 14,729 | (26.4)% | | Valencia Price per Pound Solids | $3.65 | $2.84 | 28.5% | $3.64 | $2.87 | 26.8% | - The decrease in Alico Citrus revenue was primarily due to a 50.3% and 26.4% decrease in total pound solids produced for the three and nine months, respectively, largely caused by fruit drop from Hurricane Milton, with Grove Management Services revenue also significantly decreasing due to the expiration of the Grove Owners contract[149][150] - Cost of Sales for Alico Citrus increased significantly due to accelerated depreciation on citrus trees and the impairment of young trees and long-lived assets, partially offset by lower inventory adjustments and crop insurance proceeds[151] Land Management and Other Operations Segment Land Management and Other Operations Segment Revenues (in thousands) | Revenue From: | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Land and Other Leasing | $496 | $302 | $194 | 64.2% | $1,649 | $894 | $755 | 84.5% | | Other | $89 | $71 | $18 | 25.4% | $231 | $223 | $8 | 3.6% | | Total | $585 | $373 | $212 | 56.8% | $1,880 | $1,117 | $763 | 68.3% | - Revenue for Land Management and Other Operations increased by 56.8% and 68.3% for the three and nine months, respectively, primarily due to higher rock and sand royalty income and sod sales, partially offset by reduced farm, grazing, and hunting lease revenues following the sale of Alico Ranch[156] - Operating expenses for this segment increased by 69.0% for the three months due to sod sales but decreased by 32.7% for the nine months, mainly attributable to lower property and real estate taxes after the Alico Ranch sale[157] Seasonality - Historically, Alico's citrus business was seasonal, with most annual revenue generated in the second and third fiscal quarters, but due to lower production and shifting harvest cycles, working capital requirements are now greater in the third and fourth quarters[158] - The Strategic Transformation and the termination of the Tropicana agreement are expected to diminish these seasonal patterns as the Company winds down citrus operations[160] Liquidity and Capital Resources Comparative Balance Sheet Summary (in thousands) | Metric | June 30, 2025 | September 30, 2024 | Change ($) | | :--------------------------------- | :------------ | :----------------- | :--------- | | Cash and cash equivalents | $42,073 | $3,150 | $38,923 | | Total current assets | $55,957 | $40,627 | $15,330 | | Total current liabilities | $5,969 | $10,651 | $(4,682) | | Working capital | $49,988 | $29,976 | $20,012 | | Total assets | $210,560 | $398,719 | $(188,159) | | Principal amount of term loans and lines of credit | $85,600 | $92,551 | $(6,951) | | Current ratio | 9.37 to 1 | 3.81 to 1 | | | Minimum Liquidity Requirement | $7,400 | N/A | NM | - Management believes current cash, cash from operations, asset sales, and RLOC availability will provide sufficient liquidity for debt service, working capital, and capital expenditures for at least the next twelve months and long-term[166] - The Company has a $95,000 thousand RLOC, with $92,500 thousand available as of June 30, 2025, and the Amended Credit Agreement includes a 55.0% Loan To Value Cap on term loans and RLOC capacity[167][171] Cash Flows Cash Flow Summary (in thousands) | (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | Change ($) | | :------------------------------------------ | :------------------------------ | :------------------------------ | :--------- | | Net cash provided by (used in) operating activities | $22,841 | $(18,720) | $41,561 | | Net cash provided by investing activities | $24,693 | $70,088 | $(45,395) | | Net cash used in financing activities | $(8,097) | $(45,954) | $37,857 | | Net increase in cash and cash equivalents and restricted cash | $39,437 | $5,414 | $34,023 | - The $41,561 thousand change in net cash from operating activities was driven by lower caretaking spending due to the winding down of Citrus operations[174] - Net cash from investing activities decreased by $45,395 thousand, primarily due to fewer land sales in the current nine-month period[175] - Net cash used in financing activities decreased by $37,857 thousand, mainly due to lower debt repayments compared to the prior year's repayment of Met Life Variable-Rate Term debt and WCLC balance from Alico Ranch sale proceeds[176] Contractual Obligations - Material cash requirements from contractual obligations include principal and interest payments on long-term debt, operating leases, and purchase commitments, as detailed in the financial statement notes[178] Critical Accounting Policies and Estimates - There have been no material changes to the Company's Critical Accounting Policies and Estimates from those reflected in the 2024 Annual Report on Form 10-K[181] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Alico, Inc. is exempt from providing quantitative and qualitative disclosures about market risk - Alico, Inc. is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[182] Item 4. Controls and Procedures Discusses Alico, Inc.'s disclosure controls and procedures and remediation of a material weakness in internal controls over financial reporting Limitations on effectiveness of controls and procedures - Management acknowledges that controls and procedures, regardless of design, can only provide reasonable assurance of achieving control objectives due to inherent limitations like resource constraints and the need for judgment[183] Evaluation of Disclosure Controls and Procedures - As of June 30, 2025, management, with the participation of the principal executive and financial officers, concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level[184] Remediation of Material Weakness - The material weakness in internal controls over financial reporting, previously disclosed in the 2024 Form 10-K, related to spreadsheet controls for inventory net realizable value calculation, has been remediated as of June 30, 2025[185][186] Changes in Internal Control over Financial Reporting - Other than the remediation of the material weakness, there have been no other changes in internal controls over financial reporting during the quarter ended June 30, 2025, that materially affected or are reasonably likely to materially affect them[187] PART II - OTHER INFORMATION Item 1. Legal Proceedings Alico, Inc. is involved in normal course litigation but expects no material adverse effect on its financial position or results - The Company is not currently a party to any legal proceedings that it believes will have a material adverse effect on its financial position, results of operations, or cash flows[189] Item 1A. Risk Factors Outlines numerous risks and uncertainties that could materially affect Alico, Inc.'s business, financial condition, and results Risks Related to our Business - Failure to successfully develop and execute strategic growth initiatives, particularly the shift to diversified land usage and real estate development after winding down citrus operations, could adversely affect the business[191][192] - The workforce reduction of up to 172 employees may lead to unintended consequences such as loss of institutional knowledge, decreased morale, and difficulties in pursuing new opportunities[195][196] - Adverse weather conditions, natural disasters (especially hurricanes and tropical storms in Florida), and climate change effects pose significant risks, potentially causing crop losses, increased costs, and inventory impairments[197][198] - A significant portion of future revenues is expected to shift from citrus to land usage and real estate development, and adverse events in these new areas could negatively impact financial results[201] - Other risks include intense competition in agricultural operations, unpredictable supply and demand pricing, product contamination liability, water use regulations, changes in immigration laws, harm to reputation, and potential adverse effects from significant corporate transactions[203][206][207][208][210][211][214] - Macroeconomic conditions (inflation, conflicts in Ukraine/Israel), public company costs, system security risks, data protection breaches, and complex privacy laws could also adversely affect the business[237][238][239][240][247] Risks Related to Our Indebtedness - The Company maintains significant indebtedness ($85,600 thousand principal outstanding as of June 30, 2025), which could adversely affect financial condition, limit operational flexibility, and increase vulnerability to economic downturns[251] - Failure to generate sufficient cash flow to service debt obligations, which depend on economic conditions and various business factors, could force the Company to reduce capital expenditures, sell assets, or restructure debt[252] - Variable interest rates on credit facilities could lead to higher interest expenses if rates increase, potentially reducing profitability and causing breaches of debt covenants[253] Risks Related to our Common Stock - The market price of Alico's common stock may be volatile or decline due to various factors, including operating performance, research reports, corporate announcements, and general market conditions[256] - The Company may not be able to continue paying or maintaining cash dividends, and any reduction or elimination of dividends could negatively affect the stock price[257] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the reporting period, Alico, Inc. did not engage in any unregistered sales of equity securities or issuer repurchases of its equity securities - There were no sales of unregistered equity securities during the period covered by this Quarterly Report[258] - There were no issuer repurchases of the Company's equity securities during the period covered by this Quarterly Report[259] Item 3. Defaults Upon Senior Securities Alico, Inc. reported no defaults upon senior securities during the period - There were no defaults upon senior securities[261] Item 4. Mine Safety Disclosure This item is not applicable to Alico, Inc. - Mine Safety Disclosure is not applicable to the Company[262] Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q2 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[263] Item 6. Exhibits Lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, contracts, and certifications - The report includes various exhibits such as the Restated Certificate of Incorporation, amendments to Articles of Incorporation, Second Amended By-Laws, Purchase and Sale Agreement, Letter Agreement, CEO and CFO certifications (Sections 302 and 1350), and Inline XBRL Instance Document and Taxonomy Extension documents[264]