Alico(ALCO) - 2023 Q1 - Quarterly Report

Part I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements The company's unaudited statements show a net loss of $3.2 million versus a prior-year net income of $10.1 million Condensed Consolidated Balance Sheets Total assets and liabilities both increased slightly, driven by changes in current assets and credit line borrowings Balance Sheet Summary (in thousands) | Account | Dec 31, 2022 | Sep 30, 2022 | | :--- | :--- | :--- | | Total Current Assets | $37,555 | $31,616 | | Total Assets | $412,990 | $409,255 | | Total Current Liabilities | $10,225 | $16,525 | | Total Liabilities | $167,386 | $160,390 | | Total Stockholders' Equity | $245,604 | $248,865 | - Total assets slightly increased to $413.0 million as of December 31, 2022, from $409.3 million as of September 30, 2022, primarily due to an increase in current assets like accounts receivable and inventories[11] - Total liabilities increased to $167.4 million, mainly driven by a significant increase in borrowings on lines of credit from $4.9 million to $19.0 million[11] Condensed Consolidated Statements of Operations The company experienced a significant revenue decline and shifted from a net income to a net loss year-over-year Statement of Operations Summary (in thousands, except per share data) | Metric | Q1 2023 (ended Dec 31, 2022) | Q1 2022 (ended Dec 31, 2021) | | :--- | :--- | :--- | | Total Operating Revenues | $10,588 | $15,337 | | Gross (Loss) Profit | $(3,801) | $1,811 | | Loss from Operations | $(6,310) | $(773) | | Net (Loss) Income | $(3,186) | $10,080 | | Net (Loss) Income Attributable to Alico | $(3,150) | $10,131 | | Diluted EPS | $(0.41) | $1.34 | | Cash Dividends per Share | $0.05 | $0.50 | - Total operating revenues decreased by 31.0% YoY, from $15.3 million to $10.6 million, primarily due to lower revenue from the Alico Citrus segment[12] - The company reported a net loss of $3.2 million, a significant shift from a net income of $10.1 million in the prior-year quarter, driven by lower revenues and a smaller gain on asset sales[12] Condensed Consolidated Statements of Cash Flows Operating cash usage remained stable, while investing activities used cash and financing activities provided cash Cash Flow Summary (in thousands) | Activity | Q1 2023 (ended Dec 31, 2022) | Q1 2022 (ended Dec 31, 2021) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(9,665) | $(9,608) | | Net Cash (Used in) Provided by Investing Activities | $(496) | $4,079 | | Net Cash Provided by Financing Activities | $9,565 | $4,712 | | Net Decrease in Cash | $(596) | $(817) | | Cash at End of Period | $269 | $69 | - Net cash used in operating activities remained stable at approximately $(9.7) million, reflecting the seasonal nature of the business where costs are incurred before harvest revenues are fully realized[18] - Investing activities used $0.5 million in cash, a sharp contrast to providing $4.1 million in the prior year, mainly due to lower proceeds from the sale of real estate[18] - Financing activities provided $9.6 million in cash, primarily from increased net borrowings on revolving lines of credit to fund operations[18] Notes to Condensed Consolidated Financial Statements Notes detail business segments, debt compliance, asset sales, and purchase commitments - The company operates two primary business segments: Alico Citrus (cultivation and management of citrus groves) and Land Management and Other Operations (leasing, conservation, etc)[19][24] - In Q1 2023, the company sold approximately 609 acres for $3.3 million, resulting in a gain of $3.2 million[48] - As of December 31, 2022, the company had total outstanding debt and lines of credit of $125.0 million and was in compliance with all financial covenants[56][67] - The company has outstanding purchase commitments of approximately $5.4 million for citrus trees as of December 31, 2022[109] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the revenue decline and net loss, attributing them to Hurricane Ian and a terminated contract Recent Developments Hurricane Ian significantly impacted groves, and the company is seeking federal relief while managing credit lines - Hurricane Ian, which made landfall on September 28, 2022, impacted a majority of the Company's groves, affecting fruit production[123] - The company is seeking federal relief funds made available through the Consolidated Appropriations Act to mitigate the financial impact of Hurricane Ian[126][127] - The working capital line of credit was extended to November 1, 2025, and the interest rate benchmark was converted from LIBOR to SOFR[124] - The company received the final portion of Hurricane Irma federal relief funds, amounting to $1.3 million in Q1 2023, which is recorded as a reduction to operating expenses[128] Condensed Consolidated Results of Operations A 31% revenue drop and a 73% decrease in other income led to a significant net loss compared to the prior year Quarterly Results of Operations (in thousands) | Metric | Q1 2023 (ended Dec 31, 2022) | Q1 2022 (ended Dec 31, 2021) | Change (%) | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $10,588 | $15,337 | (31.0)% | | Total Gross (Loss) Profit | $(3,801) | $1,811 | NM | | Loss from Operations | $(6,310) | $(773) | NM | | Total Other Income, net | $2,041 | $7,553 | (73.0)% | | Net (Loss) Income | $(3,186) | $10,080 | (131.6)% | - The significant decrease in revenue was primarily driven by a 30.4% decline in the Alico Citrus segment[129] - Other income decreased by 73.0% due to smaller gains on the sale of real estate in the current quarter ($3.2 million) compared to the prior-year quarter ($8.4 million)[149] Segment Performance The Alico Citrus segment suffered from a terminated contract and hurricane impact, while Land Management revenue also fell - Alico Citrus revenue decreased primarily due to a $3.2 million (94.5%) decline in Grove Management Services after a major third-party client exited the citrus business[131][134] - The Early and Mid-Season harvest was negatively impacted by Hurricane Ian, leading to accelerated harvesting, a 4.5% decrease in pound solids per box, and a 2.7% decrease in processed boxes[135] - Alico Citrus operating expenses increased by 6.8% due to significant cost increases in fertilizer, herbicide, fuel, and additional costs for hurricane-related cleanup and repairs[131][139] - Land Management and Other Operations revenue decreased by 45.7%, mainly due to lower grazing and hunting lease revenue resulting from the sale of portions of the Alico Ranch[144][145] Liquidity and Capital Resources Working capital increased significantly, and management believes liquidity is sufficient for the next twelve months Liquidity Summary (in thousands) | Metric | Dec 31, 2022 | Sep 30, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $269 | $865 | | Working capital | $27,330 | $15,091 | | Principal amount of term loans and lines of credit | $124,982 | $111,624 | - Working capital increased significantly to $27.3 million from $15.1 million, primarily due to a decrease in current liabilities, specifically accrued dividends and ad valorem taxes[73][153] - The company had approximately $50.7 million available under its $70 million working capital line of credit and $25 million available under its revolving line of credit as of December 31, 2022[157] - Management believes that cash-on-hand, cash from operations, asset sales, and available credit lines will provide sufficient liquidity for at least the next twelve months[156] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risk disclosures from its last annual report - There have been no material changes in the company's quantitative and qualitative disclosures about market risk during the reporting period[167] Item 4. Controls and Procedures Management concluded disclosure controls were ineffective due to a material weakness in financial reporting - Management concluded that disclosure controls and procedures were not effective as of the end of the period covered by the report[168] - The ineffectiveness is due to a continuing material weakness related to controls around the income tax provision and the evaluation of financial statement misstatements[170][171] - A remediation plan has been designed and is being implemented to address the control deficiencies, including instituting a more rigorous reconciliation process for the tax provision and documenting the evaluation of any misstatements[171][172] Part II - OTHER INFORMATION Item 1. Legal Proceedings The company is not party to any legal proceedings expected to have a material adverse effect - There are no current legal proceedings expected to have a material adverse effect on the Company[176] Item 1A. Risk Factors No material changes to the risk factors disclosed in the company's latest Annual Report have occurred - No material changes have occurred in the risk factors from the company's most recent Form 10-K filing[177] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not engage in any unregistered equity sales or share repurchases during the quarter - There were no sales of unregistered equity securities during the reporting period[178] - The company did not purchase any of its own equity securities during the reporting period[178]