Alico, Inc. (“Alico” or the “Company”) (NASDAQ:ALCO) announces the
Alico 2.0 Modernization Program. In January 2017, Alico Inc.
embarked on an aggressive plan to improve its operational
efficiencies and optimize its asset returns. This program,
called Alico 2.0, is transforming three legacy businesses (Alico,
Orange Co., and Silver Nip) into a single efficient enterprise,
Alico Citrus, so we will remain one of the leaders in the U.S.
citrus industry. This initiative explored every aspect of
Alico’s citrus and ranch operations, including corporate and
operational cost structures, grove costs, purchasing and
procurement, non-performing and under-performing assets,
professional fees, and human resources efficiency.
Alico has been careful to eliminate costs that it believes will
not negatively affect citrus production. In fact, we believe
that its new management structure and practices will drive enhanced
production. Alico 2.0 will take at least two seasons to
realize full results. Alico Citrus is reducing total expenses
per acre from $3,314/acre in FY16 to $2,164/acre when Alico 2.0 is
fully implemented. Overall, the program should reduce the
company’s cost to produce a pound solid from $2.14 to $1.56.
|
|
|
(Per Acre) |
FY16 |
Alico 2.0 |
Grove Costs |
$ |
1,850 |
$ |
1,300 |
Pick, Load, and Haul |
$ |
787 |
$ |
668 |
G&A |
$ |
213 |
$ |
139 |
|
|
|
|
|
This efficiency will be achieved through better purchasing, more
precise application of selected fertilizers and chemicals,
outsourcing work such as harvesting, hauling, and certain
caretaking tasks, and by streamlining grove management. Alico
Citrus also expects to deploy a more efficient labor model that is
consistent and uniform for field staffing and grove operating
programs and aligns with the geographical footprint of the citrus
groves. In addition to grove cost savings, Alico Citrus’
general and administrative expenses are projected to decline by
more than 25% over the next two years, and recent information
technology investments have already automated and simplified many
administrative tasks.
Alico 2.0 led the Company to decide to divest assets that
generated low rates of return and shut down parts of its operations
that were not profitable. Alico Citrus has shut down its
nursery in Gainesville, is in the process of selling its trucks and
trailers, consolidated offices, and sold real estate assets that
were not strategic. We believe that Alico has approximately
$175 million of assets which may be divested without materially
affecting earnings. This quarter, Alico will cease its direct
cattle operations at Alico Ranch. The ranch has been a
landholding for us for generations, but, even when profitable,
ranch operations generated a minimal rate of return on
capital. Alico will continue to own the property and still
conduct its long term water dispersement program and wildlife
management programs, but it will lease the ranch to a third party
operator instead of conducting its own cattle operations. All
of these decisions are intended to enable additional investment in
the citrus business and redeployment of capital elsewhere.
Management within Alico Citrus is also changing. Danny
Sutton has been promoted to President and General Manager of Alico
Citrus, taking over for Steve Ryan, who has resigned to pursue
other opportunities. We thank Mr. Ryan for his help in
implementing Alico 2.0. Mr. Sutton has shown great leadership
over the past year, and the performance of the Alico Citrus staff
under his direction before and after Hurricane Irma gave the Alico
Board of Directors confidence that he is ready to lead Alico Citrus
through its current challenges towards sustainable increased
prosperity.
We are pleased to announce that when Alico 2.0 is fully
implemented over the next two years, Alico Citrus expects to
generate net income of $17.9mm, EBITDA of $50mm, earnings of
$2.00-$2.40 per share and its ROCE will increase to between
12-14%. When combined with the Dispersed Water Program, the
Company believes that Adjusted EBITDA at Alico will increase to
$60mm and earnings of $3.00-$3.25/share. These estimates
assume normalized pre-hurricane levels of approximately 7.9mm boxes
of citrus production and the achievement of $12mm of cost savings
which are already in progress.
Alico 2.0 also includes an enhanced program to plant more than
400,000 trees in FY2018, which is expected to drive growth beyond
2020. The Company believes that its current acreage can
produce 10mm boxes per year on a sustained basis, even in an
environment where citrus greening continues.
Impact of Hurricane Irma
Florida’s citrus industry was hit hard by the recent impacts of
Hurricane Irma. Alico Citrus estimates that production will
be down 40-45% from the prior season that was completed in June of
2017. While Alico Citrus lost a small percentage of trees,
the force and duration of the storm impacted the majority of the
groves. Based upon prior experience with serious storms of
this nature, we expect it will take at least two seasons for the
groves to recover to pre-hurricane production levels. Alico
Citrus expects production between 4.0-4.4mm boxes in FY2018, an
increase in production in FY2019 and a return to pre-hurricane
production levels by FY2020. The Company has crop insurance
and is working closely with its insurers and adjusters. It is
also working with Florida Citrus Mutual, the industry trade group,
and government agencies on potential federal relief funds.
Despite the fixed cost nature of its agricultural business, the
Company believes that the Alico 2.0 restructuring efforts and cost
efficiencies that were began in early 2017 will mitigate the
financial impact to Alico of Hurricane Irma. The Company
expects to be EBITDA breakeven in FY2018, before the benefit of any
insurance claims paid or federal relief funds, with an improvement
the following season as production rebounds.
Alico Dispersed Water Program
Alico currently has a 10 year contract with the state of Florida
to store 94,000 acre feet of water for $127 per acre foot. This
Dispersed Water Program continues to make progress in seeking
permitting approval from the Southwest Florida Water Management
District and the Natural Resources Conservation Service. The
project impacts approximately 34,000 acres of the 71,000 acre Alico
Ranch, making it one of the largest private water storage programs
in Florida. The Company is extremely proud of developing this
venture because it protects historical lands in central Florida
from development, provides a significantly more cost efficient
solution for the state’s water storage programs, addresses
longstanding Everglades pollution issues, and provides an important
solution to numerous problems in central Florida and on both coasts
caused by overflows from Lake Okeechobee.
Real Estate Dispositions
A core goal of Alico 2.0 is that the Company will not retain
assets that depress its overall rate of return. A
comprehensive review of Alico’s assets identified approximately
$175mm of properties that generate no or low returns, including its
office building in Ft. Myers, which was recently sold. Over
the next two years, the Company expects that a substantial number
of these assets will be sold. The proceeds from these sales
will be redeployed or returned to shareholders.
About Alico
Alico is a holding company with assets and
related operations in agriculture and environmental resources,
including cattle ranching, water management, and mining. Our
mission is to create value for shareholders by managing existing
assets to their optimal current income and total returns,
opportunistically acquiring new assets and producing high quality
agricultural products while exercising responsible environmental
stewardship. Learn more about Alico (NASDAQ:ALCO) at
www.alicoinc.com.
Forward-Looking Statements
This press release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. These forward-looking statements are based on
Alico’s current expectations about future events and can be
identified by terms such as “plans,” “expect,” “may,” “anticipate,”
“intend,” “should be,” “will be,” “is likely to,” “believes,” and
similar expressions referring to future periods.
Alico believes the expectations reflected in the
forward-looking statements are reasonable but cannot guarantee
future results, level of activity, performance or achievements.
Actual results may differ materially from those expressed or
implied in the forward-looking statements. Therefore, Alico
cautions you against relying on any of these forward-looking
statements. Factors which may cause future outcomes to differ
materially from those foreseen in forward-looking statements
include, but are not limited to: changes in laws, regulation and
rules; weather conditions that affect production, transportation,
storage, demand, import and export of fresh product and its
by-products, increased pressure from diseases including citrus
greening and citrus canker, as well as insects and other pests;
disruption of water supplies or changes in water allocations;
pricing and supply of raw materials and products; market responses
to industry volume pressures; pricing and supply of energy; changes
in interest rates; availability of financing for land development
activities and other growth opportunities; onetime events;
acquisitions and divestitures, including our ability to achieve the
anticipated results of the Orange-Co acquisition and Silver Nip
merger; seasonality; labor disruptions; inability to pay debt
obligations; inability to engage in certain transactions due to
restrictive covenants in debt instruments; government restrictions
on land use; changes in agricultural land values; and market and
pricing risks due to concentrated ownership of stock, and the
actual impact of Alico 2.0 on reducing expenses, production,
profitability and EBITDA growth and actual results of sales of
certain assets and use of such proceeds. Other risks and
uncertainties include those that are described in Alico’s SEC
filings, which are available on the SEC’s website at
http://www.sec.gov. Alico undertakes no obligation to subsequently
update or revise the forward-looking statements made in this press
release, except as required by law.
Investor Contact:
John E. Kiernan
Executive Vice President and Chief Financial Officer
(239) 226-2000
JKiernan@alicoinc.com
|
Non-GAAP
Financial Measures |
|
|
|
Adjusted
EBITDA |
|
(in millions) |
|
|
Twelve MonthsEnded September 30, |
|
2020 |
|
|
Net income attributable
to common stockholders |
$ |
17.9 |
Interest
expense |
|
8.5 |
Provision
for income taxes |
|
11.2 |
Depreciation and amortization |
|
12.4 |
EBITDA (without
water) |
|
50.0 |
|
|
Water
Program |
|
10.0 |
|
|
Adjusted EBITDA |
|
60.0 |
|
|
|
Alico utilizes the non-GAAP measures EBITDA and
Adjusted EBITDA to evaluate the performance of its business. Due to
significant depreciable assets associated with the nature of our
operations and, to a lesser extent, interest costs associated with
our capital structure, management believes that EBITDA and Adjusted
EBITDA are important measures to evaluate our results of operations
between periods on a more comparable basis and to help investors
analyze underlying trends in our business, evaluate the performance
of our business both on an absolute basis and relative to our peers
and the broader market, provides useful information to both
management and investors by excluding certain items that may not be
indicative of our core operating results and operational strength
of our business and helps investors evaluate our ability to service
our debt. Such measurements are not prepared in accordance with
accounting principles generally accepted in the United States
(“U.S. GAAP”) and should not be construed as an alternative to
reported results determined in accordance with U.S. GAAP. The
non-GAAP information provided is unique to Alico and may not be
consistent with methodologies used by other companies. EBITDA
is defined as earnings before interest expense, provision for
income taxes, depreciation and amortization. Adjusted EBITDA
for the above presentation is defined as earnings before interest
expense, provision for income taxes, depreciation and amortization
adjusted for earnings related to the Dispersed Water Program.
The company has used other Adjusted EBITDA metrics in previous
periods which included other items.
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