Concentrations
Accounts receivable from the Company’s major customers as of
September 30, 2017
and
2016
and revenue for the fiscal years ended
September 30, 2017
,
2016
and
2015
, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Accounts Receivable
|
|
Revenue
|
|
% of Total Revenue
|
|
2017
|
2016
|
|
2017
|
2016
|
2015
|
|
2017
|
2016
|
2015
|
Tropicana
|
$
|
2,506
|
|
$
|
1,710
|
|
|
$
|
111,197
|
|
$
|
46,898
|
|
$
|
21,925
|
|
|
85.6
|
%
|
32.5
|
%
|
14.3
|
%
|
Cutrale Citrus Juice
|
$
|
—
|
|
$
|
—
|
|
|
$
|
1,364
|
|
$
|
22,735
|
|
$
|
23,556
|
|
|
1.1
|
%
|
15.8
|
%
|
15.4
|
%
|
Minute Maid
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
49,271
|
|
$
|
57,484
|
|
|
—
|
%
|
34.2
|
%
|
37.5
|
%
|
Louis Dreyfus
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
22,460
|
|
|
—
|
%
|
—
|
%
|
14.7
|
%
|
The citrus industry is subject to various factors over which growers have limited or no control, including weather conditions, disease, pestilence, water supply and market price fluctuations. Market prices are highly sensitive to aggregate domestic and foreign crop sizes, as well as factors including, but not limited to, weather and competition from foreign countries.
Real Estate
In recognizing revenues from land sales, the Company applies specific revenue recognition criteria, in accordance with U.S. GAAP, to determine when land sales revenues 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 a gain proportionate to collections utilizing either the installment method or deposit method as appropriate.
Inventories
The costs of growing crops, including but not limited to labor, fertilization, fuel, crop nutrition and irrigation, are capitalized into inventory throughout the respective crop year. Such costs are expensed as cost of sales when the crops are harvested and are recorded as operating expenses in the Consolidated Statements of Operations. 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”).
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation, depletion and amortization. Major improvements are capitalized while expenditures for maintenance and repairs are expensed when 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 planting 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 ranches. 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 provided on a straight-line basis over the estimated useful lives of the depreciable assets, with the exception of leasehold improvements and assets acquired through capital leases, which are depreciated over their estimated useful lives if the lease transfers ownership or contains a bargain purchase option, otherwise the term of the lease.
The estimated useful lives for property and equipment are primarily as follows:
|
|
|
Citrus trees
|
25 years
|
Equipment and other facilities
|
3-20 years
|
Buildings and improvements
|
25-39 years
|
Breeding herd
|
5-7 years
|
Changes in circumstances, such as technological advances or changes to our business model or capital strategy could result in the actual useful lives differing from the original estimates. In those cases where we determine that the useful life of property and equipment should be shortened, we would depreciate the asset over its revised estimated remaining useful life, thereby increasing depreciation expense (see Note 7. “Property and Equipment, Net”).
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 or asset group may not be recoverable. The Company records impairment losses on long-lived assets used in operations, or asset group, 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 or asset group over the remaining lives of the assets or asset group are less than the carrying amounts of those assets. In calculating impairments and the estimated cash flows, the Company assigns its asset groups by determining the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of the other Company assets. The net carrying values of assets or asset group not recoverable are reduced to their fair values. Our cash flow estimates are based on historical results adjusted to reflect our best estimates of future market conditions and operating conditions. As of
September 30, 2017
and
2016
, long-lived assets were comprised of property and equipment.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price of acquired businesses over the fair value of the assets acquired less liabilities assumed in connection with such acquisition. In accordance with the provisions of ASC 350, Intangibles-Goodwill and Other, goodwill and intangible assets with indefinite useful lives acquired in an acquisition are not amortized, but instead are tested for impairment at least annually, on the same date, or more frequently should an event occur or circumstances indicate that the carrying amount may be impaired. Such events or circumstances may be a significant change in business climate, economic and industry trends, legal factors, negative operating performance indicators, significant competition, changes in strategy or disposition of a reporting unit or a portion thereof.
In the evaluation of goodwill for impairment, we have the option to perform a qualitative assessment to determine whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Under the qualitative assessment, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. If, under the quantitative assessment, the fair value of a reporting unit is less than its carrying amount, then the amount of the impairment loss, if any, must be measured under step two of the impairment analysis. In step two of the analysis, we would record an impairment loss equal to the excess of the carrying value of the reporting unit’s goodwill over its implied fair value, should such a circumstance arise. As of September 30, 2017 and 2016, no impairment was required.
Other Non-Current Assets
Other non-current assets primarily include investments owned in agricultural cooperatives, cash surrender value on life insurance and equity investment in affiliate (Magnolia). Investments in stock related to agricultural cooperatives are carried at cost.
Income Taxes
The Company uses the asset and liability method of accounting for deferred income 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 the income tax basis of assets and liabilities. Deferred income tax assets and liabilities are measured using enacted income 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 income tax rates on deferred income 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 or all 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. As of
September 30, 2017
and
2016
, the Company did not record a valuation allowance on deferred tax assets. 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 for our common stock is calculated by dividing net income attributable to Alico common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per common share is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares of common stock issuable under equity-based compensation plans in accordance with the treasury stock method, or any other type of securities convertible into common stock, except where the inclusion of such common shares would have an anti-dilutive effect.
The following table presents a reconciliation of basic to diluted weighted average common shares outstanding for fiscal years ended
September 30, 2017
,
2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Fiscal Year Ended September 30,
|
|
2017
|
|
2016
|
|
2015
|
Weighted Average Common Shares Outstanding - Basic
|
8,300
|
|
|
8,303
|
|
|
8,056
|
|
Effect of dilutive securities - stock options and unrestricted stock
|
—
|
|
|
8
|
|
|
5
|
|
Weighted Average Common Shares Outstanding - Diluted
|
8,300
|
|
|
8,311
|
|
|
8,061
|
|
For the fiscal year ended
September 30, 2017
, the Company issued
750,000
stock options to certain executives of the Company. There were
no
employee stock options granted for the fiscal years ended
September 30, 2016
and
2015
, respectively. Non-vested restricted shares of common stock entitle the holder to receive non-forfeitable dividends upon issuance and are included in the calculation of diluted earnings per common share. For the fiscal year ended
September 30, 2017
, the Company had stock options that were excluded from the diluted earnings per share because they were anti-dilutive. For the fiscal years ended
September 30, 2016
and
2015
, there were
no
anti-dilutive equity awards or convertible securities that were excluded from the calculation of diluted earnings per common share.
Stock-Based Compensation
Stock-based compensation is measured based on the fair value of the equity award at the grant date and is typically expensed on a straight-line basis over the vesting period. Upon the vesting of restricted stock, the Company issues common stock from common shares held in treasury.
Total stock-based compensation expense for the three years ended
September 30, 2017
in general and administrative expense was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Fiscal Year Ended September 30,
|
|
2017
|
|
2016
|
|
2015
|
Stock compensation expense:
|
|
|
|
|
|
|
|
|
Executives
|
$
|
880
|
|
|
$
|
150
|
|
|
$
|
55
|
|
Board of Directors
|
773
|
|
|
774
|
|
|
762
|
|
Members
|
—
|
|
|
—
|
|
|
135
|
|
Total stock compensation expense
|
$
|
1,653
|
|
|
$
|
924
|
|
|
$
|
952
|
|
Equity Method Investments and Variable Interest Entities
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 the Company 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 statements of operation.
In May 2010, the Company 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. Revenues are 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. Expenses 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 and is included in other non-current assets in the Consolidated Balance Sheets. Based on the
September 30, 2017
unaudited internal financial statements of Magnolia, the Company recognized net investment loss of approximately
$202,000
for the fiscal year ended
September 30, 2017
. The Company recognized net investment loss of approximately
$103,000
for the fiscal year ended
September 30, 2016
and net investment income of approximately
$57,000
for the fiscal year ended
September 30, 2015
. Net investment income is included in Investment and interest income, net in the Consolidated Statements of Operations. Magnolia made certain distributions during the fiscal years ended
September 30, 2017
,
2016
and
2015
; the Company’s share of those distributions was approximately
$324,000
,
$171,000
, and
$675,000
, respectively.
Note 3. Acquisitions and Dispositions
Acquisition of Orange-Co, LP Assets
On
December 2, 2014
, the Company completed the acquisition of certain citrus and related assets of Orange-Co, LP, including
51%
of the ownership interests of Citree, pursuant to an Asset Purchase Agreement, which is referred to as the Orange-Co Purchase Agreement, dated as of
December 1, 2014
. The assets the Company purchased include approximately
20,263
acres of citrus groves in DeSoto and Charlotte Counties, Florida, which comprise one of the largest contiguous citrus grove properties in the state of Florida. Total assets acquired were approximately
$277,792,000
, net of approximately
$2,060,000
in cash acquired and approximately
$4,838,000
in fair value attributable to noncontrolling interest in Citree, including: (i) approximately
$147,500,000
in initial cash consideration funded from the proceeds of the sugarcane disposition and new term loan debt; (ii)
$7,500,000
in additional cash consideration released from escrow in equal parts, subject to certain limitations, on
December 1, 2015
and
June 1, 2016
; (iii) the refinancing of Orange-Co, LP’s outstanding debt including approximately
$92,290,000
in term loan debt and a working capital facility of approximately
$27,857,000
and (iv) the assumption of certain other liabilities totaling approximately
$4,705,000
. On
December 1, 2014
, Alico deposited an irrevocable standby letter of credit issued by Rabo Agrifinance, Inc. in the aggregate amount of
$7,500,000
into an escrow account to fund the additional cash consideration. On December 1, 2015 and June 1, 2016, the Company paid
$3,750,000
of additional consideration, as contemplated by the Orange-Co Purchase Agreement. The
Company's
$3,750,000
irrevocable letter of credit securing the final payment of the additional consideration was terminated following the final cash consideration payment.
This acquisition was accounted for under the acquisition method of accounting. Accordingly, the Company recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisition were expensed as incurred. The excess of the purchase price over the fair value of assets acquired, net of liabilities assumed, and noncontrolling interests is recognized as goodwill. All goodwill recognized will be deductible for income tax purposes.
For the fiscal years ended
September 30, 2017
and 2016 the Company incurred approximately
$0
and
$31,000
, respectively, in professional and legal costs in connection with the Orange-Co acquisition. These costs are included in general and administrative expenses in the Consolidated and Combined Statements of Operations.
The following table summarizes the final allocation of the acquisition cost to the assets acquired and liabilities assumed at the date of acquisition, based on their estimated fair values:
|
|
|
|
|
(in thousands)
|
|
|
|
Assets:
|
Amount
|
Accounts receivable
|
$
|
888
|
|
Other current assets
|
845
|
|
Inventories
|
35,562
|
|
Property and equipment:
|
|
Citrus Trees
|
164,123
|
|
Land
|
63,395
|
|
Equipment and other facilities
|
13,431
|
|
Goodwill
|
2,246
|
|
Other assets
|
2,140
|
|
Total assets, net of cash acquired
|
$
|
282,630
|
|
|
|
Liabilities:
|
|
Accounts payable and accrued liabilities
|
$
|
4,205
|
|
Debt
|
500
|
|
Contingent consideration
|
7,500
|
|
Total liabilities assumed
|
$
|
12,205
|
|
|
|
Assets acquired less liabilities assumed
|
$
|
270,425
|
|
|
|
Less: fair value attributable to noncontrolling interest
|
(4,838
|
)
|
|
|
Total purchase consideration
|
$
|
265,587
|
|
|
|
Cash proceeds from sugarcane disposition
|
$
|
97,126
|
|
Working capital line of credit
|
27,857
|
|
Term loans
|
140,604
|
|
|
|
Total purchase consideration
|
$
|
265,587
|
|
The unaudited pro-forma information below for the fiscal years ended September 30, 2015 and 2014 gives effect to this acquisition as if the acquisitions had occurred on
October 1, 2013
. The pro-forma financial information is not necessarily indicative of the results of operations if the acquisition had been effective as of this date.
|
|
|
|
|
|
|
|
|
(in thousands except per share amounts)
|
Fiscal Year Ended September 30,
|
|
2015
|
|
2014
|
|
(unaudited)
|
|
|
|
|
Revenues
|
$
|
153,654
|
|
|
$
|
175,420
|
|
Income from operations
|
$
|
19,489
|
|
|
$
|
35,450
|
|
Net income attributable to Alico Inc. common stockholders
|
$
|
12,723
|
|
|
$
|
22,906
|
|
Basic earnings per common share
|
$
|
1.58
|
|
|
$
|
3.12
|
|
Diluted earnings per common share
|
$
|
1.58
|
|
|
$
|
3.12
|
|
Note 4. Long-Term Debt and Lines of Credit
Debt Refinancing
The Company refinanced its outstanding debt obligations on
December 3, 2014
in connection with the Orange-Co acquisition. These credit facilities initially included
$125,000,000
in fixed interest rate term loans (“Met Fixed-Rate Term Loans”),
$57,500,000
in variable interest rate term loans (“Met Variable-Rate Term Loans”), a
$25,000,000
revolving line of credit (“RLOC”) with Metropolitan Life Insurance Company and New England Life Insurance Company (collectively “Met”), and a
$70,000,000
working capital line of credit (“WCLC”) with Rabo Agrifinance, Inc. (“Rabo”).
The term loans and RLOC are secured by real property. The security for the term loans and RLOC consists of approximately
38,200
gross acres of citrus groves and
5,762
gross acres of ranch land. The WCLC is collateralized by the Company’s current assets and certain other personal property owned by the Company.
The term loans, collectively, are subject to quarterly principal payments of
$2,281,250
, and mature
November 1, 2029
. The Met Fixed-Rate Term Loans bear interest at
4.15%
per annum, and the Met Variable-Rate Term Loans bear interest at a rate equal to
90
day LIBOR plus
165
basis points (the “LIBOR spread”). The LIBOR spread is subject to adjustment by the lender on May 1, 2017 and is subject to further adjustment every
two
years thereafter until maturity. Interest on the term loans is payable quarterly.
The interest rates on the Met Variable-Rate Term Loans were
2.96%
per annum and
2.25%
per annum as of
September 30, 2017
and
September 30,
2016
, respectively.
The Company may prepay up to
$8,750,000
of the Met Fixed-Rate Term Loan principal annually without penalty, and any such prepayments may be applied to reduce subsequent mandatory principal payments. The maximum annual prepayment was made for calendar year 2015 and remains available to reduce future mandatory principal payments if the Company elects to do so. There have been
no
additional optional prepayments after calendar year 2015. The Met Variable-Rate Term Loans may be prepaid without penalty.
The RLOC bears interest at a floating rate equal to
90
day LIBOR plus
165
basis points, payable quarterly. The LIBOR spread was adjusted by the lender on May 1, 2017 and is subject to further adjustment every
two years
thereafter. Outstanding principal, if any, is due at maturity on November 1, 2019. The RLOC is subject to an annual commitment fee of
25
basis points on the unused portion of the line of credit. The RLOC is available for funding general corporate needs. The variable interest rate was
2.96%
per annum and
2.25%
per annum as of
September 30, 2017
and
September 30,
2016
, respectively. Availability under the RLOC was
$25,000,000
as of
September 30, 2017
.
The WCLC is a revolving credit facility and is available for funding working capital and general corporate requirements. The interest rate on the WCLC is based on
one
month LIBOR, plus a spread, which is adjusted quarterly, based on the Company's debt service coverage ratio for the preceding quarter and can vary from
175
to
250
basis points. The rate is currently at LIBOR plus
175
basis points. The variable interest rate was
2.99%
per annum and
2.27%
per annum as of
September 30, 2017
and
September 30,
2016
, respectively. The WCLC agreement was amended on September 6, 2017, and the primary terms of the amendment were an extension of the maturity to November 1, 2019. There were no changes to the commitment amount or interest rate. Availability under the WCLC was approximately
$59,700,000
as of
September 30, 2017
.
The WCLC is subject to a quarterly commitment fee on the daily unused availability under the line computed as the commitment amount less the aggregate of the outstanding loans and outstanding letters of credit. The commitment fee is adjusted quarterly based on Alico's debt service coverage ratio for the preceding quarter and can vary from a minimum of
20
basis points to a maximum of
30
basis points. Commitment fees to date have been charged at
20
basis points.
There was
no
outstanding balance on the WCLC as of
September 30, 2017
. The WCLC agreement provides for Rabo to issue up to
$20,000,000
in letters of credit on the Company’s behalf. As of
September 30, 2017
, there was approximately
$10,300,000
in outstanding letters of credit, which correspondingly reduced the Company's availability under the line of credit. In October 2017, Rabo issued two additional letter of credits aggregating approximately
$153,000
.
In 2014, the Company capitalized approximately
$2,834,000
of debt financing costs related to the refinancing. These costs, together with approximately
$339,000
of costs related to the retired debt, are being amortized to interest expense over the applicable terms of the loans. Additionally, approximately
$123,000
and
$78,000
of financing costs were incurred in connection with letters of credit and the amendment of the WCLC, respectively. These costs are also being amortized to interest expense over the applicable terms of the obligations. The unamortized balance of deferred financing costs related to the financing above was approximately
$1,656,000
and
$1,965,000
at
September 30, 2017
and
2016
, respectively.
The Company recognized a loss on extinguishment of debt of approximately
$964,000
related to the refinancing described above for the fiscal year ended
September 30, 2015
. The loss on extinguishment of debt is included in other (expense) income in the Consolidated Statement of Operations for the fiscal year ended
September 30, 2015
.
The credit facilities above are subject to various covenants including the following financial covenants: (i) minimum debt service coverage ratio of
1.10
to 1.00, (ii) tangible net worth of at least
$160,000,000
increased annually by
10%
of consolidated net income for the preceding year, or approximately
$162,300,000
for the year ending September 30, 2017, (iii) minimum current ratio of
1.50
to 1.00, (iv) debt to total assets ratio not greater than
.625
to 1.00, and, solely in the case of the WCLC, (v) a limit on capital expenditures of
$30,000,000
per fiscal year. As of
September 30, 2017
, the Company was in compliance with these financial covenants.
Credit facilities also include a Met Life term loan collateralized by real estate owned by Citree ("Met Citree Loan"). This is a
$5,000,000
credit facility that bears interest at a fixed rate of
5.28%
per annum. An initial advance of
$500,000
was made at closing on March 4, 2014. The loan agreement was amended to provide for an interim advance of
$2,000,000
on September 17, 2015, and the interest rate was adjusted to
5.30%
per annum at the time of the interim advance. The final
$2,500,000
advance was funded on April 27, 2016 and the interest rate was adjusted to
5.28%
. The loan matures in February 2029. The unamortized balance of deferred financing costs related to this loan was approximately
$49,000
at
September 30, 2017
.
Silver Nip Citrus Debt
There are
two
fixed-rate term loans, with an original combined balance of
$27,550,000
, bearing interest at
5.35%
per annum ("Pru Loans A & B"). Principal of
$290,000
is payable quarterly, together with accrued interest. The Company may prepay up to
$5,000,000
of principal without penalty. On February 15, 2015, Silver Nip Citrus made a prepayment of
$750,000
. The loans are collateralized by real estate in Collier, Hardee, Highlands, Martin, Osceola and Polk Counties, Florida and mature June 1, 2033.
Silver Nip Citrus entered into
two
additional fixed-rate term loans with Prudential to finance the acquisition of a
1,500
acre citrus grove on September 4, 2014. Each loan was in the original amount of
$5,500,000
. Principal of
$55,000
per loan is payable quarterly, together with accrued interest. One loan bears interest at
3.85%
per annum (Pru Loan E"), while the other bears interest at
3.45%
per annum ("Pru Loan F"). The interest rate on Pru Loan E is subject to adjustment on September 1, 2019 and every year thereafter until maturity. Both loans are collateralized by real estate in Charlotte County, Florida. Pru Note E matures September 1, 2021, and Pru Note F matures September 1, 2039.
The Silver Nip Citrus credit agreements were amended on December 1, 2016. The primary terms of the amendments were (1) the Company provided a limited
$8,000,000
guaranty of the Silver Nip debt, (2) the limited personal guarantees provided by George Brokaw, Remy W. Trafelet and Clayton Wilson prior to the Company’s merger with Silver Nip Citrus, and also totaling
$8,000,000
, were released and (3) the consolidated current ratio covenant requirement, measured on an annual basis, was reduced from
1.50
to 1.00 to
1.00
to 1.00. Silver Nip Citrus was in compliance with the current ratio covenant as of
September 30, 2017
, the most recent measurement date.
Silver Nip Citrus had a
$6,000,000
revolving line of credit with Prudential. This line of credit was paid in full and terminated on April 28, 2015. The Company recognized a loss on extinguishment of debt of approximately
$87,000
related to the termination, which is included in other (expense) income on the Consolidated Statements of Operations.
The unamortized balance of deferred financing costs related to the Silver Nip Citrus debt was approximately
$325,000
at
September 30, 2017
.
The Silver Nip Citrus facilities are subject to a financial debt covenant requiring a current ratio of at least
1.50
to 1.00, measured at the end of each fiscal year. Silver Nip Citrus was in compliance with this covenant as of
September 30, 2017
.
Other Modifications of Rabo and Prudential Credit Agreements
In February 2015 Rabo agreed, subject to certain conditions, that the Company may loan Silver Nip Citrus up to
$7,000,000
on a revolving basis for cash management purposes. These advances would be funded from either cash on hand or draws on the Company’s WCLC.
Silver Nip Citrus has provided a
$7,000,000
limited guaranty and security agreement granting Rabo a security interest in crops, accounts receivable, inventory and certain other assets.
This modification required the amendment of various Prudential and Rabo loan documents and mortgages.
The following table summarizes long-term debt and related deferred financing costs, net of accumulated amortization, at
September 30, 2017
and
September 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
September 30, 2016
|
|
Principal
|
|
Deferred Financing Costs, Net
|
|
Principal
|
|
Deferred Financing Costs, Net
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion:
|
|
|
|
|
|
|
|
Met Fixed-Rate Term Loans
|
$
|
99,062
|
|
|
$
|
954
|
|
|
$
|
105,312
|
|
|
$
|
1,080
|
|
Met Variable-Rate Term Loans
|
49,594
|
|
|
439
|
|
|
52,469
|
|
|
497
|
|
Met Citree Term Loan
|
5,000
|
|
|
49
|
|
|
5,000
|
|
|
53
|
|
Pru Loans A & B
|
23,030
|
|
|
258
|
|
|
24,190
|
|
|
274
|
|
Pru Loan E
|
4,895
|
|
|
25
|
|
|
5,115
|
|
|
32
|
|
Pru Loan F
|
4,895
|
|
|
42
|
|
|
5,115
|
|
|
44
|
|
John Deere equipment loan
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
186,476
|
|
|
1,767
|
|
|
197,219
|
|
|
1,980
|
|
Less current portion
|
4,550
|
|
|
—
|
|
|
4,493
|
|
|
—
|
|
Long-term debt
|
$
|
181,926
|
|
|
$
|
1,767
|
|
|
$
|
192,726
|
|
|
$
|
1,980
|
|
The following table summarizes lines of credit and related deferred financing costs, net of accumulated amortization, at
September 30, 2017
and
September 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
September 30, 2016
|
|
Principal
|
|
Deferred Financing Costs, Net
|
|
Principal
|
|
Deferred Financing Costs, Net
|
|
(in thousands)
|
Lines of Credit:
|
|
|
|
|
|
|
|
RLOC
|
$
|
—
|
|
|
$
|
109
|
|
|
$
|
5,000
|
|
|
$
|
159
|
|
WCLC
|
—
|
|
|
153
|
|
|
—
|
|
|
230
|
|
Lines of Credit
|
$
|
—
|
|
|
$
|
262
|
|
|
$
|
5,000
|
|
|
$
|
389
|
|
Future maturities of long-term debt as of
September 30, 2017
are as follows:
|
|
|
|
|
(in thousands)
|
|
|
|
Due within one year
|
$
|
4,550
|
|
Due between one and two years
|
8,400
|
|
Due between two and three years
|
10,962
|
|
Due between three and four years
|
14,990
|
|
Due between four and five years
|
10,755
|
|
Due beyond five years
|
136,819
|
|
Total future maturities
|
$
|
186,476
|
|
Interest costs expensed and capitalized were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
2017
|
|
2016
|
|
2015
|
Interest expense
|
$
|
9,141
|
|
|
$
|
9,893
|
|
|
$
|
8,366
|
|
Interest capitalized
|
294
|
|
|
172
|
|
|
345
|
|
Total
|
$
|
9,435
|
|
|
$
|
10,065
|
|
|
$
|
8,711
|
|
Note 5. Inventories
Inventories consist of the following at
September 30, 2017
and
September 30, 2016
:
|
|
|
|
|
|
|
|
|
(in thousands)
|
September 30,
|
|
2017
|
|
2016
|
Unharvested fruit crop on the trees
|
$
|
32,145
|
|
|
$
|
52,204
|
|
Beef cattle
|
1,954
|
|
|
783
|
|
Citrus tree nursery
|
—
|
|
|
3,090
|
|
Other
|
2,105
|
|
|
2,392
|
|
Total inventories
|
$
|
36,204
|
|
|
$
|
58,469
|
|
In September 2017, the State of Florida’ citrus business, including the Company’s unharvested citrus crop, were significantly impacted by Hurricane Irma. The impact of Hurricane Irma resulted in the premature drop of unharvested fruit and damage to
citrus trees, which we expect to impact future fruit production until such time as the citrus trees recover. We anticipate future fruit production to be impacted in the 2017/2018 and, potentially, the 2018/2019 harvest seasons. The Company undertook a process to estimate the amount of inventory casualty loss as of the date of Hurricane Irma. Such process included a number of factors including: (1) touring all of the citrus groves by operational personnel to assess the estimated fruit drop by grove and the impact of damage to the citrus trees; (2) consideration of independent estimates of the reduced citrus production for the State of Florida; and (3) an estimate of fruit the Company expects to produce for the 2017/2018 harvest season after Hurricane Irma. As a result, the Company recorded a casualty loss to reduce the carrying value of unharvested fruit crop on trees inventory by approximately
$13,489,000
. While the Company believes the recorded loss to be its best estimate at this time, additional impairment could result based on the results of the 2017/2018 harvest season. The Company maintains crop insurance and is working closely with its insurers and adjusters to evaluate and determine the amount of insurance recoveries, if any, the Company may be entitled to. The amount of insurance recoveries, if any, will be recorded in the period in which such recoveries are both probable and reasonably estimable.
After determining and applying the amount of loss due to shrinkage to the inventory value, the Company evaluated the remaining inventory and determined an additional reduction was necessary in the amount of
$1,199,000
to properly reflect the net realizable value of such inventory at
September 30, 2017
.
The Company reclassified the citrus tree nursery inventory to property and equipment during fiscal 2017.
Note 6. Assets Held For Sale
During fiscal 2017, in accordance with its strategy to dispose of non-core and under-performing assets, the following assets have been classified as assets held for sale as of September 30, 2017:
|
|
|
|
|
(in thousands)
|
|
|
|
Description
|
Carrying Value
|
|
Office Building
|
$
|
3,214
|
|
Nursery - Gainsville
|
6,500
|
|
Chancey Bay
|
4,179
|
|
Gal Hog
|
70
|
|
Breeding Herd
|
5,858
|
|
Trailers
|
1,162
|
|
Total Assets Held For Sale
|
$
|
20,983
|
|
Negotiations with interested parties for some of these assets have already taken place and during October 2017 the Company has sold its corporate office building in Ft. Myers (see Note 19. “Subsequent Event”). The only classes of assets and liabilities comprising the balance of the assets held for sale relate to Property & Equipment.
No
assets were held for sale as of
September 30, 2016
.
The Company recorded an impairment loss of approximately
$4,131,000
during fiscal year 2017 on these assets classified as assets held for sale as of
September 30, 2017
. For the year ended
September 30, 2015
, the Company recorded an impairment of approximately
$541,000
on property classified as assets held for sale. These impairments are included in operating expenses on the Consolidated Statements of Operations.
Note 7. Property and Equipment, Net
Property and equipment, net consists of the following at
September 30, 2017
and
September 30, 2016
:
|
|
|
|
|
|
|
|
|
(in thousands)
|
September 30,
|
|
2017
|
|
2016
|
Citrus trees
|
$
|
258,949
|
|
|
$
|
253,665
|
|
Equipment and other facilities
|
54,592
|
|
|
59,355
|
|
Buildings and improvements
|
8,835
|
|
|
21,780
|
|
Breeding herd
|
—
|
|
|
10,921
|
|
Total depreciable properties
|
322,376
|
|
|
345,721
|
|
Less: accumulated depreciation and depletion
|
(82,443
|
)
|
|
(83,122
|
)
|
Net depreciable properties
|
239,933
|
|
|
262,599
|
|
Land and land improvements
|
109,404
|
|
|
116,648
|
|
Net property and equipment
|
$
|
349,337
|
|
|
$
|
379,247
|
|
On February 2, 2017, the Company sold
49
acres of land and facilities in Hendry County, Florida, to its former tenant for
$2,200,000
, resulting in a gain of approximately
$1,400,000
which is included in gain on sale of real estate on the Consolidated Statement of Operations for the year ended
September 30, 2017
.
During the fiscal year ended
September 30, 2017
, the Company recorded impairments aggregating to approximately
$5,215,000
on certain mines located within their properties and other property and equipment related to the Company's decision to phase out its operation at one of its nurseries. These impairments are included in operating expenses on the Consolidated Statement of Operations for the year ended
September 30, 2017
.
Note 8. Accrued Liabilities
Accrued Liabilities consist of the following at
September 30, 2017
and
September 30, 2016
:
|
|
|
|
|
|
|
|
|
(in thousands)
|
September 30,
|
|
2017
|
|
2016
|
Ad valorem taxes
|
$
|
2,648
|
|
|
$
|
2,736
|
|
Accrued interest
|
1,165
|
|
|
1,135
|
|
Accrued employee wages and benefits
|
1,320
|
|
|
964
|
|
Inventory received but not invoiced
|
—
|
|
|
710
|
|
Accrued dividends
|
494
|
|
|
498
|
|
Current portion of deferred retirement obligations
|
315
|
|
|
342
|
|
Accrued insurance
|
166
|
|
|
—
|
|
Other accrued liabilities
|
673
|
|
|
535
|
|
Total accrued liabilities
|
$
|
6,781
|
|
|
$
|
6,920
|
|
Note 9. Deferred Gain on Sale
On November 21, 2014, the Company completed the sale of approximately
36,000
acres of land used for sugarcane production and land leasing in Hendry County, Florida to Global Ag Properties, LLC (“Global”) for approximately
$97,900,000
in cash. It had previously leased approximately
30,600
of these acres to United States Sugar Corporation (the “USSC Lease”). The USSC Lease was assigned to Global in conjunction with the land sale.
The sales price is subject to post-closing adjustments over a
ten
year period. The Company realized a gain of approximately
$42,753,000
on the sale. Initially,
$29,140,000
of the gain was deferred due to the Company’s continuing involvement in the property pursuant to a post-closing agreement and the potential price adjustments. The deferral represents the Company’s estimate of the maximum exposure to loss as a result of the continuing involvement (see below). A net gain of approximately
$13,613,000
was recognized at the time of the sale and is recognized in Other (expense) income in the Consolidated Statements of Operations for the fiscal year ended September 30, 2015.
The Company estimated its maximum exposure to loss over the
ten
year period to total approximately
$42,172,000
on an aggregate undiscounted basis. This estimated maximum exposure to loss was discounted at
five
percent to determine the initial deferred gain. In May 2017 and 2016, the Company made payments of
$1,580,000
and
$1,702,000
, respectively, to Global pursuant to the sales contract. The amount of USSC’s lease is tied to the market price of sugar, and the Company's payment is required annually in advance, to supplement the lease paid by USSC in the event that the sugar prices are below certain thresholds. The 2016 sugar price remained below the threshold and therefore none of the amount advanced in 2016 will be returned to the Company. The Company has recognized approximately
$1,413,000
and
$1,406,000
in interest expense and approximately
$538,000
and
$618,000
of the deferred gain for the fiscal years ended September 30, 2017 and 2016, respectively.
Deferred gain on sale consists of the following at September 30, 2017 and September 30, 2016:
|
|
|
|
|
|
|
|
|
(in thousands)
|
September 30,
|
|
2017
|
|
2016
|
Deferred gain on sale
|
$
|
27,482
|
|
|
$
|
28,440
|
|
Annual guarantee payment, net
|
(1,042
|
)
|
|
(1,236
|
)
|
Total deferred gain on sale
|
$
|
26,440
|
|
|
$
|
27,204
|
|
Estimated payments over the remaining term of the post-closing agreement are summarized in the following table.
|
|
|
|
|
(in thousands)
|
|
|
|
2018
|
$
|
1,924
|
|
2019
|
2,561
|
|
2020
|
2,992
|
|
2021
|
3,346
|
|
2022
|
3,725
|
|
Thereafter
|
18,696
|
|
Total
|
$
|
33,244
|
|
These estimated payments represent undiscounted cash flows.
Note 10. Fair Value Measurements
The Company complies with the provisions of FASB ASC 820 “Fair Value Measurements” for its financial and non-financial assets and liabilities. ASC 820 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 and cash equivalents, accounts receivable, accounts payable and accrued liabilities as of
September 30, 2017
and
2016
, approximate their fair value because of the immediate or short term maturity of these financial instruments. 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 similar obligations. The majority of our non-financial instruments, which include inventories and property and equipment, are not required to be carried at fair value on a recurring basis. The Company does have certain assets classified as Assets Held for Sale which have been recorded at the lower of carrying value or the estimated fair value less costs to sell.
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.
|
The following table represents certain assets held for sale as of
September 30, 2017
, which have been measured at fair value on a non-recurring basis (see Note 6. for complete listing of assets held for sale):
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hierarchy
|
Carrying Value
|
Adjustment to Fair Value
|
Fair Value
|
|
Nursery - Gainsville
|
Level 3
|
$
|
10,107
|
|
$
|
3,607
|
|
$
|
6,500
|
|
Chancey Bay
|
Level 3
|
$
|
4,587
|
|
$
|
408
|
|
$
|
4,179
|
|
Trailers
|
Level 3
|
$
|
1,278
|
|
$
|
116
|
|
$
|
1,162
|
|
There were no gains or losses included in earnings attributable to changes in unrealized gains or losses relating to our assets as of
September 30, 2017
and
2016
.
We use third-party service providers to assist in the evaluation of 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
4.08%
and
4.30%
as of
September 30, 2017
and
2016
, respectively.
Note 11. Common Stock and Options
Effective January 27, 2015, the Company’s Board of Directors adopted the 2015 Stock Incentive Plan (the “2015 Plan”) which provides for up to an additional
1,250,000
common shares available for issuance to provide a long-term incentive plan for officers, employees, directors and/or consultants to directly link incentives to stockholder value. The 2015 Plan was approved by the Company’s stockholders in February 2015. The Company’s 2015 Plan provides for grants to executives in various forms including restricted shares of the Company’s common stock and stock options. 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.
Restricted Stock
In fiscal year 2015, the Company awarded
12,500
restricted shares of the Company’s common stock (“Restricted Stock”) to
two
senior executives under the 2015 Plan at a weighted average fair value of
$49.49
per common share, vesting over
three
to
five
years.
A summary of the status of the Company’s nonvested shares is as follows:
|
|
|
|
|
|
|
|
|
|
Nonvested Shares
|
|
Shares
|
|
|
Weighted-Average Grant Date Fair Value
|
|
Nonvested Shares at September 30, 2014
|
|
—
|
|
|
—
|
|
Granted during fiscal 2015
|
|
12,500
|
|
|
$
|
49.49
|
|
Vested during 2015 fiscal
|
|
—
|
|
|
—
|
|
Forfeited during fiscal 2015
|
|
—
|
|
|
—
|
|
Nonvested Shares at September 30, 2015
|
|
12,500
|
|
|
$
|
49.49
|
|
Granted during fiscal 2016
|
|
—
|
|
|
—
|
|
Vested during 2016 fiscal
|
|
(2,333
|
)
|
|
$
|
49.50
|
|
Forfeited during fiscal 2016
|
|
—
|
|
|
—
|
|
Nonvested Shares at September 30, 2016
|
|
10,267
|
|
|
$
|
49.49
|
|
Granted during fiscal 2017
|
|
—
|
|
|
—
|
|
Vested during fiscal 2017
|
|
(4,933
|
)
|
|
$
|
49.58
|
|
Forfeited during fiscal 2017
|
|
—
|
|
|
—
|
|
Nonvested Shares at September 30, 2017
|
|
5,334
|
|
|
$
|
49.39
|
|
Stock compensation expense related to the Restricted Stock totaled approximately
$264,000
and
$150,000
for the fiscal year ended September 30, 2017 and 2016, respectively.
There was approximately
$149,000
and
$413,000
of total unrecognized stock compensation costs related to nonvested stock compensation for the Restricted Stock grants at September 30, 2017 and 2016, respectively. The unrecognized stock compensation will be fully expensed in fiscal year ended September 2018.
Stock Options
A stock option grant of
300,000
options in the case of Mr. Trafelet and
225,000
options in the case of each of Messrs. Slack and Brokaw (collectively, the “Option Grants”) were granted on December 31, 2016. The option price was set at
$27.15
, the closing price on December 31, 2016. The Option Grants will vest as follows: (i)
25%
of the options will vest if the price of the Company’s common stock during a consecutive
20
-trading day period exceeds
$60.00
; (ii)
25%
of the options will vest if such price exceeds
$75.00
; (iii)
25%
of the options will vest if such price exceeds
$90.00
; and (iv)
25%
of the options will vest if such price exceeds
$105.00
. If the applicable stock price hurdles have not been achieved by (A) the second anniversary of the Executive’s termination of employment, if the Executive’s employment is terminated due to death or disability, (B) the date that is
18
months following the Executive’s termination of employment, if the Executive’s employment is terminated by the Company without cause, by the Executive with good reason, or due to the Executive’s retirement, or (C) the date of the termination of the Executive’s employment for any other reason, then any unvested options will be forfeited. In addition, if the applicable stock price hurdles have not been achieved by the fifth anniversary of the grant date (or the fourth anniversary of the grant date, in the case of the tranche described in clause (i) above), then any unvested options will be forfeited. The Option Grants will also become vested to the extent that the applicable stock price hurdles are satisfied in connection with a change in control of the Company. As of September 30, 2017, the Company’s stock was trading at
$34.15
per share and during fiscal 2017 the stock did not trade above
$34.45
per share; accordingly, none of the stock options are vested at September 30, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Options
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Contractual Term (years)
|
|
Aggregate Intrinsic Value
|
Balance - September 30, 2016
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Granted during fiscal 2017
|
|
750,000
|
|
|
$
|
3.53
|
|
|
3.33
|
|
|
—
|
|
Forfeitures/expired in fiscal 2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Exercised during fiscal 2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Balance - September 30, 2017
|
|
750,000
|
|
|
$
|
3.53
|
|
|
2.58
|
|
|
—
|
|
Stock compensation expense related to the options totaled approximately
$616,000
for the fiscal year ended September 30, 2017.
No
stock compensation expense related to options was recorded for the fiscal year ended September 30, 2016.
At September 30, 2017 there was approximately
$2,030,000
to total unrecognized stock compensation costs related to nonvested share-based compensation for the option grants.
The fair value of the Option Grants was estimated on the date of grant using a Monte Carlo valuation model that uses the assumptions noted in the following table. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding; the range given below results from different time-frames for the various market conditions being met.
|
|
|
|
Expected Volatility
|
32.19
|
%
|
Expected Term (in years)
|
2.6 - 4.0
|
|
Risk Free Rate
|
2.45
|
%
|
The weighted-average grant-date fair value of the Option Grants was
$3.53
. There were no additional stock options granted, exercised or forfeited for the fiscal year ended
September 30, 2017
.
As of September 30, 2017, there were
487,500
common shares available for issuance under the 2015 Plan.
Note 12. Treasury Stock
In fiscal year 2017, the Board of Directors authorized the repurchase of up to
$7,000,000
of the Company’s common stock in two separate authorizations (the "2017 Authorization"). In March 2017, our Board of Directors authorized the repurchase of up to
$5,000,000
of the Company’s common stock beginning March 9, 2017 and continuing through March 9, 2019. In May 2017, our Board of Directors authorized the repurchase of up to an additional
$2,000,000
of the Company’s common stock beginning May 24, 2017 and continuing through May 24, 2019. The stock repurchases made under this repurchase were made 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.
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. In fiscal year 2016, the Board of Directors authorized the repurchase of up to 50,000 shares of the Company’s outstanding common stock beginning February 18, 2016 and continuing through February 17, 2017 (the "2016 Authorization"). In fiscal year 2015, the Board of Directors authorized the repurchase of up to
170,000
shares of the Company’s common stock beginning March 25, 2015 and continuing through December 31, 2016. 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 fiscal years ended
September 30, 2017
,
2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except 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,:
|
|
|
|
|
|
|
|
|
|
|
2017
|
104,145
|
|
|
$
|
29.42
|
|
|
650,140
|
|
|
$
|
3,064
|
|
2016
|
78,446
|
|
|
$
|
40.04
|
|
|
545,995
|
|
|
$
|
3,141
|
|
2015
|
91,554
|
|
|
$
|
43.83
|
|
|
467,549
|
|
|
$
|
4,013
|
|
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, 2014
|
15,766
|
|
|
$
|
650
|
|
Purchased
|
91,554
|
|
|
4,013
|
|
Issued to Employees and Directors
|
(16,755
|
)
|
|
(701
|
)
|
|
|
|
|
Balance at September 30, 2015
|
90,565
|
|
|
3,962
|
|
Purchased
|
78,446
|
|
|
3,141
|
|
Issued to Employees and Directors
|
(35,478
|
)
|
|
(1,035
|
)
|
Issued to former Silver Nip Citrus equity holders
|
(32,923
|
)
|
|
(1,483
|
)
|
|
|
|
|
Balance at September 30, 2016
|
100,610
|
|
|
4,585
|
|
Purchased
|
104,145
|
|
|
3,064
|
|
Issued to Employees and Directors
|
(27,440
|
)
|
|
(1,147
|
)
|
|
|
|
|
Balance at September 30, 2017
|
177,315
|
|
|
$
|
6,502
|
|
Note 13. Income Taxes
The provision (benefit) for income tax for the years ended
September 30, 2017
,
2016
and
2015
consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Fiscal Year Ended September 30,
|
|
2017
|
|
2016
|
|
2015
|
Current:
|
|
|
|
|
|
|
|
|
Federal income tax
|
$
|
102
|
|
|
$
|
244
|
|
|
$
|
(1,348
|
)
|
State income tax
|
—
|
|
|
—
|
|
|
(98
|
)
|
Total current
|
102
|
|
|
244
|
|
|
(1,446
|
)
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal income tax
|
(3,286
|
)
|
|
4,538
|
|
|
10,432
|
|
State income tax
|
(662
|
)
|
|
739
|
|
|
1,919
|
|
Total deferred
|
(3,948
|
)
|
|
5,277
|
|
|
12,351
|
|
Total provision (benefit) for income taxes
|
$
|
(3,846
|
)
|
|
$
|
5,521
|
|
|
$
|
10,905
|
|
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)
|
Fiscal Year Ended September 30,
|
|
2017
|
|
2016
|
|
2015
|
Tax at the statutory federal rate
|
$
|
(4,670
|
)
|
|
$
|
4,382
|
|
|
$
|
9,335
|
|
Increase (decrease) resulting from:
|
|
|
|
|
|
|
|
|
State income taxes, net of federal benefit
|
(402
|
)
|
|
457
|
|
|
1,279
|
|
Permanent and other reconciling items, net
|
548
|
|
|
773
|
|
|
280
|
|
Expiration of capital loss carryover
|
581
|
|
|
—
|
|
|
—
|
|
Other
|
97
|
|
|
(91
|
)
|
|
11
|
|
Total provision (benefit) for income taxes
|
$
|
(3,846
|
)
|
|
$
|
5,521
|
|
|
$
|
10,905
|
|
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, 2017
, and
2016
are presented below:
|
|
|
|
|
|
|
|
|
(in thousands)
|
September 30,
|
|
2017
|
|
2016
|
Deferred tax assets:
|
|
|
|
|
|
Deferred retirement benefits
|
$
|
1,712
|
|
|
$
|
1,620
|
|
Inventories
|
6,435
|
|
|
912
|
|
Alico-Agri, Ltd. outside basis differences
|
—
|
|
|
474
|
|
Goodwill
|
33,233
|
|
|
36,217
|
|
Deferred gain recognition
|
10,601
|
|
|
10,964
|
|
Capital loss carryforwards
|
9,462
|
|
|
9,702
|
|
Alternative minimum tax credits
|
293
|
|
|
197
|
|
Net operating losses
|
3,160
|
|
|
5,844
|
|
Intangibles
|
1,027
|
|
|
763
|
|
Other
|
158
|
|
|
3
|
|
Total deferred tax assets
|
66,081
|
|
|
66,696
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
Revenue recognized from citrus and sugarcane
|
—
|
|
|
282
|
|
Property and equipment
|
91,995
|
|
|
95,149
|
|
Accrual-to-cash method
|
950
|
|
|
1,908
|
|
Prepaid insurance
|
220
|
|
|
331
|
|
Investment in Magnolia
|
24
|
|
|
82
|
|
Total deferred tax liabilities
|
93,189
|
|
|
97,752
|
|
Net deferred income tax liability
|
$
|
(27,108
|
)
|
|
$
|
(31,056
|
)
|
As of
September 30, 2017
, the Company has approximately
$8,000,000
federal and approximately
$10,100,000
state income tax net operating loss (NOL) carryforwards. The Federal NOL's of approximately
$3,600,000
will expire in 2024 and approximately
$4,400,000
in 2025. The State NOL’s of approximately
$3,600,000
will expire in 2024 and approximately
$6,500,000
in 2025. As of
September 30, 2017
, the Company has approximately
$24,600,000
of capital losses, which will expire in 2018. The Company believes that it is more likely than not that the benefit from federal and state NOL and capital loss carryforwards will be realized and, therefore, has not provided a valuation allowance on the deferred tax assets related to these NOL and capital loss carryforwards.
Note 14. Segment Information
Segments
Operating segments are defined in the criteria established under the Financial Accounting Standards Board - Accounting Standards Codification (“FASB ASC”) Topic 280 as components of public entities that engage in business activities from which they may earn revenues and incur expenses for which separate financial information is available and which is evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to assess performance and allocate resources. The Company’s CODM assesses performance and allocates resources based on
three
operating segments: Alico Citrus (formerly Orange Co.), Conservation and Environmental Resources and Other Operations.
Total revenues represent sales to unaffiliated customers, as reported in the Consolidated Statements of Operations. 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 (gross profit) from operations before general and administrative expenses, interest expense, other income (expense) and income taxes, not including nonrecurring gains and losses.
Information by operating segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Fiscal Year Ended September 30,
|
|
2017
|
|
2016
|
|
2015
|
Revenues:
|
|
|
|
|
|
Alico Citrus
|
$
|
123,441
|
|
|
$
|
137,282
|
|
|
$
|
146,147
|
|
Conservation and Environmental Resources
|
4,793
|
|
|
5,669
|
|
|
5,394
|
|
Other Operations
|
1,595
|
|
|
1,245
|
|
|
1,585
|
|
Total revenues
|
129,829
|
|
|
144,196
|
|
|
153,126
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
Alico Citrus
|
111,947
|
|
|
102,347
|
|
|
110,777
|
|
Conservation and Environmental Resources
|
8,814
|
|
|
6,393
|
|
|
4,808
|
|
Other Operations
|
138
|
|
|
397
|
|
|
2,083
|
|
Total operating expenses
|
120,899
|
|
|
109,137
|
|
|
117,668
|
|
|
|
|
|
|
|
Gross profit (loss):
|
|
|
|
|
|
Alico Citrus
|
11,494
|
|
|
34,935
|
|
|
35,370
|
|
Conservation and Environmental Resources
|
(4,021
|
)
|
|
(724
|
)
|
|
586
|
|
Other Operations
|
1,457
|
|
|
848
|
|
|
(498
|
)
|
Total gross profit (loss)
|
$
|
8,930
|
|
|
$
|
35,059
|
|
|
$
|
35,458
|
|
|
|
|
|
|
|
Capital expenditures:
|
|
|
|
|
|
Alico Citrus
|
$
|
11,738
|
|
|
$
|
10,393
|
|
|
$
|
9,403
|
|
Conservation and Environmental Resources
|
646
|
|
|
1,664
|
|
|
1,461
|
|
Other Operations
|
—
|
|
|
629
|
|
|
162
|
|
Other Capital Expenditures
|
969
|
|
|
1,619
|
|
|
497
|
|
Total capital expenditures
|
$
|
13,353
|
|
|
$
|
14,305
|
|
|
$
|
11,523
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization:
|
|
|
|
|
|
Alico Citrus
|
$
|
14,054
|
|
|
$
|
13,982
|
|
|
$
|
12,297
|
|
Conservation and Environmental Resources
|
585
|
|
|
456
|
|
|
1,275
|
|
Other Operations
|
67
|
|
|
476
|
|
|
471
|
|
Other Depreciation, Depletion and Amortization
|
520
|
|
|
468
|
|
|
689
|
|
Total depreciation, depletion and amortization
|
$
|
15,226
|
|
|
$
|
15,382
|
|
|
$
|
14,732
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
September 30,
|
|
2017
|
|
2016
|
Assets:
|
|
|
|
Alico Citrus
|
$
|
387,972
|
|
|
$
|
410,663
|
|
Conservation and Environmental Resources
|
13,845
|
|
|
13,073
|
|
Other Operations
|
10,974
|
|
|
22,050
|
|
Other Corporate Assets
|
6,391
|
|
|
9,659
|
|
Total Assets
|
$
|
419,182
|
|
|
$
|
455,445
|
|
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 provides a fixed supplemental retirement benefit for
180 months
. 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
4.08%
and
4.30%
in fiscal years
2017
and
2016
, respectively.
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 Sheets.
The amount of MSP benefit expense charged to costs and expenses was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Fiscal Year Ended September 30,
|
|
2017
|
|
2016
|
|
2015
|
Service cost
|
$
|
200
|
|
|
$
|
213
|
|
|
$
|
195
|
|
Interest cost
|
140
|
|
|
210
|
|
|
197
|
|
Recognized actuarial loss adjustment
|
(78
|
)
|
|
(5
|
)
|
|
231
|
|
Total
|
$
|
262
|
|
|
$
|
418
|
|
|
$
|
623
|
|
The following provides a roll-forward of the MSP benefit obligation:
|
|
|
|
|
|
|
|
|
(in thousands)
|
September 30,
|
|
2017
|
|
2016
|
Change in projected benefit obligation:
|
|
|
|
|
|
Benefit obligation at beginning of year
|
$
|
4,543
|
|
|
$
|
4,476
|
|
Service cost
|
200
|
|
|
213
|
|
Interest cost
|
140
|
|
|
210
|
|
Benefits paid
|
(367
|
)
|
|
(351
|
)
|
Recognized actuarial loss adjustment
|
(78
|
)
|
|
(5
|
)
|
Benefit obligation at end of year
|
$
|
4,438
|
|
|
$
|
4,543
|
|
|
|
|
|
Funded status at end of year
|
$
|
(4,438
|
)
|
|
$
|
(4,543
|
)
|
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
$348,000
,
$357,000
,
$160,000
,
$192,000
, and
$192,000
for the five-year period thereafter is an aggregate of
$1,249,000
.
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, 2017
, the Rabbi Trust had no assets, and no change of control had occurred.
Profit Sharing and 401(k) Plans
The Company maintains a 401(k) employee savings plan for eligible employees, which provides up to a
4%
matching contribution payable 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
$445,000
,
$401,000
and
$360,000
for the fiscal years
2017
,
2016
and
2015
, respectively.
The Profit Sharing Plan (“Plan”) is fully funded by contributions from the Company. Contributions to the Plan are discretionary and determined annually by the Company’s Board of Directors. Contributions to employee accounts are based on the participant’s compensation. The Company’s paid contribution to the Profit Sharing Plan was
$378,000
,
$291,000
, and
$165,000
for the fiscal years ended
September 30, 2017
,
2016
and
2015
, respectively.
Note 16. Related Party Transactions
Clayton G. Wilson
The Company entered into a Separation and Consulting Agreement with Clayton G. Wilson (the “Separation and Consulting Agreement”), the Company’s Chief Executive Officer, pursuant to which Mr. Wilson stepped down as Chief Executive Officer of the Company effective as of December 31, 2016. Under the Separation and Consulting Agreement, Mr. Wilson also acknowledged and agreed that he will continue to be bound by the restrictive covenants set forth in his Employment Agreement with the Company. The Separation and Consulting Agreement provides that, subject to his execution, delivery, and non-revocation of a general release of claims in favor of the Company, Mr. Wilson will be entitled to vesting of any unvested portion of the restricted stock award granted to him under his Employment Agreement. In addition, the Separation and Consulting Agreement provides that Mr. Wilson will serve as a consultant to the Company during 2017 and will receive an aggregate consulting fee of
$750,000
for such services (payable
$200,000
in an initial lump sum,
$275,000
in a lump sum on July 1, 2017, and
$275,000
in six equal monthly installments commencing July 31, 2017 and ending December 31, 2017). If the Company terminates the consulting period for any reason, it will continue to pay the consulting fees described in the immediately preceding sentence, subject to Mr. Wilson’s continued compliance with the restrictive covenants set forth in his employment agreement. As of
September 30, 2017
the Company satisfied its obligation to Mr. Wilson in full. The Company expensed
$562,500
for the fiscal year ended
September 30, 2017
. Mr. Wilson resigned as a member of the Company’s Board of Directors effective February 27, 2017.
Remy W. Trafelet, Henry R. Slack, and George R. Brokaw
On December 31, 2016, the Company entered into new employment agreements (collectively, the “Employment Agreements”) with each of Remy W. Trafelet, Henry R. Slack, and George R. Brokaw (collectively, the “Executives”). Mr. Trafelet serves as the President and Chief Executive Officer of the Company, Mr. Slack serves as the Executive Chairman of the Company, and Mr. Brokaw serves as the Executive Vice Chairman of the Company, and each of them continues to serve on the Company’s Board of Directors. The Employment Agreements provide for an annual base salary of
$400,000
in the case of Mr. Trafelet and
$250,000
in the case of each of Messrs. Slack and Brokaw and, additionally, provided for payment to the Executives an amount in cash equal to
$400,000
to Mr. Trafelet and
$250,000
to each of Messrs. Slack and Brokaw within five business days of December 31, 2016.
The Employment Agreements also provide that, if the applicable Executive’s employment is terminated by the Company without “cause” or the applicable Executive resigns with “good reason” (as each such term is defined in the Employment Agreements), then, subject to his execution, delivery, and non-revocation of a general release of claims in favor of the Company, the Executive will be entitled to cash severance in an amount equal to
24
months (in the case of Mr. Trafelet) or
18
months (in the case of Messrs. Slack and Brokaw) of the Executive’s annual base salary.
The Employment Agreement includes various restrictive covenants in favor of the Company, including a confidentiality covenant, a nondisparagement covenant, and
12
-month post-termination noncompetition and customer and employee nonsolicitation covenants.
As of June 26, 2017, both Messrs. Slack and Brokaw have agreed to waive payment of their salary.
Silver Nip Citrus Merger Agreement
Effective February 28, 2015, the Company completed the merger (“Merger”) with 734 Citrus Holdings, LLC (“Silver Nip Citrus”) pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) with 734 Sub, LLC, a wholly owned subsidiary of the Company (“Merger Sub”), Silver Nip Citrus and, solely with respect to certain sections thereof, the equity holders of Silver Nip Citrus. The ownership of Silver Nip Citrus was held by 734 Agriculture,
74.89%
, Mr. Clay Wilson, Chief Executive Officer of the Company,
5%
and an entity controlled by Mr. Clay Wilson owned,
20.11%
.
734 Agriculture has control over both Silver Nip Citrus and the Company, and therefore the Merger was treated as a common control acquisition.
At closing of the Merger, Merger Sub merged with and into Silver Nip Citrus, with Silver Nip Citrus and its affiliates surviving the Merger as wholly owned subsidiaries of the Company. Pursuant to the Merger Agreement, at closing, the Company issued
923,257
shares of the Company’s common stock, par value
$1.00
per share, to the holders of membership interests in Silver Nip Citrus. Silver Nip Citrus’ outstanding net indebtedness at the closing of the Merger was approximately
$40,278,000
, and other liabilities totaled approximately
$8,446,000
. The Company acquired assets at with a book value of approximately
$65,739,000
, and total net assets of approximately
$17,015,000
. The shares issued were recorded at the carrying amount of the net assets transferred. The closing price of the Company's common stock on
February 27, 2015
was
$45.67
.
In September 2015, the former holders of membership interests in Silver Nip Citrus (the "Members") received an additional
115,782
shares of the Company’s common stock pursuant to the Merger Agreement. The additional consideration was based on the value of the proceeds received by the Company from the sale of citrus fruit harvested on Silver Nip Citrus’s citrus groves following the conclusion of the 2014-2015 citrus harvest season. The Members will receive additional Company shares of common stock based on any additional proceeds received by the Company subsequent to September 2015 related to the 2014-2015 harvest season.
As of September 30, 2016, the former holders of membership interests (the "Members") in Silver Nip Citrus earned and were issued an additional
148,705
shares of the Company’s common stock pursuant to the Merger Agreement. The additional purchase consideration was based on the value of the proceeds received by the Company from the sale of citrus fruit harvested on Silver Nip Citrus’s citrus groves for 2014-2015 citrus harvest season. The Members are not expected to receive any additional Company common shares related to the 2014-2015 harvest season.
For the fiscal year ended
September 30, 2017
and
2016
the Company incurred approximately
$0
and
$85,000
in professional and legal costs in connection with the Merger. These costs are included in general and administrative expenses in the Consolidated Statements of Operations for the fiscal year ended
September 30, 2017
and
2016
, respectively.
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 included 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 paid Mr. Alexander for such services and covenants
$2,000,000
in
twenty-four
monthly installments. The Company expensed approximately
$0
,
$167,000
and
$1,000,000
under the Consulting and Non-Competition Agreement for the fiscal years ended
September 30, 2017
,
2016
and
2015
.
Ken Smith
On March 20, 2015, Ken Smith tendered his resignation as Chief Operating Officer, and as an employee of the Company. Mr. Smith’s resignation included a waiver of any rights to any payments under his Change-in-Control Agreement with the Company. On March 20, 2015, the Company and Mr. Smith also entered into a Consulting and Non-Competition Agreement under which (i) Mr. Smith will provide consulting services to the Company during the
three
-year period after the resignation date, (ii) Mr. Smith 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 resignation date, and (iii) the Company paid Mr. Smith
$925,000
for such services and covenants. The Company expensed approximately
$100,000
,
$200,000
and
$625,000
under the Consulting and Non-Competition Agreement for fiscal years ended
September 30, 2017
,
2016
and
2015
, respectively.
W. Mark Humphrey
On June 1, 2015, W. Mark Humphrey tendered his resignation as Senior Vice President and Chief Financial Officer, and as an employee of the Company. On June 1, 2015, the Company and Mr. Humphrey entered into a Separation and Consulting Agreement under which (i) Mr. Humphrey will provide consulting services to the Company for a
one
-year period after his resignation, and (ii) Mr. Humphrey will be entitled to the following benefits: (a)
$100,000
in cash in a lump sum and (b) a consulting fee of
$350,000
payable monthly during the period commencing on his resignation date and ending on the first anniversary of his resignation date. The Company expensed approximately
$0
,
$238,000
and
$268,000
under the Separation and Consulting Agreement for the fiscal years ended
September 30, 2017
,
2016
and
2015
, respectively. On June 1, 2015 the Company appointed John E. Kiernan to serve as Senior Vice President and Chief Financial Officer. Effective September 1, 2015, Mr. Humphrey was appointed to serve as Senior Vice President and Chief Accounting Officer, and continued to receive monthly payments under The Consulting Agreement through the first anniversary of his resignation date. Mr. Humphrey resigned as Senior Vice President and Chief Accounting Officer and as an employee of the Company effective April 3, 2017.
Shared Services Agreement
The Company has a shared services agreement with Trafelet Brokaw & Co., LLC (“TBCO”), whereby the Company will reimburse TBCO for use of office space and various administrative and support services. The annual cost of the office and services is approximately
$592,000
. The agreement will expire in May 2018. The Company expensed approximately
$564,000
,
$479,000
and
$379,000
under the Shared Services Agreement for the fiscal years ended
September 30, 2017
,
2016
and
2015
, respectively.
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
$725,000
,
$667,000
, and
$649,000
for the years ended
September 30, 2017
,
2016
and
2015
, respectively.
The future minimum annual rental payments under non-cancelable operating leases are as follows:
|
|
|
|
|
(in thousands)
|
|
|
|
2018
|
$
|
419
|
|
2019
|
165
|
|
2020
|
165
|
|
2021
|
169
|
|
2022
|
175
|
|
Thereafter
|
14
|
|
Total
|
$
|
1,107
|
|
Purchase Commitments
During fiscal 2017, the Company entered into contracts to purchase citrus trees, which are anticipated to be delivered in fiscal 2018. As of September 30, 2017, the Company had approximately
$1,082,000
relating to outstanding commitments for these purchases that will be paid upon delivery of the citrus trees.
Letters of Credit
The Company has outstanding standby letters of credit in the total amount of approximately
$10,300,000
and
$10,234,000
at
September 30, 2017
and
September 30, 2016
, respectively, to secure its various contractual obligations. In October 2017, the
Company executed two additional standby letter of credits associated with leasing of space at the Ft. Myers office aggregating approximately
$153,000
.
Legal Proceedings
On March 11, 2015 a putative stockholder class action lawsuit captioned Shiva Y. Stein v. Alico, Inc., et al., No. 15-CA-000645 (the “Stein lawsuit”) was filed in the Circuit Court of the Twentieth Judicial District in and for Lee County, Florida, against Alico, Inc. (“Alico”), its current and certain former directors, 734 Citrus Holdings, LLC d/b/a Silver Nip Citrus, 734 Investors, LLC (“734 Investors”), 734 Agriculture, LLC (“734 Agriculture”) and 734 Sub, LLC (“734 Sub”) in connection with the acquisition of Silver Nip by Alico (the “Acquisition”). The complaint alleged that Alico’s directors at the time of the Acquisition, 734 Investors, and 734 Agriculture, breached fiduciary duties to Alico stockholders in connection with the Acquisition, and that Silver Nip and 734 Sub aided and abetted such breaches. The lawsuit sought, among other things, monetary and equitable relief, costs, fees (including attorneys’ fees) and expenses.
On May 6, 2015 a putative stockholder class action and derivative lawsuit captioned Ruth S. Dimon Trust v. George R. Brokaw, et al., No. 15-CA-001162 (the “Dimon lawsuit”) was filed in the Circuit Court of the Twentieth Judicial District in and for Lee County, Florida, against Alico, its current directors, Silver Nip Citrus, 734 Investors and 734 Agriculture, in connection with the Acquisition of Silver Nip Citrus by Alico. The complaint alleged breach of fiduciary duty, gross mismanagement, waste of corporate assets and tortious interference with contract against Alico’s directors; unjust enrichment against
three
of the directors; and aiding and abetting breach of fiduciary duty against Silver Nip Citrus, 734 investors and 734 Agriculture. The lawsuit sought, among other things, rescission of the Acquisition, an injunction prohibiting certain payments to Silver Nip Citrus members, unspecified damages, disgorgement of profits, costs, fees (including attorneys’ fees) and expenses.
On July 17, 2015, the plaintiffs in the Stein and Dimon lawsuits filed a stipulation and proposed order consolidating their cases for all purposes under the caption, In re Alico, Inc. Shareholder Litigation, Master File No. 15-CA-000645 (the “Consolidated Action”) and seeking the appointment of a lead plaintiff and lead and liaison counsel. The court entered that proposed order on July 21, 2015.
On October 16, 2015, the lead plaintiff in the Consolidated Action reported to the Court that the parties reached an agreement in principle to settle the Consolidated Action and other claims related to the Acquisition and that they were in the process of formally documenting their agreements. The proposed settlement contemplated that Alico would adopt certain changes to its corporate governance practices, policies and procedures concerning related party transactions; that the Consolidated Action would be dismissed; and all claims that were or could have been asserted challenging any aspect of the Acquisition would be released. On March 31, 2016, the parties entered into a Stipulation of Settlement. The parties filed an Amended Stipulation of Settlement with the Court on April 22, 2016.
On April 28, 2016, the Court entered an order preliminarily approving the settlement and providing for notice to relevant Alico shareholders. Notice of the settlement was mailed to relevant Alico shareholders and a settlement hearing was held on September 12, 2016, during which the Court considered the fairness, reasonableness and adequacy of the settlement and plaintiffs' counsel’s request for an award of attorneys' fees and expenses.
Following the settlement hearing on September 12, 2016, the Court entered a final order and judgment that approved the settlement as fair, reasonable and adequate; directed the parties to consummate the settlement according to its terms; awarded plaintiffs’ counsel attorneys’ fees and expenses; and dismissed the Consolidated Action with prejudice.
From time to time, Alico may be involved in litigation relating to claims arising out of its operations in the normal course of business. There are
no
other current legal proceedings to which the Company is a party to or of which any of its property is subject to that it believes will have a material adverse effect on its business financial position or results of operations.
Note 18. Selected Quarterly Financial Data (unaudited)
Summarized quarterly financial data for the fiscal years ended
September 30, 2017
, and
2016
are computed independently each quarter, therefore, the sum of the quarter amounts may not equal the total amount for the respective year due to rounding as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
Fiscal Quarter Ended
|
|
December 31,
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
2016
|
2015
|
|
2017
|
2016
|
|
2017
|
2016
|
|
2017
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenue
|
$
|
17,445
|
|
$
|
20,604
|
|
|
$
|
56,200
|
|
$
|
71,889
|
|
|
$
|
51,518
|
|
$
|
46,853
|
|
|
$
|
4,666
|
|
$
|
4,850
|
|
Total operating expenses
|
14,692
|
|
19,238
|
|
|
41,684
|
|
52,374
|
|
|
36,510
|
|
33,170
|
|
|
28,013
|
|
4,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
2,753
|
|
1,366
|
|
|
14,516
|
|
19,515
|
|
|
15,008
|
|
13,683
|
|
|
(23,347
|
)
|
495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
3,788
|
|
3,925
|
|
|
3,399
|
|
2,849
|
|
|
3,709
|
|
2,747
|
|
|
4,128
|
|
3,692
|
|
Other (expense) income, net
|
(1,981
|
)
|
(2,535
|
)
|
|
(912
|
)
|
(1,840
|
)
|
|
(2,162
|
)
|
(2,874
|
)
|
|
(2,193
|
)
|
(2,117
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
(3,016
|
)
|
(5,094
|
)
|
|
10,205
|
|
14,826
|
|
|
9,137
|
|
8,062
|
|
|
(29,668
|
)
|
(5,314
|
)
|
Income tax expense (benefit)
|
(1,273
|
)
|
(2,075
|
)
|
|
4,321
|
|
6,102
|
|
|
3,665
|
|
3,392
|
|
|
(10,559
|
)
|
(1,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
(1,743
|
)
|
$
|
(3,019
|
)
|
|
$
|
5,884
|
|
$
|
8,724
|
|
|
$
|
5,472
|
|
$
|
4,670
|
|
|
$
|
(19,109
|
)
|
$
|
(3,416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interests
|
8
|
|
8
|
|
|
(51
|
)
|
10
|
|
|
7
|
|
11
|
|
|
81
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Alico Inc. common stockholders
|
$
|
(1,735
|
)
|
$
|
(3,011
|
)
|
|
$
|
5,833
|
|
$
|
8,734
|
|
|
$
|
5,479
|
|
$
|
4,681
|
|
|
$
|
(19,028
|
)
|
$
|
(3,411
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.21
|
)
|
$
|
(0.36
|
)
|
|
$
|
0.70
|
|
$
|
1.05
|
|
|
$
|
0.66
|
|
$
|
0.56
|
|
|
$
|
(2.29
|
)
|
$
|
(0.41
|
)
|
Diluted
|
$
|
(0.21
|
)
|
$
|
(0.36
|
)
|
|
$
|
0.70
|
|
$
|
1.05
|
|
|
$
|
0.66
|
|
$
|
0.56
|
|
|
$
|
(2.29
|
)
|
$
|
(0.41
|
)
|
Note - Total operating expenses for the fiscal quarter ended September 30, 2017 include an inventory casualty loss and net realizable value adjustment of approximately
$14,688,000
and impairments of long-lived assets of approximately
$9,346,000
. (See Notes 5. “Inventories”, Note 6. “Assets Held For Sale” and Note 7. “Property and Equipment, Net” for further information).
The operating results noted above include the operating results of Silver Nip Citrus, as a result of the common control acquisition in February 2015.
Note 19. Subsequent Events
On October 30, 2017, the Company sold its corporate office building in Fort Myers, Florida for
$5,300,000
. The building is classified as an Asset Held for Sale in the accompanying Consolidated Balance Sheet at September 30, 2017. The sales agreement provides that the Company will lease back a portion of the office space for
five
years.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.