Q1 2021 Alico Inc Earnings Call
Greetings and welcome to Aley goes the first quarter earnings conference call. At this time all participants are in a listen only mode. As a reminder, today's conference is being recorded on the call today are John Kiernan, President and Chief Executive Officer, and Rich <unk> Chief Financial Officer earlier today, The company issued a press release announcing its.
Results for the first quarter ended December 31st 2020.
If you have not had a chance to review the release it is available and Investor relations portion of the company's website and a legal incorporated dot com.
This call is being webcast and a replay will be available on the illegals website as well.
And we begin the company would like to remind everyone that the prepared remarks today contain forward looking statements.
Such statements are subject to risks uncertainties and other factors that may cause actual results to differ materially from those expressed or implied and these statements and.
Important factors that could cause or contribute to such differences include risk details and the company's quarterly reports on form 10-Q, and your reports on form 10-K current report on form 8-K, and any amendments thereto filed with the SEC and those mentioned in the earnings release the.
The company undertakes no obligation to subsequently update or revise the forward looking statements made on today's call except as required by the law.
During this call of the company will also discuss non-GAAP financial measures and including EBITDA and adjusted EBITDA for more details on these measures. Please refer to the company's press release issued earlier today.
With that I would like to turn the call over to the company's President and CEO Mr. John Kiernan. Please proceed sir.
Thank you Latanya and thank you everyone for joining us for of it goes first quarter 2021 earnings call. This morning.
Since we began our fiscal year 2021, we are encouraged by higher citrus fruit market prices per pound and solid.
And that the downward pressure on citrus pricing experienced by the industry last year has subsided.
Pricing for the early and mid cheese, and fruit is above $2 per pound solid compared to a year ago when market pricing was and the low $1 range.
The increase and price is being driven by bolt and increasing consumption of not from concentrate orange juice by retail consumers as well as tighter supplies of citrus fruit from Florida, Brazil and Mexico.
These factors have led to decreased inventory supply levels at the citrus juice processors.
Robust consumption of not from concentrate orange juice by retail consumers continues to remain strong.
Since March 2020, there's been double digit growth and consumption demand and the latest published Nielsen data shows the double digit year over year increase and not from concentrate orange juice consumption is continuing to hold steady.
We are confident that all of these factors will support higher Valencia market pricing for this season, which will begin to be harvested and the next couple of weeks.
With respect to the 2021 harvest, which commenced in December of 2020, we have seen along with the entire Florida citrus industry, a decrease and processed box production of the early and mid season crop of.
Compared to the same period last year.
At the beginning of January the USDA released its citrus crop forecast for the 2000 and 'twenty 'twenty, one harvest season and <unk>.
Indicated its expectation that the Florida Orange crop will decrease by approximately 19.8% this year as compared to the prior year with much of this discrete did with much of this decrease relating to the early and mid season crop, which is estimated to decline by approximately $32 six per.
<unk>.
We'd run a comprehensive gross management program backed by decades of operational knowledge and rigorous efficiencies, which we believe will allow our percentage decline and the early and mid season crop to be substantially lower than the usda's forecast.
Moving on to our business highlights and the quarter.
Our new long term agreement to provide citrus gross management services, including harvest and haul responsibilities for approximately 7000 acres owned by Barra and call. Your companies. Another top 10, Florida, citrus grower, it's going well.
The entrant into the agreement because we believe our operational philosophy for Citrus gross management services alliance with that of the bear and call your companies.
We've integrated our gross management programs and of realizing some of operating economies of scale.
This line of business is a natural extension for us.
How's us to monetize our operational knowledge and.
And there's an opportunity we seek to expand over the next fiscal year by focusing on targeted gross operators that meet our criteria and where we feel we can add economic value.
We continue to pursue strategic land sale opportunities for of rich and the announced in the quarter of the state of Florida entered into an option agreement to purchase approximately 5804 acres of a week of ranch for approximately $14.6 million.
If the state elects to exercise this option, we would expect to close and the beginning of the third quarter of fiscal year 2021.
In addition, we have sold off certain smaller ranch parcels of premium prices and the first quarter ended December 31 2020.
We will continue to evaluate real estate opportunities and anticipate additional sales of the week of ranch and the near future.
On October 30th 2020, we purchased of well maintained and Citrus Grove of 3280 gross acres located in the Hendry County.
Which included substantial new plantings, which were completed in recent years.
While the group has only been out of our care for a short period of time.
We have already begun additional plant things to increase the density of the Citrus Grove.
Which will result in improved production per acre.
This is part of our continued investment and our organic growth strategy is in addition to the more than 1.3 million new trees, we have planted over the past for years, which are expected to begin positively impacting our production results and the next couple of years.
We're encouraged to see citrus pricing of the rebound after a difficult year and.
And believe we are in the best position and the industry to capitalize on this improvement of pricing and we will continue to unlock long term value for our shareholders.
With that I will turn the call over to rich to discuss.
Our more detailed financial results.
Thank you John and good morning, everyone.
And this is our second earnings call I would again like to remind everyone of the seasonality of our business and.
Majority of our citrus crop is harvested and the second and third quarters of the fiscal year and.
And the majority of our profit and cash flows of typically recognized and the second and third quarters as well.
And as such the quarterly results for the first quarter are not indicative of our full year results.
For the quarter ended December 31, 2020, total operating revenue was $13 $7 million compared to $11 million and the same period of the previous fiscal year.
The interest revenue was 12 $9 million and $10 $2 million, respectively for the quarters ended December 31, 2020 and 2019.
The increase in revenue for the quarter ended December 31, 2020, compared to the same period and the prior year was primarily due to us generating greater revenue for my third party growth management services.
As John discussed earlier and the call. We had we entered into an agreement last year with and affiliated group of third parties to provide citrus gross caretaking and harvest and haul management services for approximately 7000 acres owned by these third parties.
Under the terms of this agreement we are reimbursed by third parties for all cost incurred related to providing these services and we also received the management fee based.
Based on acreage covered under this agreement.
We recorded both revenues and expenses when we provide these grow share taking management services.
Well the first quarter ended December 31, 2020, we recorded an approximate.
$2 $9 million of operating revenue, including the management fee.
Yeah.
During the quarter ended December 31, 2020, we saw a significant increase and the market price per pound solids for our early and mid season true.
The increase and the price per pound solids is due to increased consumption of <unk>.
Not from concentrate orange juice, along with tighter supplies, which has in turn led to reduce inventory levels and increased prices.
As reported by the latest Nielsen data naphtha and concentrated orange juice consumption increased 14% for the 12 week period ended December 26, 2000, and 'twenty as compared to the similar 12 week period and the prior year.
We expect based on this consumption trends that the market pricing for the upcoming harvest season of the Valencia fruit, while also increased significantly over the prior year.
For the quarter ended December 31, 2020 fuel.
A few of boxes were harvested and pound solids per box, while lower <unk>.
To the same period and the prior year.
While we harvested a greater percentage of our early and mid season crop through December 31 2020.
Measured as a as a percentage of our estimated full year early and mid season crop.
As compared to the same period and the prior year, we along with the Florida industry in general are recording a smaller number of boxes harvested due to a greater rate of fruit drop occurring during the current harvest season as compared to the previous year.
In addition, the internal quality of the fruit was not as strong as in the previous year, resulting in lower pound solids per box.
The USDA citrus crop forecast for the 2000 and 'twenty 'twenty, one harvest season indicates that the Florida Orange crop will decrease.
The 54 million boxes down from approximately $67 3 million boxes in the prior year.
The U S D E and anticipates the majority of this decrease will relate to the early and mid <unk> mid season.
Boxes as the forecast is a decrease of $9 7 million boxes, or a 32, 6% decline.
We through our comprehensive grow of management program mentioned by John earlier anticipate our decline and the early and mid season crop will be and the 20 to 25 per cent range.
Yeah.
The increase in operating expenses for the quarter ended December 31, 2020, as compared to the same period and the prior year, primarily relates to the third party gross management services.
As previously stated we have an agreement to provide the services to and affiliated group of third parties and recorded of approximately $2 6 million.
Of operating expenses and the quarter ended December 31 2020.
Additionally, the increase in operating expenses is attributable to the company harvesting a greater percentage of boxes in relation to the estimated total boxes to be harvested for the full season.
And the quarter ended December 31, and 2020 as compared to the same period and the prior year.
Leading to a larger percentage of cost being allocated to cost of sales and the current period.
We also received less proceeds under the Florida Citrus recovery Block Grant program.
Which are recorded as the reduction of operating expenses during the quarter ended December 31st 2020, when compared to the quarter ended December 31 2019.
Partially offsetting this increase was a decrease and harvest and haul expenses, resulting from a decrease and the early and mid season boxes harvested.
Income from operations for the land management and other operations segment for the quarter ended December 31 2020.
Improved by approximately $300000 compared to the quarter ended December 31 2019.
This improvement was primarily due to the due to our decision to no longer pursue are dispersed water storage project and as such.
No water conservation expenses were incurred and the current quarter and we do not anticipate any future expenses to be incurred relating to this project.
General and administrative expenses for the quarter ended December 31, 2020 totaled approximate $2.5 million compared to approximately $2 $8 million for the quarter ended December 31st 2019.
The decrease is in large part due to a reduction and payroll expenses of approximately $200000 relating to one of the senior managers, leaving the company and December 2019.
And a reduction and pension expense related to our deferred retirement benefit plan of approximately $100000. As the result of the company terminating this plan and paying out each of the plan participants in August 2020.
Other income net of other expenses for the quarter ended December 31, 2020 was approximate $2.2 million compared to other expense net of other income of approximately $1.6 million for the quarter ended December 31 2019.
The shift to other income net from other expense net is primarily due to us recording gains on the sale of real estate property and equipment and assets held for sale of approximately $3 $4 million relating to the sale of approximately 700 acres from the illegal ranch to several third parties and the quarter ended December.
The 31st 2020.
For the quarter ended December 31, 2019, we only recorded a nominal gain on the sale of real estate property and equipment and assets held for sale.
Additionally, the reduction of approximately $400000 of interest expense was realized primarily because of the reduction of our long term debt, resulting from mandatory principal payments.
Okay.
During the quarter ended December 31, 2020, we received approximately $4 $1 million of additional proceeds under the Florida Citrus recovery block Grant program relating to Hurricane Irma.
To date, we have received approximately $24 $2 million under this program.
For the fiscal quarter ended December 31, 2020, we reported net income attributable to illegal common shareholders of approximately $3 $8 million compared to net income attributable to illegal common stockholders of approximately $800000 for the fiscal quarter ended December 31, two.
And 19.
The company is affirming its fiscal year 2021 guidance.
Our balance sheet remains strong and we expect as we move forward into the peak of our season, we will provide strong and cash flow and fiscal 2021.
Our working capital at September 30 of 2020 was $39 $8 million, representing a 3.21 to one ratio.
In addition, we have experienced a steady improvement and our debt to equity ratio of debt to equity ratio at December 31, 2000, 22019, and 2018, well for seven to 1.78 to one and 0.82 to one respectively.
I would like to now pass you back to John to discuss our fiscal year 2021 out.
Thanks Rich.
We can always the leading high quality low cost producer of citrus and Florida.
And one of the largest citrus growers in the United States, We will continue to focus on controlling and managing costs and unlocking additional value for our shareholders to ensure that the legacy of a week of thrives for decades to come.
After carefully considering the impact of lower production, but higher prices. This season, we are affirming our previously announced guidance for the fiscal year 2021.
Our confidence is the result of a combination of our insight into the factors supporting increased market prices.
As well as our track record for continued stringent management for.
For operating and general and administrative expenses.
We continue to project net income of seven 5 billion the $10 million.
Adjusted net income of $4 5 million to $6 9 million.
EBITDA between $29 million and 33 million.
And adjusted EBITDA between $25 million at $28 8 million.
And with that.
We will now open the line up to questions from industry analysts.
Tanya.
At this time, we will conduct a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad.
The confirmation tone will indicate your line is the other question queue.
You May press star two if he would like to remove your question from the queue for participants using speaker equipment and it may be necessary to pick up your handset before pressing the star keys, one moment, while we poll for questions.
Our first question comes from Gerry Sweeney with Roth Capital. Please proceed with your question.
Hey, good morning, John and rich Thanks for taking my call.
Good morning, Jerry.
I wanted to start out with just the harvest, obviously, you talked a little bit about the early and mid and the the size of the harvest.
And if we and some of the harvest and this first quarters.
Was.
I think you harvest it more acres and this quarter versus last quarter or last year and the first quarter. If we just combine the.
The early and mid production from last year and sort of.
Reduce debt by the range of your provider would that would be sort of a good guidepost to potential production and for the early and mid this year.
Rich.
Yeah. So the Jerry I I would say that would be the the early and mid would be of fare.
The fair assessment.
Got it.
And then pricing obviously pricing of those.
Good.
And as we move forward into the the Valencia is which I think we start to see some of the Q and then obviously and the third quarter.
How does.
The early and mid had a substantial step up and pricing how do we look at the pricing for the Valencia and.
How does that compare to early and minutes I'm sure. There's some nuances there sort of just curious as to.
And how that potentially may play out or or some things, we can keep an eye out for.
Okay.
Yeah, So so Jerry and as we've seen and and mentioned the consumption of not from concentrate orange juice continues to be strong.
And so while we don't have specifics, we anticipate that the trend for the Valencia with respect to market pricing well.
And the similar if not a little bit stronger than what we've seen on the and the early mid size mid size. So I think and as we look forward. There's nothing here that says that trend would be anything different.
Got it and the harvest season hasn't started yet.
But every indication is that the watch your prices will be higher than what the market prices for Oems where the season.
It should be a substantial increase over last year.
And the.
And.
What.
And what gives you confidence that obviously, the early and mid for lower more.
The more for more fruit drop et cetera.
When you look at your acreage it sounds like you have some confidence.
As well of the Florida state.
The fluent and there should be less impacted or not.
And nearly as much decline and the harvest can you go through what provides the confidence or the difference why early mid sort of more decline versus potentially on the frontier for it.
I'll take that rich.
The I guess the the facts to support that claim is really we're monitoring and working our all of our gross every day.
So its under constant and inspection.
We saw the drop actually taper off.
And our early Mitch and we believe that that trend hopefully will continue as we go into the avoidance of Susan So at these lower drop levels extrapolating out that gives us great confidence as we forecasted.
Our financial results for for this current season.
Got it.
And then one more for me and I'll jump back and tried.
The Grove management.
Are you how is that moving and potential new customers. How is that moving along are you and discussions with.
The.
Other.
And any sort of.
Qualitative quantitative view of you can provide on that.
Sure, it's all going to be qualitative we we don't have any quantitative we kind of at this point well you know we've discussed previously that you know.
We're very selective on the gross management services, we would provide to potential customers. They have to meet a pretty stringent set of criteria.
So it's just the western a dozen potential targets and we've been and.
<unk> with several of them I don't have anything to report at this time on either of the likelihood that that will close and in this current fiscal year, but when we do it'll be at profitable levels.
But but there were sort of are there are active discussions that we are having.
Okay perfect I'll jump back in line. Thank you.
Thanks Jerry.
Yeah.
At this time, there are no more questions and the queue I would like to turn the call back over to Mr. John Kiernan for closing comments.
I just want to thank everyone for joining our call today and for your support of of Waco.
In addition of one of them a set of special thank you towards dedicated employees and the rest of our management team for their continued efforts to make a week of the best it can be.
Our annual meeting will be held on Thursday February 25th and Tampa.
And we're strongly encourage the shareholders this year tomorrow and their proxy vote.
We look forward to hosting another earnings call for our second quarter results and me, we hope everybody stays safe. Thank you.
Okay.
Thank you ladies and gentlemen. This concludes today's conference you may disconnect. Your lines at this time and thank you for your participation.
[noise].