Q4 2022 Alico Inc Earnings Call

Speaker 3: We repaid approximately $19.6 million of debt, which included a prepayment of approximately $15.6 million on our variable rate term loans. As of September 30, 2022, we have improved our debt to equity ratio to.45 to 1. It was.50 to 1 a year ago. Over the past six years, we have reduced our debt balances by 45%, having made principal payments of approximately $91 million. Our current supply agreements have approximately 99% of the fruit committed to the 2023 harvest season. Since 2017, we planted approximately 1.9 million new trees, which has materially increased tree density in our existing and recently purchased groves. We believe our tree planting strategy over the last six years has the long-term potential to enable the new acres we now own to significantly increase box production over the coming years. We continue to evaluate our non-citrus assets and opportunistically sold off ranch land at prices we believe to be attractive to generate cash flow. During the fiscal year 2022, we closed on the sale of approximately 9,400 acres of ranch land and we still have approximately 20,000 acres of ranch land.

Speaker 4: for potential sale and we are seeing continued interest from potential buyers. Future capital allocation decisions will be evaluated in an effort to maximize returns to shareholders which may include but are not limited to

Speaker 5: pursuing opportunities to acquire additional citrus acres at attractive prices, repurchasing common shares, making other acquisitions, and making other acquisitions.

Speaker 6: or even considering special dividends as asset sales such as additional portions of the Ueko Ranch are realized.

Speaker 7: Our environmental, social, and governance initiatives continue.

Speaker 8: And we just published our second annual sustainability report.

Speaker 9: As previously communicated, our board formed an ESG committee.

Speaker 10: We launched a sustainability page on the company's corporate website, which includes our sustainability policy, our vendor code of conduct, and our safety manual.

Speaker 11: We completed a materiality assessment that helped inform a sustainability framework to guide future ESG activities.

Speaker 12: And we joined the UN Global Compact to support universal sustainability principles of environmental responsibility, labor and human rights, and anti-corruption.

Speaker 13: With that, I'd like to turn the call over to Perry Del Vecchio to discuss our more detailed financial results.

Speaker 14: Thank you, John and good afternoon everyone. As our fourth quarter is not indicative of our full year results due to the seasonal nature of our business, I will focus primarily on the full year fiscal 2022 results today. As a reminder, the majority of our citrus crop is harvested in the second and third quarters of the fiscal year.

Speaker 15: with the majority of our profit and cash flows also recognized in the second and third quarters.

Speaker 16: For the fiscal year ended September 30, 2022, total operating revenue was $91.9 million compared to $108.6 million for the fiscal year ended September 30, 2021.

Speaker 17: Stitcher's revenue was $89.7 million and $105.8 million for the fiscal years ended September 30, 2022 and 2021 respectively.

Speaker 18: The decrease in revenue for the fiscal year ended September 30, 2022 compared to the fiscal year ended September 30, 2021 was primarily due to a decrease in the revenue from lower box production, particularly our Valencia fruit and a reduction in our growth management services.

Speaker 19: The decrease in early and mid and Valencia fruit harvested was primarily driven by a decrease in processed box production and a decrease in pound solids per box.

Speaker 20: As previously discussed, this was primarily due to the January 2022 freeze event, which increased fruit drop at the beginning of our Valencia harvesting season, and we made the decision to accelerate the harvest of the remaining fruit, which did not have time to mature to optimal quality standards.

Speaker 21: Our average blended price per pound solid increase from $2.45 in the prior fiscal year to $2.63 for the current fiscal year.

Speaker 22: This was primarily due to tighter supplies of citrus fruit, which in turn led to reduced inventory levels at the juice processors.

Speaker 23: Largely offsetting this increase in pricing was the number of fewer Valencia boxes being harvested in lower pound solid per box for the fiscal year ended September 30, 2022, compared to the prior year, which resulted in lower revenues.

Speaker 24: We, along with the entire Florida industry in general, recorded a smaller number of boxes harvested as a result of greater fruit drop during the current harvest season as compared to the previous year.

Speaker 25: During the fiscal year 2022, we provided our growth management services, which includes Citrus Grove caretaking and harvest and haul management services, to approximately 7,400 acres of land owned by third parties of approximately 7,000 acres.

Speaker 26: which are serviced on a property management agreement, which was entered into in July 2020 with a top 10 grower.

Speaker 27: During the third quarter of 2022, the property management agreement covering these approximate 7,000 acres was terminated by the Grove owner and all property management and caretaking services ceased as of June 10, 2022.

Speaker 28: As part of these agreements, we are reimbursed for all costs incurred relating to providing these services and receive a management fee based on ACRS coverage from the third parties.

Speaker 29: As a reminder, we record both an increase in revenues and expenses as and when we provide these services.

Speaker 30: For the fiscal year ended September 30th, 2022, we recorded approximately $11.9 million worth of operating revenue from Grove Management Services as compared to $17 million in the fiscal year ended September 30th, 2021.

Speaker 31: The Terminated Property Management Agreement represents $10.6 million in revenue in fiscal year ended 2022, as compared to $15.8 million in fiscal year ended 2021.

Speaker 32: The USDA, in its final citrus crop forecast for the 2021-2022 harvest season, indicated that the Florida orange crop decreased by 22.5% to approximately 41.1 million boxes.

from approximately 53 million boxes in the prior harvest season.

In comparison, we declined in the current harvest season by 12.9%.

The increase in operating expenses for the fiscal year 2022 as compared to fiscal year 2021 mostly relates to the approximate $23 million in casualty loss and inventory adjustments as a result of Hurricane Ian.

This increase was partially offset by a decrease in growth management services and harvest and haul expenses.

As previously stated, we entered into an agreement with a top 10 grower to provide property management and caretaking services covering approximately 7,000 acres.

During the third quarter of 2022, the property management agreement covering these approximate 7,000 acres was terminated by the grow owner and all property management and caretaking services ceased as of June 10, 2022.

For the fiscal year ended 2022, we recorded approximately $10.5 million of operating expenses from Growth Management Services.

As compared to approximately 15.1 million dollars in the fiscal year ended September 30th, 2021.

The Terminated Property Management Agreement represented $9.7 million in operating expenses in the fiscal year ended 2022, as compared to $14.3 million in fiscal year ended 2021.

We recognize lower harvest and haul expenses due to the lower box production previously discussed.

General and administrative expenses for the fiscal year ended September 30, 2022 were approximately $10.1 million compared to approximately $9.5 million for the fiscal year ended September 30, 2021.

Increase was primarily attributable to an increase in legal expenses as compared to fiscal year ended 2021.

with the fiscal year 2021 legal expenses reduced by a $700,000 reimbursement from insurers for a corporate legal matter from 2018.

In addition, in fiscal year end of 2022, the company recognized approximately

$2.2 million in stock compensation expense for restricted stock awarded to non-executive employees.

These increases were partially offset by reduction in payroll expenses of approximately $0.3 million relating to reduction in headcount from 222 on September 30, 2021 down to 206 at September 30, 2022.

and a reduction in the company's director fees of approximately $2.2 million relating to a remodification of the compensation agreement for the board of directors.

Other income net for the fiscal years ended September 30, 2022, and 2021 was approximately $37.8 million and approximately $31.9 million, respectively.

The increases in other income net was primarily due to the recording of higher gains on sales of real estate, property equipment, and assets held for sale in fiscal year 2022 as compared to the previous fiscal year.

For the fiscal year ended September 30, 2022, we recorded gains on sale of real estate property equipment and assets held for sale of approximately $41.1 million, relating to the sale of approximately 9,400 acres from the Eliko Ranch to several third parties.

By comparison, for the fiscal year ended September 30, 2021, we recognize gains on sale of real estate, property, and equipment, and assets held for sale of approximately $35.9 million.

Additionally, a decrease in interest expense of approximately $0.7 million for the fiscal year ended September 30, 2022, as compared to the fiscal year ended September 30, 2021, was realized due to the reduction of our long-term debt and making of mandatory principal payments along with other prepayments.

During the fiscal year ended September 30, 2022, we received approximately $1.1 million of additional proceeds under the Florida Citrus Recovery Block Grant Program, relating to hurricane Irma damage sustained in September 2017.

Through September 30, 2022, we received approximately $25.6 million of proceeds under this program.

These federal relief proceeds are included as reduction to operating expenses in the consolidated statements of operations.

During the first quarter of fiscal year 2023, we have received the remaining portion of the funds that are due under this program related to the reimbursement of certain crop insurance expenses incurred by us of approximately $1.3 million.

For the fiscal years ended September 30, 2022 and September 30, 2021, we report a net income attributable to Elico common stockholders of approximately $12.5 million and approximately $34.9 million, respectively.

Our adjusted EBITDA was approximately 13.4 million dollars for the fiscal year ended September 30th, 2022 as compared to approximately 25.3 million dollars for the fiscal year ended September 30th, 2021.

We continue to strengthen our balance sheet. Our working capital was approximately 15.1 million at September 30, 2022, representing a 1.91 to 1 ratio.

Our debt-to-equity ratio continues to improve. At September 30, 2022, September 30, 2021, and September 30, 2020, the ratios were.45 to 1,.50 to 1, and.67 to 1, respectively.

This improvement has been driven by continued mandatory prepayments on a long-term debt, as well as certain voluntary prepayments, including approximately $15.6 million in April 2022 on our variable rate term loans.

Due to the uncertainty related to the estimated fruit drop in box production, we're unable to provide guidance at this time for fiscal year 2023.

During the completion of our annual report on foreign 10K for the fiscal year ending September 30th, 2022, the company identified an error in the calculation of the deferred tax liabilities for the fiscal years 2015 through 2019.

resulting in a restatement of balance sheet items as of September 30th, 2021, and as of

the end of each fiscal quarter previously reported since December 31st, 2020.

The error had no impact on our consolidated statement of operations or our consolidated statement of cash flows presented in the Form 10-K filed earlier this afternoon.

but resulted in a cumulative reduction in deferred tax liability and a corresponding cumulative increase in retained earnings of approximately $2,512,000.

on our audited consolidated balance sheet as of September 30th, 2021.

I would like to now pass the call back to John .

Thanks, Perry...................

As we have discussed, although it was a challenging year for our company,

and the Florida citrus industry, we were able to strengthen our balance sheet through reductions in our debt levels.

and returned approximately $15.1 million in dividends.

back to our shareholders.

A week ago it paid common dividends to shareholders consistently since it became publicly held more than six decades ago.

The rate of increased dividend payments since 2019 has been a source of pride.

as rent sale proceeds and operations enabled significant amounts of capital to be returned to shareholders.

enabled significant amounts of capital to be returned to shareholders. However,

Taking into account the impact of the recent storm, Aliko's board of directors unanimously voted to reduce its next quarterly common dividend to 5 cents per share.

We believe the investments that ARICO has made over the past several years

have created what we believe to be the most productive citrus groves in Florida.

We will continue to blend a conventional agriculture investment with the ability to optimize the returns on our real assets.

We are continuing to work with land use planning professionals to develop and implement this strategy over the next several years.

which we expect to help generate greater returns for our shareholders through active land management.

With that...

We will now open the line up to questions from industry analysts.

Doug?

Thank you. Ladies and gentlemen, at this time we will be conducting a question and answer session. If you would like to ask a question, you may press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing our star key.

Our first question comes from the line of Jerry Sweeney with Roth Capital. Please proceed with your question.

Hey John and Perry, thanks for taking my call. Hey Jerry.

Curious if you give us a little bit of insight maybe on the crop insurance.

you know

sort of process that you have to go through and timing when you can.

fully understand what the availability of insurance, if any.

So we'll take them in order. We have crop insurance on all of our acres.

It's primarily catastrophic so it's going to measure very very significant crop damage and we don't think that is going to be affecting a majority of our groves. It certainly is going to affect quite a few of them but not all of them and we really can't measure.

at this point until the end of the crop season, until the actual harvest itself. We do estimates right now, but we're actually going to have to measure the actual results.

into the crop season until the actual harvest itself. We do estimates right now, but we're actually going to have to measure the actual results. So it's going to be a few more months.

Got it. I'm gonna switch gears a little bit then, kind of, step back to it. But when do you get some visibility on the quality of the harvest? And,

Again, just to be clear, the harvest, the fruit...

that came off the trees during Ian was for this.

season coming up so we won't really even know for probably a good sell year as to what like a big rebound or what kind of rebound we're going to have is that corrected

Yeah, there's going to be ways to do that.

about a week or so ago. And that crop, it was probably the most affected. And again, you have to take this with a grain of salt because we still have a lot of evaluation to do. Because it was just more mature and larger hanging on the tree when the hurricane and all those force winds came through in September . It's too early for us to really tell what that size crop. So unfortunately we can't give guidance right now. Or eventually what the ultimate quality standard and kind of juice quantity is going to be. You know, the Valencia season most likely is going to start in kind of mid February .

When would you sort of get a visibility on that harvest? So next year's harvest, would that sort of be?

August September

this year coming up.

Yeah, so traditionally we do kind of our first crop forecast internally in kind of the late summer months. So it would be kind of August going into early September . That is traditional and that will give us our first visibility.

into the first glimpse of what the crop for next season looks like. And again, it would be a waiting game to make sure that the fruit stays on the tree and matures. As we saw in Irma, there was a very quick rebound. We don't want to go out on a limb and actually say that we expect that that's going to happen. We will keep our fingers crossed.

obviously, but prior to, it had taken two plus years to kind of rebound to pre-production levels. So, it's unfortunately just going to be another waiting game to get to next summer for the first glimpse and then fingers crossed as we start the next harvest season next November , December .

Going back to the insurance part.

Thank you.

federal relief. Any updates on that? I know that's going to be a process but...

if anything is moving.

in the last week or two.

weeks. Yeah unfortunately and this is

starting to sound like a theme, but unfortunately we don't have a lot of good visibility that's come out of Washington. This most likely is not going to be a state driven program. It's almost entirely going to be dependent on federal funding.

and we are in kind of weight mode. We're working very closely with Citrus Mutual, our earned industry trade group. That's kind of the point on this initiative on behalf of all the citrus growers in the state of Florida.

Gotcha. On federal relief and again I apologize for the questions here but since I assume some of this there was Florida was declared a state of an emergency.

you know, I think probably at the state and federal level.

Does that automatically, I don't want to say automatically, but does that open a door for federal funding or is federal relief funding a whole separate?

but does that open a door for federal funding or is that a whole is federal sort of relief funding a whole separate process?

Yeah, we think it's a whole separate process, similar to what it was in the past. This isn't like a FEMA disaster emergency. It's really going to be specific year mark funds for kind of industry type relief. I think back in very early October , Senator Rubio had sponsored some sort of legislation and outlined a program that was...

here in Florida.

Okay, one more on the real estate side just

curious as to how the market looks backlog

sort of tone tenor in terms of how properties demand or activity on the property sales front.

We seldom get into really big statistics or you know...

information that we haven't actually put in the press release. We have closed a few small transactions in this quarter. As we said in the press release, you know, it is at prices that we consider to be a...

Thank you everyone for joining our call today and also for your support of Olico.

On behalf of Perry, myself, and the rest of the ELICO team based down here at Fort Myers, Florida, we look forward to speaking with you about our first quarter results coming up in February .

Thanks very much.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time. Have a wonderful day.zz

Welcome to the Viovid Conference Center. The next available conference specialist will be with you momentarily. Conference Center, how may I help you? Hi, I'm trying to connect to Aliko, Rachel Smith. Sure. Okay, I'll join you right there. Thank you. You're welcome.

For the com what?

The F F.

Welcome to ELITco's fourth quarter and full year 2022 earnings conference call. At this time, all participants are in a listen-only mode. As a reminder, today's conference is being recorded. Earlier today, the company issued a press release announcing its results for the fourth quarter and full year ended September 30, 2022. If you had not had a chance to view the release, it is available on the investor relations portion of the company's website at elitcoinc.com. This call is being webcast and replay will be available on ELITco's website as well. Before we begin, we would like to remind everyone that the prepared remarks today contain forward-looking statements. Such statements are subject to risk, uncertainties, and other factors that may cause actual results that differ materially from those expressed or...

2022 earnings call this afternoon. Fiscal year 2022 was a challenging year for Olico. Two weather events had a meaningful impact on our company and the Florida citrus industry. As previously discussed, in January , the freeze increased fruit drop for our Valencia crop at the beginning of our harvesting season. We made the decision to accelerate the harvest of the remaining fruit that did not have time to mature to optimal quality standards. At the end of September , Hurricane Ian struck southwestern Florida with 150 mile an hour winds. A slow moving storm moved across the state causing substantial fruit drop at the majority of our groves. Fortunately, tree damage was largely limited to only one property. This loss fruit impacted our fiscal year 2022 financial results through an aggregate of approximately $23 million of one time items for casualty losses and inventory adjustments. Fiscal year 2023 will see lower levels of revenue because we will have less fruit available for sale. Based upon our prior experience with storms of this nature, we anticipate it may take up to two seasons or more for our groves to recover to pre hurricane production levels. I would point out however, that after Hurricane Irma struck in 2017, our groves recovered the following harvest season. We maintain crop insurance and we are currently working closely with our insurers and adjusters to evaluate and determine the amount of insurance recovery we may be entitled to, if any. The fiscal year ended September 30th, 2022. The company reported net income attributable to OEKO common stockholders.

earnings call this afternoon. Fiscal year 2022 was a challenging year for Olico. Two weather events had a meaningful impact on our company and the Florida citrus industry. As previously discussed, in January the freeze increased fruit drop for our Valencia crop at the beginning of our harvesting season and we made the decision to accelerate the harvest of the remaining fruit and that did not have time to mature to optimal quality standards. At the end of September , Hurricane Ian struck southwestern Florida with 150 mile an hour winds. A slow-moving storm moved across the state causing substantial fruit drop at the majority of our groves. Fortunately, tree damage was largely limited to only one property. This false fruit impacted our fiscal year 2022 financial results through an aggregate of approximately 23 million dollars of one-time items for casualty losses and inventory adjustments. Fiscal year 2023 will see lower levels of revenue because we will have less fruit available for sale. Based upon our prior experience with storms of this nature, we anticipate it may take up to two seasons or more for our groves to recover to pre-hurricane production levels. I would point out however that after Hurricane Irma struck in 2017, our groves recovered the following harvest season. We maintain crop insurance and we are currently working closely with our insurers and adjusters to evaluate and determine the amount of insurance recovery we may be entitled to, if any. For the fiscal year ended September 30th 2022, the company reported net income attributable to a week of common stockholders of approximately 12.5 million dollars.

to be attractive. So there is continued demand. We've got several other buyers that are negotiating or in a contract stage at this point. So we are still active on the real estate front relative to the Owego Ranch. Gotcha. Okay that's it for me. Thank you Jerry. Thanks for your support. That concludes our question and answer session. I'd like to hand it back to Mr. Kiernan for closing remarks. Thank you everyone for joining our call today and also for your support of Owego. On behalf of Perry, myself and the rest of the Owego team based down here in Fort Myers, Florida, we look forward to speaking with you about our first quarter results coming up in February . Thanks very much. Ladies and gentlemen, this does include today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.