Q3 2023 Alico Inc Earnings Call
Welcome to <unk> third quarter 2020 free earnings conference call at this time, all participants are in listen only mode.
Today's conference is being recorded.
The company issued a press release announcing its results for the third quarter ended June 30 of 2020 free if you've not had a chance to view. The release is available on the Investor Relations portion of the company's website at <unk>, Inc. Com.
This call is being webcast and a replay will be available on them because 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 risks uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in these statements.
Factors that could raise all contribute to such differences, including risk details in the company's quarterly reports on Form 10-Q annual reports on Form 10-K current report on form 8-K, and any amendments that too.
With the FCC and those mentioned in the earnings release the company undertakes no obligation to subsequently upsides over finds the forward looking statements made on today's call except as required by law. During this call. The company will also discuss non-GAAP financial measures included EBIDTA and adjusted EBIDTA for more detail.
On these measures and for reconciliations of these non-GAAP financial measures. So the most directly comparable GAAP financial measures. Please refer to the company's press release issued earlier today with that I'd like to turn the call over to the company's President and CEO , Mr. Joe Mcadams.
Thank you Mark and thank you everyone for joining us for our weakest third quarter 2023 earnings call. This morning.
The 2022 2023 citrus harvest season.
It's been a difficult one for a week ago because of the impacts from Hurricane Ian last September .
But we are looking forward to the upcoming season with guarded optimism.
Historically, it has taken two or more seasons for citrus production to recover from such a devastating storm.
But our consistent growth caretaking practices combined.
Combined with the new Green Citrus Greening therapy, we began to apply this year.
It gives us confidence that the weaker production will substantially increase.
For the 2023 2020 for citrus harvest season, as compared to the 2022 2023 harvest season.
Of the millions of trees, we have planted beginning in 2017. Many are now mature enough to produce meaningful quantities of fruit. This season and help support the level of expectation for a better upcoming harvests per week out.
We have reported the overall decrease in box production for a week ago was 51, 4% for the 2022 2023 harvest season.
The prior year.
Although this is better than a 61, 5% decrease in box production for the overall, Florida Orange crop forecasted by the USDA.
As compared to the same period in the prior year as.
This lower level of production was insufficient to meet our operating cash flow requirements, but a week I had the balance sheet strength.
Because whilst production is always a weather related risk we'd go maintains crop insurance on all of our growth.
Through June 32023.
We have received approximately $21.4 billion in crop insurance proceeds and another.
Zero point $3 million of profit insurance proceeds was received in July .
We suffered minimal damage, but did receive approximately $800000 for property and casualty claims we filed after hurricane yet.
Nearly all of our citrus trees appear to have made it through the storm with no permanent damage, but one of our growth near pump the gorda sustained a direct hit for hours with 150 mile an hour per wins.
And a significant number of the trees there were lost.
We filed a claim for that damage under our tree insurance coverage with our insurer.
Finally, the federal relief is still pending.
Consolidated Appropriations Act, which was passed into law in December of 2022.
Has federal funds earmarked for disaster relief.
We hope that these funds eventually follow the funding mechanism previously established for the disbursement of the Hurricane Irma relief funds.
We continue to support Florida, citrus mutual our industry trade group and.
And government agencies as they work to finalize federal relief programs available under the act.
However, we cannot determine the amount if any.
Federal relief the company may be eligible for related to the damage hurricane yen caused us.
One highlight.
For the overall, Florida citrus industry. This past year has been to use of oxy tetracycline as a government approved citrus greening therapy.
We began treating our trees in January 2023.
With the new application of an OTC product.
Trucking Jackson's as the citrus greening therapy.
Boeing its approval by the Florida Department of Agriculture, and consumer services in October of 2022.
This application has been utilized in citrus Apple and other crops. It has applied once a year and through June 30th 2023.
We've treated more than 35% of our trees we.
We expect this treatment to mitigate some of the impacts of citrus greening.
Decrease the rate of fruit drop as well as improve for quality.
The extent of any benefits of the OTC application therapy will not be measurable until the completion of the fiscal year 2020 for harvest.
Everyone in the industry is hopeful that OTC helps improve the 2023 2020 for citrus harvest.
Currently.
We can expect that pricing next season will be in line with the past season.
We have the majority of our fruit under contract for the 2023 2024 harvest season and have extended one of our contracts with Tropicana through the 2020 for 2025 harvest season with improved pricing.
Although a weaker was not making any financial protections for the next fiscal year. At this time, we are observing lower market prices for some of our required fertilizer and chemicals Les.
Labor and fuel remain critical resources for us and although we utilize both as efficiently as possible on our daily operations inflation over the past few years has increase the base level of those operating expenses.
Our relationships with our lenders remains strong and we have $76 8 million of on drawn capacity on our revolving line of credit, which matures in November of 2029, and our working capital line of credit, which matures in November of 2025.
To provide ample liquidity as a weaker recovers from hurricane Ian.
Through June 30th 2023, we have sold approximately 1436 acres of ranch land for net proceeds of approximately $7.6 million.
The company is actively engaged with third parties interested in certain parcels of additional ranch land at prices, we continue to believe our competitive.
Also in the current fiscal year, we acquired two very small citrus grow purchases.
That are contiguous with one of our growth.
Our approximately 49500 citrus acres are located throughout the state of Florida, and we are continuing to work with land plan land use planning professionals to evaluate how to optimize the long term potential value for all of our real assets.
For the three months ended June 32023.
The company reported net income attributable to a weaker common stockholders of approximately $11.8 million as compared to net income attributable to veeco common stockholders of approximately $2 7 million for the same period in the prior year.
Third quarter 2023 results were primarily impacted as a result of receiving approximately $17 5 million in crop and property insurance proceeds during the three months ended June 32023.
Partially offset by the decrease in gross profit for the Valencia crops when excluding insurance proceeds received.
As a result of impact of hurricane Ian causing increase in fruit drop.
With that I'll turn the call over to Perry.
To discuss our more detailed financial results.
Thank you John and good morning, everyone due to the seasonal nature of our business. The quarterly results for our third quarter are not indicative of our full year results. The majority of our citrus crop is harvested in the second and third quarters of the fiscal year with the majority of our profit and cash flow is also recognized.
In the second and third quarters.
Total operating revenue for the quarter ended June 30 of 2023 was approximately $7 3 million compared to approximately $25 9 million for the quarter ended June 30 of 2022.
Our citrus revenue was approximately $6 7 million and $25 5 million for the quarters ended June 32023, and 2022, respectively.
The decrease in revenue for the three months ended June 32023, compared to the three months ended June 32022 was primarily due to a decrease in the Valencia fruit harvest it into a lesser extent a decrease in revenue generated from management services.
The decrease in the Valencia fruit harvest. It was primarily driven by a decrease in process box production and a decrease in pound solids per box as a result of the greater fruit drop from the impacts of Hurricane Dorian.
The USDA in its July 12, 2023, citrus crop forecast for the 2022 2023 harvest season indicated it expects the overall, Florida Orange crop will decrease from approximately $41 2 million boxes for the 2021 2022 crop year.
To approximately $15 9 million boxes for the 2022 2023 crop year, a decrease of approximately 61, 5%.
With respect to the early and mid season crop the USDA forecast at a 66, 5% decline.
Our early and mid season crop for the season was down 55%.
Regarding the blend to your crop the USDA is forecasting a decrease of 55% and our Valencia box reduction was down 49%.
While there was an impact to our fiscal year 2023 crops. There does not appear to be long term measurable damage to our trees.
The decrease in pound solids per box was mainly due to the internal quality work for not being as strong as it was in the previous year. In addition, we accelerated the harvesting of both the early and mid season, and Valencia crop to minimize the fruit drop as a result of the impact of hurricane in with the intent to maximize our box production as it.
Resolved, we realized a lower pound solids per box.
Partially offsetting the decrease in process box reduction in pounds dollars per box was an increase in the price per pound solids.
Four 4% improvement in the price per zone per pound solids for the three months ended June 32023, as compared to the same period in the prior year was due to the overall lower production citrus fruit, which has led to reduced inventory levels.
Total operating expenses were approximately.
Negative $8 2 million for the three months ended June 32023, as compared to $24 6 million in the same period in the prior year.
The decrease in operating expenses, primarily relates to the insurance proceeds received during the quarter ended June 32023.
Inventory adjustments recorded in fiscal year, 2020, two's ending inventory balance as a result of the impact of hurricane in which effectively lowered the inventory to be expensed in fiscal year 2023.
And a reduction in harvest and haul expense as a result of the lower box production.
The company experienced significant cost increases in fertilizer herbicide labor and fuel and maintaining its grows.
These cost increases coupled with the timing of the harvest in the lower box production for both it's early and mid season in Valencia harvests resulted in a higher cost of sales per box for the three months ended June 30 of 2023 as compared to the same period in the prior year.
The company realized an overall decrease in this harvest and holding expenses. However, the harvesting cost per box increase for the three months ended June 30 of 2023 as compared to the same period in the prior year due to an increase in the harvesting labor cost as well as the increased time spent by harvesters to fill the boxes as a result of it.
Increased fruit drop caused by hurricane Dorian.
During the three months ended June 32023, the company received approximately $17 5 million and hurricane even crop and property insurance proceeds.
The company also incurred additional costs related to the cleanup and repairs as a result of hurricane Dorian.
The decrease in gross management services expenses directly related to the termination of the grow with management services by the Grove owners in June of 2022.
As mentioned above the decision by the Grove owners to exit the citrus business eliminated the need for care, taking management services for the Grove owners as a result of caretaking expenses decreased significantly during the three months ended June 32023, when compared to the same period in the prior year.
General and administrative expenses for the three months ended June 30 of 2023 were approximately $2 9 million compared to approximately $2 6 million for the three months ended June 32022.
Increase was primarily due to an increase in salaries and wages and increased legal and professional fees as compared to the same period in the prior year.
Other income net for the three months ended June 32023, and 2022 was approximately $1 4 million and $4 9 million respectively.
The decrease do other income net is primarily due to the timing of the gains on sale of real estate property and equipment and assets held for sale.
During the quarter ended June 30 of 2023, the company sold approximately 548 acres from the illegal ranch and recognized a gain of approximately $2 6 million.
By comparison for the three months ended June 32022, the company recognized gains of approximately $5 8 million relating to the sale of real estate property and equipment and assets held for sale.
In addition, the company recognized an increase in interest expense of approximately 0.4 million for the three months ended June 32023, as compared to the same period in the prior year as a result of higher balance on the working capital line of credit.
And an increase in the overall interest rates on its variable rate term debt and a working capital line of credit.
For the fiscal quarter ended June 32023, and 2022, we reported net income attributable to <unk> common stockholders of $11 8 million and $2 7 million respectively or.
Our adjusted EBITDA was approximately a loss of $1 3 million for the third quarter ended June 32023, as compared to $2 8 million for the same period in the prior fiscal year.
<unk> continues to maintain a strong balance sheet, our working capital was approximately $32 3 million on June 30 of 2023, representing a three one to one ratio.
We continue to maintain a solid debt to equity ratio at June 32023 September 32022 at September 30 of 2021, the ratios were <unk> 49 to 1.45 to 1.5 to one respectively.
I will now pass the call back to John .
Thanks Perry.
A week ago, along with the rest of the Florida citrus industry.
He is focused on our care taking for our respective grows for the next harvest.
We're guardedly optimistic that the consistent Grove care, taking practices, we perform every day.
Combined with the anticipated benefits from the new citrus greening therapy, utilizing OTC truck injections to over 35% of our trees.
And the millions of new trees, we have planted since 2017, some of which are now mature support our expectations of a substantial increase in our harvested fruit next season.
Progress with sales of parcels of the weaker ranch continues and.
And our balance sheet remains strong.
We are grateful that our insurance providers paid our crop property and casualty claims quickly.
And expect that our limited tree damage claims.
To be paid soon.
We are patiently awaiting decisions from Congress regarding the funding mechanism for Hurricane Ian relief funds.
Our work with land use planning professionals to optimize the long term potential value for our real assets is expected to conclude later this calendar year.
And as we have reiterated for more than a year now we go wants to provide investors with the benefits and stability of conventional agricultural investment.
With the enhanced Optionality that comes through active land management.
And with that we'll now open the lineup for questions from industry analysts Mark.
Yes.
Thank you.
You'd like to ask question. Please dial star followed by one on you touched on key patents are key.
If you wish to withdraw your question you can do say by Don and it starts to to cancel.
And we.
You have a question on the line from Gerry Sweeney of Roth Capital. Please go ahead. Your line is open.
Hey, good morning, John and Barry Thanks for taking my call.
Good morning, Jerry.
Good morning.
Couple of questions I'm going to start with the 'twenty three 'twenty four harvest I know, it's a little bit early I think you alluded to it at least in the prepared remarks about how.
The harvest is taking shape at the quality of the tree. So one I just wanted to.
Yeah.
Circle back to that and just see it as of today. What's your initial take is on the trees and harvest and too.
When will you get a better view as to how this is shaping up.
Sure.
It is too early for us to actually make any sort of forecast on 2023 24, we really won't start harvesting until late November early December .
But.
The inspection of the trees right now and there appears not to be any permanent damage from the storm.
From Hurricane Ian last September .
But we can actually quantify for you potentially what next season it looks like.
Got it.
Will you be able to have like a forecast for.
Forecast sometime in that really fall pre harvest or should we just got to wait till the harvest.
Yeah, it's probably based on recent years it makes sense to wait later as we get closer to harvest.
Before we should really try to estimate and quantify.
Got it.
How big is the punter Gorda Orchard I know.
I could probably look it up in the documents, but I'm.
Just curious if the size.
Total acres I think is around 1000.
Okay.
Got it.
And then switching gears to OTC. Obviously this is probably some of the bigger news out there and I know you touched upon about I think 35%.
Sure.
Fortunately that's been.
Treat it just curious as to any.
Thoughts on one.
When you will do any testing that has been done in terms of yield and yield enhancement et cetera, then to again I know, it's probably a little bit early but some of our checks have indicated that the average cost.
<unk> is less than a dollar now I'm not sure if that is a dollar per dose or dollar sort of you know.
Per treatment per year. So just if you could I know theres, a couple of questions or maybe unpack that a little bit.
Yeah.
Thank you.
That's a very very good question and I'll try to do my best to answer it is as transparently as we can make it.
<unk> somewhere between 250 and $3 a tree I think just from sure sure economies of scale.
That is probably gotten below a dollar but we don't have any specific you know.
Statistics, we can give you but less than a dollar per application poetry is not a bad figure to start with.
Got it final question kindness was maybe follow up comments. It was contracts you've mentioned that one of your Tropicana contract has been extended to the 24 25 season.
Could you just.
Walk us through maybe the laddering of the contracts when they expire and roughly the size of them. If if you have that info at your fingertips. So I apologize just a little little different sure I've been dominating all the cute I saw it Perry delvecchio answer that.
Thanks, very Ah as it relates to the contracts this contract is.
One of the smaller contracts with Tropicana the larger contracts do come up for exploration next year.
At the end of next year's harvest.
At the end of fiscal 24, just wanted me yes.
Okay got it.
And then historically.
You ever knew them.
I would say you know a good amount of time before the end of the heart.
Harvest is that a way of looking at it.
Yes, I mean, we typically they'll do it within a year of when the expiration comes out and right now we've been doing it I'm on shorter durations.
So there's the shorter term contracts and I anticipate you know in the middle of next season, we'd be negotiating to renew those contracts that are expiring at the end of next season.
Got it okay.
That is it for me I really appreciate it thank you.
Jerry Thank you again.
Thank you.
What do we have any other planes.
I'd like to send the call back over with me skiing and for the closing remarks.
I just want to say, thank you to everyone for joining our call today and for your support of a week ago.
We look forward to speaking with you on our fourth quarter call.
We've actually reached the end of that today's question not session I'd like to send.
Okay Mark.
I just wanted to say, thank you to everyone for joining our call today and for your support of a week ago.
Look forward to speaking with you about our fourth quarter and for your results in December .
Oh.