ALICO, INC. 10-K

Item 8. Financial Statements and Supplementary Data 40 Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm 42 Consolidated Financial Statements: Consolidated Balance Sheets 43 Consolidated Statements of Operations 44 Consolidated Statements of Changes in Equity 45 Consolidated Statements of Cash Flows 46 Notes to Consolidated Financial Statements 47 All schedules are omitted for the reason that they are not applicable or the required information is included in the financial statements or notes. 41 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Alico, Inc. Opinions on the Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Alico, Inc. and subsidiaries (the Company) as of September 30, 2020 and 2019, and the related consolidated statements of operations, changes in equity and cash flows for each of the three years in the period ended September 30, 2020, and the related notes (collectively, the financial statements). We also have audited the Company’s internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2020 and 2019, and the results of their operations and their cash flows for each of the years in the three-year period ended September 30, 2020, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Basis for Opinions The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's financial statements and an opinion on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ RSM US LLP We have served as the Company's auditor since 2007. Orlando, Florida December 8, 2020 42 ALICO, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) September 30, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 3,163 $ 18,630 Accounts receivable, net 4,347 713 Inventories 40,855 40,143 Income tax receivable 781 — Assets held for sale 1,366 1,442 Prepaid expenses and other current assets 1,387 1,049 Total current assets 51,899 61,977 Restricted cash 16,524 5,208 Property and equipment, net 350,061 345,648 Goodwill 2,246 2,246 Other non-current assets 3,207 2,309 Total assets $ 423,937 $ 417,388 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,533 $ 4,163 Accrued liabilities 7,095 7,769 Long-term debt, current portion 9,145 5,338 Deferred retirement obligations, current portion — 5,226 Income taxes payable — 5,536 Other current liabilities 1,385 919 Total current liabilities 21,158 28,951 Long-term debt: Principal amount, net of current portion 139,106 158,111 Less: deferred financing costs, net ( 1,151 ) ( 1,369 ) Long-term debt less current portion and deferred financing costs, net 137,955 156,742 Lines of credit 2,942 — Deferred income tax liabilities, net 39,728 32,125 Other liabilities 372 172 Total liabilities 202,155 217,990 Commitments and Contingencies (Note 15) Stockholders' equity: Preferred stock, no par value, 1,000,000 shares authorized; no ne issued — — Common stock, $ 1.00 par value, 15,000,000 shares authorized; 8,416,145 shares issued and 7,492,524 and 7,476,513 shares outstanding at September 30, 2020 and September 30, 2019, respectively 8,416 8,416 Additional paid in capital 19,685 19,781 Treasury stock, at cost, 923,621 and 939,632 shares held at September 30, 2020 and September 30, 2019, respectively ( 30,779 ) ( 31,943 ) Retained earnings 219,019 198,049 Total Alico stockholders' equity 216,341 194,303 Noncontrolling interest 5,441 5,095 Total stockholders' equity 221,782 199,398 Total liabilities and stockholders' equity $ 423,937 $ 417,388 See accompanying notes to the consolidated financial statements. 43 ALICO, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Fiscal Year Ended September 30, 2020 2019 2018 Operating revenues: Alico Citrus $ 89,369 $ 119,031 $ 78,121 Land Management and Other Operations 3,138 3,220 3,160 Total operating revenues 92,507 122,251 81,281 Operating expenses: Alico Citrus 72,281 59,594 51,709 Land Management and Other Operations 2,307 2,297 3,979 Total operating expenses 74,588 61,891 55,688 Gross profit 17,919 60,360 25,593 General and administrative expenses 10,998 15,146 15,058 Income from operations 6,921 45,214 10,535 Other income (expense): Investment and interest income, net 98 49 39 Interest expense ( 5,981 ) ( 7,180 ) ( 8,561 ) Gain on sale of real estate, property and equipment and assets held for sale 30,424 13,166 11,041 Change in fair value of derivatives — ( 989 ) — Other (expense) income, net ( 85 ) ( 27 ) 136 Total other income, net 24,456 5,019 2,655 Income before income taxes 31,377 50,233 13,190 Income tax provision 7,663 12,783 390 Net income 23,714 37,450 12,800 Net (income) loss attributable to noncontrolling interests ( 52 ) 383 250 Net income attributable to Alico, Inc. common stockholders $ 23,662 $ 37,833 $ 13,050 Per share information attributable to Alico, Inc. common stockholders: Earnings per common share: Basic $ 3.16 $ 5.06 $ 1.59 Diluted $ 3.16 $ 5.05 $ 1.57 Weighted-average number of common shares outstanding: Basic 7,484 7,472 8,232 Diluted 7,496 7,493 8,301 Cash dividends declared per common share $ 0.36 $ 0.24 $ 0.24 See accompanying notes to the consolidated financial statements . 44 ALICO, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in thousands) Common stock Additional Paid-In Treasury Retained Total Alico, Inc. Non- controlling Total Shares Amount Capital Stock Earnings Equity Interest Equity September 30, 2017 8,416 $ 8,416 $ 18,694 $ ( 6,502 ) $ 140,033 $ 160,641 $ 4,728 $ 165,369 Net income (loss) — — — — 13,050 13,050 ( 250 ) 12,800 Dividends — — — — ( 1,972 ) ( 1,972 ) — ( 1,972 ) Treasury stock purchases — — — ( 2,215 ) — ( 2,215 ) — ( 2,215 ) Capital contribution received from noncontrolling interest funding — — — — — — 1,000 1,000 Stock-based compensation: Directors — — ( 322 ) 1,181 — 859 — 859 Executives — — 1,754 — — 1,754 — 1,754 September 30, 2018 8,416 8,416 20,126 ( 7,536 ) 151,111 172,117 5,478 177,595 Net income (loss) — — — — 37,833 37,833 ( 383 ) 37,450 Dividends — — — — ( 1,792 ) ( 1,792 ) — ( 1,792 ) Treasury stock purchases — — — ( 25,576 ) — ( 25,576 ) — ( 25,576 ) ASC 610-20 adoption — — — — 10,897 10,897 — 10,897 Stock-based compensation: Directors — — ( 300 ) 1,169 — 869 — 869 Executives — — 778 — — 778 — 778 Executive forfeiture — — ( 823 ) — — ( 823 ) — ( 823 ) September 30, 2019 8,416 8,416 19,781 ( 31,943 ) 198,049 194,303 5,095 199,398 Net income — — — — 23,662 23,662 52 23,714 Dividends — — — — ( 2,692 ) ( 2,692 ) — ( 2,692 ) Treasury stock purchases — — — ( 238 ) — ( 238 ) — ( 238 ) Capital contribution received from noncontrolling interest funding — — — — — — 294 294 Stock-based compensation: Directors — — ( 669 ) 1,402 — 733 — 733 Executives and managers — — 573 — — 573 — 573 September 30, 2020 8,416 $ 8,416 $ 19,685 $ ( 30,779 ) $ 219,019 $ 216,341 $ 5,441 $ 221,782 See accompanying notes to the consolidated financial statements . 45 ALICO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Fiscal Year Ended September 30, 2020 2019 2018 Net cash provided by operating activities: Net income $ 23,714 $ 37,450 $ 12,800 Adjustments to reconcile net income to net cash provided by operating activities: Deferred gain on sale of sugarcane land — — ( 967 ) Depreciation, depletion and amortization 14,520 13,924 13,756 Deferred income tax expense (benefit) 7,603 3,267 ( 1,955 ) Cash surrender value ( 10 ) 11 ( 27 ) Deferred retirement benefits ( 5,226 ) 829 ( 41 ) Gain on sale of real estate, property and equipment and assets held for sale ( 30,424 ) ( 13,166 ) ( 10,281 ) Inventory net realizable value adjustment — 808 1,115 Loss on disposal of property and equipment 659 — 207 Change in fair value of derivatives — 989 — Impairment of long-lived assets 1,321 396 2,234 Impairment of right-of-use-asset 87 — — Non-cash interest expense on deferred gain on sugarcane land — — 1,361 Insurance proceeds received for damage to property and equipment — ( 486 ) ( 477 ) Stock-based compensation expense 1,306 824 2,613 Other — — 29 Changes in operating assets and liabilities: Accounts receivable ( 3,634 ) 1,531 1,718 Inventories ( 712 ) 82 ( 6,554 ) Prepaid expenses ( 135 ) ( 211 ) 177 Income tax receivable ( 781 ) 15 ( 15 ) Other assets ( 839 ) 288 23 Accounts payable and accrued liabilities ( 1,530 ) ( 1,113 ) 2,987 Income tax payable ( 5,536 ) 3,216 2,320 Other liabilities 666 178 ( 2,445 ) Net cash provided by operating activities 1,049 48,832 18,578 Cash flows from investing activities: Purchases of property and equipment ( 21,705 ) ( 20,000 ) ( 16,352 ) Net proceeds from sale of real estate, property and equipment and assets held for sale 31,541 14,602 39,780 Insurance proceeds received for damage to property and equipment — 486 477 Change in deposits on purchase of citrus trees ( 458 ) ( 108 ) ( 431 ) Advances on notes receivables, net 136 60 ( 575 ) Other ( 25 ) — 25 Net cash provided by (used in) investing activities 9,489 ( 4,960 ) 22,924 Cash flows from financing activities: Repayments on revolving lines of credit ( 114,581 ) ( 89,231 ) ( 25,600 ) Borrowings on revolving lines of credit 117,523 86,546 28,285 Principal payments on term loans ( 15,198 ) ( 10,900 ) ( 12,127 ) Treasury stock purchases ( 238 ) ( 25,576 ) ( 2,215 ) Payment on termination of sugarcane agreement — ( 11,300 ) — Dividends paid ( 2,466 ) ( 1,833 ) ( 1,972 ) Deferred financing costs ( 23 ) — — Capital contribution received from noncontrolling interest 294 — 1,000 Capital lease obligation payments — — ( 8 ) Net cash used in financing activities ( 14,689 ) ( 52,294 ) ( 12,637 ) Net (decrease) increase in cash and cash equivalents and restricted cash ( 4,151 ) ( 8,422 ) 28,865 Cash and cash equivalents and restricted cash at beginning of the period 23,838 32,260 3,395 Cash and cash equivalents and restricted cash at end of the period $ 19,687 $ 23,838 $ 32,260 Supplemental disclosure of cash flow information: Cash paid for interest, net of amount capitalized $ 5,614 $ 6,940 $ 6,721 Cash paid for income taxes $ 6,403 $ 6,285 $ 25 Supplemental disclosure of non-cash investing and financing activities: Dividend declared but unpaid $ 674 $ 449 $ 492 See accompanying notes to the consolidated financial statements. 46 ALICO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Description of Business and Basis of Presentation Description of Business Alico, Inc., together with its subsidiaries (collectively, “Alico”, the “Company", "we", "us" or "our”), is a Florida agribusiness and land management company owning approximately 100,000 acres of land throughout Florida, holding mineral rights on approximately 90,000 of those owned acres. The Company manages its land based upon its primary usage, and reviews its performance based upon two primary classifications: (i) Alico Citrus and (ii) Land Management and Other Operations. Financial results are presented based upon its two business segments (Alico Citrus and Land Management and Other Operations). Basis of Presentation The Company has prepared the accompanying financial statements on a consolidated basis. These accompanying Consolidated Financial Statements, which are referred to herein as the “Financial Statements”, have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). All significant intercompany transactions and account balances between the consolidated businesses have been eliminated. 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 two operating segments: (i) Alico Citrus and (ii) Land Management and Other Operations. Principles of Consolidation The Financial Statements include the accounts of Alico and the accounts of all the subsidiaries in which a controlling interest is held by the Company. Under U.S. GAAP, consolidation is generally required for investments of more than 50% of the outstanding voting stock of an investee, except when control is not held by the majority owner. The Company’s subsidiaries include: Alico Land Development, Inc., Alico-Agri, Ltd., Alico Plant World, LLC, Alico Fruit Company, LLC, Alico Citrus Nursery, LLC, Alico Chemical Sales, LLC, 734 Citrus Holdings, LLC and subsidiaries, Alico Fresh Fruit, LLC, Alico Skink Mitigation, LLC and Citree Holdings 1, LLC (“Citree”). The Company considers the criteria established under FASB ASC Topic 810, “Consolidations” in its consolidation process. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the accompanying Financial Statements, the disclosure of contingent assets and liabilities in the Financial Statements and the accompanying Notes, and the reported amounts of revenues and expenses and cash flows during the periods presented. Actual results could differ from those estimates. The Company evaluates estimates on an ongoing basis. The estimates are based on current and expected economic conditions, historical experience, the experience and judgment of the Company’s management and various other specific assumptions that the Company believes to be reasonable. Noncontrolling Interest in Consolidated Subsidiary The Financial Statements include all assets and liabilities of the less-than-100%-owned subsidiary the Company controls, Citree. Accordingly, the Company has recorded a noncontrolling interest in the equity of such entity. Citree had net income of $ 107,051 for the fiscal year ended September 30, 2020 and net losses of $ 781,783 , and $ 511,854 for the fiscal years ended September 30, 2019 and 2018, respectively, of which $ 54,596 of net income and $ 398,709 and $ 261,046 of net losses was attributable to the Company for the fiscal years ended September 30, 2020, 2019 and 2018, respectively. The shift to net income for the fiscal year ended September 30, 2020 was the result of reimbursements received under the federal relief program relating to Hurricane Irma, aggregating approximately $ 493,000 . 47 Recent Accounting Pronouncements In January 2017, the FASB issued ASU 2017-04, “Intangibles-Goodwill and Other” (Topic 350), which simplifies the accounting for goodwill impairment. The updated guidance eliminates Step 2 of the impairment test, which requires entities to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value, determined in Step 1. This guidance will become effective for us in the fiscal years beginning after December 15, 2019, including interim periods within those reporting periods. We will adopt this guidance using a prospective approach. Earlier adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of ASU 2017-04 will have a material impact on its consolidated financial statements and will adopt the standard effective October 1, 2020. In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements” ( “ ASU 2018-13 ” ), which aims to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies when preparing fair value measurement disclosures. ASU 2018-13 is effective for annual and interim periods in the fiscal years beginning after December 15, 2019. Early adoption is permitted. Retrospective adoption is required, except for certain disclosures, which will be required to be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. The Company does not expect the adoption of ASU 2018-13 will have a material impact on its consolidated financial statements and will adopt the standard effective October 1, 2020. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Leases (Topic 842). The standard is effective for the Company on October 1, 2020, with early adoption permitted. The Company does not expect the adoption of ASU 2018-19 to have a material impact on the consolidated financial statements of the Company. In December 2019, the FASB issued ASU 2019-12, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in the existing guidance for income taxes and making other minor improvements. The amendments in the ASU are effective for the Company on October 1, 2021. The Company does not expect the adoption of ASU 2019-12 will have a material impact on its consolidated financial statements and will adopt the standard effective October 1, 2021. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform. The Company’s floating rate notes and variable funding notes bear interest at fluctuating interest rates based on LIBOR. If LIBOR ceases to exist, the Company may need to renegotiate its loan agreements and the Company cannot predict what alternative index would be negotiated with its lenders. ASU 2020-04 is currently effective and upon adoption may be applied prospectively to contract modifications made on or before December 31, 2022. The Company is currently assessing the impact of adopting this standard and the impact on its consolidated financial statements. The Company has reviewed other recently issued accounting standards which have not yet been adopted in order to determine their potential effect, if any, on the results of operations or financial condition. Based on the review of these other recently issued standards, the Company does not currently believe that any of those accounting pronouncements will have a significant effect on its current or future financial position, results of operations, cash flows or disclosures. Recently Adopted Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” , and subsequently issued several supplemental and/or clarifying ASU’s (collectively, “ASC 606”), which prescribes a comprehensive new revenue recognition standard that supersedes previously existing revenue recognition guidance. The new model provides a five-step analysis in determining when and how revenue is recognized. The core principle of the new guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also requires new, expanded disclosures regarding revenue recognition. The standard allows initial application to be performed retrospectively to each period presented or as a modified retrospective adjustment as of the date of adoption. ASC 606 also provides for certain practical expedients, including the option to expense as incurred the incremental costs of obtaining a contract, if the contract period is for one year or less, and policy elections regarding shipping and handling that provides the option to account for shipping and handling costs as contract fulfillment costs. The Company adopted ASC 606 effective October 1, 2018, the first day of its 2019 fiscal year, using the modified retrospective method. The implementation of ASC 606 did not require an adjustment to the opening balance of retained earnings as of October 1, 2018 (see Note 2. “Revenue Recognition”). 48 In February 2017, the FASB issued ASU 2017-05, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets” (ASC 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. This standard clarifies the scope and application of ASC 610-20 on the sale, transfer, and derecognition of nonfinancial assets and in substance nonfinancial assets to non-customers, including partial sales. It also provides guidance on how gains and losses on transfers of nonfinancial assets and in substance nonfinancial assets to non-customers are recognized. The standard also clarifies the derecognition of businesses is under the scope of ASC 810. The standard was required to be adopted concurrently with ASC 606, however an entity did not have to apply the same transition method as ASC 606. The Company adopted ASC 610-20 (“ASC 610-20”) effective October 1, 2018, the first day of its 2019 fiscal year, using the modified retrospective method. The implementation of ASC 610-20 resulted in an adjustment to increase the opening balance of retained earnings by $ 10,897,000 , net of taxes, as of October 1, 2018. As a result of the ASU 610-20, guidance specific to real estate sales in ASC 360-20 will be eliminated. As such, sales and partial sales of real estate assets will now be subject to the same derecognition model as all other nonfinancial assets. The ASU 610-20 will also impact the accounting for partial sales of nonfinancial assets (including in substance real estate). When an entity transfers its controlling interest in a nonfinancial asset, but retains a noncontrolling ownership interest, the entity will measure the retained interest at fair value. This will result in full gain/loss recognition upon the sale of a controlling interest in a nonfinancial asset. Current guidance generally prohibits gain recognition on the retained interest. The ASU 610-20 was effective for fiscal years beginning after December 15, 2017, and interim periods within those years and thus was effective for the Company for our fiscal year beginning October 1, 2018. The ASU 610-20 will be applied prospectively to any transaction occurring from the date of adoption. The Company adopted ASU 360-20 effective October 1, 2018. The new guidance did not have a material impact on the Company’s consolidated financial statements as it relates to the deferred gain on the sale of the Company’s sugarcane lands (see Note 8. “Deferred Gain on Sale”). In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230).” This ASU will provide guidance on the presentation and classification of specific cash flow items to improve consistency within the statement of cash flows. This ASU is effective for the Company for our fiscal year beginning October 1, 2019 with early adoption permitted. The Company adopted ASU 2016-15 effective September 30, 2019 and the impact under this ASU is that the Company reported certain proceeds from insurance claims relating to property and equipment in the statement of cash flows as investing activities in the Consolidated Statement of Cash Flows. Leases In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This guidance requires entities that sign leases as a lessee to recognize right-of-use assets and lease liabilities for those leases classified as operating leases under previous U.S. GAAP. The accounting applied by a lessor is largely unchanged from that applied under previous U.S. GAAP. The Company adopted ASU 2016-02 on October 1, 2019. The Company determines whether an arrangement is a lease at inception. The Company’s leases consist of operating lease arrangements for certain office space, tractor leases and IT facilities. When these lease arrangements include lease and non-lease components, the Company accounts for lease components and non-lease components (e.g. common area maintenance) separately based on their relative standalone prices. Any lease arrangements with an initial term of 12 months or less are not recorded on the Company’s Condensed Consolidated Balance Sheets, and it recognizes lease cost for these lease arrangements on a straight-line basis over the lease term. Many lease arrangements provide the options to exercise one or more renewal terms or to terminate the lease arrangement. The Company includes these options when it will be reasonably certain to exercise them in the lease term used to establish the right-of-use assets and lease liabilities. Generally, lease agreements do not include an option to purchase the leased asset, residual value guarantees or material restrictive covenants. As most of our lease arrangements do not provide an implicit interest rate, the Company applies an incremental borrowing rate based on the information available at the commencement date of the lease arrangement to determine the present value of lease payments. No lease costs associated with finance leases and sale-leaseback transactions occurred and our lease income associated with lessor and sublease arrangements are not material to our Consolidated Financial Statements. 49 Our operating leases are reported in our Consolidated Balance Sheets as follows: (in thousands) September 30, Operating lease components Classification 2020 Right-of-use assets Other non-current assets $ 774 Current lease liabilities Other current liabilities $ 512 Non-current lease liabilities Other liabilities $ 356 Our operating leases cost components are reported in our Consolidated Statements of Operations as follows: (in thousands) September 30, Operating lease components Classification 2020 Operating lease costs General and administrative expenses $ 246 Operating lease right-of-use asset impairment Other expense $ 87 Future maturities of our operating lease obligations as of September 30, 2020 by fiscal year are as follows: (in thousands) 2021 $ 519 2022 324 2023 48 Total noncancelable future lease obligations $ 891 Less: Interest ( 24 ) Present value of lease obligations $ 867 The weighted-average remaining lease term and weighted-average discount rate for our operating leases are as follows: September 30, 2020 Weighted-average remaining lease term 1.61 years Weighted-average discount rate 3.1 % Cash flow information related to leases consists of the following: (in thousands) September 30, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 247 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 1,095 The COVID-19 Pandemic On March 11, 2020, the World Health Organization declared the current novel coronavirus outbreak (“COVID-19”) to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country have imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures have had a significant adverse impact upon many sectors of the economy, including certain agriculture businesses. To date, the Company has experienced no material adverse impact from this pandemic. 50 Reclassifications Certain prior year amounts have been reclassified in the accompanying Financial Statements for consistent presentation to the current period. These reclassifications had no impact on net income, equity, cash flows or working capital as previously reported. Seasonality The Company is primarily engaged in the production of fruit for sale to citrus markets, which is of a seasonal nature, and subject to the influence of natural phenomena and wide price fluctuations. Historically, the second and third quarters of Alico's fiscal year produce the majority of the Company's annual revenue. Working capital requirements are typically greater in the first and fourth quarters of the fiscal year, coinciding with harvesting cycles. Because of the seasonality of the business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year. Note 2. Summary of Significant Accounting Policies Revenue Recognition Revenues are derived from the sale of processed fruit, fresh fruit, other citrus revenue, leasing revenue and other resource revenues. The majority of the revenue is generated from the sale of citrus fruit to processing facilities, fresh fruit sales and grove management services. For fruit sales, the Company recognizes revenue at the amount it expects to be entitled to be paid, determined when control of the products or services is transferred to its customers, which occurs upon delivery of and acceptance of the fruit by the customer and the Company has a right to payment. The Company has identified one performance obligation as the delivery of fruit to the processing facility (or harvesting of the citrus in the case of fresh fruit) of the customer for each separate variety of fruit identified in the contract. The Company initially recognizes revenue in an amount which is estimated based on contractual and market prices, if such market price falls within the range (known as “floor” and “ceiling” prices) identified in the specific contracts. Additionally, the Company also has a contractual agreement whereby revenue is determined based on applying a cost-plus structure methodology. As such, since these contracts contain elements of variable consideration, the Company recognizes this variable consideration by using the expected value method. On a quarterly basis, management reviews the reasonableness of the revenues accrued based on buyers’ and processors’ advances to growers, cash and futures markets and experience in the industry. Adjustments are made throughout the year to these estimates as more current relevant industry information becomes available. Differences between the estimates and the final realization of revenues at the close of the harvesting season can result in either an increase or decrease to reported revenues. During the periods presented, no material adjustments were made to the reported citrus revenues. Receivables under contracts, whereby pricing is based on contractual and market prices, are primarily paid at the floor amount and are collected within seven days after the harvest week. Any adjustments to pricing as a result of changes in market prices are collected or paid thirty to sixty days after final market pricing is published. Receivables under contracts, whereby pricing is based off a cost-plus structure methodology, are paid at the final prior year rate. Any adjustments to pricing as a result of the cost-plus calculation are collected or paid upon finalization of the calculation and agreement by both parties. As of September 30, 2020 and 2019, the Company had total receivables relating to sales of citrus of $ 584,000 and $ 160,000 , respectively, recorded in Accounts Receivable, net, in the Consolidated Balance Sheets. For grove management services, the Company has identified one performance obligation relating to the management of the third party’s groves. Grove management services include caretaking of the citrus groves, harvesting and hauling of citrus, management and coordination of citrus sales and other related activities. The Company is reimbursed for expenses incurred in the execution of its management duties and the Company receives a per acre management fee. The Company recognizes operating revenue, including a management fee, and corresponding operating expenses when services are rendered and consumed. 51 Disaggregated Revenue Revenues disaggregated by significant products and services for the fiscal years ended September 30, 2020, 2019 and 2018 are as follows: (in thousands) Fiscal Year Ended September 30, 2020 2019 2018 Alico Citrus Early and Mid-Season $ 31,303 $ 39,574 $ 24,309 Valencias 50,060 73,480 48,865 Fresh fruit 2,321 3,629 2,054 Grove management services 4,599 1,342 1,808 Other 1,086 1,006 1,085 Total $ 89,369 $ 119,031 $ 78,121 Land Management and Other Operations Land and other leasing $ 2,683 $ 2,787 $ 2,595 Sale of calves and culls — — 57 Other 455 433 508 Total $ 3,138 $ 3,220 $ 3,160 Total Revenues $ 92,507 $ 122,251 $ 81,281 During the time that Alico was engaged in the business of raising and selling cattle, Alico recognized revenues from cattle sales at the time the cattle were delivered. Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to the short term and immediate nature of these financial instruments. The carrying amounts of the Company’s debt approximates fair value as the debt is with commercial lenders at interest rates that vary with market conditions or have fixed rates that approximate market rates for obligations with similar terms and maturities (see Note 8. “Fair Value Measurements”). Cash and Cash Equivalents The Company considers cash in banks and highly liquid instruments with an original maturity of three months or less to be cash and cash equivalents. At various times throughout the fiscal year, and as of September 30, 2020, some accounts held at financial institutions were in excess of the federally insured limit of $ 250,000 . The Company has not experienced any losses on these accounts and believes credit risk to be minimal. Restricted Cash Restricted cash is comprised of certain cash receipts from the sale of property which was being held specifically for the purpose of deferring a tax impact on the gain on sale of the property and other cash received from the sale of certain assets in which the use of funds were restricted. In September 2020, the Company sold certain sections of the West Ranch, from which a portion of the net cash proceeds amounting to $ 16,524,000 were being held by a qualified intermediary in coordination to purchase a like-kind asset and defer a portion of the gain on sale of the ranch land. Such funds were included in restricted cash. In October 2020, the Company closed on a purchase of a like-kind asset and used all of these net cash proceeds which was being held by the intermediary (see Note 17. “Subsequent Events”). For certain sales transactions, the Company sells property which serves as collateral for specific debt obligations. As a result, the sale proceeds are only permitted to be used to purchase like-kind citrus groves acceptable to the debt holder or to pay down existing debt obligations and thus are included in restricted cash. For the fiscal year ended September 30, 2019, the Company utilized restricted cash of $ 1,800,000 towards the purchase of citrus groves. Such purchases are included as part of the collateral under certain debt obligations. Additionally, in November 2019, the Company utilized restricted cash to pay down existing debt, including outstanding interest on such debt, in the amount of $ 4,489,000 . In July 2020, the remaining restricted cash of approximately $ 719,000 relating to collateral property under debt obligations, including interest earned in the account, was released without further obligation to the Company. 52 Accounts receivable Accounts receivable from customers are generated from revenues based on the sale of citrus, grove management, leasing and other transactions. The Company grants credit in the course of its operations to third party customers. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. The Company provides an allowance for doubtful accounts for amounts which are not probable of collection. The estimate, evaluated quarterly by the Company, is based on historical collection experience, current macroeconomic climate and market conditions and a review of the current status of each customer’s account. Changes in the financial viability of significant customers and worsening of economic conditions may require changes to its estimate of the recoverability of the receivables. Such changes in estimates are recorded in the period in which these changes become known. The bad debt expense is included in general and administrative expenses in the Consolidated Statements of Operations. The following table presents accounts receivable, net as of September 30, 2020 and 2019: (in thousands) September 30, 2020 2019 Accounts receivable $ 4,384 $ 746 Allowance for doubtful accounts ( 37 ) ( 33 ) Accounts receivable, net $ 4,347 $ 713 Concentrations Accounts receivable from the Company’s major customer as of September 30, 2020 and 2019 and revenue from such customers for the fiscal years ended September 30, 2020, 2019 and 2018, are as follows: (in thousands) Accounts Receivable Revenue % of Total Revenue 2020 2019 2020 2019 2018 2020 2019 2018 Tropicana $ — $ — $ 80,388 $ 108,318 $ 70,396 86.9 % 88.6 % 86.6 % 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, irrigation, and depreciation, 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. 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 4 years. After 4 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. 53 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 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 the Company determines that the useful life of property and equipment should be shortened, Alico depreciates the asset over its revised estimated remaining useful life, thereby increasing depreciation expense (see Note 5. “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. Alico's cash flow estimates are based on historical results adjusted to reflect best estimates of future market conditions and operating conditions. For fiscal years ended September 30, 2020, 2019 and 2018, the Company recorded impairments to its long-lived assets (see Note 5. “Property and Equipment, Net”). As of September 30, 2020 and 2019, 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, Alico has 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, Alico 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, 2020 and 2019, 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 deposits on the purchase of citrus trees. Investments in stock related to agricultural cooperatives are carried at cost. 54 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. For the fiscal years ended September 30, 2020, 2019 and 2018, the Company recorded valuation allowances of $ 0 , $ 0 , and $ 5,634,000 , respectively, relating to the unutilized capital loss carryforwards which expired. 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 the Company’s 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, 2020, 2019 and 2018: (in thousands) Fiscal Year Ended September 30, 2020 2019 2018 Weighted Average Common Shares Outstanding - Basic 7,484 7,472 8,232 Effect of dilutive securities - stock options and unrestricted stock 12 21 69 Weighted Average Common Shares Outstanding - Diluted 7,496 7,493 8,301 For the fiscal years ended September 30, 2020, 2019 and 2018, respectively, the Company issued 118,000 , 10,000 , and 300,000 , respectively, stock options to certain executives and managers of the Company. 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. 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, 2020, 2019 and 2018 in general and administrative expense was as follows: (in thousands) Fiscal Year Ended September 30, 2020 2019 2018 Stock-based compensation expense: Executives $ 497 $ 778 $ 1,754 Management 76 — — Executive forfeitures — ( 823 ) — Board of Directors 733 869 859 Total stock-based compensation expense $ 1,306 $ 824 $ 2,613 55 Note 3. Inventories Inventories consist of the following at September 30, 2020 and 2019: (in thousands) September 30, 2020 2019 Unharvested fruit crop on the trees $ 40,265 $ 39,276 Other 590 867 Total inventories $ 40,855 $ 40,143 The Company records its inventory at the lower of cost or net realizable value. For the fiscal year ended September 30, 2019, the Company recorded adjustments of approximately $ 808,000 to reduce inventory to net realizable value. This adjustment to inventory is included in operating expenses in the Consolidated Statement of Operations. In September 2017, the State of Florida’s citrus business, including the Company’s unharvested citrus crop, was significantly impacted by Hurricane Irma. The impact of Hurricane Irma resulted in the premature drop of unharvested fruit and damage to citrus trees. The Company is eligible for Hurricane Irma federal relief programs for block grants that are being administered through the State of Florida. During the fourth quarter of fiscal year 2019 and for the fiscal year ended September 30, 2019, the Company received approximately $ 15,597,000 under the Florida Citrus Recovery Block Grant (“CRBG”) program. This represents the Part 1 and a portion of the Part 2 reimbursement under the three-part program. For the fiscal year ended September 30, 2020, the Company received additional proceeds of approximately $ 4,629,000 under the Florida CRBG program. This represented the remaining portion of Part 2 reimbursement under the three-part program. The timing and amount to be received under Part 3 of the program has not been finalized. These federal relief proceeds are included as a reduction to operating expenses in the Consolidated Statements of Operations. For the fiscal year ended September 30, 2019, the Company received insurance proceeds relating to Hurricane Irma of approximately $ 486,000 in additional property and casualty claims reimbursement. For the fiscal year ended September 30, 2018, the Company received insurance proceeds relating to Hurricane Irma of approximately $ 477,000 for property and casualty damage claims and approximately $ 8,952,000 for crop claims. These insurance proceeds are included as a reduction to operating expenses in the Consolidated Statements of Operations. There are no further property and casualty or crop insurance claims pending relating to Hurricane Irma. Note 4. Assets Held for Sale 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, 2020 and September 30, 2019: (in thousands) Carrying Value Fiscal Year Ended September 30, 2020 2019 East Ranch $ 1,366 $ 1,442 Total Assets Held For Sale $ 1,366 $ 1,442 On September 10, 2020, the State of Florida purchased, under the Florida Forever program, approximately 10,702 acres of the Alico Ranch for approximately $ 28,500,000 pursuant to an option agreement entered between the State of Florida and the Company. The Company recognized a gain of approximately $ 27,470,000 , which is included in Gain on sale of real estate, property and equipment and assets held for sale in the Consolidated Statements of Operations. The Company subsequently used a portion of the net cash proceeds to purchase a like-kind asset in October 2020, which allowed the Company to defer a portion of the tax impact of the gain on sale of the ranch land (see Note 17. “Subsequent Events”). On March 27, 2020, the Company sold certain sections at the East Ranch for approximately $ 2,980,000 and realized a gain of approximately $ 2,748,000 . The Company subsequently used substantially all of the net cash proceeds to purchase a like-kind asset in May 2020, which will allow the Company to defer substantially all of the tax impact of the gain on sale of the ranch land. For the fiscal year ended September 30, 2019, the Company sold certain trailers for approximately $ 47,000 , and reclassified the remaining Assets Held for Sale to property and equipment, as management has determined not to offer the remaining trailers for sale. On October 30, 2018, the Company sold certain parcels at Frostproof for approximately $ 206,000 and realized a gain of approximately $ 12,000 . 56 On May 2, 2018, the Company sold its Gal Hog property for approximately $ 7,300,000 and recognized a gain of approximately $ 6,709,000 . On February 12, 2018, the Company sold its property at Chancey Bay for approximately $ 4,200,000 and realized a loss of approximately $ 51,000 . As part of the transaction, the Company agreed to pay the purchaser rent of $ 200,000 in exchange for the Company retaining the rights of harvesting and selling of the fruit in the 2017/2018 harvest season. On February 9, 2018, the Company sold its nursery located in Gainesville for approximately $ 6,500,000 and realized a gain of approximately $ 111,000 . On January 25, 2018, the Company sold its breeding herd to a third party for approximately $ 7,800,000 and realized a gain of approximately $ 1,759,000 . As part of this transaction, the purchaser is also leasing from the Company grazing and other rights on the Alico Ranch at a rate of $ 100,000 per month. Upon the sale of a parcel within the East Ranch, the lease rate was adjusted to $ 98,750 per month. On January 19, 2018, the Company sold certain trailers to a third party for $ 500,000 . The Company received $ 125,000 and the remaining portion is to be paid in accordance with a promissory note, which bears interest at 5 %, over three years . On October 30, 2017, the Company sold its corporate office building in Fort Myers, Florida for $ 5,300,000 and realized a gain of approximately $ 1,751,000 . The sales agreement provides that the Company lease back a portion of the office space for five years . Such lease is classified as an operating lease. The Company recorded no impairment loss during the fiscal year ended September 30, 2020. The Company recorded an impairment loss of approximately $ 152,000 and $ 150,000 for the fiscal years ended September 30, 2019 and 2018, respectively. These impairment losses were included in operating expenses on the Consolidated Statements of Operations. The Company has already used a portion of the proceeds from these various asset sales to pay down debt (see Note 6. "Long-Term Debt and Lines of Credit") and to purchase citrus groves and plans to use the remaining cash proceeds from the sale of these assets to purchase other citrus groves, pay down other debt and to fund future working capital requirements and for other corporate purposes. Note 5. Property and Equipment, Net Property and equipment, net consists of the following at September 30, 2020 and September 30, 2019: (in thousands) September 30, 2020 2019 Citrus trees $ 296,012 $ 281,149 Equipment and other facilities 55,593 54,622 Buildings and improvements 8,128 8,224 Total depreciable properties 359,733 343,995 Less: accumulated depreciation and depletion ( 115,440 ) ( 104,169 ) Net depreciable properties 244,293 239,826 Land and land improvements 105,768 105,822 Property and equipment, net $ 350,061 $ 345,648 On June 1, 2020, the Company sold approximately 30 ranch acres to an employee for approximately $ 122,000 and recognized a gain of approximately $ 83,000 . On May 4, 2020, the Company purchased 334 citrus acres for approximately $ 2,850,000 . This acquisition complements the Company’s existing citrus acres as these acres are located adjacent to existing groves in the Frostproof area. Additionally, this purchase was part of a like-kind exchange transaction, which allowed the Company to defer taxes relating to the sale of certain sections of the East Ranch. For the fiscal year ended September 30, 2019, the Company purchased 203 acres of citrus blocks for approximately $ 1,950,000 . These purchases were made from grove owners from within the Company’s existing grove locations. In April 2019, the lender, PGIM Real Estate Finance, LLC (“Prudential”), agreed to accept those purchases completed through April 2019 as substitute collateral and release $ 1,800,000 from restricted cash, which was completed in the fourth quarter of fiscal year 2019. After April 2019, there were two additional purchases of Citrus blocks for approximately $ 100,000 that are not included as part of the substitution collateral. 57 On September 27, 2019, the Company sold approximately 5,500 acres from its West Ranch for approximately $ 14,775,000 and realized a gain on sale of approximately $ 13,033,000 . Upon the sale of these acres, the lease rate pertaining to the grazing and other rights was adjusted from $ 98,750 to $ 80,000 per month, as space on these acres was previously being leased to a third party. On September 29, 2018, the Company sold its property at Island Pond for $ 7,900,000 . As the Island Pond property was collateralized under one of the Company’s loan documents, $ 7,000,000 of the proceeds was restricted in use. On September 28, 2018, The Company sold a parcel within the East Ranch for approximately $ 1,920,000 and realized a gain of approximately $ 1,759,000 . On March 30, 2018, the Company sold property located on its Winter Haven location for approximately $ 225,000 and recognized a loss of approximately $ 50,000 . On March 15, 2018, the Company sold certain parcels comprised of citrus trees and land located on its Ranch One grove for approximately $ 586,000 and recognized a loss of approximately $ 87,000 . For fiscal years ended September 30, 2020, 2019 and 2018, the Company recorded impairments of approximately $ 723,000 , $ 244,000 and $ 2,084,000 , respectively, relating to the loss of citrus trees. As a result of the sale of a portion of the Alico Ranch to the State of Florida comprising approximately 10,700 acres on the western part of the ranch and because the sale of those acres affected the proposed dispersed water management project, the Company decided to suspend all permit approval activities for its dispersed water management project and the Company wrote-down approximately $ 598,000 of assets relating to this project during the fourth quarter of the fiscal year ended September 30, 2020. Note 6. Long-Term Debt and Lines of Credit The following table summarizes long-term debt and related deferred financing costs, net of accumulated amortization at September 30, 2020 and September 30, 2019: September 30, 2020 September 30, 2019 (in thousands) Principal Deferred Financing Costs, Net Principal Deferred Financing Costs, Net Long-term debt, net of current portion: Met Fixed-Rate Term Loans $ 83,438 $ 621 $ 89,688 $ 724 Met Variable-Rate Term Loans 40,969 286 43,844 334 Met Citree Term Loan 4,512 36 4,750 40 Pru Loans A & B 15,097 207 16,257 224 Pru Loan E 4,235 1 4,455 9 Pru Loan F — — 4,455 38 148,251 1,151 163,449 1,369 Less current portion 9,145 — 5,338 — Long-term debt $ 139,106 $ 1,151 $ 158,111 $ 1,369 58 The following table summarizes lines of credit and related deferred financing costs, net of accumulated amortization at September 30, 2020 and September 30, 2019: September 30, 2020 September 30, 2019 (in thousands) Principal Deferred Financing Costs, Net Principal Deferred Financing Costs, Net Lines of Credit: RLOC $ — $ 141 $ — $ 8 WCLC 2,942 — — — Lines of Credit $ 2,942 $ 141 $ — $ 8 Future maturities of long-term debt and lines of credit as of September 30, 2020 are as follows: (in thousands) September 30, 2020 Due within one year $ 9,145 Due between one and two years 10,535 Due between two and three years 10,535 Due between three and four years 13,477 Due between four and five years 10,535 Due beyond five years 96,966 Total future maturities $ 151,193 Interest costs expensed and capitalized were as follows: (in thousands) Fiscal Year Ended September 30, 2020 2019 2018 Interest expense $ 5,981 $ 7,180 $ 8,561 Interest capitalized 1,228 1,019 933 Total $ 7,209 $ 8,199 $ 9,494 Debt The Company's credit facilities consist of $ 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 5,800 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 Met beginning May 1, 2017 and is subject to further adjustment every two years thereafter until maturity. No adjustment in the LIBOR spread was made at May 1, 2019. Interest on the term loans is payable quarterly. The interest rates on the Met Variable-Rate Term Loans were 1.91 % per annum and 3.91 % per annum as of September 30, 2020 and September 30, 2019, 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. During the first and second quarter of fiscal year 2018, the Company elected not to make its principal payment and utilized a portion of its 2015 prepayment to satisfy its principal payment requirements for such quarters. At September 30, 2020, the Company had $ 5,625,000 , available from its 2015 prepayment to reduce future mandatory principal payments should the Company elect to do so. The Met Variable-Rate Term Loans may be prepaid without penalty. 59 In March 2020, as a precautionary measure, the Company drew down an aggregate of $ 70,000,000 on its revolving credit facilities; $ 20,000,000 on its RLOC and $ 50,000,000 on its WCLC. This decision was made to safeguard the Company’s liquidity and to increase available cash on hand in the event of a more protracted COVID-19 outbreak. As of September 30, 2020, the Company had paid back a majority of the balances on these credit facilities. 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. No adjustment in the LIBOR spread was made at May 1, 2019. In October 2019, the RLOC agreement was modified to extend the current maturity of November 1, 2019 to November 1, 2029. 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 1.91 % per annum and 3.91 % per annum as of September 30, 2020 and September 30, 2019, respectively. Availability under the RLOC was $ 25,000,000 as of September 30, 2020. 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 the 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 1.90 % per annum and 3.85 % per annum as of September 30, 2020 and September 30, 2019, respectively. The WCLC agreement was amended on August 25, 2020, and the primary terms of the amendment were an extension of the maturity to November 1, 2023. There were no changes to the commitment amount or interest rate. Availability under the WCLC was approximately $ 66,659,000 and $ 69,540,000 as of September 30, 2020 and September 30, 2019, respectively. 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 approximately $ 2,942,000 outstanding on the WCLC at September 30, 2020. The WCLC agreement provides for Rabo to issue up to $ 2,000,000 , reduced from $ 20,000,000 during fiscal year 2019, in letters of credit on the Company’s behalf. As of September 30, 2020, there was approximately $ 399,000 in outstanding letters of credit, which correspondingly reduced the Company's availability under the line of credit. 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 $ 23,000 and $ 133,000 of financing costs were incurred for the fiscal years ended September 30, 2020 and 2019, respectively, in connection with letters of credit. All previous costs are included in deferred financing costs and 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 $ 1,048,000 and approximately $ 1,066,000 at September 30, 2020 and September 30, 2019, respectively. These credit facilities noted 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 years, or approximately $ 167,336,000 for the year ended September 30, 2020, (iii) minimum current ratio of 1.50 to 1.00, (iv) debt to total assets ratio not greater than .625 to 1.00, and, (v) solely in the case of the WCLC, a limit on capital expenditures of $ 30,000,000 per fiscal year. As of September 30, 2020, the Company was in compliance with all of the financial covenants. Credit facilities also include a Met Life term loan collateralized by 1,200 gross acres of citrus grove 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. Principal and interest payments are made on a quarterly basis. At September 30, 2020 and 2019, there was an outstanding balance of $ 4,512,000 and $ 4,750,000 , respectively. The loan matures in February 2029. The unamortized balance of deferred financing costs related to this loan was approximately $ 36,000 and $ 40,000 at September 30, 2020 and 2019, respectively. Transition from LIBOR The Company is currently evaluating the impact of the transition from LIBOR as an interest rate benchmark to other potential alternative reference rates. Currently, the Company has debt instruments in place that reference LIBOR-based rates. The transition from LIBOR is estimated to take place in 2022 and management will continue to actively assess the related opportunities and risks involved in this transition. 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. On February 15, 2015, 734 Citrus Holdings, LLC d/b/a Silver Nip Citrus (“Silver Nip Citrus”) made a prepayment of $ 750,000 . In addition, the Company made prepayments of approximately $ 4,453,000 in the 60 second fiscal quarter of 2018 with proceeds from the sale of certain properties, which were collateralized under these loans. The Company may prepay up to $5,000,000 of principal without penalty. As such, the Company exceeded the allowed $ 5,000,000 prepayment by approximately $ 203,000 and was required to make a premium payment of approximately $ 22,000 . The loans are collateralized by approximately 5,700 of citrus groves in Collier, Hardee, Highlands and Polk Counties, Florida and mature on June 1, 2029 and June 1, 2033, respectively. 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 with principal of $ 55,000 per loan being payable quarterly, together with accrued interest. One loan bears interest at 3.85 % per annum (“Pru Loan E”), while the other bore 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. No adjustment was made at September 1, 2019. Both loans were collateralized by approximately 1,500 gross acres of citrus groves in Charlotte County, Florida. Pru Loan E matures September 1, 2021, and Pru Loan F was scheduled to mature September 1, 2039. In November 2019, the Company prepaid Pru Loan F in full by paying the then existing principal balance of $ 4,455,000 . As a result of this prepayment, the Company’s required annual principal payments on its Pru Loans was reduced by $ 220,000 per annum. The Silver Nip Citrus credit agreements are subject to a financial covenant whereby the consolidated current ratio requirement is 1.00 to 1.00. Silver Nip Citrus was in compliance with the current ratio covenant as of September 30, 2020. The unamortized balance of deferred financing costs related to the Silver Nip Citrus debt was approximately $ 208,000 and $ 271,000 at September 30, 2020 and 2019, respectively. Note 7. Accrued Liabilities Accrued liabilities consist of the following at September 30, 2020 and September 30, 2019: (in thousands) September 30, 2020 2019 Ad valorem taxes $ 2,057 $ 2,117 Accrued interest 1,020 1,110 Accrued employee wages and benefits 2,214 2,525 Accrued dividends 674 448 Accrued contractual obligation associated with sale of real estate — 402 Consulting and separation charges 146 400 Accrued insurance 636 544 Other accrued liabilities 348 223 Total accrued liabilities $ 7,095 $ 7,769 Note 8. 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. 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. 61 As of September 30, 2020 and 2019, the Company did no t have any assets held for sale that had been measured at fair value on a non-recurring basis. Management Security Plan During August 2020, the Company paid out a lump sum of approximately $ 5,175,000 to all beneficiaries in the Management Security Plan, following the equivalent annuity approach. The Company used a third-party service provider to assist in the evaluation of investments in this plan. For prior year investment valuations, the Company used current market interest rates, quality estimates by rating agencies and valuation estimates by active market participants in order to determine values. As of September 30, 2020, due to the lump sum payment made in August 2020, the deferred retirements benefit was zero . As of September 30, 2019, deferred retirement benefits were valued based on actuarial data, contracted payment schedules and an estimated discount rate of 4.08 %. Note 9. 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 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 November 2017, a senior executive was awarded 5,000 restricted shares of the Company’s common stock (“Restricted Stock”) under the 2015 Plan at a weighted average fair value of $ 31.95 per common share, vesting over 2.5 years. The following table represents a summary of the status of the Company’s nonvested shares: Nonvested Shares Shares Weighted- Average Grant Date Fair Value Nonvested Shares at September 30, 2017 5,334 $ 49.39 Granted during fiscal year 2018 5,000 31.95 Vested during fiscal year 2018 ( 3,001 ) 39.70 Forfeited during fiscal year 2018 — — Nonvested Shares at September 30, 2018 7,333 41.46 Granted during fiscal year 2019 — — Vested during fiscal year 2019 ( 1,667 ) 31.95 Forfeited during fiscal year 2019 — — Nonvested Shares at September 30, 2019 5,666 44.26 Granted during fiscal year 2020 — — Vested during fiscal year 2020 ( 5,666 ) 44.26 Forfeited during fiscal year 2020 — — Nonvested Shares at September 30, 2020 — $ — Stock compensation expense related to the Restricted Stock totaled approximately $ 69,000 , $ 104,000 , and $ 137,000 for the fiscal years ended September 30, 2020, 2019 and 2018, respectively. There was approximately $ 0 and $ 69,000 of total unrecognized stock compensation costs related to unvested stock compensation for the Restricted Stock grants at September 30, 2020 and September 30, 2019, respectively. For the fiscal year ended September 30, 2020, 5,666 shares with a grant date fair value of approximately $ 251,000 became fully vested. For the fiscal year ended September 30, 2019, 1,667 shares with a grant date fair value of approximately $ 53,000 became fully vested. 62 Stock Option Grant Stock option grants of 118,000 options to certain Officers and Managers of the Company (collectively the “2020 Option Grants”) were granted on October 11, 2019. The option exercise price was set at $ 33.96 , the closing price on October 11, 2019. The 2020 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 $ 35.00 ; (ii) 25 % of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 40.00 ; (iii) 25 % of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 45.00 ; and (iv) 25 % of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 50.00 . If the applicable stock price hurdles have not been achieved by (A) the date that is 18 months following the termination of employment, if the employment is terminated due to death or disability, (B) the date that is 12 months following the termination of employment, if the employment is terminated by the Company without cause, by the employee with good reason, or due to the employee’s retirement, or (C) the date of the termination of 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 December 31, 2022 then any unvested options will be forfeited. The 2020 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, 2020, the Company’s stock closed at $ 28.62 per share. For the fiscal year ended September 30, 2020, the Company’s common stock traded above $ 35.00 per share for twenty consecutive days. Accordingly, 25 % of the 2020 Option Grants are vested at September 30, 2020 and the corresponding stock option expense was recognized during the fiscal year ended September 30, 2020. Stock option grants of 10,000 options to Mr. John Kiernan (the “2019 Option Grants”) were granted on October 25, 2018. The option exercise price for these options was set at $ 33.34 , the closing price on October 25, 2018. The 2019 Option Grants will vest as follows: (i) 3,333 of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 40.00 ; (ii) 3,333 of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 45.00 ; (iii) 3,334 of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 50.00 . If the applicable stock price hurdles have not been achieved by (A) the date that is 18 months following the Executive’s termination of employment, if the Executive’s employment is terminated due to death or disability, (B) the date that is 12 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 December 31, 2021 then any unvested options will be forfeited. The 2019 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, 2020, the Company’s common stock was trading at $ 28.62 per share, and during the fiscal year ended September 30, 2020, the stock did not trade above $ 40.00 per share; accordingly, no ne of the stock options are vested at September 30, 2020. Stock option grants of 210,000 options to Mr. Remy Trafelet and 90,000 options to Mr. John Kiernan (collectively, the “2018 Option Grants”) were granted on September 7, 2018. The option exercise price for these options was set at $ 33.60 , the closing price on September 7, 2018. The 2018 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 $ 35.00 ; (ii) 25 % of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 40.00 ; (iii) 25 % of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 45.00 ; and (iv) 25 % of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 50.00 . If the applicable stock price hurdles have not been achieved by (A) the date that is 18 months following the Executive’s termination of employment, if the Executive’s employment is terminated due to death or disability, (B) the date that is 12 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 December 31, 2021 then any unvested options will be forfeited. The 2018 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, 2020, the Company’s common stock was trading at $ 28.62 per share. For the fiscal year ended September 30, 2020, the stock traded above $ 35.00 per share for a consecutive twenty days; accordingly, 25 % of Mr. Kiernan's 2018 Option Grants are vested at September 30, 2020 and the corresponding stock option expense was recognized during the fiscal year ended September 30, 2020. As set forth below, more than a majority of the 2018 original Option Grants issued to Mr. Trafelet were forfeited and the vesting conditions of the remainder were modified, all pursuant to the Alico Settlement Agreement, as defined below, and the remaining 2018 original Option Grants, both vested and unvested, have since been forfeited or expired. A stock option grant of 300,000 options in the case of Mr. Trafelet and 225,000 options in the case of each of Mr. Henry Slack and Mr. George Brokaw (collectively, the “2016 Option Grants”) were granted on December 31, 2016. The option price was set at $ 27.15 , the closing price on December 31, 2016. The 2016 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 63 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 2016 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, 2020, the Company’s stock was trading at $ 28.62 per share, and since the date of grant the Company’s common stock did not trade above $ 60.00 per share; accordingly, no ne of the 2016 Option Grants are vested at September 30, 2020. As set forth below, all of the 2016 Option Grants issued to Mr. Trafelet were forfeited pursuant to the Alico Settlement Agreement, as defined below. Additionally, 187,500 shares of the 2016 Option Grants made to each of Messrs. Slack and Brokaw were forfeited on September 5, 2018 and no replacement options were granted. As such, the remaining unrecognized expense associated with these options of approximately $ 783,000 was accelerated and recorded for the fiscal year ended September 30, 2018. Pursuant to a Settlement Agreement (described in Note 14. “Related Party Transactions”), which was unanimously approved by the Board of Directors, Mr. Trafelet agreed to voluntarily resign from his roles as President and Chief Executive Officer and a director of the Company. Under the Settlement Agreement, Mr. Trafelet forfeited (i) all of the 2016 Option Grants granted to him and (ii) all of the 2018 Option Grants granted to him in September 2018, other than 26,250 stock options that would vest if the minimum price of Alico's common stock over 20 consecutive trading days exceeds $ 35.00 per share and 26,250 stock options that would vest if the minimum price of Alico's common stock over 20 consecutive trading days exceeds $ 40.00 per share (“2019 Modified Option Grant”), but, in each case, only if such conditions were satisfied by the first anniversary of the date of the Settlement Agreement (collectively, the "Retained Options"). Any Retained Options that vested in accordance with their terms will expire on the date that is six months following the date on which the Retained Option vests, and any Retained Options that did not vest by the first anniversary of the Alico Settlement Agreement would be forfeited as of such first anniversary. As of September 30, 2020, the Company’s stock was trading at $ 28.62 per share. During the fiscal year ended September 30, 2020, the Company’s common stock traded above $ 35.00 per share for a consecutive twenty days ; accordingly, 26,250 stock options from the 2019 Modified Option Grants vested, however, since these Modified Options were not exercised within six months following the date on which the Retained Option vested, they were forfeited. Additionally, since the Company’s common stock did not trade above $ 40.00 per share for a consecutive twenty days by the first anniversary of the date of the Alico Settlement Agreement, the other 26,250 stock options from the 2019 Modified Option Grants were forfeited. Forfeitures of all stock options were recognized as incurred. The following table represents a summary of the Company’s stock option activity: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value Balance - September 30, 2018 675,000 $ 30.02 2.22 — Granted during fiscal year 2019 10,000 33.34 2.25 — Forfeitures/expired during fiscal year 2019 ( 457,500 ) 29.37 1.78 — Exercised during fiscal year 2019 — — — — Balance - September 30, 2019 227,500 31.46 1.22 — Granted during fiscal year 2020 118,000 33.96 2.25 — Forfeitures/expired during fiscal year 2020 ( 52,500 ) 33.60 — — Exercised during fiscal year 2020 — — — — Balance - September 30, 2020 293,000 32.09 1.79 — Stock compensation expense related to the options totaled approximately $ 504,000 , $ 674,000 and $ 1,617,000 for the fiscal years ended September 30, 2020, 2019 and 2018, respectively. At September 30, 2020 and September 30, 2019, there was approximately $ 376,000 and $ 502,000 , respectively, of total unrecognized stock compensation costs related to unvested share-based compensation for the option grants. The total unrecognized compensation cost as of September 30, 2020 is expected to be recognized over a weighted-average period of 1.72 years. The fair value of the 2020, 2019, and 2018 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 64 represents the period of time that options granted are expected to be outstanding; the range given below results from different timeframes for the various market conditions being met. 2020 Option Grant Expected Volatility 26.0 % Expected Term (in years) 3.61 Risk Free Rate 1.60 % The weighted-average grant-date fair value of the 2020 Option Grant was $ 3.20 . 2019 Modified Option Grant Expected Volatility 25.0 % Expected Term (in years) 1.50 Risk Free Rate 2.52 % The weighted-average grant-date fair value of the 2019 Modified Option Grant was $ 1.40 . 2019 Option Grants Expected Volatility 30.0 % Expected Term (in years) 4.09 Risk Free Rate 2.95 % The weighted-average grant-date fair value of the 2019 Option Grants was $ 7.10 . 2018 Option Grants Expected Volatility 30.0 % Expected Term (in years) 3.32 Risk Free Rate 2.80 % The weighted-average grant-date fair value of the 2018 Option Grants was $ 7.40 . As of September 30, 2020, there remained 939,500 common shares available for issuance under the 2015 Plan. Note 10. 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 (collectively, the "2017 Authorization"). In March 2017, the 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, the 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. During fiscal year 2018, the Company purchased 72,266 shares at a cost of $ 2,214,756 under the 2017 Authorization. As of June 29, 2018, the Company suspended its stock repurchase activity. For the fiscal year ended September 30, 2019, the Company did not purchase any shares under the 2017 Authorization. As the 2017 Authorization expired in May 2019, the Company has no funds available under this plan to repurchase stock. On October 3, 2018, the Company completed a tender offer of 752,234 shares at a price of $ 34.00 per share aggregating $ 25,575,956 . 734 Investors, Alico's largest stockholder from 2013 until November 12, 2019, participated in the tender offer by selling a small percentage of its holdings. 65 On October 10, 2019, the Board of Directors authorized the repurchase of up to 7,000 shares of the Company’s common stock from 734 Investors in a privately negotiated repurchase of shares. On October 15, 2019, the Company entered into a repurchase agreement to repurchase a total of 7,000 shares of the Company’s common stock from 734 Investors, effective October 15, 2019. 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. The following table illustrates the Company’s treasury stock purchases for the fiscal years ended September 30, 2020, 2019 and 2018: (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,: 2020 7,000 $ 33.95 1,481,640 $ 238 2019 752,234 $ 34.00 1,474,640 $ 25,576 2018 72,266 $ 30.65 722,406 $ 2,215 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, 2017 177,315 $ 6,502 Purchased 72,266 2,215 Issued to Employees and Directors ( 33,393 ) ( 1,181 ) Balance at September 30, 2018 216,188 7,536 Purchased 752,234 25,576 Issued to Employees and Directors ( 28,790 ) ( 1,169 ) Balance at September 30, 2019 939,632 31,943 Purchased 7,000 238 Issued to Employees and Directors ( 23,011 ) ( 1,402 ) Balance at September 30, 2020 923,621 $ 30,779 Note 11. Income Taxes On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act contains significant changes to corporate taxes, including a permanent reduction of the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. The Company’s statutory rate for the fiscal year ended September 30, 2018 was 24.5%, based on a fiscal year blended rate calculation. The 21% U.S. corporate tax rate is fully applicable to the fiscal year ended September 30, 2019 and each year thereafter. The Act required a one-time remeasurement of certain tax related assets and liabilities. During the first quarter ended December 31, 2017, the Company made certain estimates related to the impact of the Act including the remeasurement of deferred taxes at the new expected tax rate and a revised effective tax rate for the year ended September 30, 2018. For the fiscal year ended September 30, 2018, the Company recorded a tax benefit of approximately $ 9,847,000 to account for these deferred tax impacts. In October 2019, the Internal Revenue Service concluded their audit of the September 30, 2015 tax year with no changes. The Federal and State filings remain subject to examination by tax authorities for tax periods ending after September 30, 2015. 66 The income tax provision for the years ended September 30, 2020, 2019 and 2018 consists of the following: (in thousands) Fiscal Year Ended September 30, 2020 2019 2018 Current: Federal income tax $ 131 $ 7,314 $ 1,961 State income tax ( 71 ) 2,202 384 Total current 60 9,516 2,345 Deferred: Federal income tax 6,151 2,995 ( 3,917 ) State income tax 1,452 272 1,962 Total deferred 7,603 3,267 ( 1,955 ) Income tax provision $ 7,663 $ 12,783 $ 390 Income tax provision attributable to income before income taxes differed from the amount computed by applying the statutory federal income tax rate of 21 %, 21 % and 24.53 % to income before income taxes for the fiscal years ended September 30, 2020, September 30, 2019 and September 30, 2018, respectively, as a result of the following: (in thousands) Fiscal Year Ended September 30, 2020 2019 2018 Income tax at the statutory federal rate $ 6,568 $ 10,587 $ 3,198 Increase (decrease) resulting from: State income taxes, net of federal benefit 1,217 1,947 857 Permanent and other reconciling items, net 170 166 221 Expiration of capital loss carryforward — — 5,634 Reduction in deferred tax liability resulting from the Act — — ( 9,847 ) State rate change ( 156 ) — — Stock option cancellation — — 347 Other ( 136 ) 83 ( 20 ) Income tax provision $ 7,663 $ 12,783 $ 390 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, 2020, and 2019 are presented below: (in thousands) September 30, 2020 2019 Deferred tax assets: Deferred retirement benefits $ — $ 1,325 Goodwill 16,304 18,244 Inventories 813 930 Stock compensation 314 237 Intangibles 508 565 Other 203 168 Total deferred tax assets 18,142 21,469 Deferred tax liabilities: Property and equipment 56,707 52,551 Investment in Citree 1,016 909 Prepaid insurance 147 134 Total deferred tax liabilities 57,870 53,594 Net deferred income tax liabilities $ ( 39,728 ) $ ( 32,125 ) 67 Note 12. Segment Information Segments Operating segments are defined in the criteria established under the 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 two operating segments: Alico Citrus and Land Management and Other Operations (see name change explanation below). As a result of the Company selling approximately 10,700 acres on the western part of Alico Ranch to the State of Florida and because a sale of those acres affected the proposed dispersed water management project, the Company decided to suspend all permit approval activities for its dispersed water management project. This has resulted in a change in the financial reporting to the CODM. Therefore, the Company has renamed the “Water Resources and Other Operations” segment to “Land Management 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, 2020 2019 2018 Revenues: Alico Citrus $ 89,369 $ 119,031 $ 78,121 Land Management and Other Operations 3,138 3,220 3,160 Total revenues 92,507 122,251 81,281 Operating expenses: Alico Citrus 72,281 59,594 51,709 Land Management and Other Operations 2,307 2,297 3,979 Total operating expenses 74,588 61,891 55,688 Gross profit (loss): Alico Citrus 17,088 59,437 26,412 Land Management and Other Operations 831 923 ( 819 ) Total gross profit 17,919 60,360 25,593 Capital expenditures: Alico Citrus 21,705 20,000 15,968 Land Management and Other Operations — — 304 Other Capital Expenditures — — 80 Total capital expenditures 21,705 20,000 16,352 Depreciation, depletion and amortization: Alico Citrus 13,822 12,935 12,546 Land Management and Other Operations 185 173 219 Other Depreciation, Depletion and Amortization 513 816 991 Total depreciation, depletion and amortization $ 14,520 $ 13,924 $ 13,756 68 (in thousands) September 30, 2020 2019 Assets: Alico Citrus $ 406,763 $ 401,212 Land Management and Other Operations 15,367 15,332 Other Corporate Assets 1,807 844 Total Assets $ 423,937 $ 417,388 Note 13. Employee Benefits Plans Management Security Plan The management security plan (“MSP”) was a nonqualified, noncontributory defined supplemental deferred retirement benefit plan for a select group of management personnel. The MSP was set up to provide a fixed supplemental retirement benefit for 180 months. The MSP was frozen as of September 30, 2017. As a result, no new participants were being added to the MSP and no further benefits were accumulating. The MSP benefit expense and the projected management security plan benefit obligation were determined using assumptions as of the end of the respective year. The weighted-average discount rate used to compute the obligation was 4.08 % in fiscal year 2019. Actuarial gains or losses were recognized when incurred; therefore, the end of year benefit obligation was 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, 2020 2019 2018 Service cost $ — $ — $ — Interest cost 195 171 293 MSP termination adjustments — 985 — Recognized actuarial gain (loss) adjustment 12 13 16 Total $ 207 $ 1,169 $ 309 The following provides a roll-forward of the MSP benefit obligation: (in thousands) September 30, 2020 2019 Change in projected benefit obligation: Benefit obligation at beginning of year $ 5,226 $ 4,397 Interest cost 195 171 Benefits paid ( 258 ) ( 340 ) MSP termination adjustments — 985 MSP termination benefits payment ( 5,175 ) — Recognized actuarial gain adjustment 12 13 Benefit obligation at end of year $ — $ 5,226 Funded status at end of year $ — $ ( 5,226 ) Effective September 30, 2018, the Company terminated the MSP. Under the MSP termination, payout for benefits covered utilizing the applicable Internal Revenue Code regulations were not able to be commenced until at least twelve months following plan termination decision, but needed to be fully paid out within twenty-four (24) months following plan termination. During August 2020, the Company caused the MSP to pay the lump sum termination benefits of approximately $ 5,175,000 to all MSP beneficiaries. During the fiscal year ended September 30, 2019, the Company determined to pay out a lump sum under the equivalent annuity approach, whereby the payout under this approach was designed to mitigate participants tax burden. Under this approach, the Company would cover the amount needed to purchase an annuity providing the same after-tax benefit as if the plan was never terminated. As a result, the Company recorded an additional liability of approximately $ 720,000 . 69 The Company ha d established a “Rabbi Trust” to provide for the potential funding of accrued benefits under the MSP. According to the terms of the Rabbi Trust, funding wa s 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 would be triggered. As of September 30, 20 20 , 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 $ 397,000 , $ 380,000 and $ 342,000 for the fiscal years ended September 30, 2020, 2019 and 2018, respectively. The Company also maintains a Profit Sharing Plan (“Plan”) that 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 did not contribute to the Plan for the fiscal years ended September 30, 2020, 2019 and 2018, respectively. Note 14. Related Party Transactions Clayton G. Wilson The Company entered into a Separation and Consulting Agreement with Clayton G. Wilson (the “Separation and Consulting Agreement”), 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 would continue to be bound by the restrictive covenants set forth in his Employment Agreement with the Company. The Separation and Consulting Agreement provided that, subject to his execution, delivery, and non-revocation of a general release of claims in favor of the Company, Mr. Wilson would 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 provided that Mr. Wilson serve as a consultant to the Company during 2017 and would 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). As of December 31, 2017, the Company satisfied its obligation to Mr. Wilson in full. The Company expensed approximately $ 0 , $ 0 and $ 187,500 under the Separation and Consulting Agreement for the fiscal years ended September 30, 2020, 2019 and 2018, respectively. Mr. Wilson resigned as a member of the Company’s Board of Directors effective February 27, 2017. Henry R. Slack and George R. Brokaw On December 31, 2016, the Company entered into new employment agreements (collectively, the “Employment Agreements”) with Henry R. Slack, and George R. Brokaw. Mr. Slack previously served as the Executive Chairman of the Company, and Mr. Brokaw previously served 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 provided for an annual base salary of $ 250,000 in the case of Mr. Slack and provides for an annual base salary of $ 250,000 in the case of Mr. Brokaw. Beginning June 26, 2017, both Messrs. Slack and Brokaw agreed to waive payment of their salaries. Effective July 1, 2019, Mr. Slack resigned his employment with the Company as Executive Chairman. Effective December 31, 2019, Mr. Brokaw resigned his employment with the Company as Executive Vice Chairman. Mr. Slack and Mr. Brokaw continue to serve on the Board of the Company. Remy W. Trafelet As described above, on February 11, 2019 and as contemplated by the Alico Settlement Agreement, Mr. Trafelet submitted to the Board his resignation as President and Chief Executive Officer of the Company and a member of the Board, effective upon the execution of the Alico Settlement Agreement. Also, on February 11, 2019, as contemplated by the Settlement Agreement, the Company entered into a consulting agreement (the "Consulting Agreement") with Mr. Trafelet and 3584 Inc., an entity controlled by Mr. Trafelet (the "Consultant"). Pursuant to the Consulting Agreement, Mr. Trafelet will make himself available to provide consulting services to the Company through the Consultant for up to 24 months. In exchange for the consulting services, the Consultant will receive an annual consulting fee of $ 400,000 . The Company recorded an expense of $ 800,000 , representing the full amount due under the agreement, in fiscal year 2019 upon the execution of the agreement. The Company has paid approximately $ 400,000 and $ 254,000 in consulting fees for the fiscal years ended September 30, 2020 and 2019, respectively. If the Company terminates the consulting period (other than in certain specified circumstances), the Company will continue to pay the consulting fees described above. 70 Shared Services Agreement The Company had a shared services agreement with Trafelet Brokaw Capital Management, L.P. (“TBCM”), whereby the Company reimbursed TBCM for use of office space and various administrative and support services. The agreement expired December 31, 2018 and was not extended or renewed. The annual cost of the office and services was approximately $ 618,000 . The Company expensed approximately $ 0 , $ 155,000 and $ 592,000 for the fiscal years ended September 30, 2020, 2019 and 2018, respectively. As of September 30, 2020 and 2019, the Company did no t have any outstanding amounts with TBCM. Capital Contribution On September 10, 2020, all operating partners of Citree received a funding notice relating to an additional Cash Capital Contribution (“Contribution”) requirement of approximately $ 600,000 as a result of trees producing limited revenue because they are still in early stage development, a reduction in market price for citrus fruit for the 2019/20 harvest season due to excess inventories and the adoption of a more extensive caretaking plan focused on limiting the impact of citrus greening. The Company’s portion of the Contribution was approximately $ 306,000 and was funded on September 24, 2020. The remaining portion of the Contribution of $ 294,000 was funded by the noncontrolling parties. On April 16, 2018, all operating partners of Citree received a funding notice relating to an additional Cash Capital Contribution requirement of approximately $ 2,041,000 as a result of Hurricane Irma, which reduced the amount of crop available for sale in the 2017/2018 harvest season and the Company’s adoption of a more extensive caretaking plan focused on limiting the impact of citrus greening. The Company’s portion of the Contribution was approximately $ 1,041,000 and was funded on April 27, 2018. The remaining portion of the Contribution of $ 1,000,000 was funded by the noncontrolling parties. Distribution of Shares by Alico’s Largest Shareholder On November 12, 2019, 734 Investors, the Company’s largest shareholder, distributed the 3,173,405 shares of Company common stock held by it, on a pro rata basis, to its members. The Company understands that this share distribution was made in anticipation of a subsequent dissolution of 734 Investors. Transfers of these shares are not registered on any current Alico registration statement, but the shares are potentially transferable pursuant to Rule 144, subject to certain customary restrictions. Note 15. Commitments and Contingencies Operating Leases The Company has obligations under various non-cancelable long-term operating leases primarily for office space and equipment. In addition, the Company has various obligations under other equipment leases of less than one year. Total rent expense was approximately $ 308,000 , $ 450,000 and $ 1,062,000 for the fiscal years ended September 30, 2020, 2019 and 2018, respectively. The future minimum annual rental payments under non-cancelable operating leases are as follows: (in thousands) 2021 $ 519 2022 324 2023 48 Total $ 891 Purchase Commitments The Company enters into contracts for the purchase of citrus trees during the normal course of its business. As of September 30, 2020, the Company had approximately $ 3,014,000 relating to outstanding commitments for these purchases that will be paid upon delivery of the remaining citrus trees. Letters of Credit The Company had outstanding standby letters of credit in the total amount of approximately $ 399,000 and $ 460,000 at September 30, 2020 and September 30, 2019, respectively, to secure its various contractual obligations. 71 Legal Proceedings Florida Litigation On November 16, 2018, 734 Agriculture, RCF 2014 Legacy LLC, Delta Offshore Master II, LTD. and Mr. Remy W. Trafelet (the “Trafelet Parties”), who was at the time the Company's President and Chief Executive Officer and a member of the Board of Directors, filed a lawsuit against Messrs. George R. Brokaw, Henry R. Slack, W. Andrew Krusen and Greg Eisner, members of the Board of Directors, in the Circuit Court (the “Circuit Court”) for Hillsborough County, Florida (the “Florida Litigation”). The Trafelet Parties sought, among other things, a declaration that (1) a purported stockholder action by written consent, delivered to the Company in the name of 734 Investors and the plaintiffs in the Florida Litigation on November 11, 2018 (the “Purported Consent”) was valid and binding, (2) the resolutions passed at a meeting of the Board of Directors on November 12, 2018, to, among other things, constitute an ad hoc committee of the Board of Directors to consider, evaluate and make any and all determinations, and to take any and all actions, on behalf of the Board of Directors, in connection with the Purported Consent were null and void and (3) the four defendants in the Florida Litigation were properly removed from the Board of Directors by the Purported Consent. On November 27, 2018, the Circuit Court denied without prejudice plaintiffs’ motion for a temporary restraining order and an affirmative injunction restoring Mr. Trafelet from administrative leave to active status in his capacity as President and CEO of the Company. On November 28, 2018, the parties in the Florida Litigation stipulated to an order which provided, pending the resolution of the Delaware Litigation (as defined below), that (1) the record date for the Purported Consent was stayed indefinitely, and (2) Mr. Trafelet and the Company’s Board of Directors should not take any action out of routine day-to-day operations conducted in the ordinary course of business, including any action to change the corporate governance of Alico or removing any corporate officers or directors from positions held as of November 27, 2018. On December 6, 2018, the Trafelet Parties filed an amended complaint in the Florida Litigation which added the Company and Benjamin D. Fishman, a member of the Board of Directors, as defendants. On December 21, 2018, the Trafelet Parties filed a renewed motion for a preliminary injunction restoring Mr. Trafelet from administrative leave to active status in his capacity as President and CEO of the Company. On January 14, 2019, the defendants in the Florida Litigation filed an opposition to plaintiffs’ renewed motion for a preliminary injunction. On January 18, 2019, the defendants in the Florida Litigation filed a motion to dismiss the plaintiffs’ amended complaint. On February 11, 2019, the parties to the Florida Litigation entered into a settlement agreement (the “Alico Settlement Agreement”) wherein the parties agreed to promptly dismiss all claims in the Florida Litigation. Pursuant to the Alico Settlement Agreement, Mr. Trafelet agreed to voluntarily resign as President and Chief Executive Officer and as a member of the Board of Directors, effective upon the execution of the Alico Settlement Agreement. As contemplated by the Alico Settlement Agreement, on February 11, 2019, the Company entered into a consulting agreement (the “Consulting Agreement”) with Mr. Trafelet and 3584 Inc., an entity controlled by Mr. Trafelet (the “Consultant”). Pursuant to the Consulting Agreement, Mr. Trafelet agreed to make himself available to provide consulting services to the Company through the Consultant for up to 24 months. In exchange for the consulting services, the Consultant is receiving an annual consulting fee of $ 400,000 . If the Company terminates the consulting period (other than in certain specified circumstances), the Company will continue to pay the consulting fees described in the immediately preceding sentence through the balance of the 24-month term. As such, the Company recorded the $ 800,000 as an expense for the fiscal year ended September 30, 2019. In addition, on February 11, 2019, as contemplated by the Alico Settlement Agreement, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with Mr. Trafelet, relating to the shares of the Company’s common stock directly held by the Trafelet Parties as of February 11, 2019 (the “Registrable Securities”). The Registration Rights Agreement required the Company to, among other things and subject to the terms and conditions thereof, use reasonable best efforts to file with the SEC a registration statement on Form S-3 covering the resale of the Registrable Securities. On October 10, 2019, Mr. Trafelet executed a waiver whereby he waived the S-3 Registration Rights but maintained all other rights arising under the Registration Rights Agreement and all rights arising under Section 14 of the Alico Settlement Agreement. Delaware Litigation On November 20, 2018, members of 734 Investors filed a lawsuit against 734 Agriculture and Mr. Trafelet, who was at the time the Company's President and Chief Executive Officer and a member of the Board of Directors in the Delaware Court of Chancery (the "Delaware Court"), captioned Arlon Valencia Holdings v. Trafelet, C.A. No. 2018-0842-JTL (the “Members’ Delaware Litigation”). The plaintiffs sought, among other things, a declaration that (1) 734 Agriculture was validly replaced as the managing member of 734 Investors pursuant to the Amended and Restated Limited Liability Company Operating Agreement of 734 Investors (the “LLC Agreement”) and November 19, 2018 resolution by written consent to remove 734 Agriculture as managing member of 734 Investors, and to designate Arlon Valencia Holdings, LLC as the new managing member of 734 Investors (the “734 Consent”), and (2) the Purported Consent was invalid under the LLC Agreement. 72 Also, on November 20, 2018, 734 Agriculture filed a lawsuit contesting the 734 Consent in the Delaware Court, captioned 734 Agriculture v. Arlon Valencia Holdings, LLC, C.A. No. 2018-0844-JTL (the “734 Delaware Litigation”). On November 27, 2018, the Delaware Court entered a stipulated order consolidating the Members’ Delaware Litigation and the 734 Delaware Litigation into a single lawsuit, captioned In re 734 Investors, LLC Litigation, Consol. C.A. No. 2018-0844-JTL (the consolidated suit, the “Delaware Litigation”). On December 5, 2018, the Delaware Court entered a stipulated status quo order which provided, among other things, that 734 Agriculture was to serve as the managing member of 734 Investors during the pendency of the Delaware Litigation. The status quo order also provided that 734 Agriculture would not be permitted to take any actions outside of the ordinary course of business of 734 Investors without the consent of two-thirds of the membership interests of 734 Investors, including exercising any voting rights with respect to any shares of the Company’s common stock beneficially owned by 734 Investors. On February 11, 2019, Mr. Trafelet, 734 Agriculture, 734 Investors, and certain members of 734 Investors entered into a settlement agreement (the “734 Investors Settlement Agreement”) wherein the parties agreed to promptly dismiss all claims in the Delaware Litigation. Pursuant to the 734 Investors Settlement Agreement, 734 Agriculture resigned as Managing Member of 734 Investors and Arlon Valencia Holdings, LLC was confirmed as Managing Member of 734 Investors. 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 current legal proceedings to which the Company is a party or of which any of its property is subject that it believes will have a material adverse effect on its financial position, results of operations or cash flows. Note 16. Selected Quarterly Financial Data (unaudited) Summarized quarterly financial data for the fiscal years ended September 30, 2020, and 2019 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, 2019 2018 2020 2019 2020 2019 2020 2019 Total operating revenues $ 11,005 $ 14,779 $ 50,515 $ 48,521 $ 26,122 $ 57,565 $ 4,865 $ 1,386 Total operating expenses 5,391 11,597 43,898 32,207 19,902 31,561 5,397 ( 13,474 ) Gross profit (loss) 5,614 3,182 6,617 16,314 6,220 26,004 ( 532 ) 14,860 General and administrative expenses 2,760 3,450 2,953 4,654 2,556 2,682 2,729 4,360 Other (expense) income, net ( 1,595 ) ( 2,864 ) 1,398 ( 1,972 ) ( 1,405 ) ( 1,623 ) 26,058 11,478 Income (loss) before income taxes 1,259 ( 3,132 ) 5,062 9,688 2,259 21,699 22,797 21,978 Income tax (benefit) expense 361 ( 629 ) 1,496 2,228 171 5,483 5,635 5,701 Net (loss) income 898 ( 2,503 ) 3,566 7,460 2,088 16,216 17,162 16,277 Net (income) loss attributable to noncontrolling interests ( 107 ) 36 5 87 8 28 42 232 Net income (loss) attributable to Alico Inc. common stockholders $ 791 $ ( 2,467 ) $ 3,571 $ 7,547 $ 2,096 $ 16,244 $ 17,204 $ 16,509 Earnings (loss) per share: Basic $ 0.11 $ ( 0.33 ) $ 0.48 $ 1.01 $ 0.28 $ 2.17 $ 2.29 $ 2.21 Diluted $ 0.11 $ ( 0.33 ) $ 0.48 $ 1.01 $ 0.28 $ 2.17 $ 2.29 $ 2.21 Total operating expenses for the fiscal quarter ended September 30, 2019 includes insurance proceeds received of approximately $ 486,000 in additional property and casualty claims reimbursement relating to Hurricane Irma (see Note 3. “Inventories”) and block grants of approximately $ 15,597,000 under the Florida Citrus Recovery Block Grant (“CRBG”) program relating to Hurricane Irma. General and administrative expenses for the fiscal quarter ended September 30, 2019 include pension expense of $ 935,000 relating to termination of employee benefit plan (see Note 13. “Employee Benefit Plans” for further detail). Other income for the fiscal quarter ended September 30, 2019 includes a gain on sale of assets of approximately $ 13,166,000 (see Note 4. “Assets Held For Sale” and Note 5. “Property and Equipment, Net” for further information). Operating revenues and operating expenses for the fiscal quarter ended September 30, 2020 include approximately $ 3,246,000 and approximately $ 2,951,000 , respectively, relating to the grove management services being provided to a third-party. Other income for the fiscal quarter ended September 30, 2020 includes a gain on sale of assets of approximately $ 27,470,000 (see Note 4. “Assets Held For Sale” and Note 5. “Property and Equipment, Net” for further information). 73 Note 17. Subsequent Event On December 2, 2020, the Board of Directors of the Company declared a first quarter of fiscal year 2021 cash dividend of $ 0.18 per share on its outstanding common stock to be paid to shareholders of record as of December 24, 2020, with payment expected on January 8, 2021. In November 2020, the Company awarded 5,885 shares of restricted stock to certain officers and managers under the 2015 Plan. On October 30, 2020, the Company purchased approximately 3,280 gross citrus acres located in Hendry County for a purchase price of $ 16.5 million. 74 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.