What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-12-07 compared with 2020-12-08 · 167 added, 145 removed, 324 unchanged (49% of the section changed)

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Factors which may cause future outcomes to differ materially from those foreseen in forward-looking statements include, but are not limited to:

changes in laws, regulation and rules;

changes in laws, regulation and rules, including tax laws and tax rates;

climate change;

weather conditions that affect production, transportation, storage, demand, import and export of fresh product and their by-products;

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changes in interest rates;

availability of refinancing;

availability of financing for land development activities and other growth and corporate opportunities;

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acquisitions and divestitures;

ability to make strategic acquisitions or divestitures;

ability to redeploy proceeds from divestitures;

ability to consummate selected land acquisitions;

ability to take advantage of tax deferral options;

labor disruptions;

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the impact of the COVID-19 outbreak and coronavirus pandemic on the U.S.

and global economies and financial markets;

and global economies and financial markets, including without limitation related legislative and regulatory initiatives;

access to governmental loans and incentives;

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whether the Company's dividend policy, including its recent increased dividend amounts, is continued;

expressed desire of certain of our shareholders to liquidate their shareholdings by virtue of past market sales of common stock, by sales of common stock or by way of future transactions;

expressed desire of certain of our stockholders to liquidate their shareholdings by virtue of past market sales of common stock, by sales of common stock or by way of future transactions designed to consummate such expressed desire;

political changes and economic crises;

ability to implement ESG initiatives;

competitive actions by other companies;

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length of terms of contracts with customers;

impact of concentration of sales to one customer;

and changes in and effects of crop insurance programs, global trade agreements, trade restrictions and tariffs;

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We are a Florida agribusiness and land management company with a legacy of achievement and innovation in citrus, cattle and resource conservation.

We own approximately 100,000 acres of land in eight Florida counties, holding mineral rights on approximately 90,000 of those owned acres.

We own approximately 83,000 acres of land and approximately 90,000 acres of mineral rights throughout Florida.

Alico holds these mineral rights on substantially all its owned acres, with additional mineral rights on other acres.

Our principal lines of business are now citrus groves and land management and other operations, which include land conservation, encompassing environmental services, land leasing and related support operations.

Prior to the sale of certain ranch land to the State of Florida in September 2020, the Company’s business line also included Water Resources.

Prior to the sale of our breeding herd in January 2018, the Company’s business line also included cattle ranching.

Our mission is to create value for our customers and shareholders by managing existing lands to their optimal current income and total returns.

Our mission is to create value for our customers and stockholders by managing existing lands to their optimal current income and total returns.

Alico opportunistically acquires new agricultural assets and produces high quality agricultural products while exercising responsible environmental stewardship.

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Consolidated Results of Operations.

This section provides an analysis of our results of operations for each of the three fiscal years ended September 30, 2020.

Our discussion is presented on a consolidated basis and includes discussion on future trends by segment.

This section provides an analysis of our results of operations for each of the three fiscal years in the period ended September 30, 2021.

Our discussion is presented on a consolidated basis and includes certain discussions on future trends by segment.

Liquidity and Capital Resources.

This section provides an analysis of our cash flows for each of the three fiscal years ended September 30, 2020 and our outstanding debt, commitments and cash resources as of September 30, 2020.

This section provides an analysis of our cash flows for each of the three fiscal years in the period ended September 30, 2021 and our outstanding debt, commitments and cash resources as of September 30, 2021.

Critical Accounting Policies.

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Business Description

Alico, Inc., together with its subsidiaries (collectively, “Alico”, the “Company”, “we”, “us” or “our”) generates operating revenues primarily from the sale of its citrus products and grazing and hunting leasing.

The Company operates as two business segments and all of its operating revenues are generated in the United States.

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These measures have had a significant adverse impact upon many sectors of the economy, including certain agriculture businesses.

During March 2020, as a precautionary measure to ensure financial flexibility and maintain maximum liquidity in response to the COVID-19 pandemic, the Company implemented several measures that we believe would help ensure sufficient liquidity for the next several months, including drawing down an aggregate of $70,000,000 on its revolving credit facilities.

This decision was made to safeguard the Company’s liquidity and to increase available cash on hand in the event that a more protracted COVID-19 outbreak were to put a significant strain on the financial institutions and their ability to loan funds.

As of September 30, 2020, the Company, believing that despite the protracted COVID-19 outbreak, the financial institutions industry was experiencing less negative impact from the outbreak than originally expected, proceeded to pay down the majority of the amounts drawn under its revolving credit facilities.

Additionally, for the protection of our employees per the Centers For Disease Control and Prevention (CDC) guidelines, the Company arranged to have the majority of office personnel work remotely, has taken steps to allow and encourage greater separation for our employed and contracted field workers and has worked with its harvesters, haulers and suppliers to minimize interactions.

The Company continues to assess the situation on a routine basis.

On November 4, 2021, the Occupational Safety and Health Administration (“OSHA”) posted an Emergency Temporary Standard (“ETS”) on mandating that all private employers with 100 or more employees ensure their employees are COVID-19 fully vaccinated before entering the employer’s worksite or, at the employer’s option, require employees who remain unvaccinated and want to come to the worksite to wear an approved face covering and produce a negative COVID-19 test at least weekly.

Pursuant to the ETS, employers must offer up to four hours of additional paid time off, including travel time, per vaccine dose to allow employees to be vaccinated and reasonable time and paid sick leave to recover from side effects experienced after each vaccine dose.

Pursuant to the ETS, the ETS remains in effect for a maximum of six months.

This ETS implements President Biden’s COVID-19 Action Plan, which aims to accelerate the pace of COVID-19 vaccinations in the United States.

The ETS is effective immediately upon its publication in the Federal Register.

Pursuant to the ETS, employers must comply with most requirements within 30 days of publication (December 5th) and with optional testing requirements within 60 days of publication (January 4th).

Employees who have completed their vaccination by that date do not have to be tested, even if they have not yet completed the 2-week waiting period.

On November 6, 2021, the Fifth Circuit Court of Appeals granted an emergency motion to stay enforcement of the ETS, subject to the resolution of ongoing litigation challenging the constitutionality of the ETS.

The order enjoins the federal government from taking any action to enforce the ETS while it is in effect.

On November 12, 2021, the Fifth Circuit Court of Appeals reaffirmed its suspension of the ETS and, on November 16, 2021, OSHA announced it suspended its activities related to the implementation and enforcement of the ETS pending future developments in the litigation.

It is unknown how long the Fifth Circuit’s stay will remain in place.

The Sixth Circuit Court of Appeals was selected through the lottery system on November 16, 2021, to hear a consolidated action concerning multiple challenges to the ETS and is authorized to uphold or lift the Fifth Circuit Court of Appeals order.

Also, a number of state governments have considered legislation related to employer vaccine mandates during the pandemic.

OSHA maintains that its ETS preempts these laws, but states such as the State of Florida disagree.

On November 17, 2021, the Florida legislature passed legislation, which was signed into law on November 18, 2021 and codified at section 381.00317, Florida Statutes, prohibiting private-sector employers from implementing a COVID-19 vaccination mandate for full-time, part-time, or contract employees without providing at least five individual exemptions, including, but not limited to, pregnancy or anticipated pregnancy;

religious reasons;

COVID-19 immunity;

periodic testing;

and the use of employer-provided personal protective equipment.

If an employer fails to comply with the new law and terminates an employee based on a COVID-19 vaccination mandate, then the employer will be subject to a fine of up to $50,000 per violation.

The Company plans to monitor conflicting guidance from the State of Florida and the federal government and adjust its policies in accordance with the resolution of the ongoing litigation in the federal courts.

Since the commencement of COVID-19 in March 2020, the Company took steps to allow and encourage greater separation for our employed and contracted field workers and has worked with its harvesters, haulers and suppliers to minimize interactions.

For the continued protection of our employees and in accordance with the OSHA mandate, the Company intends to comply with all requirements as outlined in the ETS that was published on November 4, 2021, to the extent consistent with applicable law.

To date, the Company has experienced no material adverse impacts from this pandemic.

Citrus Grove Management Agreement

On July 16, 2020, the Company executed an agreement with an affiliated group of third parties to provide citrus grove caretaking and harvest and haul management services for approximately 7,000 acres owned by such third parties.

Pursuant to this agreement, the Company is to be reimbursed by the third parties for all of its costs incurred related to providing these services and also is to receive a management fee based on acres covered under this agreement.

Agreements with Tropicana

On each of May 18, 2020 and May 20, 2020, the Company entered into a new agreement to supply Tropicana, its largest customer, with citrus fruit.

These new agreements are effective October 1, 2020, conclude on July 31, 2024, and succeed an existing agreement that expired at the end of September 2020.

Prepayment and Restructure of Fixed-Rate Term Loans

In April 2021, the Company made a prepayment of $10,312,500 on the Met Fixed-Rate Term Loans and, effective May 1, 2021, the Company modified its Met Fixed-Rate Term Loans, which in the aggregate, after the prepayment, had a balance of $70,000,000 to be interest only with a balloon payment to be paid at maturity, which is November 1, 2029.

As part of this modification, the interest rate on these Met Fixed-Rate Term Loans, which were bearing interest at 4.15%, has been adjusted to 3.85% and the Company will no longer have the prepayment option previously allowed under the arrangement.

Sales and Purchase of Land

On December 3, 2021, the State of Florida purchased, under the Florida Forever program, approximately 1,638 acres of the Alico Ranch for approximately $5,675,000 pursuant to an option agreement entered into on September 21, 2021 between the State of Florida and the Company.

On June 3, 2021, the Company sold approximately 11,700 acres, which were encumbered by an easement, to a third-party for approximately $12,219,000.

In 2013, these acres were enrolled in the Wetlands Reserve Program (“WRP”), which calls for the restoration and maintenance of the property for the duration of the WRP easement.

As part of that enrollment in 2013, Alico received approximately $1,800 per acre.

On April 15, 2021, the State of Florida purchased, under the Florida Forever program, approximately 5,734 acres of Alico Ranch for approximately $14,445,000, pursuant to an option agreement between the State of Florida and Alico dated December 15, 2020.

This is the third sales transaction Alico has completed with the State of Florida within the last three years, aggregating over 22,000 acres.

Alico used most of the net sales proceeds to prepay a portion of its fixed-rate term debt.

On October 30, 2020, the Company purchased approximately 3,280 gross acres located in Hendry County for a purchase price of $18,230,000.

This acquisition allows the Company to add additional scale to its existing 45,000 gross acres of citrus properties.

Strategically, with these acquired groves neighboring existing Alico groves, Alico believes that this acquisition will help Alico with its operation as a low-cost, high producing citrus grower.

Federal Relief Program

The Company is eligible for Hurricane Irma federal relief programs for block grants that are being administered through the State of Florida.

During the fiscal year ended September 30, 2020 and 2019, the Company received approximately $4,629,000 and $15,597,000, respectively, under the Florida Citrus Recovery Block Grant (“CRBG”) program.

This represents the Part 1 and Part 2 reimbursement under a three-part program.

The timing and amount to be received under Part 3 of the program, if any, has not been finalized.

Distribution of Shares by 734 Investors

On November 14, 2019, 734 Investors filed a Form 4 and an amendment to Schedule 13D with the SEC disclosing that on November 12, 2019, it distributed all of its shares of Company common stock previously held by it, consisting of 3,173,405 shares, on a pro rata basis, to its members.

Prior to such distribution, 734 Investors was the Company’s largest shareholder.

Employee and Board of Directors Matters

On August 6, 2020, the Board of Directors increased the number of its directors by two and appointed Mr.

Adam Putnam and Ms.

Kate English as directors, each to serve until the 2021 annual meeting of the Company’s shareholders or until his or her earlier death, resignation, or removal in accordance with the Amended and Restated Bylaws of the Company.

In December 2019, Mr.

Brokaw, the then Executive Vice Chairman, informed the Board of Directors that he would voluntarily step down as Executive Vice Chairman effective December 31, 2019 and that change has taken effect.

After the effectiveness of this change, Mr.

Brokaw has remained a member of the Board of Directors.

Effective February 27, 2020 (which was immediately after the 2020 Annual Meeting of Shareholders), by way of action that has been taken by and at the direction of the Board of Directors, Benjamin D.

Fishman, the non-employee Executive Chairman, became the Chairman of the Board.

Fishman has remained a non-employee director.

Condensed Consolidated Results of Operations

The Company was eligible for Hurricane Irma federal relief programs for block grants that were being administered through the State of Florida.

During the fiscal years ended September 30, 2021, 2020, and 2019, the Company received approximately $4,299,000, $4,629,000, and $15,597,000, respectively, under the Florida Citrus Recovery Block Grant (“CRBG”) program.

The remaining portion of the funds that are due to Alico under the Florida CRBG program relates to certain crop insurance expenses incurred by the Company, which is estimated to be approximately $2,000,000.

In October 2021, the Company received its first portion of this crop insurance expense reimbursement in an amount equal to approximately $1,000,000 and expects to receive the remaining portion in fiscal year 2023.

Consolidated Results of Operations

The following discussion provides an analysis of Alico's results of operations and should be read in conjunction with the accompanying Consolidated Statements of Operations for the fiscal years ended September 30, 2021, 2020 and 2019:

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Total operating revenues

Gross profit (loss):

Gross profit:

Land Management and Other Operations

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Income tax provision

Net (income) loss attributable to noncontrolling interests

Net loss (income) attributable to noncontrolling interests

Net income attributable to Alico, Inc.

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The Company sells its Early and Mid-Season and Valencia oranges to processors that convert the majority of the citrus crop into orange juice.

They generally buy the citrus on a pound solids basis, which is the measure of the soluble solids (sugars and acids) contained in one box of fruit.

Fresh fruit is generally sold to packing houses that purchase the citrus on a per box basis.

Other revenues consist of third-party grove caretaking and the purchase and reselling of fruit.

Alico's operating expenses consist primarily of cost of sales and harvesting and hauling costs.

The processors generally buy the citrus crop on a pound solids basis, which is the measure of the soluble solids (sugars and acids) contained in one box of fruit.

The Company’s fresh fruit is generally sold to packing houses that purchase the citrus on a per box basis.

The Company also provides citrus grove caretaking and harvest and haul management services to third parties from which revenues are generated , including a management fee.

Other revenues consist of the purchase and reselling of fruit.

Alico's operating expenses consist primarily of cost of sales, harvesting and hauling costs and grove management service costs.

Cost of sales represents the cost of maintaining the citrus groves for the preceding calendar year and does not vary in relation to production.

Harvesting and hauling costs represent the costs of bringing citrus product to processors and varies based upon the number of boxes produced.

Other expenses include the period costs of third-party grove caretaking and the purchase and reselling of fruit.

The decrease in revenue for the fiscal year ended September 30, 2020, compared to the fiscal year ended September 30, 2019 was due to a decrease in the price per pound solids as well as a decrease in aggregate processed box production.

Grove management services include those costs associated with citrus grove caretaking and harvest and haul management services provided to third parties.

Other expenses include the period costs of reselling of third-party fruit.

The increase in revenue for the fiscal year ended September 30, 2021, compared to the fiscal year ended September 30, 2020 was primarily due to an increase in the revenue generated from grove management services and the Valencia fruit harvested.

Under the terms of this agreement, the Company is reimbursed by the third parties for all its costs incurred related to providing these services and receives a management fee based on acres covered under this agreement.

The Company records both an increase in revenues and expenses as and when the Company provides these citrus grove caretaking management services.

For the fiscal year ended September 30, 2021, under this agreement, the Company recorded approximately $15,752,000 of operating revenue relating to these grove management services, including the management fee, as compared to approximately $3,311,000 in the fiscal year ended September 30, 2020.

The increase from the Valencia fruit harvest was driven by an increase in the market price per pound solids as compared to the prior year.

The increase in the price per pound solids was due to increased consumption of Not-from-Concentrate Orange Juice (“NFC”) as well as tighter supplies of citrus fruit from Florida, Brazil and Mexico, which, in turn, led to reduced inventory levels.

Largely offsetting this increase in pricing was the effect of fewer Valencia boxes being harvested and lower pound solids per box for the fiscal year ended September 30, 2021, compared to the fiscal year ended September 30, 2020.

The Company, along with the Florida industry in general, recorded a smaller number of boxes harvested as a result of greater fruit drop rate during the current harvest season as compared to the previous year.

In addition, the internal quality of the fruit was not as strong as in the previous year resulting in lower pound solids per box.

The decrease in revenue for the fiscal year ended September 30, 2020, when compared to the fiscal year ended September 30, 2019, was due to a decrease in the price per pound solids as well as a decrease in aggregate processed box production.

The decrease in the price per pound solids in the market-place was a result of excess supply from domestic and international growers.

The decrease in aggregate processed box production was the result of greater fruit drop and smaller fruit size of Valencias in the current harvest season as compared to the prior harvest season, offset in part by an increase in processed box production of the Early and Mid-season fruit.

As previously disclosed, the Company anticipated a reduction in the market prices throughout the 2019-20 harvest season as a result of the excess supply from domestic and international growers.

However, due to an increase in the consumption of Not from Concentrate Orange Juice ("NFC"), as indicated in the published Nielsen data, since March 2020, inventory levels have decreased and, as a result, the Company anticipates that market pricing will improve in the 2020-21 harvest season.

The Company completed its harvest season in the middle of May 2020 and was able to complete the harvest without any negative impact from the COVID-19 pandemic.

The increase in revenues for the fiscal year ended September 30, 2019, compared to the fiscal year ended September 30, 2018, was primarily related to the negative impact of Hurricane Irma on the prior fiscal year harvest.

As a result of Hurricane Irma, which occurred in September 2017, the Company experienced a greater amount of fruit drop and consequently harvested approximately 3,202,000 fewer boxes in fiscal year 2018, as compared to fiscal year 2019.

The Company also saw an overall increase in pound solids per box in fiscal year 2019, which was 5.91 as compared to 5.64 for fiscal year 2018.

In addition, the increase in revenue, to a smaller extent, was due to a greater number of boxes of fresh fruit being sold in fiscal year 2019.

The decrease in aggregate processed box production was the result of greater fruit drop and smaller fruit size of Valencias in the then-current harvest season as compared to the prior harvest season, offset in part by an increase in processed box production of the Early and Mid-season fruit.

The Company completed its harvest season in early May 2021 and was able to complete the harvest without any negative impact from the COVID-19 pandemic.

Total processed boxes harvested in fiscal year 2021 decreased by approximately 13.9%, as compared to fiscal year 2020.

Pound solids decreased by approximately 24.2% for the Early and Mid-Season crop and decreased by approximately 14.0% for the Valencia crop.

The combination of these items resulted in approximately 7,938,000 fewer pound solids sold in fiscal year 2021, as compared to fiscal year 2020.

Total processed boxes harvested in fiscal year 2020 decreased by approximately 7.5%, as compared to fiscal year 2019.

Pound solids increased by approximately 6.4% and decreased by approximately 14.1% for the Early and Mid-Season and Valencia oranges, respectively.

The combination of these items resulted in approximately 3,149,000 fewer pound solids sold in fiscal year 2020, as compared to fiscal year 2019.

Total processed boxes harvested in fiscal year 2019 increased by approximately 68.1%, as compared to fiscal year 2018.

Pound solids increased by approximately 6.9% and approximately 4.0% for the Early and Mid-Season and Valencia oranges, respectively.

The combination of these items resulted in approximately 20,214,000 of additional pound solids sold in fiscal year 2019, as compared to fiscal year 2018.

The USDA, in its November 10, 2020 Citrus Crop Forecast for the 2020-21 harvest season, indicated its expectation that the Florida orange crop will decrease from approximately 67,300,000 boxes for the 2019-20 crop year to approximately 57,000,000 boxes for the 2020-21 crop year, a decrease of approximately 15.3%.

As production is estimated to be lower than in the prior year, the Company anticipates there will be an increase in market prices in the 2020-21 harvest season primarily driven by an increase in demand for NFC orange juice, which will more than offset the negative impact from the estimated decline in production.

The USDA, in its October 12, 2021 Citrus Crop Forecast for the 2021-22 harvest season, indicated its expectation that the Florida orange crop will decrease from approximately 52,800,000 boxes for the 2020-21 crop year to approximately 47,000,000 boxes for the 2021-22 crop year, a decrease of approximately 11.0%.

While the USDA box production is estimated to be lower than in the prior year, the Company anticipates that market prices will remain consistent with or slightly above the 2020-21 harvest season market price levels, which is being driven by continued strong demand for NFC orange juice, along with anticipated declines in both Brazil and Florida box production.

The increase in operating expenses for the fiscal year 2021, as compared to the fiscal year 2020, primarily relates to grove management services it provides to third parties.

As mentioned above, the Company executed an agreement with an affiliated group of third parties to provide citrus grove caretaking and harvest and haul management services for approximately 7,000 acres owned by such third parties.

Under this agreement, for the fiscal years ended September 30, 2021 and 2020, the Company recorded approximately $14,342,000 and $3,016,000, respectively, of operating expenses relating to these grove management services.

Additionally, the increase in operating expenses is attributable to the Company

purchasing additional citrus acres in May and October 2020, which resulted in cost of sales relating to these groves in the current fiscal year.

Partially offsetting these increases was a reduction in harvest and haul expenses attributable to a decrease in Early and Mid-season and Valencia boxes harvested.

The increase in operating expenses for the fiscal year 2020, as compared to the fiscal year 2019, primarily relates to the Company receiving less federal relief proceeds through the Florida CRBG program relating to Hurricane Irma, which are recorded as a reduction of operating expenses, during fiscal year 2020, as compared to fiscal year 2019.

The Company received proceeds of approximately $4,629,000 and $15,597,000 through the Florida CRBG program relating to Hurricane Irma during the fiscal years ended September 30, 2020 and 2019, respectively.

Additionally, the Company recorded additional grove management services expense of approximately $3.0 million.

Partially offsetting this decrease in operating expenses was a reduction in harvesting and hauling costs experienced by the Company as a result of fewer processed boxes being harvested during the fiscal year ended September 30, 2020 as compared to the same period in the prior year.

Under the terms of this agreement, the Company is to be reimbursed by the third parties for all of its costs incurred related to providing these services and also is to receive a management fee based on acres covered under this agreement.

As the Company provides these citrus grove caretaking management services, the Company will be recording both an increase in revenues and expenses.

For the fourth quarter ended September 30, 2020, the Company recorded approximately $3,300,000 of operating revenue, including the management fee, and approximately $3,000,000 of operating expenses relating to this arrangement.

Additionally, the Company recorded additional grove management services expense of approximately $3,016,000.

Partially offsetting this increase in operating expenses was a reduction in harvesting and hauling costs experienced by the Company as a result of fewer processed boxes being harvested during the fiscal year ended September 30, 2020 as compared to the same period in the prior year.

As a result of a lower gross profit percentage generated from grove caretaking management services, as compared to citrus sales generated from groves, the overall gross profit percentage within the Alico Citrus segment was lower in fiscal year 2021 and 2020 and is expected to be lower in future fiscal years than prior fiscal years due to the execution of the above-mentioned new caretaking services agreement.

The credit amounts shown in “Other” in operating expenses above, for the most part, represent federal relief proceeds received under the CRBG program for the fiscal years ended September 30, 2021, 2020, and 2019.

Land Management and Other Operations

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Land and other leasing

Sale of calves and culls

Operating Expenses:

Land and other leasing

Cost of calves sold

Water conservation

Gross Profit (loss)

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Land and other leasing include lease income from leases for grazing rights, hunting leases, a farm lease, a lease to a third party of an aggregate mine, leases of oil extraction rights to third parties, and other miscellaneous income.

The slight decrease in revenues from Land Management and Other Operations for the fiscal year ended September 30, 2020 is primarily due to a reduction in the leased acreage relating to a cattle grazing lease.

The reduction in the leased acreage was due to certain acres, which were included under this lease arrangement, having been sold in September 2019.

The decrease in revenues from Land Management and Other Operations for the fiscal year ended September 30, 2021, compared to the fiscal year ended September 30, 2020, was primarily due to a reduction in the leased acreage relating to grazing and hunting leases.

The reduction in the leased acreage was due to the sale of certain acres, which were previously included under these lease arrangements, thus resulting in fewer acres now being leased under these grazing and hunting leases.

The decrease in operating expenses from Land Management and Other Operations for the fiscal year ended September 30, 2021, compared to the fiscal year ended September 30, 2020, was primarily due to the Company no longer pursuing its dispersed water storage project and, therefore, incurring no water conservation expenses for the fiscal year ended September 30, 2021.

On September 10, 2020, the Company sold approximately 10,700 acres on the western part of Alico Ranch to the State of Florida.

Because the acres involved in the sale would have been critical to our planned dispersed water storage project, the Company has decided to no longer pursue permit approval activities for this particular project.

As a result of this decision, 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.

The Company anticipates that it will have no further expenses incurred relating to the dispersed water storage project moving forward.

The slight increase in revenues from Land Management and Other Operations for the fiscal year ended September 30, 2019 is primarily due to the Company recording a full year of grazing lease revenue in fiscal year 2019, while only recording nine months of revenue as the lease for these grazing rights was executed on January 8, 2018, at the time of the sale of the cattle herd.

Partially offsetting this increase was a decrease in farm lease revenue as a result of a lease not being renewed in fiscal year 2019.

Since the acres involved in the sale would have been critical to its planned dispersed water storage project, the Company decided to no longer pursue the related permit approval activities.

Accordingly, the Company anticipates it will have no future expenses incurred relating to the dispersed water storage project.

Additionally, the Company has seen a decrease in ad valorem taxes due to certain ranch land sales.

The slight decrease in revenues from Land Management and Other Operations for the fiscal year ended September 30, 2020 , compared to the fiscal year ended September 30, 20 19, was primarily due to a reduction in the leased acreage relating to a cattle grazing lease.

Upon the Company selling approximately 10,700 acres on the western part of Alico Ranch to the State of Florida, as mentioned above, and deciding to no longer pursue permit approval activities for this particular project, 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.

General and Administrative

General and administrative expenses for the fiscal year ended September 30, 2020 was approximately $10,998,000, compared to approximately $15,146,000 for the fiscal year ended September 30, 2019.

General and administrative expenses for the fiscal year ended September 30, 2021 were approximately $9,453,000, compared to approximately $10,998,000 for the fiscal year ended September 30, 2020.

The decrease in general and administrative expenses for the fiscal year ended September 30, 2021, as compared to the fiscal year ended September 30, 2020, was attributable to (i) a reduction in legal expense of approximately $805,000, primarily resulting from the receipt of insurance proceeds for the reimbursement of legal fees in the amount of approximately $658,000 during the fiscal year ended September 30, 2021 relating to corporate legal matters, (ii) a reduction in stock compensation expense of approximately $241,000 in light of the fact that in the prior fiscal year, in January 2020 certain stock options had vested, which in turn resulted in an acceleration of expense in that prior fiscal year, (iii) a reduction in payroll expenses for the fiscal year ended September 30, 2021 of approximately $259,000 relating to the resignation of a senior manager in December 2019 and the reduction in other administrative personnel made during fiscal year ended September 30, 2021 and (iv) a reduction in pension expense related to the Company’s deferred retirement benefit plan of approximately $207,000 as a result of the Company terminating such plan and paying out each of the plan participants in August 2020.

Partially offsetting this decrease was the Company’s incurring of approximately $200,000 in corporate advisory fees in the fiscal year ended September 30, 2021.

General and administrative expenses for the fiscal year ended September 30, 2020 were approximately $10,998,000, compared to approximately $15,146,000 for the fiscal year ended September 30, 2019.

The decrease in general and administrative expenses for the fiscal year ended September 30, 2020, as compared to the fiscal year ended September 30, 2019, was primarily due to professional fees, relating to a corporate litigation matter, of approximately $2,300,000 being incurred for the fiscal year ended September 30, 2019.

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Partially offsetting these decreases was a lower amount of stock compensation expense of $823,000 recognized in fiscal year ended September 30, 2019 as a result of a former senior executive forfeiting his stock options as part of the settled litigation and an increase in Directors and Officers insurance of approximately $247,000.

The slight increase in general and administrative expenses for the fiscal year ended September 30, 2019, as compared to the fiscal year ended September 30, 2018, was primarily due to an increase in professional fees, relating to a corporate litigation matter, of approximately $2,300,000 during the fiscal year ended September 30, 2019.

This litigation has been resolved with a settlement being reached on February 11, 2019.

The Company does not anticipate further professional fees relating to this litigation.

Additionally, as part of this settlement, the Company recorded consulting and separation fees of $800,000 during the fiscal year ended September 30, 2019.

The Company also recorded a one-time pension expense related to its deferred retirement benefit plan of approximately $965,000 in fiscal year 2019.

Partially offsetting these increases wer e decreases in expenses due to (i) a reduction in stock compensation expense of $823,000 as a result of a former senior executive forfeiting his stock options as part of the settled litigation, (ii) a reduction in rent expense of approximately $450,000 as a result of the Company not renewing its lease for office space in New York City, (iii) an acceleration of stock compensation expense in fiscal year 2018 of approximately $782,000 as a result of two senior executives forfeiting a portion of their stock options, and (iv) a reduction in payroll costs of approximately $1,261,000.

The reduction in payroll costs was primarily from (i) a reduction in separation expenses of approximately $388,000;

(ii) a reduction in accrual for paid-time-off of approximately $100,000;

and (iii) a reduction in executive compensation expense of approximately $725,000 relating to the resignation of a former senior executive.

Other Income, net

Other income, net, for the fiscal years ended September 30, 2021 and 2020 was approximately $31,947,000 and approximately $24,456,000, respectively.

The increase in other income, net was primarily due to the Company recognizing significant gains on sales of real estate, property and equipment and assets held for sale in both fiscal years.

For the fiscal year ended September 30, 2021, the Company recorded gains on sale of real estate, property and equipment and assets held for sale of approximately $35,898,000 relating primarily to the sale of approximately 19,776 acres from the Alico Ranch to several third parties.

For the fiscal year ended September 30, 2020, the Company recognized a gain on sale of real estate, property and equipment and assets held for sale of approximately $30,424,000.

Additionally, a decrease in interest expense of approximately $1,994,000 for the fiscal year ended September 30, 2021, as compared to the fiscal year ended September 30, 2020, was primarily due to the reduction of the Company’s long-term debt from the making of mandatory principal payments and certain prepayments.

In addition, the Company maintained lower balances on both its working capital line of credit and revolving line of credit, which also resulted in reduced interest expense.

Other income, net, for the fiscal years ended September 30, 2020 and 2019 was approximately $24,456,000 and approximately $5,019,000, respectively.

The increase in other income, net was primarily due to the Company recording a higher gain on sale of real estate, property and equipment and assets held for sale in fiscal year 2020, as compared to fiscal year 2019.

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Additionally, the Company recognized a reduction of approximately $1,199,000 in interest expense in fiscal year 2020 as a result of (i) the reduction of its long-term debt attributable to making its mandatory principal payments, (ii) the Company prepaying approximately $4,455,000 on its debt obligations and (iii) a reduction in interest rates.

Other income, net for the fiscal years ended September 30, 2019 and 2018 was approximately $5,019,000 and approximately $2,655,000, respectively.

The increase in other income, net was primarily due to the Company recording a higher gain on sale of real estate, property and equipment and assets held for sale in fiscal year 2019, as compared to fiscal year 2018.

In fiscal year 2019, the Company recorded a gain of approximately $13,166,000, which was generated primarily for the sale of land on its West Ranch in September 2019.

For the fiscal year ended September 30, 2018, the Company recorded a gain of $11,041,000 on the sale of real estate, property and equipment and assets held for sale, which included its corporate office building in Fort Myers, Florida, its Gal Hog property and a land parcel within its East Ranch resulting in gains of approximately $1,751,000, $6,709,000 and $1,759,000, respectively.

Additionally, the Company incurred less interest expense of approximately $1,381,000 in fiscal year 2019, as compared to fiscal year 2018, primarily due to the Company recording imputed interest expense during the fiscal year ended September 30, 2018 relating to its Sugarcane transaction, which was terminated in fiscal year 2019.

For the fiscal years ended September 30, 2021, 2020 and 2019, the provision for income taxes was approximately $11,567,000, $7,663,000 and $12,783,000, respectively, and the related effective income tax rates were approximately 24.94%, 24.42% and 25.45%, respectively.

The change in the tax provision for the fiscal year ended September 30, 2020 is the result of the Company generating less net income during the current fiscal year as compared to the prior fiscal year.

The change in the tax provision for the fiscal year ended September 30, 2019 was the result of the Company generating greater net income during fiscal year 2019, as compared to the prior fiscal year.

Additionally, a one-time non-cash deferred income tax benefit of approximately $9,847,000 was recorded in fiscal year 2018 which resulted from the remeasurement of the Company's net deferred tax liabilities due to the 21% corporate tax rate that was enacted December 22, 2017, and an effect of the expiration of its capital loss carryforward, which expired at September 30, 2018, of approximately $5,634,000 which was recorded in fiscal year 2018, thus resulting in an additional income tax expense.

The increase in the dollar amount of the tax provision for the fiscal year ended September 30, 2021 is the result of the Company generating greater net income during the current fiscal year as compared to the prior fiscal year.

The decrease in the dollar amount of the tax provision for the fiscal year ended September 30, 2020 was the result of the Company generating less net income during fiscal year 2020, as compared to the prior fiscal year.

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.

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Current ratio

Sources and Uses of Liquidity and Capital

Alico's business has historically generated positive net cash flows from operating activities.

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Management believes that a combination of cash-on-hand, cash generated from operations, asset sales and availability under the Company's lines of credit will provide sufficient liquidity to service the principal and interest payments on its indebtedness and will satisfy working capital requirements and capital expenditures for at least the next twelve months and over the long term.

Borrowing Facilities and Long-term Debt

Alico has a $70,000,000 working capital line of credit, of which approximately $69,664,000 is available for general use as of September 30, 2021, and a $25,000,000 revolving line of credit, all of which is available for general use as of September 30, 2021 (see Note 6.

“Long-Term Debt and Lines of Credit" to the accompanying Consolidated Financial Statements).

If the Company pursues significant growth and other corporate opportunities, it could have a material adverse impact on its cash balances, and may need to finance such activities by drawing down monies under its lines of credit or by obtaining additional debt or equity financing.

Additionally, effective May 1, 2021, the Company converted its Met Fixed-Rate Term Loans into interest bearing only loans with a balloon payment of the balance due at maturity, which is November 1, 2029.

Such conversion has increased available cash and can be expected to continue to increase the available cash for the foreseeable future.

With the increase in available cash, the Company could utilize the available cash for other possible uses such as paying down indebtedness, citrus grove acquisitions, share repurchases, and additional increased dividends.

If the Company chooses to pursue significant growth and other corporate opportunities, such as the transaction whereby it acquired 3,280 citrus grove acres on October 30, 2020 for $18,230,000, pay down of

indebtedness, engag ing in share repurchases or pay ing increased dividends, these actions could have a material adverse impact on its cash balances and may require the Company to finance such activities by drawing down on its lines of credit or by obtaining additional debt or equity financing.

There can be no assurance that additional financing will be available to the Company when needed or, if available, that it can be obtained on commercially reasonable terms.

Any inability to obtain additional financing could impact Alico's ability to pursue different growth and other corporate opportunities.

Any inability to obtain additional financing could adversely impact Alico's ability to pursue different growth and other corporate opportunities.

The level of debt could have important consequences on Alico's business, including, but not limited to, increasing its vulnerability to general adverse economic and industry conditions, limiting the availability of cash flow to fund future investments, capital expenditures, working capital, business activities and other general corporate requirements, and limiting flexibility in planning for, or reacting to, changes in its business and industry.

Alico debt covenants under its credit facilities 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 $169,730,000 applicable for the year ended September 30, 2021, (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, 2021, the Company was in compliance with all of the financial covenants.

Cash Management Impacts

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Net cash provided by operating activities

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

Net cash used in financing activities

Net (decrease) increase in cash and cash equivalents and restricted cash

Net decrease in cash and cash equivalents and restricted cash

Net Cash Provided By Operating Activities

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September 30,

Deferred gain on sale of sugarcane land

Depreciation, depletion and amortization

Deferred income tax expense (benefit)

Debt issue costs expense

Deferred income tax expense

Cash surrender value

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Impairment of right-of-use asset

Non-cash interest expense on deferred gain on sugarcane land

Insurance proceeds received for damage to property and equipment

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Net cash provided by operating activities

The increase in net cash provided by operating activities for the fiscal year ended September 30, 2021, as compared to the fiscal year ended September 30, 2020, was primarily due to an increase in net income and an increase in working capital which was primarily driven by an increase in accounts payable and timing of income tax payments.

The increase in accounts payable relates to the timing and billing of fertilizer and chemical applications in the citrus groves.

Offsetting a significant portion of this increase was the amount of gain on sale of real estate, property and equipment and assets held for sale being greater in the fiscal year ended September 30, 2021 as compared to the prior year, primarily resulting from a greater number of acres being sold in the current fiscal year.

The decrease in net cash provided by operating activities for the fiscal year ended September 30, 2020, as compared to the same period in fiscal year 2019, was primarily due to (i) an increase in gain on sale of real estate, property and equipment and assets held for sale in the fiscal year ended September 30, 2020, relating to the sale of certain sections of the West Ranch, (ii) a decrease in net income, which was primarily driven by decreased citrus sales, (iii) a decrease in the deferred retirement benefit as a result of the Company terminating its pension plan and paying all participants on August 30, 2020 and (iv) a decrease in working capital as a result of the payment of income taxes and an increase in accounts receivable related to the Company’s grove management services whereby the Company pays all growing costs and then is reimbursed in the future from proceeds of fruit sales of the third-party.

The increase in net cash provided by operating activities for the fiscal year ended September 30, 2019, as compared to the same period in fiscal year 2018, was primarily due to (i) an increase in net income which was primarily driven by increased citrus sales and the receipt of federal disaster relief funds relating to Hurricane and (ii) an increase in working capital, which is due to a decrease in accounts receivable and an increase in income taxes payable.

Due to the seasonal nature of Alico's business, working capital requirements are typically greater in the first and fourth quarters of its fiscal year.

Cash flows from operating activities typically improve in the second and third fiscal quarters, as sales of its harvested citrus are made.

Net Cash Provided By (Used In) Investing Activities

The following table details the items contributing to Net Cash Provided By (Used In) Investing Activities for the fiscal years ended September 30, 2020, 2019 and 2018:

Net Cash (Used In) Provided By Investing Activities

The following table details the items contributing to Net Cash (Used In) Provided By Investing Activities for the fiscal years ended September 30, 2021, 2020 and 2019:

(in thousands)

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Purchases of property and equipment

Purchases of citrus groves

Net proceeds from sale of real estate, property and equipment and assets held for sale

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Advances on notes receivables, net

Net cash provided by (used in) investing activities

Purchases of mineral rights

Net cash (used in) provided by investing activities

The shift from net cash provided by investing activities for the fiscal year ended September 30, 2020 to net cash used in investing activities for the fiscal year ended September 30, 2021 was primarily due to the use of funds to purchase approximately 3,280 gross acres located in Hendry County for a purchase price of approximately $18,230,000 in October 2020 and the acquisition of additional smaller citrus groves.

Partially offsetting this shift was net proceeds received for the sale of real estate, property and equipment and assets held for sale being greater in the fiscal year ended September 30, 2021 as compared to the same period in the prior year (see Note 4.

“Assets Held for Sale” and Note 5.

“Property & Equipment, Net” to the accompanying Consolidated Financial Statements), including the Company’s receipt of approximately $5,725,000 more proceeds from the sale of ranch land to various third parties than the proceeds received in the fiscal year ended September 30, 2020.

The shift from net cash used in investing activities for the fiscal year ended September 30, 2019 to net cash provided by investing activities for the fiscal year ended September 30, 2020 was primarily due to an increase in proceeds received on the sale of certain assets sold during fiscal year 2020, as compared to fiscal year 2019.

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“Property & Equipment, Net” to the accompanying Consolidated Financial Statements).

The change from net cash provided by investing activities for the fiscal year ended September 30, 2018 to net cash used in investing activities for the fiscal year ended September 30, 2019 was primarily due to a decrease in proceeds received on the sale of certain assets sold during fiscal year 2019, as compared to fiscal year 2018.

This is due to the Company divesting of several more assets in fiscal year 2018, as compared to fiscal year 2019 (see Note 4.

“Assets Held for Sale” and Note 5.

“Property & Equipment, Net” to the accompanying Consolidated Financial Statements).

In addition, the shift, to a smaller extent, was due to an increase in capital expenditures which was driven by the purchase of certain land blocks within its existing grove location.

Net Cash Used In Financing Activities

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Payment on termination of sugarcane agreement

Deferred Financing costs

Dividends paid

Deferred financing costs

Capital contribution received from noncontrolling interest

Capital lease obligation payments

Net cash used in financing activities

The increase in net cash used in financing activities for the fiscal year ended September 30, 2021, as compared to the fiscal year ended September 30, 2020, was primarily due to the Company paying down a greater amount on its long-term debt during the fiscal year ended September 30, 2021, as compared to the prior year.

During fiscal year ended September 30, 2021, the Company prepaid approximately $10,312,000 of principal on its fixed rate term loans with MetLife and also paid approximately $4,070,000 of principal on one of its loans

outstanding with Prudential which matured in September 2021.

Partially offsetting these increased payments was the conversion of the Company’s Met Fixed-Rate Term Loans into interest bearing only loans with a balloon payment of the balance due on November 1, 2029.

Additionally, the Company paid a greater amount of dividends to stockholders of the Company’s common stock during the current fiscal year, as compared to the prior year, as a result of the Company increasing its annual dividend to $2.00 per common share in June 2021.

The Company also paid down, net of borrowings, its revolving line of credit during the current fiscal year.

The decrease in net cash used in financing activities for the fiscal year ended September 30, 2020, as compared to the fiscal year ended September 30, 2019, was primarily due to the Company repurchasing its common shares through a tender offer in October 2018 for an aggregate approximate amount of $25,576,000 and the termination of its 2014 Post-Closing Agreement in March 2019 pursuant to which the Company paid $11,300,000.

Partially offsetting this shift was a prepayment of one of its long-term debt obligations in November 2019 in the amount of $4,455,000.

The increase in net cash used in financing activities for the fiscal year ended September 30, 2019, as compared to the fiscal year ended September 30, 2018, was primarily due to the Company purchasing 752,234 common shares through a tender offer, for an aggregate amount of approximately $25,576,000, the termination of its 2014 Post-Closing Agreement relating to sugarcane transaction pursuant to which the Company paid approximately $11,300,000, and a pay down, net of borrowings, of its revolving line of credit by approximately $2,265,000.

Alico had approximately $2,942,000 outstanding on its revolving lines of credit as of September 30, 2020 and approximately $91,659,000 remaining availability.

Alico had $0 outstanding on its revolving lines of credit as of September 30, 2021 and approximately $94,664,000 remaining availability.

The WCLC line of credit agreement provides for Rabo Agrifinance, Inc.

to issue up to $2,000,000 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 slightly reduced Alico's availability under the line of credit.

Off-Balance Sheet Arrangements

As of September 30, 2021, there was approximately $336,000 in outstanding letters of credit, which correspondingly reduced Alico's availability under the line of credit.

Contractual Obligations

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Interest on Long-Term Debt

Consulting/Non-Compete Agreement

Operating Leases

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Changes in the relative value of money due to inflation or recession generally are not considered.

The primary effect of inflation on our operations is reflected in increased operating costs.

In our management’s opinion, changes in interest rates affect the financial condition to a far greater degree than changes in the inflation rate.

While interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate.

Interest rates are highly sensitive to many factors that are beyond our control, including changes in the expected rate of inflation, the influence of general and local economic conditions and the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities.

Critical Accounting Policies

We are exposed to the impact of inflation on our cost of products sold.

We use a number of strategies to mitigate the effects of cost inflation including commodity hedging and pursuing cost productivity initiatives.

We experienced higher inflation in 2021 and expect to experience increased inflation in 2022.

Pricing actions and supply chain productivity initiatives introduced at the end of 2021 will mitigate a portion of this inflationary pressure, but we do not expect such benefits will fully offset the incremental costs in 2022.

Critical Accounting Policies and Estimates

Alico's Consolidated Financial Statements are prepared in accordance with U.S.

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Management considers an accounting policy to be critical if it is important to the Company's financial condition and results of operations and if it requires significant judgment and estimates on the part of management in its application.

Alico considers policies relating to the following matters to be critical accounting policies:

Management considers an accounting estimate to be critical if it is made in accordance with generally accepted accounting principles, involves a significant level of estimation uncertainty, and has had or is reasonably likely to have a material impact on the Company’s financial condition or results of operations.

Alico considers policies and estimates relating to the following matters to be critical accounting policies:

Revenue Recognition

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For grove management services, the Company recognizes operating revenue, including a management fee, when services are rendered and consumed.

The Company recognized revenues from cattle sales at the time the cattle were delivered.

Management reviews the reasonableness of the revenue accruals quarterly based on buyers’ and processors’ advances to growers, cash and futures markets and experience in the industry.

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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.

For the fiscal years ended September 30, 2021, 2020 and 2019, the Company did not record any valuation allowances.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

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The carrying amounts in the balance sheets for operating accounts receivable, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term maturity of these items.

The carrying amounts reported for our long-term debt approximates fair value as our borrowings with commercial lenders are at interest rates that vary with market conditions and fixed rates that approximate market rates for comparable loans.

The carrying amounts reported for our long-term debt approximates fair value as

our borrowings with commercial lenders are at interest rates that vary with market conditions and fixed rates that approximate market rates for comparable loans.

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date.

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Impact of Accounting Pronouncements

"Financial Statements and Supplemental Data" - Note 1.

"Financial Statements and Supplementary Data" - Note 1.

"Description of Business and Basis of Presentation" for additional information about the impact of accounting pronouncements.

Subsequent Events

On December 2, 2020, the Board of Directors of the Company declared a cash dividend for the first quarter of fiscal year 2021 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.

Compensatory Arrangements of Certain Officers.

On December 2, 2019, the Company entered into a new employment agreement (the “Rallo Employment Agreement”) with Richard Rallo.

Rallo serves as Chief Financial Officer of the Company.

The Rallo Employment Agreement provides for an annual base salary of $275,000.

Rallo is eligible for an annual incentive compensation award with an annual target opportunity in an amount equal to 40% of his annual base salary.

The Rallo Employment Agreement also provides that, if Mr.

Rallo’s employment is terminated by the Company without “cause” or Mr.

Rallo resigns with “good reason” (as each such term is defined in the Rallo Employment Agreement), then, subject to his execution, delivery, and non-revocation of a general release of claims in favor of the Company, Mr.

Rallo will be entitled to (i) cash severance in an amount equal to 12 months of the annual base salary, (ii) the Accrued Obligations (as defined in the Rallo Employment Agreement) in a cash lump sum within 30 days after the date of termination, (iii) any rights or payments that are vested benefits or that Mr.

Rallo is otherwise entitled to receive at or subsequent to the date of termination under any employee benefit plan or any other contract or agreement with the Company, and (iv) any Annual Bonus (as defined in the Rallo Employment Agreement) that has been earned but not paid as of the date of termination.

The Rallo Employment Agreement includes various restrictive covenants in favor of the Company, including a confidentiality covenant, a non-disparagement covenant, and 12-month post-termination noncompetition and customer and employee non-solicitation covenants.

In addition to his position as Chief Financial Officer, Mr.

Rallo retains his position as the Company’s Principal Accounting Officer.

The foregoing description of the Rallo Employment Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Rallo Employment agreement, which is attached hereto as Exhibit 10.37 to this Annual Report on Form 10-K and is incorporated herein by reference.

On October 15, 2021 and November 5, 2021, the Company awarded 2,500 and 2,224 restricted shares of the Company’s common stock to certain executives and senior managers under the 2015 Plan at a weighted average fair value of $35.77 per common share, with 2,500 vesting on January 1, 2022 and the remaining shares vesting on January 1, 2023.

On December 2, 2021, the Board of Directors of the Company declared a cash dividend for the first quarter of fiscal year 2022 of $0.50 per share on its outstanding common stock to be paid to stockholders of record as of December 31, 2021, with payment expected on January 14, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis