What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-12-07 compared with 2020-12-08 · 301 added, 417 removed, 749 unchanged (49% of the section changed)

13 unchanged sentences

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.

and its subsidiaries (the Company) as of September 30, 2021 and 2020, the related consolidated statements of operations, changes in equity and cash flows for each of the years in the three-year period ended September 30, 2021, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements 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.

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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.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits 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.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

We determined that there are no critical audit matters.

/s/ RSM US LLP

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Long-term debt, current portion

Deferred retirement obligations, current portion

Income taxes payable

Other current liabilities

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Interest expense

Gain on sale of real estate, property and equipment and assets held for sale

Gains on sale of real estate, property and equipment and assets held for sale

Change in fair value of derivatives

Other (expense) income, net

Other income (expense), net

Total other income, net

1 unchanged sentence

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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Treasury stock purchases

Capital contribution received from noncontrolling interest funding

Stock-based compensation:

September 30, 2018

Net income (loss)

Treasury stock purchases

ASC 610-20 adoption

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Treasury stock purchases

Capital contribution received from noncontrolling interest funding

Capital contribution received from noncontrolling interest

Stock-based compensation:

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September 30, 2020

Net income (loss)

Stock-based compensation:

Executives and managers

September 30, 2021

See accompanying notes to the consolidated financial statements .

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Adjustments to reconcile net income to net cash provided by operating activities:

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

Deferred retirement benefits

Deferred retirement (expense) benefit

Gain on sale of real estate, property and equipment and assets held for sale

4 unchanged sentences

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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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

Cash flows from financing activities:

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Capital contribution received from noncontrolling interest

Capital lease obligation payments

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

Cash and cash equivalents and restricted cash at beginning of the period

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Supplemental disclosure of non-cash investing and financing activities:

Dividend declared but unpaid

Dividends declared but unpaid

See accompanying notes to the consolidated financial statements.

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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.

Alico, Inc., together with its subsidiaries (collectively, “Alico”, the “Company", "we", "us" or "our”), is a Florida agribusiness and land management company owning 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.

The Company manages its land based upon its primary usage, and reviews its performance based upon two primary classifications:

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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”).

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 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.

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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.

Citree had net loss of $ 79,479 for the fiscal year ended September 30, 2021, net income of $ 107,051 for the fiscal year ended September 30, 2020, and a net loss of $ 781,783 for the fiscal year ended September 30, 2019, respectively, of which a net loss of $ 40,535 , a net income of $ 54,596 , and a net loss of $ 398,709 were attributable to the Company for the fiscal years ended September 30, 2021, 2020 and 2019, 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 .

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.

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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.

Because LIBOR will cease to exist, the Company will need to renegotiate its loan agreements but the Company cannot predict what alternative index would be negotiated with its lenders.

ASU 2020-04 is currently effective on or before December 31, 2022 and upon adoption may be applied prospectively to contract modifications made.

The Company is currently assessing the impact of adopting this standard and the impact on its consolidated financial statements.

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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”).

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.

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.

The accounting applied by a lessor is largely unchanged from that applied under previous U.S.

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.

Our operating leases are reported in our Consolidated Balance Sheets as follows:

(in thousands)

September 30,

Operating lease components

Classification

Right-of-use assets

Other non-current assets

Current lease liabilities

Other current liabilities

Non-current lease liabilities

Other liabilities

Our operating leases cost components are reported in our Consolidated Statements of Operations as follows:

(in thousands)

September 30,

Operating lease components

Classification

Operating lease costs

General and administrative expenses

Operating lease right-of-use asset impairment

Other expense

Future maturities of our operating lease obligations as of September 30, 2020 by fiscal year are as follows:

(in thousands)

Total noncancelable future lease obligations

Present value of lease obligations

The weighted-average remaining lease term and weighted-average discount rate for our operating leases are as follows:

September 30,

Weighted-average remaining lease term

Weighted-average discount rate

Cash flow information related to leases consists of the following:

(in thousands)

September 30,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

In January 2017, the FASB issued Accounting Standards Update (“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.

The Company adopted ASU 2017-04 effective October 1, 2020, using the prospective approach, and will apply this standard in future impairment tests.

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 became effective for annual and interim periods in the fiscal years beginning after December 15, 2019.

The Company adopted ASU 2018-13 effective October 1, 2020, and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

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 adopted ASU 2018-19 effective October 1, 2020, and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

The COVID-19 Pandemic

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

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.

Pursuant to the ETS, 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.

Reclassifications

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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.

Historically, the second and third quarters of Alico's fiscal year produce most 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.

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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.

For the sale of fruit, the Company has identified one performance obligation, which is the delivery of fruit to the processing facility of the customer (or harvesting of the citrus in the case of fresh fruit) for each separate variety of fruit identified in the respective contract with the respective customer.

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.

As such, since all of 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.

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.

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Land and other leasing

Sale of calves and culls

Total Revenues

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

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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.

Restricted cash was 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.

Such funds were included in restricted cash as of September 30, 2020.

In October 2020, the Company closed on a purchase of a like-kind asset and used all of these net cash proceeds which were being held by the intermediary.

Accounts receivable

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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:

Accounts receivable from the Company’s major customer as of September 30, 2021 and 2020 and revenue from such customer for the fiscal years ended September 30, 2021, 2020 and 2019, are as follows:

(in thousands)

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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.

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.

The overall decrease in Tropicana revenue as a percentage of sales was due to an agreement entered into in July 2020 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 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.

Excluding these revenues for these citrus grove caretaking and harvest and haul management services, revenue from Tropicana represents approximately 90.1 % of total revenues for the fiscal year ended September 30, 2021.

In addition, most of the citrus from the managed groves is also sold to Tropicana, so the revenues from grove caretaking is indirectly related to payments received from Tropicana.

In February 2017, the FASB issued ASU 2017-05, “ Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets ” (ASC 610-20):

This standard clarified the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets and clarified 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.

The standard provided guidance on how gains and losses on transfers of nonfinancial assets and in substance nonfinancial assets to non-customers are recognized.

The Company recognizes a gain on the sale of real estate as outlined by ASC 610-20.

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.

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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.

For fiscal year ended September 30, 2021 the Company did not record impairments of its long-lived assets.

For the fiscal years ended September 30, 2020 and 2019, the Company recorded impairments of its long-lived assets (see Note 5.

“Property and Equipment, Net”).

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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.

The carrying value of goodwill is tested for impairment annually as of September 30, and, additionally on an interim basis, whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

The accounting standards for goodwill allow for the assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If the Company does not utilize a qualitative assessment approach, then the quantitative goodwill impairment test is utilized to identify potential impairments.

The Company identifies any potential impairment by comparing the carrying value of a reporting unit to its fair value.

The Company typically determines the fair value of its reporting units using a discounted cash flow valuation approach.

If a potential impairment is identified, the Company will determine the amount of goodwill impairment by comparing the fair value of a reporting unit with its carrying amount.

As of September 30, 2021 and 2020, 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.

Other non-current assets primarily include intangible assets relating to mineral rights, water permits, right-of-use assets relating to lease obligations, 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.

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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 no t record any valuation allowances.

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

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Weighted Average Common Shares Outstanding - Diluted

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.

For the fiscal years ended September 30, 2021, 2020 and 2019, respectively, the Company issued 0 , 118,000 , and 10,000 , 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.

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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.

This adjustment to inventory is included in operating expenses in the Consolidated Statements 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.

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.

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.

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 and 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 is expected to receive the remaining portion in fiscal 2023.

Assets Held for Sale

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Total Assets Held for Sale

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

The Company recognized a gain of approximately $ 11,351,000 .

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 the Alico ranch for approximately $ 14,445,000 pursuant to an option agreement entered between the State of Florida and the Company.

The Company recognized a gain of approximately $ 13,921,000 .

On December 18, 2020, the Company sold approximately 600 acres of the Alico Ranch for approximately $ 2,630,000 and recognized a gain of approximately $ 2,550,000 .

Additionally, during fiscal year 2021, the Company sold an aggregate of approximately 1,742 acres of the Alico Ranch to various third parties for approximately $ 8,286,000 and recognized a gain of approximately $ 7,697,000 .

One of these sales transactions, consisting of approximately 97 acres, was sold to an employee of the Company for approximately $ 392,000 .

On September 10, 2020, the State of Florida purchased, under the Florida Forever program, approximately 10,700 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 .

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.

The Company recorded no impairment loss during the fiscal year ended September 30, 2021 and 2020.

The Company recorded an impairment loss on assets held for sale of approximately $ 152,000 for the fiscal year ended September 30, 2019.

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.

The Company has 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"), purchase citrus groves and fund the increased dividend 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.

Property and Equipment, Net

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Property and equipment, net

For the fiscal years ended September 30, 2021 and 2019, the Company did not record any impairments and for the fiscal year ended September 30, 2020, the Company recorded approximately $ 598,000 of impairments on property and equipment.

This impairment resulted from 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 (see Note 4.

Assets Held For Sale) 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 the assets relating to this project during the fourth quarter of the fiscal year ended September 30, 2020.

This impairment relates to the Company’s Land Management and Other Operations segment and was recorded in Operating Expenses in the Consolidated Statement of Operations.

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

This acquisition complements the Company’s existing citrus acres as these acres are located adjacent to existing groves in Hendry County.

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 West Ranch.

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 .

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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.

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 Alico Ranch.

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.

Long-Term Debt and Lines of Credit

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Long-term debt

The following table summarizes lines of credit and related deferred financing costs, net of accumulated amortization at September 30, 2020 and September 30, 2019:

The following table summarizes amounts outstanding under lines of credit and related deferred financing costs, net of accumulated amortization at September 30, 2021 and September 30, 2020:

September 30, 2021

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Interest capitalized

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.

The Company's credit facilities consist of fixed interest rate term loans originally in the amount of $ 125,000,000 (“Met Fixed-Rate Term Loans”), variable interest rate term loans originally in the amount of, $ 57,500,000 (“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.

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 security for the term loans and RLOC consists of approximately 38,200 gross acres of citrus groves and originally included 5,800 gross acres of ranch land.

In April 2021, the 5,800 gross acres of ranch land was released as security against the term loans and RLOC and only the 38,200 gross acres of citrus groves remain as security for the term loans and RLOC.

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”).

Initially, the Met Fixed-Rate Term Loans were subject to quarterly principal payments of $ 1,562,500 and bore interest at 4.15 % per annum.

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

The interest rate on these Met Fixed-Rate Term Loans, which were bearing interest at 4.15 %, was adjusted to 3.85 %.

As part of this modification, the Company no longer has the prepayment option previously allowed under the arrangement.

The Met Variable-Rate Term Loans are subject to quarterly principal payments of $ 718,750 and 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.

No adjustment was made at May 1, 2019 or at May 1, 2021.

Interest on the term loans is payable quarterly.

The interest rates on the Met Variable-Rate Term Loans were 1.78 % per annum and 1.91 % per annum as of September 30, 2021 and September 30, 2020, 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.

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 Met Variable-Rate Term Loans mature on November 1, 2029.

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 LIBOR spread was adjusted by Met on May 1, 2017 and is subject to further adjustment every two years thereafter.

No adjustment was made on May 1, 2019 or on May 1, 2021.

In October 2019, the RLOC agreement was modified to extend the maturity 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.

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There were no changes to the commitment amount or interest rate.

The WCLC agreement provides for Rabo to issue up to $ 2,000,000 in letters of credit on the Company’s behalf, of which $ 336,000 was issued as of September 30, 2021.

Availability under the WCLC was approximately $ 69,664,000 and $ 66,659,000 as of September 30, 2021 and September 30, 2020, respectively.

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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.

There were no amounts outstanding on the WCLC on September 30, 2021 and approximately $ 2,942,000 outstanding on the WCLC on September 30, 2020.

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, 2021, the Company had repaid all of the balances on these credit facilities.

In 2014, the Company capitalized approximately $ 2,834,000 of debt financing costs related to the refinancing and approximately $ 339,000 of costs related to the retired debt.

Additionally, financing costs of approximately $ 23,000 were incurred for the fiscal years ended September 30, 2020 in connection with letters of credit.

All 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 $ 891,000 and approximately $ 1,048,000 at September 30, 2021 and September 30, 2020, 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.

(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.

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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.

On September 30, 2021 and 2020, there was an outstanding balance of $ 4,263,000 and $ 4,512,000 , 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.

The unamortized balance of deferred financing costs related to this loan was approximately $ 31,000 and $ 36,000 on September 30, 2021 and 2020, 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.

On July 27, 2017, the United Kingdom's Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that it intends to phase out LIBOR.

On November 30, 2020, ICE Benchmark Administration (“IBA”), the administrator of LIBOR, with the support of the United States Federal Reserve and the Financial Conduct Authority of the United Kingdom, announced plans to consult on ceasing publication of LIBOR on December 31, 2021 for only the one week and two-month LIBOR tenors, and on June 30, 2023 for all other LIBOR tenors.

On March 5, 2021, the FCA confirmed that all LIBOR settings will either cease to be provided by any administrator or no longer be representative:

(a) immediately after December 31, 2021, in the case of the one week and two-month U.S.

dollar settings;

and (b) immediately after June 30, 2023, in the case of the remaining U.S.

dollar settings.

The Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has proposed an alternative rate to replace U.S.

Dollar LIBOR:

the Secured Overnight Financing Rate (SOFR).

The outcome of these reforms is uncertain and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phaseout could cause LIBOR to perform differently than in the past.

The Company is continuing to evaluate 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 one-month and three-month LIBOR-based rates.

The transition from LIBOR, as mentioned above is estimated to take place in fiscal 2023 and management will continue to actively assess the related opportunities and risks involved in this transition.

Silver Nip Citrus Debt

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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

second fiscal quarter of 2018 with proceeds from the sale of certain properties, which were collateralized under these loans.

In addition, the Company made prepayments of approximately $ 4,453,000 in the 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.

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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 .

In November 2019, the Company prepaid Pru Loan F in full in the amount 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.

Pru Loan E, which matured September 1, 2021, was satisfied in full.

After this payment, the two additional loans have been paid and the Company has no further obligation under either of these loans.

The loans were collateralized by approximately 1,500 gross acres of citrus groves in Charlotte County, Florida.

The remaining 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, 2021.

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Accrued dividends

Accrued contractual obligation associated with sale of real estate

Consulting and separation charges

Accrued insurance

Professional fees

Other accrued liabilities

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As of September 30, 2021, 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 %.

Common Stock and Options

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Non-vested restricted shares generally vest over requisite service periods of one to six years from the date of grant.

Stock Compensation - Board of Directors

The Board of Directors can either elect to receive stock compensation or cash for their fees for services provided.

Stock-based compensation expense relating to the Board of Directors fees was approximately $ 844,000 , $ 733,000 and $ 869,000 for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.

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.

On November 10, 2020, the Company awarded 5,885 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 $ 31.20 per common share, vesting on January 1, 2022.

The following table represents a summary of the status of the Company’s nonvested shares:

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Nonvested Shares at September 30, 2018

Granted during fiscal year 2018

Vested during fiscal year 2019

Forfeited during fiscal year 2018

Nonvested Shares at September 30, 2019

Granted during fiscal year 2019

Vested during fiscal year 2020

Forfeited during fiscal year 2019

Nonvested Shares at September 30, 2020

Granted during fiscal year 2021

Vested during fiscal year 2020

Forfeited during fiscal year 2020

Nonvested Shares at September 30, 2021

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There was approximately $ 40,000 and $ 0 of total unrecognized stock compensation costs related to unvested stock compensation for the Restricted Stock grants at September 30, 2021 and September 30, 2020, respectively.

For the fiscal year ended September 30, 2021, no shares vested.

For the fiscal year ended September 30, 2020, 5,666 shares with a grant date fair value of approximately $ 251,000 became fully vested.

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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.

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.

During the fiscal year ended September 30, 2021, the stock did not trade above $ 40.00 per share for twenty consecutive days (the $ 35.00 per share threshold was met during fiscal year 2020 and thus 25 % was previously vested);

accordingly, no additional amounts of the 2020 Option Grants vested at September 30, 2021.

Stock option grants of 10,000 options to Mr.

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(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.

and (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 Mr.

Kiernan’s termination of employment, if Mr.

Kiernan’s employment is terminated due to death or disability, (B) the date that is 12 months following Mr.

Kiernan’s termination of employment, if Mr.

Kiernan’s employment is terminated by the Company without cause, by Mr.

Kiernan with good reason, or due to Mr.

Kiernan’s retirement, or (C) the date of the termination of Mr.

Kiernan’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.

Since the date of grant the stock did not trade above $ 40.00 per share for twenty consecutive days;

accordingly, no ne of the 2019 Option Grants are vested at September 30, 2021.

Stock option grants of 210,000 options to Mr.

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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 respective Executive’s termination of employment, if the respective Executive’s employment is terminated due to death or disability, (B) the date that is 12 months following the respective Executive’s termination of employment, if the respective Executive’s employment is terminated by the Company without cause, by the respective Executive with good reason, or due to the respective Executive’s retirement, or (C) the date of the termination of the respective 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.

During the fiscal year ended September 30, 2021, the stock did not trade above $ 40.00 per share for a consecutive twenty days (the $ 35.00 per share threshold was met during fiscal year 2020 and thus 25 % was previously vested);

accordingly, no additional stock options of Mr.

Kiernan's 2018 Option Grants vested at September 30, 2021.

As set forth below, more than a majority of the 2018 Option Grants issued to Mr.

Trafelet were forfeited, vesting conditions of the remainder were modified, all pursuant to the Alico Settlement Agreement, and as noted below, such Option Grants issued to Mr.

Trafelet have subsequently all been forfeited.

A stock option grant of 300,000 options in the case of Mr.

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(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

of the termination of the Executive’s employment for any other reason, then any unvested options will be forfeited.

(ii) 25 % of the options will vest if such price during a consecutive 20-trading day period exceeds $ 75.00 ;

(iii) 25 % of the options will vest if such price during a consecutive 20-trading day period exceeds $ 90.00 ;

and (iv) 25 % of the options will vest if such price during a consecutive 20-trading day period exceeds $ 105.00 .

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;

Since the date of grant the stock did not trade above $ 60.00 per share for twenty consecutive days;

accordingly, no ne of the 2016 Option Grants are vested at September 30, 2021.

As set forth below, all of the 2016 Option Grants issued to Mr.

All 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.

Pursuant to an Alico Settlement Agreement dated February 11, 2019 (described in Note 15.

“Related Party Transactions”), which was unanimously approved by the Board of Directors, Mr.

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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.

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 were to vest if the minimum price of Alico's common stock over 20 consecutive trading days exceeded $ 35.00 per share and 26,250 stock options that were to vest if the minimum price of Alico's common stock over 20 consecutive trading days exceeded $ 40.00 per share (“2019 Modified Option Grant”), in each case, by the first anniversary of the date of the Alico Settlement Agreement (collectively, the "Retained Options").

Any Retained Options that vest in accordance with their terms were to expire on the date that is six months following the date on which the Retained Option vests, and any Retained Options that do not vest by the first anniversary of the Alico Settlement Agreement were to be forfeited as of such first anniversary.

Although, by the first anniversary of the Alico Settlement Agreement, the Company’s common stock traded above $ 35.00 per share for a consecutive twenty days and thus 26,250 stock options from the 2019 Modified Options Grant vested, such Retained Options were not exercised within six months following the date on which such Retained Options vested, and accordingly they were forfeited.

Additionally, since the 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 never vested and were forfeited.

Forfeitures of all stock options were recognized as incurred.

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Forfeitures/expired during fiscal year 2020

Exercised during fiscal year 2019

Balance - September 30, 2020

Granted during fiscal year 2020

Forfeitures/expired during fiscal year 2021

Exercised during fiscal year 2020

Balance - September 30, 2021

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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

represents the period of time that options granted are expected to be outstanding;

The expected term of options granted is derived from the output of the option valuation model and 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.

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The weighted-average grant-date fair value of the 2019 Option Grants was $ 7.10 .

2018 Option Grants

Expected Volatility

Expected Term (in years)

Risk Free Rate

The weighted-average grant-date fair value of the 2018 Option Grants was $ 7.40 .

As of September 30, 2021, there remained 1,014,500 common shares available for issuance under the 2015 Plan.

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.

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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 .

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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, 2021, 2020 and 2019:

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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.

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.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (H.R.

748) (the “CARES Act”).

Among the changes to the U.S.

federal income tax rules, the CARES Act restored net operating loss carryback rules that were eliminated by the 2017 Tax Cuts and Jobs Act, modified the limit on the deduction for net interest expense, and accelerated the timeframe for refunds of AMT credit carryovers.

From a federal tax reporting standpoint, the Company had a federal tax net operating loss (“NOL”) in the amount of $ 2,390,415 for the fiscal year ended September 30, 2020 and, pursuant to the provisions of the CARES Act, Form 1139 was filed for the NOL carryback during fiscal year ended September 30, 2021, resulting in a refund due of $ 580,314 .

In October 2019, the Internal Revenue Service concluded their audit of the September 30, 2015 tax year with no changes.

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Income tax provision

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:

Income tax provision attributable to income before income taxes differed from the amount computed by applying the statutory federal income tax rate of 21 % to income before income taxes for each of the fiscal years ended September 30, 2021, September 30, 2020 and September 30, 2019, respectively, as a result of the following:

(in thousands)

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Permanent and other reconciling items, net

Expiration of capital loss carryforward

Reduction in deferred tax liability resulting from the Act

State rate change

Stock option cancellation

Income tax provision

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Deferred tax assets:

Deferred retirement benefits

Stock compensation

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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”.

Alico Citrus and Land Management and Other Operations.

Total revenues represent sales to unaffiliated customers, as reported in the Consolidated Statements of Operations.

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Total operating expenses

Gross profit (loss):

Gross profit:

Land Management and Other Operations

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Capital expenditures:

Land Management and Other Operations

Other Capital Expenditures

Total capital expenditures

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Other Corporate Assets

The accounting applied by a lessor is largely unchanged from that applied under previous U.S.

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 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.

Our operating leases are reported in our Consolidated Balance Sheets as follows:

(in thousands)

September 30,

Operating lease components

Classification

Right-of-use assets - non-current

Other non-current assets

Current lease liabilities

Other current liabilities

Non-current lease liabilities

Other liabilities

Our operating leases cost components are reported in our Consolidated Statements of Operations as follows:

(in thousands)

September 30,

Operating lease components

Classification

Operating lease costs

General and administrative expenses

Operating lease right-of-use asset impairment

Other expense

Future maturities of our operating lease obligations as of September 30, 2021 by fiscal year are as follows:

(in thousands)

Total noncancelable future lease obligations

Present value of lease obligations

September 30,

Weighted-average remaining lease term

Weighted-average discount rate

Cash flow information related to leases consists of the following:

(in thousands)

September 30,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

Employee Benefits Plans

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MSP termination adjustments

Recognized actuarial gain (loss) adjustment

The following provides a roll-forward of the MSP benefit obligation:

Recognized actuarial gain adjustment

The following provides a roll-forward of the MSP benefit obligation for the fiscal year ended September 30, 2020, the year in which all termination benefits were paid:

(in thousands)

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Benefits paid

MSP termination adjustments

MSP termination benefits payment

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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.

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 and 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.

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As a result, the Company recorded an additional liability of approximately $ 720,000 .

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.

The Company had 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 was 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.

As of September 30, 2018, date the Company terminated the MSP, the Rabbi Trust had no assets, and no change of control had occurred, and no funding had been triggered.

Profit Sharing and 401(k) Plans

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Related Party Transactions

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.

Wilson resigned as a member of the Company’s Board of Directors effective February 27, 2017.

Slack and George R.

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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.

Brokaw previously served as the Executive Vice Chairman of the Company.

The Employment Agreements provided for an annual base salary of $ 250,000 in the case of Mr.

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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 .

Trafelet made 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 received 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.

As of September 30, 2021, the Company has paid $ 800,000 in consulting fees and no further payments are due under this Consulting Agreement.

Shared Services Agreement

2 unchanged sentences

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 , $ 0 and $ 155,000 for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.

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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.

Distribution of Shares by Alico’s Largest Stockholder

On November 12, 2019, 734 Investors, the Company’s largest stockholder at the time, 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.

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Legal Proceedings

Florida Litigation

On November 16, 2018, 734 Agriculture, RCF 2014 Legacy LLC, Delta Offshore Master II, LTD.

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.

Brokaw, Henry R.

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.

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.

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.

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.

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.

9 unchanged sentences

General and administrative expenses

Other (expense) income, net

Other income (expense), net

Income (loss) before income taxes

Income tax (benefit) expense

Net (loss) income

Net (income) loss attributable to noncontrolling interests

Net income (loss)

Net loss (income) attributable to noncontrolling interests

Net income (loss) attributable to Alico Inc.

1 unchanged sentence

Earnings (loss) per share:

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).

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.

1 unchanged sentence

“Property and Equipment, Net” for further information).

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.

Operating revenues and operating expenses for the fiscal quarter ended December 31, 2020 include approximately $ 2,869,000 and approximately $ 2,631,000 , respectively, relating to the grove management services being provided to a third-party.

Operating revenues and operating expenses for the fiscal quarter ended March 31, 2021 include approximately $ 4,685,000 and approximately $ 4,150,000 , respectively, relating to the grove management services being provided to a third-party.

Operating revenues and operating expenses for the fiscal quarter ended June 30, 2021 include approximately $ 5,114,000 and approximately $ 4,545,000 , respectively, relating to the grove management services being provided to a third-party.

Other income for the fiscal quarter ended June 30, 2021 includes a gain on sale of assets of approximately $ 30,288,000 (see Note 4.

“Assets Held for Sale” and Note 5.

“Property and Equipment, Net” for further information).

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.

General and administrative expenses for the fiscal quarter ended June 30, 2021 include the receipt of insurance proceeds for the reimbursement of legal fees in the amount of approximately $ 658,000 relating to corporate legal matters.

Operating revenues and operating expenses for the fiscal quarter ended September 30, 2021 include approximately $ 3,083,000 and approximately $ 3,015,000 , respectively, relating to the grove management services being provided to a third-party.

Subsequent Events

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.

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.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data