ALICO, INC. 10-K

Item 8. Financial Statements and Supplementary Data 41 Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm 43 Consolidated Financial Statements: Consolidated Balance Sheets 44 Consolidated Statements of Operations 45 Consolidated Statements of Changes in Equity 46 Consolidated Statements of Cash Flows 47 Notes to Consolidated Financial Statements 48 All schedules are omitted for the reason that they are not applicable or the required information is included in the financial statements or notes. 42 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Alico, Inc. Opinions on the Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Alico, Inc. and 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the 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. 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 We have served as the Company's auditor since 2007. Orlando, Florida December 7, 2021 43 ALICO, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) September 30, 2021 2020 ASSETS Current assets: Cash and cash equivalents $ 886 $ 3,163 Accounts receivable, net 6,105 4,347 Inventories 43,377 40,855 Income tax receivable 3,233 781 Assets held for sale 160 1,366 Prepaid expenses and other current assets 1,152 1,387 Total current assets 54,913 51,899 Restricted cash — 16,524 Property and equipment, net 373,231 350,061 Goodwill 2,246 2,246 Other non-current assets 2,827 3,207 Total assets $ 433,217 $ 423,937 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 7,274 $ 3,533 Accrued liabilities 9,872 7,095 Long-term debt, current portion 4,285 9,145 Other current liabilities 875 1,385 Total current liabilities 22,306 21,158 Long-term debt: Principal amount, net of current portion 122,009 139,106 Less: deferred financing costs, net ( 986 ) ( 1,151 ) Long-term debt less current portion and deferred financing costs, net 121,023 137,955 Lines of credit — 2,942 Deferred income tax liabilities, net 41,977 39,728 Other liabilities 306 372 Total liabilities 185,612 202,155 Commitments and Contingencies (Note 16) Stockholders' equity: Preferred stock, no par value, 1,000,000 shares authorized; no ne issued — — Common stock, $ 1.00 par value, 15,000,000 shares authorized; 8,416,145 shares issued and 7,526,004 and 7,492,524 shares outstanding at September 30, 2021 and September 30, 2020, respectively 8,416 8,416 Additional paid in capital 19,989 19,685 Treasury stock, at cost, 890,141 and 923,621 shares held at September 30, 2021 and September 30, 2020, respectively ( 29,853 ) ( 30,779 ) Retained earnings 243,651 219,019 Total Alico stockholders' equity 242,203 216,341 Noncontrolling interest 5,402 5,441 Total stockholders' equity 247,605 221,782 Total liabilities and stockholders' equity $ 433,217 $ 423,937 See accompanying notes to the consolidated financial statements. 44 ALICO, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Fiscal Year Ended September 30, 2021 2020 2019 Operating revenues: Alico Citrus $ 105,796 $ 89,369 $ 119,031 Land Management and Other Operations 2,768 3,138 3,220 Total operating revenues 108,564 92,507 122,251 Operating expenses: Alico Citrus 83,893 72,281 59,594 Land Management and Other Operations 778 2,307 2,297 Total operating expenses 84,671 74,588 61,891 Gross profit 23,893 17,919 60,360 General and administrative expenses 9,453 10,998 15,146 Income from operations 14,440 6,921 45,214 Other income (expense): Investment and interest income, net 23 98 49 Interest expense ( 3,987 ) ( 5,981 ) ( 7,180 ) Gains on sale of real estate, property and equipment and assets held for sale 35,898 30,424 13,166 Change in fair value of derivatives — — ( 989 ) Other income (expense), net 13 ( 85 ) ( 27 ) Total other income, net 31,947 24,456 5,019 Income before income taxes 46,387 31,377 50,233 Income tax provision 11,567 7,663 12,783 Net income 34,820 23,714 37,450 Net loss (income) attributable to noncontrolling interests 39 ( 52 ) 383 Net income attributable to Alico, Inc. common stockholders $ 34,859 $ 23,662 $ 37,833 Per share information attributable to Alico, Inc. common stockholders: Earnings per common share: Basic $ 4.64 $ 3.16 $ 5.06 Diluted $ 4.64 $ 3.16 $ 5.05 Weighted-average number of common shares outstanding: Basic 7,516 7,484 7,472 Diluted 7,519 7,496 7,493 Cash dividends declared per common share $ 1.36 $ 0.36 $ 0.24 See accompanying notes to the consolidated financial statements . 45 ALICO, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in thousands) Common stock Additional Paid-In Treasury Retained Total Alico, Inc. Non- controlling Total Shares Amount Capital Stock Earnings Equity Interest Equity September 30, 2018 8,416 $ 8,416 $ 20,126 $ ( 7,536 ) $ 151,111 $ 172,117 $ 5,478 $ 177,595 Net income (loss) — — — — 37,833 37,833 ( 383 ) 37,450 Dividends — — — — ( 1,792 ) ( 1,792 ) — ( 1,792 ) Treasury stock purchases — — — ( 25,576 ) — ( 25,576 ) — ( 25,576 ) ASC 610-20 adoption — — — — 10,897 10,897 — 10,897 Stock-based compensation: Directors — — ( 300 ) 1,169 — 869 — 869 Executives — — 778 — — 778 — 778 Executive forfeiture — — ( 823 ) — — ( 823 ) — ( 823 ) September 30, 2019 8,416 8,416 19,781 ( 31,943 ) 198,049 194,303 5,095 199,398 Net income — — — — 23,662 23,662 52 23,714 Dividends — — — — ( 2,692 ) ( 2,692 ) — ( 2,692 ) Treasury stock purchases — — — ( 238 ) — ( 238 ) — ( 238 ) Capital contribution received from noncontrolling interest — — — — — — 294 294 Stock-based compensation: Directors — — ( 669 ) 1,402 — 733 — 733 Executives and managers — — 573 — — 573 — 573 September 30, 2020 8,416 8,416 19,685 ( 30,779 ) 219,019 216,341 5,441 221,782 Net income (loss) — — — — 34,859 34,859 ( 39 ) 34,820 Dividends — — — — ( 10,227 ) ( 10,227 ) — ( 10,227 ) Stock-based compensation: Directors — — 74 770 — 844 — 844 Executives and managers — — 230 156 — 386 — 386 September 30, 2021 8,416 $ 8,416 $ 19,989 $ ( 29,853 ) $ 243,651 $ 242,203 $ 5,402 $ 247,605 See accompanying notes to the consolidated financial statements . 46 ALICO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Fiscal Year Ended September 30, 2021 2020 2019 Net cash provided by operating activities: Net income $ 34,820 $ 23,714 $ 37,450 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 15,122 14,282 13,603 Debt issue costs expense 179 238 321 Deferred income tax expense 2,249 7,603 3,267 Cash surrender value ( 14 ) ( 10 ) 11 Deferred retirement (expense) benefit — ( 5,226 ) 829 Gain on sale of real estate, property and equipment and assets held for sale ( 35,898 ) ( 30,424 ) ( 13,166 ) Inventory net realizable value adjustment — — 808 Loss on disposal of property and equipment 2,338 1,382 244 Change in fair value of derivatives — — 989 Impairment of long-lived assets — 598 152 Impairment of right-of-use-asset — 87 — Insurance proceeds received for damage to property and equipment ( 103 ) — ( 486 ) Stock-based compensation expense 1,230 1,306 824 Changes in operating assets and liabilities: Accounts receivable ( 1,758 ) ( 3,634 ) 1,531 Inventories ( 2,522 ) ( 712 ) 82 Prepaid expenses ( 115 ) ( 135 ) ( 211 ) Income tax receivable ( 2,452 ) ( 781 ) 15 Other assets 575 ( 839 ) 288 Accounts payable and accrued liabilities 3,429 ( 1,530 ) ( 1,113 ) Income tax payable — ( 5,536 ) 3,216 Other liabilities ( 576 ) 666 178 Net cash provided by operating activities 16,504 1,049 48,832 Cash flows from investing activities: Purchases of property and equipment ( 22,258 ) ( 18,785 ) ( 18,050 ) Purchases of citrus groves ( 18,527 ) ( 2,920 ) ( 1,950 ) Net proceeds from sale of real estate, property and equipment and assets held for sale 37,266 31,541 14,602 Insurance proceeds received for damage to property and equipment 103 — 486 Change in deposits on purchase of citrus trees 217 ( 458 ) ( 108 ) Advances on notes receivables, net 371 136 60 Purchases of mineral rights ( 453 ) — — Other 13 ( 25 ) — Net cash (used in) provided by investing activities ( 3,268 ) 9,489 ( 4,960 ) Cash flows from financing activities: Repayments on revolving lines of credit ( 50,735 ) ( 114,581 ) ( 89,231 ) Borrowings on revolving lines of credit 47,793 117,523 86,546 Principal payments on term loans ( 21,957 ) ( 15,198 ) ( 10,900 ) Treasury stock purchases — ( 238 ) ( 25,576 ) Payment on termination of sugarcane agreement — — ( 11,300 ) Dividends paid ( 7,138 ) ( 2,466 ) ( 1,833 ) Deferred financing costs — ( 23 ) — Capital contribution received from noncontrolling interest — 294 — Net cash used in financing activities ( 32,037 ) ( 14,689 ) ( 52,294 ) Net decrease in cash and cash equivalents and restricted cash ( 18,801 ) ( 4,151 ) ( 8,422 ) Cash and cash equivalents and restricted cash at beginning of the period 19,687 23,838 32,260 Cash and cash equivalents and restricted cash at end of the period $ 886 $ 19,687 $ 23,838 Supplemental disclosure of cash flow information: Cash paid for interest, net of amount capitalized $ 3,940 $ 5,832 $ 6,940 Cash paid for income taxes $ 11,770 $ 6,403 $ 6,285 Supplemental disclosure of non-cash investing and financing activities: Dividends declared but unpaid $ 3,763 $ 674 $ 449 See accompanying notes to the consolidated financial statements. 47 ALICO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Description of Business and Basis of Presentation Description of Business Alico, Inc., together with its subsidiaries (collectively, “Alico”, the “Company", "we", "us" or "our”), is a Florida agribusiness and land management company owning approximately 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: (i) Alico Citrus and (ii) Land Management and Other Operations. Financial results are presented based upon its two business segments (Alico Citrus and Land Management and Other Operations). Basis of Presentation The Company has prepared the accompanying financial statements on a consolidated basis. These accompanying Consolidated Financial Statements, which are referred to herein as the “Financial Statements”, have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). All significant intercompany transactions and account balances between the consolidated businesses have been eliminated. Segments Operating segments are defined in the criteria established under the Financial Accounting Standards Board - Accounting Standards Codification (“FASB ASC”) Topic 280 as components of public entities that engage in business activities from which they may earn revenues and incur expenses for which separate financial information is available and which is evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to assess performance and allocate resources. The Company’s CODM assesses performance and allocates resources based on two operating segments: (i) Alico Citrus and (ii) Land Management and Other Operations. Principles of Consolidation The Financial Statements include the accounts of Alico and the accounts of all the subsidiaries in which a controlling interest is held by the Company. Under U.S. GAAP, consolidation is generally required for investments of more than 50% of the outstanding voting stock of an investee, except when control is not held by the majority owner. The Company’s subsidiaries include: Alico Land Development, Inc., Alico-Agri, Ltd., Alico Plant World, LLC, Alico Fruit Company, LLC, Alico Citrus Nursery, LLC, Alico Chemical Sales, LLC, 734 Citrus Holdings, LLC and subsidiaries, Alico Skink Mitigation, LLC and Citree Holdings 1, LLC (“Citree”). The Company considers the criteria established under FASB ASC Topic 810, “Consolidations” in its consolidation process. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the accompanying Financial Statements, the disclosure of contingent assets and liabilities in the Financial Statements and the accompanying Notes, and the reported amounts of revenues and expenses and cash flows during the periods presented. Actual results could differ from those estimates. The Company evaluates estimates on an ongoing basis. The estimates are based on current and expected economic conditions, historical experience, the experience and judgment of the Company’s management and various other specific assumptions that the Company believes to be reasonable. Noncontrolling Interest in Consolidated Subsidiary The Financial Statements include all assets and liabilities of the less-than-100%-owned subsidiary the Company controls, Citree. Accordingly, the Company has recorded a noncontrolling interest in the equity of such entity. Citree had net 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 . 48 Recent Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in the existing guidance for income taxes and making other minor improvements. The amendments in the ASU are effective for the Company on October 1, 2021. The Company does not expect the adoption of ASU 2019-12 will have a material impact on its consolidated financial statements and will adopt the standard effective October 1, 2021. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform. The Company’s floating rate notes and variable funding notes bear interest at fluctuating interest rates based on LIBOR. 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. The Company has reviewed other recently issued accounting standards which have not yet been adopted in order to determine their potential effect, if any, on the results of operations or financial condition. Based on the review of these other recently issued standards, the Company does not currently believe that any of those accounting pronouncements will have a significant effect on its current or future financial position, results of operations, cash flows or disclosures. Recently Adopted Accounting Pronouncements In 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. 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 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. 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 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 On March 11, 2020, the World Health Organization declared the current novel coronavirus outbreak (“COVID-19”) to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country have imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures have had a significant adverse impact upon many sectors of the economy, including certain agriculture businesses. To date, the Company has experienced no material adverse impact from this pandemic. 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. 49 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 Certain prior year amounts have been reclassified in the accompanying Financial Statements for consistent presentation to the current period. These reclassifications had no impact on net income, equity, cash flows or working capital as previously reported. Seasonality The Company is primarily engaged in the production of fruit for sale to citrus markets, which is of a seasonal nature, and subject to the influence of natural phenomena and wide price fluctuations. Historically, the second and third quarters of Alico's fiscal year produce 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. Because of the seasonality of the business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year. Note 2. Summary of Significant Accounting Policies Revenue Recognition Revenues are derived from the sale of processed fruit, fresh fruit, other citrus revenue, leasing revenue and other resource revenues. The majority of the revenue is generated from the sale of citrus fruit to processing facilities, fresh fruit sales and grove management services. For fruit sales, the Company recognizes revenue at the amount it expects to be entitled to be paid, determined when control of the products or services is transferred to its customers, which occurs upon delivery of and acceptance of the fruit by the customer and the Company has a right to payment. 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. 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 respective contracts. Additionally, the Company also has a contractual agreement whereby revenue is determined based on applying a cost-plus structure methodology. 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 50 relevant industry information becomes available. Differences between the estimates and the final realization of revenues at the close of the harvesting season can result in either an increase or decrease to reported revenues. During the periods presented, no material adjustments were made to the reported citrus revenues. Receivables under contracts, whereby pricing is based on contractual and market prices, are primarily paid at the floor amount and are collected within seven days after the harvest week. Any adjustments to pricing as a result of changes in market prices are collected or paid thirty to sixty days after final market pricing is published. Receivables under contracts, whereby pricing is based off a cost-plus structure methodology, are paid at the final prior year rate. Any adjustments to pricing as a result of the cost-plus calculation are collected or paid upon finalization of the calculation and agreement by both parties. As of September 30, 2021 and 2020, the Company had total receivables relating to sales of citrus of $ 3,161,000 and $ 584,000 , respectively, recorded in Accounts Receivable, net, in the Consolidated Balance Sheets. For grove management services, the Company has identified one performance obligation relating to the management of the third party’s groves. Grove management services include caretaking of the citrus groves, harvesting and hauling of citrus, management and coordination of citrus sales and other related activities. The Company is reimbursed for expenses incurred in the execution of its management duties and the Company receives a per acre management fee. The Company recognizes operating revenue, including a management fee, and corresponding operating expenses when services are rendered and consumed. Disaggregated Revenue Revenues disaggregated by significant products and services for the fiscal years ended September 30, 2021, 2020 and 2019 are as follows: (in thousands) Fiscal Year Ended September 30, 2021 2020 2019 Alico Citrus Early and Mid-Season $ 31,525 $ 31,303 $ 39,574 Valencias 55,918 50,060 73,480 Fresh fruit 608 2,321 3,629 Grove management services 16,983 4,599 1,342 Other 762 1,086 1,006 Total $ 105,796 $ 89,369 $ 119,031 Land Management and Other Operations Land and other leasing $ 2,404 $ 2,683 $ 2,787 Other 364 455 433 Total $ 2,768 $ 3,138 $ 3,220 Total Revenues $ 108,564 $ 92,507 $ 122,251 Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to the short term and immediate nature of these financial instruments. The carrying amounts of the Company’s debt approximates fair value as the debt is with commercial lenders at interest rates that vary with market conditions or have fixed rates that approximate market rates for obligations with similar terms and maturities (see Note 8. “Fair Value Measurements”). Cash and Cash Equivalents The Company considers cash in banks and highly liquid instruments with an original maturity of three months or less to be cash and cash equivalents. At various times throughout the fiscal year, and as of September 30, 2021, some accounts held at financial institutions were in excess of the federally insured limit of $ 250,000 . The Company has not experienced any losses on these accounts and believes credit risk to be minimal. 51 Restricted Cash 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 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 Accounts receivable from customers are generated from revenues based on the sale of citrus, grove management, leasing and other transactions. The Company grants credit in the course of its operations to third party customers. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. The Company provides an allowance for doubtful accounts for amounts which are not probable of collection. The estimate, evaluated quarterly by the Company, is based on historical collection experience, current macroeconomic climate and market conditions and a review of the current status of each customer’s account. Changes in the financial viability of significant customers and worsening of economic conditions may require changes to its estimate of the recoverability of the receivables. Such changes in estimates are recorded in the period in which these changes become known. The bad debt expense is included in general and administrative expenses in the Consolidated Statements of Operations. The following table presents accounts receivable, net, as of September 30, 2021 and 2020: (in thousands) September 30, 2021 2020 Accounts receivable $ 6,118 $ 4,384 Allowance for doubtful accounts ( 13 ) ( 37 ) Accounts receivable, net $ 6,105 $ 4,347 Concentrations 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) Accounts Receivable Revenue % of Total Revenue 2021 2020 2021 2020 2019 2021 2020 2019 Tropicana $ 3,066 $ — $ 84,136 $ 80,388 $ 108,318 77.5 % 86.9 % 88.6 % The citrus industry is subject to various factors over which growers have limited or no control, including weather conditions, disease, pestilence, water supply and market price fluctuations. Market prices are highly sensitive to aggregate domestic and foreign crop sizes, as well as factors including, but not limited to, weather and competition from foreign countries. 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. 52 Real Estate 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. Inventories The costs of growing crops, including but not limited to labor, fertilization, fuel, crop nutrition, irrigation, and depreciation, are capitalized into inventory throughout the respective crop year. Such costs are expensed as cost of sales when the crops are harvested and are recorded as operating expenses in the Consolidated Statements of Operations. Inventories are stated at the lower of cost or net realizable value. The cost for unharvested citrus crops is based on accumulated production costs incurred during the period from January 1 through the balance sheet date. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation, depletion and amortization. Major improvements are capitalized while expenditures for maintenance and repairs are expensed when incurred. Costs related to the development of citrus groves through planting of trees are capitalized. Such costs include land clearing, excavation and construction of ditches, dikes, roads, and reservoirs, among other costs. After the planting, caretaking costs or pre-productive maintenance costs are capitalized for 4 years. After 4 years, a planting is considered to have reached maturity and the accumulated costs are depreciated over 25 years, except for land clearing and excavation, which are considered costs of land and not depreciated. Real estate costs incurred for the acquisition, development and construction of real estate projects are capitalized. Depreciation is provided on a straight-line basis over the estimated useful lives of the depreciable assets, with the exception of leasehold improvements and assets acquired through capital leases, which are depreciated over their estimated useful lives if the lease transfers ownership or contains a bargain purchase option, otherwise the term of the lease. The estimated useful lives for property and equipment are primarily as follows: Citrus trees 25 years Equipment and other facilities 3 - 20 years Buildings and improvements 25 - 39 years Changes in circumstances, such as technological advances or changes to our business model or capital strategy could result in the actual useful lives differing from the original estimates. In those cases where the Company determines that the useful life of property and equipment should be shortened, Alico depreciates the asset over its revised estimated remaining useful life, thereby increasing depreciation expense (see Note 5. “Property and Equipment, Net”). Impairment of Long-Lived Assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The Company records impairment losses on long-lived assets used in operations, or asset group, when events and circumstances indicate that the assets might be impaired and the estimated cash flows (undiscounted and without interest charges) to be generated by those assets or asset group over the remaining lives of the assets or asset group are less than the carrying amounts of those assets. In calculating impairments and the estimated cash flows, the Company assigns its asset groups by determining the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of the other Company assets. The net carrying values of assets or asset group not recoverable are reduced to their fair values. Alico's cash flow estimates are based on historical results adjusted to reflect best estimates of future market conditions and operating conditions. For fiscal 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”). As of September 30, 2021 and 2020, long-lived assets were comprised of property and equipment. 53 Goodwill and Intangible Assets Goodwill represents the excess of the purchase price of acquired businesses over the fair value of the assets acquired less liabilities assumed in connection with such acquisition. In accordance with the provisions of ASC 350, Intangibles-Goodwill and Other, goodwill and intangible assets with indefinite useful lives acquired in an acquisition are not amortized, but instead are tested for impairment at least annually, on the same date, or more frequently should an event occur or circumstances indicate that the carrying amount may be impaired. Such events or circumstances may be a significant change in business climate, economic and industry trends, legal factors, negative operating performance indicators, significant competition, changes in strategy or disposition of a reporting unit or a portion thereof. 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 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. Income Taxes The Company uses the asset and liability method of accounting for deferred income taxes. The provision for income taxes includes income taxes currently payable and those deferred as a result of temporary differences between the financial statements and the income tax basis of assets and liabilities. Deferred income tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in income tax rates on deferred income tax assets and liabilities is recognized in income or loss in the period that includes the enactment date. A valuation allowance is provided to reduce deferred tax assets to the amount of future tax benefit when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Projected future taxable income and ongoing tax planning strategies are considered and evaluated when assessing the need for a valuation allowance. Any increase or decrease in a valuation allowance could have a material adverse or beneficial impact on the Company’s income tax provision and net income or loss in the period the determination is made. For the fiscal years ended September 30, 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. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which a change in judgment occurs. The Company records interest related to unrecognized tax benefits in income tax expense. Earnings per Share Basic earnings per share for the Company’s common stock is calculated by dividing net income attributable to Alico common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per common share is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares of common stock issuable under equity-based compensation plans in accordance with the treasury stock method, or any other type of securities convertible into common stock, except where the inclusion of such common shares would have an anti-dilutive effect. 54 The following table presents a reconciliation of basic to diluted weighted average common shares outstanding for fiscal years ended September 30, 2021, 2020 and 2019: (in thousands) Fiscal Year Ended September 30, 2021 2020 2019 Weighted Average Common Shares Outstanding - Basic 7,516 7,484 7,472 Effect of dilutive securities - stock options and unrestricted stock 3 12 21 Weighted Average Common Shares Outstanding - Diluted 7,519 7,496 7,493 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. Stock-Based Compensation Stock-based compensation is measured based on the fair value of the equity award at the grant date and is typically expensed on a straight-line basis over the vesting period. Upon the vesting of restricted stock, the Company issues common stock from common shares held in treasury. Total stock-based compensation expense for the three years ended September 30, 2021, 2020 and 2019 in general and administrative expense was as follows: (in thousands) Fiscal Year Ended September 30, 2021 2020 2019 Stock-based compensation expense: Executives $ 349 $ 497 $ 778 Management 37 76 — Executive forfeitures — — ( 823 ) Board of Directors 844 733 869 Total stock-based compensation expense $ 1,230 $ 1,306 $ 824 Note 3. Inventories Inventories consist of the following at September 30, 2021 and 2020: (in thousands) September 30, 2021 2020 Unharvested fruit crop on the trees $ 42,117 $ 40,265 Other 1,260 590 Total inventories $ 43,377 $ 40,855 The Company records its inventory at the lower of cost or net realizable value. For the fiscal year ended September 30, 2019, the Company recorded adjustments of approximately $ 808,000 to reduce inventory to net realizable value. This adjustment to inventory is included in operating expenses in the Consolidated 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 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. 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. 55 Note 4. Assets Held for Sale In accordance with its strategy to dispose of non-core and under-performing assets, the following assets have been classified as assets held for sale as of September 30, 2021 and September 30, 2020: (in thousands) Carrying Value Fiscal Year Ended September 30, 2021 2020 Ranch $ 160 $ 1,366 Total Assets Held for Sale $ 160 $ 1,366 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 lands. 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. 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 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. 56 Note 5. Property and Equipment, Net Property and equipment, net consists of the following at September 30, 2021 and September 30, 2020: (in thousands) September 30, 2021 2020 Citrus trees $ 320,245 $ 296,012 Equipment and other facilities 57,584 55,593 Buildings and improvements 8,494 8,128 Total depreciable properties 386,323 359,733 Less: accumulated depreciation and depletion ( 127,046 ) ( 115,440 ) Net depreciable properties 259,277 244,293 Land and land improvements 113,954 105,768 Property and equipment, net $ 373,231 $ 350,061 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 . On May 4, 2020, the Company purchased 334 citrus acres for approximately $ 2,850,000 . This acquisition complements the Company’s existing citrus acres as these acres are located adjacent to existing groves in the Frostproof area. Additionally, this purchase was part of a like-kind exchange transaction, which allowed the Company to defer taxes relating to the sale of certain sections of the 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. 57 Note 6. Long-Term Debt and Lines of Credit The following table summarizes long-term debt and related deferred financing costs, net of accumulated amortization at September 30, 2021 and September 30, 2020: September 30, 2021 September 30, 2020 (in thousands) Principal Deferred Financing Costs, Net Principal Deferred Financing Costs, Net Long-term debt, net of current portion: Met Fixed-Rate Term Loans $ 70,000 $ 524 $ 83,438 $ 621 Met Variable-Rate Term Loans 38,094 241 40,969 286 Met Citree Term Loan 4,263 31 4,512 36 Pru Loans A & B 13,937 190 15,097 207 Pru Loan E — — 4,235 1 126,294 986 148,251 1,151 Less current portion 4,285 — 9,145 — Long-term debt $ 122,009 $ 986 $ 139,106 $ 1,151 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 September 30, 2020 (in thousands) Principal Deferred Financing Costs, Net Principal Deferred Financing Costs, Net Lines of Credit: RLOC $ — $ 126 $ — $ 141 WCLC — — 2,942 — Lines of Credit $ — $ 126 $ 2,942 $ 141 Future maturities of long-term debt and lines of credit as of September 30, 2021 are as follows: (in thousands) September 30, 2021 Due within one year $ 4,285 Due between one and two years 4,285 Due between two and three years 4,285 Due between three and four years 4,285 Due between four and five years 4,285 Due beyond five years 104,869 Total future maturities $ 126,294 Interest costs expensed and capitalized were as follows: (in thousands) Fiscal Year Ended September 30, 2021 2020 2019 Interest expense $ 3,987 $ 5,981 $ 7,180 Interest capitalized 1,431 1,228 1,019 Total $ 5,418 $ 7,209 $ 8,199 58 Debt 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. (“Rabo”). The term loans and RLOC are secured by real property. The security for the term loans and RLOC consists of approximately 38,200 gross acres of citrus groves and 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. 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 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 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 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. The RLOC is available for funding general corporate needs. The variable interest rate was 1.78 % per annum and 1.91 % per annum as of September 30, 2021 and September 30, 2020, respectively. Availability under the RLOC was $ 25,000,000 as of September 30, 2021. The WCLC is a revolving credit facility and is available for funding working capital and general corporate requirements. The interest rate on the WCLC is based on the one-month LIBOR, plus a spread, which is adjusted quarterly, based on the Company's debt service coverage ratio for the preceding quarter and can vary from 175 to 250 basis points. The rate is currently at LIBOR plus 175 basis points. The variable interest rate was 1.83 % per annum and 1.90 % per annum as of September 30, 2021 and September 30, 2020, respectively. The WCLC agreement was amended on August 25, 2020, and the primary terms of the amendment were an extension of the maturity to November 1, 2023. There were no changes to the commitment amount or interest rate. 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. The WCLC is subject to a quarterly commitment fee on the daily unused availability under the line computed as the commitment amount less the aggregate of the outstanding loans and outstanding letters of credit. The commitment fee is adjusted quarterly based on Alico's debt service coverage ratio for the preceding quarter and can vary from a minimum of 20 basis points to a maximum of 30 basis points. Commitment fees to date have been charged at 20 basis points. There 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. 59 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 $ 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. Credit facilities also include a Met Life term loan collateralized by 1,200 gross acres of citrus grove owned by Citree ("Met Citree Loan"). This is a $ 5,000,000 credit facility that bears interest at a fixed rate of 5.28 % per annum. Principal and interest payments are made on a quarterly basis. 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 $ 31,000 and $ 36,000 on September 30, 2021 and 2020, respectively. Transition from LIBOR 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 There are two fixed-rate term loans, with an original combined balance of $ 27,550,000 , bearing interest at 5.35 % per annum (“Pru Loans A & B”). Principal of $ 290,000 is payable quarterly, together with accrued interest. On February 15, 2015, 734 Citrus Holdings, LLC d/b/a Silver Nip Citrus (“Silver Nip Citrus”) made a prepayment of $ 750,000 . In addition, the Company made prepayments of approximately $ 4,453,000 in the second fiscal quarter of 2018 with proceeds from the sale of certain properties, which were collateralized under these loans. The Company may prepay up to $5,000,000 of principal without penalty. As such, the Company exceeded the allowed $ 5,000,000 prepayment by approximately $ 203,000 and was required to make a premium payment of approximately $ 22,000 . The loans are collateralized by approximately 5,700 of citrus groves in Collier, Hardee, Highlands and Polk Counties, Florida and mature on June 1, 2029 and June 1, 2033, respectively. Silver Nip Citrus entered into two additional fixed-rate term loans with Prudential to finance the acquisition of a 1,500 acre citrus grove on September 4, 2014. Each loan was in the original amount of $ 5,500,000 with principal of $ 55,000 per loan being payable quarterly, together with accrued interest. 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. 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. The unamortized balance of deferred financing costs related to the Silver Nip Citrus debt was approximately $ 190,000 and $ 208,000 at September 30, 2021 and 2020, respectively. 60 Note 7. Accrued Liabilities Accrued liabilities consist of the following at September 30, 2021 and September 30, 2020: (in thousands) September 30, 2021 2020 Ad valorem taxes $ 2,018 $ 2,057 Accrued interest 888 1,020 Accrued employee wages and benefits 2,105 2,214 Accrued dividends 3,763 674 Consulting and separation charges — 146 Accrued insurance 618 636 Professional fees 348 201 Other accrued liabilities 132 147 Total accrued liabilities $ 9,872 $ 7,095 Note 8. Fair Value Measurements The Company complies with the provisions of FASB ASC 820 “Fair Value Measurements” for its financial and non-financial assets and liabilities. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. ASC 820 clarifies that fair value is an exit price representing the amount that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: • Level 1- Observable inputs such as quoted prices in active markets; • Level 2- Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and • Level 3- Unobservable inputs in which there is little or no market data, such as internally developed valuation models which require the reporting entity to develop its own assumptions. As of September 30, 2021 and 2020, the Company did no t have any assets held for sale that had been measured at fair value on a non-recurring basis. Management Security Plan During August 2020, the Company paid out a lump sum of approximately $ 5,175,000 to all beneficiaries in the Management Security Plan, following the equivalent annuity approach. The Company used a third-party service provider to assist in the evaluation of investments in this plan. For prior year investment valuations, the Company used current market interest rates, quality estimates by rating agencies and valuation estimates by active market participants in order to determine values. As of September 30, 2021, due to the lump sum payment made in August 2020, the deferred retirements benefit was zero . 61 Note 9. Common Stock and Options Effective January 27, 2015, the Company’s Board of Directors adopted the 2015 Stock Incentive Plan (the “2015 Plan”) which provides for up to 1,250,000 common shares available for issuance to provide a long-term incentive plan for officers, employees, directors and/or consultants to directly link incentives to stockholder value. The 2015 Plan was approved by the Company’s stockholders in February 2015. The Company’s 2015 Plan provides for grants to executives in various forms including restricted shares of the Company’s common stock and stock options. Awards are discretionary and are determined by the Compensation Committee of the Board of Directors. Awards vest based upon service conditions. Non-vested restricted shares generally vest over requisite service periods of one to six years from the date of grant. 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: Nonvested Shares Shares Weighted- Average Grant Date Fair Value Nonvested Shares at September 30, 2018 7,333 $ 41.46 Vested during fiscal year 2019 ( 1,667 ) 31.95 Nonvested Shares at September 30, 2019 5,666 44.26 Vested during fiscal year 2020 ( 5,666 ) 44.26 Nonvested Shares at September 30, 2020 — — Granted during fiscal year 2021 5,885 31.20 Nonvested Shares at September 30, 2021 5,885 $ 31.20 Stock compensation expense related to the Restricted Stock totaled approximately $ 144,000 , $ 69,000 , and $ 104,000 for the fiscal years ended September 30, 2021, 2020 and 2019, respectively. 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. For the fiscal year ended September 30, 2019, 1,667 shares with a grant date fair value of approximately $ 53,000 became fully vested. Stock Option Grant Stock option grants of 118,000 options to certain Officers and Managers of the Company (collectively the “2020 Option Grants”) were granted on October 11, 2019. The option exercise price was set at $ 33.96 , the closing price on October 11, 2019. The 2020 Option Grants will vest as follows: (i) 25 % of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 35.00 ; (ii) 25 % of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 40.00 ; (iii) 25 % of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 45.00 ; and (iv) 25 % of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 50.00 . If the applicable stock price hurdles have not been achieved by (A) the date that is 18 months following the termination of employment, if the employment is terminated due to death or disability, (B) the date that is 12 months following the termination of employment, if the employment is terminated by the Company without cause, by the employee with good reason, or due to the employee’s retirement, or (C) the date of the 62 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. 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. John Kiernan (the “2019 Option Grants”) were granted on October 25, 2018. The option exercise price for these options was set at $ 33.34 , the closing price on October 25, 2018. The 2019 Option Grants will vest as follows: (i) 3,333 of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 40.00 ; (ii) 3,333 of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 45.00 ; 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. 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. Remy Trafelet and 90,000 options to Mr. John Kiernan (collectively, the “2018 Option Grants”) were granted on September 7, 2018. The option exercise price for these options was set at $ 33.60 , the closing price on September 7, 2018. The 2018 Option Grants will vest as follows: (i) 25 % of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 35.00 ; (ii) 25 % of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 40.00 ; (iii) 25 % of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 45.00 ; and (iv) 25 % of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 50.00 . If the applicable stock price hurdles have not been achieved by (A) the date that is 18 months following the 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. 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. Trafelet and 225,000 options in the case of each of Mr. Henry Slack and Mr. George Brokaw (collectively, the “2016 Option Grants”) were granted on December 31, 2016. The option price was set at $ 27.15 , the closing price on December 31, 2016. The 2016 Option Grants will vest as follows: (i) 25 % of the options will vest if the price of the Company’s common stock during a consecutive 20-trading day period exceeds $ 60.00 ; (ii) 25 % of the options will vest if such price 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 . 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. 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. 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. All the 2016 Option Grants issued to Mr. Trafelet were forfeited pursuant to the Alico Settlement Agreement, as defined below. 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. Trafelet agreed to voluntarily resign from his roles as President and Chief Executive Officer and a director of the Company. Under the Settlement Agreement, Mr. Trafelet forfeited (i) all of the 2016 Option Grants granted to him 63 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. The following table represents a summary of the Company’s stock option activity: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value Balance - September 30, 2019 227,500 $ 31.46 1.22 — Granted during fiscal year 2020 118,000 33.96 2.25 — Forfeitures/expired during fiscal year 2020 ( 52,500 ) 33.60 — — Balance - September 30, 2020 293,000 32.09 1.79 — Forfeitures/expired during fiscal year 2021 ( 75,000 ) 27.15 — — Balance - September 30, 2021 218,000 $ 33.78 0.79 — Stock compensation expense related to the options totaled approximately $ 242,000 , $ 504,000 , and $ 674,000 for the fiscal years ended September 30, 2021, 2020 and 2019, respectively. At September 30, 2021 and September 30, 2020, there was approximately $ 134,000 and $ 376,000 , respectively, of total unrecognized stock compensation costs related to unvested share-based compensation for the option grants. The total unrecognized compensation cost as of September 30, 2021 is expected to be recognized over a weighted-average period of 0.72 years. The fair value of the 2020, 2019, and 2018 Option Grants was estimated on the date of grant using a Monte Carlo valuation model that uses the assumptions noted in the following table. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding; the range given below results from different timeframes for the various market conditions being met. 2020 Option Grant Expected Volatility 26.0 % Expected Term (in years) 3.61 Risk Free Rate 1.60 % 64 The weighted-average grant-date fair value of the 2020 Option Grant was $ 3.20 . 2019 Modified Option Grant Expected Volatility 25.0 % Expected Term (in years) 1.50 Risk Free Rate 2.52 % The weighted-average grant-date fair value of the 2019 Modified Option Grant was $ 1.40 . 2019 Option Grants Expected Volatility 30.0 % Expected Term (in years) 4.09 Risk Free Rate 2.95 % The weighted-average grant-date fair value of the 2019 Option Grants was $ 7.10 . As of September 30, 2021, there remained 1,014,500 common shares available for issuance under the 2015 Plan. Note 10. Treasury Stock In March 2017, the Board of Directors authorized the repurchase of up to $ 5,000,000 of the Company’s common stock beginning March 9, 2017 and continuing through March 9, 2019. In May 2017, the Board of Directors authorized the repurchase of up to an additional $ 2,000,000 of the Company’s common stock beginning May 24, 2017 and continuing through May 24, 2019. The stock repurchases made under this repurchase were made through open market transactions at times and in such amounts as the Company’s broker determined subject to the provisions of SEC Rule 10b-18. On October 3, 2018, the Company completed a tender offer of 752,234 shares at a price of $ 34.00 per share aggregating $ 25,575,956 . 734 Investors, Alico's largest stockholder from 2013 until November 12, 2019, participated in the tender offer by selling a small percentage of its holdings. On October 10, 2019, the Board of Directors authorized the repurchase of up to 7,000 shares of the Company’s common stock from 734 Investors in a privately negotiated repurchase of shares. On October 15, 2019, the Company entered into a repurchase agreement to repurchase a total of 7,000 shares of the Company’s common stock from 734 Investors, effective October 15, 2019. The following table illustrates the Company’s treasury stock purchases for the fiscal years ended September 30, 2021, 2020 and 2019: (in thousands, except share amounts) Total Number of Shares Purchased Average Price Paid Per Share Total Shares Purchased as Part of Publicly Announced Plan or Program Total Dollar Value of Shares Purchased Fiscal Year Ended September 30,: 2021 — $ — — $ — 2020 7,000 $ 33.95 1,481,640 $ 238 2019 752,234 $ 34.00 1,474,640 $ 25,576 65 The following table outlines the Company’s treasury stock transactions during the past three fiscal years: (in thousands, except share amounts) Shares Cost Balance at September 30, 2018 216,188 $ 7,536 Purchased 752,234 25,576 Issued to Employees and Directors ( 28,790 ) ( 1,169 ) Balance at September 30, 2019 939,632 31,943 Purchased 7,000 238 Issued to Employees and Directors ( 23,011 ) ( 1,402 ) Balance at September 30, 2020 923,621 30,779 Purchased — — Issued to Employees and Directors ( 33,480 ) ( 926 ) Balance at September 30, 2021 890,141 $ 29,853 Note 11. Income Taxes On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act contains significant changes to corporate taxes, including a permanent reduction of the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. The 21% U.S. corporate tax rate is fully applicable to the fiscal year ended September 30, 2019 and each year thereafter. 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. The Federal and State filings remain subject to examination by tax authorities for tax periods ending after September 30, 2017. The income tax provision for the years ended September 30, 2021, 2020 and 2019 consists of the following: (in thousands) Fiscal Year Ended September 30, 2021 2020 2019 Current: Federal income tax $ 7,347 $ 131 $ 7,314 State income tax 1,971 ( 71 ) 2,202 Total current 9,318 60 9,516 Deferred: Federal income tax 2,144 6,151 2,995 State income tax 105 1,452 272 Total deferred 2,249 7,603 3,267 Income tax provision $ 11,567 $ 7,663 $ 12,783 66 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) Fiscal Year Ended September 30, 2021 2020 2019 Income tax at the statutory federal rate $ 9,741 $ 6,568 $ 10,587 Increase (decrease) resulting from: State income taxes, net of federal benefit 1,645 1,217 1,947 Permanent and other reconciling items, net 41 170 166 State rate change — ( 156 ) — Other 140 ( 136 ) 83 Income tax provision $ 11,567 $ 7,663 $ 12,783 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of September 30, 2021, and 2020 are presented below: (in thousands) September 30, 2021 2020 Deferred tax assets: Goodwill $ 14,463 $ 16,304 Inventories 744 813 Stock compensation 212 314 Intangibles 454 508 Other 146 203 Total deferred tax assets 16,019 18,142 Deferred tax liabilities: Property and equipment 56,842 56,707 Investment in Citree 968 1,016 Prepaid insurance 186 147 Total deferred tax liabilities 57,996 57,870 Net deferred income tax liabilities $ ( 41,977 ) $ ( 39,728 ) Note 12. Segment Information Segments Operating segments are defined in the criteria established under the FASB ASC Topic 280 as components of public entities that engage in business activities from which they may earn revenues and incur expenses for which separate financial information is available and which is evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to assess performance and allocate resources. The Company’s CODM assesses performance and allocates resources based on two operating segments: Alico Citrus and Land Management and Other Operations. Total revenues represent sales to unaffiliated customers, as reported in the Consolidated Statements of Operations. Goods and services produced by these segments are sold to wholesalers and processors in the United States who prepare the products for consumption. The Company evaluates the segments’ performance based on direct margins (gross profit) from operations before general and administrative expenses, interest expense, other income (expense) and income taxes, not including nonrecurring gains and losses. 67 Information by operating segment is as follows: (in thousands) Fiscal Year Ended September 30, 2021 2020 2019 Revenues: Alico Citrus $ 105,796 $ 89,369 $ 119,031 Land Management and Other Operations 2,768 3,138 3,220 Total revenues 108,564 92,507 122,251 Operating expenses: Alico Citrus 83,893 72,281 59,594 Land Management and Other Operations 778 2,307 2,297 Total operating expenses 84,671 74,588 61,891 Gross profit: Alico Citrus 21,903 17,088 59,437 Land Management and Other Operations 1,990 831 923 Total gross profit 23,893 17,919 60,360 Capital expenditures: Alico Citrus 41,785 21,705 20,000 Total capital expenditures 41,785 21,705 20,000 Depreciation, depletion and amortization: Alico Citrus 14,523 13,584 12,614 Land Management and Other Operations 147 185 173 Other Depreciation, Depletion and Amortization 452 513 816 Total depreciation, depletion and amortization $ 15,122 $ 14,282 $ 13,603 (in thousands) September 30, 2021 2020 Assets: Alico Citrus $ 418,633 $ 406,763 Land Management and Other Operations 13,230 15,367 Other Corporate Assets 1,354 1,807 Total Assets $ 433,217 $ 423,937 Note 13. Leases In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This guidance requires entities that sign leases as a lessee to recognize right-of-use assets and lease liabilities for those leases classified as operating leases under previous U.S. GAAP. The accounting applied by a lessor is largely unchanged from that applied under previous U.S. GAAP. The Company adopted ASU 2016-02 on October 1, 2019. The Company determines whether an arrangement is a lease at inception. The Company’s leases consist of operating lease arrangements for certain office space, tractor leases and IT facilities. When these lease arrangements include lease and non-lease components, the Company accounts for lease components and non-lease components (e.g., common area maintenance) separately based on their relative standalone prices. Any lease arrangements with an initial term of 12 months or less are not recorded on the Company’s 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. 68 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, September 30, Operating lease components Classification 2021 2020 Right-of-use assets - non-current Other non-current assets $ 288 $ 774 Current lease liabilities Other current liabilities $ 323 $ 512 Non-current lease liabilities Other liabilities $ 42 $ 356 Our operating leases cost components are reported in our Consolidated Statements of Operations as follows: (in thousands) September 30, September 30, Operating lease components Classification 2021 2020 Operating lease costs General and administrative expenses $ 504 $ 246 Operating lease right-of-use asset impairment Other expense $ — $ 87 Future maturities of our operating lease obligations as of September 30, 2021 by fiscal year are as follows: (in thousands) 2022 $ 324 2023 47 Total noncancelable future lease obligations $ 371 Less: Interest ( 6 ) Present value of lease obligations $ 365 September 30, 2021 Weighted-average remaining lease term 0.66 years Weighted-average discount rate 3.30 % Cash flow information related to leases consists of the following: (in thousands) September 30, 2021 September 30, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 519 $ 247 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ — $ 1,095 69 Note 14. Employee Benefits Plans Management Security Plan The management security plan (“MSP”) was a nonqualified, noncontributory defined supplemental deferred retirement benefit plan for a select group of management personnel. The MSP was set up to provide a fixed supplemental retirement benefit for 180 months. The MSP was frozen as of September 30, 2017. As a result, no new participants were being added to the MSP and no further benefits were accumulating. The MSP benefit expense and the projected management security plan benefit obligation were determined using assumptions as of the end of the respective year. The weighted-average discount rate used to compute the obligation was 4.08 % in fiscal year 2019. Actuarial gains or losses were recognized when incurred; therefore, the end of year benefit obligation was the same as the accrued benefit costs recognized in the Consolidated Balance Sheets. The amount of MSP benefit expense charged to costs and expenses was as follows: (in thousands) Fiscal Year Ended September 30, 2020 2019 Service cost $ — $ — Interest cost 195 171 MSP termination adjustments — 985 Recognized actuarial gain adjustment 12 13 Total $ 207 $ 1,169 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) September 30, 2020 Change in projected benefit obligation: Benefit obligation at beginning of year $ 5,226 Interest cost 195 Benefits paid ( 258 ) MSP termination benefits payment ( 5,175 ) Recognized actuarial gain adjustment 12 Benefit obligation at end of year $ — Funded status at end of year $ — 70 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 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. During the fiscal year ended September 30, 2019, the Company determined to pay out a lump sum under the equivalent annuity approach, whereby the payout under this approach was designed to mitigate participants tax burden. Under this approach, the Company would cover the amount needed to purchase an annuity providing the same after-tax benefit as if the plan was never terminated. As a result, the Company recorded an additional liability of approximately $ 720,000 . 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, 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 The Company maintains a 401(k) employee savings plan for eligible employees, which provides up to a 4 % matching contribution payable on employee payroll deferrals. The Company’s matching funds vest to the employee immediately, pursuant to a safe harbor election effective in October 2012. The Company’s contribution to the plan was approximately $ 401,000 , $ 397,000 and $ 380,000 for the fiscal years ended September 30, 2021, 2020 and 2019, respectively. The Company also maintains a Profit Sharing Plan (“Plan”) that is fully funded by contributions from the Company. Contributions to the Plan are discretionary and determined annually by the Company’s Board of Directors. Contributions to employee accounts are based on the participant’s compensation. The Company did not contribute to the Plan for the fiscal years ended September 30, 2021, 2020 and 2019, respectively. Note 15. Related Party Transactions Henry R. Slack and George R. Brokaw On December 31, 2016, the Company entered into new employment agreements (collectively, the “Employment Agreements”) with Henry R. Slack, and George R. Brokaw. Mr. Slack previously served as the Executive Chairman of the Company, and Mr. Brokaw previously served as the Executive Vice Chairman of the Company. The Employment Agreements provided for an annual base salary of $ 250,000 in the case of Mr. Slack and provides for an annual base salary of $ 250,000 in the case of Mr. Brokaw. Beginning June 26, 2017, both Messrs. Slack and Brokaw agreed to waive payment of their salaries. Effective July 1, 2019, Mr. Slack resigned his employment with the Company as Executive Chairman. Effective December 31, 2019, Mr. Brokaw resigned his employment with the Company as Executive Vice Chairman. Mr. Slack and Mr. Brokaw continue to serve on the Board of the Company. Remy W. Trafelet As described above, on February 11, 2019 and as contemplated by the Alico Settlement Agreement, Mr. Trafelet submitted to the Board his resignation as President and Chief Executive Officer of the Company and a member of the Board, effective upon the execution of the Alico Settlement Agreement. Also, on February 11, 2019, as contemplated by the Settlement Agreement, the Company entered into a consulting agreement (the "Consulting Agreement") with Mr. Trafelet and 3584 Inc., an entity controlled by Mr. Trafelet (the "Consultant"). Pursuant to the Consulting Agreement, Mr. Trafelet 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. 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 The Company had a shared services agreement with Trafelet Brokaw Capital Management, L.P. (“TBCM”), whereby the Company reimbursed TBCM for use of office space and various administrative and support services. The agreement expired December 31, 2018 and was not extended or renewed. The Company expensed approximately $ 0 , $ 0 and $ 155,000 for the fiscal years ended September 30, 2021, 2020 and 2019, respectively. As of September 30, 2021 and 2020, the Company did no t have any outstanding amounts with TBCM. 71 Capital Contribution On September 10, 2020, all operating partners of Citree received a funding notice relating to an additional Cash Capital Contribution (“Contribution”) requirement of approximately $ 600,000 as a result of trees producing limited revenue because they are still in early-stage development, a reduction in market price for citrus fruit for the 2019/20 harvest season due to excess inventories and the adoption of a more extensive caretaking plan focused on limiting the impact of citrus greening. The Company’s portion of the Contribution was approximately $ 306,000 and was funded on September 24, 2020. The remaining portion of the Contribution of $ 294,000 was funded by the noncontrolling parties. 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. Transfers of these shares are not registered on any current Alico registration statement, but the shares are potentially transferable pursuant to Rule 144, subject to certain customary restrictions. Note 16. Commitments and Contingencies Operating Leases The Company has obligations under various non-cancelable long-term operating leases primarily for office space and equipment. In addition, the Company has various obligations under other equipment leases of less than one year. Total rent expense was approximately $ 304,000 , $ 308,000 and $ 450,000 for the fiscal years ended September 30, 2021, 2020 and 2019, respectively. The future minimum annual rental payments under non-cancelable operating leases are as follows: (in thousands) 2022 $ 324 2023 47 Total $ 371 Purchase Commitments The Company enters into contracts for the purchase of citrus trees during the normal course of its business. As of September 30, 2021, the Company had approximately $ 2,405,000 relating to outstanding commitments for these purchases that will be paid upon delivery of the remaining citrus trees. Letters of Credit The Company had outstanding standby letters of credit in the total amount of approximately $ 336,000 and $ 399,000 at September 30, 2021 and September 30, 2020, respectively, to secure its various contractual obligations. Legal Proceedings From time to time, Alico may be involved in litigation relating to claims arising out of its operations in the normal course of business. There are no current legal proceedings to which the Company is a party or of which any of its property is subject that it believes will have a material adverse effect on its financial position, results of operations or cash flows. 72 Note 17. Selected Quarterly Financial Data (unaudited) Summarized quarterly financial data for the fiscal years ended September 30, 2021, and 2020 are computed independently each quarter, therefore, the sum of the quarter amounts may not equal the total amount for the respective year due to rounding as follows: (in thousands, except per share amounts) Fiscal Quarter Ended December 31, March 31, June 30, September 30, 2020 2019 2021 2020 2021 2020 2021 2020 Total operating revenues $ 13,732 $ 11,005 $ 55,944 $ 50,515 $ 34,888 $ 26,122 $ 4,000 $ 4,865 Total operating expenses 8,335 5,391 45,718 43,898 26,378 19,902 4,240 5,397 Gross profit (loss) 5,397 5,614 10,226 6,617 8,510 6,220 ( 240 ) ( 532 ) General and administrative expenses 2,528 2,760 2,653 2,953 1,911 2,556 2,361 2,729 Other income (expense), net 2,185 ( 1,595 ) ( 1,104 ) 1,398 29,387 ( 1,405 ) 1,479 26,058 Income (loss) before income taxes 5,054 1,259 6,469 5,062 35,986 2,259 ( 1,122 ) 22,797 Income tax (benefit) expense 1,250 361 1,579 1,496 8,853 171 ( 115 ) 5,635 Net income (loss) 3,804 898 4,890 3,566 27,133 2,088 ( 1,007 ) 17,162 Net loss (income) attributable to noncontrolling interests 41 ( 107 ) ( 23 ) 5 ( 14 ) 8 35 42 Net income (loss) attributable to Alico Inc. common stockholders $ 3,845 $ 791 $ 4,867 $ 3,571 $ 27,119 $ 2,096 $ ( 972 ) $ 17,204 Earnings (loss) per share: Basic $ 0.51 $ 0.11 $ 0.65 $ 0.48 $ 3.61 $ 0.28 $ ( 0.13 ) $ 2.29 Diluted $ 0.51 $ 0.11 $ 0.65 $ 0.48 $ 3.61 $ 0.28 $ ( 0.13 ) $ 2.29 Operating revenues and operating expenses for the fiscal quarter ended September 30, 2020 include approximately $ 3,246,000 and approximately $ 2,951,000 , respectively, relating to the grove management services being provided to a third-party. Other income for the fiscal quarter ended September 30, 2020 includes a gain on sale of assets of approximately $ 27,470,000 (see Note 4. “Assets Held for Sale” and Note 5. “Property and Equipment, Net” for further information). 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). 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. Note 18. 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. 73 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.