UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): November 21, 2014
ALICO, INC.
(Exact name of Registrant as specified in its Charter)
Florida | 0-261 | 59-0906081 |
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
10070 Daniels Interstate Court Fort Myers, Florida, 33913 |
(Address of principal executive offices) |
Registrant’s Telephone Number: (239) 226-2000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12 |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.01 | Completion of Acquisition or Disposition of Assets. |
On November 21, 2014, Alico, Inc. (the “Company”) completed the previously announced sale of land used for sugarcane production and land leasing in Hendry County, Florida (the “Land Disposition”). At the closing, the Company sold 35,983 acres (the “Property”) to Global Ag Properties USA LLC, (the “Buyer”), an affiliate of Terra Land Company, and received total gross proceeds of approximately $97.9 million (the “Purchase Price”). These proceeds have been deposited with a qualified intermediary in anticipation of a potential tax deferred like kind exchange pursuant to Internal Revenue Code Section 1031. The Land Disposition excluded certain oil and gas rights as well as crops grown on the Property by tenants who lease the Property.
In connection with the Land Disposition, the Company assigned to the Buyer the 10-year, triple net agricultural lease (the “US Sugar Lease”), dated as of May 19, 2014, by and between the Company and United States Sugar Corporation (“US Sugar”) covering 30,600 acres of the Property as well as certain other grazing, hunting and other leases. The Company has obtained a letter of credit for the benefit of the Buyer in an aggregate principal amount of $9,800,000, which is held in escrow and will be disbursed to the Buyer to cure certain potential defaults by US Sugar on its obligations under the US Sugar Lease, the early termination of the US Sugar Lease by US Sugar or certain potential defaults by the Company under its agreements with the Buyer.
The Company and the Buyer also agreed to make certain post-closing payments to each other during the ten years following the closing of the Land Disposition. These payments are generally equal to the difference, if any, between (x) the annual rental payments the Buyer receives from the Tenant under the US Sugar Lease less (y) the greater of 5% of the Purchase Price and 5% of the most recent fair market value of the Property, subject to a 6% ceiling on the annual increase in the fair market value (on an annualized basis), and further adjusted for amounts received by the Buyer under the other assigned leases, certain costs incurred by the Buyer and other factors. If such difference is a negative number, the Company will pay it to the Buyer. If such difference is a positive number, the Buyer will pay it to the Company.
Item 9.01 | Financial Statements and Exhibits. |
(b) Pro Forma Financial Information.
The unaudited pro forma financial statements of the Company reflecting the consummation of the Land Disposition are filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.
(d) Exhibits.
Exhibit Number |
Description |
99.1 | Unaudited Pro Forma Condensed Consolidated Financial Information |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Alico, Inc. | |
Date: November 28, 2014 | By: /s/ W. Mark Humphrey |
Name: W. Mark Humphrey | |
Title: Senior Vice President and Chief Financial Officer |
EXHIBIT 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On November 21, 2014, Alico, Inc. (the “Company”), a Florida corporation, completed the sale of approximately 36,000 acres of land (the “Property”) in Hendry County, Florida to Global Ag Properties USA, LLC (“Buyer”) for $97,913,921 in cash (the “Disposition”). The Property was used for sugarcane production and land leasing.
On May 19, 2014, the Company entered into a triple net Agricultural Lease (the “USSC Lease”) to lease approximately 30,600 acres of the Property to United States Sugar Corporation (“USSC”). At the time it entered into the USSC Lease, the Company received a one-time reimbursement for costs incurred to plant sugarcane, sugarcane growing costs and for the sale of certain rolling stock used in the sugarcane operation of approximately $11,000,000, which was $2,300,000 less than the net book value. The USSC Lease was assigned to the Buyer in conjunction with the Disposition. The annual base rent payable by USSC under the lease is $3,548,485 and is due and payable on or before the first day of each lease year. USSC is obligated to pay additional rent per acre annually if the year-end average net selling price of sugar is greater than or equal to $28 per hundred weight. This effectively increases the rent in the event sugar prices rise during the term of the lease. Certain other recreational and grazing leases were also assigned to the Buyer.
The Company has recorded the sale on its financial statements, however the gain of $42,943,879 has been deferred due to the Company’s continuing involvement in the Property pursuant to a Post-Closing Agreement and the potential adjustments. The Company has not had the opportunity to fully evaluate its maximum possible exposure in order to determine if any partial gain recognition would be appropriate at this time. The Company will continue its analysis and will provide an update, if any, when booking the transaction for the quarterly period ended December 31, 2014.
The accompanying unaudited pro forma financial information should be read in conjunction with our historical consolidated financial statements and the accompanying notes included in the 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on December 9, 2013, and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 filed with the SEC on August 11, 2014.
The unaudited pro forma condensed consolidated statement of operations for the year ended September 30, 2013 and the nine months ended June 30, 2014, have been prepared giving effect to the Disposition as if the transaction had occurred on October 1, 2012. The unaudited pro forma condensed consolidated balance sheet gives effect to the Disposition as if the transaction had occurred effective June 30, 2014.
The unaudited pro forma condensed consolidated financial statements are prepared in accordance with Article 11 of Regulation S-X. The pro forma adjustments are described in the accompanying notes and are based upon information and assumptions available at the time of the filing of this report on Form 8-K.
The unaudited pro forma financial information is based on financial statements prepared in accordance with U.S. generally accepted accounting principles, which are subject to change and interpretation. The unaudited pro forma condensed consolidated financial statements were based on and derived from our historical consolidated financial statements, adjusted for those amounts which were determined to be directly attributable to the Disposition, factually supportable, and with respect to the Unaudited Pro Forma Condensed Consolidated Statement of Operations, expected to have a continuing impact on our consolidated results. Actual adjustments, however, may differ materially from the information presented. Pro forma adjustments do not include allocations of corporate costs, as those are not directly attributable to the transaction. In addition, the unaudited pro forma financial information is based upon available information and assumptions that management considers to be reasonable, and such assumptions have been made solely for purposes of developing such unaudited pro forma financial information for illustrative purposes in compliance with the disclosure requirements of the SEC. The unaudited pro forma financial information is not necessarily indicative of the financial position or results of operations that would have actually occurred had the Disposition occurred on the dates indicated. In addition, these unaudited pro forma condensed consolidated financial statements should not be considered to be indicative of our future financial performance and results of operations of the consolidated Company.
ALICO, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2014 (UNAUDITED)
(dollars in thousands, except share and per share amounts)
As Reported | Pro Forma Adjustments | Pro Forma | |||||||||||
ASSETS | |||||||||||||
Current assets: | |||||||||||||
Cash and cash equivalents | $ | 24,192 | $ | (3,086 | ) | (a) | $ | 21,106 | |||||
Restricted cash | – | 97,126 | (b) | 97,126 | |||||||||
Investments | 262 | – | 262 | ||||||||||
Accounts receivable, net | 16,465 | – | 16,465 | ||||||||||
Due from sugar processor | 11,012 | – | 11,012 | ||||||||||
Inventories | 16,693 | – | 16,693 | ||||||||||
Assets held for sale | 3,538 | – | 3,538 | ||||||||||
Other current assets | 700 | – | 700 | ||||||||||
Total current assets | 72,862 | 94,040 | 166,902 | ||||||||||
Investment in Magnolia Fund | 2,043 | 2,043 | |||||||||||
Investments, deposits and other non-current assets | 2,066 | 2,066 | |||||||||||
Cash surrender value of life insurance | 905 | 905 | |||||||||||
Property, buildings and equipment, net | 123,122 | (53,939 | ) | (b) | 69,183 | ||||||||
Total assets | $ | 200,998 | $ | 40,101 | $ | 241,100 | |||||||
LIABILITIES & STOCKHOLDERS’ EQUITY | |||||||||||||
Current liabilities: | |||||||||||||
Accounts payable | $ | 1,385 | – | $ | 1,385 | ||||||||
Long-term debt, current portion | 2,000 | – | 2,000 | ||||||||||
Accrued expenses | 3,081 | 243 | 3,324 | ||||||||||
Income taxes payable | 3,546 | – | 3,546 | ||||||||||
Dividend payable | 441 | – | 441 | ||||||||||
Accrued ad valorem taxes | 1,207 | – | 1,207 | ||||||||||
Other current liabilities | 4,138 | (3,086 | ) | (a) | 1,052 | ||||||||
Total current liabilities | 15,798 | (2,843 | ) | 12,956 | |||||||||
Long-term debt, net of current portion | 32,500 | – | 32,500 | ||||||||||
Deferred income taxes, net of current portion | 6,520 | – | 6,520 | ||||||||||
Deferred gain on land sale | – | 42,944 | (b) | 42,944 | |||||||||
Deferred retirement benefits, net of current portion | 4,071 | – | 4,071 | ||||||||||
Total liabilities | 58,889 | 40,101 | 98,990 | ||||||||||
Commitments and contingencies | |||||||||||||
Stockholders’ equity: | |||||||||||||
Preferred stock, no par value. Authorized 1,000,000 shares; issued and outstanding, none | – | – | |||||||||||
Common stock, $1 par value; 15,000,000 shares authorized; 7,377,106 shares issued and 7,355,890 shares outstanding | 7,377 | – | 7,377 | ||||||||||
Additional paid in capital | 3,763 | – | 3,763 | ||||||||||
Treasury stock at cost, 21,216 shares held | (875 | ) | – | (875 | ) | ||||||||
Retained earnings | 131,844 | – | 131,844 | ||||||||||
Total stockholders’ equity | 142,109 | – | 142,109 | ||||||||||
Total liabilities and stockholders’ equity | $ | 200,998 | $ | 40,101 | $ | 241,100 | |||||||
See accompanying notes to condensed consolidated financial statements (unaudited).
ALICO, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
NINE MONTHS ENDED JUNE 30, 2014 (UNAUDITED)
(in thousands, except per share amounts)
As Reported | Pro Forma Adjustments | Pro Forma | |||||||||||
Operating revenues: | |||||||||||||
Citrus Groves | $ | 47,023 | $ | 47,023 | |||||||||
Agricultural Supply Chain Management | 12,324 | 12,324 | |||||||||||
Improved Farmland | 19,442 | (19,217 | ) | (c) | 225 | ||||||||
Ranch and Conservation | 1,956 | 1,956 | |||||||||||
Other Operations | 394 | 394 | |||||||||||
Total operating revenue | 81,139 | (19,217 | ) | 61,922 | |||||||||
Operating expenses: | |||||||||||||
Citrus Groves | 29,963 | 29,963 | |||||||||||
Agricultural Supply Chain Management | 12,085 | 12,085 | |||||||||||
Improved Farmland | 20,986 | (19,254 | ) | (d) | 1,733 | ||||||||
Ranch and Conservation | 870 | 870 | |||||||||||
Other Operations | 280 | 280 | |||||||||||
Total operating expenses | 64,184 | (19,254 | ) | 44,931 | |||||||||
Gross profit | 16,955 | 37 | 16,991 | ||||||||||
Corporate general and administrative | 8,410 | 8,410 | |||||||||||
Income from operations | 8,545 | 37 | 8,581 | ||||||||||
Other (expense) income: | |||||||||||||
Interest and investment income, net | 115 | 115 | |||||||||||
Interest expense | (766 | ) | (766 | ) | |||||||||
Other loss, net | (173 | ) | (173 | ) | |||||||||
Total other expense, net | (824 | ) | – | (824 | ) | ||||||||
Income before income taxes | 7,721 | 37 | 7,757 | ||||||||||
Income tax expense | 3,236 | 14 | (e) | 3,250 | |||||||||
Net income attributable to common shareholders | 4,485 | 23 | 4,507 | ||||||||||
Comprehensive income, net of tax effect | – | – | – | ||||||||||
Comprehensive income attributable to common shareholders | $ | 4,485 | $ | 23 | $ | 4,507 | |||||||
Weighted-average number of shares outstanding: | |||||||||||||
Basic | 7,327 | 7,327 | 7,327 | ||||||||||
Diluted | 7,351 | 7,351 | 7,351 | ||||||||||
Earnings per common share: | |||||||||||||
Basic | $ | 0.61 | $ | – | $ | 0.62 | |||||||
Diluted | $ | 0.61 | $ | – | $ | 0.61 | |||||||
Cash dividends declared per common share | $ | 0.18 | $ | 0.18 | $ | 0.18 | |||||||
See accompanying notes to condensed consolidated financial statements (unaudited).
ALICO, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED SEPTEMBER 30, 2013
(in thousands, except per share amounts)
As Reported | Pro Forma Adjustments | Pro Forma | |||||||||||
Operating revenues: | |||||||||||||
Citrus Groves | $ | 43,689 | $ | 43,689 | |||||||||
Agricultural Supply Chain Management | 28,412 | 28,412 | |||||||||||
Improved Farmland | 21,917 | (21,313 | ) | (c) | 604 | ||||||||
Ranch and Conservation | 6,755 | 6,755 | |||||||||||
Other Operations | 888 | 888 | |||||||||||
Total operating revenue | 101,661 | (21,313 | ) | 80,348 | |||||||||
Operating expenses: | |||||||||||||
Citrus Groves | 31,533 | 31,533 | |||||||||||
Agricultural Supply Chain Management | 27,949 | 27,949 | |||||||||||
Improved Farmland | 16,202 | (16,077 | ) | (d) | 125 | ||||||||
Ranch and Conservation | 3,798 | 3,798 | |||||||||||
Other Operations | 505 | 505 | |||||||||||
Total operating expenses | 79,987 | (16,077 | ) | 63,910 | |||||||||
Gross profit (loss) | 21,674 | (5,235 | ) | 16,439 | |||||||||
Corporate general and administrative | 9,739 | 9,739 | |||||||||||
Income from operations | 11,935 | (5,235 | ) | 6,700 | |||||||||
Other (expense) income: | |||||||||||||
Interest and investment income, net | 704 | 704 | |||||||||||
Interest expense | (1,257 | ) | (1,257 | ) | |||||||||
Gain on sale of real estate | 20,299 | 20,299 | |||||||||||
Other loss, net | (6 | ) | (6 | ) | |||||||||
Total other expense, net | 19,740 | – | 19,740 | ||||||||||
Income before income taxes | 31,675 | (5,235 | ) | 26,440 | |||||||||
Income tax expense | 12,029 | (2,020 | ) | (e) | 10,009 | ||||||||
Net income attributable to common shareholders | 19,646 | (3,216 | ) | 16,430 | |||||||||
Comprehensive income, net of tax effect | – | – | |||||||||||
Comprehensive income attributable to common shareholders | $ | 19,646 | $ | (3,216 | ) | $ | 16,430 | ||||||
Weighted-average number of shares outstanding: | |||||||||||||
Basic | 7,313 | 7,313 | 7,313 | ||||||||||
Diluted | 7,357 | 7,357 | 7,357 | ||||||||||
Earnings per common share: | |||||||||||||
Basic | $ | 2.69 | $ | (0.44 | ) | $ | 2.25 | ||||||
Diluted | $ | 2.67 | $ | (0.44 | ) | $ | 2.23 | ||||||
Cash dividends declared per common share | $ | 0.36 | $ | 0.36 | $ | 0.36 | |||||||
See accompanying notes to condensed consolidated financial statements (unaudited).
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A – Disposition of Sugarcane Land in Hendry County, Florida
On November 21, 2014, Alico, Inc. (the “Company”), a Florida corporation, completed the sale of approximately 36,000 acres of land (the “Property”) in Hendry County, Florida to Global Ag Properties USA, LLC (“Buyer”) for $97,913,921 in cash (the “Disposition”). The Property was used for sugarcane production and land leasing.
Proceeds from the sale have been deposited with a Qualified Intermediary (“QI”) in anticipation of a potential tax deferred like kind exchange pursuant to Internal Revenue Code Section 1031 and are classified as Restricted Cash on the Pro Forma Balance Sheet.
On May 19, 2014, the Company entered into a triple net Agricultural Lease (the “USSC Lease”) to lease approximately 30,600 acres of the Property to United States Sugar Corporation (“USSC”). At the time it entered into the USSC Lease, the Company received a one-time reimbursement for costs incurred to plant sugarcane, sugarcane growing costs and for the sale of certain rolling stock used in the sugarcane operation of approximately $11,000,000, which was $2,300,000 less than the net book value. The USSC Lease was assigned to the Buyer in conjunction with the Disposition. The annual base rent payable by USSC under the lease is $3,548,485 and is due and payable on or before the first day of each lease year. USSC is obligated to pay additional rent per acre annually if the year-end average net selling price of sugar is greater than or equal to $28 per hundred weight. This effectively increases the rent in the event sugar prices rise during the term of the lease. Certain other recreational and grazing leases were also assigned to the Buyer.
The sales price is subject to post-closing adjustments over a ten year period. In the first two years of the lease, the Buyer is entitled to a return equal to the purchase price multiplied by 5%. If rental payments received under current leases on the Property exceed these amounts, the Company will receive a payment from Buyer for the excess. Conversely, if rental payments received under current leases on the Property are less than these amounts, the Company will pay Buyer for the shortfall.
During years three through ten, the Buyer will receive annual payments equal to the greater of (i) the purchase price multiplied by 5% or (ii) the most recent fair market value of the property multiplied by 5%, subject to a ceiling on the annual increase of 6% annualized over years one through ten. If rental payments received under current leases on the property exceed these amounts, the Company will receive a payment from Buyer for the excess. Conversely, if rental payments received under current leases on the property are less than these amounts, the Company will pay Buyer for the shortfall.
The Company has recorded the sale on its financial statements, however the gain of $42,943,879 has been deferred due to the Company’s continuing involvement in the Property pursuant to a Post-Closing Agreement and the potential adjustments described above. The Company has not had the opportunity to fully evaluate its maximum possible exposure in order to determine if any partial gain recognition would be appropriate at this time. The Company will continue its analysis and will provide an update, if any, when booking the transaction for the quarterly period ended December 31, 2014.
Note B - Pro Forma Adjustments (dollars in thousands)
The following is a summary of the pro forma adjustments reflected in the unaudited pro forma condensed consolidated financial statements based on preliminary estimates, which may change as additional information is obtained:
(a) – Unearned Rent
Reflects an adjustment to pay Buyer the unearned portion of prepaid rent received from USSC as though the assignment of the USSC lease was effective June 30, 2014.
(b) – Deferred Gain on Land Sale
The following balance sheet adjustments were made to record the deferred gain on land sale as of June 30, 2014.
Sales price | $ | 97,914 | |
Closing costs | (788 | ) | |
Restricted cash | 97,126 | ||
Basis of Property | (53,939 | ) | |
Accrued legal and accounting | (243 | ) | |
Deferred gain on land sale | $ | 42,944 |
The Company has not had the opportunity to fully evaluate the maximum possible exposure to loss to determine if any partial gain recognition would be appropriate.
(c) – Farmland Revenue
Adjustments reflect elimination of sugarcane farming revenues, assignment of USSC and other leases and estimated positive post-closing adjustments on the Property Sale. The following table summarizes these adjustments for the nine months ended June 30, 2014 and the year ended September 30, 2013, respectively.
Nine Months Ended | Year Ended | |||||||
June 30, 2014 | September 30, 2013 | |||||||
Elimination of sugarcane revenue | $ | (18,245 | ) | $ | (20,925 | ) | ||
Assignment of leases | (972 | ) | (479 | ) | ||||
Post-closing adjustments | – | 91 | ||||||
Total | $ | (19,217 | ) | $ | (21,313 | ) |
Actual sugarcane market prices of $29.47 and $36.86 per hundred weight were used to estimate the post-closing adjustments for the nine months and year ended June 30, 2014 and September 30, 2013, respectively.
(d) – Farmland Operating Expenses
Adjustments reflect elimination of sugarcane costs of sale, sugarcane harvest and hauling expenses, assignment of USSC and other leases, loss on disposition of certain assets in connection with the USSC Lease and estimated negative post-closing adjustments on the Property sale. The following table summarizes these adjustments for the nine months ended June 30, 2014 and the year ended September 30, 2013, respectively.
Nine Months Ended | Year Ended | |||||||
June 30, 2014 | September 30, 2013 | |||||||
Elimination of sugarcane costs of sale | $ | (13,881 | ) | $ | (11,580 | ) | ||
Elimination of sugarcane harvest and hauling expenses | (3,759 | ) | (4,298 | ) | ||||
Assignment of leases | (373 | ) | (199 | ) | ||||
Loss on disposition of sugarcane assets | (2,300 | ) | – | |||||
Post-closing adjustments | 1,059 | – | ||||||
Total | $ | (19,254 | ) | $ | (16,077 | ) |
Actual sugarcane market prices of $29.47 and $36.86 per hundred weight were used to estimate the post-closing adjustments for the nine months and year ended June 30, 2014 and September 30, 2013, respectively.
(e) – Income Taxes
It has been assumed that the Company will reinvest the proceeds from the sale in a tax deferred like kind exchange transaction pursuant to Internal Revenue Code Section 1031, so income taxes related to the gain have not been reported in the Pro Forma Financial Statements.
The estimated income tax effect of the Farmland Revenue and Farmland Operating Expenses has been computed and included in the Pro Forma Condensed Consolidated Statements of Comprehensive Income utilizing the Company’s effective tax rate.