ALICO (ALCO) Fails to Report Results on Time — Blames Deferred Tax Liability Accounting Issue
Alico (ALCO) failed to file its financial results on time. The company was scheduled to report its full-year results on December 6th. Instead, it put out this explanation:
“…the Company and its independent public accounting firm determined they need additional time to complete the audit of…financial results. The key item that is requiring such additional time involves evaluation of the proper amount of the Company’s Deferred Tax Liability, particularly certain portions of that Deferred Tax Liability arising in prior fiscal years, including those going back to fiscal year 2019 or possibly several years before fiscal year 2019. Potential adjustments related to this portion of the Deferred Tax Liability, if required, would be a decrease in the Deferred Tax Liability and an increase in Retained Earnings for the prior period or an out of period adjustment increasing Net Income for fiscal year 2022.”
Alico has a new Chief Financial Officer. The new CFO was hired in September. The company’s previous CFO quit in May:
“On May 17, 2022, Richard Rallo notified the Company of his decision to resign from his role as the Company’s Senior Vice President and Chief Financial Officer…Mr. Rallo’s decision to resign is for personal reasons to eliminate extensive travel and/or avoid relocation to Florida and is not related to any disagreement with the Company or its independent registered public accountants on any matter relating to the Company’s financial or accounting operations, policies or practices.”
Alico’s stock price dropped when it reported its failure to report financial results as scheduled. It hit a new low for the year. The stock has since risen a bit from that low.
Alico stock looks cheap compared to the company’s best guess of the fair market value of its land holdings. It’s possible the company is trading for as little as half of the value of the ranch and citrus land combined.
However, this calculation is a bit difficult to make right now because of three factors. One, land prices may have fallen due to increased interest rates in the economy generally causing the company’s estimates to be a little stale. Two, some of Alico’s citrus groves were hit by a hurricane and there was damage – though Alico does not expect this to result in much in the way of permanent losses (as opposed to losses that will affect this growing season alone). And three, the delay in reporting financial results means we won’t have an updated balance sheet for some time. For these reasons, it’s not possible to have a lot of confidence in any precise calculation of estimated land values versus the company’s enterprise value.
However, it is safe to say the stock is trading well below previous estimates of the value of the land. So, on a liquidation basis, the stock appears cheap.
On an operating basis, this was a bad year for Florida orange growers.