Welcome to Alico's fourth quarter and full year 2021 earnings conference call. At this time, all participants are in listen-only mode. As a reminder, today's conference is being recorded. Earlier today, the company issued a press release announcing its results for the fourth quarter and full year ended September 30, 2021. If you've not had a chance to view the release, it's available on the investor relations portion of the company's website at alicoinc.com. This call is being webcast and a replay will be available on Alico's website as well. Before we begin, we would like to remind everyone that the prepared remarks today contain forward-looking statements. Such statements are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in these statements.
Important factors that could cause or contribute to such differences include risk details in the company's quarterly reports on Form 10-Q, annual reports on Form 10-K, current reports on Form 8-K, and any amendments thereto, filed with the SEC and those mentioned in the earnings release. The company undertakes no obligation to subsequently update or revise the forward-looking statements made on today's call, except as required by the law. During this call, the company will also discuss non-GAAP financial measures, including EBITDA and adjusted EBITDA. For more details on these measures, please refer to the company's press release issued earlier today. With that, I would like to turn the call over to the company's President and CEO, Mr. John Kiernan. Please go ahead.
Thank you, Rob. Thank you everyone for joining us for Alico's fourth quarter and fiscal year ended September 30, 2021 earnings call this morning. Overall, we are pleased with our financial results for fiscal year 2021. We saw a significant increase in our Adjusted EBITDA over the prior year, increasing 41% as a result of the increased fruit market prices, the expansion of our caretaking management initiative, and the continued stringent control over our expenses, specifically our general and administrative expenses, which declined by approximately 8% over the prior year when excluding non-recurring items. These results were achieved despite box production and average pound solids per box disappointments, largely due to the higher drop rate for citrus in Florida this past season and the quality of the fruit not being as strong as in the previous year.
Market prices significantly improved in fiscal year 2021 due to the steady consumption of not-from-concentrate orange juice throughout the fiscal year. As a result of this improved level of consumption, combined with lower quantities of citrus fruit grown last season in Florida as well as in Brazil and Mexico, we recognize that current processor inventories for not-from-concentrate orange juice were at lower than normal levels. We are encouraged that consumption of not-from-concentrate orange juice is continuing to remain strong in fiscal year 2022, and the latest Nielsen data shows consumption now at levels last seen in 2016.
Based on these trends for consumption demand and local and global supplies, we believe market prices for fiscal year 2022 should remain near or above those recorded in the 2020-2021 harvest season. Along with the improved financial results, there were other significant actions we executed throughout the fiscal year that we believe will improve our future shareholder returns. These actions consisted of the following. Our board of directors approved a considerable increase in our quarterly dividend, raising it to $0.50 per common share from $0.18 per common share. We believe this latest increase reflects our board's continued confidence that our financial strength and business strategy will support this increased dividend level for the foreseeable future.
We successfully improved our balance sheet by converting two fixed rate amortizing term loans into interest-only debt, which will continue to mature in November 2029. This modification improves our annual cash flow by approximately $5 million-$6 million. Additionally, as part of this modification, we were also able to reduce our interest rate from 4.15% to 3.85% for that tranche of debt. We repaid approximately $22 million of debt, which included a prepayment of $10.3 million on our fixed rate term loans prior to the debt modification. As of September 30, 2021, we have improved our debt-to-equity ratio from 0.51 to one. It was 0.68 to one a year ago.
Over the past five years, we have reduced our debt balances by 36%, having made principal payments of approximately $71 million. We acquired approximately 3,280 gross citrus acres using proceeds from a previous sale of ranch land to the state of Florida, which enabled us to defer almost $4 million of gain from that sale. These acquired citrus acres were well-maintained and close to our existing groves, which is allowing us to further leverage the economies of scale for our grove operations and back office. Since making this acquisition, we have planted over 100,000 trees at this location to increase its density and are confident that this investment will generate positive cash flow in the years to come.
We entered into new citrus supply agreements with Peace River Citrus Products, covering 3,614 gross citrus acres purchased in May and October of 2020. With these new supply agreements, along with our existing agreements with Tropicana, approximately 99% of our fruit is under contract through the 2023 and 2024 harvest seasons, with the largest portion being under contract through the 2024 harvest season. These contracts will continue to enable the company to realize competitive margins for their duration. We continue to evaluate our non-citrus assets and opportunistically sold off ranch land at premium prices to generate cash flow, which improves rates of return for our investors. During the fiscal year 2021, we closed on the sale of approximately 19,800 acres of ranch land.
Most recently, last week actually, we closed the sale of an additional 1,638 acres for approximately $5.7 million to the state of Florida under the Florida Forever program, making this the fourth sale we have completed with them under this program for an aggregate of approximately 24,000 acres. We still have approximately 32,000 acres of ranch land for potential sale, and interest from buyers continues to be high. Net proceeds from future sales of non-strategic assets will be used to maximize shareholder returns by either acquiring additional citrus acres at attractive prices, prepaying variable rate term debt without penalties, repurchasing common shares, diversifying our business through other acquisitions, and/or paying special dividends.
We planted approximately 400,000 trees in fiscal year 2021, and have planted approximately 1.5 million new trees since 2018, with anticipated production from the first of those plantings expected in fiscal year 2022. We believe our tree planting strategy over the last four years has the long-term potential to enable the acres we now own to return box production close to our historic 10 million box level. We've also continued to move forward with our environmental, social and governance initiatives. As previously communicated, we formed a board committee, launched a sustainability page on the company's corporate website, which includes our sustainability policy, vendor code of conduct, and safety manual.
Completed a materiality assessment that helped inform a sustainability framework to guide future ESG activities, and joined the UN Global Compact to support universal sustainability principles of environmental responsibility, labor and human rights, and anti-corruption. We are also in the final stages of completing our inaugural annual sustainability report, which we plan to publish later this week. As we look ahead to fiscal year 2022, we are providing guidance as follows. Net income is projected to be between $10.7 million and $12.7 million. Adjusted net income after adjusting for certain expected non-recurring items, is projected to be between $5.4 million and $7.1 million. EBITDA is projected to be between $33.7 million and $37.1 million.
Adjusted EBITDA, after adjusting for certain expected non-recurring items, is projected to be between $26 million and $29 million. The above guidance only includes estimates of gains from asset sales for sales transactions that have closed in fiscal year 2022 to date. In the event that any additional significant gains on asset sales are realized, Alico may decide to revise the company's guidance. The above guidance reflects improved adjusted net income and Adjusted EBITDA as compared to prior fiscal year financial results. With that, I'll turn the call over to Rich Rallo, who will discuss our more detailed financial results. Rich?
Thank you, John, and good morning, everyone. As our fourth quarter is not indicative of our full-year results due to the seasonal nature of our business, I will focus primarily on our full-year 2021 results today. As a reminder, the majority of our citrus crop is harvested in the second and third quarters of the fiscal year, with the majority of our profit and cash flows also recognized in the second and third quarters. For the fiscal year ended September 30, 2021, total operating revenue was $108.6 million compared to $92.5 million for the fiscal year ended September 30, 2020. Citrus revenue was $105.8 million and $89.4 million for the fiscal years ended September 30, 2021 and 2020, respectively.
The increase in revenue for the fiscal year ended September 30, 2021 compared to the fiscal year ended September 30, 2020 was due to an increase in revenue generated from our grove management services and our Valencia fruit harvester. We provide our grove management services, which include citrus grove caretaking and harvest and haul management services to approximately 7,400 acres owned by third parties, of which approximately 7,000 acres are serviced under a long-term agreement we entered into in July 2020 with a top 10 grower. As part of these agreements, we are reimbursed for all costs incurred related to providing these services and receive a management fee based on acres covered from the third parties. As a reminder, we record both an increase in revenues and expenses as and when we provide these services.
For the fiscal year ended September thirtieth, two thousand twenty-one, we recorded approximately $17 million of operating revenue from grove management services as compared to approximately $4.6 million in the fiscal year ended September thirtieth, 2020 . The increase from the Valencia fruit harvest was driven by an increase in the market price per pound solids as compared to the prior year. Our average blended price per pound solids increased from $1.86 in the prior fiscal year to $2.46 for the current fiscal year. The increase, as mentioned earlier, was due to increased consumption of not-from-concentrate orange juice as well as tighter supplies of citrus fruit, which in turn led to reduced inventory levels.
Largely offsetting this increase in pricing was the effect of fewer Valencia boxes being harvested and lower pound solids per box for the fiscal year ended September 30, 2021 compared to the prior year. We, along with the entire Florida industry in general, recorded a smaller number of boxes harvested as a result of greater fruit drop during the current harvest season as compared to the previous year. In addition, the internal quality of the fruit was not as strong as in the previous year, resulting in lower pound solids per box. The USDA, in its final Citrus Crop Forecast report for the 2020-2021 harvest season, indicated that the Florida orange crop decreased by 21.7% to approximately 52.8 million boxes from approximately 67.4 million boxes in the prior harvest season.
In comparison, we managed a more favorable decline in the current harvest season of 16.1%. The increase in operating expenses for the fiscal year 2021 as compared to fiscal year 2020 mostly relates to our grove management services. As previously stated, we entered into an agreement with a top ten grower to provide caretaking management services covering approximately 7,000 acres. For the fiscal year ended September 30, 2021, we recorded approximately $15.1 million of operating expenses from grove management services as compared to approximately $3.8 million in the fiscal year ended September 30, 2020. Additionally, in May and October of 2020, we purchased additional citrus acres which resulted in cost of sales relating to these acres being realized in fiscal year 2021.
Partially offsetting these increases was a reduction in harvest and haul expenses attributable to a decrease in early and mid-season and Valencia boxes harvested. General and administrative expenses for the fiscal year ended September 30, 2021 were approximately $9.5 million compared to approximately $11 million for the fiscal year ended September 30, 2020. The decrease was attributable to a reduction in legal expense of approximately $800,000, primarily resulting from the receipt of insurance proceeds for the reimbursement of legal fees in the amount of approximately $700,000 during the fiscal year ended September 30, 2021 relating to corporate legal matters.
A reduction in stock compensation expense of approximately $200,000 pertaining to certain stock options that had vested in January 2020, which in turn resulted in an acceleration of expense in that fiscal year. A reduction in payroll expenses of approximately $300,000 relating to the resignation of a senior manager in fiscal year 2020 and the reduction in other administrative personnel made in fiscal year 2021. A reduction in pension expense related to our deferred retirement benefit plan of approximately $200,000 as a result of terminating this plan and paying out each plan participant in August 2020.
Partially offsetting this decrease was approximately $200,000 incurred in corporate advisory fees in fiscal year ended September 30, 2021. Other income net for the fiscal years ended September 30, 2021 and 2020 was approximately $31.9 million and approximately $24.5 million, respectively. The increase in other income net was primarily due to the recording of higher gains on sales of real estate, property and equipment and assets held for sale in fiscal year 2021 as compared to the previous fiscal year. For the fiscal year ended September 30, 2021, we recorded gains on sales of real estate, property and equipment and assets held for sale of approximately $35.9 million relating to the sale of approximately 19,800 acres of the Alico Ranch to several third parties.
By comparison, for the fiscal year ended September 30, 2020, we recognized gains on sales of real estate, property and equipment and assets held for sale of approximately $30.4 million. Additionally, a decrease in interest expense of approximately $2 million for the fiscal year ended September 30, 2021, as compared to the fiscal year ended September 30, 2020, was realized due to the reduction of our long-term debt from the making of mandatory principal payments along with other prepayments. In addition, we maintain low balances on our working and revolving line of credits, which also resulted in reduced interest expense.
During the fiscal years ended September 30, 2021, we received approximately $4.3 million of additional proceeds under the Florida Citrus Recovery Block Grant program relating to Hurricane Irma damage sustained in 2017. Through September 30, 2021, we have received approximately $24.5 million of proceeds under this program. These federal relief proceeds are included as a reduction to operating expenses in the consolidated statement of operations. The remaining portion of funds that are due under this program relates to the reimbursement of certain crop insurance expenses incurred by us that are estimated to be approximately $2 million.
In October 2021, we received the first portion of this crop insurance expense reimbursement in the amount equal to approximately $1 million, and we expect to receive the remaining portion in the early part of fiscal year 2023. For the fiscal years ended September 30, 2021 and September 30, 2020, we recorded net income attributable to Alico stockholders of approximately $34.9 million and approximately $23.7 million, respectively, representing a 47.3% increase. Our Adjusted EBITDA was approximately $25.3 million for the fiscal year ended September 30, 2021, as compared to approximately $17.9 million for the fiscal year ended September 30, 2020, representing a 41.2% increase. We continue to strengthen our balance sheet.
Our working capital was approximately $32.6 million at September 30, 2021, representing a 2.46-to-1 ratio. Our debt to equity ratio continues to improve. At September 30, 2021, September 30, 2020 and September 30, 2019, the ratios were 0.5-to-1, 0.68-to-1, and 0.82-to-1, respectively. This improvement has been driven by continued mandatory payments of our long-term debt as well as certain prepayments made, including approximately $10.3 million in April 2021 on our fixed-term loans. I would like to now pass the call back to John.
Thank you, Rich. As stated, fiscal year 2021 was a good year for Alico. We saw improvement with our financial results compared to the prior year, and we're also able to execute on several other business strategies which we feel will have long-term benefits for both Alico and its shareholders. Looking ahead to fiscal year 2022, we believe we have positioned ourselves for continued leadership in the citrus industry and are cautiously optimistic that we can continue to grow our financial results this season. With that, we will now open the line up to questions from industry analysts. Rob?
Thank you. We'll now be conducting the question and answer session. If you'd like to ask a question, please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Once again, that's star one. Thank you. Our first question comes from the line of Gerry Sweeney with Roth Capital. Please proceed with your question.
Hey, good morning, John and Rich. Thanks for taking my call.
Good morning, Gerry. How are you doing today?
I'm doing well, thanks. I had a question on volumes and not just even next year, but even referring to some of your comments about, you know, potentially getting back to the Alico historical rate of 10 million boxes. I think we planted about 1.5 million trees. Obviously, they take some time to mature. There's some. You made a, you know, small acquisition, and then you have sort of Mother Nature who, you know, waves her hands over all this, you know, any given year. What type of production could we look at next year? And, you know, potentially how long would it take to get to that? 10 million, we'll call it an aspirational goal, 10 million boxes. And, you know, would you need additional acquisitions to get there?
A couple questions all wrapped up into one, but if you could hit the highlights.
Sure. I'll let Rich dig into the details of that, but this is basically just organic. We're not gonna require any additional. This is on 49,000 acres of citrus that we currently own and operate. You know, we have been planting. You know, we have in excess of five million trees in the ground right now. The younger trees are developing quite nicely. You know, we haven't made any sort of detailed long-term forecast other than kind of year to year, so we're gonna be reluctant to actually put a pin in the ground of when potentially we could get back to that 10 million number. We have been at 10 million in recent past.
Mm-hmm.
Rich, you wanna take it any further?
Yeah. Gerry, I'll just mention, as you mentioned, that we planted 1.5 million trees. Just a reminder for everyone, we really don't see any production. That production doesn't really commence until year four and really doesn't peak till year seven and eight. As you look at over the next several years, we'll have all of these trees coming into production and slowly but surely continuing to produce greater production. I just wanted to point that out so you can see in several years how that build up is gonna work out.
Got it. Okay. Acquisitions, big to small orchard acquisitions, how does that pipeline look? I imagine obviously you're one of the biggest or, you know, top two or three in the state. How are some of the discussions pipelines going? What's sort of the feel you're or what are you seeing out there, and how active could you be in that space or wanna be or, you know, willing sellers are there?
Sure. You know, we can't really speak to the mindset of potential sellers, but you know, it has been difficult to compete in the citrus industry here in Florida over the past several years. You know, pricing has been a challenge. Certainly production has been a challenge. Input costs are becoming more expensive by the day, particularly on the fertilizer side. Alico is blessed because over a 120-year history, you know, we've built a bulletproof balance sheet, and we have access to capital as a public company that honestly our competitors can't really kind of measure up against. In the event that there are willing sellers at reasonable prices, Alico should be the first call to basically strike a deal. We've demonstrated our long-term commitment to the citrus industry.
You know, we've demonstrated our ability to commit assets and resources to put more trees in the ground. You know, we have a very strong, highly competent management team, but an even stronger and more competent workforce that basically caretakes our acres day in and day out. We think they're the best in the state. We just, you know, value and respect them, and we're committed to staying in the citrus industry for generations to come. In the event that there is gonna be consolidation with citrus, we believe that Alico is going to be participating in that.
Does the phone ever ring? I'm just curious. I mean, or do you get the opportunity to kick tires or is it just quiet right now?
No, it really isn't quiet. You know, we acquire small parcels here and there in an opportunistic fashion if it makes good economic sense for us, typically adjacent to existing properties. You know, we have not had you know significant serious conversations with very large competitors because I think they're evaluating their own strategy and we respect them as competitors. They're running their business, and frankly, we would like to see the citrus industry in Florida stronger than it is today. Anything that we can do to kinda promote the strength of the industry, you know, we're all about that. No, we're not in active discussions right now with any large parties.
Okay. Yeah, that's, I got it. Small but not large. I got it. Then you Inflation, right? You mentioned a little bit even on, you know, fertilizer, there's obviously harvest and hauling costs. Anything to, for us to keep an eye out on that front? You know, we do know fertilizer prices.
Sure.
Headed up differently, and just curious across the board.
You know, some input costs we think are probably tied a little bit more to the supply chain headaches as opposed to just general overall inflation. Certainly we're competing globally now for input costs, you know, fertilizer coming abroad and such. We're very sensitive to kind of labor, you know. We need people, you know, working every day. We believe we've got our bases with labor covered. You know, we did have a wage increase with our workforce this year. We have secured ample labor over the next several seasons already for our harvest and hauling activities, as well as some certain caretaking activities that we're gonna be using some third party labor for as well. You know, we kinda have de-risked the labor issue at least for the next couple of years.
All of those kinda wage increases are factored into the guidance that Rich and I actually have already shared with you. We're forecasting financial improvement despite a higher inflationary environment.
Got it. Just a couple more. I don't know if there's anyone else in line, but land management, I think you run the 7,000 acres that you run for a large company. How are the discussions on that front in terms of adding to that opportunity? Not just the 7,000, but new customers, I should say. I apologize.
Sure. No, no. You know, that third-party caretaking customer, we still value very highly. You know, we're in discussions with them every day, from a communication perspective. You know, they have a diversified business overall. You know, I think they appreciate us being able to kind of manage their citrus resources, with our citrus assets and, you know, personnel, with the expertise that we bring to the table. We certainly are in discussions with a few other parties, at any given time. You know, as we said at the beginning, we are very discriminating on, you know, which customers we would entertain doing kind of broad, large-scale caretaking business for, because it has to make economic sense for the customer.
We also want to make sure that the quality of fruit that we'd be working with, you know, kinda is in line with kind of our quality, because when we sell it, at the end of the day, it's.
It's your contract.
Represented by us. Yeah.
Yeah.
We basically are a little discriminating on that side. You know, we do see it as a growth avenue. You know, that is the counterbalance of if somebody decides they are having difficulty in citrus as an operator and, you know, want to explore kind of third-party caretaking, sometimes we can actually, you know, provide them economic advantages that they could not do on their own, just based on our economies of scale. That certainly is a very strong alternative as opposed to just selling out and, you know, disposing of land that they may have been in their family for generations. Those talks are ongoing, but again, nothing to significantly report at this time.
Gotcha. Obviously land sales. I think Florida Forever has been a big acquisition opportunity through the state of Florida. Anything else? This last purchase was a little smaller than some of the purchases in years past. Just curious if how those talks are going with the state of Florida and then just the general tone and tenor across the board for other opportunities.
Sure. The State of Florida, obviously we closed on that sale last week. We had been in talks, you know, and that transaction had been kind of, you know, in process since last winter. It took a little bit longer, basically because of some Tallahassee approvals relative to cabinet meetings and such that got delayed and deferred for a few months. It proceeded without a hitch, and we think it was at a good value. I think they're very satisfied buyers. That was the fourth acquisition that we had basically completed with the state. They acquired from us, by the way, we didn't acquire from them.
It's a good feeling to know that the land that's been in the family for decades is going to be able to be part of a wildlife preserve and state park. You know, it's gonna be for the greater good for the overall citizens of Florida, and it'll be kept intact for conservation purposes. We think that's wonderful. We have done some smaller transactions as well over the last couple quarters with some private buyers that again share that same mindset, kind of recreational hunters who want to get out there and basically just enjoy the remaining acres that we have on the ranch land, you know, for all its beauty and hopefully keep it intact as well.
We think that bodes very well with kind of the themes that we'll be sharing with everyone in our first sustainability report, which should be coming out this week. There is a scarcity factor, particularly for contiguous ranch land in southwestern Florida, and we've got about 32,000 acres remaining. You know, most of that is over on the east side of our ranch now, which is somewhat contiguous. You know, we are entertaining discussions with potential buyers all the time. We're showing that property constantly. We're just holding out for good, you know, at or better market prices that, you know, hopefully are gonna generate higher returns for shareholders once we realize them.
Got it. Okay, perfect. Well, great, nice, great year-end wrap-up and, I appreciate your time, so thanks.
Thanks, Gerry. We appreciate the support.
Thanks.
Next question is from the line of Marco Rodriguez with Stronghill Capital. Please proceed with your question.
Good morning. Thank you for taking my question.
Good morning, Marco.
Most of my questions have actually been asked and answered, but I did have one quick follow-up, if I might, just kind of along the lines of your expectations for pricing and inflation. I wonder if maybe you can provide a little bit more color on some of these inflationary pressures and how you might be thinking about that as it relates to any potential impact on consumption and then any sort of supply dynamics.
Sure. You know, we are not experts in kinda retail consumption dynamics. You know, we sell the inputs, right? We sell the oranges themselves. Relative to kind of what consumers can expect, you know, in their supermarket shelves, we're really not in a position to comment on that. However, as we mentioned earlier, you know, 99% of our fruit is now under kind of long-term, you know, offtake agreements and some contracts, with a couple of parties, Tropicana being the most dominant. Those are actually structured within kind of a collared arrangement. We believe we're probably at the higher end of the collar for the foreseeable future, so we'll be looking at kind of maximum revenues that we potentially could gain.
At the end of the 2023 and 2024 harvest seasons, those contracts would be up for renewal and would be reset, obviously, if there was still a higher inflationary environment at higher prices.
Right. Last one, just wanna kinda clarify some of the commentary you had on the selling of non-core assets. It kind of sounds like the market's not terribly active. There's some activity, but perhaps should we be thinking about this coming fiscal year as maybe being a little bit lower level of activity in terms of sales and acquisitions versus the prior year?
Yeah. I think that's a fair statement. You know, as opportunistic sellers of a very precious resource, which is our Alico ranch land, we're really not in a rush, and the board is not holding us accountable for disposing of this ranch land on any sort of timetable. Last year, I think we did $37 million worth of asset sales. I would expect that's gonna be substantially lower this year, although we just realized a ranch sale last week.
Appreciate your time, guys. Thank you.
Of course.
Thank you. We've reached the end of today's question and answer session. I'd like to turn the call back over to Mr. Kiernan for closing remarks.
Thank you. Thank you everyone for joining us on the call today and also for your support of Alico throughout the year. We really look forward to speaking with you about our first quarter results in February, and wish everyone a Merry Christmas.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.