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ALCO > SEC Filings for ALCO > Form 8-K on 22-May-2014All Recent SEC Filings

Show all filings for ALICO INC

Form 8-K for ALICO INC


22-May-2014

Entry into a Material Definitive Agreement


Item 1.01 Entry into a Material Definitive Agreement.

Alico, Inc. (the "Company") entered into a triple net Agricultural Lease on May 19, 2014 (the "Lease") with its sole sugarcane customer, United States Sugar Corporation (the "Tenant") of approximately 30,600 gross acres of land in Hendry County, Florida used for sugarcane farming which includes 19,181 acres planted or plantable to sugar ("Net Cane Acres"). As a result of the Lease, the Company will no longer be directly engaged in sugarcane farming.

The term of the Lease is ten (10 years) which may be extended by either party for three (3) additional one year periods, except with respect to a specific portion of the leased premises (4,561 Net Cane Acres) which has a five (5) year term which may be extended by either party for an additional year but can be terminated by the Company at any time after one year. The Lease includes various covenants, indemnities, defaults, termination rights, and other provisions customary for lease transactions of this nature.

The annual base rent under the Lease is $3,548,485 due and payable to the Company on or before the first day of each year, and the Tenant is obligated to pay additional rent per Net Cane Acre annually if the year-end average net selling price per hundred weight is greater than or equal to $28. This effectively increases the rent in the event sugar prices rise in the future. The Lease also provides for a one-time reimbursement to the Company, at book value, for costs to plant sugarcane, growing costs and purchase of certain rolling stock used in the sugarcane operation.

The Company believes that the Lease will reduce both operational and production risks while eliminating capital expenditures related to planting costs and farming equipment. The Lease will increase the Company's free cash flow allowing for investment in other opportunities while also allowing the Company to participate in future rising sugar prices, if any. The Company expects this lease transaction to result in a modest increase in operating income, decrease earnings before interest, taxes, depreciation and amortization (EBITDA) and increase free cash flow.

The foregoing description of the Lease does not purport to be complete and is qualified in its entirety by reference to the Lease, a copy of which will be filed with the Company's next Quarterly Report on Form 10-Q.

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