UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Commission File Number: 0-261

Alico, Inc.

Registrant’s telephone number, including area code:239-226-2000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.R ☑ Yes£ ☐  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).R Yes£ ☑ Yes☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

£☐ YesR ☑ No

There were 8,277,5138,281,352 shares of common stock, par value $1.00 per share, outstanding as of May 7,August 3, 2015.

ALICO, INC.

INDEX TO FORM 10-Q

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.Statements

ALICO, INC.

CONDENSED COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(in thousands, except per share amounts)

See accompanying notes

ALICO, INC.

CONDENSED COMBINED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

See accompanying notes

ALICO, INC.

CONDENSED COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

See accompanying notes

ALICO, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Description of Business and Basis of Presentation

Description of Business  and Basis of Presentation

Alico, Inc. (“Alico”), andtogether with its subsidiaries (collectively, the “Company”“Company, we, or our”), areis an agribusiness and land management company. The Company owns approximately 121,000 acres of land in twelve Florida counties (Alachua, Charlotte, Collier, Desoto, Glades, Hardee, Hendry, Highlands, Lee, Martin, Osceola and Polk) and includes approximately 90,000 acres of mineral rights. In addition to principal lines of business in citrus groves, improved farmland, leasing, cattle ranching and conservation, and related support operations, we also receive royalties from rock mining and oil production.

Common Control Acquisition between the Company and 734 Citrus Holdings, LLC

Effective February 28, 2015, the Company completed the merger (“Merger”) with 734 Citrus Holdings, LLC (“Silver Nip Citrus”) pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) with 734 Sub, LLC, a wholly owned subsidiary of the Company (“Merger Sub”), Silver Nip Citrus and, solely with respect to certain sections thereof, the equity holders of Silver Nip Citrus. The ownership of Silver Nip Citrus was held by 734 Agriculture, 74.89%, Mr. Clay Wilson, Chief Executive Officer of the Company, 5% and an entity controlled by Mr. Clay Wilson owned, 20.11%. Silver Nip Citrus entities include 734 Harvest, LLC, 734 Co-op Groves, LLC, 734 LMC Groves, LLC and 734 BLP Groves, LLC.

On November 19, 2013, 734 Agriculture and its affiliates, including 734 Investors, acquired approximately 51% of the Company’s common stock. 734 Agriculture is the sole managing member of 734 Investors. By virtue of their ownership percentage, 734 Agriculture is able to elect all of the Directors and, consequently, control Alico. 

734 Agriculture hashad control over both Silver Nip Citrus and the Company, and therefore the Merger was treated as a common control acquisition.

At closing of the Merger, Merger Sub merged with and into Silver Nip Citrus, with Silver Nip Citrus and its affiliates surviving the Merger as a wholly owned subsidiarysubsidiaries of the Company. Pursuant to the Merger Agreement, at closing, the Company issued 923,257 shares (the “Stock Issuance”) of the Company’s common stock, par value $1.00 per share, (the “Common Stock”), to the holders of membership interests in Silver Nip Citrus. Silver Nip Citrus’ outstanding net indebtedness at the closing of the Merger was approximately $40,278,000 and other liabilities totaled $6,952,000. The Company acquired assets at netwith a book value of $65,739,000 and total net assets of $18,509,000.$18,470,000. The shares of common stock issued were recorded at the carrying amount of the net assets transferred. The holders of membership interests in Silver Nip Citrus will also receive additional Company shares based on the value of the proceeds received by the Company from the sale of citrus fruit harvested on Silver Nip Citrus’ real property following the conclusion of the 2014-2015 citrus harvest season.

TheFor the nine months ended June 30, 2015, the Company expensed $811,000incurred approximately $894,000 in professional and legal feescosts in connection with the MergerMerger. These costs are included in corporate, general and administrative expenses in the sixCondensed Combined Consolidated Statements of Operations and Comprehensive Income for the nine months ended March 31,June 30, 2015.

Basis of Presentation

BecauseThe Company has prepared the accompanying financial statements on a consolidated and combined basis. These accompanying unaudited condensed combined consolidated interim financial statements, which are referred to herein as the “Financial Statements”, have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to Article 10-01 of Regulation S-X of the U.S. Securities and Exchange Commission ("SEC") for interim financial information. These Financial Statements do not include all of the disclosures required for complete annual financial statements and, accordingly, certain information, footnotes and disclosures normally included in annual financial statements, prepared in accordance with U.S. GAAP, have been condensed or omitted in accordance with SEC rules and regulations. The Company believes that the disclosures made are adequate to make the information not misleading. Accordingly, the Financial Statements should be read in conjunction with the Company's audited Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2014, filed with the SEC on December 12, 2014.

The Financial Statements presented in this Form 10-Q are unaudited; however, in the opinion of management, such Financial Statements include all adjustments, consisting solely of normal recurring adjustments, necessary to present fairly the financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP applicable to interim periods.

Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the current fiscal year ending September 30, 2015. All intercompany transactions and account balances between the consolidated and combined businesses have been eliminated.

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 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 based upon future events. The Company evaluates the 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.

As the Company and Silver Nip Citrus were under common control at the time of the Merger, we are required under generally accepted accounting principles in the United States (“GAAP”)U.S. GAAP to account for this Common Control Acquisitioncommon control acquisition in a manner similar to the pooling of interest method of accounting. Under this method of accounting, our balance sheet reflectsCondensed Combined Consolidated Balance Sheets as of June 30, 2015 and September 30, 2014 reflect Silver Nip Citrus’ historical carryover basis in the assets and liabilities instead of reflecting the fair market value of the assets and liabilities. We have also retrospectively recast our financial statements to combine the operating results of the Company and Silver Nip Citrus from the date common control began, November 19, 2013.

The accompanying (a) condensed combined consolidated balance sheet as of September 30, 2014, which has been derived from financial statements, and (b) unaudited condensed combined consolidated interim financial statements (the “Financial Statements”) of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Financial Statements include all adjustments, consisting of normal and recurring adjustments, which in the opinion of management were necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. The results of the interim period are not necessarily indicative of the results for any other interim periods or the entire fiscal year.

Due to the factSince Silver Nip Citrus’ fiscal year end is June 30, the Company’s condensed combined consolidated financial condition as of March 31,June 30, 2015 includes the financial condition of Silver Nip Citrus as of DecemberMarch 31, 2014,2015, and the Company’s condensed combined consolidated results of operations for the sixthree and nine months ended March 31,June 30, 2015 includes the Silver Nip Citrus results of operations for the sixthree and nine months ended December 31, 2014. The Company’s combined consolidated financial condition as of March 31, 2014 reflects the financial condition of Silver Nip Citrus as of December 31, 2013, and the2015. The Company’s condensed combined consolidated results of operations for the sixthree and nine months ended March 31,June 30, 2014 includes Silver Nip Citrus’ results of operations from November 19, 2013 (the initial date of common control) through DecemberMarch 31, 2013.2014.

The Financial Statements have been presented according to the rules and regulations of the Securities and Exchange Commission (“SEC”), instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information, footnotes and disclosures normally included in annual financial statements, prepared in accordance with GAAP, have been condensed or omitted in accordance with those rules and regulations. The Company believes that the disclosures made are adequate to make the information not misleading. The Financial Statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2014.

Principles of Consolidation

The Financial Statements include the accounts of Alico, Inc. and its subsidiaries.subsidiaries, over which the Company exercises control. The Company’s subsidiaries include: Alico Land Development, Inc., Alico-Agri, Ltd., Alico Plant World, LLC, Alico Fruit Company, LLC (formerly Bowen“Bowen Brothers Fruit Company, LLC”), Alico Citrus Nursery, LLC, Alico Chemical Sales, LLC, 734 Citrus Holdings LLC and Citree Holdings 1, LLC. All significant intercompany accounts and transactions have been eliminated in consolidation.

Noncontrolling Interests in Consolidated Affiliate

The condensed combined consolidated financial statementsFinancial Statements include all assets and liabilities of the less-than-100%-owned affiliate the Company controls, Citree Holdings I, LLC (“Citree”). Accordingly, the Company has recorded a noncontrolling interestsinterest in the equity of such entity. Citree did not have any income or loss for the quarterthree and nine months ended March 31, 2015, and therefore there is no allocation of income or loss to the noncontrolling interest holders based upon the portion of the subsidiary they own.

June 30, 2015.

Business Combinations

The Company accounts for its business acquisitions under the acquisition method of accounting as indicated in ASC No. 805, Business Combinations,“Business Combinations”, which requires the acquiring entity in a business combination to recognize the fair value of all assets acquired, liabilities assumed and any noncontrolling interest in the acquiree, and establishes the acquisition date as the fair value measurement point. Accordingly, the Company recognizes assets acquired and liabilities assumed in business combinations, including contingent assets and liabilities and noncontrolling interest in the acquiree, based on fair value estimates as of the date of acquisition. In accordance with ASC No. 805, the Company recognizes and measures goodwill, if any, as of the acquisition date, as the excess of the fair value of the consideration paid over the fair value of the identified net assets acquired.

When we acquire a business from an entity under common control, whereby the companies are ultimately controlled by the same party or parties both before and after the transaction, it is treated similar to the pooling of interest method of accounting, whereby the assets and liabilities are recorded at the transferring entity’s historical cost instead of reflecting the fair market value of assets and liabilities.

New Accounting Pronouncements

Presentation of Debt Issuance Costs for Term Debt

In April 2015, the FASB issued Accounting Standard Update 2015-03,“Simplifying the Presentation of Debt Issuance Costs” ("ASU 2015-03"). Upon adoption, ASU 2015-03 will require debt issuance costs associated with outstanding term debt to be presented in the balance sheet as a direct reduction in the carrying value of the associated debt liability, consistent with the current presentation of a debt discount. For fees paid to lenders to secure revolving lines of credit, such fees will continue to be presented as a deferred charge (asset) on the balance sheet. Under current guidance prior to ASU 2015-03, all debt issuance costs, for both term debt and revolving lines of credit, are presented in the balance sheet as a deferred charge (asset). ASU 2015-03 is limited to the presentation of debt issuance costs and will not affect the recognition and measurement of debt issuance costs. Upon adoption, ASU 2015-03 must be applied on a retrospective basis and is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted. Since ASU 2015-03 involves balance sheet presentation only, its adoption will not have any impact on the Company's results of operations, financial condition, or cash flows. The Company is evaluating a decision to early adopt ASU 2015-03 prior to its mandatory effective date.

Simplified Measurement Date for Defined Benefit Plan Assets and Obligations

In April 2015, the FASB issued Accounting Standard Update 2015-04, “Practical Expedient for the Measurement Date of an Employer's Defined Benefit Obligation and Plan Assets” ("ASU 2015-04"). Upon adoption, ASU 2015-04 will allow employers with fiscal year ends that do not coincide with a calendar month end to make an accounting policy election to measure defined benefit plan assets and obligations as of the end of the month closest to their fiscal year ends (i.e., on an alternative measurement date). An employer that makes this election must consistently apply the practical expedient from year to year and to all of its defined benefit plans. ASU 2015-04 will be effective for interim and fiscal periods beginning after December 15, 2015; prospective application is required and early adoption is permitted. The Company's fiscal year end is September 30 and the Company has a defined retirement plan. The Company is currently evaluating the policy election that will be allowed upon the adoption of ASU 2015-04.

Revenue Recognition

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2014-09,“Revenue from Contracts with Customers” (Topic 606), which clarifies the principles for recognizing revenue. The guidance is applicable to all contracts with customers regardless of industry-specific or transaction-specific fact patterns. Further, the guidance requires improved disclosures as well as additional disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The standard is effective for the Company beginning in the first quarter of fiscal 2018, including interim periods within that first fiscal year, and early adoption is now permitted for 2017. Upon becoming effective, the Company will apply the amendments in the updated standard either retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application. The Company is currently evaluating the impact of adopting this standard on its consolidated financial position, results of operations, and cash flows.

Reclassifications

Certain reclassificationsprior year amounts have been madereclassified in the accompanying Financial Statements for consistent presentation to the prior years’ consolidated financial statements to conform to the fiscal year 2015 presentation.current period. These reclassifications had no impact on working capital, net income, stockholders’ equity or cash flows as previously reported.

Seasonality

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates based upon future events. The Company periodically evaluates the estimates. The estimates are based on current and expected economic conditions, historical experience and various other specific assumptions that the Company believes to be reasonable.

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 our fiscal year generally produce the majority of our annual revenue, and our working capital requirements are typically greater in the first and fourth quarters of our fiscal year. The results of the reported periodperiods herein are not necessarily indicative of the results for any other interim periods or the entire fiscal year.

Note 2. Inventories

A summaryInventories consist of the Company’s inventories consisted of the following at March 31, 2015 and September 30, 2014:(in thousands):

Note 3. Property, Buildings and Equipment, Net

Property, buildings and equipment, consistednet consist of the following at March 31, 2015 and September 30, 2014:(in thousands):

Land Purchase

Silver Nip Citrus purchased approximately 1,500 acres of citrus groves that included land, trees and fruit inventory as well as irrigation and other equipment on September 4, 2014. The purchase price was approximately $17,600,000 which was funded through cash plus additional financing of $11,000,000 in term debt (see “Note 7. Long -Term Debt” in the Notes to the Condensed Combined Consolidated Financial Statements (Unaudited)).

Land Sale

Certain Silver Nip Citrus land with a cost of $2,832,159 was classified as held for sale as of September 30, 2014. It was sold during the six month periodnine months ended March 31,June 30, 2015 resulting in a gain on sale of assets of $2,926,553.

Asset Impairment

The Company recorded an impairment loss of approximately $541,000 during the quarternine months ended March 31,June 30, 2015 on property classified as Assets Heldassets held for Sale.sale as of September 30, 2014. The Company entered into a sales contract on February 17, 2015, which triggered the impairment of the property based on the negotiated sales price. The property was closedsold on April 3, 2015 and the Company received approximately $1,509,000 in net sales proceeds.

Note 4. Orange-Co Acquisition

Acquisitions and Dispositions

On December 2, 2014, the Company completed the acquisition of certain citrus and related assets of Orange-Co, LP (“Orange-Co”) pursuant to an Asset Purchase Agreement, which we refer to as the Orange-Co Purchase Agreement, dated as of December 1, 2014 and 51% of the ownership interests of Citree Holdings 1, LLC.Citree. The assets Alicothe Company purchased include approximately 20,263 acres of citrus groves in DeSoto and Charlotte Counties, Florida, which comprise one of the largest contiguous citrus grove properties in the state of Florida. The total purchase price wasTotal assets acquired were approximately $276,673,300,$277,792,000, net of $2,060,000 in cash acquired and $4,838,000 in fair value attributable to noncontrolling interest, including: (1) $147,500,000 in initial cash consideration funded from the proceeds of the sugarcane disposition (see “Note 5. Assets held for sale” in the Notes to the Condensed Combined Consolidated Financial Statements (Unaudited)) and new term loan debt; (2) up to $7,500,000 in additional cash consideration to be released from escrow in equal parts, subject to certain limitations, on December 1, 2015 and June 1, 2016; (3) the refinancing of Orange-Co’s outstanding debt including approximately $91,371,000$92,290,000 in term loan debt and a working capital facility of approximately $27,775,000$27,857,000 and (4) the assumption of certain other liabilities totaling $4,587,000.$4,705,000. On December 1, 2014, Alico deposited an irrevocable standby letter of credit issued by Rabo Agrifinance, Inc., or Rabo, in the aggregate amount of $7,500,000 into an escrow account to fund the additional cash consideration.

The Company acquired Orange-Co to transform our citrus business and meaningfully enhance the Company’s position in the citrus industry. The Company has included the financial results of Orange-Co in the consolidated financial statementsFinancial Statements from the date of acquisition in the Citrus Groves operating segment.acquisition. These results include approximately $37,625,000$72,233,000 in revenue and $7,786,000$18,060,000 in gross profit.

This acquisition was accounted for under the acquisition method of accounting. Accordingly, the Company recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisition were expensed as incurred. The excess of the purchase price over the fair value of assets acquired, net of liabilities assumed, and noncontrolling interests is recognized as goodwill. All goodwill recognized will be deductible for income tax purposes. The initial accounting for the business combination is not complete and adjustments to provisional amounts, or recognition of additional assets acquired or liabilities assumed, may occur as more detailed analyses are completed and additional information is obtained about the facts and circumstances that existed as of the acquisition date. In the Company’s Condensed Combined Consolidated Financial Statements for the period ended June 30, 2015, the total assets acquired and liabilities assumed were based on preliminary information and were subject to adjustment as new information was obtained. During the three months ended June 30, 2015, an adjustment to the fair value of total assets acquired resulted in an increase of approximately $1,000,000.

TheFor the nine months ended June 30, 2015, the Company expensed $3,037,000incurred approximately $3,239,000 in professional and legal feescosts in connection with the Orange-Co acquisition,acquisition. These costs are included in corporate, general and administrative expenses in the sixCondensed Combined Consolidated Statements of Operations and Comprehensive Income for the nine months ended March 31,June 30, 2015.

The following table summarizes the consideration paid for the acquired net assets and the preliminary acquisition accounting for the fair values of the assets recognizedacquired and liabilities assumed, as adjusted, in the Condensed Combined Consolidated Balance Sheets atas of the acquisition date. These balances are subject to change when final asset valuations are obtained and the potential for liabilities has been further evaluated.

The fair value of the consideration paid for the acquisition of the net assets, as adjusted, was as follows:

The unaudited pro-forma information below for the three and sixnine months ended March 31,June 30, 2015 and 2014 gives effect to this acquisition as if the acquisitions had occurred on October 1, 2013. The pro-forma financial information is not necessarily indicative of the results of operations if the acquisition had been effective as of this date.

Acquisition of Citrus Grove

On September 4, 2014, Silver Nip Citrus and TRB Groves, LLC entered into a Purchase and Sale Agreement pursuant to which Silver Nip Citrus purchased all of the assets on a 1,500 acre citrus grove in Charlotte County, FL for a purchase price of approximately $17,624,000. The purchase price was funded from Silver Nip Citrus’ cash and cash equivalents and $11,000,000 in term loans (see “Note 7” to the accompanying Condensed Combined Consolidated Financial Statements). We acquired the citrus acres to increase the size of our citrus groves which we believe strengthens our market position.

The total cost of the acquisition was allocated to the assets acquired based on their estimated respective fair values in accordance with ASC 805, Business Combinations and was accounted for using the acquisition method of accounting.

Note 5.

The results of operations have been included in our combined consolidated statements of operations since September 4, 2014, the date of closing. Pro-forma operating results, as if the Company had completed the acquisition at the beginning of the periods presented, are not significant to the Company’s consolidated financial statements and are not presented.

Assets Held for Saleacquired in the acquisition are as follows:

Sugarcane landLand

On November 21, 2014, the Company completed the sale of approximately 36,000 acres of land used for sugarcane production and land leasing in Hendry County, Florida to Global Ag Properties, LLC (“Global Ag Properties”) for $97,913,921approximately $97,900,000 in cash. We had previously leased approximately 30,600 of these acres to United States Sugar Corporation (“USSC”) (the “USSC Lease”). The USSC Lease was assigned to Global Ag Properties in conjunction with the land sale.

Net proceeds from the sugarcane land sale of approximately $97,126,000 were deposited with a Qualified Intermediary in anticipation of the Orange-Co asset acquisition in a tax deferred like kindlike-kind exchange pursuant to Internal Revenue Code Section §1031 (see “Note 4. Orange-Co Acquisition” in the Notes to the Condensed Combined Consolidated Financial Statements (Unaudited)).§1031.

The sales price is subject to post-closing adjustments over a ten (10)-year period. The Company realized a gain of $42,753,000 on the sale. However,Initially, $29,140,000 of the gain has beenwas deferred due to the Company’s continuing involvement in the property pursuant to a post-closing agreement and the potential price adjustments. The deferral represents the Company’s estimate of the maximum exposure to loss as a result of the continuing involvement. A net gain of $13,613,000approximately$13,613,000 was recognized in the financial statements asCondensed Combined Consolidated Statement of Operations and Comprehensive Income for the sixnine months ended March 31,June 30, 2015.

On May 1, 2015, the Company made a payment of $1,347,000 to Global Ag Properties pursuant to the sales contract. USSC’s rent is tied to the market price of sugar, and this payment is required annually in advance, to supplement the rent paid by USSC in the event that the sugar prices are below certain thresholds. This advance payment is included in other current assets at June 30, 2015.

As a result of the disposition of our sugarcane land, we are no longer involved in sugarcane operations, and, as of November 21, 2014, the Improved Farmland segment was no longer material to our business, however, the sugarcane operation has not been classified as a discontinued operation due to the post-closing adjustments, amongst other involvement, as described above.

Our sugarcane

Note 5. Common Control Acquisition

The Company completed the Merger with Silver Nip Citrus on February 28, 2015 (see “Note 1” to the accompanying Condensed Combined Consolidated Financial Statements). Silver Nip Citrus owns approximately 7,434 acres of land, was classifiedconsisting primarily of citrus groves, in six Florida counties (Polk, Hardee, Osceola, Martin, Highlands and Collier). Substantially all of its revenues derive from citrus operations. As the Company and Silver Nip Citrus were under common control at the time of the Merger, we have combined the operating results of the Company and Silver Nip Citrus from the date common control began.

The Company’s results of operations for the three and nine months ended June 30, 2015 include the Silver Nip Citrus results of operations for the three and nine months ended March 31, 2015. The Company’s results of operations for the three and nine months ended June 30, 2014 include the Silver Nip Citrus results of operations from November 19, 2013 (the initial date of common control) through March 31, 2014.

Separate results for the Company and Silver Nip Citrus for the three and nine months ended June 30, 2015 and 2014 were as assets held for sale as of September 30, 2014.follows :

Note 6. Income Taxes

The Company’s effectiveIncome tax rates were 31.0%expense was approximately $6,227,000 and 38%$791,000 for the sixthree months ended March 31,June 30, 2015 and 2014, respectively. The Company’s effective income tax rates were 44.5% and 43.4% for the three months ended June 30, 2015 and 2014, respectively. Income tax expense was approximately $10,940,000 and $3,236,000 for the nine months ended June 30, 2015 and 2014, respectively. The Company’s effective income tax rates for the nine months ended June 30, 2015 and 2014 were 37.4% and 39.2%, respectively.

During the three months ended June 30, 2015, the Company revised its effective tax rates to reflect the impact of claiming certain deductions on amended federal and state income tax returns filed in prior fiscal years. Other changes to the effective tax rates relate primarily to the nondeductible nature of projected political contributions and lobbying expenses. In addition, there were limitations on certain deductions related to the vesting of the long-term incentive grants for fiscal year 2014, and non-deductible transaction costs related to the Silver Nip Citrus merger for fiscal year 2015.

The Company applies a “more likely than not” threshold to the recognition and nonrecognition of tax positions. A change in judgment related to prior years’ tax positions is recognized in the quarter of such change. The Company had no reserve for uncertain tax positions at March 31,as of June 30, 2015 and September 30, 2014. The Company recognizes interest and/or penalties related to income tax matters in income tax expense and in income taxes payable.

The Internal Revenue Service (“IRS”) is currently auditing Alico’s tax returnreturns for the fiscal yearyears ended September 30, 2013.2013, 2012 and 2011.

Note 7. Long-Term Debt and Lines of Credit

Outstanding debt under the Company’s various loan agreements is presented in the table below:

Refinancing on December 3, 2014

The Company refinanced its outstanding debt on December 3, 2014 in connection with the Orange-Co acquisition (see “Note 4. Orange-Co Acquisition” in4” to the Notes to theaccompanying Condensed Combined Consolidated Financial Statements (Unaudited))Statements). The debt facilities include $114,688,000$113,125,000 in fixed rate term loans, $56,781,000$56,063,000 in variable rate term loans and 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 approximately 38,700 gross acres of citrus groves and 14,000 gross acres of farmland. The WCLC is secured by current assets and certain other personal property owned by the Company.

The term loans are subject to quarterly principal payments of $2,281,250 and mature November 1, 2029. The fixed rate term loans bear interest at 4.15%, per annum, and the variable rate term loans bear interest at a rate equal to 90 day LIBOR plus 150 basis points (the “LIBOR spread”). The LIBOR spread is subject to adjustment by the lender on May 1, 2017 and every two years thereafter. Interest on the term loans is payable quarterly.

The Company may prepay up to $8,750,000 of the fixed rate term loan principal annually without penalty, and any such prepayments shall be applied to reduce subsequent mandatory principal payments. The maximum annual prepayment has been made for the current fiscal year. The variable rate term loans may be prepaid without penalty.

The RLOC bears interest at a floating rate equal to 90 day LIBOR plus 150 basis points payable quarterly. The LIBOR spread is subject to adjustment by the lender on May 1, 2017 and every two years thereafter. Outstanding principal, if any, is due at maturity on November 1, 2019. The RLOC is subject to an annual commitment fee of 25 basis points on the unused portion of the line. The RLOC is available for funding general corporate needs.

The WCLC is a revolving credit facility and is available for funding working capital and general corporate needs. The interest rate on the WCLC is based on the one month LIBOR plus a spread. The spread is adjusted quarterly based on our 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 WCLC facility matures November 1, 2016.

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 our debt service coverage ratio for the preceding quarter and can vary from 20 to 30 basis points.

The WCLC agreement provides for Rabo to issue up to $20,000,000 in letters of credit on ourthe Company’s behalf. At March 31,As of June 30, 2015, there was $17,498,500 in outstanding letters of credit which correspondingly reduced our availability under the line of credit.

The Company capitalized approximately $2,834,000 of debt issuancefinancing costs and recognized a loss on extinguishment of debt of approximately $585,000. Deferred financing costs are capitalized and amortized to interest expense over the applicable term of the loan. The capitalized deferred debt financing costs are included in other assets in the Condensed Combined Consolidated Balance Sheet as of June 30, 2015. The loss on extinguishment of debt is included in other income (expense), net in the Condensed Combined Consolidated Statement of Operations and Comprehensive Income for the nine months ended June 30, 2015.

The facilities above are subject to various covenants including the following financial covenantscovenants: (1) minimum debt service coverage ratio of 1.10 to 1.00, (2) tangible net worth of at least $160,000,000 increased annually by 10% of consolidated net income for the preceding year, (3) minimum current ratio of 1.50 to 1.00, (4) debt to total assets ratio not greater than .625 to 1.00, and, solely in the case of the WCLC, (5) a limit on capital expenditures of $30,000,000 per fiscal year. The Company iswas in compliance with all covenants at March 31,as of June 30, 2015.

Debt Prior to Refinancing

Prior to the December 3, 2014 refinancing, the Company had a $34,000,000 term loan and a $60,000,000 revolving line of credit (“Old RLOC”) with Rabo.

The term loan required quarterly payments of interest at a floating rate of one month LIBOR plus 225 basis points and quarterly principal payments of $500,000. The term loan was refinanced in connection with the Orange-Co acquisition.

The Old RLOC had an interest rate based on one month LIBOR plus a spread. The spread was determined based upon our debt service coverage ratio for the preceding fiscal year and could vary from 195 to 295 basis points. The rate was LIBOR plus 195 basis points at the date of the refinancing and September 30, 2014. Interest on the Old RLOC was payable quarterly. The Old RLOC was subject to an unused commitment fee of 20 basis points on the annual average unused availability. There was no balance outstanding at the time of the refinancing or September 30, 2014.

Loan origination feesDebt financing costs incurred as a result of entry into the Rabo credit facility loan agreement, including appraisal fees, document stamps, legal feescosts and lender fees of approximately $1,202,000 were capitalized in fiscal year ended September 30, 2010 and were being amortized to interest expense over the term of the loan agreement.loan. The unamortized balance of the loan origination feesdeferred financing costs at the time of December 3, 2014 refinancing waswere approximately $697,000 of which approximately $396,000$375,000 was written off and expensed as a loss on extinguishment of debt and approximately $301,000 will be amortized over the applicable terms of the new loans.

At September 30, 2014, the Company was in compliance with the financial debt covenants and terms of the Rabo loan agreement.

Silver Nip Citrus Debt

Silver Nip Citrus has fivevarious loans payable to Prudential Mortgage Capital Company, LLC (“Prudential”) as described below.

There are two fixed rate term loans with total outstanding balances of $26,970,000$25,930,000 and $27,550,000 at DecemberMarch 31, 20142015 and June 30, 2014, respectively. Principal of $290,000 is payable quarterly. Interest accrues at 5.35% per annum and is also payable quarterly. The Company may prepay up to $5,000,000 of principal without penalty. The loan isloans are secured by real estate in Collier, Hardee, Hendry, Highlands, Martin, Osceola and Polk Counties, Florida.

In connection with the purchase of 1,500 acres of citrus grove on September 4, 2014 (see “Note 3. Property, Buildings and Equipment, Net” in the Notes4” to the Condensed Combined Consolidated Financial Statements (Unaudited)),Statements) Silver Nip Citrus has a fixed rate term loan with Prudential with an outstanding balance of $5,500,000 at December$5,445,000 as of March 31, 20142015 that bears interest at the rate of 3.85%. per annum. Principal in the amount of $55,000 is payable quarterly together with accrued interest. The loan isloans are secured by real estate in Charlotte County, Florida.

Silver Nip Citrus also has a fixed rate term loan with Prudential with an outstanding balance of $5,500,000$5,445,000 at DecemberMarch 31, 20142015 that bears interest at the rate of 3.45%. per annum. The rate is subject to adjustment on September 1, 2019 and every five years thereafter until maturity. Principal of $55,000 is payable quarterly together with accrued interest. The loan is secured by real estate in Charlotte County, Florida.

Silver Nip Citrus hashad a $6,000,000 revolving line of credit with Prudential. Outstanding balances were $5,736,000$3,348,000 and $3,160,000 at DecemberMarch 31, 20142015 and June 30, 2014, respectively. The interest rate on the line is based on the three month LIBOR rate plus 275 basis points. Interest is payable semi-annually with outstanding principal due at maturity.

The Silver Nip Citrus facilities are subject to a financial covenant requiring a current ratio of at least 2.00 to 1.00 measured at the end of each fiscal year. The Company was in compliance with all covenants related to the Silver Nip debt at March 31, 2015 and June 30, 2014.

The Silver Nip Citrus facilities are personally guaranteed by George Brokaw, Remy Trafelet and Clayton Wilson.

Modification of Credit Agreements

The Silver Nip Citrus line of credit with Prudential was paid in full and terminated on April 28, 2015. Rabo has agreed, subject to certain conditions, that the Company may loan Silver Nip Citrus up to $7,000,000 on a revolving basis. These advances would be funded from either cash on hand or draws on the Company’s WCLC.

Silver Nip has provided a $7,000,000 limited guaranty and security agreement granting Rabo a security interest in crops, accounts receivable, inventory and certain other assets.

This modification required the amendment of various Prudential and Rabo loan documents and mortgages.

Outstanding debt obligations under the Company’s various loan agreements is presented in the tables below:

Debt Maturities

Maturities of the Company’s outstanding debt as of June 30, 2015 were as follows at March 31, 2015:follows:

Interest costs expensed and capitalized to property, buildings and equipment were as follows: