UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
__X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For three months ended November 30, 2002.
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _______________.
Commission file number 0-261.
ALICO, INC.
(Exact name of registrant as specified in its charter)
Florida 59-0906081
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
P. O. Box 338, La Belle, FL 33975
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code 863/675-2966
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.
Yes X No
There were 7,064,829 shares of common stock, par value $1.00
per share, outstanding at January 14, 2002.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ALICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - See Accountants' Review Report)
Three Months Ended November 30,
2002 2001
_______________________________
Revenue:
Citrus $ 1,620,698 $ 1,505,998
Sugarcane 2,748,216 2,255,263
Ranch 2,117,870 3,589,560
Rock products and sand 517,478 454,797
Oil lease and land rentals 246,315 169,425
Forest products 49,958 104,484
Retail land sales 83,897 39,450
___________ ___________
Total revenue 7,384,432 8,118,977
___________ ___________
Cost of sales
Citrus production,
harvesting and marketing 1,580,421 1,485,057
Sugarcane production and
harvesting 2,224,093 1,854,842
Ranch 2,213,779 3,010,443
Retail land sales 68,714 33,682
____________ ___________
Total costs of sales 6,087,007 6,384,024
____________ ___________
Gross Profit 1,297,425 1,734,953
General and administration
expenses 1,278,135 1,366,640
____________ ___________
Income from operations 19,290 368,313
Other income (expenses):
Profit on sales of real estate 451,035 2,779,340
Interest and investment income 276,063 497,479
Interest expense (540,769) (514,243)
Other 143,681 149,726
____________ ___________
Total other income, net 330,010 2,912,302
____________ ___________
Income before income taxes 349,300 3,280,615
Provision for income taxes 91,062 276,963
____________ ___________
Net income 258,238 3,003,652
____________ ___________
____________ ___________
Weighted average number
of shares outstanding 7,096,644 7,055,720
____________ ___________
____________ ___________
Per share amounts:
Basic $ .04 $ .43
Fully diluted $ .04 $ .43
Dividends $ .35 $ 1.00
See accompanying Notes to Condensed Consolidated Financial
Statements.
ALICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(See Accountants' Review Report)
November 30, August 31,
2002 2002
(Unaudited)
____________ __________
ASSETS
Current assets:
Cash and cash investments $ 12,663,658 $ 10,139,659
Marketable securities 20,295,222 21,417,046
Accounts receivable 7,411,379 9,460,834
Mortgage and notes receivable 2,451,340 2,451,340
Inventories 22,076,982 21,671,964
Other current assets 921,769 1,126,483
____________ ___________
Total current assets 65,820,350 66,267,326
Notes receivable, non-current 2,688,835 2,693,186
Land held for development and sale 16,601,451 16,786,717
Investments 908,049 908,049
Property, buildings and equipment 145,194,423 142,354,775
Less: Accumulated depreciation (38,700,857) (37,100,353)
____________ ____________
Total assets $192,512,251 $191,909,700
____________ ____________
____________ ____________
ALICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(See Accountants' Review Report)
(Continued)
November 30, August 31,
2002 2002
LIABILITIES (Unaudited)
____________ ____________
Current liabilities:
Accounts payable $ 446,480 $ 1,437,756
Accrued ad valorem taxes 2,086,987 1,523,980
Current portion of notes payable 3,318,524 3,318,524
Accrued expenses 1,277,009 1,168,652
Deferred income taxes 946,176 1,038,727
Due to profit sharing - 284,649
Other current liabilities 777,330 770,721
____________ ____________
Total current liabilities 8,852,506 9,543,009
Deferred revenue - 113,532
Notes payable 55,101,100 52,657,508
Deferred income taxes 9,847,461 9,727,889
Deferred retirement benefits 209,766 119,247
Other non-current liability 3,785,418 3,640,593
Donation payable 2,917,819 2,890,423
____________ ____________
Total liabilities 80,714,070 78,692,201
____________ ____________
STOCKHOLDERS' EQUITY
Common stock $ 7,104,906 $ 7,080,344
Additional paid in capital 2,284,539 1,715,616
Accumulated other comprehensive loss (221,036) (432,577)
Retained earnings 102,629,772 104,854,116
____________ ____________
Total stockholders' equity 111,798,181 113,217,499
____________ ____________
Total liabilities and
stockholders' equit $192,512,251 $191,909,700
____________ ____________
____________ ____________
See accompanying Notes to Condensed Consolidated Financial
Statements.
ALICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(See Accountants' Review Report)
Accumulated
Common Stock Other Additional
Shares Retained Comprehensive Paid in
Issued Amount Earnings Income Capital Total
_________ __________ ___________ _______ __________ ____________
Balances,
August 31, 2001 7,044,513 $7,044,513 $104,378,151 $ 871,077 $331,617 $112,625,358
_______________
Comprehensive income:
Net income for the year
ended August 31, 2002 - - 7,535,005 - - 7,535,005
Unrealized losses on
securities, net of taxes
and reclassification adjustment - - - (1,303,654) - (1,303,654)
___________
Total comprehensive income: 6,231,351
Dividends paid - - (7,059,040) - - (7,059,040)
Stock options exercised 35,831 35,831 - - 493,197 529,028
Stock based compensation - - - - 890,802 890,802
_________ __________ ___________ ________ ____________
Balances,
August 31, 2002 7,080,344 $7,080,344 $104,854,116 $(432,577) $1,715,616 $113,217,499
_______________
Comprehensive income:
Net income for the three months
ended November 30, 2002 - - 258,238 - - 258,238 Unrealized gains on
securities, net of taxes
and reclassification adjustment - - - 211,541 - 211,541
___________
Total comprehensive income: 469,779
Dividends paid - - (2,482,582) - - (2,482,582)
Stock options exercised 24,562 24,562 - - 359,178 383,740
Stock based compensation - - - - 209,745 209,745
_________ __________ ___________ ________ ___________
Balances,
November 30, 2002 (Unaudited) 7,104,906 $7,104,906 $102,629,772 $ (221,036)$2,284,539 $111,798,181
_________ __________ ___________ ________ ___________
_________ __________ ___________ ________ ___________
November 30, August 31,
2002 2002
Disclosure of reclassification amount: _(Unaudited) ___________
Unrealized holding gains (losses)
arising during the period $ 393,717 $(1,774,892)
Less: reclassification adjustment
for gains (losses) included in net
income 182,176 (471,238)
_________ __________
Net unrealized gains (losses) on securities $ 211,541 $(1,303,654)
_________ __________
_________ __________
See accompanying Notes to Condensed Consolidated Financial Statements.
ALICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - See Accountants' Review Report)
Three Months Ended November 30,
2002 2001
_______________________________
Cash flows from operating
activities:
Net income $ 258,238 $3,003,652
Adjustments to reconcile net income
to cash provided from (used for)
operating activities:
Depreciation and amortization 1,685,464 1,770,604
Net decrease in current assets
and liabilities 532,442 (1,337,086)
Deferred income taxes 27,021 (517,241)
Gain on sales of real estate (466,218) (2,785,108)
Stock options granted below
fair market value 209,745 222,714
Other 119,922 20,076
__________ __________
Net cash provided from
operating activities 2,366,614 377,611
__________ __________
Cash flows used for investing
activities:
Purchases of property and equipment (2,270,444) (2,176,516)
Proceeds from sales of real estate 541,027 1,113,702
Proceeds from sales of
property and equipment 156,640 185,662
Purchases of marketable securities (814,251) (1,042,966)
Proceeds from sales of
marketable securities 2,195,312 1,417,338
Notes receivable collections
(additions) 4,351 (21,756)
__________ __________
Net cash used for
investing activities (187,365) (524,536)
__________ __________
Cash flows used for financing
activities:
Repayment of bank loan (6,683,990) (7,271,853)
Proceeds from bank loan 9,127,582 16,696,173
Proceeds from exercising
stock options 383,740 267,584
Dividends paid (2,482,582) (7,059,040)
__________ __________
Net cash provided from
financing activities 344,750 2,632,864
__________ __________
Net increase in cash and
cash investments $2,523,999 $2,485,939
Cash and cash investments:
At the beginning of the period 10,139,659 6,225,088
__________ __________
At the end of the period 12,663,658 8,711,027
__________ __________
__________ __________
Supplemental disclosures of cash
flow information:
Cash paid for interest, net of
amount capitalized $ 337,927 $ 635,971
__________ __________
__________ __________
Cash paid for income taxes $ - $ 605,600
__________ __________
__________ __________
Non-cash investing and financing activities:
Mortgage and notes receivable issued
in exchange for land,
less unamortized discount $ - $ 1,759,459
___________ __________
___________ __________
Fair value adjustments to securities
available for sale $ 257,741 $ 59,962
__________ __________
__________ __________
Income tax effect related to fair
value adjustment $ 46,200 $ 22,563
__________ __________
__________ __________
Reclassification of breeding herd
to property & equipment $ 700,347 $ 515,398
__________ __________
__________ __________
See accompanying Notes to Condensed Consolidated Financial
Statements.
ALICO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(See Accountants' Review Report)
(in thousands except for per share data)
1. Basis of financial statement presentation:
The accompanying condensed consolidated financial statements
include the accounts of Alico, Inc. and its wholly owned
subsidiaries, Saddlebag Lake Resorts, Inc. (Saddlebag) and
Agri-Insurance Company, Ltd. (Agri),after elimination of all
significant intercompany balances and transactions.
The accompanying unaudited condensed consolidated financial
statements have been prepared on a basis consistent with the
accounting principles and policies reflected in the Company's
annual report for the year ended August 31, 2002. In the
opinion of Management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments
(consisting only of normal recurring accruals) necessary for
a fair presentation of its consolidated financial position at
November 30, 2002 and the consolidated results of operations
and cash flows for the three months ended November 30, 2002
and 2001.
The basic business of the Company is agriculture which is of a
seasonal nature and subject to the influence of natural
phenomena and wide price fluctuations. Fluctuation in the
market prices for citrus fruit has caused the Company to
recognize additional revenue from the prior year's crop
totaling $193 in 2002 and $186 in 2001. The results of
operations for the stated periods are not necessarily
indicative of results to be expected for the full year.
Certain items from 2001 have been reclassified to conform to
the 2002 presentation.
2. Real Estate:
Real estate sales are recorded under the accrual method of
accounting. Under this method, a sale is not recognized until
payment is received, including interest, aggregating 10% of
the contract sales price for residential properties and 20%
for commercial properties.
3. Mortgage and notes receivable:
Mortgage and notes receivable arose from real estate sales.
The balances at November 30, 2002 and August 31, 2002 are as
follows:
November 30, August 31,
2002 2002
(Unaudited)
________ ________
Mortgage notes receivable
on retail land sales $ 194 $ 193
Mortgage notes receivable
on bulk land sales 4,926 4,926
Other notes receivable 20 25
________ ________
Total mortgage notes receivable $ 5,140 $ 5,144
Less current portion 2,451 2,451
________ ________
Non-current portion $ 2,689 $ 2,693
________ ________
________ ________
4. Inventories:
A summary of the Company's inventories is shown below:
November 30, August 31,
2002 2002
(Unaudited)
________ _________
Unharvested fruit crop on trees $ 9,856 $ 8,599
Unharvested sugarcane 5,103 5,274
Beef cattle 6,722 7,507
Sod 396 292
________ _________
Total inventories $ 22,077 $ 21,672
________ _________
________ _________
Subject to prevailing market conditions, the Company may hedge
a portion of its beef inventory by entering into cattle futures
contracts to reduce exposure to changes in market prices. Any
gains or losses anticipated under these agreements were
deferred, with the cost of the related cattle being adjusted
when the contracts are settled. At November 30, 2002, the
Company had no open positions.
5. Income taxes:
The provision for income taxes for the quarters ended
November 30, 2002 and 2001 is summarized as follows:
Three Months Ended November 30,
2002 2001
(Unaudited) (Unaudited)
______________________________
Current:
Federal income tax $ 55 $ 698
State income tax 9 119
__________ __________
64 817
__________ __________
Deferred:
Federal income tax 23 (468)
State income tax 4 (72)
__________ __________
27 (540)
__________ __________
Total provision for
income taxes $ 91 $ 277
__________ __________
__________ __________
6. Indebtedness:
The Company has financing agreements with commercial banks that
permit the Company to borrow up to $54 million. Financing
agreements allowing the Company to borrow up to $41 million
are due in 2004, and up to $3 million which is due on demand.
In December 2001, the Company entered into an additional
financing agreement to borrow $10 million to be paid in equal
principal installments over five years with interest to be
paid quarterly. The outstanding debt under these agreements
was $43.8 million and $41.0 million at November 30 and at
August 31, 2002 respectively. In March 1999, the Company
mortgaged 7,680 acres for $19 million in connection with a
$22.5 million acquisition of producing citrus and sugarcane
operations. The total amount of long-term debt at November 30,
2002 and August 31, 2002 was $55.1 million and $52.7 million
respectively.
Maturities of the indebtedness of the Company over the next
five years are as follows : 2003- $3,319; 2004- $37,085;
2005- $3,315; 2006- $3,312; 2007- $3,315; and $8,074 there-
after.
Interest cost expensed and capitalized during the three months
ended November 30, 2002 and 2001 was as follows:
2002 2001
________ ________
Interest expensed $ 541 $ 514
Interest capitalized 60 51
________ ________
Total interest cost $ 601 $ 565
________ ________
________ ________
7. Other non-current liability:
Alico formed a wholly owned insurance subsidiary, Agri
Insurance Company, Ltd. (Bermuda) ("Agri") in June of 2000.
Agri was formed in response to the lack of insurance
availability, both in the traditional commercial insurance
markets and governmental sponsored insurance programs, suitable
to provide coverages for the increasing number and potential
severity of agricultural related events. Such events include
citrus canker, crop diseases, livestock related maladies and
weather. Alico's goal included not only prefunding its
potential exposures related to the aforementioned events, but
also to attempt to attract new underwriting capital if it is
successful in profitably underwriting its own potential risks
as well as similar risks of its historic business partners.
Alico primarily utilized its inventory of land and additional
contributed capital to bolster the underwriting capacity of
Agri. As Agri has converted certain of the assets contributed
by Alico to cash, book and tax differences have arisen
resulting from differing viewpoints related to the tax
treatment of insurance companies for both federal and state
tax purposes. Due to the historic nature of the primary assets
contributed as capital to Agri and the timing of the sales of
certain of those assets by Agri, management has decided to
record a contingent liability, providing for potential
differences in the tax treatment of sales of Agri's assets.
Management's decision has been influenced by perceived changes
in the regulatory environment.
8. Dividends:
On October 11, 2002 the Company declared a year-end dividend
of $.35 per share, which was paid on October 25, 2002.
9. Disclosures about reportable segments:
Alico, Inc. has three reportable segments: citrus, sugarcane,
and ranching. The commodities produced by these segments are
sold to wholesalers and processors who prepare the products
for consumption. The Company's operations are located in
Florida.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies.
Alico, Inc. evaluates performance based on profit or loss from
operations before income taxes. Alico, Inc.'s reportable
segments are strategic business units that offer different
products. They are managed separately because each segment
requires different management techniques, knowledge and skills.
The following table presents information for each of the
Company's operating segments as of and for the three months
ended November 30, 2002:
________________________________________________
Consol
Citrus Sugarcane Ranch Other* Total
________________________________________________
Revenue $ 1,621 2,748 2,118 1,768 8,255
Costs and
expenses 1,581 2,224 2,214 1,887 7,906
Depreciation and
amortization 593 592 364 136 1,685
Segment
profit (loss) 40 524 (96) (119) 349
Segment assets 53,388 50,461 24,169 64,494 192,512
The following table presents information for each of the
Company's operating segments as of and for the three months
ended November 30, 2001:
________________________________________________
Consol
Citrus Sugarcane Ranch Other* Total
________________________________________________
Revenue $ 1,506 2,255 3,590 4,198 11,549
Costs and
expenses 1,485 1,855 3,011 1,917 8,268
Depreciation and
amortization 604 660 381 126 1,771
Segment profit 21 400 579 2,281 3,281
Segment assets 54,749 53,042 20,372 54,096 182,259
*Consists of rents, investments, real estate activities and
other such items of a general corporate nature.
10. Stock Option Plan
On November 3, 1998, the Company adopted the Alico, Inc.,
Incentive Equity Plan (The Plan) pursuant to which the Board
of Directors of the Company may grant options, stock
appreciation rights, and/or restricted stock to certain
directors and employees. The Plan authorizes grants of shares
or options to purchase up to 650,000 shares of authorized but
unissued common stock. Stock options granted have a strike
price and vesting schedules which are at the discretion of the
Board of Directors and determined on the effective date of the
grant. The strike price cannot be less than 55% of the market
price.
Weighted
Weighted average
average remaining
exercise contractual
Options price Life (in years)
_______ _________ _______________
Balance outstanding,
August 31, 2000 49,742 $14.62 8
Granted 51,074 14.62 _______________
Exercised 16,686 14.62 _______________
_______ _________
Balance outstanding,
August 31, 2001 84,130 14.62 9
_______________
Granted 69,598 15.68 _______________
Exercised 35,831 14.76
_______ _________
Balance outstanding,
August 31, 2002 117,897 15.20 8
_______________
Granted 67,280 15.68 _______________
Exercised 24,562 15.62
_______ _________
Balance outstanding,
November 30, 2002 160,615 15.34
_______ _________
_______ _________
On November 30, 2002, there were 160,615 shares exercisable and
412,306 shares available for grant.
11. Future Application of Accounting Standards
In June 2002, the FASB issued SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities". This
statement addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in
a Restructuring)." The statement requires that a liability for
costs associated with an exit or disposal activity be
recognized and measured initially at fair value when the
liability is incurred rather than at the plan commitment date.
An exit or disposal activity is defined as including the sale
or termination of a line of business, the closure of a business
in a particular location, the relocation of a business, change
in management structure or a fundamental reorganization that
affects the nature and focus of operations. The Statement is
effective for any exit or disposal activities that are
initiated after December 31, 2002.
The adoption of this statement is not expected to have any
impact on the financial position or results of operations of
the Company.
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES:
Working capital increased to $56.9 million at November 30, 2002,
up from $56.7 million at August 31, 2002. As of November 30,
2002, the Company had cash and cash investments of $12.7
million compared to $10.1 million at August 31, 2002.
Marketable securities decreased to $20.3 million from $21.4
million during the same period. The ratio of current assets to
current liabilities increased to 7.44 to 1 at November 30, 2002
up from 6.94 to 1 at August 31, 2002. Total assets increased by
$600 thousand to $192.5 million at November 30, 2002, compared
to $191.9 million at August 31, 2002.
Management believes that the Company will be able to meet its
working capital requirements for the foreseeable future with
internally generated funds. In addition, the Company has
credit commitments which provide for revolving credit of up to
$54.0 million, of which $10.2 million was available for the
Company's general use at November 30, 2002 (see Note 6 to
consolidated financial statements).
RESULTS OF OPERATIONS:
The basic business of the Company is agriculture, which is of
a seasonal nature and is subject to the influence of natural
phenomena and wide price fluctuations. The results of
operations for the stated periods are not necessarily
indicative of results to be expected for the full year.
Net income for the three months ending November 30, 2002
decreased by $2.7 million when compared to the first quarter
of the prior year. This was primarily due to a decrease in
earnings from land sales for the quarter ended November 30,
2002 when compared to the quarter ended November 30, 2001
($450 thousand vs. $2.8 million during the first three months
of fiscal 2003 and 2002, respectively).
Income from operations decreased to $19 thousand for the first
quarter of fiscal 2003 from $368 thousand for the first quarter
of fiscal 2002. The decline was primarily due to a decrease in
earnings from agricultural operations. Specifically, ranch
earnings are down compared to the same period a year ago.
Citrus
______
Citrus earnings were $40 thousand for the first quarter of
fiscal 2003 as compared to $21 thousand during the first
quarter of fiscal 2002. Recognition of revenue from the prior
year's crop totaled $193 thousand in fiscal 2003 vs. $186
thousand in the first quarter of fiscal 2002 (see Note 1 to
Condensed Consolidated Financial Statements). While it is too
early in the harvest cycle to evaluate current year financial
results for this division, citrus yields are expected to be
lower in fiscal 2003, when compared to fiscal 2002. The
anticipated production decline is primarily the result of
disease damage in prior years.
Sugarcane
_________
Sugarcane earnings were $524 thousand for the first quarter of
fiscal 2003, an increase of $124 thousand over the $400
thousand earnings during the first quarter of fiscal 2002.
More acres were harvested during the first quarter of fiscal
2003 than fiscal 2002. This difference is largely due to the
timing of the harvest.
Ranching
________
Ranch earnings decreased during the first quarter of 2003 when
compared to the same period a year ago (($96 thousand) vs.
$579 thousand for the three months ended November 30, 2002 and
2001, respectively). The number of cattle sold decreased by
40% during the first quarter of fiscal 2003 compared to the
same period in 2002. Additionally, costs per head increased
over the prior year due to increased costs of ad valorem taxes,
depreciation, pasture cultivation and feed costs.
General Corporate
_________________
The Company is continuing its marketing and permitting
activities for its land which surrounds the Florida Gulf Coast
University site. At November 30, 2002, there were sales
contracts for over 5,230 acres at various stages in the due
diligence process with potential closing dates varying from a
few months to two years. Potential revenues from the
contracts, if closed, total $147.5 million with terms varying
from cash at closing to ten year mortgage terms.
In Polk County, real estate activities include an option for
the sale of 267 acres for $618 thousand. In Hendry County,
sales contracts for 514 acres total $669 thousand.
In July 2000, the Company formed Agri-Insurance Company, Ltd.
(Agri)a wholly owned subsidiary. The insurance company was
initially capitalized by transferring cash and approximately
3,000 acres of the Lee County property. Through Agri, the
Company has been able to underwrite previously uninsurable
risk related to catastrophic crop and other losses.
Additionally, the insurance company will have access to
reinsurance markets, otherwise inaccessible. The Federal Crop
Insurance Program provides coverage for certain perils e.g.
freeze damage, windstorm, disease, etc. However, the current
Federal Crop Insurance Program does not provide business
interruption coverage. The coverages currently underwritten
by Agri will indemnify the insured for a loss of their revenue
stream resulting from a catastrophic event that would cause a
grove to be replanted. The insurance market is bifurcated
into insurers and reinsurers. Reinsurers provide wholesale
insurance coverage to the industry. Some specialized
reinsurers will only deal with insurance companies. As a
result, the only way to access the wholesale insurance market
is through the formation of a captive insurance company.
Reinsurers provide greater insurance coverage flexibility than
can be found in the primary insurance market.
Agri is in a relatively early stage of financial development.
Therefore, it would be difficult, if not impossible, to
speculate about the impact it could have on our financial
position, results of operations and liquidity in future
periods. Since future coverages that will be written, as
liquidity is generated, will be primarily for the benefit of
Alico, the financial substance of this venture is to insure
risk that is inherent in the Company's existing operations.
To expedite the creation of the capital liquidity necessary to
underwrite the Company's exposure to catastrophic losses,
another 5,600 acres were transferred during fiscal 2001.
Agri underwrote a limited amount of coverage for Ben Hill
Griffin, Inc. during Fiscal 2001, 2002 and 2003.
In August 2002, Agri began insuring all of Alico, Inc., citrus
groves. As Agri gains underwriting experience and increases
its liquidity, it will be able to increase its insurance
programs.
As discussed above and in Note 7 to the Condensed Consolidated
Financial Statements, Alico primarily utilized its inventory of
land and additional contributed capital to bolster the
underwriting capacity of Agri. As Agri has converted certain
of the assets contributed by Alico to cash, book and tax
differences have arisen resulting from differing viewpoints
related to the tax treatment of insurance companies for both
federal and state tax purposes. Due to the historic nature
of the primary assets contributed as capital to Agri and the
subsequent sales of those assets by Agri, management has
decided to record a contingent liability, providing for
potential differences in the tax treatment of certain sales of
Agri's assets. Management's decision has been influenced by
perceived changes in the regulatory environment.
During November 2001, Agri began to close on a 2,500 acres,
$30 .0 million sale, of which 40 acres were transferred in
November 2001 and 1,744 acres were transferred by the end of
December 2001. However, upon mutual consent, 323 acres,
representing $9.6 million were released from the contract and
retained by Agri for sale at a future date. The remaining 393
acres are expected to be transferred by the end of fiscal 2003.
The profits from portions of this transaction, that have closed,
are included in the fiscal 2002 statement of operations under
profit on sales of real estate.
During January 2002, Agri acquired 40 acres of Lee County,
Florida property for $9.5 million. The property is located
near one of the interstate highway access ramps to Florida Gulf
Coast University and the Southwest Florida International
Airport.
In December 2001, the Company agreed to donate $5.0 million to
Florida Gulf Coast University for a new athletic complex,
scholarships and athletic programs. The agreement called for
$1.0 million to be donated in fiscal 2002, and $800 thousand
to be donated each year over the next five years. The entire
donation was accrued and included in general and administrative
expenses in the fiscal 2002 statement of operations.
Critical Accounting Policies and Estimates
__________________________________________
The preparation of the Company's financial statements and
related disclosures in conformity with accounting principles
generally accepted in the United States of America requires
management to make estimates and judgments that affect the
reported amounts of assets and liabilities, revenues and
expenses, and related disclosures of contingent assets and
liabilities. On an on-going basis, management evaluates the
estimates and assumptions based upon historical experience and
various other factors and circumstances. Management believes
that the estimates and assumptions are reasonable in the
circumstances; however, actual results may vary from these
estimates and assumptions under different future circumstances.
The following critical accounting policies that affect the
more significant judgments and estimates used in the
preparation of the consolidated financial statements are
discussed below.
Alico records inventory at the lower of cost or market.
Management regularly assesses estimated inventory valuations
based on current and forecasted usage of the related commodity
and any other relevant factors that affect the net realizable
value.
Based on fruit buyers' and processors' advances to growers,
stated cash and futures markets combined experience in the
industry, management reviews the reasonableness of the citrus
revenue accrual. Adjustments are made throughout the year to
these estimates as relevant information regarding the citrus
market becomes available. Fluctuation in the market prices
for citrus fruit has caused the Company to recognize additional
revenue from the prior year's crop totaling $193 thousand
during fiscal 2003 and $185 thousand in 2002.
In accordance with Statement of Position 85-3 "Accounting by
Agricultural Producers and Agricultural Cooperatives", the cost
of growing crops (citrus and sugarcane) are capitalized into
inventory until the time of harvest. Once a given crop is
harvested, the related inventoried costs are recognized as
cost of sales to provide an appropriate matching of costs
incurred with the related revenue earned.
Cautionary Statement
____________________
Readers should note, in particular, that this Form 10-Q
contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), that involve substantial risks and
uncertainties. When used in this document, or in the documents
incorporated by reference herein, the words "anticipate",
"believe","estimate", "may", "intend" and other words of
similar meaning, are likely to address the Company's growth
strategy, financial results and/or product development programs.
Actual results, performance or achievements could differ
materially from those contemplated, expressed or implied by the
forward-looking statements contained herein. The
considerations listed herein represent certain important
factors the Company believes could cause such results to
differ. These considerations are not intended to represent a
complete list of the general or specific risks that may effect
the Company. It should be recognized that other risks,
including general economic factors and expansion strategies,
may be significant, presently or in the future, and the risks
set forth herein may affect the Company to a greater extent
than indicated.
ITEM 3. Quantitative and Qualitative Disclosures about
Market Risk
No changes
ITEM 4. Controls and Procedures
Evaluation of disclosure controls and procedures
The Company maintains controls and procedures designed to
ensure that information required to be disclosed in the reports
that the Company files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the
Securities and Exchange Commission. Based upon their
evaluation of those controls and procedures performed within
90 days of the filing date of this report, the Chief Executive
and Chief Financial officers of the Company concluded that the
Company's disclosure controls and procedures were adequate.
Changes in internal controls
The Company made no significant changes in its internal
controls or in other factors that could significantly affect
these controls subsequent to the date of the evaluation of
those controls by the Chief Executive and Chief Financial
officers.
FORM 10-Q
PART II. OTHER INFORMATION
ITEMS 1-5 have been emitted as there are no items to report
during this interim period.
ITEM 6. Exhibits and reports on Form 8-K.
(a) Exhibits:
Exhibit 11. Computation of Weighted Average Shares
Outstanding at November 30, 2002.
Exhibit 99. Accountant's Report.
Exhibit 99.1 Certifications.
(b) Reports on Form 8-K.
December 6, 2002
December 9, 2002
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.
(Registrant)
January 14, 2003 W. Bernard Lester
Date President
Chief Operating Officer
(Signature)
January 14, 2003 L. Craig Simmons
Date Vice President
Chief Financial Officer
(Signature)
January 14, 2003 Patrick W. Murphy
Date Controller
(Signature)
EXHIBIT 11
ALICO, INC.
Computation of Weighted Average Shares Outstanding and
basic earnings per share as of November 30, 2002:
Outstanding Total
Date Days Shares (days X shares)
09/01/02 2 7,080,344 14,160,688
09/03/02 1 7,083,592 7,083,592
09/04/02 1 7,089,392 7,089,392
09/05/02 1 7,089,562 7,089,562
09/06/02 3 7,090,492 21,271,476
09/09/02 46 7,093,092 326,282,232
10/25/02 4 7,095,092 28,380,368
10/29/02 2 7,100,406 14,200,812
10/31/02 4 7,101,706 28,406,824
11/04/02 1 7,102,106 7,102,106
11/05/02 26 7,104,906 184,727,556
_____ ___________
Total 91 645,794,608
_____ ___________
_____ ___________
Average outstanding shares
(Total weight / days) 7,096,644
___________
___________
Net income for the three months
ended November 30, 2002 $ 258,238
___________
___________
Earnings per share
(Net income / Average outstanding shares) $.04
___________
___________
EXHIBIT 99
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
______________________________________
The Stockholders and Board of Directors Alico, Inc.:
We have reviewed the condensed consolidated balance sheet of
Alico, Inc. and subsidiaries as of November 30, 2002, and the
related condensed consolidated statements of operations for the
three month periods ended November 30, 2002 and 2001, the con-
densed consolidated statements of stockholders' equity for the
three month period ended November 30, 2002,and the condensed
consolidated statements of cash flows for the three month
periods ended November 30, 2002 and 2001. These condensed
consolidated financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards establi-
shed by the American Institute of Certified Public Accountants.
A review of interim financial information consists principally
of applying analytical review procedures to financial data and
making inquiries of persons responsible for financial and ac-
counting matters. It is substantially less in scope than an
audit conducted in accordance with auditing standards generally
accepted in the United States of America, the objective of
which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our reviews, we are not aware of any material modi-
fications that should be made to the condensed consolidated
financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the
United States of America.
We have previously audited, in accordance with auditing
standards generally accepted in the United States of America,
the consolidated balance sheet of Alico, Inc. and subsidiaries
as of August 31, 2002 and the related consolidated statements
of operations, stockholders' equity and cash flows for the
year then ended (not presented herein); and in our report dated
October 8, 2002 we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed
consolidated balance sheet as of August 31, 2002, is fairly
presented, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
/s/ KPMG LLP
Orlando, Florida
January 4, 2003
CERTIFICATION
I, Ben Hill Griffin, III certify that;
1. I have reviewed this quarterly report on Form 10-Q of
Alico, Inc. (Alico),
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statement made,
in light of the circumstances under which such statements
were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of Alico
as of, and for, the periods presented in this quarterly
report;
4. Alico's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for Alico and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to Alico, including its
consolidated subsidiaries, is made known to us by others
within those entities,particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of Alico's disclosure controls
and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. Alico's other certifying officer and I have disclosed, based
on our most recent evaluation to Alico's auditors and audit
committee of Alico's Board of Directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect Alico's
ability to record, process, summarize and report financial
data and have identified for Alico's auditors any material
weakness in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in Alico's
internal controls; and
6. Alico's other certifying officer and I have indicated in
this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Dated: ________________ /S/ BEN HILL GRIFFIN, III
Ben Hill Griffin, III
Chairman and Chief
Executive Officer
CERTIFICATION
I, L. Craig Simmons certify that;
1. I have reviewed this quarterly report on Form 10-Q of
Alico, Inc. (Alico),
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statement made,
in light of the circumstances under which such statements
were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of Alico
as of, and for, the periods presented in this quarterly
report;
4. Alico's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for Alico and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to Alico, including its
consolidated subsidiaries, is made known to us by others
within those entities,particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of Alico's disclosure controls
and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. Alico's other certifying officer and I have disclosed, based
on our most recent evaluation to Alico's auditors and audit
committee of Alico's Board of Directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect Alico's
ability to record, process, summarize and report financial
data and have identified for Alico's auditors any material
weakness in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in Alico's
internal controls; and
6. Alico's other certifying officer and I have indicated in
this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Dated: ________________ /S/ L. CRAIG SIMMONS
L. Craig Simmons
Vice President and
Chief Financial Office