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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 nine months ended May 31, 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 7,074,966 shares of common stock, par value $1.00 per share,
outstanding at July 15, 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 Nine Months Ended
May 31, 2002 May 31, 2001 May 31, 2002 May 31, 2001
_____________ _____________ _____________ ______________
Revenue:
Citrus $ 9,889,128 $12,658,475 $ 19,083,652 $ 24,175,466
Sugarcane 1,882,782 2,697,707 11,116,222 11,939,228
Ranch 2,535,861 2,156,471 8,138,412 7,907,715
Rock products
and sand 570,417 447,055 1,428,971 1,280,913
Oil lease and
land rentals 308,233 298,838 647,223 671,438
Forest products 110,744 7,700 252,324 35,983
Retail land sales 49,100 53,850 88,550 116,350
___________ __________ ___________ ___________
Total revenue 15,346,265 18,320,096 40,755,354 46,127,093
___________ ___________ ____________ ____________
Cost of sales:
Citrus production,
harvesting and
marketing 7,605,387 9,396,475 16,438,618 19,656,578
Sugarcane production
and harvesting 1,863,944 2,031,410 9,215,828 9,324,038
Ranch 2,433,630 1,445,549 7,301,419 6,679,233
Retail land sales 44,434 48,171 91,000 122,215
___________ __________ ___________ ___________
Total cost of sales 11,947,395 12,921,605 33,046,865 35,782,064
___________ __________ ___________ ___________
Gross Profit 3,398,870 5,398,491 7,708,489 10,345,029
General and administration
expenses 1,296,650 1,043,296 8,537,630 3,089,703
___________ __________ ___________ ___________
Income (loss)
from operations 2,102,220 4,355,195 (829,141) 7,255,326
Other income (expenses):
Profit on sales of real
estate 202,444 425,098 11,529,231 1,475,014
Interest and
investment income 403,478 214,852 1,237,044 946,433
Interest expense (682,486) (647,342) (1,728,105) (2,356,042)
Other (5,915) 49,067 102,010 190,923
___________ ___________ ____________ ____________
Total other income, net (82,479) 41,675 11,140,180 256,328
___________ ___________ ____________ ____________
Income before income taxes 2,019,741 4,396,870 10,311,039 7,511,654
Provision for income taxes 1,588,437 1,425,128 2,159,736 2,444,302
___________ ___________ ____________ ____________
Net income $ 431,304 $ 2,971,742 $ 8,151,303 $ 5,067,352
___________ ___________ ____________ ____________
___________ ___________ ____________ ____________
Weighted average number of shares
outstanding 7,065,053 7,031,585 7,065,053 7,029,023
___________ ___________ ____________ ____________
___________ ___________ ____________ ____________
Per share amounts:
Basic $ .06 $ .42 $ 1.15 $ .72
Fully diluted $ .06 $ .42 $ 1.14 $ .72
Dividends $ - $ - $ 1.00 $ 1.00
See accompanying Notes to Condensed Consolidated Financial Statements.
ALICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(See Accountants' Review Report)
May 31, 2002 August 31, 2001
___(Unaudited)_____________________
ASSETS
Current assets:
Cash and cash investments $ 8,145,555 $ 6,225,088
Marketable securities 21,118,518 18,726,723
Accounts receivable 10,781,186 10,153,205
Mortgage and notes receivable 2,518,435 2,482,454
Income taxes refundable 477,567 -
Inventories 18,866,678 23,246,609
Other current assets 874,901 510,760
____________ ____________
Total current assets 62,782,840 61,344,839
Notes receivable, non-current 5,111,145 5,112,309
Land held for development and sale 16,641,653 7,931,544
Investments 1,290,734 1,170,898
Property, buildings and equipment 144,363,298 138,352,300
Less: Accumulated depreciation (38,918,694) (34,878,310)
____________ ____________
Total assets $191,270,976 $179,033,580
____________ ____________
____________ ____________
ALICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(See Accountants' Review Report)
(Continued)
May 31, 2002 August 31, 2001
LIABILITIES ___(Unaudited)_______________________
Current liabilities:
Accounts payable $ 1,545,386 $ 1,810,094
Due to profit sharing plan - 443,942
Accrued ad valorem taxes 592,974 1,383,111
Current portion of notes payable 3,301,146 1,301,146
Accrued expenses 1,506,410 1,394,940
Income taxes payable - 22,670
Deferred revenue 150,523 52,987
Deferred income taxes 1,620,459 1,234,697
____________ ____________
Total current liabilities 8,716,898 7,643,587
Notes payable 51,236,127 46,704,954
Deferred income taxes 9,531,532 11,909,252
Other non-current liability 3,640,593 -
Accrued donation 2,917,819 -
Deferred retirement benefits 430,816 150,429
____________ ____________
Total liabilities 76,473,785 66,408,222
____________ ____________
STOCKHOLDERS' EQUITY
Common stock 7,074,966 7,044,513
Additional paid in capital 1,419,654 331,617
Accumulated other comprehensive income 832,156 871,077
Retained earnings 105,470,415 104,378,151
____________ ____________
Total stockholders' equity 114,797,191 112,625,358
____________ ____________
Total liabilities and
stockholders' equity $191,270,976 $179,033,580
____________ ____________
____________ ____________
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, 2000 7,027,827 $7,027,827 $95,339,847 $1,159,445 $ 17,885 $103,545,004
_______________
Comprehensive income:
Net income for the year
ended August 31, 2001 - - 16,066,131 - - 16,066,131
Unrealized losses on
securities, net of taxes
and reclassification adjustment - - - (288,368) - (288,368)
___________
Total comprehensive income 15,777,763
Dividends paid - - (7,027,827) - - (7,027,827)
Stock options exercised 16,686 16,686 - - 227,264 243,950
Stock based compensation - - - - 86,468 86,468
_________ __________ ___________ ________ ___________
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 nine months
ended May 31 , 2002 - - 8,151,303 - - 8,151,303
Unrealized losses on
securities, net of taxes
and reclassification adjustment - - - (38,921) - (38,921)
___________
Total comprehensive income 8,112,382
Dividends paid - - (7,059,039) - - (7,059,039)
Stock options exercised 30,453 30,453 - - 419,896 450,349
Stock based compensation - - - - 668,141 668,141
_________ __________ ___________ _________ ___________
Balances,
May 31, 2002 (Unaudited) 7,074,966 $7,074,966 $105,470,415 $ 832,156 $1,419,654 $114,797,191
_________ __________ ___________ _________ ___________
_________ __________ ___________ _________ ___________
May 31, August 31,
2002 2001
Disclosure of reclassification amount: _(Unaudited) ___________
Unrealized holding gains (losses)
arising during the period $ 432,748 $ (206,715)
Less: reclassification adjustment
for gains (losses) included in net
income 393,827 81,653
_________ __________
Net unrealized losses on securities $ (38,921) $ (288,368)
_________ __________
_________ __________
See accompanying Notes to Condensed Consolidated Financial Statements.
ALICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - See Accountants' Review Report)
Nine Months Ended May 31,
2002 2001
_______________________________
Cash flows from operating activities:
Net income $ 8,151,303 $ 5,067,352
Adjustments to reconcile net income to cash
provided from (used for) operating activities:
Depreciation and amortization 5,208,871 5,224,329
Contribution expense accrued 3,627,140 -
Net decrease in current assets and
liabilities (154,602) (2,551,434)
Deferred income taxes (1,941,699) (27,516)
Other non-current liability 3,640,593 -
Gain on sales of real estate (11,526,781) (1,469,149)
Other 1,553,994 367,484
__________ __________
Cash provided from
operating activities 8,558,819 6,611,066
__________ __________
Cash flows from (used for) investing activities:
Notes receivable issuances (171,295) (324,000)
Notes receivable collections 136,478 77,541
Purchases of real estate (10,135,343) -
Purchases of property and equipment (7,439,353) (6,277,820)
Proceeds from sales of real estate 13,109,833 2,606,304
Proceeds from sales of property and equipment 440,031 901,190
Purchases of marketable securities (5,349,439) (2,525,341)
Proceeds from sales of marketable securities 3,298,602 1,631,371
__________ __________
Cash used for
investing activities (6,110,486) (3,910,755)
__________ __________
Cash flows from (used for) financing activities:
Repayment of bank loan (40,146,992) (30,980,583)
Proceeds from bank loan 46,678,165 36,013,827
Dividends paid (7,059,039) (7,027,827)
__________ __________
Cash used for
financing activities (527,866) (1,994,583)
__________ __________
Increase in cash and
cash investments 1,920,467 705,728
__________ __________
Cash at beginning of period 6,225,088 1,796,428
__________ _________
Cash at end of period $ 8,145,555 $ 2,502,156
__________ __________
__________ __________
Supplemental disclosures of cash flow information:
Cash paid for interest, net of
amount capitalized $2,005,171 $2,575,648
__________ __________
__________ __________
Cash paid for income taxes $ 961,078 $5,548,139
__________ __________
__________ __________
Non-cash investing and financing activities:
Fair value adjustments to securities
available for sale $ (89,181) $ 195,458
__________ __________
__________ __________
Income tax effect related to fair
value adjustment $ (50,260) $ (73,551)
__________ __________
__________ __________
Reclassification of breeding herd
to property & equipment $ 515,398 $ 370,192
__________ __________
__________ __________
See accompanying Notes to Condensed Consolidated Financial Statements.
ALICO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(See Accountants' Review Report)
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, 2001.
In the opinion of Management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting only of normal recur-
ring accruals) necessary for a fair presentation of its consolidated financial
position at May 31, 2002 and August 31, 2001 and the consolidated results
of operations and cash flows for the three month and nine month periods
ended May 31, 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.
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 2002 presentation.
The Company accounts for long-lived assets in accordance with the provisions
of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets for
Long-Lived Assets to be Disposed of". This Statement requires the long-
lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flows expected to be generated
by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.
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
May 31, 2002 and August 31, 2001 are as follows:
May 31, August 31,
2002 2001
____________ __________
Mortgage notes receivable
on retail land sales $ 297,859 $ 241,852
Mortgage notes receivable
on bulk land sales 7,156,407 7,052,911
Other notes receivable 175,314 300,000
____________ __________
Total mortgage notes receivable $ 7,629,580 $ 7,594,763
Less current portion 2,518,435 2,482,454
____________ __________
Non-current portion $ 5,111,145 $5,112,309
____________ __________
____________ __________
In July 2000, the Company received a mortgage note in exchange for land sold.
The note totaled $9,540,000 and principal payments of $2,385,000 are due
annually on July 14, bearing interest at LIBOR, over four years.
4. Inventories:
A summary of the Company's inventories (in thousands) is shown below:
May 31, August 31,
2002 2001
____________ ___________
Unharvested fruit crop on trees $ 8,524,469 $ 9,626,006
Unharvested sugarcane 3,258,773 5,386,633
Beef cattle 6,842,327 8,075,729
Sod 241,109 158,241
____________ ___________
Total inventories $ 18,866,678 $23,246,609
____________ ___________
____________ ___________
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 are deferred, with the cost of the related cattle being
adjusted when the contracts are settled. At May 31, 2002, the Company
had no open positions.
5. Income taxes:
The provision for income taxes for the quarters and nine months ended May 31,
2002 and May 31, 2001 is summarized as follows:
Three Months Ended Nine Months Ended
May 31, 2002 May 31, 2001 May 31, 2002 May 31, 2001
_____________ _____________ _____________ ______________
Current:
Federal income tax $ 3,177,970 $ 705,690 $ 3,486,220 $2,101,045
State income tax 568,290 118,429 615,215 370,773
_____________ _____________ _____________ ______________
3,746,260 824,119 4,101,435 2,471,818
_____________ _____________ _____________ ______________
Deferred:
Federal income tax (1,551,890) 508,397 (1,398,023) (27,149)
State income tax (605,933) 92,612 (543,676) (367)
_____________ _____________ _____________ ______________
(2,157,823) 601,009 (1,941,699) (27,516)
_____________ _____________ _____________ ______________
Total provision for
income taxes $1,588,437 $ 1,425,128 $2,159,736 $ 2,444,302
_____________ _____________ _____________ ______________
_____________ _____________ _____________ ______________
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 $26 million are due in 2003, $15 million in 2004,
and up to $3 million 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. 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 under these
agreements at May 31, 2002 and August 31, 2001 was $51,236,127 and
$46,704,954 respectively.
Maturities of the indebtedness of the Company over the next five years are as
follows: 2002- $3,301,146; 2003- $17,553,559; 2004- $18,306,142
2005- $3,308,905; 2006- $3,311,862; thereafter $8,755,659.
Interest cost expensed and capitalized during the nine months ended
May 31, 2002 and May 31, 2001 was as follows:
2002 2001
________ ________
Interest expensed $1,728,105 $2,356,042
Interest capitalized 216,662 138,959
________ ________
Total interest cost $1,944,767 $2,495,001
________ ________
________ ________
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 in its initial year of operation. Management's decision has
been influenced by perceived changes in the regulatory environment.
8. Dividends:
On October 2, 2001 the Company declared a year-end dividend of $1.00 per
share, which was paid on October 26, 2001.
9. Disclosures about reportable segments:
Alico, Inc. has three reportable segments: citrus, sugarcane, and ranch.
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 nine months ended May 31, 2002:
____________________________________________________________
General Consolidated
Citrus Sugarcane Ranch Corporate* Total
____________________________________________________________
Revenue $ 19,083,652 11,116,222 8,138,412 2,417,068 40,755,354
Costs and
expenses 16,438,618 9,215,828 7,301,419 91,000 33,046,865
Depreciation and
amortization 1,796,862 1,929,899 1,119,446 362,664 5,208,871
Segment profit 2,645,034 1,900,394 836,993 2,326,068 7,708,489
Segment assets 57,818,342 53,486,709 20,357,175 59,608,750 191,270,976
The following table presents information for each of the Company's operating
segments as of and for the six months ended May 31, 2001:
____________________________________________________________
General Consolidated
Citrus Sugarcane Ranch Corporate* Total
____________________________________________________________
Revenue $ 24,175,466 11,939,228 7,907,715 2,104,684 46,127,093
Costs and
expenses 19,656,578 9,324,038 6,679,233 122,215 35,782,064
Depreciation and
amortization 1,847,958 1,929,626 1,067,935 378,810 5,224,329
Segment profit 4,518,888 2,615,190 1,228,482 1,982,469 10,345,029
Segment assets 54,025,358 52,274,626 19,743,567 48,975,178 175,018,729
*Consists of amounts related to forest products sales, rock and sand
royalties, oil lease and land rentals, 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 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
Shares price life (in years)
_______ _________ _______________
Balance outstanding,
August 31, 1999 34,700 $ 14.62 10.6
_______________
Granted 15,042 14.62 _______________
_______ _________
Balance outstanding,
August 31, 2000 49,742 14.62 9.7
_______________
Granted 51,074 14.62 _______________
Exercised 16,686 14.62
_______ __________
Balance outstanding,
August 31, 2001 84,130 14.62 9.5
_______________
Granted 69,598 15.68 _______________
Exercised 30,453 14.79
_______ __________
Balance outstanding,
May 31, 2002 123,275 $ 15.18 10
_______ _________ _______________
_______ _________ _______________
On May 31, 2002, there were 123,275 shares exercisable and 479,586
shares available for grant.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES:
Working capital increased to $54,065,942 at May 31, 2002, up from
$53,701,252 at August 31, 2001. As of May 31, 2002, the Company had cash
and cash investments of $8,145,555 compared to $6,225,088 at August 31, 2001.
Marketable securities increased from $18,726,723 to $21,118,518 during the
same period. The ratio of current assets to current liabilities decreased
to 7.20 to 1 at May 31, 2002 from 8.03 to 1 at August 31, 2001. The
increase in working capital ($54,065,942 vs. $53,701,252 as of May 31, 2002
and August 31, 2001, respectively) was largely due to the increase in
the marketable securities. Total assets increased to $191,270,976 at
May 31, 2002, compared to $179,033,580 at August 31, 2001.
In connection with financing agreements with commercial banks (See Note 6
under Notes to Condensed Consolidated Financial Statements), the Company
has an unused availability of funds of approximately $14.8 million at
May 31, 2002.
RESULTS OF OPERATIONS:
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. 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 nine months ending May 31, 2002 increased by
$3,083,951 when compared to the same period a year ago. ($8,151,303 vs.
$5,067,352 for the nine months ended May 31, 2002 and May 31, 2001,
respectively). Net income decreased during the three months ended
May 31, 2002, compared to the same period a year ago ($431,304
vs. $2,971,742).
Income before income taxes increased $2,799,385 for the nine months
ended May 31, 2002, when compared to the same period a year ago.
This was largely due to the increase in earnings from real estate
activities ($11,529,231 for the nine months ended May 31, 2002 compared
to $1,475,014 for the nine months ended May 31, 2001).
Earnings from agricultural activities decreased from the prior year
($2,404,810 vs. $4,639,219 for the third quarter, and $5,382,421 vs.
$8,362,560 during the first nine months of fiscal 2002 and 2001,
respectively).
Citrus
______
Citrus earnings decreased for the third quarter ($2,283,741 during fiscal
2002 vs. $3,262,000 during fiscal 2001) and during the nine months ended
May 31, 2002, when compared to the prior year ($2,645,034
during the nine months of fiscal 2002 vs. $4,518,888 during the same
period in fiscal 2001). This is in part the result of the recognition of
additional revenue from the fiscal 2001 fruit crop which was less than the
comparable amount realized in the first quarter of the prior year
($568,269 in fiscal 2002, compared to $617,086 in fiscal 2001).
Additionally, producing acreage and boxes produced per acre decreased
when compared to the prior year, resulting in higher unit costs for
both the boxes harvested and the related pounds of solids.
Sugarcane
_________
Sugarcane earnings decreased for the third quarter ($18,838 for
fiscal 2002 vs. $666,297 for fiscal 2001) and for the nine
months ended May 31, 2002 ($1,900,394 vs. $2,615,190 for the nine
months ended May 31, 2001). The number of producing acres are
down slightly when compared to the prior year. This factor, combined
with the effects of drought conditions early in the growing cycle,
has combined to decrease the yield from this years crop.
Ranching
________
Ranch earnings decreased for both the third quarter ($102,231 vs.
$710,922 for the nine months ended May 31, 2002 and
May 31, 2001, respectively) and for the nine months ($836,993
vs. $1,228,482 for the nine months ended May 31, 2002 and
May 31, 2001, respectively). Market prices, as well as the number
of cattle sold for the third quarter, were lower than the same
period a year ago.
General Corporate
_________________
The Company is continuing its marketing and permitting activities for its
land which surrounds the Florida Gulf Coast University site. At May 31,
2002, there were sales contracts in place for more than 5,400 acres of
the Lee County, Florida property totaling $146 million. The agreements are
at various stages of the due diligence periods with closing dates over the
next ten years.
The Company announced the formation of Agri-Insurance Company, Ltd. (Agri)
a wholly owned subsidiary, during July of 2000. 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 a newly created entity. It would be difficult, if not impossible,
to speculate about the impact that Agri 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, referred to above, during
fiscal 2001. As Agri gains underwriting experience and increases its
liquidity, it will be able to increase its insurance program.
During September of 1999, the Company announced a sale of 1,270 acres
of land surrounding the University site in Lee County for $16.5 million.
The contract called for 25 percent of the purchase price to be paid at
closing, with the balance payable over the next four years. In July
of 2000, Agri sold another 488 acres to the same buyer, also near the
University, for $10.6 million. In connection with the sale, the purchaser
agreed to pay off the $12.3 million mortgage related to the September 1999
sale and pay 10% of the contract price for their second purchase at closing,
with the balance payable over the next four years. The first sale generated
a pre-tax gain of $13.4 million. The gain related to the second sale was
recognized during fiscal 2000, to the extent that 10% of the purchase price
has been collected net of closing costs ($959 thousand). The remainder of
the gain and related mortgage were recognized during the current fiscal
year upon receipt of the first annual mortgage payment which, combined
with the initial payment in fiscal 2000, exceeded 20% of the contract price.
During November 2001, Agri began to close on a 2,500 acre, $30 million sale,
of which 40 acres were transferred in November and 1,744 acres were
transferred by the end of December. 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 scheduled to be transferred by the end of calendar year 2002.
The profit from this transaction is included in statement of operations
under gain on sales of real estate.
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 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 in its initial year of operation. Management's decision has
been influenced by perceived changes in the regulatory environment.
Also in December 2001, the Company agreed to donate $5 million to
Florida Gulf Coast University for a new athletic complex, scholarships
and athletic programs. The agreement calls for $1 million to be donated
during the current fiscal year and $800 thousand to be donated each year
over the next five years. The donation has been accrued and is
included in general and administrative expenses in the statement of
operations.
During January 2002, the Company acquired 40 acres of Lee County 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.
Critical Accounting Policies and Estimates
__________________________________________
The preparation of our 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 our
reported amounts of assets and liabilities, revenues and expenses, and related
disclosures of contingent assets and liabilities. On an on-going basis, we
evaluate our estimates and assumptions based upon historical experience and
various other factors and circumstances. Management believes that our estimates
and assumptions are reasonable in the circumstances; however, actual results
may vary from these estimates and assumption under different future
circumstances. We have identified the following critical accounting policies
that affect the more significant judgments and estimates used in the
preparation of our consolidated financial statements.
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 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 $568,269 during fiscal 2002 and $617,086 in 2001.
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
a cost of sale 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
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 6. Exhibits and reports on Form 8-K.
(a) Exhibits:
A. Accountant's Report.
B. Computation of Weighted Average Shares Outstanding at
May 31, 2002.
(b) Reports on Form 8-K.
October 2, 2001
October 9, 2001
December 5, 2001
December 7, 2001
December 7, 2001
December 12, 2001
December 13, 2001
January 7, 2002
January 7, 2002
January 31, 2002
February 25, 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)
July 15, 2002 W. Bernard Lester
Date President
Chief Operating Officer
(Signature)
July 15, 2002 L. Craig Simmons
Date Vice President
Chief Financial Officer
(Signature)
July 15, 2002 Deirdre M. Purvis
Date Controller
(Signature)
EXHIBIT A
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 May 31, 2002, and the related condensed
consolidated statements of operations for the three-month and nine-month
periods ended May 31, 2002 and May 31, 2001, the condensed
consolidated statements of stockholders' equity for the nine-month period
May 31, 2002, and the condensed consolidated statements of cash
flows for the nine-month periods ended May 31, 2002 and May 31, 2001.
These condensed consolidated financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established 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 accounting 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 modifications 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, 2001 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 12, 2001 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, 2001, is
fairly presented, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
s/s KPMG LLP
Orlando, Florida
June 27,2002
FORM 10-Q
ALICO, INC.
Computation of Weighted Average Shares Outstanding as of May 31, 2002:
Number of shares outstanding at August 31, 2001 7,044,513
_________
_________
Number of shares outstanding at May 31, 2002 7,074,966
_________
_________
Weighted Average 9/1/01 - 05/31/02 7,065,053
_________
_________
EXHIBIT B