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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 six months ended February 28, 2003.
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
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes X No
There were 7,109,595 shares of common stock, par value $1.00 per share,
outstanding at April 11, 2003.
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 February 28, Six months ended February 28,
2003 2002 2003 2002
_____________ _____________ _____________ ______________
Revenue:
Citrus $ 9,773,993 $ 7,688,526 $ 11,394,691 $ 9,194,524
Sugarcane 5,212,007 6,978,177 7,960,223 9,233,440
Ranch 1,145,629 2,012,991 3,263,499 5,602,551
Rock products
and sand 562,752 403,757 1,080,230 858,554
Oil lease and
land rentals 288,950 169,565 535,265 338,990
Forest products 77,654 37,096 127,612 141,580
Retail land sales 31,953 - 115,850 39,450
___________ __________ ___________ ___________
Total revenue 17,092,938 17,290,112 24,477,370 25,409,089
___________ ___________ ____________ ____________
Cost of sales:
Citrus production,
harvesting and
marketing 9,404,744 7,348,174 10,985,165 8,833,231
Sugarcane production
and harvesting 4,061,809 5,497,042 6,285,902 7,351,884
Ranch 1,024,790 1,857,346 3,238,569 4,867,789
Retail land sales 30,378 12,884 99,092 46,566
___________ __________ ___________ ___________
Total cost of sales 14,521,721 14,715,446 20,608,728 21,099,470
___________ __________ ___________ ___________
Gross Profit 2,571,217 2,574,666 3,868,642 4,309,619
General and administration
expenses 1,368,777 5,874,340 2,646,912 7,240,980
___________ __________ ___________ ___________
Income (loss) from operations 1,202,440 (3,299,674) 1,221,730 (2,931,361)
Other income (expense):
Profit on sales of real
estate 102,271 8,547,447 553,306 11,326,787
Interest and
investment income 244,864 336,087 520,927 833,566
Interest expense (483,234) (531,376) (1,024,003) (1,045,619)
Other 13,137 (41,801) 156,818 107,925
___________ ___________ ____________ ____________
Total other income
(expense), net (122,962) 8,310,357 207,048 11,222,659
___________ ___________ ____________ ____________
Income before income taxes 1,079,478 5,010,683 1,428,778 8,291,298
Provision for income taxes 289,883 294,336 380,945 571,299
___________ ___________ ____________ ____________
Net income $ 789,595 $ 4,716,347 $ 1,047,833 $ 7,719,999
___________ ___________ ____________ ____________
___________ ___________ ____________ ____________
Weighted average number of shares
outstanding 7,107,852 7,065,440 7,102,217 7,060,686
___________ ___________ ____________ ____________
___________ ___________ ____________ ____________
Per share amounts:
Basic $ .11 $ .67 $ .15 $ 1.09
Fully diluted $ .11 $ .66 $ .14 $ 1.08
Dividends $ - $ - $ .35 $ 1.00
See accompanying Notes to Condensed Consolidated Financial Statements.
ALICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(See Accountants' Review Report)
February 28, 2003 August 31, 2002
___(Unaudited)_____________________
ASSETS
Current assets:
Cash and cash investments $ 12,760,030 $ 10,139,659
Marketable securities 19,985,413 21,417,046
Accounts receivable 9,416,871 9,460,834
Mortgage and notes receivable 2,514,698 2,451,340
Inventories 18,887,122 21,671,964
Other current assets 874,765 1,126,483
____________ ____________
Total current assets 64,438,899 66,267,326
Notes receivable, non-current 2,652,873 2,693,186
Land held for development and sale 16,606,704 16,786,717
Investments 885,614 908,049
Property, buildings and equipment 144,479,051 142,354,775
Less: Accumulated depreciation (38,426,285) (37,100,353)
____________ ____________
Total assets $190,636,856 $191,909,700
____________ ____________
____________ ____________
ALICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(See Accountants' Review Report)
(Continued)
February 28, 2003 August 31, 2002
LIABILITIES ___(Unaudited)_______________________
Current liabilities:
Accounts payable $ 2,286,044 $ 1,437,756
Accrued ad valorem taxes 388,094 1,523,980
Current portion of notes payable 3,318,524 3,318,524
Accrued expenses 1,260,003 1,168,652
Deferred income taxes 706,262 1,038,727
Due to profit sharing - 284,649
Current portion of donation payable 698,430 770,721
____________ ____________
Total current liabilities 8,657,357 9,543,009
Deferred revenue 123,644 113,532
Notes payable 53,406,692 52,657,508
Deferred income taxes 9,784,843 9,727,889
Deferred retirement benefits 333,974 119,247
Other non-current liability 3,797,797 3,640,593
Donation payable 2,228,623 2,890,423
____________ ____________
Total liabilities 78,332,930 78,692,201
____________ ____________
STOCKHOLDERS' EQUITY
Common stock $ 7,109,595 $ 7,080,344
Additional paid in capital 2,559,473 1,715,616
Accumulated other comprehensive loss (784,509) (432,577)
Retained earnings 103,419,367 104,854,116
____________ ____________
Total stockholders' equity 112,303,926 113,217,499
____________ ____________
Total liabilities and
stockholders' equity $190,636,856 $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
(loss)
_________ __________ ___________ _______ __________ ____________
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 six months
ended February 28, 2003 - - 1,047,833 - - 1,047,833 Unrealized losses on
securities, net of taxes
and reclassification adjustment - - - (351,932) - (351,932)
___________
Total comprehensive income: 695,901
Dividends paid - - (2,482,582) - - (2,482,582)
Stock options exercised 29,251 29,251 - - 424,366 453,617
Stock based compensation - - - - 419,491 419,491
_________ __________ ___________ ________ ___________
Balances,
February 28, 2003 (Unaudited) 7,109,595 $7,109,595 $103,419,367 $ (784,509)$2,559,473 $112,303,926
_________ __________ ___________ ________ ___________
_________ __________ ___________ ________ ___________
February 28, August 31,
2003 2002
Disclosure of reclassification amount: _(Unaudited) ___________
Unrealized holding losses
arising during the period $(552,756) $(1,774,892)
Less: reclassification adjustment
for losses included in net
income (200,824) (471,238)
_________ __________
Net unrealized losses on securities $(351,932) $(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)
Six Months Ended February 28,
2003 2002
_______________________________
Cash flows from operating activities:
Net income $ 1,047,833 $7,719,999
Adjustments to reconcile net income to cash
provided from operating activities:
Depreciation and amortization 3,399,991 3,544,473
Net decrease in current assets
and liabilities 1,853,703 1,848,383
Deferred income taxes (275,511) 216,124
Gain on sales of real estate (570,064) (11,319,671)
Stock options granted below fair
market value 419,491 445,428
Other 776,388 738,073
Donation accrual - 3,581,800
__________ __________
Net cash provided from
operating activities 6,651,831 6,774,609
__________ __________
Cash flows used for investing activities:
Purchases of property and equipment (4,719,689) (15,009,473)
Proceeds from sales of real estate 773,235 12,802,198
Proceeds from sales of property and equipment 358,717 367,896
Purchases of marketable securities (1,766,733) (3,540,773)
Proceeds from sales of marketable securities 2,625,836 2,553,615
Notes receivable collections (additions) (23,045) (23,054)
__________ __________
Net cash used for
investing activities (2,751,679) (2,849,591)
__________ __________
Cash flows used for financing activities:
Repayment of bank loan (16,763,398) (25,690,326)
Proceeds from bank loan 17,512,582 31,153,165
Proceeds from exercising stock options 453,617 374,193
Dividends paid (2,482,582) (7,059,039)
__________ __________
Net cash used for
financing activities (1,279,781) (1,222,007)
__________ __________
Net increase in cash and
cash investments $2,620,371 $2,703,011
Cash and cash investments
At the beginning of year 10,139,659 6,225,088
__________ __________
At end of period 12,760,030 8,928,099
__________ __________
__________ __________
Supplemental disclosures of cash flow information:
Cash paid for interest, net of
amount capitalized $ 922,211 $1,202,643
__________ __________
__________ __________
Cash paid for income taxes $ - $ 925,600
__________ __________
__________ __________
Non-cash investing and financing activities:
Mortgage and notes receivable issued in exchange
for land, less unamortized discount $ 51,080 $ 1,759,459
___________ __________
___________ __________
Fair value adjustments to securities
available for sale $ (552,756) $ (330,704)
__________ __________
__________ __________
Income tax effect related to fair
value adjustment $ (200,824) $ 116,329
__________ __________
__________ __________
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 February 28, 2003 and
the consolidated results of operations and cash flows for the three and six
month periods ended February 28, 2003 and 2002.
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 $196 in
2003 and $186 in 2002. The results of operations for the stated periods
are not necessarily indicative of results to be expected for the full year.
Certain items from 2002 have been reclassified to conform to the 2003
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
(in thousands) at February 28, 2003 and August 31, 2002 are as follows:
February 28, August 31,
2003 2002
(Unaudited)
____________ __________
Mortgage notes receivable
on retail land sales $ 198 $ 193
Mortgage notes receivable
on bulk land sales 4,950 4,926
Other notes receivable 20 25
____________ __________
Total mortgage notes receivable $ 5,168 $ 5,144
Less current portion 2,515 2,451
____________ __________
Non-current portion $ 2,653 $ 2,693
____________ __________
____________ __________
4. Inventories:
A summary of the Company's inventories is shown below:
February 28, August 31,
2003 2002
(Unaudited)
____________ ___________
Unharvested fruit crop on trees $ 7,308 $ 8,599
Unharvested sugarcane 3,276 5,274
Beef cattle 7,827 7,507
Sod 476 292
____________ ___________
Total inventories $ 18,887 $ 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 are deferred, with the cost of the related cattle being
adjusted when the contracts are settled. At February 28, 2003, the Company
had 11 contracts with a combined fair market value of $83.
5. Income taxes:
The provision for income taxes for the quarters and six months ended
February 28, 2003 and February 28, 2002 is summarized as follows:
Three months ended February 28, Six months ended February 28,
2003 2002 2003 2002
_____________ _____________ _____________ ______________
Current:
Federal income tax $ 248 $ (389) $ 303 $ 308
State income tax 23 (73) 32 47
_____________ _____________ _____________ ______________
271 (462) 335 355
_____________ _____________ _____________ ______________
Deferred:
Federal income tax 19 622 42 154
State income tax - 134 4 62
_____________ _____________ _____________ ______________
19 756 46 216
_____________ _____________ _____________ ______________
Total provision for
income taxes $ 290 $ 294 $ 381 $ 571
_____________ _____________ _____________ ______________
_____________ _____________ _____________ ______________
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 $42.4 million
and $41.0 million at February 28, 2003 and 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 February 28,
2003 and August 31, 2002 was $53.4 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- $37,711; 2005- $3,311;
2006- $3,311; 2007- $1,315; and $7,758 thereafter.
Interest cost expensed and capitalized during the six months ended
February 28, 2003 and 2002 was as follows:
2003 2002
________ ________
Interest expensed $ 1,024 $ 1,046
Interest capitalized 123 129
________ ________
Total interest cost $ 1,147 $ 1,175
________ ________
________ ________
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 six months ended February 28, 2003:
____________________________________________________________
Consolidated
Citrus Sugarcane Ranch Other* Total
____________________________________________________________
Revenue $ 11,395 7,960 3,263 3,090 25,708
Costs and
expenses 10,985 6,286 3,239 3,770 24,280
Depreciation and
amortization 1,179 1,215 766 240 3,400
Segment profit (loss) 410 1,674 24 (680) 1,428
Segment assets 52,676 48,013 24,934 65,014 190,637
The following table presents information for each of the Company's
operating segments as of and for the six months ended February 28, 2002:
____________________________________________________________
Consolidated
Citrus Sugarcane Ranch Other* Total
____________________________________________________________
Revenue $ 9,195 9,233 5,603 13,646 37,677
Costs and
expenses 8,833 7,352 4,868 8,333 29,386
Depreciation and
amortization 1,203 1,340 755 246 3,544
Segment profit 362 1,881 735 5,313 8,291
Segment assets 56,168 53,447 21,698 56,331 187,644
*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 49,692 $14.62 6
Granted 51,074 14.62 _______________
Exercised 16,686 14.62 _______________
_______ _________
Balance outstanding,
August 31, 2001 84,080 14.62 9
_______________
Granted 69,598 15.68 _______________
Exercised 35,831 14.76
_______ _________
Balance outstanding,
August 31, 2002 117,847 15.20 10
_______________
Granted 67,280 15.68 _______________
Exercised 29,251 15.68
_______ _________
Balance outstanding,
February 28, 2003 155,876 15.35
_______ _________
_______ _________
On February 28, 2003, there were 155,876 shares exercisable and 412,356
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.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, including Indirect
Guarantees of Indebtedness of Others." Interpretation No. 45 supercedes
Interpretation No. 34, "Disclosure of Indirect Guarantees of Indebtedness
of Others," and provides guidance on the recognition and disclosures to be
made by a guarantor in its interim and annual financial statements about its
obligations under certain guarantees. The initial recognition and
measurements provisions of Interpretation No. 45 are effective for guarantees
issued or modified after December 31, 2002, and are to be applied
prospectively. The disclosure requirements are effective for financial
statements for interim or annual periods ending after December 15, 2002.
Interpretation No. 45 was adopted in December of fiscal 2002.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure." SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock-Based Compensation," and provides alternative methods
of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. SFAS No. 148 also amends
the disclosure requirements of SFAS No. 123 to require more prominent and
frequent disclosures in financial statements about the effects of stock-based
compensation. The transition guidance and annual disclosure provisions of
SFAS No. 148 are effective for financial statements issued for fiscal years
ending after December 15, 2002. The interim disclosure provisions are
effective for financial reports containing financial statements for interim
periods beginning after December 15, 2002.
The adoption of these statements are 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 decreased to $55.8 million at February 28, 2003, down from
$56.7 million at August 31, 2002. As of February 28, 2003, the Company had
cash and cash investments of $12.8 million compared to $10.1 million at
August 31, 2002. Marketable securities decreased to $20.0 million from $21.4
million during the same period. The ratio of current assets to current
liabilities increased to 7.44 to 1 at February 28, 2003 up from 6.94 to 1 at
August 31, 2002. Total assets decreased by $1.3 million to $190.6 million at
February 28, 2003, 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 $11.6 million was available for the
Company's general use at February 28, 2003 (see Note 6 to condensed
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 six months ending February 28, 2003 decreased by
$6.7 million when compared to the first six months of the prior year. This was
primarily due to a decrease in earnings from real estate sales for the six
months ended February 28, 2003 when compared to the six months ended
February 28, 2002 ($0.6 million vs. $11.3 million during the first six months
of fiscal 2003 and 2002, respectively).
Income from operations increased to $1.2 million for the first six months of
fiscal 2003, compared to a $2.9 million loss for the first six months of
fiscal 2002. The increase was largely due to a decrease in general and
administrative expenses as a donation of $5.0 million was accrued at its net
present value and charged against earnings in the second quarter of the
prior fiscal year.
Earnings from agricultural activities decreased from the prior year ($1.6
million vs. $2.0 million for the second quarter, and $2.1 million vs. $3.0
million during the first six months of fiscal 2003 and 2002, respectively).
Citrus
______
Citrus earnings were $369 thousand and $340 thousand for the second quarter,
and $410 thousand and $362 thousand for the first six months of fiscal 2003
and fiscal 2002, respectively. 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
incurred in prior years.
Sugarcane
_________
Sugarcane earnings were $1.2 and $1.5 million for the second quarter of
fiscal 2003, and fiscal 2002, respectively. Sugarcane earnings were $1.7
million vs. $1.9 million for the first six months of fiscal 2003 and fiscal
2002, respectively. Less acres were harvested during the first six months of
fiscal 2003 than fiscal 2002. This difference is largely due to the timing
of the harvest.
Ranching
________
Ranch earnings were $121 thousand and $156 thousand during the second quarter
of 2003 and 2002, respectively. Ranch earnings were $25 thousand vs. $735
thousand for the six months ended February 28, 2003 and 2002, respectively.
The number of cattle sold decreased by 38% during the first six months 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 February
28, 2003, there were sales contracts for all of the Lee County, Florida
property (approximately 6,200 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 $197.5 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
from the Company to Agri. 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 otherwise
inaccessible reinsurance markets. 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.'s 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.
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.
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.
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 our 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 11.1 Computation of Weighted Average Shares Outstanding at
February 28, 2003.
Exhibit 99.1 Accountant's Report.
Exhibit 99.2 Certifications pursuant to 18 U.S.C. 1350
(b) Reports on Form 8-K.
December 6, 2002 Press release of annual meeting highlights
December 9, 2002 Press release announcing land sale in Lee County, FL
February 24, 2003 Announcement of enforceability of settlement agreement
March 10, 2003 Press release announcing land sale in Lee County, FL
March 25, 2003 Press release announcing land sale in Lee County, FL
April 8, 2003 Settlement agreement update
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)
April 14, 2003 W. Bernard Lester
Date President
Chief Operating Officer
(Signature)
April 14, 2003 L. Craig Simmons
Date Vice President
Chief Financial Officer
(Signature)
April 14, 2003 Patrick W. Murphy
Date Controller
(Signature)
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: April 11, 2003 /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:
d) 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;
e) 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
f) 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:
c) 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
d) 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: April 11, 2003 /S/ L. CRAIG SIMMONS
L. Craig Simmons
Vice President and
Chief Financial Officer
Exhibit Index
Exhibit No. Description
___________ ___________
11.1 Computation of Weighted Average shares
Outstanding at February 28, 2003
99.1 Accountant's Report dated April 2, 2003
99.2 Certifications pursuant to 18 U.S.C 1350
EXHIBIT 11.1
ALICO, INC.
Outstanding
Date Days Shares Total (days X shares)
12/01/02 22 7,104,906 156,307,932
12/23/02 43 7,108,345 305,658,835
02/04/03 25 7,109,595 177,739,875
_____ _____________
Total 90 639,706,642
_____ _____________
_____ _____________
Average outstanding shares (Total weight / days) 7,107,852
___________
___________
Net income for the three months ended February 28, 2003 $ 789,595
___________
___________
Earnings per share (Net income/Average outstanding shares $ .11
___________
___________
Computation of Weighted Average Shares Outstanding as of February 28, 2003:
Outstanding
Date Days Shares Total (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 48 7,104,906 341,035,488
12/23/02 43 7,108,345 305,658,835
02/04/03 25 7,109,595 177,739,875
_____ _____________
Total 181 1,285,501,250
_____ _____________
_____ _____________
Average outstanding shares (Total weight / days) 7,102,217
___________
___________
Net income for the six months ended February 28, 2003 $ 1,047,833
___________
___________
Earnings per share
(Net income / Average outstanding shares) $.15
___________
___________
EXHIBIT 99.1
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 February 28, 2003, and the related condensed
consolidated statements of operations for the three and six month periods
ended February 28, 2003 and 2002, the condensed consolidated statements
of stockholders' equity for the six month period ended February 28, 2003,
and the condensed consolidated statements of cash flows for the six
month periods ended February 28, 2003 and 2002. 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, 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
April 2, 2003
EXHIBIT 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Alico, Inc. (the "Company") on
Form 10-Q for the six months ended February 28, 2003 as filed with the
Securities and Exchange Commission on April 11, 2003 (the "Form 10-Q"), I,
Ben Hill Griffin, III, Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:
(1) The Form 10-Q fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d));
and
(2) The information contained in the Form 10-Q fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Dated: April 11, 2003
Ben Hill Griffin, III
Chief Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Alico, Inc. (the "Company") on
Form 10-Q for the six months ended February 28, 2003 as filed with the
Securities and Exchange Commission on April 11, 2003 (the "Form 10-Q"), I,
L. Craig Simmons, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:
(1) The Form 10-Q fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d));
and
(2) The information contained in the Form 10-Q fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Dated: April 11, 2003
L. Craig Simmons
Chief Financial Officer