10-K 1 alico.txt ALICO, INC. 10K AUGUST 31, 2002 Alico, Inc. P. O. Box 338 La Belle, FL 33975 November 15, 2002 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: Pursuant to the requirements of the Securities Exchange Act of 1934, we are transmitting herewith the attached Form 10-K for the year ending August 31, 2002. Sincerely, ALICO, INC. L. Craig Simmons L. Craig Simmons Vice President and Chief Financial Officer UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K __X__ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended August 31, 2002. OR _____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) 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 or organization) Identification No.) P. O. Box 338, La Belle, Florida 33975 ______________________________________ __________ (Address of principal executive offices) (Zip Code) (863)675-2966 Registrant's telephone number, including area code_____________ SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Name of each exchange on Title of each class which registered ___________________ ________________________ None None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON CAPITAL STOCK, $1.00 Par value, Non-cumulative _____________________________________________________ (Title of Class) 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 such 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,to the best of registrant's knowledge, in definitive proxy or information statements incorporated by eference in Part III of this Form 10-K or any amendment to this Form 10-K. _____ As of October 11, 2002 there were 7,093,092 shares of stock outstanding and the aggregate market value (based upon the average bid and asked price, as quoted on NASDAQ) of the common stock held by non-affiliates was approximately $101,184,156. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Proxy Statement dated November 8, 2002 are incorporated by reference in Parts II and III, respectively. PART I ______ Item 1. Business. __________________________ Alico, Inc. (the "Company") is generally recognized as an agribusiness company operating in Central and Southwest Florida. The Company's primary asset is 140,526 acres of land located in Collier, Hendry, Lee and Polk Counties. (See table on Page 7 for location and acreage by current primary use.) The Company is involved in various operations and activities including citrus fruit production, cattle ranching, sugarcane and sod production, and forestry. The Company also leases land for farming, cattle grazing, recreation, and oil exploration. The Company's land is managed for multiple use wherever possible. Cattle ranching, forestry and land leased for farm- ing, grazing,recreation and oil exploration, in some instances, utilize the same acreage. Agricultural operations have combined to produce from 69 to 89 percent of annual revenues during the past five years. Citrus groves generate the most gross revenue. Sugarcane ranks second in revenue production. While the cattle ranching operation utilizes the largest acreage, it ranks third in the production of revenue. Approximately 9,197 acres of the Company's property are classified as timberlands, however, the area in which these lands are located is not highly rated for timber production. These lands are also utilized as native range, in the ranching operation, and leased out for recreation and oil exploration. Diversification of the Company's agricultural base was initiated with the development of a Sugarcane Division at the end of the 1988 fiscal year. The 11,680 acres in production during the 2002 fiscal year consisted of 1,520 acres planted in 1997, 3,326 acres planted in 1998, 4,152 acres planted in 1999 and 2,682 acres planted in 2000. Leasing of lands for rock mining and oil and mineral explor- ation, rental of land for grazing, farming, recreation and other uses, while not classified as agricultural operations, are important components of the Company's land utilization and operation. Gross revenue from these activities during the past five years has ranged from 4 to 5 percent of total revenue. The Company is not in the retail land sales and development business, except through its wholly owned subsidiary, Saddlebag Lake Resorts, Inc.. However,it does from time to time sell properties which, in the judgment of management, are surplus to the Company's primary operations. Additionally, the Company's wholly owned subsidiary, Agri-Insurance Company, Ltd., engages in bulk land sales in connection with the gene- ration of underwriting capital. Gains from sales of real estate during the past five years has ranged from 3 to 23 per- cent of total revenues. For further discussion of the relative importance of the various segments of the Company's operations, including finan- cial information regarding revenues, operating profits (losses) and assets attributable to each major segment of the Company's business, see Note 15 of Notes to Consolidated Financial State- ments and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this document. Subsidiary Operations _____________________ The Company has two wholly owned subsidiaries; Saddlebag Lake Resorts, Inc. ("Saddlebag") and Agri-Insurance Company, Ltd. ("Agri"). Saddlebag has been active in the subdividing, deve- lopment and sale of real estate since its inception in 1971. Saddlebag has two subdivisions near Frostproof, Florida which have been developed and are on the market. While one of the subdivisions has been sold out, approximately 62% of the lots in the second development have been sold. Agri, formed during fiscal 2000, was created to write crop insurance against catastrophic losses due to weather and disease. During fiscal 2002, Agri supplied reinsurance to an independent underwriter who insured catastrophic business interruption coverage for Ben Hill Griffin, Inc.. The total coverage under the policy was $3.2 million and the premium charged was $128 thousand. The coverage term was from Decem- ber 2001 to December 2002. The Company expects to renew the policy and appropriately adjust premium rates. Additionally, Agri directly underwrote catastrophic business interruption coverage for its parent company, Alico, Inc., insuring all of Alico's citrus groves. The coverage term was from August 31, 2002 to August 2003. Total coverage under the policy was $12.7 million and the premium charged was $803 thousand. The financial results of the operation of these subsidiaries are consolidated with those of the Company. (See Note 1 of Notes to Consolidated Financial Statements.) Citrus ______ Approximately 9,756 acres of citrus were harvested during the 2001/02 season. Since 1983 the Company has maintained a mar- keting contract covering the majority of the Company's citrus crop with Ben Hill Griffin, Inc., a Florida corporation and major shareholder. The agreement provides for modifications to meet changing market conditions and provides that either party may terminate the contract by giving notice prior to the first day of August preceding each fruit season. Under the terms of the contract, the Company's fruit is packed and/or processed and sold along with fruit from other growers, including Ben Hill Griffin, Inc. The proceeds are distributed on a pro rata basis as the finished product is sold. During the year ended August 31, 2002, approximately 77% of the Company's fruit crop was marketed under this agreement, the same percen- tage as in the year ended August 31, 2001. In addition, Ben Hill Griffin, Inc. provides harvesting services to the Company for citrus sold to unrelated processors. These sales accounted for the remaining 23% of total citrus revenue for the year. For the year ended August 31, 2000, approximately 76% of the Company's fruit crop was marketed under this agreement. Ranch ______ The Company has a cattle operation located in Hendry and Collier Counties, Florida which is engaged primarily in the production of beef cattle and the raising of replacement heifers. The breeding herd consists of approximately 13,755 cows, bulls and replacement heifers. Approximately 47% of the herd are from one to five years old, while the remaining 53% are six and older. The Company primarily sells to packing and processing plants. The Company also sells cattle through local livestock auction markets and to contract cattle buyers. These buyers provide ready markets for the Company's cattle. The loss of any one or a few of these plants and/or buyers would not, in management's view, have a material adverse effect on the Company's cattle operation. Subject to prevailing market conditions, the Company may hedge its beef inventory by entering into cattle futures contracts to reduce exposure to changes in market prices. Sugarcane _________ The Company had 11,680 acres, 11,722 acres, and 9,588 acres of sugarcane in production during the 2001/02,2000/01, and 1999/00 fiscal years, respectively. The 2001/02, 2000/01, and 1999/00 crops yielded approximately 376,000, 417,000, and 321,000 gross tons, respectively. Forest Products _______________ Approximately 7% of the Company's properties are classified as timberlands. The principal forest products sold by the Company are sabal palms and other horticultural commodities. These products are sold to various landscaping companies. The Company does not incur any of the harvesting expenses. Part of the lands, from which the timber was removed, is being converted to semi-improved pasture and other uses. Land Rental for Grazing, Agricultural and Other Uses ____________________________________________________ The Company rents land to others for grazing, farming and recreational uses, on a tenant-at-will basis, for an annual fee. The income is not significant when compared to overall gross income, however, it does help to offset the expense of carrying these properties until they are put to a more profit- able use. The Company has developed additional land to lease for farming. There were no significant changes in the method of rental for these purposes during the past fiscal year. Leases for Oil and Mineral Exploration ______________________________________ The Company has leased subsurface rights to a portion of its properties for the purpose of oil and mineral exploration. Currently, there are two leases in effect. Twenty-four wells have been drilled during the years that the Company has been leasing subsurface rights to oil companies. The drilling has resulted in twenty-one dry holes, one marginal producer, which has been abandoned,and two average producers, still producing. Mining Operations: Rock and Sand _________________________________ The Company leases 6,143 acres in Lee County, Florida to CSR America,Inc. of West Palm Beach, Florida for mining and production of rock, aggregate, sand, baserock and other road building and construction materials. Royalties which the company receives for these products are based on a percentage of the F.O.B. plant sales price. Competition ___________ As indicated, the Company is primarily engaged in a limited number of agricultural activities, all of which are highly competitive. For instance, citrus is grown in several states, the most notable of which are: Florida, California, Arizona and Texas. In addition, citrus and sugarcane products are im- ported from some foreign countries. Beef cattle are produced throughout the United States and domestic beef sales must also compete with sales of imported beef. Additionally, forest and rock products are produced in most parts of the United States. Leasing of land for oil exploration is also widespread. The Company's share of the market for citrus, sugarcane, cattle and forest products in the United States is insignificant. Environmental Regulations _________________________ The Company's operation is subject to various federal, state and local laws regulating the discharge of materials into the environment. The Company is in compliance with all such rules and such compliance has not had a material effect upon capital expenditures, earnings or the competitive position of the Company. While compliance with environmental regulations has not had a material economic effect on the Company's operations, execu- tive officers are required to spend a considerable amount of time keeping current on these matters. In addition, there are ongoing costs incurred in complying with the permitting and reporting requirements. Employees _________ At the end of August 2002, the Company had a total of 152 full- time employees classified as follows: Citrus 73; Ranch 19; Sugarcane 16; Facilities Maintenance Support 27; General and Administrative 17. There are no employees engaged in the deve- lopment of new products or research. Management is not aware of any efforts by employees or outside organizers to create any type of labor union arrangement. Management believes that the employer/employee relationship environment is such that labor organization activities are unlikely to occur. Seasonal Nature of Business ___________________________ As with any agribusiness enterprise, the Company's business operations are predominantly seasonal in nature. The harvest and sale of citrus fruit generally occurs from October to June. Sugarcane is harvested during the first, second and third quar- ters. Other segments of the Company's business such as its cattle and sod sales, and its timber, mining and leasing oper- ations, tend to be more successive than seasonal in nature. Item 2. Properties. ____________________________ At August 31, 2002, the Company owned a total of 140,526 acres of land located in four counties in Florida. Acreage in each county and the primary classification with respect to present use of these properties is shown in the following table:
ACREAGE BY CURRENT PRIMARY USE ______________________________ Timber Native Improved Citrus Sugar- Agri- County Land Pasture Pasture Sod Land cane culture Other Total ___________________________________________________________________________ Polk 251 9,268 359 -- 3,253 -- -- 1 13,132 Lee 3,221 1,086 -- -- -- -- 1,460 625 6,392 Hendry 3,823 43,138 24,774 580 3,765 14,358 15,953 3,435 109,826 Collier 1,902 1,700 1,112 -- 4,129 -- -- 2,333 11,176 ______ _______ ______ ___ _____ _____ _____ _____ _______ Totals 9,197 55,192 26,245 580 11,147 14,358 17,413 6,394 140,526 ______ _______ ______ ___ _____ _____ ______ _____ _______ ______ _______ ______ ___ _____ _____ ______ _____ _______
Of the above lands, the Company utilizes 24,178 acres of imp- roved pasture plus approximately 46,000 acres of native pasture for cattle production and 6,143 acres are leased for rock mining operations. Much of the land is also leased for multi- purpose use such as cattle grazing, oil exploration, agriculture and recreation. In addition to the land shown in the above table, the Company owns full subsurface rights to 1,064 acres and fractional sub- surface rights to 18,707 acres located throughout the Counties referred to above. From the inception of the Company's initial development program in 1948, the goal has been to develop the lands for the most profitable use. Prior to implementation of the development program, detailed studies were made of the properties focusing on soil capabilities, topography, transportation, availability of markets and the climatic characteristics of each of the tracts. Based on these and later studies, the use of each tract was determined. It is the opinion of Management that the lands are suitable for agricultural, residential and commercial uses. However, since the Company is primarily engaged in agri- cultural activities, some of the lands are considered surplus to its needs for this purpose and, as indicated under Item 1 of this report, sales of real property are made from time to time. Management believes that each of the major programs is adequately supported by agricultural equipment, buildings, fences, irrigation systems and other amenities required for the operation of the projects. Item 3. Legal Proceedings. ___________________________________ The Company has been informed by Ben Hill Griffin III, Chairman of the Board, that he is party to a lawsuit filed against him in Polk County, Florida Circuit Court by the families of his four sisters, most of the members of whom are beneficiaries of a trust, entitled the Ben Hill Griffin, Jr. Revocable Inter Vivos Trust #1 (the "Trust"). The plaintiffs in the lawsuit (The Four Sisters Protectorate, et al. v. Ben Hill Griffin, III, Trustee, Case No. GC-G-0054, Section 81) sought to impose judicial sanctions on Mr. Griffin III, including his removal as Trustee of the Trust based on allegations of over-compen- sation and receipt of an illegal bonus. On March 29, 2001, after court-ordered mediation pending completion of which the trial was adjourned, Mr. Griffin III and a representative of the Four Sisters Protectorate, joined by their respective counsel, executed a "Settlement Agreement" which set forth the basic elements of a settlement of the lawsuit, contingent upon several events, including Internal Revenue Service approval of the proposed transaction as a tax free split-off for federal income tax purposes, and the Court's judicial termination of the Trust. The terms contained in the Settle- ment Agreement were not intended, nor were they sufficient, to resolve all specific items necessary to consummate a settlement of the lawsuit. The Settlement Agreement provided that the shares of Alico, Inc., stock then owned by Ben Hill Griffin Investments Inc. would be utilized in the tax free split-off, along with other assets, as a means of allocating to the Four Sisters Protectorate assets approximating the value of their interests in Ben Hill Griffin Investments Inc., a holding company wholly owned by the Trust, Ben Hill Griffin III, The Four Sisters Protectorate and its members. Mr. Griffin III has indicated that following execution of the Settlement Agreement the parties disagreed as to its validity or enforceability on various grounds. On May 14, 2001, the Harris Family filed a motion in the Circuit Court of the 10th Judicial Circuit in and for Polk County, Florida (Case No. GC-G-0054) seeking to have the Settlement Agreement set aside as invalid and unenforceable. On November 2, 2001 the Court entered a written order that the Settlement Agreement is en- forceable. The Harris family has filed an Appeal in response to the order. Mr. Griffin, III has informed the Company that the issues related to the mechanism and terms of the proposed distribution of certain of the assets of the Trust to the families of the four sisters, including the Alico stock bene- ficially owned by the Trust, have been worked out between the representatives of the four sisters and Ben Hill Griffin III, and are set forth in a definitive separation agreement. The Company further understands that consummation of the settle- ment continues to be subject to certain conditions which are still pending, specifically, the Harris family litigation. The Company has been informed by Mr. Griffin III that the arties have received a favorable IRS Revenue Ruling. Neither the Company nor Mr. Griffin III or his attorneys know when the settlement will be implemented, but believe related litigation proceedings could take 6 months to a year to be resolved. Mr. Griffin III has also informed the Company that immediately before the hearing on the enforcement of the State court action, lawyers for the Harris family provided Mr. Griffin III's attorneys with copies of a federal court action naming among others as defendants, Mr. Griffin III, individually and as Trustee of the Ben Hill Griffin, Jr., revocable Inter Vivos Trust #1, and BHG Inc. According to Mr. Griffin III's attor- neys, this litigation was filed in the federal district court for the Northern District of Florida (Case No: 4:olcv 432-5PM). The complaint, among other things,seeks to set aside the settlement agreement based on alleged violations of the secur- ities laws, fraud, and negligence. This suit was filed on October 2, 2001. Mr. Griffin III's attorneys have indicated that they believe this suit is without merit, if not frivolous, and have stated that Mr. Griffin III will defend it vigorously. Since the Company opted out of the Florida Business Corporation Act's provisions on Affiliated Transactions and Control Share Acquisitions (currently FBCA s. 607.0901 and s. 607.0902) under the predecessor statutes to such sections, transactions contem- plated by the Settlement Agreement may not be subject to share- holder approval or review by the Company's Board of Directors. The Company is not a party to any of this litigation. Item 4. Submission of Matters to a Vote of Security Holders. ____________________________________________________________ None. PART II _______ Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters. ____________________________________________________________ Common Stock Prices ___________________ The common stock of Alico, Inc. is traded over-the-counter on the NASDAQ National Market System under the symbol ALCO. The high and low sales prices, by fiscal quarter, during the years ended August 31, 2002 and 2001 are presented below:
2002 2001 Bid Price Bid Price _________ _________ High Low High Low First Quarter 30.21 24.90 16.81 15.31 Second Quarter 32.17 28.50 17.75 15.63 Third Quarter 29.70 28.20 28.63 15.75 Fourth Quarter 29.54 28.01 32.06 26.63
Approximate Number of Holders of Common Stock _____________________________________________ As of October 11, 2002, there were approximately 619 holders of record of the Company's Common Stock. Dividend Information ____________________ Only year-end dividends have been paid and during the last three fiscal years the dividends were as follows: Amount Paid Record Date Payment Date Per Share _________ ____________ ___________ October 18, 1999 November 5, 1999 $ .30 October 13, 2000 October 27, 2000 $ 1.00 October 12, 2001 October 26, 2001 $ 1.00 Dividends are paid at the discretion of the Company's Board of Directors. The Company foresees no change in its ability to pay annual dividends in the immediate future; nevertheless, there is no assurance that dividends will be paid in the future since they are dependent upon earnings, the financial condition of the Company, and other factors. Equity Compensation Plan Information ____________________________________ Number of securities Number of remaining securities available for to be future issuance issued upon Weighted under equity exercise of Average compensation outstanding exercise plans options, price of (excluding warrants outstanding securities and options, reflected in rights warrants column (a) Plan category and rights _____________ ________ ________ ________ (a) (b) (c) Equity compensation plans approved by security holders 117,847 $15.20 479,636 Equity compensation plans not approved by security holders - - - ________ ________ _________ Total 117,847 $15.20 479,636 ________ ________ _________ ________ ________ _________ Item 6. Selected Financial Data. _________________________________________
Years Ended August 3l, DESCRIPTION 2002 2001 2000 1999 1998 ________ ________ ________ ________ ________ (In Thousands, Except Per Share Amounts) Revenues $ 62,530 $ 68,318 $ 62,540 $ 44,947 $ 44,679 Costs & Expenses 52,737 48,205 41,965 37,886 33,654 Income Taxes 2,258 4,046 6,464 2,980 4,249 Net Income 7,535 16,066 14,111 4,081 6,776 Average Number of Shares Outstanding 7,070 7,033 7,028 7,028 7,028 Net Income Per Share 1.07 2.29 2.01 .58 .96 Cash Dividend Paid per Share 1.00 1.00 .30 .50 .60 Current Assets 66,267 61,345 56,578 45,182 42,354 Total Assets 191,909 179,134 176,876 156,922 130,554 Current Liabilities 9,543 7,691 12,346 8,738 5,649 Ratio-Current Assets to Current Liabilities 6.94:1 7.98:1 4.58:1 5.17:1 7.50:1 Working Capital 56,724 53,654 44,232 36,444 36,705 Long-Term Obligations 69,149 58,818 60,985 56,789 34,938 Total Liabilities 78,692 66,508 73,331 65,527 40,587 Stockholders' Equity 113,217 112,625 103,545 91,395 89,967
Item 7. Management's Discussion and Analysis of Financial ______________________________________________________________ Condition and Results of Operations. ____________________________________ Cautionary Statement ____________________ Readers should note, in particular, that this document 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", "esti- mate", "may","intend", "expect" 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 affect 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 Com- pany to a greater extent than indicated. The following discussion focuses on the results of operations and the financial condition of the Company. This section should be read in conjunction with the consolidated financial statements and notes. Liquidity and Capital Resources _______________________________ The Company had cash and marketable securities of $31.6 million at August 31, 2002, compared with $25.0 million at August 31, 2001. Working capital was $56.7 million and $53.7 million at August 31, 2002 and August 31, 2001 respectively. Cash outlay for land, equipment, buildings, and other improve- ments totaled $9.3 million during fiscal 2002, compared to $8.5 million during fiscal 2001 and $10.0 million during fiscal 2000, respectively. Land preparation for citrus development and capital maintenance continued, as did expenditures for replace- ment equipment and raising of breeding cattle. Additional sod acreage also was developed. 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 $13.0 million was available for the Company's general use at August 31, 2002 (see Note 6 of Notes to consolidated financial statements). Results of Operations _____________________ Summary of results (in thousands):
Years Ended August 31, 2002 2001 2000 _______ _______ _______ Operating revenue $49,185 $51,533 $45,207 Gross profit 9,679 11,921 11,364 General & administrative expenses 10,806 5,471 4,416 Income (loss) from operations (1,127) 6,450 6,949 Profit on sale of real estate 11,641 11,354 13,281 Interest and investment income 1,471 2,124 3,093 Interest expense 2,421 3,029 3,020 Other income 229 3,213 272 Provision for income taxes 2,258 4,046 6,464 Effective income tax rate 23.1% 20.1% 31.4% Net income 7,535 16,066 14,111
Operating Revenue _________________ Operating revenues for fiscal 2002 decreased compared to fiscal 2001. A decrease in revenues from agricultural activities was the most significant factor in the decline. Operating revenues for fiscal 2001 increased when compared to those of fiscal 2000. An increase in revenues from agricul- tural activities was the most significant factor in the rise. Income (loss) from Operations _____________________________ Earnings from operations decreased significantly during fiscal 2002 when compared to the prior year ( $(1,127) in fiscal 2002 vs. $6,450 in fiscal 2001). The decrease was largely impacted by the Company's commitment to donate $5.0 million to Florida Gulf Coast University (the University) in December 2001, for a new athletic complex, scholarships and athletic programs. In accordance with the Company's agreement with the University, $1.0 million was donated in fiscal 2002, and $800 thousand will be donated each year over the next five years. The entire donation has been accrued and is included in general and administrative expenses in the current year. The remain- ing decline in gross profits from operations was due to a decline in earnings from agricultural activities. Income from operations decreased 7% during fiscal 2001 due to increased general and administrative expenses. Profit on Sale of Real Estate ____________________________________ Profit from retail land sales, made through Saddlebag, were at breakeven for fiscal 2002 and 2001. Profit from bulk land sales, increased from $11.4 million in fiscal 2001 to $11.6 million in fiscal 2002. Real estate profits decreased from $13.3 million in fiscal 2000 to $11.4 million during fiscal 2001. Interest and Investment Income ______________________________ Interest and investment income is generated principally from investments in marketable equity securities, corporate and municipal bonds, mutual funds, U.S. Treasury securities and mortgages held on real estate sold on the installment basis. Realized investment earnings were reinvested throughout fiscal 2002, 2001 and 2000, increasing investment levels during each year. The decrease in fiscal 2002 and 2001 interest and realized and unrealized investment income resulted from unfa- vorable financial conditions. The rise in fiscal 2000 interest and realized and unrealized investment income resulted from favorable market conditions during the year. Interest Expense ________________ Interest expense declined during fiscal 2002 when compared to fiscal 2001, as interest rates on borrowings have declined. Interest expense increased during fiscal 2001 and 2000, compared to each respective prior year. This was primarily due to increased borrowings related to the acquisition of 7,680 acres of sugarcane, citrus and ranch during fiscal 1999. Total interest cost decreased slightly in 2001 while increasing 54% during fiscal 2000. Individual Operating Divisions ______________________________ Gross profit for the individual operating divisions, for fiscal 2002, 2001 and 2000, is presented in the following schedule and is discussed in subsequent sections:
Years Ended August 31, (in thousands) 2002 2001 2000 _______ _______ _______ CITRUS Revenues: Sales $25,105 $27,570 $28,172 Less harvesting & marketing 9,364 10,046 9,737 _______ _______ _______ Net sales 15,741 17,524 18,435 Cost and expenses: Direct production** 8,594 8,932 8,655 Allocated cost* 3,463 3,472 3,040 _______ _______ _______ Total 12,057 12,404 11,695 _______ _______ _______ Gross profit, citrus 3,684 5,120 6,740 _______ _______ _______ SUGARCANE Revenues: Sales 11,300 11,939 8,501 Less harvesting & hauling 2,239 2,516 1,997 _______ _______ _______ Net sales 9,061 9,423 6,504 Costs and expenses: Direct production 3,731 3,810 2,787 Allocated cost* 3,220 2,992 2,178 _______ _______ _______ Total 6,951 6,802 4,965 _______ ______ _______ Gross profit, sugarcane 2,110 2,621 1,539 _______ _______ _______ Years Ended August 31, (in thousands) 2002 2001 2000 _______ _______ _______ RANCH Revenues: Sales 9,591 9,299 6,062 Costs and expenses: Direct production 6,321 5,571 3,844 Allocated cost* 2,461 2,133 1,479 _______ _______ _______ Total 8,782 7,704 5,323 _______ _______ _______ Gross profit, ranch 809 1,595 739 _______ _______ _______ Total gross profit, agriculture 6,603 9,336 9,018 _______ _______ _______ OTHER OPERATIONS Revenues: Rock products & sand 1,999 1,726 1,320 Oil leases & land rentals 721 770 923 Forest products 355 91 84 Recovery of citrus eradication costs in excess of basis - 2,968 235 Other 229 245 37 _______ _______ _______ Total 3,304 5,800 2,599 Costs and expenses: Allocated cost* 735 604 658 General & administrative, all operations 10,070 4,867 3,757 _______ _______ _______ Total 10,805 5,471 4,415 _______ _______ _______ Gross (loss) income, other operations (7,501) 329 (1,816) _______ _______ _______ Years Ended August 31, (in thousands) 2002 2001 2000 _______ _______ _______ Total gross profit (loss) (898) 9,665 7,202 _______ _______ _______ INTEREST & DIVIDENDS Revenue 1,471 2,124 3,094 Expense 2,421 3,029 3,020 _______ _______ _______ Interest & dividends, net (950) (905) 74 _______ _______ _______ REAL ESTATE Revenue: Sale of real estate 11,758 12,442 14,112 Expenses: Cost of sales 61 857 126 Other Costs 56 233 687 _______ _______ _______ Total 117 1,090 813 _______ _______ _______ Gain on sale of real estate 11,641 11,352 13,299 _______ _______ _______ Income before income taxes $ 9,793 $20,112 $20,575 _______ _______ _______ _______ _______ _______
* Allocated cost includes ad valorem and payroll taxes, depreciation and insurance. ** Excludes capitalized maintenance cost of groves less than five years of age consisting of $2.5 million on 1,326 acres in 2002, $200 thousand on 570 acres in 2001, and $309 thousand on 411 acres in 2000. Citrus ______ Gross profit was $3.7 million in fiscal 2002, $5.1 million in fiscal 2001, and $6.7 million for fiscal 2000. Revenue from citrus sales decreased 9% during fiscal 2002, compared to fiscal 2001 ($25.1 million during fiscal 2002 vs. $27.6 million during fiscal 2001). Production decreased during fiscal 2002, compared to fiscal 2001, and was the primary cause of the decline. Harvesting and marketing costs decreased when compared to fis- cal 2001due to the decrease in boxes harvested during the year. Direct production and allocated costs decreased 3% due to a de- cline in the number of producing acres. Revenue from citrus sales decreased 2% during fiscal 2001, compared to fiscal 2000 ($27.6 million during fiscal 2001 vs. $28.2 million during fiscal 2000). Production improved during fiscal 2001, however, the average market price decreased compared to fiscal 2000. Harvesting and marketing costs increased in fiscal 2001 com- pared to fiscal 2000, corresponding with an increase in boxes harvested. Direct production and allocated costs increased 6% resulting from inflation and increased cultivation costs related to replanted trees. The final returns from citrus pools are not precisely deter- minable at year end. Returns are estimated each year based on the most current information available. Differences between the estimates and the final realization of revenues can be sig- nificant. Revenues collected in excess of prior year and year end estimates were $568 thousand, $617 thousand, and $1.8 million during fiscal 2002, 2001 and 2000, respectively.
ACREAGE BY VARIETY AND AGE VARIETY 1-4 5-6 7-8 9-10 11-12 13-14 15-16 17+ Acres ___ ___ ___ ____ _____ _____ _____ ____ _____ Early: Parson Brown Oranges - - - - 118 30 - - 148 Hamlin Oranges 225 - 22 63 - 159 872 2,152 3,493 Red Grapefruit - - - - - 73 - 335 408 Tangelos - - - - - - - 38 38 Navel Oranges - - - - - - - 138 138 Mid Season: Pineapple Oranges - - - 102 - - - 518 620 Honey Tangerines - - 76 - - - - 143 219 Midsweet Oranges 46 71 54 110 - - - - 281 Late: Valencia Oranges 1,161 206 513 310 253 1,071 784 1,504 5,802 _____ ___ ___ ___ _____ ___ ___ _____ _____ Totals: 1,432 277 665 585 371 1,333 1,656 4,828 11,147
Sugarcane _________ Gross profit for fiscal 2002 was $2.1 million, compared to $2.6 million in fiscal 2001 and $1.5 million in fiscal 2000. Sales revenues from sugarcane decreased 5% during fiscal 2002, compared to fiscal 2001 ($11.3 million vs. $11.9 million, re- spectively). The decline inrevenue was the result of a de- creased yield per acre resulting from drought conditions during the growing season. Direct production costs decreased 2% during fiscal 2002, compared to fiscal 2001. However, allo- cated costs increased 8% during 2002 over 2001 levels due to an increase in ad valorem taxes. Sales revenues from sugarcane increased 40% during fiscal 2001, compared to fiscal 2000 ($11.9 million vs. $8.5 million, respectively). The rise in revenue and related costs was the result of the increase in the number of producing acres. Ranching ________ The gross profit from ranch operations for fiscal 2002, 2001 and 2000 was $809 thousand, $1.6 million, and $739 thousand, respectively. Revenues from cattle sales increased 3% during fiscal 2002, compared to fiscal 2001 ($9.6 million in fiscal 2002 vs. $9.3 million in fiscal 2001). The proportion of animals sold from feedlots increased in the current year resulting in higher sales weights per head and higher revenues. The increase in revenues was offset, however, by a 14% rise in direct and allocated costs when compared to the prior year ($8.8 million during fiscal 2002 and $7.7 million during fiscal 2001). Revenues from cattle sales increased 54% during fiscal 2001, compared to fiscal 2000 ($9.3 million in fiscal 2001 vs. $6.1 million in fiscal 2000). The number of animals sold during the year increased 52% over the prior year due to increased sales of feeder cattle during the year and market prices for beef improved. Direct and allocated costs increased 45% when compared to the prior year ($7.7 million during fiscal 2001 and $5.3 million during fiscal 2000) corresponding to the increase in the number of animals sold. The Company's cattle marketing activities include retention of calves in western feedlots, contract and auction sales, and risk management contracts. Other Operations ________________ Revenues from oil royalties and land rentals were $721 thousand in fiscal 2002 as compared to $770 thousand for fis- cal 2001 and $923 thousand for fiscal 2000. Returns from rock products and sand were $2.0 million for fis- cal 2002,$1.7 million for 2001 and $1.3 million during 2000. Rock and sand supplies are sufficient to meet current demand, and no major price changes have occurred over the past 3 years. Profits from the sale of sabal palms and other horticultural items, for landscaping purposes, during fiscal 2002 were $355 thousand compared to $91 thousand and $84 thousand for fiscal years 2001 and 2000, respectively. Direct and allocated expenses charged to the "Other" opera- tions category included general and administrative and other costs not charged directly to the citrus, ranching, sugarcane divisions. These expenses totaled $10.8 million during fiscal 2002, compared to $5.5 million during fiscal 2001 and to $4.4 million during fiscal 2000. In December 2001, the Company agreed to donate $5.0 million to the Florida Gulf Coast University for a new athletic complex, scholarships and athletic programs. As per the agreement with the University, $1.0 million was donated in fiscal 2002, and $800 thousand will be donated each year over the next five years. The net present value of the total donation was ac- crued and included in general and administrative expenses in fiscal 2002 and was the primary cause for the increase in general and administrative expenses for the year. General Corporate _________________ The Company is continuing its marketing and permitting activi- ties for its land which surrounds the Florida Gulf Coast Uni- versity site. There are sales contracts in place for more than 5,400 acres of the Lee County, Florida property totaling $146.0 million. The agreements are at various stages in the due diligence process 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 transfer- ring cash and approximately 3,000 acres of the Lee County property. Through Agri, the Company has been able to under- write 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 cer- tain perils such as freeze damage, windstorm damage, disease, etc. However, the current Federal Crop Insurance Program does not provide business interruption coverage. The coverages cur- rently underwritten by Agri will indemnify the insured for the loss of the revenue stream resulting from a catastrophic event that would cause a grove to be replanted. The insurance market is bifurcated into direct insurers and reinsurers. Reinsurers provide wholesale insurance coverage to direct insurers. 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 recently created entity. It would be difficult, if not impossible, to speculate about the impact that Agri could have on the Company's financial position, results of operations and liquidity in future periods. Since the cover- ages 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 was trans- ferred during fiscal 2001. Agri underwrote a limited amount of coverage for Ben Hill Griffin, Inc. during fiscal 2002 and 2001 and in August 31, 2002 began insuring all of the Alico, Inc., citrus groves. 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 mort- gage were recognized during the 2001 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, $30.0 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 statement of operations under gain on sales of real estate. Also in December 2001, the Company agreed to donate $5.0 mil- lion to Florida Gulf Coast University for a new athletic com- plex, scholarships and athletic programs. The agreement called for $1.0 million to be donated in the current fiscal year, and $800 thousand to be donated each year over the next five years. The entire donation has been accrued and is in- cluded in general and administrative expenses in the statement of operations. During January 2002, the Company 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 rela- ted disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the re- ported amounts of assets and liabilities, revenues and ex- penses, 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 have been identi- fied that affect the more significant judgments and estimates used in the preparation of the consolidated financial statements. The Company 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 prior years' crop totaling $568 thousand, $617 thousand, and $1.8 million, during fiscal 2002, 2001 and 2000, respectively. 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. 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 avail- ability, both in the traditional commercial insurance markets and governmental sponsored insurance programs, suitable to pro- vide 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 poten- tial exposures related to the aforementioned events, but also to attempt to attract new underwriting capital if it is suc- cessful 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 result- ing from differing viewpoints related to the tax treatment of insurance companies for other 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. Item 7(a). Quantitative and Qualitative Disclosure About Market Risk ______________________________________________________________ Alico's exposure to market rate risk for changes in interest rates relates primarily to its investment portfolio. There are no derivative financial instruments in the investment port- folio. Investments are placed with high quality issuers and, by policy, limit the amount of credit exposure to any one issuer. Alico is adverse to principal loss and ensures the safety and preservation of invested funds by limiting default, market and reinvestment risk. The Company classifies cash equivalents and short-term investments as fixed-rate if the rate of return on such instruments remains fixed over their term. These fixed-rate investments include fixed-rate U.S. government securities, municipal bonds, time deposits and certificates of deposit. Cash equivalents and short-term in- vestments are classified as variable-rate if the rate of return on such investments varies based on the change in a pre- determined index or set of indices during their term. These variable-rate investments primarily include money market ac- counts, mutual funds and equities held at various securities brokers and investment banks. The table below presents the amounts (in thousands) and related weighted interest/dividend yield rates of the investment portfolio at August 31, 2002:
Average Interest Estimated Marketable Securities and Rate/Dividend Yield Cost Fair Value Short-term Investments (1) ________________ _____________ ___________ Fixed Rate 3.35% $ 7,141 $ 6,404 Variable Rate 2.29% $ 14,802 $ 15,013 (1) See definition in Notes 1 and 2 to our Notes to Consolidated Financial Statements.
The aggregate fair value of investments in debt instruments (net of mutual funds of $4,768) as of August 31, 2002, by contractual maturity date, consisted of the following: Aggregate Fair Values ______________ (in thousands) Due in one year or less $ 118 Due between one and five years 234 Due between five and ten years 433 Due thereafter 851 ______________ $ 1,636 ______________ ______________ Item 8. Financial Statements and Supplementary Data. _____________________________________________________________ Independent Auditors' Report ____________________________ The Stockholders and Board of Directors Alico, Inc.: We have audited the consolidated balance sheets of Alico, Inc. and subsidiaries as of August 31, 2002 and 2001, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the three-year period ended August 31, 2002. In connection with our audits of the consolidated financial statements, we also have audited the related consolidated financial statement schedules as listed in Item 14(a)(2) herein. These consolidated financial statements and financial statements schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Alico,Inc. and subsidiaries at August 31, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended August 31, 2002 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related consolidated financial statement schedules, when considered in relation to the consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. KPMG LLP (Signature) Orlando, Florida October 12, 2002
CONSOLIDATED BALANCE SHEETS August 31, 2002 2001 _____________ ____________ ASSETS Current assets: Cash, including time deposits and other cash investments of $10,028,199 in 2002 and $478,260 in 2001 $ 10,139,659 $ 6,225,088 Marketable securities available for sale, at estimated fair value in 2002 and in 2001 (Note 2) 21,417,046 18,726,723 Accounts receivable ($6,456,783 in 2002 and $6,901,275 in 2001 due from affiliate) (Note 12) 9,460,834 10,153,205 Mortgages and notes receivable, current portion (Note 3) 2,451,340 2,482,454 Inventories (Note 4) 21,671,964 23,246,609 Income tax refund receivable 271,036 - Other current assets 855,447 510,760 ____________ ____________ Total current assets 66,267,326 61,344,839 ____________ ____________ Other assets: Land inventories 16,786,717 8,031,544 Mortgages and notes receivable, net of current portion (Note 3) 2,693,186 5,112,309 Investments 908,049 1,170,898 ____________ ____________ Total other assets 20,387,952 14,314,751 ____________ ____________ Property, buildings and equipment (Note 5) 142,354,775 138,352,300 Less accumulated depreciation (37,100,353) (34,878,310) ____________ ____________ Net property, buildings and equipment 105,254,422 103,473,990 ____________ ____________ Total assets $191,909,700 $179,133,580 ____________ ____________ ____________ ____________ See accompanying Notes to Consolidated Financial Statements.
August 31, 2002 2001 ____________ ____________ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,437,756 $ 1,810,094 Due to profit sharing plan (Note 10) 284,649 443,942 Accrued ad valorem taxes 1,523,980 1,383,111 Current portion of notes payable (Note 6) 3,318,524 1,301,146 Accrued expenses 1,168,652 1,494,940 Income taxes payable - 22,670 Deferred income taxes (Note 11) 1,038,727 1,234,697 Donation payable 770,721 - ____________ ____________ Total current liabilities 9,543,009 7,690,600 Deferred revenue 113,532 52,987 Notes payable (Note 6) 52,657,508 46,704,954 Deferred income taxes (Note 11) 9,727,889 11,909,252 Deferred retirement benefits (Note 10) 119,247 150,429 Other non-current liability (Note 8) 3,640,593 - Donation payable 2,890,423 - ____________ ____________ Total liabilities 78,692,201 66,508,222 ____________ ____________ Stockholders' equity: Preferred stock, no par value. Authorized 1,000,000 shares; issued, none - - Common stock, $1 par value. Authorized 15,000,000 shares; issued and outstanding 7,080,344 in 2002 and 7,044,513 in 2001 7,080,344 7,044,513 Additional paid in capital 1,715,616 331,617 Accumulated other comprehensive income (432,577) 871,077 Retained earnings 104,854,116 104,378,151 ____________ ____________ Total stockholders' equity 113,217,499 112,625,358 ____________ ____________ Total liabilities and stockholders' equity $191,909,700 $179,133,580 ____________ ____________ ____________ ____________ See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended August 31, 2002 2001 2000 ___________ ___________ ___________ Revenue: Citrus (including revenues from affiliate (Note 12) $25,105,126 $27,569,705 $28,172,057 Sugarcane 11,300,199 11,939,228 8,501,549 Ranch 9,591,237 9,299,477 6,062,224 Forest products 354,699 90,861 84,104 Rock and sand royalties 1,998,863 1,725,997 1,319,525 Oil lease and land rentals 721,239 770,170 923,535 Retail land sales 114,000 137,950 144,250 ___________ __________ ___________ Total revenue 49,185,363 51,533,388 45,207,244 ___________ __________ ___________ Costs of sales: Citrus production, harvesting and marketing (including charges from affiliate (Note 12)) 21,420,816 22,450,086 21,431,441 Sugarcane production, harvesting and hauling 9,189,734 9,317,739 6,962,366 Ranch 8,781,819 7,704,467 5,323,002 Retail land sales 114,398 140,102 126,012 __________ ___________ ___________ Total costs of sales 39,506,767 39,612,394 33,842,821 __________ ___________ ___________ Gross profit 9,678,596 11,920,994 11,364,423 General and administrative expenses 10,806,157 5,471,128 4,415,614 __________ ___________ ___________ Income (loss) from operations (1,127,561) 6,449,866 6,948,809 Other income (expenses): Profit on sales of real estate: Sales 12,658,954 12,840,652 27,575,329 Cost of sales 1,017,635 1,486,282 4,754,645 ___________ ___________ ___________ Gross profit 11,641,319 11,354,370 22,820,684 Gross profit not yet recognized - - 9,540,000 ___________ ___________ ___________ Profit on sales of real estate, net 11,641,319 11,354,370 13,280,684 Interest and investment income 1,471,056 2,123,595 3,093,203 Recovery of citrus eradication costs in excess of basis (Note 14) - 2,967,950 234,920 Interest expense (Note 6) (2,420,893) (3,028,631) (3,019,819) Other 229,276 245,165 37,177 ___________ ___________ ___________ Total other income, net 10,920,758 13,662,449 13,626,165 ___________ ___________ ___________ Income before income taxes 9,793,197 20,112,315 20,574,974 Provision for income taxes (Note 11) 2,258,192 4,046,184 6,464,358 ___________ ___________ ___________ Net Income $ 7,535,005 $16,066,131 $14,110,616 ___________ ___________ ___________ ___________ ___________ ___________ Weighted-average number of shares outstanding 7,070,024 7,032,929 7,027,827 ___________ ___________ ___________ ___________ ___________ ___________ Weighted-average number of shares outstanding assuming dilution 7,198,191 7,057,395 7,031,861 ___________ ___________ ___________ ___________ ___________ ___________ Per share amounts: Basic $ 1.07 $ 2.29 $ 2.01 Diluted $ 1.05 $ 2.28 $ 2.01 Dividends $ 1.00 $ 1.00 $ .30 See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Accumulated Common Stock Other Additional Shares Retained Comprehensive Paid in Issued Amount Earnings Income Capital Total ________ __________ ___________ _______ ________ ________ Balances, August 31, 1999 7,027,827 $7,027,827 $83,337,579 $1,029,953 $ - $91,395,359 _________ Comprehensive income: Net income for the year ended August 31, 2000 - - 14,110,616 - - 14,110,616 Unrealized gains on securities, net of taxes - - - 129,492 - 129,492 and reclass- ification adjustment __________ Total comprehensive income: 14,240,108 Dividends paid - - (2,108,348) - - (2,108,348) Stock based compensation - - - - 17,885 17,885 _________ _________ ___________ ________ _____ ___________ 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 gains on securities, net of taxes - - - (288,368) - (288,368) and reclass- ification adjustment ___________ 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 year ended August 31, 2002 - - 7,535,005 - - 7,535,005 Unrealized losses on securities, net of taxes - - - (1,303,654) - (1,303,654) and reclass- ification adjustment ___________ 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 _________ __________ ___________ ________ ________ ___________ _________ __________ ___________ ________ ________ ___________ Disclosure of reclassification amount: 2002 2001 2000 ________ __________ ________ Unrealized holding gains (losses) arising during the period $(1,774,892) $ (206,715) $2,176,940 Less: reclassification adjustment for gains (losses) included in net income (471,238) 81,653 2,047,448 ________ __________ _________ Net unrealized gains (losses) on securities $(1,303,654) $ (288,368) $ 129,492 _________ _________ _________ _________ _________ _________ See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended August 31, 2002 2001 2000 ___________ ___________ __________ Increase (Decrease) in Cash and Cash Investments: Cash flows from operating activities: Net income $ 7,535,005 $16,066,131 $14,110,616 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 6,982,221 6,946,005 5,118,854 (Gain) loss on breeding herd sales (84,279) (76,993) 99,766 Deferred income tax expense, net 1,263,260 1,178,810 (613,097) Deferred retirement benefits (31,182) (102,380) (124,678) Net (gain) loss on sale of marketable securities 380,579 (159,830) (1,868,010) (Gain) Loss on sale of property and equipment (149,970) 1,641,938 1,232,535 Gain on real estate sales (11,758,419) (11,585,627) (13,967,688) Stock options granted below fair market value 890,802 86,468 17,885 Cash provided by (used for) changes in: Accounts receivable 692,371 1,846,507 (3,930,668) Inventories 1,059,247 (1,701,762) (2,214,387) Other assets 57,255 (600,335) (201,767) Accounts payable and accrued expenses 2,944,094 (112,219) 161,824 Income taxes payable (293,706) (4,146,847) 4,719,103 Deferred revenues 47,845 52,987 - ___________ ___________ ___________ Net cash provided by operating activities 9,535,123 9,332,853 2,540,288 ___________ ___________ ___________ Cash flows from investing activities: Increase in land inventories (9,785,254) (924,851) (713,832) Purchases of property and equipment (9,269,856) (8,502,483) (9,995,159) Proceeds from disposals of property and equipment 1,256,850 959,324 522,091 Proceeds from sale of real estate 12,788,500 2,880,279 17,089,222 Purchases of investments (126,393) (211,646) (69,937) Proceeds from the sale of other assets - - 56,829 Purchases of marketable securities (8,047,072) (3,013,303) (2,902,598) Proceeds from sales of marketable securities 3,672,516 2,039,159 1,967,397 Issuances of mortgages and notes receivable (79,256) (381,425) (85,080) Collection of mortgages and notes receivable 2,529,493 2,630,275 105,926 ___________ __________ ___________ Net cash provided by (used for) investing activities (7,060,472) (4,524,671) 5,974,859 ___________ ___________ ___________ Years Ended August 31, 2002 2001 2000 ___________ ___________ ___________ Cash flows from financing activities: Proceeds from exercising stock options 529,028 243,950 - Proceeds from bank loans 43,597,058 43,193,828 33,086,000 Repayment of bank loans (35,627,126) (36,789,473) (38,437,200) Dividends paid (7,059,040) (7,027,827) (2,108,348) ___________ ___________ ___________ Net cash provided by (used for) financing activities 1,439,920 (379,522) (7,459,548) ___________ ___________ ___________ Net increase (decrease) in cash and cash investments 3,914,571 4,428,660 1,055,599 Cash and cash investments: At beginning of year 6,225,088 1,796,428 740,829 ___________ ___________ __________ At end of year $10,139,659 $ 6,225,088 $ 1,796,428 ___________ ___________ ___________ ___________ ___________ ___________ Supplemental disclosures of cash flow information: Cash paid for interest, net of amount capitalized $ 2,123,822 $ 3,101,692 $ 2,863,215 ___________ ___________ ___________ ___________ ___________ ___________ Cash paid for income taxes, $ 942,811 $ 3,115,896 $ 2,472,505 including related interest (Note 11)___________ ___________ ___________ ___________ ___________ ___________ Noncash investing activities: Fair value adjustments to securities available for sale $(1,925,167) $ (462,350) $ 208,175 ___________ ___________ ___________ ___________ ___________ ___________ Income tax effect related to fair value adjustments $ (621,513) $ (173,982) $ 78,336 ___________ ___________ ___________ ___________ ___________ ___________ Reclassification of breeding herd to Property & Equipment $ 515,398 $ 370,192 $ 989,896 ___________ ___________ ___________ ___________ ___________ ___________ See accompanying Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended August 31, 2002, 2001 and 2000 (1) Summary of Significant Accounting Policies __________________________________________ (a) Basis of Consolidated Financial Statement Presentation ______________________________________________________ The consolidated financial statements include the accounts of Alico, Inc. (the Company) 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. (b) Revenue Recognition ___________________ Income from sales of citrus under marketing pool agreements is recognized at the time the crop is harvested. Based on fruit buyers' and processors' advances to growers, stated cash and futures markets, 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 $568 thousand, $617 thousand, and $1.8 million during fiscal years 2002, 2001 and 2000, respectively. Revenue from sugarcane is recognized when the har- vested product is taken for processing. The earnings process is complete at that time and the resulting revenue is determinable for the sugarcane crop as of year-end, therefore, no estimations are necessary. The Company recognizes revenue from cattle sales at the time the cattle are sold at auction. (c) Real Estate ___________ Real estate sales are recorded under the accrual method of accounting. Residential retail land sales made through Saddlebag are not recognized until the buyer's initial investment or cumulative payments of principal and interest equal or exceed 10 percent of the contract sales price Commercial or bulk land sales,made mostly through Agri, are not recognized until payments received for property to be developed within two years after the sale equal 20%, or property to be developed after two years equal 25%, of the contract sales price. At August 31, 2000, the Company did not recognize gross profit totaling $9.5 million related to commercial real estate which was sold subject to a mortgage note receivable (note 3). The terms of the sale called for 10% of the contract price of $10.6 million to be paid at closing. The $1.1 million less the land basis and closing costs was recognized as a gain on the sale of real estate totaling $288 thousand during August 31, 2000. During the year ended August 31, 2001, the purchaser made the first of four equal annual installments, required in the mortgage, totaling $2.4 million, plus interest. The deferred profit on the sale was then recognized as 32.5 percent of the contract price was received and the buyer's continuing invest- ment became adequate to demonstrate its commitment to pay for the property. Profits from commercial real estate sales are discounted to reflect the market rate of interest where the stated rate is less than the market rate. The recorded valuation discounts are realized as the balances due are collected. In the event of early liquidation, interest is recognized on the simple interest method. Tangible assets that are purchased during the period to aid in the sale of the project as well as costs for services performed to obtain regulatory approval of the sales are capitalized as land and land im- provements to the extent they are estimated to be recoverable from the sale of the property. Land and land improvement costs are allocated to individual parcels on a per lot basis using the relative sales value method. The Company has entered into an agreement with a real estate consultant to assist in obtaining the necessary regulatory approvals for the development and marketing of a tract of raw land. The marketing costs under this agreement are being expensed as in- curred. The costs incurred to obtain the necessary regulatory approvals are capitalized into land costs when paid. These costs will be expensed as cost of sales when the underlying real estate is sold. (d) Marketable Securities Available for Sale ________________________________________ Marketable securities available for sale are carried at their estimated fair value. Net unrealized investment gains and losses are recorded net of related deferred taxes in accumulated other comprehensive income within stockholders' equity until realized. Fair value for debt and equity investments is based on quoted market prices at the reporting date for those or similar investments. The cost of all marketable securities available for sale are deter- mined on the specific identification method. (e) Inventories ___________ The costs of growing citrus and sugarcane are capitalized into inventory until the time of harvest. Once a given crop is harvested, the related inven- toried costs are recognized as a cost of sale to pro- vide an appropriate matching of costs incurred with the related revenue earned. Beef cattle inventories are stated at the lower of cost or market. The cost of the beef cattle inven- tory is based on the accumulated cost of developing such animals for sale. Unharvested crops are stated at the lower of cost or market. The cost for unhar- vested crops is based on accumulated production costs incurred during the eight month period from January 1 through August 31. (f) Property, Buildings and Equipment _________________________________ Property, buildings and equipment are stated at cost. Properties acquired from the Company's predecessor corporation in exchange for common stock issued in 1960, at the inception of the Company, are stated on the basis of cost to the predecessor corporation. Property acquired as part of a land exchange trust is valued at the carrying value of the property transferred to the trust. All costs related to the development of citrus groves, through planting, are capitalized. Such costs include land clearing, excavation and construc- tion of ditches, dikes, roads, and reservoirs, etc. After the planting, caretaking costs or preproductive maintenance costs are capitalized for four years. After four years, a grove is considered to have reached maturity and the accumulated costs, except for land excavation become the depreciable basis of a grove and are written off over 25 years. Development costs for sugarcane are capitalized the same as citrus. However, sugarcane matures in one year and the Company is able to harvest an average of 3 crops (1 per year) from one planting. As a re- sult, cultivation/caretaking costs are expensed as the crop is harvested, while the appropriate deve- lopment and planting costs are depreciated over 3 years. The breeding herd consists of purchased animals and animals raised on the ranch. Purchased animals are stated at cost. The cost of animals raised on the ranch is based on the accumulated cost of developing such animals for productive use. Depreciation for financial reporting purposes is computed on straight-line and accelerated methods over the estimated useful lives of the various classes of depreciable assets. The Company accounts for long-lived assets in accor- dance with the provisions of SFAS No. 121, "Accoun- ting for the Impairment of Long-Lived Assets for Long-Lived Assets to be Disposed of". This Statement requires the long-lived assets and certain identifi- able 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 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. (g) Land Inventories Land inventories are carried at cost and consists of property located in Lee County, Florida and owned by Agri-Insurance Co., Ltd. The property is held for sale as commercial real estate. (h) Other Investments Other investments are carried at cost which primarily includes stock owned in cooperatives. The Company uses cooperatives to process and sell sugarcane and cattle. Cooperatives typically require members to ac- quire ownership as a term of use of its services. (i) Income Taxes ____________ The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those tem- porary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (j) Net Earnings Per Share ________________________ Outstanding stock options issued by the Company represent the only dilutive effect reflected in the computation of diluted weighted average shares outstanding assuming dilution. Options do not impact the numerator of the earnings per share computation. There were no stock options that could potentially dilute basic earnings per share in the future that were not included in the computation of earnings per share assuming dilution. (k) Cash Flows __________ For purposes of the cash flows, cash and cash invest- ments include cash on hand and amounts due from financial institutions with an original maturity of less than three months. (l) Use of Estimates ________________ In preparing the consolidated financial statements, management is required to make estimates and assump- tions that effect the reported amounts of assets and liabilities. Actual results could differ signifi- cantly from those estimates. Although some variability is inherent in these estimates, manage- ment believes that the amounts provided are adequate. (m) Financial Instruments and Accruals __________________________________ The carrying amounts in the consolidated balance sheets for accounts receivable, mortgage and notes receivable, accounts payable and accrued expenses approximate fair value, because of the immediate or short term maturity of these items. The carrying amounts reported for the Company's long-term debts approximate fair value. (n) Derivative and Hedging Instruments __________________________________ In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which establishes accounting and reporting standards for derivative instruments, including certain deriva- tive instruments embedded in other contracts (collec- tively referred to as derivatives), and for hedging activities. SFAS No. 133 was amended by SFAS No. 138 in June 2000, in part, to allow "normal purchases and normal sales" transactions to be excluded from SFAS 133. At September 1, 2000, the Company had no open derivatives. Accordingly, the Company's adoption of the provisions of SFAS No. 133, as amended, on September 1, 2000, did not result in a transition adjustment. The Company engages in cattle futures trading acti- vities for the purpose of economically hedging against price fluctuations. The Company records gains and losses related to economic hedges in costs of goods sold. At August 31, 2002 and 2001, the Company had no open positions. (o) Accumulated Other Comprehensive Income ______________________________________ Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes both net income and other comprehensive income. Items included in other comprehensive income are classified based on their nature. The total of other comprehensive income for a period has been transferred to an equity account and displayed as "accumulated other comprehensive income". (p) Stock-Based Compensation ________________________ The Company applies Accounting Principles Board Opinion No. 25,"Accounting for Stock Issued to Employees" (APB 25) for stock options and other stock- based awards while disclosing pro forma net income and net income per share as if the fair value method had been applied in accordance with Statement of Financial Accounting Standards No. 123,"Accounting for Stock-based Compensation" (SFAS 123). (q) Reportable Segments _________________ The Company has three reportable segments: citrus, sugarcane, and ranch. The citrus segment produces fruit for both the fresh fruit and processed juice mar- kets. The sugarcane segment produces sugarcane for processing. The ranch segment raises beef cattle to be sold in the wholesale market. The Company's reportable segments are strategic busi- ness units that offer different products. They are managed separately because each business requires different operating strategies. (r) Reclassifications _________________ Certain amounts from 2001 have been reclassified to conform to the 2002 presentation. (2) Marketable Securities Available for Sale ________________________________________ The Company has classified 100% of its investments in marketable securities as available for sale and, as such, the securities are carried at estimated fair value. Any unrealized gains and losses, net of related deferred taxes, are recorded as a net amount in a separate component of stockholders' equity until realized. The cost and estimated fair values of marketable securities available for sale at August 31, 2002 and 2001 (in thousands) were as follows:
2002 2001 _____________________________ _____________________________ Gross Estimated Gross Estimated Equity Unrealized Fair Unrealized Fair securities: Cost Gains Losses Value Cost Gains Losses Value _______ ____ ____ _______ ______ ______ ___ ________ Preferred stocks $ 3,160 $ 65( $ 79) $ 3,146 $ 3,565 $ 27 $ - $ 3,592 Common stocks 1,734 135( 242) 1,627 2,152 261 - 2,413 Mutual funds 9,908 479( 147) 10,240 8,515 1,076 - 9,591 _____________________________ ______________________________ Total equity securities 14,802 679( 468) 15,013 14,232 1,364 - 15,596 _____________________________ ______________________________ Debt securities: Mutual bonds 559 36 - 595 750 37 - 787 Mutual funds 5,418 232 ( 882) 4,768 1,986 45 - 2,031 Fixed maturity funds 282 15 ( 1) 296 - - - - Corporate bonds 882 14 ( 151) 745 362 - (49) 313 _____________________________ ______________________________ Total debt securities 7,141 297 (1,034) 6,404 3,098 82 (49) 3,131 _____________________________ ______________________________ Marketable securities available for sale 21,943 976 (1,502) 21,417 17,330 1,446 (49) 18,727 _____________________________ ______________________________ _____________________________ ______________________________
At August 31, 2002, debt instruments (net of mutual funds of $4,768) are collectible as follows: $118 within one year, $234 between one and five years, $433 between five and ten years, and $851 there after. (3) Mortgage and Notes Receivable ____________________________ Mortgage and notes receivable arose from real estate sales. The balances (in thousands) are as follows:
August 31, 2002 August 31, 2001 _______________ _______________ Mortgage notes receivable on retail land sales $ 193 $ 242 Mortgage notes receivable on bulk land sales 4,926 7,262 Other notes receivable 25 90 ________________ _______________ Total mortgage and notes receivable $ 5,144 $ 7,594 Less current portion 2,451 2,482 ________________ _______________ Non-current portion $ 2,693 $ 5,112 ________________ _______________ ________________ _______________
In July 2000, the Company received a mortgage note in exchange for land sold. The note totaled $9.5 million and principal payments of $2.4 million are due annually on July 14, bearing interest at LIBOR, over four years. (4) Inventories ___________ A summary of the Company's inventories (in thousands) at August 31, 2002 and 2001 is shown below:
2002 2001 _______ _______ Unharvested fruit crop on trees $ 8,599 $ 9,626 Unharvested sugarcane 5,274 5,387 Beef cattle 7,507 8,076 Sod 292 158 _______ _______ Total inventories $21,672 $23,247 _______ _______ _______ _______
(5) Property, Buildings and Equipment _________________________________ A summary of the Company's property, buildings and equip- ment (in thousands) at August 31, 2002 and 2001 is shown below:
Estimated 2002 2001 Useful Lives _______ _______ ____________ Breeding herd $12,618 $12,465 5-7 years Buildings 3,945 3,806 5-40 years Citrus trees 28,555 25,328 22-40 years Sugarcane 8,360 8,378 4-15 years Equipment and other facilities 29,996 29,993 3-40 years _______ _______ Total depreciable properties 83,474 79,970 Less accumulated depreciation 37,100 34,878 _______ _______ Net depreciable properties 46,374 45,092 Land & land improvements 58,880 58,382 _______ _______ Net property, buildings and equipment $105,254 $103,474 _______ _______ _______ _______
The Company's citrus trees, fruit crop, unharvested sugarcane and cattle are partially uninsured. (6) Indebtedness ____________ The Company has financial agreements with commercial banks that permit the Company to borrow up to $54 million. The financing agreements allow the Company to borrow up to $41 million which is 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 $41.0 million and $31.8 million at August 31, 2002 and 2001, 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 August 31, 2002 and 2001 was $52.7 million and $46.7 million, respectively. Maturities of the indebtedness of the Company over the next five years (in thousands) are as follows: 2003- $3,319; 2004- $34,321; 2005- $3,319; 2006- $3,312; 2007- $3,315 and $8,390 thereafter. Interest cost expensed and capitalized (in thousands) during the three years ended August 31, 2002, 2001 and 2000 was as follows:
2002 2001 2000 ______ ______ ______ Interest expense $2,421 $3,029 $3,020 Interest capitalized 322 175 431 ______ ______ ______ Total interest cost $2,743 $3,204 $3,451 ______ ______ ______ ______ ______ ______
(7) Commitments and Contingencies _____________________________ The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management,the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position, results of operation or liquidity. (8) 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 insur- ance availability, both in the traditional commercial in- surance markets and governmental sponsored insurance pro- grams, 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 in- cluded not only prefunding its potential exposures related to the aforementioned events, but also to attempt to at- tract 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 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 as- sets by Agri,management has decided to record a contin- gent 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. (9) 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 have vesting schedules which are at the discretion of the Board of Directors and determined on the effective date of the grant.
Weighted Weighted average average remaining exercise contractual Shares price Life (in years) ______ _________ _______________ Balance outstanding, August 31, 2000 49,692 $14.62 8 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 8 ______ _________ _______________ ______ _________ _______________
On August 31, 2002 and 2001, there were 479,636 and 549,234 shares available for grant, respectively. The fair value of stock options granted was $819 thousand in 2002 and $79 thousand in 2001 on the date of the grant using the Black Scholes option-pricing model with the fol- lowing weighted average assumptions:
2002 2001 ____ ____ Volatility 8.39% 10.19% Dividend paid 6.38% 6.84% Risk-free interest rate 4.75% 5.75% Expected life in years 1 1
All stock options granted, except as noted in the para- graph below, have been granted to directors or employees with an exercise price equal to the fair value of the com- mon stock at the date of the grant. The Company applies APB Opinion No. 25 for issuances to directors and employees in accounting for its Plan. No compensation cost was recognized in the consolidated financial statements through August 31, 2000, as options were issued at or above fair value. On September 9, 1999, the Company granted 14,992 stock options with an exercise price of $14.62 and a fair value of $15.813. The Company recorded $18 thousand of unearned compensation at the date of the grant. On September 12, 2000, the Company granted an additional 51,074 stock options with an exercise price of $14.62 and a fair value of $16.313. The Company recorded $86 thousand of unearned compensation at the date of the grant. On September 11, 2001, the Company granted an additional 69,598 stock options with an exercise price of $15.68 and a fair value of $28.48. The Company recorded $891 thousand of unearned compensation at the date of the grant. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net income would have changed to the pro forma amounts indicated below:
2002 2001 ____ ____ Net income as reported $ 7,535,005 $16,066,131 Pro forma net income $ 7,606,899 $16,073,741 Basic earnings per share, as reported $ 1.07 $ 2.29 Pro forma basic earnings per share $ 1.08 $ 2.29
(10) Employee Benefit Plans ______________________ The Company has a profit sharing plan covering substan- tially all employees. The plan was established under In- ternal Revenue Code Section 401(k). Contributions made to the profit sharing plan (in thousands) were $285, $444 and $430 for the years ended August 31, 2002, 2001 and 2000, respectively. Additionally, the Company implemented a nonqualified de- fined benefit retirement plan covering the officers and other key management personnel of the Company. The plan is being funded by the purchase of insurance contracts. The accrued pension liability for the nonqualified defined benefit retirement plan at August 31, 2002 and 2001 was $119,247 and $150,429, respectively. Pension expenses (in thousands) for the additional retire- ment benefits were $488, $395 and $128 for the years ended August 31, 2002, 2001 and 2000, respectively. (11) Income Taxes ____________ The provision for income taxes (in thousands) for the years ended August 31, 2002, 2001 and 2000 is summarized as follows:
2002 2001 2000 ______ ______ ______ Current: Federal income tax $3,713 $2,428 $6,218 State income tax 396 439 860 ______ ______ ______ 4,109 2,867 7,078 ______ ______ ______ Deferred: Federal income tax (1,673) 1,058 (528) State income tax (178) 121 ( 86) ______ ______ ______ (1,851) 1,179 (614) ______ ______ ______ Total provision for income taxes $2,258 $4,046 $6,464 ______ ______ ______ ______ ______ ______
Following is a reconciliation of the expected income tax expense computed at the U.S. Federal statutory rate of 34% and the actual income tax provision (in thousands) for the years ended August 31, 2002, 2001 and 2000:
2002 2001 2000 ______ ______ ______ Expected income tax $3,330 $6,838 $6,995 Increase (decrease) resulting from: State income taxes, net of federal benefit 144 328 516 Nontaxable interest and dividends (102) (113) (127) Internal Revenue Service examinations 11 479 (352) Utilization of charitable contribution carryforward - - (136) Income from Agri- Insurance Company, Ltd. (1,156) (3,829) - Other reconciling items, net 31 343 (432) ______ ______ ______ Total provision for income taxes $2,258 $4,046 $6,464 ______ ______ ______ ______ ______ ______
Some items of revenue and expense included in the state- ment of operations may not be currently taxable or de- ductible on the income tax returns. Therefore, income tax assets and liabilities are divided into a current portion, which is the amount attributable to the current year's tax return,and a deferred portion, which is the amount attributable to another year's tax return. The revenue and expense items not currently taxable or deductible are called temporary differences. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (in thousands):
2002 2001 _______ _______ Deferred Tax Assets: Contribution carry forward (1,698) - Pension (168) (168) Prepaid sales commissions (789) (776) Inventory-beef - (376) Land inventories (480) (435) Deferred retirement benefits (502) (303) Other (1,380) (943) _______ _______ Total gross deferred tax assets (5,017) (3,001) _______ _______ Deferred Tax Liabilities: Revenue recognized from citrus and sugarcane 458 861 Property and equipment (principally due to depreciation and soil and water deductions) 12,645 12,390 Mortgage notes receivable 10 117 Inventories 886 468 Deferred real estate gains 1,600 1,600 Unrealized gains on securities - 526 Other 185 183 _______ _______ Total gross deferred tax liabilities 15,784 16,145 _______ _______ Net deferred income tax liabilities $10,767 $13,144 _______ _______ _______ _______
Based on the Company's history of taxable earnings and its expectations for the future, management has determined that its taxable income will more likely than not be suf- ficient to fully recognize all deferred tax assets. Agri Insurance Company, Ltd. (Agri), a wholly owned insurance company subsidiary of Alico, is treated as a U.S. taxpayer,pursuant to an election under Internal Revenue Code Section 953(d), for all purposes except for consolidating an operating loss by virtue of the dual con- solidated loss rules. (Dual consolidated losses prevent operating losses (not capital losses) from occurring in insurance companies domiciled outside of the United States from offsetting operating income irrespective of the fact that the insurance company is a member of the consolidated return group.) Agri was established to provide agricultural insurance that falls outside of the Federal Crop Insurance Program, for catastrophic perils. Agri was domiciled in Bermuda because it offers easy access to reinsurance markets. Agri issued its initial policy in August 2000 to a third party. Agri's ability to underwrite insurance risks has been limited to its operational liquidity, by the Regis- trar of Companies in Bermuda. Agri will be able to under- write additional insurance as its liquidity is increased from additional asset sales and as payments are received on prior sales. For Federal income tax purposes, only premiums received by Agri from policies of insurance is- sued to parties other than its parent, Alico Inc., are considered insurance premiums. The preceding limiting factors resulted in Agri not incurring a tax liability on underwriting profits or investment income. Agri's tax status resulted in it filing its Federal tax return on a stand alone basis for the calendar year periods ending December 31, 2001 and 2000. (12) Related Party Transactions __________________________ Citrus ______ Citrus revenues of $19.1 million, $19.9 million and $20.0 million were recognized for a portion of citrus crops sold under a marketing agreement with Ben Hill Griffin, Inc. (Griffin) for the years ended August 31, 2002, 2001 and 2000, respectively. Griffin and its subsidiaries is the owner of approximately 49.85 percent of the Company's com- mon stock. Accounts receivable, resulting from citrus sales, include amounts due from Griffin totaling $6.5 mil- lion and $6.9 million at August 31, 2002 and 2001, res- pectively. These amounts represent estimated revenues to be received periodically under pooling agreements as the sale of pooled products is completed. Harvesting, marketing, and processing costs, related to the citrus sales noted above, totaled $7.1 million, $7.6 million, and $7.5 million for the years ended August 31, 2002, 2001 and 2000, respectively. In addition, Griffin provided the harvesting services for citrus sold to unrelated processors. The aggregate cost of these services was $2.0 million, $2.2 million and $2.0 million for the years ended August 31, 2002, 2001 and 2000, respectively. The accompanying consolidated balance sheets include ac- counts payable to Griffin for citrus production, harvest- ing and processing costs in the amount of $594 thousand and $414 thousand at August 31, 2002 and 2001, respectively. Other Transactions __________________ The Company purchased fertilizer and other miscellaneous supplies, services, and operating equipment from Griffin, on a competitive bid basis, for use in its cattle, sugar- cane, sod and citrus operations. Such purchases totaled $6.2 million, $6.0 million and $5.5 million during the years ended August 31, 2002, 2001 and 2000, respectively. (13) Future Application of Accounting Standards __________________________________________ In June 2001, the Financial Accounting Standard Board (FASB) issued Financial Accounting Standards (SFAS) No. 141, "Business Combinations". This statement addresses financial accounting and reporting for business combina- tions and supersedes Accounting Principal Board (APB) Option No. 16, "Business Combinations", and FASB Statement No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises". All business combinations in the scope of this Statement are to be accounted for using one method, the purchase method. The provisions of this Statement apply to all business combinations initiated af- ter June 30, 2001. The Statement also applies to all business combinations accounted for using the purchase method which the date of acquisition is July 1, 2001, or later. Adoption of this Statement is not expected to have a significant impact on the financial position or results of operations of the Company. In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets". This Statement addresses finan- cial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets". It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. This Statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. Adoption of this Statement is not expected to have a significant impact on the financial position or results of operations of the Company. In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement Obligations." This statement addresses financial accounting and reporting for obligations asso- ciated with the retirement of tangible long-lived assets and the associated asset retirement costs. It applies to legal obligations associated with the retirement of long- lived assets that result from the acquisition, construc- tion, development and (or) the normal operation of a long- lived asset, except for certain obligations of lessees. This Statement is effective for financial statements with fiscal years beginning after June 15, 2002. Adoption of this Statement is not expected to have a significant im- pact on the financial position or results of operations of the Company. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This Statement addresses financial accounting and report- ing for the impairment or disposal of long-lived assets. This Statement supercedes both FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets to Be Disposed Of" and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects of Dis- posal of a Segment of a Business, and Extraordinary, Un- usual and Infrequently Occurring Events and Transactions of a Segment of a Business." This Statement is effective for financial statements with fiscal years beginning af- ter December 15, 2001. Adoption of this Statement is not expected to have a significant impact on the financial position or results of operations of the Company. (14) Recovery of Citrus Canker Eradication Costs in Excess of Basis ______________________________________________________________ The Company incurred losses during the years ended August 31, 2001 and 2000, related to citrus canker eradication. The eradication program called for the removal of 507 acres of citrus trees from a grove in Hendry County, Flo- rida. While the trees were insured under the Federal Crop Insurance Program, additional relief funding was available and secured by the Company from both Federal and State government sources. A summary of the recovery sources, related basis of the trees removed and the crop inventory losses are summarized (in thousands) as follows:
2002 2001 2000 ______ ______ ______ Recovery Sources Federal $ - $ 2,830 $1,423 State - 157 - Insurance - 219 383 ______ ______ ______ Total Recovery - 3,206 1,806 Loss Basis Net Book Value of Trees - 238 1,222 Fruit Inventory - - 349 ______ ______ ______ Total Basis - 238 1,571 ______ ______ ______ Excess of Recovery over Basis $ - $ 2,968 $ 235 ______ ______ ______ ______ ______ ______
15) Reportable Segment Information ____________________________ The Company is primarily engaged in agricultural opera- tions, which are subject to risk, including market prices, weather conditions and environmental concerns. The Company is also engaged in retail land sales and, from time to time, sells real estate considered surplus to its operating needs. Information about the Company's reportable segments (in thousands) for the years ended August 31, 2002, 2001 and 2000 is summarized as follows:
2002 2001 2000 ________ ________ ________ Revenues Agriculture: Citrus $ 25,105 $ 27,570 $ 28,172 Sugarcane 11,300 11,939 8,501 Ranch 9,591 9,299 6,062 ________ ________ ________ Total revenues from external customers for reportable segments 45,996 48,808 42,735 Other revenues from external customers 3,189 2,725 2,472 ________ ________ ________ Total consolidated revenues $ 49,185 $ 51,533 $ 45,207 ________ ________ ________ ________ ________ ________ Costs of sales: Citrus $ 21,421 $ 22,450 $ 21,431 Sugarcane 9,190 9,318 6,962 Ranch 8,782 7,704 5,323 ________ ________ ________ Total costs of sales for reportable segments 39,393 39,472 33,716 Other costs of sales 114 140 127 ________ ________ ________ Total consolidated costs of sales $ 39,507 $ 39,612 $ 33,843 ________ ________ ________ ________ ________ ________ 2002 2001 2000 ________ ________ ________ Gross profit: Agriculture: Citrus $ 3,684 $ 5,120 $ 6,741 Sugarcane 2,110 2,621 1,539 Ranch 809 1,595 739 ________ ________ ________ Total profit for reportable segments 6,603 9,336 9,019 Other gross profit 3,075 2,585 2,345 ________ ________ ________ Consolidated gross profit 9,678 11,921 11,364 ________ ________ ________ Unallocated amounts: Profit on sale of bulk real estate 11,641 11,354 13,281 Other corporate expense (11,526) (3,163) (4,070) ________ ________ ________ Income before income taxes $ 9,793 $ 20,112 $ 20,575 ________ ________ ________ ________ ________ ________ Capital expenditures: Agriculture: Citrus $ 4,704 $ 3,310 $ 1,331 Sugarcane 1,293 2,632 5,861 Ranch 3,240 2,157 2,940 ________ ________ ________ Total agriculture capital expenditures for reportable segments 9,237 8,099 10,132 Other capital expenditures 548 773 853 Cattle transferred from inventory held for sale into breeding stock (515) (370) (990) ________ ________ ________ Total consolidated capital expenditures $ 9,270 $ 8,502 $ 9,995 ________ ________ ________ ________ ________ ________ Depreciation, depletion and amortization: Agriculture: Citrus $ 2,394 $ 2,405 $ 2,417 Sugarcane 2,527 2,587 2,235 Ranch 1,573 1,456 (66) ________ ________ ________ Total depreciation, depletion and amortization for reportable segments 6,494 6,448 4,586 Other depreciation, depletion, and amortization 488 498 533 ________ ________ ________ Total consolidated depreciation, depletion and amortization $ 6,982 $ 6,946 $ 5,119 ________ ________ ________ ________ ________ ________ Assets: Agriculture: Citrus $ 53,876 $ 53,266 $ 56,173 Sugarcane 50,083 51,678 50,784 Ranch 23,852 22,205 21,765 ________ ________ ________ Total assets for reportable segments 127,811 127,149 128,722 Other assets 64,098 51,985 48,154 ________ ________ ________ Total consolidated assets $191,909 $179,134 $176,876 ________ ________ ________ ________ ________ ________
Identifiable assets represent assets on hand at year-end which are allocable to a particular segment either by their direct use or by allocation when used jointly by two or more segments. Other assets consist principally of cash, temporary investments, mortgage notes receivable, bulk land inventories, and property and equipment used in general corporate business. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data (in thousands except for per share amounts) for the years ended August 31, 2002 and August 31, 2001, is as follows:
Quarters Ended November 30, Feb. 28, May 31, August 31, 2001 2000 2002 2001 2002 2001 2002 2001 _______ _______ _______ _______ _______ _______ _______ ______ Revenue: Citrus $ 1,506 $ 1,096 $ 7,689 $10,421 $ 9,889 $12,658 $ 6,021 $3,395 Sugarcane 2,255 2,938 6,978 6,303 1,883 2,698 184 - Ranch 3,590 4,800 2,013 951 2,536 2,156 1,452 1,392 Property sales 2,822 195 8,544 1,025 252 515 140 9,850 Interest 497 502 336 230 403 215 235 1,177 Other revenues 879 744 569 633 983 803 874 3,620 _______ _______ _______ _______ _______ _______ _______ ______ Total revenue 11,549 10,275 26,129 19,563 15,946 19,045 8,906 19,434 _______ _______ _______ _______ _______ _______ _______ ______ Costs and expenses: Citrus 1,485 835 7,348 9,425 7,605 9,396 4,983 2,794 Sugarcane 1,855 2,236 5,497 5,056 1,864 2,031 (26) (5) Ranch 3,010 4,315 1,857 918 2,434 1,446 1,481 1,025 Interest 514 729 531 980 682 647 694 673 Other 1,404 980 5,885 1,249 1,341 1,128 2,292 2,347 ______ ______ ______ ______ ______ _____ _____ _____ Total costs and ex- penses 8,268 9,095 21,118 17,628 13,926 14,648 9,424 6,834 ______ ______ ______ ______ ______ _____ _____ _____ Income be- fore income taxes 3,281 1,180 5,011 1,935 2,020 4,397 (518)12,600 Provision for income taxes 277 375 295 644 1,589 1,425 98 1,602 ______ ______ ______ ______ ______ ______ ______ _____ Net income $3,004 $ 805 $4,716 $1,291 $ 431 $2,972 $ (616)10,998 ______ ______ ______ ______ ______ ______ ______ _____ ______ ______ ______ ______ ______ ______ ______ _____ Basic earnings per share $ .43 $ .11 $ .66 $ .18 $ .06 $ .42 $ (.08) $1.58 ______ ______ ______ ______ ______ ______ ______ _____ ______ ______ ______ ______ ______ ______ ______ _____ Weighted average Shares out- standing 7,056 7,028 7,061 7,028 7,065 7,032 7,070 7,033 ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Item 9. Changes in & Disagreements with Accountants on Accounting and Financial Disclosure. ______________________________________________________________ None PART III ________ Item 10. Directors and Executive Officers of the Registrant. ______________________________________________________________ Executive Officers of the Company _________________________________ Information with respect to Directors and Executive Officers may be found under the captions "Nomination for Election as Directors" and "Executive Offices" of the Company's Proxy Statement for the Annual Meeting of Shareholders to be held December 5, 2002 (the "Proxy Statement"). Such information is incorporated herein by reference. Section 16 - Beneficial Ownership Reporting Compliance ______________________________________________________ Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company pursuant to Rule 16a-3(e) dur- ing the 2002 fiscal year and Forms 5 and amendments thereto furnished to the Company during fiscal year 1992 and certain written representations, if any, made to the Company, no offi- cer, director or beneficial owners of 10% or more of the Com- pany's common stock has failed to file on a timely basis any reports required by Section 16(a) of the Exchange Act to be filed during fiscal 2002. For information with respect to the executive officers of the registrant, see "Executive Officers of the Registrant" at the end of Part I of this report. The information called for regarding directors is incorporated by reference to the Company's Proxy Statement dated November 8, 2002. Item 11. Executive Compensation. _________________________________________ The information in the Proxy Statement set forth under the cap- tions "Executive Compensation" and "Directors' Compensation, Committees of the Board of Directors and certain meetings" is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. ______________________________________________________________ Information called for by Items 12 is incorporated by reference to the Company's Proxy Statement dated November 8, 2002. Item 13. Certain Relationships and Related Transactions. ______________________________________________________________ Information called for by Items 13 is incorporated by reference to the Company's Proxy Statement dated November 8, 2002. Item 14. Controls and Procedures ______________________________________________________________ Evaluation of disclosure controls and procedures The Company maintans 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 Secu- rities 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 con- trols or in other factors that could significantly affect these controls subsequent to the date of the evaluation of those con- trols by the Chief Executive and Chief Financial officers. PART IV _______ Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K. ______________________________________________________________ (a)1. Financial Statements: ____________________ Included in Part II, Item 8 of this Report Report of Independent Auditors' Consolidated Balance Sheets - August 31, 2002 and 2001 Consolidated Statements of Operations - For the Years Ended August 31, 2002, 2001 and 2000 Consolidated Statements of Stockholders' Equity - For the Years Ended August 31, 2002, 2001 and 2000 Consolidated Statements of Cash Flows - For the Years Ended August 31, 2002, 2001 and 2000 (a)2. Financial Statement Schedules: _____________________________ Selected Quarterly Financial Data - For the Years Ended August 31, 2002 and 2001 - Included in Part II, Item 8 Schedule I - Marketable Securities and Other Investments - at August 31, 2002 Schedule V - Property, Plant and Equipment - For the Years Ended August 31, 2002, 2001 and 2000 Schedule VI - Reserves for Depreciation, Depletion and Amortization of Property, Plant and Equipment - For the Years Ended August 31, 2002, 2001 and 2000 Schedule IX - Supplementary Income Statement Information - For the Years Ended August 31, 2002, 2001 and 2000 All other schedules not listed above are not submitted because they are not applicable or not required or because the required information is included in the financial statements or notes thereto. (a)3. Exhibits: ________ (3) Articles of Incorporation: * Schedule I - Restated Certificate of Incorporation, Dated February 17, 1972 Schedule II - Certificate of Amendment to Certificate of Incorporation, Dated January 14, 1974 Schedule III - Amendment to Articles of Incorporation, Dated January 14, 1987 Schedule IV - Amendment to Articles of Incorporation, Dated December 27, 1988 Schedule V - By-Laws of Alico, Inc., Amended to September 13, 1994 (4) Instruments Defining the Rights of Security Holders, Including Indentures - Not Applicable (10) Material Contracts - Citrus Processing and Marketing Agreement with Ben Hill Griffin, Inc., dated November 2, 1983, a Continuing Contract. * (11) Statement - Computation of Per Share Earnings (12) Statement - Computation of Ratios (19) Annual Report to Security Holders - By Reference (21) Subsidiaries of the Registrant - Sadddlebag Lake Resorts, Inc. (incorporated in 1971) and Agri-Insurance Company, Ltd.(incorporated in 2000). (22) Published Report Regarding Matters Submitted to Vote of Security Holders - Not Applicable (99) Additional Exhibits - None (b) Reports on Form 8-K: ___________________ Form 8-K dated September 17, 2002 regarding disposition of land. Form 8-K dated September 16, 2002 announcing new Director. Form 8-K dated February 25, 2002 regarding Chairman adopting a written sales plan. Form 8-K dated February 25, 2002 regarding amendment of sales plan. Form 8-K dated January 7, 2002 announcing of 13D/A filing by majority shareholder group. Form 8-K dated January 7, 2002 regarding purchase of land. Form 8-K dated January 31, 2002 regarding land disposition revision. Form 8-K dated December 12, 2001 announcing donation to Florida Gulf Coast University. Form 8-K dated December 7, 2001 announcing purchase of land. Form 8-K dated December 7, 2001 revising announcements of land purchase. Form 8-K dated December 6, 2001 regarding re-election of Directors and election of officers. Form 8-K dated December 4, 2001 regarding land disposition. Form 8-K dated November 20, 2001 regarding land disposition. Form 8-K dated October 26, 2001 regarding land disposition. Form 8-K dated October 9, 2001 regarding a settlement agreement and litigation in State Court, Polk County, Florida. Form 8-K dated October 2, 2001 announcing 13D/A filing by Majority shareholder group. Material has been filed with the Securities and Exchange Commission and NASDAQ and may be obtained upon request.
ALICO, INC. SCHEDULE I Marketable Securities and Other Investments August 31, 2002 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E ________ ________ ________ ________ ________ Amount of Which Each Portfolio of Equity Secu- Number of Market rity Issues and Shares or Value of Each Other Se- Name of Issuer Units-Principal Cost of Each Issue curity Issue and Title of Amounts of Bonds Each at Balance Carried in the Each Issue and Notes Issue Sheet Date Balance Sheet ______________ _______________ ___________ ____________ ___________ Municipal Bonds 558,829 $ 558,829 $ 595,254 $ 595,254 Corporate Bonds 882,176 882,176 745,850 745,850 Mutual-Debt 5,417,604 5,417,604 4,766,982 4,766,982 Preferred Stocks 125,500 3,159,887 3,146,153 3,146,153 Common Stocks 57,695 1,733,592 1,626,919 1,626,919 Mutual Equity 9,908,936 9,908,936 10,239,657 10,239,657 Other Investments 281,561 281,561 296,231 296,231 ___________ ___________ ___________ Total: $21,942,585 $21,417,046 $21,417,046 ___________ ___________ ___________ ___________ ___________ ___________
ALICO, INC. SCHEDULE V PROPERTY, PLANT AND EQUIPMENT COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F ________ _________ _________ ________ ________ ________ Other Changes Balance Retire- Debit and/or Balance Beginning Additions ments Credit- at Close Description of Period at Cost or Sales Describe of Period ___________ _________ _________ _________ ___________ __________ For Year Ended August 31, 2002 ______________________________ Land $31,623,725 $ 51,201 $ 133,242 $ $ 31,541,684 Roads 2,188,493 58,138 2,246,631 Agricultural Land Preparation 9,906 9,906 Forest Improvements 100,026 100,026 Pasture Improvements 3,038,915 135,064 3,173,979 Buildings 3,788,616 138,770 3,927,386 Feeding and Watering Facilities for Cattle Herd 18,039 7,316 2,738 22,617 Water Control Facilities 5,338 5,338 Fences 286,273 17,461 1,037 302,697 Cattle Pens 176,073 9,329 166,744 Interest-Ranch 16,963 17,105 34,068 Irrigation System- Ranch 329,801 346,334 676,135 Citrus Groves, Including Irrigation Systems 45,112,548 4,064,545 1,295,996 47,881,097 Equipment 9,446,885 1,316,095 1,405,396 9,357,584 Breeding Herd 12,464,867 1,723,202 1,570,420 12,617,649 Sugarcane-Land Prep- aration, Etc. 27,039,605 1,177,767 1,364,621 26,852,751 Sod Land-Prep- aration, Etc. 857,910 725,806 1,583,716 Farm Land Prep- aration, Etc. 1,848,317 6,450 1,854,767 ___________ ___________ __________ _______ ____________ $138,352,300 $ 9,785,254 $5,782,779 $ $142,354,775 ___________ ___________ __________ _______ ____________ ___________ ___________ __________ _______ ____________
ALICO, INC. SCHEDULE V PROPERTY, PLANT AND EQUIPMENT COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F ________ _________ _________ ________ ________ ________ Other Changes Balance Retire- Debit and/or Balance Beginning Additions ments Credit- at Close Description of Period at Cost or Sales Describe of Period ___________ _________ _________ _________ ___________ __________ For Year Ended August 31, 2001 ______________________________ Land $32,395,754 $ 42,266 $ 814,295 $ $31,623,725 Roads 2,156,452 32,041 2,188,493 Agricultural Land Preparation 9,906 9,906 Forest Improvements 100,026 100,026 Pasture Improvements 3,012,907 50,446 24,438 3,038,915 Buildings 3,553,390 235,226 3,788,616 Feeding and Watering Facilities for Cattle Herd 22,995 4,956 18,039 Water Control Facilities 5,338 5,338 Fences 277,102 10,669 1,498 286,273 Cattle Pens 186,809 10,736 176,073 Interest-Ranch 0 16,963 16,963 Irrigation System- Ranch 0 329,801 329,801 Citrus Groves, Including Irrigation Systems 44,327,540 2,817,916 2,032,908 45,112,548 Equipment 8,956,294 1,100,457 609,866 9,446,885 Breeding Herd 13,713,389 1,531,307 2,779,829 12,464,867 Sugarcane-Land Prep- aration, Etc. 25,991,443 2,112,392 1,064,230 27,039,605 Sod-Land Prep- aration, Etc. 270,719 587,191 857,910 Farm Land Prep- aration 1,842,317 6,000 1,848,317 ___________ __________ __________ _______ ____________ $136,822,381 $ 8,872,675 $7,342,756 $ $138,352,300 ___________ __________ __________ _______ ____________ ___________ __________ __________ _______ ____________
ALICO, INC. SCHEDULE V PROPERTY, PLANT AND EQUIPMENT COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F ________ _________ _________ ________ ________ ________ Other Changes Balance Retire- Debit and/or Balance Beginning Additions ments Credit- at Close Description of Period at Cost or Sales Describe of Period ___________ _________ _________ _________ ___________ __________ For the Year Ended August 31, 2000 __________________________________ Land $32,446,339 $ 15,821 $ 66,406 $ $32,395,754 Roads 1,415,260 741,192 2,156,452 Agricultural Land Preparation 9,906 9,906 Forest Improvements 100,026 100,026 Pasture Improve- ments 2,988,469 24,438 3,012,907 Buildings 3,378,101 293,695 118,406 3,553,390 Feeding and Watering Facilities for Cattle Herd 17,454 5,541 22,995 Water Control Facilities 5,338 5,338 Fences 266,909 24,402 14,209 277,102 Cattle Pens 155,652 31,157 186,809 Citrus Groves, Including Irri- gation Systems 46,184,668 849,070 2,706,198 44,327,540 Equipment 8,159,823 1,555,882 759,411 8,956,294 Breeding Herd 12,584,592 2,619,785 1,490,988 13,713,389 Sugarcane-Land Prep.,Etc. 22,634,544 4,736,794 1,379,895 25,991,443 Sod-Land Prep- aration,Etc. 191,441 79,278 270,719 Farm Land Prep- aration 1,834,317 8,000 1,842,317 ___________ __________ __________ _________ ___________ $132,372,839 $10,985,055 $6,535,513 $ $136,822,381 ___________ __________ __________ _________ ___________ ___________ __________ __________ _________ ___________ * Reclassification from other assets.
ALICO, INC. SCHEDULE VI Reserves for Depreciation, Depletion and Amortization of Property, Plant and Equipment _____________________________________________________ COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F ________ __________ __________ __________ ________ ________ Additions Other Balance Balance Charged To Changes at Beginning Profit & Loss Retire- Add(Deduct) Close of Description of Period of Income ments Desccribe Period ___________ _________ ____________ __________ _________ ________ For Year Ended August 31, 2002 ______________________________ Buildings $ 1,662,509 $ 170,298 $ $ $ 1,832,807 Feeding and Watering Facilities for Cattle Herd 4,845 1,344 2,738 3,451 Fences 157,483 29,323 1,037 185,769 Cattle Pens 102,801 13,155 9,329 106,627 Interest-Ranch 283 2,124 2,407 Irrigation System- Ranch 3,997 24,028 28,025 Citrus Groves, Including Irriga- tion Systems 14,836,199 1,922,057 992,449 15,765,807 Equipment 5,621,992 1,080,638 1,350,503 5,352,127 Breeding Herd 4,467,256 1,332,142 1,039,502 4,759,896 Roads 288,519 122,624 411,143 Sugarcane Lane Prep- aration, Etc. 7,519,249 2,220,866 1,364,620 8,375,495 Sod Land Prepara- tion, Etc. 24,553 24,799 49,352 Farm Land Preparation 188,624 38,823 227,447 ___________ __________ __________ ____ ___________ $34,878,310 $6,982,221 $4,760,178 $ 0 $37,100,353 ___________ __________ __________ ____ ___________ ___________ __________ __________ ____ ___________
ALICO, INC. SCHEDULE VI Reserves for Depreciation, Depletion and Amortization of Property, Plant and Equipment _____________________________________________________ COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F ________ __________ __________ __________ ________ ________ Additions Other Balance Balance Charged To Changes at Beginning Profit & Loss Retire- Add(Deduct) Close of Description of Period of Income ments Desccribe Period ___________ _________ ____________ __________ _________ ________ For Year Ended August 31, 2001 ______________________________ Buildings $ 1,502,400 $ 160,109 $ $ $ 1,662,509 Feeding and Watering Facilities for Cattle Herd 9,067 734 4,956 4,845 Fences 129,521 28,165 203 157,483 Cattle Pens 99,012 14,525 10,736 102,801 Interest- Ranch 0 283 283 Irrigation System- Ranch 0 3,997 3,997 Citrus Groves, Including Irriga- tion Systems 13,715,634 1,949,064 828,499 14,836,199 Equipment 5,088,513 1,037,208 503,729 5,621,992 Breeding Herd 5,132,625 1,275,138 1,940,507 4,467,256 Roads 173,052 115,467 288,519 Sugarcane-Land Prep- aration, Etc. 5,950,645 2,314,161 745,557 7,519,249 Sod-Land Prepara- tion, Etc. 16,066 8,487 24,553 Farm Land Preparation 149,957 38,667 188,624 ___________ __________ __________ ____ ___________ $31,966,492 $6,946,005 $4,034,187 $ 0 $34,878,310 ___________ __________ __________ ____ ___________ ___________ __________ __________ ____ ___________
ALICO, INC. SCHEDULE VI Reserves for Depreciation, Depletion and Amortization of Property, Plant and Equipment _____________________________________________________ COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F ________ __________ __________ __________ ________ ________ Additions Other Balance Balance Charged To Changes at Beginning Profit & Loss Retire- Add(Deduct) Close of Description of Period of Income ments Desccribe Period ___________ _________ ____________ __________ _________ ________ For the Year Ended August 31, 2000 __________________________________ Buildings $ 1,407,257 $ 153,267 $ 58,124 $ $ 1,502,400 Feeding and Watering Facilities for Cattle Herd 8,496 571 9,067 Fences 117,083 26,647 14,209 129,521 Cattle Pens 85,215 13,797 99,012 Citrus Groves, Including Irrigation Systems 13,213,300 1,986,634 1,484,300 13,715,634 Equipment 4,793,420 989,713 694,620 5,088,513 Breeding Herd 6,276,893 (220,982) 923,286 5,132,625 Roads 113,385 59,667 173,052 Sugarcane-Land Prep.,Etc. 5,263,793 2,066,746 1,379,894 5,950,645 Sod-Land Prep- aration, Etc. 11,414 4,652 16,066 Farm Land Preparation 111,815 38,142 149,957 ___________ __________ __________ _______ ___________ $31,402,071 $5,118,854 $4,554,433 $ 0 $31,966,492 ___________ __________ __________ _______ ___________ ___________ __________ __________ _______ ___________
ALICO, INC. SCHEDULE IX ____________ SUPPLEMENTARY INCOME STATEMENT INFORMATION __________________________________________ ______________________________________________________________ COLUMN A COLUMN B ______________________________________________________________ Charged to Costs and Expenses _____________________________ Years Ended August 31, ______________________ Item 2002 2001 2000 ____ ____ ____ ____ 1. Maintenance and repairs $ 861,587 $1,475,565 $1,294,131 2. Taxes, other than payroll and income taxes 2,053,763 1,616,942 2,130,749
EXHIBIT 11 ALICO, INC. Computation of Weighted Average Shares Outstanding as of August 31, 2002: Number of shares outstanding at August 31, 2002: 7,080,344 _________ _________ Number of shares outstanding at August 31, 2001: 7,044,513 _________ _________ Weighted Average 9/1/01 - 8/31/02: 7,070,024 _________ _________ EXHIBIT 12 ALICO, INC. Computation of Ratios: 2002 Current Assets $66,267,326 Current Liabilities 9,543,009 66,267,326 divided by 9,543,009 = 6.94:1 2001 Current Assets $61,344,839 Current Liabilities 7,690,600 61,344,839 divided by 7,690,600 = 7.98:1 Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the under- signed, thereunto duly authorized. ALICO, INC. (Registrant) November 12, 2002 /s/ Ben Hill Griffin, III _________________ _________________________ Ben Hill Griffin, III Date Chairman, Chief Executive Officer and Director November 12, 2002 /s/ W. Bernard Lester _________________ _________________________ W. Bernard Lester Date President, Chief Operating Officer and Director November 12, 2002 /s/ L. Craig Simmons _________________ _________________________ L. Craig Simmons Date Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following per- sons on behalf of the registrant and in the capacities and on the date indicated: /s/ Richard C. Ackert /s/ Ben Hill Griffin, IV _____________________ _________________________ Richard C. Ackert Ben Hill Griffin, IV Director Director /s/ K. E. Hartsaw /s/ Thomas E. Oakley _____________________ _________________________ K. E. Hartsaw Thomas E. Oakley Director Director /s/ William L. Barton /s/ Monterey Campbell, III _____________________ _________________________ William L. Barton Monterey Campbell, III Director Director /s/ Walker E. Blount, Jr. /s/ Amy Gravina _____________________ _________________________ Walker E. Blount, Jr. Amy Gravina Director Director November 12, 2002 _________________ Date Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following per- sons on behalf of the registrant and in the capacities and on the date indicated: I, Ben Hill Griffin, III, certify that: 1. I have reviewed this annual report on Form 10-K of Alico, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are respon- sible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report on September 10, 2002; and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the regist- rant's auditors and the audit committee of registrant's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the regist- rant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether 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. Date: November 12, 2003 __________________ /s/ Ben Hill Griffin, III _______________________ Ben Hill Griffin, III Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following per- sons on behalf of the registrant and in the capacities and on the date indicated: I, L. Craig Simmons, certify that: 1. I have reviewed this annual report on Form 10-K of Alico, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are respon- sible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report on September 10, 2002; and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the regist- rant's auditors and the audit committee of registrant's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the regist- rant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether 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. Date: November 12, 2003 __________________ /s/ L. Craig Simmons _______________________ L. Craig Simmons Chief Financial Officer and Vice President