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, 2003.
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 whether the registrant is an accelerated filer (as
Defined in rule 12b-2 of the Exchange Act).
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 reference in Part III of this Form 10-K or any
amendment to this Form 10-K. _____
As of October 17, 2003 there were 7,141,197 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 $108,013,944.
Explanatory note
This Amendment on Form 10-K/A constitutes Amendment No. 2 to our Annual
Report on Form 10-K for the fiscal year ended August 31, 2003 which was
previously filed with the Securities and Exchange Commission (the "SEC") on
November 19, 2003 and amended December 5, 2003. We are amending the
footnotes to the financial statements and the disclosures set forth in
Management's Discussion and Analysis.
This Amendment amends the footnotes to the financial statements and
Management's discussion and analysis portions of the Annual Report as
specified above and does not reflect events occurring
after the original filing date of the Annual Report on November 19, 2003.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement dated November 10, 2003
are incorporated by reference in Parts II and III, respectively.
PART I
______
Item 1. Business.
__________________________
Alico, Inc. (the "Company"), was formed February 29, 1960 as a spinoff of
the Atlantic Coast Line Railroad Company and is generally recognized as an
agribusiness company operating in Central and Southwest Florida. The
Company's primary asset is 141,764 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 farming, grazing, recreation and oil
exploration, in some instances, utilize the same acreage.
Agricultural operations have combined to produce from 67 to 82 percent of
total annual revenues during the past five years. Citrus groves generate the
most gross operating revenue. Sugarcane ranks second in operating revenue
production. While the cattle ranching operation utilizes the largest acreage,
it ranks third in the production of operating revenue. Approximately 8,748
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 11,840 acres in production during the 2003 fiscal year consisted of
2,477 acres planted in 1998, 4,052 acres planted in 1999, 2,550 acres
planted in 2000 and 2,761 acres planted in 2001.
Leasing of lands for rock mining and oil and mineral exploration, 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, Alico-Agri, Ltd., engages in bulk
land sales in connection with the generation of underwriting capital.
Revenues from sales of real estate during the past five years has ranged from
10 to 26 percent of total revenues.
For further discussion of the relative importance of the various segments
of the Company's operations, including financial 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 Statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this document.
Subsidiary Operations
_____________________
The Company has three wholly owned subsidiaries; Saddlebag Lake Resorts,
Inc. ("Saddlebag") Agri-Insurance Company, Ltd. ("Agri") and Alico-Agri, Ltd.
("A/A").
Saddlebag has been active in the subdividing, development 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 69% 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 $3.5 million and the premium charged
was $138 thousand. The coverage term was from December 2002 to December 2003.
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 but
two of Alico's citrus groves. The coverage term was from August 2002 to
August 2003. Total coverage under the policy was $12.7 million and the
premium charged was $803 thousand. Alico, Inc., renewed the policy in
August 2003, extending the coverage term to August 2004. The coverage
under the renewal was $13.6 million and the premium charge was $858 thousand.
Agri underwrote catastrophic business coverage for Alico's remaining two
groves under a policy covering the term from January 2003 to January 2004.
Total coverage under the policy is $2.0 million, and the premium charged was
$119 thousand.
Alico-Agri, Ltd. was formed during fiscal 2003 to manage the real estate
holdings of Agri. The partnership allows Alico to provide management and
administrative services so that Agri can focus on insurance issues. Agri
transferred all of its property holdings and the related contracts to
A/A for a 99% partnership interest. Alico, the managing partner,
transferred cash for a 1% interest in the partnership.
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 9,715 acres of citrus were harvested during the 2002/03 season.
Since 1983 the Company has maintained a marketing 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, 2003, approximately 75% of the Company's
fruit crop was marketed under this agreement, as compared to 77% for each
of the years ended August 31, 2002 and 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 25% of
total citrus revenue for the year.
Sugarcane
_________
The Company had 11,840 acres, 11,680 acres, and 11,722 acres of sugarcane
in production during the 2003, 2002, and 2001 fiscal years, respectively.
The 2003, 2002, and 2001 fiscal year crops yielded approximately 413,000,
376,000, and 417,000 gross tons, respectively.
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 13,428 cows, bulls and replacement heifers. Approximately
42% of the herd are from one to five years old, while the remaining 58% 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.
Forest Products
_______________
Approximately 6% 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 land, from which the timber was removed, is being converted to
semi-improved pasture and other uses.
Mining Operations: Rock and Sand
_________________________________
The Company leases approximately 5,714 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.
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 profitable 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.
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 imported 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.
All of the Company's sales are to United States purchasers. 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, executive 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 2003, the Company had a total of 143 full-time
employees classified as follows: Citrus 75; Ranch 15; Sugarcane 12;
Facilities Maintenance Support 26; General and Administrative 15. There
are no employees engaged in the development 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 quarters. Other segments of the Company's business
such as its cattle and sod sales, and its timber, mining and leasing
operations, tend to be more successive than seasonal in nature.
Available information
______________________
The Company's internet address is: http://www.alicoinc.com. The Company files
reports with the Securities Exchange Commission ("SEC") as required by
SEC rules and regulations on Form 10-Q, Form 10-K and the annual proxy
statement. These reports are available to the public to read and copy at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
The Company is an electronic filer with the SEC and these reports are
available through the SEC internet site (http:/www.sec.gov), and through the
Company's website as soon as reasonably practicable after filing with the SEC.
Copies of SEC filed documents are also available free of charge upon request.
Item 2. Properties.
____________________________
At August 31, 2003, the Company owned a total of 141,764 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 8,559 359 -- 3,253 -- -- 1 12,423
Lee 2,792 1,086 -- -- -- -- 1,460 625 5,963
Hendry 3,823 48,735 21,573 580 3,765 14,358 15,953 3,435 112,222
Collier 1,882 1,700 1,112 -- 4,129 -- -- 2,333 11,156
______ _______ ______ ___ _____ _____ _____ _____ _______
Totals 8,748 60,080 23,044 580 11,147 14,358 17,413 6,394 141,764
______ _______ ______ ___ _____ _____ ______ _____ _______
______ _______ ______ ___ _____ _____ ______ _____ _______
Of the above lands, the Company utilizes approximately 20,977 acres of
improved pasture plus approximately 49,000 acres of native pasture for cattle
production and approximately 5,714 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 subsurface 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 agricultural 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.
___________________________________
Ben Hill Griffin III, Chairman of
the Board, was a 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-compensation and receipt of an illegal bonus.
The Company has been informed by Mr. Griffin III, that he has executed a
"Settlement Agreement" with the families of his four sisters, The Four Sisters
Protectorate, and that the enforceability of the settlement agreement was
affirmed by both the Circuit court, Case number GC-G-0054, and the second
District Court of Appeals for the State of Florida, Case numbers 2D01-5407 and
2D03-0499. A second litigation challenging the enforceability of the
settlement Agreement, Case number 4:01CU432-RH, was dismissed with prejudice
by the United States District Court for the Northern District of Florida,
Tallahassee Division.
The Settlement Agreement had been entered into subject to certain conditions,
including Internal Revenue Service approval of the proposed transaction as a
tax free split-off for federal income tax purposes and judicial termination
of the Trust. Mr. Griffin, III has informed the Company that (a) 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 beneficially 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, and (b) the parties have received
a favorable IRS Revenue Ruling related to the original "Settlement Agreement".
On June 11, 2003, BHG Investments, a wholly owned subsidiary of Ben Hill
Griffin, Inc. (BHG) and the record owner of 3,493,777 shares of the Company
(the "Alico Shares") was merged into Alico Holding, LLC (the "Merger"),
another entity wholly owned by BHG. Also on June 11, 2003, Mr. Griffin,
III, individually and as trustee of the Trust, BHG, and BHG Investments (prior
to consummation of the Merger) and certain beneficiaries of the Trust entered
into a supplemental settlement agreement (the "Griffin Agreement"), which
set forth certain actions to be performed by Mr. Griffin, III, as Trustee, to
facilitate the performance of a separate supplement agreement that had been
executed on June 5, 2003, by and among other of the Trust's beneficiaries
and members of their respective families (the "2003 Mediated Settlement
Agreement"). The purpose of both the Griffin Agreement and the 2003 Mediated
Settlement Agreement, each resulting from further mediation, was to finally
settle all disputes among the parties to the Mediation Settlement Agreement,
thereby facilitating final performance of the Settlement Agreement.
On August 6, 2003, an Order Approving Supplemental Mediation Settlement
Agreements was entered by the Tenth Judicial Circuit Court in and for Polk
County, Florida, Case No. GC-G-0054, approving the Griffin Agreement and the
2003 Mediated Settlement Agreements as being in the best interests of all
persons having any interest in the Trust and authorizing Mr. Griffin III, as
trustee, to perform all of the actions required of him under each agreement.
Those actions, following receipt of a favorable private letter ruling from the
Internal Revenue Service that takes into account the changes to the Griffin
Agreement and the "2003 Mediated Settlement Agreement", will result
in the transfer and assignment of the Alico Shares to a Florida corporation
formed for the purpose of transferring and assigning of substantially all
shares of that corporation's issued and outstanding voting stock to Atlantic
Blue Trust, Inc. (ABT), an entity to be formed as a subsidiary of BHG
Investments. BHG Investments will then distribute the stock of ABT up to
BHG the parent company of BHG Investments, which will then transfer such
Stock to The Four Sisters Protectorate and the Protectorate Family Trusts,
trusts for the benefit of Mr. Griffin, III's four sisters and their lineal
descendants, so as to cause control of Alico to shift from Mr. Griffin, III
to such trusts.
The Company is not a party to any of this litigation.
The Company is also involved in certain other claims and legal actions arising
in the ordinary course of its business. The ultimate disposition of all such
matters is not expected to have a material adverse effect on the Company's
financial position, results of operations or liquidity.
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 prices, by
fiscal quarter, during the years ended August 31, 2003 and 2002
are presented below:
2003 2002
Bid Price Bid Price
_________ _________
High Low High Low
First Quarter 28.80 22.25 30.21 24.90
Second Quarter 28.04 21.15 32.17 28.50
Third Quarter 27.30 21.00 29.70 28.20
Fourth Quarter 28.70 22.72 29.54 28.01
Approximate Number of Holders of Common Stock
_____________________________________________
As of October 17, 2003, there were approximately 553 holders of record of the
Company's Common Stock.
The closing price for the Company's stock was $32.80 on November 13,2003.
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 13, 2000 October 27, 2000 $1.00
October 12, 2001 October 26, 2001 $1.00
October 11, 2002 October 25, 2002 $0.35
The Company's Board of directors, at its meeting on October 7, 2003, declared
a dividend of $.60 per share payable on October 31, 2003 to shareholders of
record on October 17, 2003. 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
remaining available
Number of securities for future issuance
to be issued Weighted-average under equity
upon exercise of exercise price of compensation plans
outstanding options, outstanding options, (excluding securities
Plan category warrants and rights warrants and rights reflected in column(a)
_____________ ___________________ ___________________ _____________________
(a) (b) (c)
Equity compensation
plans approved by
security holders 149,401 $15.34 412,356
Equity compensation
plans not approved
by security holders - - -
________ ________ _________
Total 149,401 $15.34 412,356
________ ________ _________
________ ________ _________
Item 6. Selected Financial Data.
_________________________________________
Years Ended August 3l,
DESCRIPTION 2003 2002 2001 2000 1999
________ ________ ________ ________ ________
(In Thousands, Except Per Share Amounts)
Total Revenues $ 66,532 $ 63,545 $ 69,710 $ 62,540 $ 44,947
Costs and Expenses 47,448 53,752 49,598 41,965 37,886
Income Taxes 6,425 2,258 4,046 6,464 2,980
Net Income 12,659 7,535 16,066 14,111 4,081
Average Number of
Shares Outstanding 7,106 7,070 7,033 7,028 7,028
Net Income Per Share 1.78 1.07 2.29 2.01 .58
Cash Dividend Paid per Share 0.35 1.00 1.00 .30 .50
Current Assets 90,204 66,267 61,345 56,578 45,182
Total Assets 212,748 191,910 179,134 176,876 156,922
Current Liabilities 10,722 9,543 7,691 12,346 8,738
Ratio-Current Assets
to Current Liabilities 8.41:1 6.94:1 7.98:1 4.58:1 5.17:1
Working Capital 79,482 56,724 53,654 44,232 36,444
Long-Term Obligations 75,844 69,149 58,818 60,985 56,789
Total Liabilities 86,566 78,692 66,508 73,331 65,527
Stockholders' Equity 126,182 113,218 112,625 103,545 91,395
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",
"estimate", "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 Company 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 $55.2 million at August
31, 2003, compared with $31.6 million at August 31, 2002. Working capital
was $79.5 million and $56.7 million at August 31, 2003 and August 31, 2002
respectively.
Cash outlay for land, equipment, buildings, and other improvements totaled
$7.3 million during fiscal 2003, compared to $9.3 million during fiscal
2002 and $8.5 million during fiscal 2001, respectively. Land preparation for
citrus re-development and capital maintenance continued, as did expenditures
for replacement equipment and raising of breeding cattle.
Management believes that the Company will be able to meet its working
capital requirements for the foreseeable future with internally generated
funds. Management expects several real estate transactions to close in
fiscal 2004. Additionally, Management expects continued profitability from
its agricultural operations in fiscal 2004. The outlook is for
gross profits from citrus operations to decline due to a large
crop forecast for the industry as a whole and substantial carryover
inventories for the industry. Management also expects gross profits from
sugarcane to decline as the Company's current crop is expected
to be smaller in fiscal 2004 than in fiscal 2003.
Gross profits from the Company's cattle operations are expected to increase
due to reduced beef supplies creating favorable market conditions
beef and an increase in the number of cattle sold.
In addition, the Company has credit commitments which provide
for revolving credit of up to $54.0 million, of which $10.2 million was
available for the Company's general use at August 31, 2003 (see Note 6 of
Notes to consolidated financial statements).
Results of Operations
_____________________
Summary of results (in thousands):
Years Ended August 31,
2003 2002 2001
_______ _______ _______
Operating revenue $48,285 $49,185 $51,533
Gross profit 11,022 9,678 11,921
General & administrative expenses 6,319 10,806 5,471
Income (loss) from operations 4,703 (1,128) 6,450
Profit on sale of real estate 14,994 11,641 11,354
Interest and investment income 1,201 1,471 2,124
Interest expense 2,081 2,421 3,029
Other income 267 230 3,213
Provision for income taxes 6,425 2,258 4,046
Effective income tax rate 33.7% 23.1% 20.1%
Net income 12,659 7,535 16,066
Operating Revenue
_________________
Operating revenues for fiscal 2003 decreased compared to fiscal 2002.
A decrease in revenues from agricultural activities was the most
significant factor in the decline.
Operating revenues for fiscal 2002 decreased when compared to those of
fiscal 2001. A decrease in revenues from agricultural activities was
the most significant factor in the decline.
Income (loss) from Operations
_____________________________
Earnings from operations increased significantly during fiscal 2003 when
compared to the prior year ( $ 4,703 in fiscal 2003 vs. $(1,128) in fiscal
2002). The improvement in earnings was largely impacted by the Company's
fiscal 2002 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 paid in fiscal 2002, $800 thousand was paid
in fiscal 2003, and $800 thousand will be paid each year over the next four
years. The entire donation was accrued and included in general and
administrative expenses during fiscal 2002. The remaining increase in
income from operations was due to an increase in earnings from agricultural
activities.
Income from operations decreased 112% during fiscal 2002 when compared to
fiscal 2001, primarily due to increased general and administrative expenses
resulting from the accrued University donation.
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 2003, 2002 and 2001, increasing investment levels during each year.
The decrease in fiscal 2003, 2002 and 2001, interest and realized and
unrealized investment income resulted from unfavorable conditions in the
financial markets.
Interest Expense
________________
Interest expense declined during fiscal 2003 when compared to fiscal 2002,
as interest rates on borrowings have declined.
Interest expense decreased during fiscal 2002, compared to fiscal 2001.
This was due to a decline in interest rates on borrowings.
Individual Operating Divisions
______________________________
Gross profits for the individual operating divisions, for fiscal 2003, 2002
and 2001, are presented in the following schedule and are discussed in
subsequent sections:
Years Ended August 31,
(in thousands)
2003 2002 2001
_______ _______ _______
CITRUS
Revenues:
Sales $24,107 $25,105 $27,570
Cost and expenses:
Harvesting & marketing 8,910 9,364 10,046
Direct production** 7,671 8,594 8,932
Allocated cost* 3,525 3,463 3,472
_______ _______ _______
Total 20,106 21,421 22,450
_______ _______ _______
Gross profit, citrus 4,001 3,684 8,088
_______ _______ _______
SUGARCANE
Revenues:
Sales 13,373 11,789 12,450
Costs and expenses:
Harvesting & hauling 2,915 2,239 2,516
Direct production 3,844 3,965 4,094
Allocated cost* 3,429 3,253 3,018
_______ _______ _______
Total 10,188 9,457 9,628
_______ _____ _______
Gross profit, sugarcane 3,185 2,332 2,822
_______ _______ _______
Years Ended August 31,
(in thousands)
2003 2002 2001
_______ _______ _______
RANCH
Revenues:
Sales 7,175 9,102 8,788
Costs and expenses:
Direct production 4,937 6,087 5,287
Allocated cost* 1,853 2,428 2,107
_______ _______ _______
Total 6,790 8,515 7,394
_______ _______ _______
Gross profit, ranch 385 587 1,394
_______ _______ _______
Total gross profit,
agriculture 7,571 6,603 9,336
_______ _______ _______
OTHER OPERATIONS
Revenues:
Rock products and sand 2,154 1,999 1,726
Oil leases and land rentals 973 721 770
Forest products 292 355 91
Recovery of citrus eradication costs - - 2,968
Other 267 230 245
_______ _______ _______
Total 3,686 3,305 5,800
Costs and expenses:
Allocated cost* 882 735 604
General and administrative,
all operations 5,437 10,071 4,867
_______ _______ _______
Total 6,319 10,806 5,471
_______ _______ _______
Gross (loss) income, other
operations (2,633) (7,501) 329
_______ _______ _______
Total gross profit (loss) 4,938 (898) 9,665
_______ _______ _______
INTEREST & DIVIDENDS
Revenue 1,201 1,471 2,124
Expense 2,081 2,421 3,029
_______ _______ _______
Interest & dividends, net (880) (950) (905)
_______ _______ _______
Years Ended August 31,
(in thousands)
2003 2002 2001
_______ _______ _______
REAL ESTATE
Revenue:
Sale of real estate 16,990 12,773 12,978
Expenses:
Cost of sales 1,925 1,076 1,393
Other Costs 39 56 233
_______ _______ _______
Total 1,964 1,132 1,626
_______ _______ _______
Gain on sale of real estate 15,026 11,641 11,352
_______ _______ _______
Income before income taxes $19,084 $ 9,793 $20,112
_______ _______ _______
_______ _______ _______
* 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 $2.3 million on 1,617 acres in 2003, $2.5 million on
1,326 acres in 2002, and $200 thousand on 570 acres in 2001.
Citrus
______
Gross profit was $4.0 million in fiscal 2003, $3.7 million in fiscal 2002,
and $5.1 million for fiscal 2001.
Revenue from citrus sales decreased 4% during fiscal 2003, compared to
fiscal 2002 ($24.1 million during fiscal 2003 vs. $25.1 million during
fiscal 2002).
Pounds of fruit solids per box decreased during fiscal 2003, compared to
fiscal 2002, and was the primary cause of the decline.
Harvesting and marketing costs decreased when compared to fiscal 2002
due to procedural efficiencies that resulted in a decrease in the per
box rate during the year. Direct production and allocated costs decreased 7%
due to a decrease in the costs of cultivation and irrigation impacted by
improved weather conditions.
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). Additionally, during fiscal 2001 $2.9 million was recognized
from the recovery of citrus eradication costs in excess of basis (see note
14 to the consolidated financial statements).
Production decreased during fiscal 2002, compared to fiscal 2001 and was
the primary cause of the decline.
Harvesting and marketing costs decreased in fiscal 2002 compared to fiscal
2001, corresponding to a decrease in boxes harvested. Direct production
and allocated costs decreased 3% due to a decline in the number of producing
acres.
The final returns from citrus pools are not precisely determinable 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 significant. Revenues collected in excess of prior
year and year end estimates were $198 thousand, $568 thousand, and
$617 thousand during fiscal 2003, 2002 and 2001, respectively.
Sugarcane
_________
Gross profit for fiscal 2003 was $3.2 million, compared to $2.3 million in
fiscal 2002 and $2.8 million in fiscal 2001.
Sales revenue from sugarcane increased 13% during fiscal 2003, compared to
fiscal 2002 ($13.4 million vs. $11.8 million, respectively). The increase was
the result of an improvement in the yield per acre brought about by favorable
weather conditions during the growing season. Total sugarcane yields were
523,000, 466,000, and 507,000 standard tons for the fiscal years ended
August 31, 2003, 2002 and 2001, respectively. Yields per acre were 45.51,
41.37 and 44.33 for the 2003, 2002 and 2001 fiscal years, respectively.
Direct production costs decreased 3% during fiscal 2003, compared to fiscal
2002. This was offset by a 5% rise in allocated costs during 2003, compared
to 2002 levels, due to increases in insurance costs and ad valorem taxes.
Sales revenues from sugarcane decreased 5% during fiscal 2002, compared to
fiscal 2001 ($11.8 million vs. $12.5 million, respectively). The decrease in
revenue and related costs was the result of lower yields resulting from a
drought.
Ranching
________
The gross profit from ranch operations for fiscal 2003, 2002 and 2001 was
$385 thousand, $587 thousand, and $1.4 million, respectively.
Revenues from cattle sales decreased 21% during fiscal 2003, compared to
fiscal 2002 ($7.2 million in fiscal 2003 vs. $9.1 million in fiscal 2002).
Direct and allocated production costs decreased by 20% during fiscal 2003,
as compared to fiscal 2002 ($6.8 million in fiscal 2003 vs. $8.5 million in
fiscal 2002). The decline in revenue and total production costs primarily
resulted from a corresponding decrease in the total number of cattle sold
during fiscal 2003 when compared to fiscal 2002. Less animals of the age
and size required by meat packers were available for sale in fiscal 2003
than in 2002 because of the timing of placements into western feedlots.
Total head sold was 9,062, 12,166 and 12,362 for 2004, 2003 and 2002.
Revenues from cattle sales increased 3% during fiscal 2002, compared to
fiscal 2001 ($9.1 million in fiscal 2002 vs. $8.8 million in fiscal 2001)
due to increased sales of feeder cattle during the year.
Direct and allocated costs increased 15% when compared to the prior year
($8.5 million during fiscal 2002 and $7.4 million during fiscal 2001)
due to the increase in the number of animals sold from feedlots.
The Company's cattle marketing activities include retention of calves in
western feedlots, contract and auction sales, and risk management contracts.
Other Operations
________________
Returns from rock products and sand were $2.2 million for fiscal 2003,
$2.0 million for 2002 and $1.7 million during 2001. Rock and sand
supplies are sufficient to meet current demand, and no major price changes
have occurred over the past 3 years.
Revenues from oil royalties and land rentals were $973 thousand in fiscal
2003 as compared to $721 thousand in fiscal 2002 and $770 thousand for fiscal
2001. The fiscal 2003 improvement is primarily due to an increase in the
amount of land leased for farming.
Profits from the sale of sabal palms and other horticultural items, for
landscaping purposes, during fiscal 2003 were $292 thousand compared to $355
thousand and $91 thousand for fiscal years 2002 and 2001, respectively.
Direct and allocated expenses charged to the "Other" operations category
included general and administrative and other costs not charged directly to
the citrus, ranching or sugarcane divisions. These expenses totaled $6.3
million during fiscal 2003, compared to $10.8 million during fiscal 2002 and
to $5.5 million during fiscal 2001. 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 paid in fiscal 2002, $800 thousand was paid
in fiscal 2003 and $800 thousand will be paid each year over the next four
years. The net present value of the total donation was accrued and included
in general and administrative expenses in fiscal 2002 and was the primary
cause for the increase in general and administrative expenses that year.
Profit on Sale of Real Estate
____________________________________
Profit from retail land sales, made through Saddlebag, were $32 thousand
in fiscal 2003, vs. breaking even during fiscal 2002. Profit from bulk land
sales, increased from $11.6 million in fiscal 2002 to $15.0 million in fiscal
2003. As discussed below, sales contracts are in place for all of the Lee
County property totaling $171.8 million. These sales are expected to close
over the next two year period. When or if all these sales do close, they are
expected to result in gains in excess of $132 million. The Board of Directors
has not specified how these excess funds will be used if received.
Real estate profits increased from $11.4 million in fiscal 2001 to $11.6
million during fiscal 2002.
General Corporate
_________________
The Company is continuing its marketing and permitting activities for its
land which surrounds Florida Gulf Coast University in Lee County, Florida.
There are sales contracts in place for all this property, totaling $171.8
million. The agreements are at various stages in the due diligence process
with closing dates expected over the next three years.
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. During the third quarter of fiscal 2003, Agri
announced a contract to sell the 40 acres. The contract price is $13.1
million and the closing may occur by December 10, 2004.
During the second quarter of fiscal 2003, Agri contracted to sell an
additional 53 acres in Lee County, Florida to the Ginn Company. The contract
price is $10.6 million. Agri also announced an addition to the original Ginn
Company contract, adding 555 acres for a price of $13.3 million. This
amendment brought the total acreage of the contract to 5,060.
During the third quarter of fiscal 2003, the Company entered into a
limited partnership with its wholly owned subsidiary, Agri-Insurance
Company, Ltd. The partnership was created to manage Agri's real estate
holdings. Agri transferred all of the Lee County property and associated
sales contracts to the limited partnership, Alico-Agri, Ltd (Alico-Agri)
in return for a 99% partnership interest. Alico, Inc. transferred $1.2
million cash for a 1% interest. The creation of the partnership allows
Agri to concentrate solely on insurance matters while utilizing Alico's
knowledge of real estate management. The partnership will pay Alico a
management fee for real estate management and administrative services.
In the fourth quarter of fiscal 2003, the Company, through Alico-Agri,
completed the sale of 313 acres in Lee County, Florida to Airport Interstate
Associates, LLC. The sales price was $9.7 million and resulted in a gain of
$8.7 million. Additionally, Alico-Agri completed the sale of 40 acres in Lee
County, Florida to University Club Apartments/Gulf Coast, LLC. The sales
price of the property was $5.5 million and generated a gain of $4.7 million.
During the fourth quarter of fiscal 2003, the Company sold 358 acres in
Hendry County, Florida for $669 thousand. The sale generated a gain of
$335 thousand. Additionally, the Company sold 266 acres in Polk County,
Florida for $617 thousand, generating a gain of $612 thousand.
The Company announced the formation of Agri-Insurance Company, Ltd. (Agri)
a wholly owned subsidiary, during July of 2000. The insurance company was
initially capitalized by transferring cash and approximately 3,000 acres of
the Lee County property. Through Agri, the Company has been able to underwrite
previously uninsurable risk related to catastrophic crop and other losses. The
coverages currently underwritten by Agri will indemnify insured's for the
loss of the revenue stream resulting from a catastrophic event that would
cause a grove to be replanted. To expedite the creation of the capital
liquidity necessary to underwrite the Company's exposure to catastrophic
losses, another 5,600 acres was transferred during fiscal 2001. Agri
underwrote a limited amount of coverage for Ben Hill Griffin, Inc. during
fiscal 2003, 2002 and 2001 and in August 2002 began insuring the Alico, Inc.,
citrus groves. As Agri gains underwriting experience and increases its
liquidity, it will be able to increase its insurance programs. 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
coverages that have been written, as liquidity has been generated, are
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.
Critical Accounting Policies and Estimates
The preparation of the Company's financial statements and related disclosures
in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and judgments that
affect the reported amounts of assets and liabilities, revenues and expenses,
and related disclosures of contingent assets and liabilities. On an on-going
basis, management evaluates the estimates and assumptions based upon
historical experience and various other factors and circumstances. Management
believes that the estimates and assumptions are reasonable in the
circumstances; however, actual results may vary from these estimates and
assumptions under different future circumstances. The following critical
accounting policies have been identified 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 $198 thousand, $568 thousand, and $617 thousand during fiscal
2003, 2002, and 2001, 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 availability, both in the traditional commercial insurance
markets and governmental sponsored insurance programs, suitable to provide
coverages for the increasing number and potential severity of agricultural
related events. Such events include citrus canker, crop diseases, livestock
related maladies and weather. Alico's goal included not only prefunding its
potential exposures related to the aforementioned events, but also to attempt
to attract new underwriting capital if it is successful in profitably
underwriting its own potential risks as well as similar risks of its historic
business partners. Alico primarily utilized its inventory of land
and additional contributed capital to bolster the underwriting capacity of
Agri. As Agri has converted certain of the assets contributed by Alico to
cash, book and tax differences have arisen resulting from differing
viewpoints related to the tax treatment of insurance companies for federal
and state tax purposes. Due to the historic nature of the primary assets
contributed as capital to Agri and the timing of the sales of certain of
those assets by Agri, management has decided to record a contingent
liability, providing for potential differences in the tax treatment of sales
of Agri's assets. Management's decision has been influenced by perceived
changes in the regulatory environment.
Off-Balance Sheet Arrangements
______________________________
The Company is not involved in any off-balance sheet arrangements that have,
or are reasonably likely to have, a current or future material effect on the
Company's financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources.
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 portfolio. 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 investments are classified as variable-rate
if the rate of return on such investments varies based on the change in a
predetermined index or set of indices during their term. These
variable-rate investments primarily include money market accounts, 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, 2003:
Average Interest Estimated
Marketable Securities and Rate/Dividend Yield Cost Fair Value
Short-term Investments (1) ________________ _____________ ___________
Fixed Rate 5.38% $ 14,423 $ 14,259
Variable Rate 2.93% $ 23,013 $ 24,561
(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 $8,435) as of August 31, 2003, by contractual maturity date,
consisted of the following:
Aggregate Fair
Values
______________
(in thousands)
Due in one year or less $ 8,115
Due between one and five years 4,454
Due between five and ten years 1,335
Due thereafter 355
______________
$14,259
______________
______________
The Company has debt which has interest rates that vary with the LIBOR and
prime rate. A 1% change in these rates would impact the Company's annual
interest expense by approximately $438 thousand based on the Company's
outstanding debt under these agreements as of August 31, 2003.
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, 2003 and 2002, and the related consolidated
statements of operations, stockholders' equity and comprehensive income (loss),
and cash flows for each of the years in the three-year period ended August
31, 2003. In connection with our audits of the consolidated financial
statements, we also have audited the related consolidated financial statement
schedules as listed in Item 15(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, 2003 and 2002, and the results of their
operations and their cash flows for each of the years in the three-year
period ended August 31, 2003 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 10, 2003
CONSOLIDATED BALANCE SHEETS
(in thousands)
August 31,
2003 2002
_____________ ____________
ASSETS
Current assets:
Cash, including time deposits and other
cash investments of $16,303 in 2003
and $10,028 in 2002 $ 16,352 $ 10,140
Marketable securities available for
sale, at estimated fair value in
2003 and in 2002 (Note 2) 38,820 21,417
Accounts receivable ($6,470 in 2003 and
$6,457 in 2002 due from affiliate)
(Note 12) 9,680 9,461
Mortgages and notes receivable, current
portion (Note 3) 2,534 2,451
Inventories (Note 4) 21,845 21,672
Income tax refund receivable 229 271
Other current assets 744 855
____________ ____________
Total current assets 90,204 66,267
____________ ____________
Other assets:
Land inventories 16,587 16,787
Mortgages and notes receivable, net of
current portion (Note 3) 234 2,693
Investments 886 908
____________ ____________
Total other assets 17,707 20,388
____________ ____________
Property, buildings and equipment (Note 5) 144,578 142,355
Less accumulated depreciation (39,741) (37,100)
____________ ____________
Net property, buildings and equipment 104,837 105,255
____________ ____________
Total assets $ 212,748 $ 191,910
____________ ____________
____________ ____________
See accompanying Notes to Consolidated Financial Statements.
August 31,
2003 2002
____________ ____________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,110 $ 1,438
Due to profit sharing plan (Note 10) 350 285
Accrued ad valorem taxes 1,519 1,524
Current portion of notes payable (Note 6) 3,321 3,318
Accrued expenses 988 1,169
Deferred income taxes (Note 11) 1,680 1,038
Donation payable 754 771
____________ ____________
Total current liabilities 10,722 9,543
Deferred revenue 91 113
Notes payable (Note 6) 54,127 52,658
Deferred income taxes (Note 11) 9,668 9,728
Deferred retirement benefits (Note 10) 120 119
Other non-current liability (Note 8) 9,609 3,641
Donation payable 2,229 2,890
____________ ____________
Total liabilities 86,566 78,692
____________ ____________
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
7,116,070 in 2003 and 7,080,344 in 2002 7,116 7,080
Additional paid in capital 3,074 1,716
Accumulated other comprehensive income (loss) 961 (432)
Retained earnings 115,031 104,854
____________ ____________
Total stockholders' equity 126,182 113,218
____________ ____________
Total liabilities and stockholders'
equity $ 212,748 $ 191,910
____________ ____________
____________ ____________
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
Years Ended August 31,
2003 2002 2001
___________ ___________ ___________
Revenue:
Citrus, including revenues from
affiliate (Note 12) $ 24,107 $25,105 $27,570
Sugarcane 13,373 11,789 12,450
Ranch 7,175 9,102 8,788
Forest products 292 355 91
Rock and sand royalties 2,154 1,999 1,726
Oil lease and land rentals 973 721 770
Retail land sales 211 114 138
___________ __________ ___________
Operating revenue 48,285 49,185 51,533
___________ __________ ___________
Costs of sales:
Citrus production, harvesting and
marketing (including charges from
affiliate (Note 12)) 20,106 21,421 22,450
Sugarcane production, harvesting
and hauling 10,188 9,457 9,628
Ranch 6,790 8,515 7,394
Retail land sales 179 114 140
__________ ___________ ___________
Total costs of sales 37,263 39,507 39,612
__________ ___________ ___________
Gross profit 11,022 9,678 11,921
General and administrative
expenses 6,319 10,806 5,471
__________ ___________ ___________
Income (loss) from operations 4,703 (1,128) 6,450
Other income (expenses):
Profit on sales of real estate:
Sales 16,779 12,659 12,840
Cost of sales 1,785 1,018 1,486
___________ ___________ ___________
Profit on sales of
real estate, net 14,994 11,641 11,354
Interest and investment income 1,201 1,471 2,124
Recovery of citrus eradication
costs in excess of basis (note 14) - - -
Interest expense (Note 6) (2,081) (2,421) (3,029)
Other 267 230 245
___________ ___________ ___________
Total other income, net 14,381 10,921 13,662
___________ ___________ ___________
Income before income taxes 19,084 9,793 20,112
Provision for income taxes (Note 11) 6,425 2,258 4,046
___________ ___________ ___________
Net Income 12,659 $ 7,535 $ 16,066
___________ ___________ ___________
___________ ___________ ___________
Weighted-average number of shares
outstanding 7,106 7,070 7,033
___________ ___________ ___________
___________ ___________ ___________
Weighted-average number of shares
outstanding assuming dilution 7,256 7,188 7,057
___________ ___________ ___________
___________ ___________ ___________
Per share amounts:
Basic $ 1.78 $ 1.07 $ 2.29
Diluted $ 1.74 $ 1.05 $ 2.28
Dividends $ 0.35 $ 1.00 $ 1.00
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME(LOSS)
(in thousands)
Accumulated
Common Stock Additional Other
Shares Paid in Comprehensive Retained
Issued Amount Capital Income Earnings Total
_______ __________ ___________ _______ ________ ________
Balances,
August 31,
2000 7,028 $ 7,028 $ 18 $ 1,159 $95,340 $ 103,545
_________
Comprehensive
income:
Net income
for the year
ended
August 31, 2001 - - - - 16,066 16,066
Unrealized gains
on securities,
net of taxes of $(174) - - (288) - (288)
of and reclass-
ification adjustment __________
Total comprehensive
income: 15,778
Dividends paid - - - - (7,028) (7,028)
Stock options
Exercised 17 17 227 - 244
Stock based
compensation - - 86 - - 86
_________ _________ ___________ ________ _____ ___________
Balances,
August 31,
2001 7,045 $ 7,045 $ 331 $ 871 $ 104,378 $ 112,625
_________
Comprehensive
income:
Net income
for the year
ended
August 31, 2002- - - - 7,535 7,535
Unrealized gains
on securities
net of taxes of $(622) - - (1,303) - (1,303)
and reclass-
ification adjustment ___________
Total comprehensive
income: 6,232
Dividends paid - - - - (7,059) (7,059)
Stock options
exercised 35 35 494 - - 529
Stock based
compensation - - 891 - - 891
_________ _________ __________ _______ _______ ___________
Balances,
August 31,
2002 7,080 $ 7,080 $ 1,716 $ (432) $104,854 $ 113,218
_________
Comprehensive
income:
Net income
for the year
ended
August 31, 2003 - - - 12,659 12,659
Unrealized gains
(losses) on securities,
net of taxes of $552 - - 1,393 - 1,393
of and reclass-
ification adjustment ___________
Total comprehensive income: 14,052
Dividends paid - - - - (2,482) (2,482)
Stock options
exercised 36 36 519 - - 555
Stock based
compensation - - 839 - - 839
_________ _________ _________ _______ _________ ___________
Balances,
August 31,
2003 7,116 $ 7,116 $ 3,074 $ 961 $115,031 $ 126,182
_________ __________ ___________ ________ ________ ___________
_________ __________ ___________ ________ ________ ___________
Disclosure of reclassification amount: 2003 2002 2001
________ __________ ________
Unrealized holding gains (losses)
arising during the period $ 2,651 $ (1,774) $ (207)
Less: reclassification adjustment
for gains (losses) included in net
income 1,258 (471) 81
________ __________ _________
Net unrealized gains
(losses) on securities $ 1,393 $ (1,303)$ (288)
_________ _________ _________
_________ _________ _________
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended August 31,
2003 2002 2001
___________ ___________ __________
Increase (Decrease) in Cash and Cash Investments:
Cash flows from operating activities:
Net income $ 12,659 $ 7,535 $ 16,066
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 6,723 6,982 6,946
(Gain) loss on breeding herd sales (16) (84) (77)
Deferred income tax expense, net 582 1,263 1,179
Deferred retirement benefits 1 (31) (102)
Net (gain) loss on sale of marketable
securities (691) 381 (160)
(Gain) Loss on sale of property
and equipment 606 (150) 1,642
Gain on real estate sales (15,026) (11,758) (11,586)
Stock options granted below fair
market value 839 891 86
Cash provided by (used for) changes in:
Accounts receivable (218) 692 1,847
Inventories (173) 1,059 (1,702)
Other assets 111 57 (600)
Accounts payable and accrued
expenses 5,840 2,944 (112)
Income taxes payable 42 (294) (4,147)
Deferred revenues (23) 48 53
___________ ___________ ___________
Net cash provided by operating
activities 11,256 9,535 9,333
___________ ___________ ___________
Cash flows from investing activities:
Increase in land inventories (684) (9,785) (925)
Purchases of property and
equipment (7,325) (9,270) (8,502)
Proceeds from disposals of
property and equipment 431 1,257 959
Proceeds from sale of real
estate 15,911 12,789 2,880
Purchases of investments - (126) (212)
Purchases of marketable
securities (20,257) (8,047) (3,013)
Proceeds from sales of
marketable securities 4,958 3,673 2,039
Issuances of mortgages and
notes receivable - (79) (381)
Collection of mortgages and
notes receivable 2,377 2,528 2,630
___________ __________ ___________
Net cash used for
investing activities (4,589) (7,060) (4,525)
___________ ___________ ___________
Years Ended August 31,
2003 2002 2001
___________ ___________ ___________
Cash flows from financing activities:
Proceeds from exercising
stock options 555 529 244
Proceeds from bank loans 33,169 43,597 43,194
Repayment of bank loans (31,697) (35,627) (36,789)
Dividends paid (2,482) (7,059) (7,028)
___________ ___________ ___________
Net cash provided by
(used for) financing
activities (455) 1,440 (379)
___________ ___________ ___________
Net increase (decrease) in
cash and cash investments 6,212 3,915 4,429
Cash and cash investments:
At beginning of year 10,140 6,225 1,796
___________ ___________ __________
At end of year $ 16,352 $ 10,140 $ 6,225
___________ ___________ ___________
___________ ___________ ___________
Supplemental disclosures of cash flow information:
Cash paid for interest,
net of amount capitalized $ 1,767 $ 2,124 $ 3,102
___________ ___________ ___________
___________ ___________ ___________
Cash paid for income taxes, $ 1,060 $ 943 $ 3,116
including related interest (Note 11)__________ ___________ ___________
___________ ___________ ___________
Noncash investing activities:
Fair value adjustments to
securities available for sale $ 1,945 $ (1,925) $ (462)
___________ ___________ ___________
___________ ___________ ___________
Income tax effect related
to fair value adjustments $ 552 $ (622) $ (174)
___________ ___________ ___________
___________ ___________ ___________
Reclassification of breeding
herd to Property & Equipment $ 700 $ 515 $ 370
___________ ___________ ___________
___________ ___________ ___________
See accompanying Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended August 31, 2003, 2002 and 2001
(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), Agri-Insurance
Company, Ltd. (Agri), and Alico-Agri, Ltd. after elimination
of all significant intercompany balances and transactions.
(b) Revenue Recognition
___________________
Income from the sale of citrus 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 $198
thousand, $568 thousand, and $617 thousand during fiscal years
2003, 2002 and 2001, respectively.
Income from sugarcane under a pooled agreement is recognized at the
time the crop is harvested. Based on the processor's advance
payment, management reviews the reasonableness of the sugarcane
revenue accrual. Adjustments are made as additional relevant
information regarding the sugar market becomes available. Market
price increases to the sugar pool have caused the Company to
recognize additional revenue from the prior year's crop totaling
$356 thousand, $318 thousand and $49 thousand during the fiscal
year's 2003, 2002, and 2001, respectively.
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 Alico-Agri, Ltd. 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 $9,540,000
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 $10,600,000 to be paid at closing. The
$1,060,000 less the land basis and closing costs was recognized
as a gain on the sale of real estate totaling $287,880 during
the year ended 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 $2,385,000, 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 investment 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 improvements 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 incurred. 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 determined on the specific identification method.
(e) Inventories
___________
The costs of growing crops 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.
Beef cattle inventories are stated at the lower of cost or
market. The cost of the beef cattle inventory 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 unharvested 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 construction of ditches, dikes, roads, and
reservoirs, etc. After the planting, caretaking costs or
pre-productive 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 result, cultivation/caretaking costs are expensed as the
crop is harvested, while the appropriate development 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 or accelerated methods over the estimated useful
lives of the various classes of depreciable assets.
The Company accounts for long-lived assets in accordance with
the provisions of SFAS No. 144, "Accounting for the Impairment
or disposal of Long-Lived Assets".
This Statement requires long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such 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 consist of property
located in Lee County, Florida and owned by Alico-Agri, Ltd.,
and residential lots in Polk County, Florida and owned by
Saddlebag. The Lee County property is held for sale as commercial
real estate.
(h) Other Investments
Other investments are carried at cost which primarily includes
stock owned in agricultural cooperatives. The Company uses
cooperatives to process and sell sugarcane and citrus.
Cooperatives typically require members to acquire 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 temporary 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 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 investments 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 assumptions that effect the reported
amounts of assets and liabilities. Actual results could differ
significantly from those estimates. Although some variability is
inherent in these estimates, management believes that the amounts
provided are adequate. The valuation of the Company's inventories
and the recognition of citrus and sugarcane revenues are two of the
more significant estimates made by Management.
(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 because they are arms length
transactions with commercial lenders at market interest rates.
(n) Derivative and Hedging Instruments
__________________________________
The Company engages in cattle futures trading activities 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, 2003 and 2002, 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)and amended by Statement of Financial Accounting Standards
No. 148 "Accounting for Stock-Based Compensation - Transition and
Disclosure".
(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 markets. 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 business units that
offer different products. They are managed separately because each
business requires different operating strategies.
(r) Reclassifications
_________________
Certain amounts from 2002 and 2001 have been reclassified to conform
to the 2003 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, 2003 and 2002 (in thousands) were as follows:
2003 2002
_____________________________ _____________________________
Gross Estimated Gross Estimated
Equity Unrealized Fair Unrealized Fair
securities: Cost Gains Losses Value Cost Gains Losses Value
_______ ____ ____ _______ ______ ______ ___ ________
Preferred
stocks $ 2,504 $ 85 $ (65) $ 2,524 $ 3,160 $ 65 $(79)$ 3,146
Common stocks 1,893 221 (306) 1,808 1,734 135 (242) 1,627
Mutual funds* 10,181 1,801 - 11,982 9,908 479 (147) 10,240
_____________________________ ______________________________
Total equity
securities 14,578 2,107 (371) 16,314 14,802 679 (468) 15,013
_____________________________ ______________________________
Debt securities:
Municipal bonds 515 28 - 543 559 36 - 595
Mutual funds 8,435 421 (609) 8,247 5,418 232 (882) 4,768
Fixed maturity
funds 11,146 - (31) 11,115 282 15 (1) 296
Corporate bonds 2,762 22 (183) 2,601 882 14 (151) 745
_____________________________ ______________________________
Total debt
securities 22,858 471 (823) 22,506 7,141 297 (1,034) 6,404
_____________________________ ______________________________
Marketable
securities
available
for sale 37,436 2,578 (1,194) 38,820 21,943 976 (1,502) 21,417
_____________________________ ______________________________
_____________________________ ______________________________
* Includes shares held by regulated investment companies as well as a limited
partnership hedge fund primarily investing in marketable equity securities.
At August 31, 2003, debt instruments (net of mutual funds of $8,435)
are collectible as follows: $8,115 within one year, $4,454 between one
and five years, $1,335 between five and ten years, and $519 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, 2003 August 31, 2002
_______________ _______________
Mortgage notes receivable
on retail land sales $ 235 $ 193
Mortgage notes receivable
on bulk land sales 2,420 4,926
Other notes receivable 113 25
________________ _______________
Total mortgage and notes
receivable $ 2,768 $ 5,144
Less current portion 2,534 2,451
________________ _______________
Non-current portion $ 234 $ 2,693
________________ _______________
________________ _______________
In July 2000, the Company received a mortgage note in exchange for land
sold. The note totaled $9,540,000 and principal payments of $2,385,000
are due annually on July 14, bearing interest at LIBOR, over four years.
(4) Inventories
___________
A summary of the Company's inventories (in thousands) at August 31,
2003 and 2002 is shown below:
2003 2002
_______ _______
Unharvested fruit crop on trees $ 8,135 $ 8,599
Unharvested sugarcane 5,159 5,274
Beef cattle 7,892 7,507
Sod 659 292
_______ _______
Total inventories $21,845 $21,672
_______ _______
_______ _______
(5) Property, Buildings and Equipment
_________________________________
A summary of the Company's property, buildings and equipment (in
thousands) at August 31, 2003 and 2002 is shown below:
Estimated
2003 2002 Useful Lives
_______ _______ ____________
Breeding herd $12,711 $12,618 5-7 years
Buildings 3,875 3,945 5-40 years
Citrus trees 31,109 28,555 22-40 years
Sugarcane 8,350 8,360 4-15 years
Equipment and other facilities 29,526 29,996 3-40 years
_______ _______
Total depreciable properties 85,571 83,474
Less accumulated depreciation 39,741 37,100
_______ _______
Net depreciable properties 45,830 46,374
Land and land improvements 59,007 58,881
_______ _______
Net property, buildings
and equipment $104,837 $105,255
_______ _______
_______ _______
The Company's 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 $54.0 million. The financing agreements
allow the Company to borrow up to $41.0 million which is due in 2005 and
up to $3.0 million which is due on demand. In December 2001, the Company
entered into an additional financing agreement to borrow $10.0 million to
be paid in equal principal installments over five years with interest to
be paid quarterly. The outstanding debt under these agreements was
$43.8 million and $41.0 million at August 31, 2003 and 2002,
respectively.
In March 1999, the Company mortgaged 7,680 acres for $19.0 million in
connection with a $22.5 million acquisition of producing citrus and
sugarcane operations. The outstanding debt under the mortgage was $13.4
million and $14.7 million as of August 31, 2003 and 2002, respectively.
The total long-term portion of the Company's indebtedness at August 31,
2003 and 2002 was $54.1 million and $52.7 million, respectively.
Maturities of the indebtedness of the Company over the next five years
(in thousands) are as follows: 2004- $3,321; 2005- $36,264; 2006-
$3,312; 2007- $3,315; 2008- $1,318 and $9,918 thereafter.
Interest cost expensed and capitalized (in thousands) during the three
years ended August 31, 2003, 2002 and 2001 was as follows:
2003 2002 2001
______ ______ ______
Interest expense $2,081 $2,421 $3,029
Interest capitalized 267 322 175
______ ______ ______
Total interest cost $2,348 $2,743 $3,204
______ ______ ______
______ ______ ______
(7) Commitments and Contingencies
_____________________________
The Company is involved in various claims and legal actions arising
in the ordinary course of business. Additionally, the Company, through
Agri during fiscal 2002, supplied reinsurance to an independent
underwriter who insured catastrophic business interruption coverage for
Ben Hill Griffin, Inc. The total coverage under the policy was $3.5
million and the premium charged was $138 thousand. The coverage term was
from December 2002 to December 2003. The Company is not aware of any
outstanding claims or losses existing with respect to this policy at
August 31, 2003 or 2002. Agri is required to maintain liquidity equal
to its outside underwriting risk. As of August 31, 2003, Agri's
liquidity was sufficient to cover its underwriting risk. The policy
described abofe is the only underwriting exposure at August 31, 2003.
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 insurance availability, both in the traditional
commercial insurance markets and governmental sponsored insurance
programs, suitable to provide coverages for the increasing number and
potential severity of agricultural related events. Such events include
citrus canker, crop diseases, livestock related maladies and weather.
Alico's goal included not only prefunding its potential exposures
related to the aforementioned events, but also to attempt to attract
new underwriting capital if it is successful in profitably
underwriting its own potential risks as well as similar risks of its
historic business partners. Alico primarily utilized its inventory of
land and additional contributed capital to bolster the underwriting
capacity of Agri.
Alico capitalized Agri by contributing real estate located in Lee County
Florida. The real estate was transferred at its historical cost basis.
Agri received a determination letter from the Internal Revenue Service (IRS)
stating that Agri was exempt from taxation provided that net premium levels,
consisting only of premiums with third parties, were below an annual stated
level ($350 thousand). Third party premiums have remained below the stated
annual level. As the Lee county real estate was sold, substantial gains were
generated in Agri, creating permanent book/tax differences.
Since receiving the favorable IRS determination letter, certain transactions,
entered into by other taxpayers under the same IRS Code Section came under
scrutiny and criticism by the news media. In reaction, Management has
recorded a contingent liability of $9.6 million for income taxes in the event
of an IRS challenge. Management's decision has been influenced by perceived
changes in the regulatory environment. The Company believes that it can
successfully defend any such challenge, however, because it is probable that
a challenge will be made and possible that it may be successful, Management
has provided for the contingency.
The Internal Revenue Service has notified the Company of its intent to examine
the Company tax returns for the years ended August 31, 2001 and 2002. Any
adjustments resulting from the examination will be currently due and payable.
No adjustments have been proposed to date.
(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
Shares average remaining
Under exercise contractual
Option price Life (in years)
______ _________ _______________
Balance outstanding,
August 31, 2001 84,080 $14.62 7
Granted 69,598 $15.68 _______________
Exercised 35,831 $14.76
______ _________ _______________
Balance outstanding,
August 31, 2002 117,847 15.20 7
_______________
Granted 67,280 15.68 _______________
Exercised 35,726 15.53
______ _________
Balance outstanding,
August 31, 2003 149,401 $15.34 9
______ _________ _______________
______ _________ _______________
On August 31, 2003 and 2002, there were 412,356 and 479,636 shares
available for grant, respectively.
The fair value of stock options granted was $845 thousand in 2003 and
$819 thousand in 2002 on the date of the grant using the Black Scholes
option-pricing model with the following weighted average
assumptions:
2003 2002
____ ____
Volatility 8.39% 8.39%
Dividend paid 2.23% 6.38%
Risk-free interest rate 4.75% 4.75%
Expected life in years 1 1
All stock options granted, except as noted in the paragraph below,
have been granted to directors or employees with an exercise price
equal to the fair value of the common stock at the date of the grant,
and a vesting period of one year.
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, 2001, 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. On September 10, 2002, the Company granted an
additional 67,280 stock options with an exercise price of $15.68 and a
fair value of $28.15. The Company recorded $839 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 (in thousands):
2003 2002
____ ____
Net income as reported $ 12,659 $ 7,535
Pro forma net income $ 12,653 $ 7,607
Basic earnings per share, as reported $ 1.78 $ 1.07
Pro forma basic earnings per share $ 1.78 $ 1.08
(10) Employee Benefit Plans
______________________
The Company has a profit sharing plan covering substantially all
employees. The plan was established under Internal Revenue Code Section
401(k). Contributions made to the profit sharing plan (in thousands)
were $350, $285 and $444 for the years ended August 31, 2003, 2002 and
2001, respectively.
Additionally, the Company has a nonqualified defined benefit
retirement plan covering the officers and other key management personnel
of the Company. Details concerning this plan are as follows:
August 31,
2003 2002
_____ ______
Beginning benefit obligation 3,785 2,446
Service cost 626 714
Interest cost 234 185
Benefits paid (132) (79)
Actuarial losses - 517
Other 2 2
______ ______
Ending benefit obligation 4,515 3,785
______ ______
Changes in plan assets
Beginning plan assets 3,666 2,299
Return on plan assets 109 834
Employer contributions 39 545
Plan participant contributions 115 67
Benefits paid (132) (79)
______ ______
Ending plan assets 3,797 3,666
______ ______
Net pension liability 718 119
Less: current payable (598) -
______ ______
Long term portion 120 119
______ ______
Components of net pension cost
Service cost, net of participant contributions 511 301
Interest cost 234 185
Expected return on plan assets - -
Prior service cost amortization 2 2
______ ______
Net pension cost for defined benefit plan 747 488
______ ______
The net benefit obligation was computed using a discount rate of 6.25%.
(11) Income Taxes
____________
The provision for income taxes (in thousands) for the years ended
August 31, 2003, 2002 and 2001 is summarized as follows:
2003 2002 2001
______ ______ ______
Current:
Federal income tax $5,872 $3,713 $2,428
State income tax 628 396 439
______ ______ ______
6,500 4,109 2,867
______ ______ ______
Deferred:
Federal income tax (68) (1,673) 1,058
State income tax (7) (178) 121
______ ______ ______
(75) (1,851) 1,179
______ ______ ______
Total provision for
income taxes $6,425 $2,258 $4,046
______ ______ ______
______ ______ ______
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, 2003, 2002 and
2001:
2003 2002 2001
______ ______ ______
Expected income tax $6,489 $3,330 $6,838
Increase (decrease)
resulting from:
State income taxes, net
of federal benefit 410 144 328
Nontaxable interest
and dividends (97) (102) (113)
Internal Revenue Service
examinations 14 11 479
Income from Agri-
Insurance
Company, Ltd. (752) (1,156) (3,829)
Other reconciling
items, net 361 31 343
______ ______ ______
Total provision for
income taxes $6,425 $2,258 $4,046
______ ______ ______
______ ______ ______
Some items of revenue and expense included in the statement of operations
may not be currently taxable or deductible 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):
2003 2002
_______ _______
Deferred Tax Assets:
Contribution carry forward (1,632) (1,698)
Pension (183) (168)
Prepaid sales commissions (802) (789)
Land inventories (488) (480)
Deferred retirement benefits (749) (502)
Other (1,256) (1,380)
_______ _______
Total gross deferred
tax assets (5,110) (5,017)
_______ _______
Deferred Tax Liabilities:
Revenue recognized from
citrus and sugarcane 607 458
Property and equipment
(principally due to
depreciation and soil
and water deductions) 12,981 12,645
Mortgage notes receivable 11 10
Inventories 1,205 886
Deferred real estate gains 1,625 1,600
Other 29 184
_______ _______
Total gross deferred
tax liabilities 16,458 15,783
_______ _______
Net deferred income
tax liabilities $11,348 $10,766
_______ _______
_______ _______
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 sufficient 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 consolidated 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 Registrar of Companies in
Bermuda. Agri will be able to underwrite 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 issued to parties other than its parent, Alico, 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, 2002, 2001 and 2000.
The Internal Revenue Service has notified the Company of its
intent to examine the Company tax returns for the years ended
August 31, 2001 and 2002. Any adjustments resulting from the
examination will be currently due and payable. No adjustments
have been proposed to date.
(12) Related Party Transactions
__________________________
Citrus
______
Citrus revenues of $17.7 million, $19.1 million and $19.9 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, 2003, 2002 and 2001, respectively. Griffin and
its subsidiaries is the owner of approximately 49.52 percent of
the Company's common stock. Accounts receivable, resulting from
citrus sales, include amounts due from Griffin totaling
$6.5 million at both August 31, 2003 and 2002. These amounts represent
estimated revenues to be received periodically under pooling agreements
as sale of pooled products is completed.
Harvesting, marketing, and processing costs, related to the citrus sales
noted above, totaled $6.6 million, $7.1 million, and $7.6 million for the
years ended August 31, 2003, 2002 and 2001, respectively. In addition,
Griffin provided the harvesting services for citrus sold to unrelated
processors. The aggregate cost of these services was $2.1 million,
$2.0 million and $2.2 million for the years ended August 31, 2003, 2002
and 2001, respectively. The accompanying consolidated balance sheets
include accounts payable to Griffin for citrus production, harvesting
and processing costs in the amount of $435 thousand and $594 thousand
at August 31, 2003 and 2002, 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, sugarcane, sod and citrus operations.
Such purchases totaled $6.4 million, $6.2 million and $6.0 million
during the years ended August 31, 2003, 2002 and 2001, respectively.
Griffin purchased catastrophic business interruption coverage from Agri
during fiscal 2003, 2002 and 2001. The total coverage under the policy
was $3.5 million, $3.2 million and $3.2 million for the fiscal years
2003, 2002 and 2001, respectively. The policy renews annually in
December for a one year term. The premiums charged under this policy
were $138 thousand, $128 thousand and $114 thousand for 2003, 2002 and
2001, respectively.
(13) Future Application of Accounting Standards
__________________________________________
In May 2003 the FASB issued SFAS 150 "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" This
Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities
and equity. It requires that an issuer classify a financial instrument
that is within its scope as a liability (or an asset in some
circumstances). The remaining provisions of this Statement are
consistent with the Board's proposal to revise that definition to
encompass certain obligations that a reporting entity can or must settle
by issuing its own equity shares, depending on the nature of the
relationship established between the holder and the issuer. This
Statement is effective for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003, except for
mandatorily redeemable financial instruments of nonpublic entities. It
is to be implemented by reporting the cumulative effect of a change in an
accounting principle for financial instruments created before the
issuance date of the Statement and still existing at the beginning of
the interim period of adoption. Restatement is not permitted. The
adoption of this Statement is not expected to have a significant impact
on the financial position or results of operations of the Company.
In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, "Consolidation of Variable Interest Entities."
Interpretation No. 46 requires unconsolidated variable interest entities
to be consolidated by their primary beneficiaries if the entities do not
effectively disperse the risks and rewards of ownership among their
owners and other parties involved. The provisions of Interpretation No.
46 are applicable immediately to all variable interest entities created
after January 31, 2003 and variable interest entities in which an enter-
prise obtains an interest after that date, and for variable interest
entities created before that date, the provisions are effective July 1,
2003. The adoption of Interpretation No. 46 is not expected to have a
material effect on the financial condition, results of operations, or
liquidity of the Company.
(14) Recovery of Citrus Canker Eradication Costs in Excess of Basis
______________________________________________________________
The Company incurred losses during the year ended August 31, 2001
related to citrus canker eradication. The eradication program
called for the removal of 507 acres of citrus trees from a grove
in Hendry County, Florida. 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:
2003 2002 2001
______ ______ ______
Recovery Sources
Federal $ - $ - $2,830
State - - 157
Insurance - - 219
______ ______ ______
Total Recovery - - 3,206
Loss Basis
Net Book Value of Trees - - 238
Fruit Inventory - - -
______ ______ ______
Total Basis - - 238
______ ______ ______
Excess of Recovery over Basis $ - $ - $ 2,968
______ ______ ______
______ ______ ______
15) Reportable Segment Information
____________________________
The Company is primarily engaged in agricultural operations, 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, 2003, 2002
and 2001 is summarized as follows:
2003 2002 2001
________ ________ ________
Revenues
Agriculture:
Citrus $ 24,107 $ 25,105 $ 27,570
Sugarcane 13,373 11,789 12,450
Ranch 7,175 9,102 8,788
________ ________ ________
Total revenues from
external customers
for reportable segments 44,655 45,996 48,808
Other revenues from
external customers 3,630 3,189 2,725
________ ________ ________
Total operating revenue $ 48,285 $ 49,185 $ 51,533
________ ________ ________
________ ________ ________
Costs of sales:
Citrus $ 20,106 $ 21,421 $ 22,450
Sugarcane 10,188 9,457 9,628
Ranch 6,790 8,515 7,394
________ ________ ________
Total costs of sales
for reportable segments 37,084 39,393 39,472
Other costs of sales 179 114 140
________ ________ ________
Total consolidated
costs of sales $ 37,263 $ 39,507 $ 39,612
________ ________ ________
________ ________ ________
2003 2002 2001
________ ________ ________
Gross profit:
Agriculture:
Citrus $ 4,001 $ 3,684 $ 5,120
Sugarcane 3,185 2,332 2,822
Ranch 385 587 1,394
________ ________ ________
Total profit for
reportable segments 7,571 6,603 9,336
Other gross profit 3,451 3,075 2,585
________ ________ ________
Consolidated gross profit 11,022 9,678 11,921
________ ________ ________
Other income (expense):
Citrus (Note 14) - - 2,968
Sugarcane - - -
Ranch - - -
Unallocated amounts:
Profit on sale of bulk
real estate 14,994 11,641 11,354
Other corporate expense (6,932) (11,526) (6,131)
________ ________ ________
Income before income taxes $ 19,084 $ 9,793 $ 20,112
________ ________ ________
________ ________ ________
Capital expenditures:
Agriculture:
Citrus $ 3,216 $ 4,704 $ 3,310
Sugarcane 1,451 1,293 2,632
Ranch 2,245 3,240 2,157
________ ________ ________
2003 2002 2001
________ ________ ________
Total agriculture capital
expenditures for
reportable segments 6,912 9,237 8,099
Other capital expenditures 1,113 548 773
Cattle transferred from
inventory held for sale
into breeding stock (700) (515) (370)
________ ________ ________
Total consolidated
capital expenditures $ 7,325 $ 9,270 $ 8,502
________ ________ ________
________ ________ ________
Depreciation, depletion and amortization:
Agriculture:
Citrus $ 2,354 $ 2,394 $ 2,405
Sugarcane 2,414 2,527 2,587
Ranch 1,474 1,573 1,456
________ ________ ________
Total depreciation,
depletion and amortization
for reportable segments 6,242 6,494 6,448
Other depreciation, depletion,
and amortization 481 488 498
________ ________ ________
Total consolidated depreciation,
depletion and
amortization $ 6,723 $ 6,982 $ 6,946
________ ________ ________
________ ________ ________
Assets:
Agriculture:
Citrus $ 54,549 $ 53,876 $ 53,266
Sugarcane 52,283 52,015 51,678
Ranch 22,430 21,920 22,205
________ ________ ________
Total assets for
reportable segments 129,262 127,811 127,149
Other assets 83,486 64,099 51,985
________ ________ ________
Total consolidated assets $212,748 $191,910 $179,134
________ ________ ________
________ ________ ________
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, 2003 and August 31, 2002, is as
follows:
Quarters Ended
November 30, Feb. 28, May 31, August 31,
2002 2001 2003 2002 2003 2002 2003 2002
_______ _______ _______ _______ _______ _______ _______ ______
Revenue:
Citrus $ 1,621 $ 1,506 $ 9,774 $ 7,689 $ 9,247 $ 9,889 $ 3,465 $6,021
Sugarcane 2,748 2,255 5,212 6,978 4,977 1,883 436 673
Ranch 2,118 3,590 1,146 2,013 3,086 2,536 825 963
Property
sales 535 2,819 134 8,547 178 252 16,143 1,155
Interest 276 497 245 336 229 403 451 235
Other
revenues 957 879 942 569 703 983 1,084 874
_______ _______ _______ _______ _______ _______ _______ ______
Total
revenue 8,255 11,546 17,453 26,132 18,420 15,946 22,404 9,921
_______ _______ _______ _______ _______ _______ _______ ______
Costs and expenses:
Citrus 1,580 1,485 9,405 7,348 7,385 7,605 1,736 4,983
Sugarcane 2,224 1,855 4,062 5,497 3,476 1,864 426 241
Ranch 2,214 3,010 1,025 1,857 2,658 2,434 893 1,214
Interest 541 514 483 531 518 682 539 694
Other 1,347 1,401 1,398 5,888 1,436 1,341 4,102 3,308
______ ______ ______ ______ ______ _____ _____ _____
Total costs
and
expenses 7,906 8,265 16,373 21,121 15,473 13,926 7,696 10,440
______ ______ ______ ______ ______ _____ _____ _____
Income (loss) be-
fore income
taxes 349 3,281 1,080 5,011 2,947 2,020 14,708 (519)
Provision for
income
taxes 91 277 290 295 882 1,589 5,162 97
______ ______ ______ ______ ______ ______ ______ _____
Net income
(loss) $ 258 $3,004 $ 790 $4,716 $2,065 $ 431 $ 9,546 (616)
______ ______ ______ ______ ______ ______ ______ _____
______ ______ ______ ______ ______ ______ ______ _____
Basic earnings (loss)
per share $ .04 $ .43 $ .11 $ .66 $ .29 $ .06 $ 1.34 $(.08)
______ ______ ______ ______ ______ ______ ______ _____
______ ______ ______ ______ ______ ______ ______ _____
Weighted average
Shares out-
standing 7,097 7,056 7,108 7,065 7,110 7,073 7,111 7,070
______ ______ ______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______ ______ ______
Item 9. Changes in & Disagreements with Accountants on
Accounting and Financial Disclosure.
_______________________________________________________________________
None
Item 9 (a) Controls and Procedures.
__________________________________________
Evaluation of disclosure controls and procedures
The Company maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the Company files
or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the rules and
forms of the Securities and Exchange Commission. Based upon their evaluation
of those controls and procedures performed within 90 days of the filing date
of this report, the chief executive and chief financial officers of the
Company concluded that the Company's disclosure controls and procedures were
adequate.
Changes in internal controls
The Company made no significant changes in its internal controls or in other
factors that could significantly affect these controls subsequent to the date
of the evaluation of those controls by the Chief Executive and Chief Financial
officers.
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 Officers"
of the Company's Proxy Statement for the Annual Meeting of Shareholders to be
held December 4, 2003 (the "Proxy Statement"). Such information is
incorporated herein by reference.
Section 16 (a) - Beneficial Ownership Reporting Compliance
______________________________________________________
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) during the 2003 fiscal
year and certain written representations, if any, made to the
Company, no officer, director or beneficial owners of 10% or more of the
Company'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 2003,
with the following two exceptions. William L. Barton filed one late Form 4
related to the sale of shares in the Company and Amy Gravina filed one
late Form 3 related to the initial acquisition of shares in the Company by
a family member.
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 10, 2003.
Code of Ethics
______________
The Company adopted a code of Business Conduct and Ethics during fiscal
2003. This Code of Ethics applies to all directors, officers and employees
and includes a "Whistleblower Policy" with procedures for the submission of
complaints or concerns regarding financial statement disclosures and other
matters. A copy of the Code of Ethics is attached as an Exhibit to this
annual Report on Form 10-K, and is also posted on the Company's website. Any
person will be provided with a copy of such Code of Ethics without charge upon
written request to the Company's address, attention: Denise Plair, Corporate
Secretary.
Item 11. Executive Compensation.
_________________________________________
The information in the Proxy Statement set forth under the captions "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 10, 2003.
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 10, 2003.
Item 14. Principal Accountant's Fees and Services.
_________________________________________________________________
Information called for by Items 14 is incorporated by
reference to the Company's Proxy Statement dated November 10, 2003.
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, 2003 and 2002
Consolidated Statements of Operations - For the Years Ended
August 31, 2003, 2002 and 2001
Consolidated Statements of Stockholders' Equity and Comprehensive
Income (loss) - For the Years Ended August 31, 2003, 2002 and 2001
Consolidated Statements of Cash Flows - For the Years Ended
August 31, 2003, 2002 and 2001
(a)2. Financial Statement Schedules:
_____________________________
Selected Quarterly Financial Data - For the Years Ended
August 31, 2003 and 2002 - Included in Part II, Item 8
Schedule I - Marketable Securities and Other Investments -
at August 31, 2003
Schedule V - Property, Plant and Equipment - For the Years
Ended August 31, 2003, 2002 and 2001
Schedule VI - Reserves for Depreciation, Depletion and
Amortization of Property, Plant and Equipment - For the
Years Ended August 31, 2003, 2002 and 2001
Schedule IX - Supplementary Income Statement Information -
For the Years Ended August 31, 2003, 2002 and 2001
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 Weighted Average Shares
Outstanding and Per Share Earnings.
(12) Statement - Computation of Ratios
(14) Code of ethics
(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
(31.1) Rule 13a-14(a) certification
(31.2) Rule 13a-14(a) certification
(32.1) Section 1350 certification
(32.2) Section 1350 certification
(99) Additional Exhibits - None
(b) Reports on Form 8-K:
___________________
Form 8-K dated August 12, 2003 regarding settlement agreement
proceedings.
Form 8-K dated July 15, 2003 regarding land sale.
Form 8-K dated June 12, 2003 regarding land sale.
Form 8-K dated April 8, 2003 regarding settlement agreement
enforceability.
Form 8-K dated March 26, 2003 regarding land sale.
Form 8-K dated March 12, 2003 regarding land sale.
Form 8-K dated February 24, 2003 regarding settlement agreement
enforceability.
Form 8-K dated December 10, 2002 regarding land sale.
Form 8-K dated December 6, 2002 regarding re-election of directors,
Officers, and additional comments by the chairman.
Form 8-K dated September 17, 2002 regarding land sale.
Form 8-K dated September 16, 2002 announcing new director.
*Material has been filed with Securities and Exchange Commission and NASDAQ
and may be obtained upon request.
ALICO, INC.
SCHEDULE I
Marketable Securities and Other Investments
(in thousands)
August 31, 2003
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 500 $ 515 $ 543 $ 543
Corporate Bonds 2,557 2,762 2,601 2,601
Mutual-Debt 8,435 8,435 8,247 8,247
Preferred Stocks 99 2,504 2,524 2,524
Common Stocks 67 1,893 1,808 1,808
Mutual Equity 10,181 10,181 11,982 11,982
Fixed maturity
Funds 11,146 11,146 11,115 11,115
___________ ___________ ___________
Total: $ 37,436 $ 38,820 $ 38,820
___________ ___________ ___________
___________ ___________ ___________
See accompanying independent auditors report
ALICO, INC.
SCHEDULE V
(In Thousands)
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, 2003
______________________________
Land $ 31,542 $ 126 $ 374 $ $ 31,294
Roads 2,247 33 2,280
Agricultural Land
Preparation 10 10
Forest Improvements 100 100
Pasture
Improvements 3,174 154 3,328
Buildings 3,927 168 238 3,857
Feeding and Watering
Facilities for
Cattle Herd 23 23
Water Control
Facilities 5 5
Fences 303 9 39 273
Cattle Pens 167 10 29 148
Interest-Ranch 34 4 38
Irrigation System-
Ranch 676 676
Citrus Groves,
Including Irrigation
Systems 47,881 2,709 374 50,216
Equipment 9,358 761 470 9,649
Breeding Herd 12,618 1,859 1,766 12,711
Sugarcane-Land Prep-
aration, Etc. 26,853 1,256 1,812 26,297
Sod Land-Prep-
aration, Etc. 1,583 193 1,776
Farm Land Prep-
aration, Etc. 1,854 43 1,897
___________ ___________ __________ _______ ____________
$ 142,355 $ 7,325 $ 5,102 $ $ 144,578
___________ ___________ __________ _______ ____________
___________ ___________ __________ _______ ____________
See accompanying independent auditors report
ALICO, INC.
SCHEDULE V
(In thousands)
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 $ 31,624 $ 51 $ 133 $ $ 31,542
Roads 2,189 58 2,247
Agricultural Land
Preparation 10 10
Forest Improvements 100 100
Pasture
Improvements 3,039 135 3,174
Buildings 3,789 138 3,927
Feeding and Watering
Facilities for
Cattle Herd 18 7 2 23
Water Control
Facilities 5 5
Fences 286 18 1 303
Cattle Pens 176 9 167
Interest-Ranch 17 17 34
Irrigation System-
Ranch 330 346 676
Citrus Groves,
Including Irrigation
Systems 45,112 4,065 1,296 47,881
Equipment 9,447 1,316 1,405 9,358
Breeding Herd 12,465 1,723 1,570 12,618
Sugarcane-Land Prep-
aration, Etc. 27,039 1,180 1,366 26,853
Sod-Land Prep-
aration, Etc. 858 725 1,583
Farm Land Prep-
aration 1,848 6 1,854
___________ __________ __________ _______ ____________
$ 138,352 $ 9,785 $ 5,782 $ $ 142,355
___________ __________ __________ _______ ____________
___________ __________ __________ _______ ____________
See accompanying independent auditors report
ALICO, INC.
SCHEDULE V
(In thousands)
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, 2001
__________________________________
Land $ 32,396 $ 42 $ 814 $ $ 31,624
Roads 2,157 32 2,189
Agricultural Land
Preparation 10 10
Forest Improvements 100 100
Pasture Improve-
ments 3,012 51 24 3,039
Buildings 3,554 235 3,789
Feeding and Watering
Facilities for
Cattle Herd 23 5 18
Water Control
Facilities 5 5
Fences 277 10 1 286
Cattle Pens 187 11 176
Interest-Ranch 0 17 17
Irrigation System-
Ranch 0 330 330
Citrus Groves,
Including Irri-
gation Systems 44,327 2,818 2,033 45,112
Equipment 8,956 1,101 610 9,447
Breeding Herd 13,714 1,531 2,780 12,465
Sugarcane-Land
Prep.,Etc. 25,991 2,112 1,064 27,039
Sod-Land Prep-
aration,Etc. 271 587 858
Farm Land Prep-
aration 1,842 6 1,848
___________ __________ __________ _________ ___________
$ 136,822 $ 8,872 $ 7,342 $ $ 138,352
___________ __________ __________ _________ ___________
___________ __________ __________ _________ ___________
* Reclassification from other assets.
See accompanying independent auditors report
ALICO, INC.
SCHEDULE VI
(In thousands)
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, 2003
______________________________
Buildings $ 1,833 $ 181 $ 238 $ $ 1,776
Feeding and Watering
Facilities for
Cattle Herd 3 2 5
Fences 186 30 32 184
Cattle Pens 106 12 29 89
Interest-Ranch 3 3 6
Irrigation System-
Ranch 28 34 62
Citrus Groves,
Including Irriga-
tion Systems 15,765 1,867 374 17,258
Equipment 5,352 1,071 470 5,953
Breeding Herd 4,760 1,242 1,127 4,875
Roads 411 127 538
Sugarcane Lane Prep-
aration, Etc. 8,376 2,058 1,812 8,622
Sod Land Prepara-
tion, Etc. 49 57 106
Farm Land Preparation 228 39 267
___________ __________ __________ ____ ___________
$ 37,100 $ 6,723 $ 4,082 $ 0 $ 39,741
___________ __________ __________ ____ ___________
___________ __________ __________ ____ ___________
See accompanying independent auditors report
ALICO, INC.
SCHEDULE VI
(In thousands)
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 $ 1,663 $ 170 $ $ $ 1,833
Feeding and Watering
Facilities for
Cattle Herd 5 1 3 3
Fences 158 29 1 186
Cattle Pens 102 13 9 106
Interest- Ranch 1 2 3
Irrigation System-
Ranch 4 24 28
Citrus Groves,
Including Irriga-
tion Systems 14,835 1,922 992 15,765
Equipment 5,622 1,081 1,351 5,352
Breeding Herd 4,467 1,332 1,039 4,760
Roads 288 123 411
Sugarcane-Land Prep-
aration, Etc. 7,520 2,221 1,365 8,376
Sod-Land Prepara-
tion, Etc. 24 25 49
Farm Land Preparation 189 39 228
___________ __________ __________ ____ ___________
$ 34,878 $ 6,982 $ 4,760 $ 0 $ 37,100
___________ __________ __________ ____ ___________
___________ __________ __________ ____ ___________
See accompanying independent auditors report
ALICO, INC.
SCHEDULE VI
(In thousands)
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, 2001
__________________________________
Buildings $ 1,503 $ 160 $ $ $ 1,663
Feeding and Watering
Facilities for
Cattle Herd 9 1 5 5
Fences 130 28 0 158
Cattle Pens 99 14 11 102
Citrus Groves,
Interest-Ranch 0 1 1
Irrigation System-
Ranch 0 4 4
Including Irrigation
Systems 13,714 1,949 828 14,835
Equipment 5,089 1,037 504 5,622
Breeding Herd 5,133 1,275 1,941 4,467
Roads 172 116 288
Sugarcane-Land
Prep.,Etc. 5,951 2,314 745 7,520
Sod-Land Prep-
aration, Etc. 16 8 24
Farm Land
Preparation 150 39 189
___________ __________ __________ _______ ___________
$ 31,966 $ 6,946 $ 4,034 $ 0 $ 34,878
___________ __________ __________ _______ ___________
___________ __________ __________ _______ ___________
See accompanying independent auditors report
ALICO, INC.
SCHEDULE IX
____________
SUPPLEMENTARY INCOME STATEMENT INFORMATION
__________________________________________
_____________________________________________________________________________
COLUMN A COLUMN B
_____________________________________________________________________________
Charged to Costs and Expenses
_____________________________
(In thousands)
Years Ended August 31,
______________________
Item 2003 2002 2001
____ ____ ____ ____
1. Maintenance and repairs $ 1,156 $ 862 $ 1,476
2. Taxes, other than payroll
and income taxes 2,081 2,054 1,617
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 undersigned, thereunto duly authorized.
ALICO, INC.
(Registrant)
December 7, 2004 John R. Alexander
Date Chairman and Director
/s/ John R. Alexander
December 7, 2004 W. Bernard Lester
Date President, Chief Executive
Officer and Director
/s/ W. Bernard Lester
December 7, 2004 L. Craig Simmons
Date Vice President and
Chief Financial Officer
/s/ L. Craig Simmons
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated:
John R. Alexander Richard C. Ackert
Director Director
/s/ John R. Alexander /s/ Richard C. Ackert
J.D. Alexander William L. Barton
Director Director
/s/ J.D. Alexander /s/ William L. Barton
Larry A. Carter W. Bernard Lester
Director Director
/s/ Larry A. Carter /s/ W. Bernard Lester
Stephen M. Mulready Thomas E. Oakley
Director Director
/s/ Stephen M. Mulready /s/ Thomas E. Oakley
Baxter G. Troutman
Director
/s/ Baxter G. Troutman
December 7, 2004
Date
1