UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q __X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For three months ended November 30, 1999. OR _____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________ to ____________________. Commission file number 0-261. ALICO, INC. (Exact name of registrant as specified in its charter) Florida 59-0906081 (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) P. O. Box 338, La Belle, FL 33975 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 863/675-2966 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No There were 7,027,827 shares of common stock, par value $1.00 per share, outstanding at January 14, 2000.
PART I. FINANCIAL INFORMATION Item 1. Financial Statements ALICO, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (See Accountants' Review Report) Three Months Ended November 30, 1999 1998 _______________________________ Revenue: Citrus $ 1,702,564 $ 1,586,598 Sugarcane 1,451,140 1,193,533 Ranch 2,986,818 2,647,356 Rock products and sand 348,840 352,174 Oil lease and land rentals 413,136 134,449 Forest products 33,248 54,248 Profit on sales of real estate 12,859,851 0 Interest and investment income 769,672 195,852 Other 0 11,546 ___________ ___________ Total revenue 20,565,269 6,175,756 ___________ ___________ Cost and expenses: Citrus production, harvesting and marketing 1,075,455 1,275,238 Sugarcane production and harvesting 1,422,700 875,922 Ranch 2,899,568 2,787,028 Real estate expenses 380,564 131,112 Interest 632,399 408,937 Other, general and administrative 384,848 688,987 ____________ ___________ Total costs and expenses 6,795,534 6,167,224 ____________ ___________ Income before income taxes 13,769,735 8,532 Provision for income taxes 5,158,364 (18,562) ____________ ___________ Net income 8,611,371 27,094 ____________ ___________ ____________ ___________ Weighted average number of shares outstanding 7,027,827 7,027,827 ____________ ___________ ____________ ___________ Per share amounts: Basic $ 1.23 $ .00 Dividends $ .30 $ .50 See accompanying notes to condensed consolidated financial statements.
ALICO, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (See Accountants' Review Report) November 30, 1999 August 31, 1999 ___________________________________ ASSETS Current assets: Cash and cash investments $ 708,480 $ 740,829 Marketable Securities 15,737,773 15,043,713 Accounts receivable 6,785,288 8,030,863 Notes receivable 2,815,911 73,589 Inventories 19,537,467 20,547,215 Refundable income taxes 0 549,586 Other current assets 629,986 195,904 ____________ ____________ Total current assets 46,214,905 45,181,699 Notes receivable, non-current 9,048,885 394,203 Land held for development and sale 7,263,651 9,429,295 Investments 956,317 946,145 Property, buildings and equipment 136,450,115 132,372,839 Less: Accumulated depreciation (32,418,441) (31,402,071) ____________ ____________ Total assets $167,515,432 $156,922,110 ____________ ____________ ____________ ____________ CONDENSED CONSOLIDATED BALANCE SHEETS (See Accountants' Review Report) (Continued) November 30, 1999 August 31, 1999 LIABILITIES _________________ _______________ Current liabilities: Accounts payable $ 1,598,318 $ 2,571,579 Due to profit sharing plan 221,512 269,177 Accrued ad valorem taxes 0 1,997,834 Current portion of notes payable 1,322,033 1,322,033 Accrued expenses 334,111 683,848 Income taxes payable 192,418 0 Deferred income taxes 1,815,082 1,893,360 ____________ ____________ Total current liabilities 5,483,474 8,737,831 Notes payable 48,454,245 45,630,912 Deferred income taxes 15,203,895 10,780,521 Deferred retirement benefits 422,402 377,487 ____________ ____________ Total liabilities 69,564,016 65,526,751 ____________ ____________ STOCKHOLDERS' EQUITY Common stock $ 7,027,827 $ 7,027,827 Accumulated other comprehensive income 1,082,987 1,029,953 Retained earnings 89,840,602 83,337,579 ____________ ____________ Total stockholders' equity 97,951,416 91,395,359 ____________ ____________ Total liabilities and stockholders' equity $167,515,432 $156,922,110 ____________ ____________ ____________ ____________ See Accompanying notes to condensed consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Accumulated Common Stock Other Shares Retained Comprehensive Issued Amount Earnings Income Total _______ ________ ________ _______ _________ Balances, August 31, 1998 7,027,827 $7,027,827 $82,770,769 $168,345 $89,966,941 _______________ Comprehensive income: Net income for the year ended August 31, 1999 - - 4,080,724 - 4,080,724 Unrealized gains on Securities, net of taxes - - - 861,608 861,608 and reclassification adjustment (see disclosure) __________ Total Comprehensive income: 4,942,332 Dividends paid - - (3,513,914) - (3,513,914) _________ __________ ___________ ________ __________ Balances, August 31, 1999 7,027,827 $7,027,827 $83,337,579 $1,029,953 $91,395,359 _______________ Comprehensive income: Net income for the three months ended November 30, 1999 - - 8,611,371 - 8,611,371 Unrealized gains on Securities, net of taxes - - - 53,034 53,034 and reclassification adjustment (see disclosure) __________ Total Comprehensive income: 8,664,405 Dividends paid - - (2,108,348) - (2,108,348) _________ __________ ___________ ________ _____________ Balances, November 30, 1999 7,027,827 $7,027,827 $89,840,602 $1,082,987 $97,951,416 _________ __________ ___________ ________ ____________ _________ __________ ___________ ________ ____________ 2000 1999 Disclosure of reclassification amount: ___________ __________ Unrealized holding gains (losses) arising during the period $606,496 $824,144 Less: reclassification adjustment for gains (losses) included in net income 553,462 (37,464) _________ __________ Net unrealized gains (losses) on securities $ 53,034 $ 861,608 _________ __________ _________ __________ See accompanying notes to consolidated financial statements. ALICO, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (See Accountants' Review Report) Three Months Ended November 30, 1999 1998 _______________________________ Cash flows from operating activities: Net income $ 8,611,371 $ 27,094 Adjustments to reconcile net income to cash provided from (used for) operating activities: Depreciation and amortization 1,458,920 1,212,374 Net decrease in current assets and liabilities (1,104,837) (87,098) Deferred income taxes 4,198,273 (718,306) Gain on sales of real estate (12,859,851) 0 Other (1,131,601) (97,431) __________ __________ Net cash provided from (used for) operating activities (827,725) 336,633 __________ __________ Cash flows from (used for) investing activities: Purchases of property and equipment (3,850,238) (3,468,992) Proceeds from sales of real estate 3,971,175 0 Proceeds from sales of property and equipment 230,457 4,894 Purchases of marketable securities (443,737) (1,041,667) Proceeds from sales of marketable securities 173,164 530,014 __________ __________ Net cash provide from (used for) investing activities 80,821 (3,975,751) __________ __________ Cash flows from (used for) financing activities: Notes receivable collections (430) 26,728 Repayment of bank loan (9,001,667) (4,850,000) Proceeds from bank loan 11,825,000 11,500,000 Dividends paid (2,108,348) (3,513,914) __________ __________ Net cash provided from financing activities 714,555 3,162,814 __________ __________ Net decrease in cash and cash investments $ (32,349) $ (476,304) __________ __________ __________ __________ Supplemental disclosures of cash flow information: Cash paid for interest, net of amount capitalized $ 501,111 $ 368,647 __________ __________ __________ __________ Cash paid for income taxes, including $ 103,817 $ 792,700 related interest __________ __________ __________ __________ Non-cash investing and financing activities: Mortgage notes receivable issued in exchange for land, less unamortized discount $11,396,574 $ 0 ___________ __________ ___________ __________ Fair value adjustments to securities available for sale $ 85,588 $ 856,196 __________ __________ __________ __________ Income tax effect related to fair value adjustment $ 32,554 $ 322,187 __________ __________ __________ __________ See accompanying notes to condensed consolidated financial statements.
ALICO, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (See Accountants' Review Report) 1. Basis of financial statement presentation: The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Saddlebag Lake Resorts, Inc., after elimination of all significant intercompany balances and transactions. The accompanying unaudited condensed consolidated financial statements have been prepared on a basis consistent with the accounting principles and policies reflected in the Company's annual report for the year ended August 31, 1999. In the opinion of Management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recur- ring accruals) necessary for a fair presentation of its consolidated financial position at November 30, 1999 and August 31, 1999 and the consolidated results of operations and cash flows for the three months ended November 30, 1999 and 1998. The basic business of the Company is agriculture which is of a seasonal nature and subject to the influence of natural phenomena and wide price fluctuations. Fluctuation in the market prices for citrus fruit has caused the Company to recognize additional revenue from the prior year's crop totaling $758,750 in 1999 and $218,943 in 1998. The results of operations for the stated periods are not necessarily indicative of results to be expected for the full year. 2. Real Estate: Real Estate sales are recorded under the accrual method of accounting. Under this method, a sale is not recognized until payment is received, including interest, aggregating 10% of the contract sales price for residential properties and 20% for commercial properties. 3. Notes receivable: Notes receivable include mortgages and other notes receivable. Mortgage notes receivable arose from real estate sales. The balances at November 30, 1999 and August 31, 1999 are as follows: November 30, August 31, 1999 1999 ____________ __________ Mortgage notes receivable on retail land sales $ 246,879 $ 246,660 Mortgage notes receivable on bulk land sales 12,344,684 0 Less unamortized discount based on imputed interest rate of 8% (948,110) 0 Other notes receivable 221,343 221,132 ____________ __________ Total mortgage notes receivable $ 11,864,796 $ 467,792 Less current portion 2,815,911 73,589 ____________ __________ Non-current portion $ 9,048,885 $ 394,203 ____________ __________ ____________ __________ In September 1999, the Company received a mortgage note in exchange for land sold. The note totaled $12,344,684 and is due annually in September, bearing interest at 4%, over the next four years.
4. Inventories: A summary of the Company's inventories (in thousands) is shown below: November 30, August 31, 1999 1999 ____________ __________ Unharvested fruit crop on trees $ 10,549 $ 9,359 Unharvested sugarcane 3,751 3,639 Beef cattle 5,104 7,433 Sod 134 116 ____________ __________ Total inventories $ 19,538 $ 20,547 5. Income taxes: The provision for income taxes for the quarters ended November 30, 1999 and 1998 is summarized as follows: Three Months Ended November 30, 1999 1998 _______________________________ Current: Federal income tax $ 692,482 $ 100,453 State income tax 120,786 17,051 __________ __________ 813,268 117,504 __________ __________ Deferred: Federal income tax 3,710,017 (122,940) State income tax 635,079 (13,126) __________ __________ 4,345,096 (136,066) __________ __________ Total provision for income taxes $5,158,364 $ (18,562) __________ __________ __________ __________ 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 for the quarters ended November 30, 1999 and 1998: Three Months Ended November 30, 1999 1998 _______________________________ Expected income tax $4,681,709 $ 2,901 Increase (decrease) resulting from: State income taxes, net of federal benefit 498,179 310 Nontaxable interest and dividends (26,736) (23,825) Other reconciling items, net 5,212 2,052 __________ __________ Total provision for income taxes $5,158,364 $ (18,562) __________ __________ __________ __________ The Company is currently under examination by the Internal Revenue Service for the years ended August 31, 1995 and 1996. When the examinations are resolved, any income taxes due will become currently payable. However, the majority of the proposed adjustments relate to, among other things, the Company's computation of the deferral determination of the amounts of certain charitable contributions, all of which have been provided for in the Company's deferred tax liability account. The Company plans to continue to defend the positions taken in its income tax returns. 6. Indebtedness: The Company has financing agreements with commercial banks that permit the Company to borrow up to $44 million. The financing agreements allow the Company to borrow up to $41 million which is due in 2001 and up to $3 million which is due on demand. In March 1999, the Company mortgaged 7,680 acres for $19 million in connection with a $22.5 million acquisition of producing citrus and sugarcane operations. The total amount of long-term debt under these agreements at November 30, 1999 and August 31, 1998 was $49,776,278 and $46,952,945, respectively. Maturities of the indebtness of the Company over the next five years are as follows: 2000- $1,322,033; 2001- $32,582,033; 2002- $1,322,033; 2004- $1,322,033; 2005- $1,322,033; thereafter $11,906,113. Interest cost expensed and capitalized during the three months ended November 30, 1999 and November 30, 1998 was as follows: 1999 1998 ________ ________ Interest expensed $632,399 $408,937 Interest capitalized 95,473 29,943 ________ ________ Total interest cost $727,872 $438,880 ________ ________ ________ ________ 7. Dividends: On October 5, 1999 the Company declared a year-end dividend of $.30 per share, which was paid on November 5, 1999. 8. Disclosures about reportable segments: Alico, Inc. has four reportable segments: citrus, sugarcane, ranching and general corporate. The commodities produced by these segments are sold to wholesalers and processors who prepare the products for consumption. The Company's operations are located in Florida. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Alico, Inc. evaluates performance based on profit or loss from operations before income taxes. Alico, Inc.'s reportable segments are strategic business units that offer different products. They are managed separately because each segment requires different management techniques, knowledge and skills. The following table presents information for each of the Company's operating segments as of and for the three months ended November 30, 1999: ____________________________________________________________ General Consolidated Citrus Sugarcane Ranch Corporate* Total ____________________________________________________________ Revenue $ 1,702,564 1,451,140 2,986,818 15,372,684 21,513,379 Costs and expenses 1,075,455 1,422,700 2,899,568 1,397,638 6,795,534 Depreciation and amortization 603,876 492,292 240,062 122,690 1,458,920 Segment profit 627,109 28,440 87,250 13,975,046 14,717,845 Segment assets 39,387,876 42,368,444 13,474,271 8,801,083 104,031,674 *Consists of rents, investments, real estate activities and other such items of a general corporate nature. 9. Future Application of Accounting Standards In June 1998, the Financial Standards Board issued Statements of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative instruments and Hedging Activities". SFAS 133 requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Gains and losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The key criterion for hedge accounting is that the hedging relationship must be highly effective in achieving offsetting changes in fair value or cash flows. In June 1999, the FASB issued SFAS 137 which amended the implementation date for SFAS 133 to be effective for all fiscal years beginning after June 15, 2000. 10. Stock Option Plan On November 3, 1998, the Company adopted the Alico, Inc., Incentive Equity Plan (The Plan) pursuant to which the Board of Directors of the Company may grant options, stock appreciation rights, and/or restricted stock to certain directors and employees. The Plan authorizes grants of shares or options to purchase up to 650,000 shares of authorized but unissued common stock. Stock options granted have a maximum term of ten years and have vesting schedules which are at the discretion of the Board of Directors and determined on the effective date of the grant. Effective April 6, 1999, the Company granted 34,700 with an exercise price of $14.62 and a fair value of $14.62. Additionally, effective September 9, 1999, the Company granted 14,992 options with an exercise price of $14.62 and a fair value of $15.813. Options granted have a ten year contracual life. As of November 30, 1999, there were 49,692 options remained outstanding with an weighted average exercise price of $14.62 and a weighted average remaining contractual life of ten years. At November 30, 1999, there were no shares exercisable and 600,308 shares available and for grant under the Plan. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. LIQUIDITY AND CAPITAL RESOURCES: Working capital increased to $40,731,431 at November 30, 1999, up from $36,443,868 at August 31, 1999. As of November 30, 1999, the Company had cash and cash investments of $708,480 compared to $740,829 at August 31, 1999. Marketable securities increased from $15,043,713 to $15,737,773 during the same period. The ratio of current assets to current liabilities increased to 8.43 to 1 at November 30, 1999 from 5.17 to 1 at August 31, 1999. Total assets increased by $10,593,322 to $167,515,432 at November 30, 1999 from $156,922,110 at August 31, 1999. In connection with financing agreements with commercial banks (See Note 6 under Notes to Condensed Consolidated Financial Statements), the Company has an unused availability of funds of approximately $ 12.7 million at November 30, 1999. RESULTS OF OPERATIONS: The basic business of the Company is agriculture which is of a seasonal nature and subject to the influence of natural phenomena and wide price fluctuations. The results of operations for the stated periods are not necessarily indicative of results to be expected for the full year. Net income for the three months ending November 30, 1999 increased by $8,584,277 when compared to the first quarter of fiscal 1999. Income before income taxes increased $13,761,203 for the three months ended November 30, 1999, when compared to the same period a year ago. This was primarily due to increase in earnings from real estate activities (a gain of ($12,479,287 for the three months ended November 30, 1999, compared to a loss of ($131,112) for the three months ended November 30, 1998). Earnings from agricultural activities also increased during the first quarter of fiscal 2000 ($742,799 vs. $489,299 during the first three months of fiscal 2000 and 1999, respectively). During September of 1999, the Company completed a sale of 1,230 acres of land surrounding the University site in Lee County for $16.5 million. The contract called for 25 percent of the purchase price to be paid at closing, with the balance of $12.3 million payable annually over the next four years. The sale generated a pre-tax gain of approximately $12.9 million. Citrus ______ Citrus earnings increased for the quarter ended November 30, 1999, when compared to the prior year ($627,109 during the first quarter of fiscal 2000 vs. $311,360 during the same period in fiscal 1999). This is largely the result of the recognition of the revenues from the prior year's fresh fruit crop which was greater than amount realized in the first quarter of the prior year ($758,750 in the first quarter of fiscal 2000, compared to $218,943 in the first quarter of fiscal 1999, see Note 1 to the Condensed Consolidated Financial Statements). Additionally, market prices for fresh grapefruit have improved over the prior year levels. Sugarcane _________ Sugarcane earnings were lower during the first quarter of 2000 ($28,440 during fiscal 2000 vs. $317,611 during fiscal 1999) when compared to the prior year. Although producing acres has increased and, as a result, more acres are being harvested, decreased yields and lower market prices have combined to generate the decline. Ranching ________ Ranch earnings increased when compared to a year ago (a profit of $87,250 vs. a loss of ($139,672) for the three months ended November 30, 1999 and November 30, 1998, respectively). Improved market prices for beef is the primary cause of the rise. General Corporate _________________ In July of 1999, the Company entered into a contract to sell 402 acres near the Florida Gulf Coast University for approximately $15.5 million. The sale is scheduled to close during fiscal 2001. If the sale is consummated, it is expected to generate a pre-tax gain of approximately $13.5 million. Additionally, the Company has agreed to sell 190 acres, also near the University, for approximately $6.6 million. This sale is expected to close during fiscal 2001 and could potentially generate a $5.8 million pre-tax gain. The Company is continuing its marketing and permit activities for its land which surrounds the Florida Gulf Coast University. Cautionary Statement ____________________ Readers should note, in particular, that this Form 10-Q contains forward- looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that involve substantial risks and uncertainties. When used in this document, or in the documents incorporated by reference herein, the words "anticipate", "believe", "estimate", "may", "intend" statements. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein. The considerations listed herein represent certain important factors the Company believes could cause such results to differ. These considerations are not intended to represent a complete list of the general or specific risks that may effect the Company. It should be recognized that other risks, including general economic factors and expansion strategies, may be significant, presently or in the future, and the risks set forth herein may affect the Company to a greater extent than indicated. ITEM 3. Quantitative and Qualitative Disclosures about Market Risk No changes FORM 10-Q PART II. OTHER INFORMATION ITEM 6. Exhibits and reports on Form 8-K. (a) Exhibits: A. Accountant's Report. B. Computation of Weighted Average Shares Outstanding at November 30, 1999. C. Exhibit 27 - Financial Data Schedule. (b) Reports on Form 8-K. December 9, 1999. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ALICO, INC. (Registrant) January 14, 2000 W. Bernard Lester Date President Chief Operating Officer (Signature) January 14, 2000 L. Craig Simmons Date Vice President Chief Financial Officer (Signature) January 14, 2000 Deirdre M. Purvis Date Controller (Signature) EXHIBIT A INDEPENDENT ACCOUNTANT'S REVIEW REPORT ______________________________________ The Stockholders and Board of Directors Alico, Inc: We have reviewed the condensed consolidated balance sheet of Alico, Inc. and subsidiary as of November 30, 1999, and the related condensed consolidated statements of operations for the three-month periods ended November 30, 1999 and 1998. These condensed consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical review procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Alico, Inc. and subsidiary as of August 31, 1999 and the related consolidated statement of operations, stock- holders' equity and cash flows for the year then ended (not presented herein); and in our report dated October 13, 1999 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of August 31, 1999, is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived. S/ KPMG LLP Orlando, Florida January 7, 2000 FORM 10-Q ALICO, INC. Computation of Weighted Average Shares Outstanding as of November 30, 1999: Number of shares outstanding at August 31, 1999 7,027,827 _________ _________ Number of shares outstanding at November 30, 1999 7,027,827 _________ _________ Weighted Average 9/1/99 - 11/30/99 7,027,827 _________ _________ EXHIBIT B