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, 2003. OR _____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________ to ____________________. Commission file number 0-261. ALICO, INC. (Exact name of registrant as specified in its charter) Florida 59-0906081 (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) P. O. Box 338, La Belle, FL 33975 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 863/675-2966 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No There were 7,159,104 shares of common stock, par value $1.00 per share, outstanding at January 13, 2004. PART I. FINANCIAL INFORMATION Item 1. Financial Statements ALICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited - See Accountants' Review Report) Three Months Ended November 30, 2003 2002 _______________________________ Revenue: Citrus $ 1,354 $ 1,621 Sugarcane 2,591 2,748 Ranch 3,344 2,118 Rock products and sand 765 517 Oil lease and land rentals 289 246 Forest products 82 50 Retail land sales 14 84 ___________ ___________ Total operating revenue 8,439 7,384 ___________ ___________ Cost of sales Citrus production, harvesting and marketing 2,254 1,580 Sugarcane production and harvesting 2,107 2,224 Ranch 2,620 2,214 Retail land sales 16 69 ____________ ___________ Total costs of sales 6,997 6,087 ____________ ___________ Gross Profit 1,442 1,297 General and administration expenses 1,409 1,278 ____________ ___________ Income from operations 33 19 Other income (expenses): (loss) profit on sales of real estate - 451 Interest and investment income 450 276 Interest expense (488) (541) Other 79 144 ____________ ___________ Total other income, net 41 330 ____________ ___________ Income before income taxes 74 349 Provision for income taxes 25 91 ____________ ___________ Net income 49 258 ____________ ___________ ____________ ___________ Weighted average number of shares outstanding 7,140 7,097 ____________ ___________ ____________ ___________ Per share amounts: Basic $ .01 $ .04 Fully diluted $ .01 $ .04 Dividends $ .60 $ .35 See accompanying Notes to Condensed Consolidated Financial Statements. ALICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (See Accountants' Review Report) November 30, 2003 August 31, 2003 (unaudited) _________________ _______________ ASSETS Current assets: Cash and cash investments $ 7,244 $ 16,352 Marketable securities 44,720 38,820 Accounts receivable 5,933 9,680 Mortgage and notes receivable 2,514 2,534 Inventories 21,160 21,845 Other current assets 1,084 973 ____________ ____________ Total current assets 82,655 90,204 Notes receivable, non-current 221 234 Land held for development and sale 16,714 16,587 Investments 856 886 Property, buildings and equipment 147,034 144,578 Less: Accumulated depreciation (41,022) (39,741) ____________ ____________ Total assets $ 206,458 $ 212,748 ____________ ____________ ____________ ____________ ALICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (See Accountants' Review Report) (Continued) November 30, 2003 August 31, 2003 (unaudited) LIABILITIES _________________ ________________ Current liabilities: Accounts payable $ 908 $ 2,110 Accrued ad valorem taxes - 1,519 Current portion of notes payable 3,321 3,321 Accrued expenses 978 988 Deferred income taxes 1,638 1,680 Due to profit sharing - 350 Other current liabilities 863 754 ____________ ____________ Total current liabilities 7,708 10,722 Deferred revenue 10 91 Notes payable 53,276 54,127 Deferred income taxes 9,574 9,668 Deferred retirement benefits 511 120 Other non-current liability 9,609 9,609 Donation payable 2,228 2,229 ____________ ____________ Total liabilities 82,916 86,566 ____________ ____________ STOCKHOLDERS' EQUITY Common stock $ 7,152 $ 7,116 Additional paid in capital 3,810 3,074 Accumulated other comprehensive income 1,784 961 Retained earnings 110,796 115,031 ____________ ____________ Total stockholders' equity 123,542 126,182 ____________ ____________ Total liabilities and stockholders' equity $ 206,458 $ 212,748 ____________ ____________ ____________ ____________ See accompanying Notes to Condensed Consolidated Financial Statements. ALICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited - See Accountants' Review Report) Three Months Ended November 30, 2003 2002 ____________ _____________ Cash flows from operating activities: Net cash provided from operating activities $ 2,448 $ 2,367 __________ __________ Cash flows used for investing activities: Purchases of property and equipment (2,343) (2,270) Proceeds from sales of real estate - 541 Proceeds from sales of property and equipment 143 157 Purchases of marketable securities (5,690) (814) Proceeds from sales of marketable securities 999 2,195 Other (95) 4 __________ __________ Net cash used for investing activities (6,986) (187) __________ __________ Cash flows used for financing activities: Repayment of bank loan (8,561) (6,684) Proceeds from bank loan 7,710 9,127 Proceeds from exercising stock options 566 383 Dividends paid (4,285) (2,482) __________ __________ Net cash (used for) provided from financing activities (4,570) 344 __________ __________ Net (decrease)increase in cash and cash investments $ (9,108) $ 2,524 Cash and cash investments At the beginning of year 16,352 10,140 __________ __________ At end of period 7,244 12,664 __________ __________ __________ __________ See accompanying Notes to Condensed Consolidated Financial Statements. ALICO, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (See Accountants' Review Report) (in thousands except for per share data) 1. Basis of financial statement presentation: The accompanying condensed consolidated financial statements include the accounts of Alico, Inc. and its wholly owned subsidiaries, Saddlebag Lake Resorts, Inc. (Saddlebag),Agri-Insurance Company, Ltd. (Agri), and Alico-Agri, LLC 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, 2003. In the opinion of Management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for a fair presentation of its consolidated financial position at November 30, 2003 and the consolidated results of operations and cash flows for the three months ended November 30, 2003 and 2002. The basic business of the Company is agriculture which is of a seasonal nature and subject to the influence of natural phenomena and wide price fluctuations. Fluctuation in the market prices for citrus fruit has caused the Company to recognize additional revenue from the prior year's crop totaling $174 in 2003 and $193 in 2002. Due to current market conditions for citrus, the Company recorded a valuation allowance of ($722) for its unharvested fruit crop on trees at November 30, 2003. The results of operations for the stated periods are not necessarily indicative of results to be expected for the full year. Certain items from 2002 have been reclassified to conform to the 2003 presentation. 2. Real Estate: Real estate sales are recorded under the accrual method of accounting. Under this method, a sale is not recognized until payment is received, including interest, aggregating 10% of the contract sales price for residential properties and 20% for commercial properties. 3. Mortgage and notes receivable: Mortgage and notes receivable arose from real estate sales. The balances at November 30, 2003 and August 31, 2003 are as follows: November 30, August 31, 2003 2003 (Unaudited) ____________ __________ Mortgage notes receivable on retail land sales $ 235 $ 235 Mortgage notes receivable on bulk land sales 2,410 2,420 Other notes receivable 90 113 ____________ __________ Total mortgage notes receivable $ 2,735 $ 2,768 Less current portion 2,514 2,534 ____________ __________ Non-current portion $ 221 $ 234 ____________ __________ ____________ __________ 4. Inventories: A summary of the Company's inventories is shown below: November 30, August 31, 2003 2003 (Unaudited) ____________ ___________ Unharvested fruit crop on trees $ 8,692 $ 8,135 Unharvested sugarcane 4,829 5,159 Beef cattle 6,943 7,892 Sod 696 659 ____________ ___________ Total inventories $ 21,160 $ 21,845 ____________ ___________ ____________ ___________ Subject to prevailing market conditions, the Company may hedge a portion of its beef inventory by entering into cattle futures contracts to reduce exposure to changes in market prices. Any gains or losses anticipated under these agreements were deferred, with the cost of the related cattle being adjusted when the contracts are settled. At November 30, 2003, the Company had no open positions. 5. Income taxes: The provision for income taxes for the quarters ended November 30, 2003 and 2002 is summarized as follows: Three Months Ended November 30, 003 2002 (Unaudited) (Unaudited) _______________________________ Current: Federal income tax $ 281 $ 55 State income tax 30 9 __________ __________ 311 64 __________ __________ Deferred: Federal income tax (258) 23 State income tax (28) 4 __________ __________ (286) 27 __________ __________ Total provision for income taxes $ 25 $ 91 __________ __________ __________ __________ The Internal Revenue Service has begun its examination of the Company tax returns for the years ended August 31, 2000, 2001 and 2002, and Agri tax returns for calendar years 2000, 2001 and 2002. Any adjustments resulting from the examination will be currently due and payable. No adjustments have been proposed to date. 6. Indebtedness: The Company has financing agreements with commercial banks that permit the Company to borrow up to $54.0 million. Financing agreements allowing the Company to borrow up to $41.0 million are 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 million to be paid in equal principal installments over five years with interest to be paid quarterly. The outstanding debt under these agreements was $43.3 million and $41.0 million at November 30 and August 31, 2003 respectively. In March 1999, the Company mortgaged 7,680 acres for $19 million in connection with a $22.5 million acquisition of producing citrus and sugarcane operations. The total long-term portion of debt at November 30, 2003 and August 31, 2003 was $53.3 million and $54.1 million respectively. Maturities of the indebtedness of the Company over the next five years are as follows : 2004- $3,321; 2005- $36,260; 2006- $3,312; 2007- $3,315; 2008- $1,318; and $9,071 thereafter. Interest cost expensed and capitalized during the three months ended November 30, 2003 and 2002 was as follows: 2003 2002 ________ ________ Interest expensed $ 488 $ 541 Interest capitalized 66 60 ________ ________ Total interest cost $ 554 $ 601 ________ ________ ________ ________ 7. Other non-current liability: Alico formed a wholly owned insurance subsidiary, Agri Insurance Company, Ltd. (Bermuda) ("Agri") in June of 2000. Agri was formed in response to the lack of insurance availability, both in the traditional commercial insurance markets and governmental sponsored insurance programs, suitable to provide coverages for the increasing number and potential severity of agricultural related events. Such events include citrus canker, crop diseases, livestock related maladies and weather. Alico's goal included not only prefunding its potential exposures related to the aforementioned events, but also to attempt to attract new underwriting capital if it is successful in profitably underwriting its own potential risks as well as similar risks of its historic business partners. Alico primarily utilized its inventory of land and additional contributed capital to bolster the underwriting capacity of Agri. As Agri has converted certain of the assets contributed by Alico to cash, book and tax differences have arisen resulting from differing viewpoints related to the tax treatment of insurance companies for both federal and state tax purposes. Due to the historic nature of the primary assets contributed as capital to Agri and the timing of the sales of certain of those assets by Agri, management has decided to record a contingent liability, providing for potential differences in the tax treatment of sales of Agri's assets. Management's decision has been influenced by perceived changes in the regulatory environment. 8. Dividends: On October 7, 2003 the Company declared a dividend of $.60 per share, which was paid on October 31, 2003. 9. Disclosures about reportable segments: Alico, Inc. has three reportable segments: citrus, sugarcane, and ranching. The commodities produced by these segments are sold to wholesalers and processors who prepare the products for consumption. The Company's operations are located in Florida. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Alico, Inc. evaluates performance based on profit or loss from operations before income taxes. Alico, Inc.'s reportable segments are strategic business units that offer different products. They are managed separately because each segment requires different management techniques, knowledge and skills. The following table presents information for each of the Company's operating segments as of and for the three months ended November 30, 2003: ____________________________________________________________ Consolidated Citrus Sugarcane Ranch Other* Total ____________________________________________________________ Revenue $ 1,354 2,591 3,344 1,630 8,919 Costs and expenses 2,254 2,107 2,620 1,864 8,845 Depreciation and amortization 603 535 356 81 1,575 Segment profit (loss) (900) 484 724 (234) 74 Segment assets 52,972 50,164 23,630 79,692 206,458 The following table presents information for each of the Company's operating segments as of and for the three months ended November 30, 2002: ____________________________________________________________ Consolidated Citrus Sugarcane Ranch Other* Total ____________________________________________________________ Revenue $ 1,621 2,748 2,118 1,768 8,255 Costs and expenses 1,580 2,224 2,214 1,888 7,906 Depreciation and amortization 593 592 364 136 1,685 Segment profit 41 524 (96) (120) 349 Segment assets 53,388 50,461 24,169 64,494 192,512 *Consists of rents, investments, real estate activities and other such items of a general corporate nature. 10. Stock Option Plan On November 3, 1998, the Company adopted the Alico, Inc., Incentive Equity Plan (The Plan) pursuant to which the Board of Directors of the Company may grant options, stock appreciation rights, and/or restricted stock to certain directors and employees. The Plan authorizes grants of shares or options to purchase up to 650,000 shares of authorized but unissued common stock. Stock options granted have a strike price and vesting schedules which are at the discretion of the Board of Directors and determined on the effective date of the grant. The strike price cannot be less than 55% of the market price. On November 30, 2003, there were 113,883 shares exercisable and 347,225 shares available for grant. Weighted Weighted average average remaining exercise contractual Options price Life (in years) _______ _________ _______________ 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 _______________ Granted 65,081 15.34 _______________ Exercised 35,518 15.57 _______ _________ Balance outstanding, November 30, 2003 178,964 15.38 _______ _________ _______ _________ Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS 123, the Company's net income would have changed to the proforma amounts indicated below (in thousands): Three months ended November 30, 2003 2002 _______ _______ Net income as reported $ 49 $ 258 Proforma net income $ 63 $ 256 Basic earnings per share reported $ .01 $ .04 Proforma basic earnings per share $ .01 $ .04 11. Future Application of Accounting Standards 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 enterprise obtains an interest after that date, and for variable interest entities created before that date, the provisions are effective for reporting periods beginning after December 31, 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. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. LIQUIDITY AND CAPITAL RESOURCES: Working capital decreased to $74.9 million at November 30, 2003, down from $79.5 million at August 31, 2003. As of November 30, 2003, the Company had cash and cash investments of $7.2 million compared to $16.4 million at August 31, 2003. Marketable securities increased to $44.7 million from $38.8 million during the same period. The ratio of current assets to current liabilities increased to 10.72 to 1 at November 30, 2003 up from 8.41 to 1 at August 31, 2003. Total assets decreased by $6.2 million to $206.5 million at November 30, 2003, compared to $212.7 million at August 31, 2003. Management believes that the Company will be able to meet its working capital requirements for the foreseeable future with internally generated funds. In addition, the Company has credit commitments which provide for revolving credit of up to $54.0 million, of which $10.7 million was available for the Company's general use at November 30, 2003 (see Note 6 to condensed consolidated financial statements). RESULTS OF OPERATIONS: The basic business of the Company is agriculture, which is of a seasonal nature and is subject to the influence of natural phenomena and wide price fluctuations. The results of operations for the stated periods are not necessarily indicative of results to be expected for the full year. Net income for the three months ending November 30, 2003 decreased by $209 thousand when compared to the first quarter of the prior year. This was primarily due to a decrease in profit from bulk real estate sales for the quarter ended November 30, 2003 when compared to the quarter ended November 30, 2002. No bulk real estate sales occurred in the first quarter of fiscal 2004, while a profit of $451 thousand was earned from bulk real estate sales during the first quarter of fiscal 2003. Income from operations increased to $33 thousand for the first quarter of fiscal 2004 from $19 thousand for the first quarter of fiscal 2003. The increase was primarily due to an increase in earnings from rock and sand product sales. Earnings from agricultural operations decreased when compared to the first quarter of fiscal 2003 ($308 thousand vs. $469 thousand for the first three months of fiscal 2004 and 2003, respectively). Citrus ______ The Citrus division recorded a loss of $900 thousand for the first quarter of fiscal 2004, compared to $41 thousand profit during the first quarter of fiscal 2003. Recognition of revenue from the prior year's crop totaled $174 thousand in fiscal 2003 vs. $193 thousand in the first quarter of fiscal 2003 (see Note 1 to Condensed Consolidated Financial Statements). The current year Florida orange crop has been forecasted to be the largest on record. Accordingly, citrus prices have declined. In light of this, the Company recorded a valuation allowance of $722 thousand for its unharvested fruit crop on trees at November 30, 2003. Sugarcane _________ Sugarcane earnings were $484 thousand for the first quarter of fiscal 2004, compared to $524 thousand during the first quarter of fiscal 2003. Less acres were harvested during the first quarter of fiscal 2004 than the first quarter of fiscal 2003, and was the primary reason for the decline. Ranching ________ Ranch earnings increased during the first quarter of 2004 when compared to the same period a year ago ($724 thousand vs. ($96 thousand) for the three months ended November 30, 2003 and 2002, respectively). The number of cattle sold increased by 28% during the first quarter of fiscal 2004 compared to the same period in 2003. Additionally, cattle prices increased 34% when compared to the same period a year ago. During December 2003, a cow in Washington State tested positive for bovine spongiform encephalopathy (BSE a/k/a "mad cow disease"). This has caused some foreign countries to ban beef imports from the United States. Although there have been price declines since the BSE discovery, the incident appears to be isolated and beef prices are still currently at prior year levels. The Company has no reason to believe its beef herd is subject to any risk from this disease. 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. The Company formed 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 under- write previously uninsurable risk related to catastrophic crop and other losses. The coverages currently underwritten by Agri will indemnify insureds 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 were transferred during fiscal 2001. Agri under- wrote a limited amount of coverage for Ben Hill Griffin, Inc. during fiscal years 2001 - 2004, and in August 2002, Agri 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. Due to Agri's limited operating history, 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. During the third quarter of fiscal 2003, the Company entered into a limited partnership with Agri 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. 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. 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. During the second quarter of fiscal 2004, the Company, through Alico-Agri, completed the sale of 244 acres in Lee County, Florida. The sales price was $30.9 million and will result in a gain of $18.2 million, of which $2.1 million will be recorded in the second quarter of fiscal 2004, while the remainder is expected to be recognized by August 31, 2004. Off Balance Sheet arrangements ______________________________ The Company has no off balance sheet arrangements that have, or are reasonably likely to have any material impact on the Company's current or future financial condition, revenues, or results of operations. Disclosure of Contractual Obligations _____________________________________ Contractual obligations of the Company are outlined below: November 30, 2003 (in thousands) Less than 1-3 3-5 5+ Contractual obligations Total 1 year years years years Long-term debt $56,597 $3,321 $39,572 $4,633 $9,071 Leases (Operating & capital) - - - - - Purchase obligations (donation) 3,012 784 1,458 770 - Other long-term liabilities 19,704 - 9,931 180 9,593 August 31, 2003 (in thousands) Less than 1-3 3-5 5+ Contractual obligations Total 1 year years years years Long-term debt $57,448 $3,321 $39,576 $4,633 $9,918 Leases (Operating & capital) - - - - - Purchase obligations (donation) 2,983 754 1,459 770 - Other long-term liabilities 19,488 - 9,820 180 9,488 Critical Accounting Policies and Estimates __________________________________________ The preparation of the Company's financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, management evaluates the estimates and assumptions based upon historical experience and various other factors and circumstances. Management believes that the estimates and assumptions are reasonable in the circumstances; however, actual results may vary from these estimates and assumptions under different future circumstances. The following critical accounting policies that affect the more significant judgments and estimates used in the preparation of our consolidated financial statements are discussed below. Alico records inventory at the lower of cost or market. Management regularly assesses estimated inventory valuations based on current and forecasted usage of the related commodity and any other relevant factors that affect the net realizable value. Based on fruit buyers' and processors' advances to growers, stated cash and futures markets combined experience in the industry, management reviews the reasonableness of the citrus revenue accrual. Adjustments are made throughout the year to these estimates as relevant information regarding the citrus market becomes available. Fluctuation in the market prices for citrus fruit has caused the Company to recognize additional revenue from the prior year's crop totaling $174 thousand during fiscal 2004 and $193 thousand in fiscal 2003. In accordance with Statement of Position 85-3 "Accounting by Agricultural Producers and Agricultural Cooperatives", the cost of growing crops (citrus and sugarcane) are capitalized into inventory until the time of harvest. Once a given crop is harvested, the related inventoried costs are recognized as cost of sales to provide an appropriate matching of costs incurred with the related revenue earned. The inventoried cost of each crop is then compared with the estimated net realizable value (NRV) of the crop and any costs in excess of the NRV are immediately recognized as cost of sales. Cautionary Statement ____________________ Readers should note, in particular, that this Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that involve substantial risks and uncertainties. When used in this document, or in the documents incorporated by reference herein, the words "anticipate", "believe", "estimate", "may", "intend" and other words of similar meaning, are likely to address the Company's growth strategy, financial results and/or product development programs. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward looking statements contained herein. The considerations listed herein represent certain important factors the Company believes could cause such results to differ. These considerations are not intended to represent a complete list of the general or specific risks that may effect the Company. It should be recognized that other risks, including general economic factors and expansion strategies, may be significant, presently or in the future, and the risks set forth herein may affect the Company to a greater extent than indicated. ITEM 3. Quantitative and Qualitative Disclosures about Market Risk No changes ITEM 4. Controls and Procedures Evaluation of disclosure controls and procedures The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed within 90 days of the filing date of this report, the Chief Executive and Chief Financial officers of the Company concluded that the Company's disclosure controls and procedures were adequate. Changes in internal controls The Company made no significant changes in its internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation of those controls by the Chief Executive and Chief Financial officers. FORM 10-Q PART II. OTHER INFORMATION ITEMS 1-5 have been omitted as there are no items to report during this interim period. ITEM 6. Exhibits and reports on Form 8-K. (a) Exhibits: Exhibit 11. Computation of Weighted Average Shares Outstanding at November 30, 2003. Exhibit 99. Accountant's Review Report. Exhibit 99.1 Rule 13a-14(a) certifications. Exhibit 99.2 Section 1350 certifications (b) Reports on Form 8-K. January 8, 2004 announcing real estate sale by Alico-Agri 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 13, 2004 W. Bernard Lester Date President Chief Operating Officer (Signature) January 13, 2004 L. Craig Simmons Date Vice President Chief Financial Officer (Signature) January 13, 2004 Patrick W. Murphy Date Controller (Signature) EXHIBIT 11 ALICO, INC. Computation of Weighted Average Shares Outstanding and earnings per share as of November 30, 2003: Date Shares Outstanding Days Weight 09/01/03 - 7,116,070 3 21,348,210 09/03/03 4,461 7,120,531 1 7,120,531 09/04/03 3,206 7,123,737 - 09/04/03 2,000 7,125,737 4 28,502,948 09/08/03 4,529 7,130,266 - 09/08/03 2,000 7,132,266 - 09/08/03 2,181 7,134,447 1 7,134,447 09/09/03 4,000 7,138,447 14 99,938,258 09/23/03 2,000 7,140,447 48 342,741,456 11/10/03 4,940 7,145,387 7 50,017,709 11/17/03 1,712 7,147,099 3 21,441,297 11/20/03 2,000 7,149,099 - 11/20/03 2,000 7,151,099 6 42,906,594 11/26/03 539 7,151,638 4 28,606,552 123,811 7,140,198 91 649,758,002 Average outstanding shares (Total weight / days) 7,140,198 ___________ ___________ Net income for the three months ended November 30, 2003 $ 49,000 ___________ ___________ Earnings per share (Net income / Average outstanding shares) $.01 ___________ ___________ Average outstanding shares (non diluted) 7,140,198 Dilutive securities (stock options) 113,883 __________ Diluted shares 7,254,081 ___________ ___________ Fully diluted earnings per share $.01 (Net income / diluted shares) ___________ ___________ EXHIBIT 99 INDEPENDENT ACCOUNTANT'S REVIEW REPORT ______________________________________ The Stockholders and Board of Directors Alico, Inc.: We have reviewed the condensed consolidated balance sheet of Alico, Inc. and subsidiaries as of November 30, 2003, and the related condensed consolidated statements of operations for the three month periods ended November 30, 2003 and 2002, and the condensed consolidated statements of cash flows for the three month periods ended November 30, 2003 and 2002. These condensed consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical review procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Alico, Inc. and subsidiaries as of August 31, 2003 and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended (not presented herein); and in our report dated October 10, 2003 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, 2003, 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 December 31, 2003 EXHIBIT 99.1 CERTIFICATION I, Ben Hill Griffin, III certify that; 1. I have reviewed this quarterly report on Form 10-Q of Alico, Inc. (Alico), 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of Alico as of, and for, the periods presented in this quarterly report; 4. Alico's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for Alico and we have: a) designed such disclosure controls and procedures to ensure that material information relating to Alico, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of Alico's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effective- ness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. Alico's other certifying officer and I have disclosed, based on our most recent evaluation to Alico's auditors and audit committee of Alico's Board of Directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect Alico's ability to record, process, summarize and report financial data and have identified for Alico's auditors any material weakness in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in Alico's internal controls; and 6. Alico's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: January 13, 2004 /S/ BEN HILL GRIFFIN, III Ben Hill Griffin, III Chairman and Chief Executive Officer CERTIFICATION I, L. Craig Simmons certify that; 1. I have reviewed this quarterly report on Form 10-Q of Alico, Inc. (Alico), 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of Alico as of, and for, the periods presented in this quarterly report; 4. Alico's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for Alico and we have: a) designed such disclosure controls and procedures to ensure that material information relating to Alico, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of Alico's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. Alico's other certifying officer and I have disclosed, based on our most recent evaluation to Alico's auditors and audit committee of Alico's Board of Directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect Alico's ability to record, process, summarize and report financial data and have identified for Alico's auditors any material weakness in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in Alico's internal controls; and 6. Alico's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: January 13, 2004 /S/ L. CRAIG SIMMONS L. Craig Simmons Vice President and Chief Financial Officer EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report of Alico, Inc. (the "Company") on Form 10-Q for the three months ended November 30, 2003 as filed with the Securities and Exchange Commission on January 13, 2004 (the "Form 10-Q"), I, Ben Hill Griffin, III, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: January 13, 2004 Ben Hill Griffin, III Chief Executive Officer CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report of Alico, Inc. (the "Company") on Form 10-Q for the three months ended November 30, 2003 as filed with the Securities and Exchange Commission on January 13, 2004 (the "Form 10-Q"), I, L. Craig Simmons, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: January 13, 2004 L. Craig Simmons Chief Financial Officer