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 the nine months ended May 31, 1997.
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 941/675-2966
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 July 14, 1997.
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ALICO, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(See Accountants' Review Report)
(Unaudited) (Unaudited)
Three Months Ended May 31, Nine Months Ended May 31,
1997 1996 1997 1996
_______________________________ _____________________________
Revenue:
Citrus $ 8,526,853 $ 8,721,183 $20,445,952 $20,024,525
Sugarcane 152,949 354,709 4,748,375 5,763,342
Ranch 1,741,367 1,533,122 4,240,827 3,263,385
Rock products and sand 297,382 228,429 908,644 676,065
Oil lease and land rentals 245,444 184,416 532,680 367,909
Forest products 88,305 58,660 160,299 136,080
Profit on sales of real estate 15,311 90,637 11,422,994 187,538
Interest and investment income 353,298 233,763 948,126 845,042
Other 28,881 35,177 87,749 120,973
___________ ___________ ___________ ___________
Total revenue 11,449,790 11,440,096 43,495,646 31,384,859
___________ ___________ ___________ ___________
Cost and expenses:
Citrus production, harvesting and
marketing 5,915,914 5,089,841 16,301,333 14,095,803
Sugarcane production and harvesting - - 4,091,272 4,198,186
Ranch 1,642,271 3,198,471 3,551,749 4,871,301
Real estate expenses 125,349 110,792 355,094 369,646
Interest 73,113 486,524 382,388 796,228
Other, general and administrative 547,708 474,034 1,876,705 1,828,948
___________ ___________ ___________ ___________
Total costs and expenses 8,304,355 9,359,662 26,558,541 26,160,112
___________ ___________ ___________ ___________
Income before income taxes 3,145,435 2,080,434 16,937,105 5,224,747
Provision for income taxes 1,153,420 857,410 6,305,941 1,954,363
___________ ___________ ___________ ___________
Net income 1,992,015 1,223,024 10,631,164 3,270,384
Retained earnings beginning of period 77,678,116 67,701,311 70,093,141 68,113,690
Dividends paid - - (1,054,174) (2,459,739)
___________ ___________ ___________ ___________
Retained earnings end of period $79,670,131 $68,924,335 $79,670,131 $68,924,335
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
Weighted average number of shares outstanding 7,027,827 7,027,827 7,027,827 7,027,827
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
Per share amounts:
Net income $ .28 $ .17 $ 1.51 $ .47
Dividends $ - $ - $ .15 $ .35
See accompanying notes to condensed consolidated financial statements.
ALICO, INC. AND SUBSIDIARY FORM 10-Q
CONDENSED CONSOLIDATED BALANCE SHEETS
(See Accountants' Review Report)
(Unaudited) (Audited)
May 31, 1997 August 31, 1996
_________________ _______________
ASSETS
Current assets:
Cash and cash investments $ 1,382,789 $ 1,428,059
Marketable securities 10,842,691 9,626,025
Accounts and mortgage notes receivable 11,060,914 10,299,983
Inventories 12,372,286 13,284,527
Prepaid expenses 128,637 124,752
Interest receivable 31,515 113,286
____________ ____________
Total current assets 35,818,832 34,876,632
Mortgage notes receivable, non-current 1,032,222 1,531,947
Land held for development and sale 8,116,453 7,777,942
Investments 893,968 1,016,526
Other 34,581 -
Property, buildings and equipment 99,179,290 97,029,453
Less: Accumulated depreciation (29,156,583) (27,728,927)
____________ ____________
Total assets $115,918,763 $114,503,573
____________ ____________
____________ ____________
CONDENSED CONSOLIDATED BALANCE SHEETS
(See Accountants' Review Report)
(Continued)
(Unaudited) (Audited)
May 31, 1997 August 31, 1996
LIABILITIES _________________ _______________
Current liabilities:
Accounts payable $ 1,317,051 $ 1,070,092
Due to profit sharing plan - 223,152
Accrued ad valorem taxes 690,135 1,095,427
Accrued donation (See Note 6) 546,712 1,236,340
Accrued expenses 130,598 142,047
Income taxes payable 2,771,312 190,639
Deferred income taxes 1,001,356 1,157,169
____________ ____________
Total current liabilities 6,457,164 5,114,866
Note payable to bank 10,581,000 20,630,000
Deferred income taxes 11,378,253 11,291,936
Deferred retirement benefits 153,004 84,117
____________ ____________
Total liabilities 28,569,421 37,120,919
____________ ____________
STOCKHOLDERS' EQUITY
Common stock $ 7,027,827 $ 7,027,827
Unrealized gains on marketable securities 651,384 261,686
Retained earnings 79,670,131 70,093,141
____________ ____________
Total stockholders' equity 87,349,342 77,382,654
____________ ____________
Total liabilities and stockholders' equity $115,918,763 $114,503,573
____________ ____________
____________ ____________
See accompanying notes to condensed consolidated financial statements.
ALICO, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(See Accountants' Review Report)
(Unaudited)
Nine Months Ended May 31,
1997 1996
____________________________
Cash flows from operating activities:
Net income $10,631,164 $ 3,270,384
Adjustments to reconcile net income to cash
provided from (used for) operating activities:
Depreciation 3,164,047 3,136,985
Accrued donation (689,628) (397,800)
Net increase (decrease) in current assets and
liabilities 2,741,913 (2,293,604)
Deferred income taxes (304,615) 176,605
Gain on sale of real estate (11,422,994) (187,538)
Other (590,656) (190,355)
___________ ___________
Net cash provided from operating activities 3,529,231 3,514,677
___________ ___________
Cash flows from (used for) investing activities:
Purchases of property and equipment (4,723,303) (4,604,584)
Proceeds from sale of real estate 11,306,136 187,538
Proceeds from sales of property and equipment 604,970 101,830
Purchases of marketable securities (3,605,669) (3,490,568)
Proceeds from sales of marketable securites 3,514,575 2,944,187
___________ ___________
Net cash from (used for) investing activities 7,096,709 (4,861,597)
___________ ___________
Cash flows from (used for) financing activities:
Notes receivable collections 431,964 26,641
Repayment of bank loan (22,243,000) (9,091,000)
Proceeds from bank loan 12,194,000 12,636,000
Dividends paid (1,054,174) (2,459,739)
___________ ___________
Net cash provided from (used for)
financing activities (10,671,210) 1,111,902
___________ ___________
Net decrease in cash and cash investments $ (45,270) $ (235,018)
___________ ___________
___________ ___________
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amount capitalized $ 366,647 $ 444,378
___________ ___________
___________ ___________
Cash paid for income taxes $ 4,029,884 $ 1,785,000
___________ ___________
___________ ___________
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 Alico, Inc. (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, 1996. In the opinion
of Management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of its
consolidated financial position at May 31, 1997 and the consolidated
results of operations for the three and nine months ended May 31,
1997 and May 31, 1996 and cash flows for the nine months then ended.
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 $1,007,211 in 1997 and $1,087,921
in 1996. The results of operations for the stated periods are not
necessarily indicative of results to be expected for the full year.
2. Recognition of revenue for real estate sales
Mortgage notes receivable are recorded under the accrual method of
accounting. Under this method, a sale is not recognized until
payments received, including interest, aggregate 10% of the contract
sales price for residential properties and 20% for commercial properties.
3. Inventories:
A summary of the Company's inventories (in thousands) is shown below:
May 31, August 31,
1997 1996
___________ ___________
Unharvested fruit crop on trees $ 5,133 $ 7,064
Unharvested sugarcane 1,401 2,231
Beef cattle 5,698 3,937
Sod 140 53
_______ _______
Total inventories $12,372 $13,285
_______ _______
_______ _______
FORM 10-Q
4. Income taxes:
The provision for income taxes for the quarters ended May 31, 1997 and May 31, 1996
is summarized as follows:
Three Months Ended May 31, Nine Months Ended May 31,
1997 1996 1997 1996
_______________________________ _____________________________
Current:
Federal income tax $ 841,521 $ 632,889 $5,640,170 $1,503,047
State income tax 139,743 92,841 960,165 233,281
__________ __________ __________ __________
981,264 725,730 6,600,335 1,736,328
__________ __________ __________ __________
Deferred:
Federal income tax 166,693 110,725 (254,853) 188,750
State income tax 5,463 20,955 (39,541) 29,285
__________ __________ __________ __________
172,156 131,680 (294,394) 218,035
__________ __________ __________ __________
Total provision for
income taxes $1,153,420 $ 857,410 $6,305,941 $1,954,363
__________ __________ __________ __________
__________ __________ __________ __________
Following is a reconciliation of the expected income tax expense computed at the U.S. Federal statutory rate
of 34% and 35% and the actual income tax provision for the quarters ended May 31, 1997 and 1996:
Three Months Ended Nine Months Ended
May 31, May 31, May 31, May 31,
1997 1996 1997 1996
_______________________________ _____________________________
Expected income tax $1,138,819 $ 707,348 $5,827,987 $1,776,414
Increase (decrease) resulting
from:
State income taxes, net
of federal benefit 110,363 75,519 611,001 189,658
Nontaxable interest and
dividends (28,655) (35,782) (81,084) (115,886)
Other reconciling items,
net (67,107) 110,325 (51,963) 104,177
__________ __________ __________ __________
Total provision for
income taxes $1,153,420 $ 857,410 $6,305,941 $1,954,363
__________ __________ __________ __________
__________ __________ __________ __________
The Company is currently under examination by the Internal Revenue Service
for the years ended August 31, 1994, 1993, 1992, 1991 and 1990. The adjustments
proposed to date by the Internal Revenue Service would result in approximately
$6.9 million in additional income taxes. When the matter is resolved, any
income taxes due will become currently payable. However, the majority of the
proposed adjustments relate to the timing of recognition of certain income and
expense items already provided for in the Company's deferred tax liability
accounts.
Partial settlements totaling $1,385,043 have been made with the Internal Revenue
Service for the year ended August 31, 1990. The items conceded related to the
timing of items previously expensed. The effect of these payments was to
increase interest expense by $124,784 in April of 1995 and $263,000 in May of
1996. The deferred tax liability was reduced by $260,259 and $737,000 in April
1995 and May 1996, respectively.
5. Indebtedness:
The Company has financing agreements with commercial banks that permit the
Company to borrow up to $30 million. The financing agreements allow the
Company to borrow up to $27,000,000 which is due in January 1998 and up to
$3,000,000 which is due on demand. The total amount of long-term debt under
these agreements at May 31, 1997 and August 31, 1996 was $10,581,000 and
$20,630,000, respectively.
Interest cost expensed and capitalized during the nine months ended May 31,
1997 and May 31, 1996 was as follows:
1997 1996
__________ __________
Interest expensed $ 382,388 $ 796,228
Interest capitalized 450,626 525,867
__________ __________
Total interest cost $ 833,014 $1,322,095
__________ __________
__________ __________
6. Commitment:
During October 1992 the Company entered into an agreement to donate land,
improvements and other items, to the State of Florida, to be used as a site
for a new university. The gift included 975 acres of land, road construction,
engineering and planning services, assistance with utility costs and academic
chairs. The commitment was recorded as a contribution in May 1994 when the
title to the land was transferred. Costs related to road construction have
been accrued and capitalized into land. Other costs will be expensed as
incurred.
7. Accountants' review report:
The accompanying unaudited condensed consolidated financial statements have
been reviewed by the Company's independent auditors in accordance with
standards for such limited reviews established by the American Institute of
Certified Public Accountants. The report of such auditors with respect to
their limited review is attached hereto as Exhibit A.
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES:
Working capital declined slightly to $29,361,668 at May 31, 1997, down from
$29,761,766 at August 31, 1996. As of May 31, 1997, the Company had cash and
cash investments of $1,382,789 compared to $1,428,059 at August 31, 1996.
Marketable securities increased from $9,626,025 to $10,842,691 during the same
period. The ratio of current assets to current liabilities decreased from 6.82
to 1 at August 31, 1996 to 5.55 to 1 at May 31, 1997. Total assets increased by
$1,415,190 from $114,503,573 at August 31, 1996 to $115,918,763 at May 31, 1997.
The working capital decrease ($400,098) is primarily the result of an increase
in income taxes payable ($2,771,312 at May 31, 1997 vs. $190,639 at August 31,
1996). A large real estate sale ($11,500,000 gross price) to the State of
Florida was closed in the second quarter of fiscal 1997, generating a large
portion of the tax liability. The proceeds from the sale were used to reduce
the note payable.
In connection with a financing agreement with commercial banks (See Note 5 under
Notes to Condensed Consolidated Financial Statements), the Company has an unused
availability of funds of approximately $19.4 million at May 31, 1997.
RESULTS OF OPERATIONS:
Net income for the three months ending May 31, 1997 increased by $768,991 over
the third quarter of fiscal 1996, and $7,360,780 over the nine-month period then
ended. Income before income taxes increased $1,065,001 and $11,712,358 for the
three and nine months ended May 31, 1997, respectively, when compared to the
same periods a year ago. The increase in earnings for the quarter was due to
increases in earnings from agricultural activities ($542,282), and lower
interest costs ($413,411). Interest costs decreased as land sale proceeds were
applied to principal balances. The year to date increase in net income is due
to the sale of approximately 21,700 acres of land in Hendry County, Florida,
to the State of Florida for $11.5 million. The pretax gain from the sale
totaled $11,050,174.
Earnings from agriculture increased when compared to the third quarter of the
prior year ($2,862,984 vs. $2,320,702 for the three months ended May 31, 1997
and 1996, respectively). Year to date earnings from agricultural activities
declined when compared to the nine months ended May 31, 1996 ($5,490,800 vs.
$5,885,962 in 1997 and 1996, respectively).
ITEM 2. Management's Discussion
RESULTS OF OPERATIONS (Continued):
Citrus earnings decreased both for the quarter ($2,610,939 during fiscal 1997
vs. $3,631,342 during fiscal 1996) and for the nine months ($4,144,619 during
fiscal 1997 vs. $5,928,722 during fiscal 1996) ended May 31, 1997 when compared
to the prior year. Despite an increase in boxes harvested, lower prices for
citrus products caused a decline in earnings for this division.
Sugarcane earnings were lower for both the quarter ($152,949 during fiscal 1997
vs. $354,709 during fiscal 1996) and for the nine months ended May 31, 1997
($657,103 in 1997 vs. $1,565,156 in 1996) when compared to the prior year.
Fewer tons were harvested due to poor growing conditions caused by weather.
Specifically, we experienced a freeze during February 1996 and drought
conditions during the summer months of the growing season.
Ranch earnings improved substantially during both the quarter and nine months
ended May 31, 1997 when compared to the prior year ($99,096 vs. -$1,665,349 for
the three months ended May 31, 1997 and May 31, 1996, respectively), and
($689,078 vs. -$1,607,916 for the nine months ending May 31, 1997 and May 31,
1996, respectively). Improved prices for beef products, coupled with lower feed
costs, have generated the improvement. During the third quarter of fiscal 1996,
the Company adjusted cattle and sod farming inventories to their net realizable
values. These adjustments totaled approximately $1.2 million and contributed to
the large ranch losses in the prior year.
Construction continues on the new Florida Gulf Coast University, scheduled to
open in August 1997. The Company is continuing its marketing and permit
activities for its land which surrounds the University site.
During November of 1996, the Company announced an agreement with Miromar
Development, Inc. of Montreal, Canada to sell 550 acres of land surrounding the
University site in Lee County for $9.35 million. The contract calls for 25
percent of the purchase price to be paid at closing, with the balance payable
over the next four years. If the sale closes, it will generate a pretax gain
of approximately $8.7 million.
Additionally, the Company announced an option agreement with REJ Group, Inc..
The option agreement permits the acquisition of a minimum 150 acres and a
maximum of 400 acres within the 2,300 acre university village. The potential
pretax gain to Alico, if the option is exercised, would vary from $8.5 million
to $24.5 million, depending on the time at which the option is exercised, and
the total number of acres selected.
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
May 31, 1997.
C. Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K.
None.
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)
July 14, 1997 W. Bernard Lester
Date Exeuctive Vice President
and Chief Operating Officer
(Signature)
July 14, 1997 L. Craig Simmons
Date Vice President and
Chief Financial Officer
(Signature)
July 14, 1997 Patrick W. Murphy
Date Controller
(Signature)
EXHIBIT A
INDEPENDENT ACCOUNTANTS' 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 May 31, 1997, and the related condensed
consolidated statements of operations and retained earnings for the
three-month and nine-month periods ended May 31, 1997 and 1996
and the related condensed consolidated statements of cash flows
for the nine-month periods ended May 31, 1997 and May 31, 1996. 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
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, 1996 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 4, 1996, 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, 1996, is fairly presented, in all material respects,
in relation to the consolidated balance sheet from which it has been derived.
KPMG PEAT MARWICK LLP
(Signature)
Orlando, Florida
July 8, 1997
FORM 10-Q
ALICO, INC.
Computation of Weighted Average Shares Outstanding as of May 31,
1997:
Number of shares outstanding at August 31, 1996 7,027,827
_________
_________
Number of shares outstanding at May 31, 1997 7,027,827
_________
_________
Weighted Average 9/1/96 - 5/31/97 7,027,827
_________
_________
EXHIBIT B