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, 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 January 15, 1998.
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) Three Months Ended November 30, 1997 1996 _______________________________ Revenue: Citrus $ 3,814,858 $ 2,093,471 Sugarcane 1,699,690 1,077,707 Ranch 3,099,678 838,407 Rock products and sand 312,082 345,945 Oil lease and land rentals 159,896 140,338 Forest products 44,491 26,928 Profit on sales of real estate 627,660 23,719 Interest and investment income 295,532 243,596 Other 14,599 21,640 ___________ ___________ Total revenue 10,068,486 4,811,751 ___________ ___________ Cost and expenses: Citrus production, harvesting and marketing 3,443,008 1,789,031 Sugarcane production and harvesting 1,475,296 828,138 Ranch 2,818,387 565,571 Real estate expenses 103,625 113,372 Interest 169,995 248,943 Other, general and administrative 588,048 702,535 ____________ ___________ Total costs and expenses 8,598,359 4,247,590 ____________ ___________ Income before income taxes 1,470,127 564,161 Provision for income taxes 522,789 182,129 ____________ ___________ Net income 947,338 382,032 Retained earnings beginning of period 80,211,659 70,093,141 Dividends paid (4,216,696) (1,054,174) ___________ ___________ Retained earnings end of period 76,942,301 69,420,999 ___________ ___________ Weighted average number of shares outstanding 7,027,827 7,027,827 ___________ ___________ ___________ ___________ Per share amounts: Net income $ .13 $ .05 Dividends $ .60 $ .15 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) November 30, 1997 August 31, 1997 ASSETS Current assets: Cash and cash investments $ 1,281,865 $ 1,459,765 Marketable Securities 12,117,580 11,412,915 Accounts and mortgage notes receivable 8,399,730 8,358,049 Inventories 15,148,090 16,387,128 Other current assets 593,697 269,463 ____________ ____________ Total current assets 37,540,962 37,887,320 Mortgage notes receivable, non-current 542,440 588,860 Land held for development and sale 8,452,124 8,345,116 Investments 938,247 955,779 Property, buildings and equipment 98,200,126 96,709,440 Less: Accumulated depreciation (27,570,024) (26,763,790) ____________ ____________ Total assets $118,103,875 $117,722,725 ____________ ____________ ____________ ____________ CONDENSED CONSOLIDATED BALANCE SHEETS (See Accountants' Review Report) (Continued) (Unaudited) (Audited) November 30, 1997 August 31, 1997 LIABILITIES _________________ _______________ Current liabilities: Accounts payable $ 946,393 $ 1,158,012 Due to profit sharing plan - 230,545 Accrued ad valorem taxes 1,083,539 1,253,053 Accrued road commitment (See Note 6) 123,139 212,075 Accrued expenses 170,697 329,772 Income taxes payable 935,302 934,895 Deferred income taxes 543,110 869,763 ____________ ____________ Total current liabilities 3,802,180 4,988,115 Notes payable to banks 17,356,000 12,856,000 Deferred income taxes 11,927,423 11,712,806 Deferred retirement benefits 1,682 13,259 ____________ ____________ Total liabilities 33,087,285 29,570,180 ____________ ____________ STOCKHOLDERS' EQUITY Common stock $ 7,027,827 $ 7,027,827 Unrealized gains on marketable securities 1,046,462 913,059 Retained earnings 76,942,301 80,211,659 ____________ ____________ Total stockholders' equity 85,016,590 88,152,545 ____________ ____________ Total liabilities and stockholders' equity $118,103,875 117,722,725 ____________ ____________ ____________ ____________ See Accompanying notes to condensed consolidated financial statements.
ALICO, INC. AND SUBSIDIARY FORM 10-Q CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (See Accountants' Review Report) (Unaudited) Three Months Ended November 30, 1997 1996 _______________________________ Cash flows from operating activities: Net income $ 947,338 $ 382,032 Adjustments to reconcile net income to cash provided from (used for) operating activities: Depreciation 1,140,337 1,068,727 Accrued road commitment (88,936) (879) Net decrease in current assets and liabilities 140,986 (2,338,635) Deferred income taxes (192,523) (38,498) Other (945,573) (383,944) __________ __________ Net cash provided from (used for) operating activities 1,001,629 (1,311,197) __________ __________ Cash flows from (used for) investing activities: Purchases of property and equipment (1,833,714) (1,896,769) Proceeds from sales of property and equipment 789,258 230,069 Purchases of marketable securities (994,553) (1,371,101) Proceeds from sales of marketable securites 567,965 1,097,382 __________ __________ Net cash used for investing activities (1,471,044) (1,940,419) __________ __________ Cash flows used for financing activities: Notes receivable collections 8,211 60,262 Repayment of bank loan (5,435,000) (1,950,000) Proceeds from bank loan 9,935,000 5,870,000 Dividends paid (4,216,696) (1,054,174) __________ __________ Net cash provided from financing activities 291,515 2,926,088 __________ __________ Net increase (decrease) in cash and cash investments $ (177,900) $ (325,528) __________ __________ __________ __________ Supplemental disclosures of cash flow information: Cash paid for interest, net of amount capitalized $ 144,670 $ 225,056 __________ __________ __________ __________ Cash paid for income taxes $ 798,000 $ 137,500 __________ __________ __________ __________ 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, 1997. 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, 1997 and August 31, 1997 and the consolidated results of operations and cash flows for the three months ended November 30, 1997 and 1996. 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 $663,413 in 1997 and $370,130 in 1996. The results of operations for the stated periods are not necessarily indicative of results to be expected for the full year. 2. Accounts and mortgage notes receivable: Mortgage notes receivable 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. Inventories: A summary of the Company's inventories (in thousands) is shown below: November 30, August 31, 1997 1997 ____________ __________ Unharvested fruit crop on trees $ 7,211 $ 6,909 Unharvested sugarcane 1,925 2,322 Beef cattle 5,786 6,993 Sod 226 163 _______ _______ Total inventories $15,148 $16,387 _______ _______ _______ _______
4. Income taxes: The provision for income taxes for the quarters ended November 30, 1997 and 1996 is summarized as follows: Three Months Ended November 30, 1997 1996 _______________________________ Current: Federal income tax $ 542,685 $ 186,901 State income tax 94,523 33,727 __________ __________ 637,208 220,628 __________ __________ Deferred: Federal income tax (103,382) (34,785) State income tax (11,037) (3,714) __________ __________ (114,419) (38,499) __________ __________ Total provision for income taxes $ 522,789 $ 182,129 __________ __________ __________ __________ 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, 1997 and 1996: Three Months Ended November 30, 1997 1996 _______________________________ Expected income tax $ 499,843 $ 191,815 Increase (decrease) resulting from: State income taxes, net of federal benefit 53,366 20,479 Nontaxable interest and dividends (25,514) (22,939) Other reconciling items, net (4,906) (7,226) __________ __________ Total provision for income taxes $ 522,789 $ 182,129 __________ __________ __________ __________ The Company is currently under examination by the Internal Revenue Service for the years ended August 31, 1991, 1992, 1993 and 1994. When the examinations are resolved, any income taxes due will become currently payable. However, the majority of the proposed adjustments relate to the timing of certain income and expense items already provided for in the Company's deferred tax liability accounts. Previously the Company had been under audit for the year ended August 31, 1990. A final settlement was reached in August of 1997. Payments totaling approximately $1.4 million resulted in a refund due of approximately $80 thousand. The items settled related to the timing of recognition of certain items previously expensed. The aforementioned payments increased interest expense by $124,784 and $263,000 during the fiscal years ended August 31, 1995 and 1996, respectively. The adjustments proposed to date for the years ended August 31, 1991 and 1992 would potentially result in $3.3 million of additional income tax payments. Management anticipates a settlement regarding these years to occur within the next twelve months. No adjustments have yet been proposed for the years ended August 31, 1993 and 1994. 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 1999 and up to $3,000,000 which is due on demand. The total amount of long-term debt under this agree- ment at November 30, 1997 and August 31, 1997 was $17,356,000 and $12,856,000, respectively. Interest cost expensed and capitalized during the three months ended November 30, 1997 and November 30, 1996 was as follows: 1997 1996 ________ ________ Interest expensed $169,995 $248,943 Interest capitalized 84,803 139,699 ________ ________ Total interest cost $254,798 $388,642 ________ ________ ________ ________ 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. Dividends: On October 7, 1997 the Company declared a year-end dividend of $.15 per share and a special dividend of $.45 per share, which were paid on November 7, 1997. 8. 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 increased to $33,738,782 at November 30, 1997, up from $32,899,205 at August 31, 1997. As of November 30, 1997, the Company had cash and cash investments of $1,281,865 compared to $1,459,765 at August 31, 1997. Marketable securities increased from $11,412,915 to $12,117,580 during the same period. The ratio of current assets to current liabilities increased from 7.60 to 1 at August 31, 1997 to 9.87 to 1 at November 30, 1997. Total assets increased by $381,150 from $117,722,725 at August 31, 1997 to $118,103,875 at November 30, 1997. The working capital increase ($839,577) resulted from an increase in cash provided by operations. 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 $12.6 million at November 30, 1997. RESULTS OF OPERATIONS: Income before income taxes and net income increased $905,966 and $565,306, respectively, during the first quarter of fiscal 1998, when compared to the same period a year ago. The increases were largely due to an increase in earnings from real estate activities ($524,035 for the three months ended November 30, 1997 vs. a loss of ($89,653) for the three months ended November 30, 1996). Additionally, agricultural earnings for the period were slightly higher when compared to the first quarter of fiscal 1997 ($877,535 for the three months ended November 30, 1997 vs. $826,845 for the three months ended November 30, 1996). Citrus earnings increased during the first quarter of fiscal 1998, when compared to the same period last year ($371,850 vs. $304,440). This was due to the recognition of additional revenues from the prior year's crop of $663,413 (see Note 1 to the Condensed Consolidated Financial Statements). Lower market prices for citrus products have been experienced during the first quarter of fiscal year 1998. If this trend continues, it may result in lower earnings for this division. Sugarcane earnings during the first quarter of fiscal 1998 approximated the same period a year ago, ($224,394 vs. $249,569 during the first quarter of fiscal 1998 and 1997, respectively). Total gross tons harvested during fiscal 1998 are expected to increase over those harvested in fiscal 1997, provided growing conditions are not negatively impacted by weather or other uncontrollable events. However, the increase in tonnage for the first quarter was offset by a decrease in sugar content, when compared to the same period a year ago. FORM 10-Q ITEM 2. Management's Discussion RESULTS OF OPERATIONS (Continued): Earnings from ranching activities approximated those of a year ago ($281,291 during the first quarter of fiscal 1998, compared to $272,836 during the first quarter of fiscal 1997). Although more animals have been sold in the current period, prior year sales included a greater number of fully depreciated cows, which typically generate a higher profit margin per head sold. The Company is continuing its marketing and permit activities for its land which surrounds the Florida Gulf Coast University. During November of 1997, 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 could possibly close as early as August of 1998. 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 November 30, 1997. C. Exhibit 27 - Financial Data Schedule. (b) Reports on Form 8-K. December 2, 1997. 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 15, 1998 W. Bernard Lester Date President Chief Operating Officer (Signature) January 15, 1998 L. Craig Simmons Date Vice President Chief Financial Officer (Signature) January 15, 1998 Patrick W. Murphy 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, 1997, and the related condensed consolidated statements of operations and retained earnings for the three-month periods ended November 30, 1997 and 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 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, 1997 and the related consolidated statements of operations, stock- holders' equity and cash flows for the year then ended (not presented herein); and in our report dated October 10, 1997 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, 1997, 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 January 6, 1998 FORM 10-Q ALICO, INC. Computation of Weighted Average Shares Outstanding as of November 30, 1997: Number of shares outstanding at August 31, 1997 7,027,827 _________ _________ Number of shares outstanding at November 30, 1997 7,027,827 _________ _________ Weighted Average 9/1/97 - 11/30/97 7,027,827 _________ _________ EXHIBIT B