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 six months ended February 28, 2002. 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 7,073,466 shares of common stock, par value $1.00 per share, outstanding at April 15, 2002.
PART I. FINANCIAL INFORMATION Item 1. Financial Statements ALICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited - See Accountants' Review Report) Three Months Ended Six Months Ended Feb. 28, 2002 Feb. 28, 2001 Feb. 28, 2002 Feb. 28, 2001 _____________ _____________ _____________ ______________ Revenue: Citrus $ 7,688,526 $10,421,372 $ 9,194,524 $ 11,516,991 Sugarcane 6,978,177 6,303,311 9,233,440 9,241,521 Ranch 2,012,991 951,472 5,602,551 5,751,244 Rock products and sand 403,757 412,213 858,554 833,858 Oil lease and land rentals 169,565 167,860 338,990 372,600 Forest products 37,096 576 141,580 28,283 Retail land sales - 47,500 39,450 62,500 ___________ __________ ___________ ___________ Total revenue 17,290,112 18,304,304 25,409,089 27,806,997 ___________ ___________ ____________ ____________ Cost of sales: Citrus production, harvesting and marketing 7,348,174 9,424,949 8,833,231 10,260,103 Sugarcane production and harvesting 5,497,042 5,056,250 7,351,884 7,292,628 Ranch 1,857,346 918,405 4,867,789 5,233,684 Retail land sales 12,884 50,939 46,566 74,044 ___________ __________ ___________ ___________ Total cost of sales 14,715,446 15,450,543 21,099,470 22,860,459 ___________ __________ ___________ ___________ Gross Profit 2,574,666 2,853,761 4,309,619 4,946,538 General and administration expenses 5,874,340 1,165,033 7,240,980 2,046,407 ___________ __________ ___________ ___________ Income (loss) from operations (3,299,674) 1,688,728 (2,931,361) 2,900,131 Other income (expenses): Profit on sales of real estate 8,547,447 944,895 11,326,787 1,049,916 Interest and investment income 336,087 229,659 833,566 731,581 Interest expense (531,376) (979,890) (1,045,619) (1,708,700) Other (41,801) 51,251 107,925 141,856 ___________ ___________ ____________ ____________ Total other income, net 8,310,357 245,915 11,222,659 214,653 ___________ ___________ ____________ ____________ Income before income taxes 5,010,683 1,934,643 8,291,298 3,114,784 Provision for income taxes 294,336 643,777 571,299 1,019,174 ___________ ___________ ____________ ____________ Net income $ 4,716,347 $ 1,290,866 $ 7,719,999 $ 2,095,610 ___________ ___________ ____________ ____________ ___________ ___________ ____________ ____________ Weighted average number of shares outstanding 7,060,928 7,027,827 7,060,928 7,027,827 ___________ ___________ ____________ ____________ ___________ ___________ ____________ ____________ Per share amounts: Basic $ .67 $ .18 $ 1.09 $ .30 Fully diluted $ .66 $ .18 $ 1.08 $ .30 Dividends $ - $ - $ 1.00 $ 1.00 See accompanying Notes to Condensed Consolidated Financial Statements.
ALICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (See Accountants' Review Report) February 28, 2002 August 31, 2001 ___(Unaudited)_____________________ ASSETS Current assets: Cash and cash investments $ 8,928,099 $ 6,225,088 Marketable securities 19,707,554 18,726,723 Accounts receivable 8,289,452 10,153,205 Mortgage and notes receivable 2,491,682 2,482,454 Income taxes refundable 290,881 - Inventories 19,450,674 23,246,609 Other current assets 782,773 510,760 ____________ ____________ Total current assets 59,941,115 61,344,839 Notes receivable, non-current 5,126,135 5,112,309 Land held for development and sale 16,345,903 7,931,544 Investments 1,288,659 1,170,898 Property, buildings and equipment 142,392,239 138,352,300 Less: Accumulated depreciation (37,450,205) (34,878,310) ____________ ____________ Total assets $187,643,846 $179,033,580 ____________ ____________ ____________ ____________ ALICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (See Accountants' Review Report) (Continued) February 28, 2002 August 31, 2001 LIABILITIES ___(Unaudited)_______________________ Current liabilities: Accounts payable $ 1,911,758 $ 1,810,094 Due to profit sharing plan - 443,942 Accrued ad valorem taxes 237,545 1,383,111 Current portion of notes payable 3,301,146 1,301,146 Accrued expenses 1,434,991 1,394,940 Income taxes payable - 22,670 Deferred revenue 211,607 52,987 Deferred income taxes 2,044,357 1,234,697 ____________ ____________ Total current liabilities 9,141,404 7,643,587 Notes payable 50,167,793 46,704,954 Deferred income taxes 11,199,387 11,909,252 Accrued donation 2,917,819 - Deferred retirement benefits 325,879 150,429 ____________ ____________ Total liabilities 73,752,282 66,408,222 ____________ ____________ STOCKHOLDERS' EQUITY Common stock 7,069,757 7,044,513 Additional paid in capital 1,125,994 331,617 Accumulated other comprehensive income 656,702 871,077 Retained earnings 105,039,111 104,378,151 ____________ ____________ Total stockholders' equity 113,891,564 112,625,358 ____________ ____________ Total liabilities and stockholders' equity $187,643,846 $179,033,580 ____________ ____________ ____________ ____________ See accompanying Notes to Condensed Consolidated Financial Statements.
ALICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (See Accountants' Review Report) Accumulated Common Stock Other Additional Shares Retained Comprehensive Paid in Issued Amount Earnings Income Capital Total _________ __________ ___________ _______ __________ ____________ Balances, August 31, 2000 7,027,827 $7,027,827 $95,339,847 $1,159,445 $ 17,885 $103,545,004 _______________ Comprehensive income: Net income for the year ended August 31, 2001 - - 16,066,131 - - 16,066,131 Unrealized gains on securities, net of taxes and reclassification adjustment - - - (288,368) - (288,368) ___________ Total comprehensive income 15,777,763 Dividends paid - - (7,027,827) - - (7,027,827) Stock options exercised 16,686 16,686 - - 227,264 243,950 Stock based compensation - - - - 86,468 86,468 _________ __________ ___________ ________ ___________ Balances, August 31, 2001 7,044,513 $7,044,513 $104,378,151 $ 871,077 $331,617 $112,625,358 _______________ Comprehensive income: Net income for the six months ended February 28, 2002 - - 7,719,999 - - 7,719,999 Unrealized gains on securities, net of taxes and reclassification adjustment - - - (214,375) - (214,375) ___________ Total comprehensive income 7,505,624 Dividends paid - - (7,059,039) - - (7,059,039) Stock options exercised 25,244 25,244 - - 348,949 374,193 Stock based compensation - - - - 445,428 445,428 _________ __________ ___________ ________ ___________ Balances, February 28, 2002 (Unaudited) 7,069,757 $7,069,757 $105,039,111 $ 656,702 $1,125,994 $113,891,564 _________ __________ ___________ ________ ___________ _________ __________ ___________ ________ ___________ February 28, August 31, 2002 2001 Disclosure of reclassification amount: _(Unaudited) ___________ Unrealized holding gains (losses) arising during the period $ 134,187 $ (206,715) Less: reclassification adjustment for gains (losses) included in net income 348,562 81,653 _________ __________ Net unrealized gains (losses) on securities $(214,375) $ (288,368) _________ __________ _________ __________ See accompanying Notes to Condensed Consolidated Financial Statements.
ALICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited - See Accountants' Review Report) Six Months Ended February 28, 2002 2001 _______________________________ Cash flows from operating activities: Net income $ 7,719,999 $2,095,610 Adjustments to reconcile net income to cash provided from (used for) operating activities: Depreciation and amortization 3,544,473 3,470,493 Contribution expense accrued 3,581,800 - Net decrease in current assets and liabilities 5,140,394 1,528,714 Deferred income taxes 216,124 (628,525) Gain on sales of real estate (11,326,787) (1,049,916) Other 1,190,617 (318,693) __________ __________ Cash provided from operating activities 10,066,620 5,097,683 __________ __________ Cash flows from (used for) investing activities: Notes receivable issuances (24,800) (312,300) Notes receivable collections 1,746 57,894 Purchases of real estate (9,946,814) - Purchases of property and equipment (5,062,659) (4,719,030) Proceeds from sales of real estate 12,802,198 704,220 Proceeds from sales of property and equipment 367,896 880,351 Purchases of marketable securities (3,540,773) (1,558,796) Proceeds from sales of marketable securities 2,553,615 1,090,519 __________ __________ Cash used for investing activities (2,849,591) (3,857,142) __________ __________ Cash flows from (used for) financing activities: Repayment of bank loan (35,690,325) (24,038,916) Proceeds from bank loan 38,235,346 30,518,827 Dividends paid (7,059,039) (7,027,827) __________ __________ Cash used for financing activities (4,514,018) (547,916) __________ __________ Increase in cash and cash investments 2,703,011 692,625 __________ __________ Cash at beginning of period 6,225,088 1,796,428 __________ _________ Cash at end of period $ 8,928,099 $ 2,489,053 __________ __________ __________ __________ Supplemental disclosures of cash flow information: Cash paid for interest, net of amount capitalized $1,202,643 $1,857,944 __________ __________ __________ __________ Cash paid for income taxes $ 925,600 $4,291,269 __________ __________ __________ __________ Non-cash investing and financing activities: Fair value adjustments to securities available for sale $ (330,704) $ (59,557) __________ __________ __________ __________ Income tax effect related to fair value adjustment $ 116,329 $ 22,411 __________ __________ __________ __________ Reclassification of breeding herd to property & equipment $ 515,398 $ 370,192 __________ __________ __________ __________ See accompanying Notes to Condensed Consolidated Financial Statements.
ALICO, INC. AND SUBSIDIARIES 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. and its wholly owned subsidiaries, Saddlebag Lake Resorts, Inc. (Saddlebag) and Agri-Insurance Company, Ltd. (Agri), 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, 2001. 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 February 28, 2002 and August 31, 2001 and the consolidated results of operations and cash flows for the three and six months ended February 28, 2002 and February 28, 2001. 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. Certain items from 2001 have been reclassified to conform to 2002 presentation. The Company accounts for long-lived assets in accordance with the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets for Long-Lived Assets to be Disposed of". This Statement requires the long- lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. 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 February 28, 2002 and August 31, 2001 are as follows:
February 28, August 31, 2002 2001 ____________ __________ Mortgage notes receivable on retail land sales $ 239,784 $ 241,852 Mortgage notes receivable on bulk land sales 7,143,033 7,052,911 Other notes receivable 235,000 300,000 ____________ __________ Total mortgage notes receivable $ 7,617,817 $ 7,594,763 Less current portion 2,491,682 2,482,454 ____________ __________ Non-current portion $ 5,126,135 $5,112,309 ____________ __________ ____________ __________
In July 2000, the Company received a mortgage note in exchange for land sold. The note totaled $9,540,000 and principal payments of $2,385,000 are due annually on July 14, bearing interest at the LIBOR, over four years.
4. Inventories: A summary of the Company's inventories (in thousands) is shown below: February 28, August 31, 2002 2001 ____________ ___________ Unharvested fruit crop on trees $ 9,363,003 $ 9,626,006 Unharvested sugarcane 2,641,746 5,386,633 Beef cattle 7,237,247 8,075,729 Sod 208,678 158,241 ____________ ___________ Total inventories $ 19,450,674 $23,246,609 ____________ ___________ ____________ ___________
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 February 28, 2002, the Company had no open positions. 5. Income taxes: The provision for income taxes for the quarters and six months ended February 28, 2002 and February 28, 2001 is summarized as follows:
Three Months Ended Six Months Ended Feb. 28, 2002 Feb. 28, 2001 Feb. 28, 2002 Feb. 28, 2001 _____________ _____________ _____________ ______________ Current: Federal income tax $ (389,139) $ 842,581 $ 308,250 $1,395,355 State income tax (72,454) 163,895 46,925 252,344 _____________ _____________ _____________ ______________ (461,593) 1,006,476 355,175 1,647,699 _____________ _____________ _____________ ______________ Deferred: Federal income tax 621,989 (308,573) 153,867 (535,546) State income tax 133,940 (54,126) 62,257 (92,979) _____________ _____________ _____________ ______________ 755,929 (362,699) 216,124 (628,525) _____________ _____________ _____________ ______________ Total provision for income taxes $ 294,336 $ 643,777 $ 571,299 $1,019,174 _____________ _____________ _____________ ______________ _____________ _____________ _____________ ______________
6. Indebtedness: The Company has financing agreements with commercial banks that permit the Company to borrow up to $54 million. Financing agreements allowing the Company to borrow up to $41 million are due in 2003 and up to $3 million are 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. 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 February 28, 2002 and August 31, 2001 was $50,167,793 and $46,704,954, respectively. Maturities of the indebtedness of the Company over the next five years are as follows: 2002- $3,301,146; 2003- $31,168,559; 2004- $3,306,142; 2005- $3,308,905; 2006- $3,311,862; thereafter $9,072,325. Interest cost expensed and capitalized during the six months ended February 28, 2002 and February 28, 2001 was as follows: 2002 2001 ________ ________ Interest expensed $1,045,619 $1,708,700 Interest capitalized 129,366 109,909 ________ ________ Total interest cost $1,174,985 $1,818,609 ________ ________ ________ ________ 7. Dividends: On October 2, 2001 the Company declared a year-end dividend of $1.00 per share, which was paid on October 26, 2001. 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 six months ended February 28, 2002: ____________________________________________________________ General Consolidated Citrus Sugarcane Ranch Corporate* Total ____________________________________________________________ Revenue $ 9,194,524 9,233,440 5,602,551 13,646,852 37,677,367 Costs and expenses 8,833,231 7,351,884 4,867,789 8,333,165 29,386,069 Depreciation and amortization 1,202,541 1,340,356 755,403 246,173 3,544,473 Segment profit 361,293 1,881,556 734,762 5,313,687 8,291,298 Segment assets 56,168,167 53,447,255 21,697,849 56,330,575 187,643,846 The following table presents information for each of the Company's operating segments as of and for the six months ended February 28, 2001: ____________________________________________________________ General Consolidated Citrus Sugarcane Ranch Corporate* Total ____________________________________________________________ Revenue $ 11,516,991 9,241,521 5,751,244 3,220,594 29,730,350 Costs and expenses 10,260,103 7,292,628 5,233,684 3,829,151 26,615,566 Depreciation and amortization 1,243,000 1,256,219 718,639 252,635 3,470,493 Segment profit 1,256,888 1,948,893 517,560 (608,557) 3,114,784 Segment assets 54,845,676 51,831,962 20,407,345 45,370,653 172,455,636 *Consists of amounts related to forest products sales, rock and sand royalties, oil lease and land rentals, investments, real estate activities and other such items of a general corporate nature. 9. Stock Option Plan On November 3, 1998, the Company adopted the Alico, Inc., Incentive Equity Plan (The Plan) pursuant to which the Board of Directors of the Company may grant options, stock appreciation rights, and/or restricted stock to certain directors and employees. The Plan authorizes grants of shares or options to purchase up to 650,000 shares of authorized but unissued common stock. Stock options granted have 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.
Weighted Weighted average average remaining exercise contractual Shares price life (in years) _______ _________ _______________ Balance outstanding, August 31, 1999 34,700 $ 14.62 10 _______________ Granted 15,042 14.62 _______________ _______ _________ Balance outstanding, August 31, 2000 49,742 14.62 9.3 _______________ Granted 51,074 14.62 _______________ Exercised 16,686 14.62 _______ __________ Balance outstanding, August 31, 2001 84,130 14.62 9.3 _______________ Granted 69,598 15.68 _______________ Exercised 25,244 14.82 _______ __________ Balance outstanding, February 28, 2002 128,484 $ 15.15 9.15 _______ _________ _______________ _______ _________ _______________
On February 28, 2002, there were 128,484 shares exercisable and 479,586 shares available for grant. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. LIQUIDITY AND CAPITAL RESOURCES: Working capital decreased to $50,799,711 at February 28, 2002, down from $53,701,252 at August 31, 2001. As of February 28, 2002, the Company had cash and cash investments of $8,928,099 compared to $6,225,088 at August 31, 2001. Marketable securities increased from $18,726,723 to $19,707,554 during the same period. The ratio of current assets to current liabilities decreased to 6.56 to 1 at February 28, 2002 from 8.03 to 1 at August 31, 2001. The decrease in working capital ($50,799,711 vs. $53,701,252 as of February 28, 2002 and August 31, 2001, respectively) was largely due to the $2,000,000 increase in the current portion of notes payable during the same period. Total assets increased to $187,643,846 at February 28, 2002, compared to $179,033,580 at August 31, 2001. 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 $16.1 million at February 28, 2002. 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 six months ending February 28, 2002 increased by $5,624,389 when compared to the same period a year ago. ($7,719,999 vs. $2,095,610 for the six months ended February 28, 2002 and February 28, 2001, respectively). Net income increased during the three months ended February 28, 2002, compared to the same period a year ago ($4,716,347 vs. $1,290,866). Income before income taxes increased $5,176,514 for the six months ended February 28, 2002, when compared to the same period a year ago. This was primarily due to the increase in earnings from real estate activities ($11,366,237 for the six months ended February 28, 2002 compared to $1,112,416 for the six months ended February 28, 2001). Earnings from agricultural activities decreased from the prior year ($1,977,132 vs. $2,276,551 for the second quarter, and $2,977,611 vs. $3,723,341 during the first six months of fiscal 2002 and 2001, respectively). Citrus ______ Citrus earnings decreased for the second quarter ($340,352 during fiscal 2002 vs. $996,423 during fiscal 2001) and during the six months ended February 28, 2002, when compared to the prior year ($361,293 during the first half of fiscal 2002 vs. $1,256,888 during the same period in fiscal 2001). This is in part the result of the recognition of revenue from the fiscal 2000 fresh fruit crop which was greater than the comparable amount realized in the first quarter of the current year ($185,697 in the second quarter of fiscal 2002, compared to $280,758 in the second quarter of fiscal 2001, see Note 1 to the Notes to Condensed Consolidated Financial Statements). Additionally, producing acreage And boxes produced per acre decreased when compared to the prior year, resulting in higher unit costs for both the boxes harvested and the related pounds of solids. Sugarcane _________ Sugarcane earnings increased for the second quarter ($1,481,135 for fiscal 2002 vs. $1,247,061 for fiscal 2001) but decreased for the six months ended February 28, 2002 ($1,881,556 vs. $1,948,893 for the six months ended February 28, 2001). The number of producing acres are down slightly when compared to the prior year. This factor, combined with the effects of drought conditions early in the growing cycle, has combined to decrease the yield from this years crop. Ranching ________ Ranch earnings increased for both the second quarter ($155,645 vs. $33,067 for the three months ended February 28, 2002 and February 28, 2001, respectively) and for the six months ($734,762 vs. $517,560 for the six months ended February 28, 2002 and February 28, 2001, respectively). Reduced operating expenses for beef are the primary reason for the improvement. Market prices for the second quarter were approximately the same as a year ago, while the number of cattle sold has decreased. Total revenue decreased slightly as a result of the decrease in sales quantity. General Corporate _________________ The Company is continuing its marketing and permitting activities for its land which surrounds the Florida Gulf Coast University site. At February 28, 2002, there were sales contracts in place for more than 5,400 acres of the Lee County, Florida property totaling $146 million. The agreements are at various stages of the due diligence periods with closing dates over the next ten years. The Company announced the formation of Agri-Insurance Company, Ltd. (Agri) a wholly owned subsidiary, during July of 2000. The insurance company was initially capitalized by transferring cash and approximately 3,000 acres of the Lee County property (along with the sales contracts totaling $8 million). Through Agri, the Company expects to be able to underwrite previously uninsurable risk related to catastrophic crop and other losses. Additionally, the insurance company will have access to reinsurance markets, otherwise inaccessible. However, the current Federal Crop Insurance Program does not provide business interruption coverage. The coverages contemplated by Agri would indemnify the insured for the loss of the revenue stream resulting from a catastrophic event that would cause a grove to be replanted. The insurance market is bifurcated into insurers and reinsurers. Reinsurers provide wholesale insurance coverage to the industry. Same specialized reinsurers will only deal with insurance companies. As a result, the only way to access the wholesale insurance market is through the formation of a captive insurance company. Reinsurers provide greater insurance coverage flexibility than can be found in the primary insurance market. To expedite the creation of the capital liquidity necessary to underwrite the Company's exposure to catastrophic losses through land sales, another 5,600 acres was transferred during fiscal 2001. Agri underwrote a limited amount of coverage during fiscal 2001. As Agri gains underwriting experience and increases its liquidity, it will be able to increase its insurance program. During November 2001, Agri began to close on a 2,500 acre, $30 million sale, of which 40 acres were transferred in November and 1,744 acres were transferred by the end of December. However, upon mutual consent 323 acres, representing $9.6 million was released from the contract and retained by Agri for sale at a future date. The remaining 393 acres are scheduled to be transferred by the end of calendar year 2002. The profit from this transaction is included in statement of operations under gain on sales of real estate. Also in December 2001, the Company agreed to donate $5 million to Florida Gulf Coast University for a new athletic complex, scholarships and athletic programs. The agreement calls for $1 million to be donated during the current fiscal year and $800 thousand to be donated each year over the next five years. The donation has been accrued and is included in general and administrative expenses in the statement of operations. During January 2002, the Company acquired 40 acres of Lee County property for $9.5 million. The property is located near one of the interstate highway access ramps to Florida Gulf Coast University and the Southwest Florida International Airport. Critical Accounting Policies and Estimates __________________________________________ The preparation of our 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 our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances. Management believes that our estimates and assumptions are reasonable in the circumstances; however, actual results may vary from these estimates and assumption under different future circumstances. We have identified the following critical accounting policies that affect the more significant judgments and estimates used in the preparation of our consolidated financial statements. 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 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 $185,697 during fiscal 2002 and $280,758 in 2001. In accordance with Statement of Position 85-3 "Accounting by Agricultural Producers and Agricultural Cooperatives", the cost of growing crops (citrus and sugarcane) are capitalized into inventory until the time of harvest. Once a given crop is harvested, the related inventoried costs are recognized as a cost of sale to provide an appropriate matching of costs incurred with the related revenue earned. 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 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 February 28, 2002. (b) Reports on Form 8-K. October 2, 2001 October 9, 2001 December 5, 2001 December 7, 2001 December 7, 2001 December 12, 2001 December 13, 2001 January 7, 2002 January 7, 2002 January 31, 2002 February 25, 2002 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) April 15, 2002 W. Bernard Lester Date President Chief Operating Officer (Signature) April 15, 2002 L. Craig Simmons Date Vice President Chief Financial Officer (Signature) April 15, 2002 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 subsidiaries as of February 28, 2002, and the related condensed consolidated statements of operations for the three-month and six-month periods ended February 28, 2002 and February 28, 2001, the condensed consolidated statements of stockholders' equity for the six-month period February 28, 2002, and the condensed consolidated statements of cash flows for the six-month periods ended February 28, 2002 and February 28, 2001. 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, 2001 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 12, 2001 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, 2001, is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived. s/s KPMG LLP Orlando, Florida April 5, 2002 FORM 10-Q ALICO, INC. Computation of Weighted Average Shares Outstanding as of February 28, 2002: Number of shares outstanding at August 31, 2001 7,044,513 _________ _________ Number of shares outstanding at February 28, 2002 7,069,757 _________ _________ Weighted Average 9/1/01 - 02/28/02 7,060,928 _________ _________ EXHIBIT B