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