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, 1996. 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 13, 1997.
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, 1996 1995 _______________________________ Revenue: Citrus $ 2,093,471 $ 4,170,160 Sugarcane 1,077,707 1,386,324 Ranch 838,407 1,534,571 Rock products and sand 345,945 234,392 Oil lease and land rentals 140,338 71,148 Forest products 26,928 39,450 Profit on sales of real estate 23,719 16,908 Interest and investment income 243,596 351,632 Other 21,640 19,944 ___________ ___________ Total revenue 4,811,751 7,824,529 ___________ ___________ Cost and expenses: Citrus production, harvesting and marketing 1,789,031 3,374,648 Sugarcane production and harvesting 828,138 1,051,472 Ranch 565,571 1,528,916 Real estate expenses 113,372 97,204 Interest 248,943 136,311 Other, general and administrative 702,535 650,587 ____________ ___________ Total costs and expenses 4,247,590 6,839,138 ____________ ___________ Income before income taxes 564,161 985,391 Provision for income taxes 182,129 338,065 ____________ ___________ Net income 382,032 647,326 Retained earnings beginning of period 70,093,141 68,113,690 Dividends paid (1,054,174) (2,459,739) ___________ ___________ Retained earnings end of period 69,420,999 66,301,277 ___________ ___________ Weighted average number of shares outstanding 7,027,827 7,027,827 ___________ ___________ ___________ ___________ Per share amounts: Net income $ .05 $ .09 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) November 30, 1996 August 31, 1996 ASSETS Current assets: Cash and cash investments $ 1,102,531 $ 1,428,059 Marketable Securities 10,347,222 9,626,025 Accounts and mortgage notes receivable 8,997,248 10,299,983 Inventories 15,694,511 13,284,527 Prepaid expenses 469,340 124,752 Interest receivable 110,147 113,286 ____________ ____________ Total current assets 36,720,999 34,876,632 Mortgage notes receivable, non-current 1,496,685 1,531,947 Land held for development and sale 7,889,001 7,777,942 Investments 1,063,184 1,016,526 Other 44,581 - Property, buildings and equipment 98,134,865 97,029,453 Less: Accumulated depreciation (28,292,946) (27,728,927) ____________ ____________ Total assets $117,056,369 $114,503,573 ____________ ____________ ____________ ____________ CONDENSED CONSOLIDATED BALANCE SHEETS (See Accountants' Review Report) (Continued) (Unaudited) (Audited) November 30, 1996 August 31, 1996 LIABILITIES _________________ _______________ Current liabilities: Accounts payable $ 1,210,333 $ 1,070,092 Due to profit sharing plan - 223,152 Accrued ad valorem taxes - 1,095,427 Accrued donation (See Note 6) 1,235,461 1,236,340 Accrued expenses 159,684 142,047 Income taxes payable 273,767 190,639 Deferred income taxes 212,080 1,157,169 Note payable to bank - current portion 2,550,000 - ____________ ____________ Total current liabilities 5,641,325 5,114,866 Note payable to bank 22,000,000 20,630,000 Deferred income taxes 12,363,003 11,291,936 Deferred retirement benefits 68,918 84,117 ____________ ____________ Total liabilities 40,073,246 37,120,919 ____________ ____________ STOCKHOLDERS' EQUITY Common stock $ 7,027,827 $ 7,027,827 Unrealized gains on marketable securities 534,297 261,686 Retained earnings 69,420,999 70,093,141 ____________ ____________ Total stockholders' equity 76,983,123 77,382,654 ____________ ____________ Total liabilities and stockholders' equity $117,056,369 $114,503,573 ____________ ____________ ____________ ____________ 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, 1996 1995 _______________________________ Cash flows from operating activities: Net income $ 382,032 $ 647,326 Adjustments to reconcile net income to cash provided from (used for) operating activities: Depreciation 1,068,727 1,042,544 Accrued donation (879) (98,397) Net decrease in current assets and liabilities (2,338,635) (563,878) Deferred income taxes (38,498) (88,159) Other (383,944) (497,759) __________ __________ Net cash provided from (used for) operating activities (1,311,197) 441,677 __________ __________ Cash flows from (used for) investing activities: Purchases of property and equipment (1,896,769) (1,698,177) Proceeds from sales of property and equipment 230,069 40,431 Purchases of marketable securities (1,371,101) (694,369) Proceeds from sales of marketable securites 1,097,382 1,270,199 __________ __________ Net cash used for investing activities (1,940,419) (1,081,916) __________ __________ Cash flows from (used for) financing activities: Notes receivable collections 60,262 13,626 Repayment of bank loan (1,950,000) (3,270,000) Proceeds from bank loan 5,870,000 6,805,000 Dividends paid (1,054,174) (2,459,739) __________ __________ Net cash provided from financing activities 2,926,088 1,088,887 __________ __________ Net increase (decrease) in cash and cash investments $ (325,528) $ 448,648 __________ __________ __________ __________ Supplemental disclosures of cash flow information: Cash paid for interest, net of amount capitalized $ 225,056 $ 118,075 __________ __________ __________ __________ Cash paid for income taxes $ 137,500 $ 285,000 __________ __________ __________ __________ 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 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 only of normal recur- ring accruals) necessary for a fair presentation of its consolidated financial position at November 30, 1996 and August 31, 1996 and the consolidated results of operations and cash flows for the three months ended November 30, 1996 and 1995. 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 $370,130 in 1996 and $482,211 in 1995. 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, 1996 1996 ____________ __________ Unharvested fruit crop on trees $ 7,837 $ 7,064 Unharvested sugarcane 2,317 2,231 Beef cattle 5,479 3,937 Sod 62 53 _______ _______ Total inventories $15,695 $13,285 _______ _______ _______ _______
4. Income taxes: The provision for income taxes for the quarters ended November 30, 1996 and 1995 is summarized as follows: Three Months Ended November 30, 1996 1995 _______________________________ Current: Federal income tax $ 186,901 $ 348,863 State income tax 33,727 58,322 __________ __________ 220,628 407,185 __________ __________ Deferred: Federal income tax (34,785) (62,452) State income tax (3,714) (6,668) __________ __________ (38,499) (69,120) __________ __________ Total provision for income taxes $ 182,129 $ 338,065 __________ __________ __________ __________ 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, 1996 and 1995: Three Months Ended November 30, 1996 1995 _______________________________ Expected income tax $ 191,815 $ 335,033 Increase (decrease) resulting from: State income taxes, net of federal benefit 20,479 35,770 Nontaxable interest and dividends (22,939) (42,100) Other reconciling items, net (7,226) 9,362 __________ __________ Total provision for income taxes $ 182,129 $ 338,065 __________ __________ __________ __________ The Company is currently under examination by the Internal Revenue Service for the years ended August 31, 1992, 1991 and 1990. The adjustments proposed to date by the Internal Revenue Service would potentially 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 were made with the Internal Revenue Service during April of 1995 and June of 1996 for the year ended August 31, 1990. The items conceded related to the timing of recognition of certain items previously expensed. The effect of the $385,043 payment made in April 1995 was to increase interest ex- pense by $124,784 and reduce the current deferred tax liability by $260,259. The $1,000,000 payment made in June 1996 reduced the current deferred tax lia- bility by $737,000. Interest totaling $263,000 was recognized for the year ending August 31, 1996. 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 1998 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, 1996 and August 31, 1996 was $22,000,000 and $20,630,000, respectively. Interest cost expensed and capitalized during the three months ended November 30, 1996 and November 30, 1995 was as follows: 1996 1995 ________ ________ Interest expensed $248,943 $136,311 Interest capitalized 139,699 175,990 ________ ________ Total interest cost $388,642 $312,301 ________ ________ ________ ________ 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 increased to $31,079,674 at November 30, 1996, up from $29,761,766 at August 31, 1996. As of November 30, 1996, the Company had cash and cash investments of $1,102,531 compared to $1,428,059 at August 31, 1996. Marketable securities increased from $9,626,025 to $10,347,222 during the same period. The ratio of current assets to current liabilities decreased from 6.82 to 1 at August 31, 1996 to 6.51 to 1 at November 30, 1996. Total assets in- creased by $2,552,796 from $114,503,573 at August 31, 1996 to $117,056,369 at November 30, 1996. The working capital increase ($1,317,908) is primarily the result of an increase in inventories ($13,284,527 vs. $15,694,511 at August 31, 1996 and November 30, 1996, respectively). Additional costs incurred to produce citrus crops, and placement of cattle into western feedlots have caused both citrus and beef in- ventories to increase. In connection with a financing agreement with commercial banks (See Note 5 under Notes to Condensed Consolidated Financail Statements), the Company has an unused availability of funds of approximately $5.4 million at November 30, 1996. RESULTS OF OPERATIONS: Net income for fiscal 1997 decreased by $265,294 when compared to the first quarter of fiscal 1996. Income before income taxes decreased $421,230 during the first quarter of fiscal 1997, when compared to the same period a year ago. The decrease was primarily due to a decline in earnings from agricultural activities ($826,845 vs. $1,136,019 during the first three months of fiscal 1997 and 1996, respectively). Citrus earnings decreased during the first quarter of fiscal 1997, when compared to the same period last year ($304,440 vs. $795,512). While the number of boxes harvested to date are below the first quarter of fiscal 1996 levels, this is a matter of timing and the difference will reverse as the year progresses. Market prices, however, are below the same period a year ago, a trend which is expected to continue through the end of the fiscal year. Sugarcane earnings also decreased during the first quarter of fiscal 1997, com- pared to the same period a year ago, ($249,569 vs. $334,852 during fiscal 1997 and 1996, respectively). Fewer tons were harvested in the first quarter of fiscal 1997, compared to the first quarter a year ago, due to adverse growing conditions which reduced yields for the current year's crop. Yields for the year are expected to remain below the prior year. FORM 10-Q ITEM 2. Management's Discussion RESULTS OF OPERATIONS (Continued): Earnings from ranching activities improved during the first quarter of fiscal 1997, compared to the first quarter a year ago ($272,836 during the first quarter of fiscal 1997, compared to $5,655 during the first quarter of fiscal 1996). Improved prices for beef products, coupled with lower feed costs, the result of more abundant grain supplies, have generated the improvement. The Company is cautiously optimistic that these trends will continue. Actual construction is underway for 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 December of 1996, the Company sold approximately 21,700 acres of land, in Hendry County, Florida, to the State of Florida for $11.5 million. This sale is expected to generate a pretax gain in excess of $11 million. 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 could possibly close as early as August of 1997. The contact 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. 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, 1996. C. Exhibit 27 - Financial Data Schedule. (b) Reports on Form 8-K. December 3, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ALICO, INC. (Registrant) January 13, 1997 W. Bernard Lester Date Exeuctive Vice President and Chief Operating Officer (Signature) January 13, 1997 L. Craig Simmons Date Vice President and Chief Financial Officer (Signature) January 13, 1997 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, 1996, and the related condensed consolidated statements of operations and retained earnings for the three-month periods ended November 30, 1996 and 1995, and the related condensed consolidated statements of cash flows for the three-month periods ended November 30, 1996 and 1995, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of obtaining an understanding of the system for the preparation of interim financial informa- tion, 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, 1996 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 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 balance sheet from which it has been derived. KPMG PEAT MARWICK LLP (Signature) Orlando, Florida January 3, 1997 FORM 10-Q ALICO, INC. Computation of Weighted Average Shares Outstanding as of November 30, 1996: Number of shares outstanding at August 31, 1996 7,027,827 _________ _________ Number of shares outstanding at November 30, 1996 7,027,827 _________ _________ Weighted Average 9/1/96 - 11/30/96 7,027,827 _________ _________ EXHIBIT B