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 nine months ended May 31, 1998.
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to _______________________.
Commission file number 0-261.
ALICO, INC.
(Exact name of registrant as specified in its charter)
Florida 59-0906081
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
P. O. Box 338, La Belle, FL 33975
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 941/675-2966
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
There were 7,027,827 shares of common stock, par value $1.00 per share,
outstanding at July , 1998.
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ALICO, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(See Accountants' Review Report)
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
May 31, 1998 May 31, 1997 May 31, 1998 May 31, 1997
_____________ _____________ _____________ _____________
<S> <C> <C> <C> <C>
Revenue:
Citrus $ 7,692,572 $ 8,526,853 $19,880,035 $20,445,952
Sugarcane 1,529,918 152,949 6,026,361 4,748,375
Ranch 1,898,400 1,741,367 6,141,814 4,240,827
Rock products and sand 334,033 297,382 909,701 908,644
Oil lease and land rentals 157,199 245,444 421,208 532,680
Forest products 27,216 88,305 109,329 160,299
Gain on sales of real estate 448,871 15,311 1,082,243 11,422,994
Interest and investment income 555,854 353,298 1,175,891 948,126
Other 24,948 28,881 67,623 87,749
___________ ___________ ___________ ___________
Total revenue 12,669,011 11,449,790 35,814,205 43,495,646
___________ ___________ ___________ ___________
Cost and expenses:
Citrus production, harvesting and
marketing 6,069,739 5,915,914 16,070,376 16,301,333
Sugarcane production and harvesting 824,211 - 4,539,847 4,091,272
Ranch 1,686,088 1,642,271 5,519,118 3,551,749
Real estate expenses 117,652 125,349 332,071 355,094
Interest 256,106 73,113 634,436 382,388
Other, general and administrative 639,594 547,708 1,897,692 1,876,705
___________ ___________ ___________ ___________
Total costs and expenses 9,593,390 8,304,355 28,993,540 26,558,541
___________ ___________ ___________ ___________
Income before income taxes 3,075,621 3,145,435 6,820,665 16,937,105
Provision for income taxes 1,173,587 1,153,420 2,521,055 6,305,941
___________ ___________ ___________ ___________
Net income 1,902,034 1,992,015 4,299,610 10,631,164
Retained earnings beginning of period 78,392,539 77,678,116 80,211,659 70,093,141
Dividends paid - - (4,216,696) (1,054,174)
___________ ___________ ___________ ___________
Retained earnings end of period $80,294,573 $79,670,131 $80,294,573 $79,670,131
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
Weighted average number of shares
outstanding 7,027,827 7,027,827 7,027,827 7,027,827
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
Per share amounts:
Earnings - Basic and Diluted $ .27 $ .28 $ .61 $ 1.51
Dividends $ - $ - $ .60 $ .15
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
ALICO, INC. AND SUBSIDIARY FORM 10-Q
CONDENSED CONSOLIDATED BALANCE SHEETS
(See Accountants' Review Report)
(Unaudited) (Audited)
May 31, 1998 August 31, 1997
ASSETS
<S> <C> <C>
Current assets:
Cash and cash investments $ 682,333 $ 1,459,765
Marketable Securities 13,392,724 11,412,915
Accounts and mortgage notes receivable 10,814,471 8,358,049
Inventories 14,079,153 16,387,128
Other current assets 403,722 269,463
____________ ____________
Total current assets 39,372,403 37,887,320
Mortgage notes receivable, non-current 531,097 588,860
Land held for development and sale 8,673,138 8,345,116
Investments 1,130,146 955,779
Property, buildings and equipment 98,972,968 96,709,440
Less: Accumulated depreciation (28,834,146) (26,763,790)
____________ ____________
Total assets $119,845,606 $117,722,725
____________ ____________
____________ ____________
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS
(See Accountants' Review Report)
(Continued)
(Unaudited) (Audited)
<S> May 31, 1998 August 31, 1997
LIABILITIES ____________ _______________
<C> <C>
Current liabilities:
Accounts payable $ 1,400,170 $ 1,158,012
Due to profit sharing plan - 230,545
Accrued ad valorem taxes 1,121,714 1,253,053
Accrued expenses 273,109 541,847
Income taxes payable 662,085 934,895
Deferred income taxes 1,319,960 869,763
____________ ____________
Total current liabilities 4,777,038 4,988,115
Notes payable to banks 15,075,000 12,856,000
Deferred income taxes 11,491,804 11,712,806
Deferred retirement benefits 79,984 13,259
____________ ____________
Total liabilities 31,423,826 29,570,180
____________ ____________
STOCKHOLDERS' EQUITY
Common stock $ 7,027,827 $ 7,027,827
Unrealized gains on marketable securities 1,099,380 913,059
Retained earnings 80,294,573 80,211,659
____________ ____________
Total stockholders' equity 88,421,780 88,152,545
____________ ____________
Total liabilities and
stockholders' equity $119,845,606 117,722,725
____________ ____________
____________ ____________
<FN>
See Accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALICO, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(See Accountants' Review Report)
(Unaudited)
Nine Months Ended May 31,
1998 1997
_____________ _____________
<S>
Cash flows from operating activities:
<C> <C>
Net income $ 4,299,610 $10,631,164
Adjustments to reconcile net income to cash
provided from (used for) operating activities:
Depreciation 3,415,600 3,164,047
Accrued donation (206,676) (689,628)
Cash provided by (used for) changes in
current assets and liabilities (1,192,318) 2,741,913
Deferred income taxes 116,782 (304,615)
Gain on sales of real estate (1,082,243) (11,422,994)
Other (1,132,440) (590,656)
___________ ___________
Net cash provided from
operating activities 4,218,315 3,529,231
___________ ___________
Cash flows from (used for) investing activities:
Purchases of property and equipment (3,155,021) (4,723,303)
Proceeds from sales of real estate 1,157,153 11,306,136
Proceeds from sales of other property
and equipment 355,930 604,970
Purchases of marketable securities (4,466,407) (3,605,669)
Proceeds from sales of marketable securites 3,090,054 3,514,575
___________ ___________
Net cash provided by (used for)
investing activities (3,018,291) 7,096,709
___________ ___________
Cash flows from (used for) financing activities:
Notes receivable collections 20,240 431,964
Repayment of bank loan (16,011,000) (22,243,000)
Proceeds from bank loan 18,230,000 12,194,000
Dividends paid (4,216,696) (1,054,174)
___________ ___________
Net cash used for
financing activities (1,977,456) (10,671,210)
___________ ___________
Net decrease in cash and
cash investments $ (777,432) $ (45,270)
___________ ___________
___________ ___________
Supplemental disclosures of cash flow information:
Cash paid for interest, net of
amount capitalized $ 2,761,430 $ 366,647
___________ ___________
___________ ___________
Cash paid for income taxes $ 543,959 $ 4,029,884
___________ ___________
___________ ___________
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
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 necessary for a fair presentation
of its consolidated financial position at May 31, 1998 and August 31, 1997
and the consolidated results of operations for the three months and nine months
ended May 31, 1998 and 1997 and cash flows for the nine months ended May 31,
1998 and 1997.
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 $2,656,629 in
1998 and $1,007,211 in 1997. 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:
May 31, August 31,
1998 1997
____________ __________
Unharvested fruit crop on trees $ 5,750 $ 6,909
Unharvested sugarcane 1,473 2,322
Beef cattle 6,571 6,993
Sod 285 163
_______ _______
Total inventories $14,079 $16,387
_______ _______
_______ _______
<PAGE>
<TABLE>
<CAPTION>
4. Income taxes:
The provision for income taxes for the quarters and nine months ended May 31, 1998 and 1997 is
summarized as follows:
Three Months Ended Nine Months Ended
May 31, 1998 May 31, 1997 May 31, 1998 May 31, 1997
_____________ _____________ _____________ _____________
<S> <C> <C> <C> <C>
Current:
Federal income tax $ 893,001 $ 841,521 $2,113,937 $5,640,170
State income tax 181,212 139,743 348,148 960,165
__________ __________ __________ __________
1,074,213 981,264 2,462,085 6,600,335
__________ __________ __________ __________
Deferred:
Federal income tax 89,787 166,693 53,281 (254,853)
State income tax 9,587 5,463 5,689 (39,541)
__________ __________ __________ __________
99,374 172,156 58,970 (294,394)
__________ __________ __________ __________
Total provision for
income taxes $1,173,587 $1,153,420 $2,521,055 $6,305,941
__________ __________ __________ __________
__________ __________ __________ __________
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 and nine months ended May 31, 1998 and
May 31, 1997:
Three Months Ended Nine Months Ended
May 31, 1998 May 31, 1997 May 31, 1998 May 31, 1997
_____________ _____________ _____________ _____________
<S> <C> <C> <C> <C>
Expected income tax $1,045,711 $1,138,819 $2,319,026 $5,827,987
Increase (decrease) resulting
from:
State income taxes, net
of federal benefit 111,645 110,363 247,590 611,001
Nontaxable interest and
dividends (17,210) (28,655) (68,183) (81,084)
Other reconciling items,
net 33,441 (67,107) 22,622 (51,963)
__________ __________ __________ __________
Total provision for
income taxes $1,173,587 $1,153,420 $2,521,055 $6,305,941
__________ __________ __________ __________
__________ __________ __________ __________
<PAGE>
The Company is currently under examination by the Internal Revenue Service for
the years ended August 31, 1991, 1992, 1993 and 1994. 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.
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. 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 million which is due in January 1999 and up to
$3 million which is due on demand. The total amount of long-term debt under
this agreement at May 31, 1998 and August 31, 1997 was $15,075,000 and $12,856,000,
respectively.
Interest cost expensed and capitalized during the nine months ended May 31, 1998
and May 31, 1997 was as follows:
1998 1997
________ ________
Interest expensed $634,436 $382,388
Interest capitalized 257,106 450,626
________ ________
Total interest cost $891,542 $833,014
________ ________
________ ________
6. Accounting Statements to be Adopted During the Next Fiscal Year:
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income." This statement establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains, and losses) in a full set of general-purpose financial
statements. This statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. The statement also requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other income separately
from retained earnings and additional paid-in capital in the equity section of
a statement of financial position. The statement is required for fiscal years
beginning after December 15, 1997.
<PAGE>
6. Accounting Statements to be Adopted During the Next Fiscal Year (Continued):
The adoption of this standard will require the Company to disclose as a
component of comprehensive income, the unrealized gains or losses on
investment securities available for sale and any unrealized gains or losses
resulting from futures options or contracts held as a hedge.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosure about Segments of an Enterprise and Related Information." This
statement establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. The statement is
required for fiscal years beginning after December 15, 1997.
The adoption of this standard may change the presentation of the Company's
consolidated financial statements.
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.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES:
Working capital increased to $34,595,365 at May 31, 1998, up from $32,899,205 at
August 31, 1997. As of May 31, 1998, the Company had cash and cash investments
of $682,333 compared to $1,459,765 at August 31, 1997. Marketable securities
increased from $11,412,915 to $13,392,724 during the same period. The ratio of
current assets to current liabilities increased from 7.60 to 1 at August 31,
1997 to 8.24 to 1 at May 31, 1998. Total assets increased by $2,122,881 from
$117,722,725 at August 31, 1997 to $119,845,606 at May 31, 1998.
The working capital increase of $1,696,160 is largely resulting from an increase
in accounts receivable. Sales of sugarcane and citrus have generated the
increase.
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 $14.9 million at May 31, 1998.
RESULTS OF OPERATIONS:
Net income for the three months ending May 31, 1998 decreased by $89,981 when
compared to the third quarter of fiscal 1997, and $6,331,554 when compared to
the nine month period then ended. Income before income taxes decreased $69,814
and $10,116,440 for the three and nine months ended May 31, 1998, respectively,
when compared to the same periods a year ago. This was due to the sale of
approximately 21,700 acres of land in Hendry County, Florida, to the State of
Florida for $11.5 million in fiscal year 1997. The pretax gain from the sale
totaled $11.1 million.
Earnings from agriculture activities increased over the prior year's nine month
total ($5,918,869 vs. $5,490,800 during the first nine months of fiscal 1998 and
1997, respectively), but decreased slightly when compared to the three month
totals of the prior year ($2,540,852 vs. $2,862,984 for the third quarter of
fiscal 1998 and 1997, respectively).
Citrus earnings decreased both for the quarter ($1,622,833 during fiscal 1998
vs. $2,610,939 during fiscal 1997) and for the nine months ($3,809,659 during
fiscal 1998 vs. $4,144,619 during fiscal 1997) ended May 31, 1998 when compared
to the prior year. A decline in the current year's prices for citrus products
is the reason for the decline in earnings of this division.
Sugarcane earnings were higher for both the quarter ($705,707 during fiscal 1998
vs. $152,949 during fiscal 1997) and for the nine months ended May 31, 1998
($1,486,514 in 1998 vs. $657,103 in 1997) when compared to the prior year.
Improved yields per acre, combined with an increase in the number of producing
acres, resulted in an increase in gross tons harvested from the prior year.
<PAGE>
ITEM 2. Management's Discussion
RESULTS OF OPERATIONS (Continued)
Ranch earnings approximated those of a year ago for both the quarter and nine
months ended May 31, 1998 when compared to the prior year ($212,312 vs. $99,096
for the three months ended May 31, 1998 and May 31, 1997, respectively), and
($622,696 vs. $689,078 for the nine months ending May 31, 1998 and May 31, 1997,
respectively).
The Company is continuing its marketing and permit activities for its land which
surrounds the Florida Gulf Coast University.
During November of 1996, the Company announced an agreement with Miromar
Development, Inc. of Montreal, Canada to sell 550 acres of land surrounding the
University site in Lee County for $9.35 million. The contract calls for 25
percent of the purchase price to be paid at closing, with the balance payable
over the next four years. If the sale closes, it will generate a pretax gain
of approximately $8.7 million.
Additionally, the Company announced an option agreement with REJ Group, Inc.
The option agreement permits the acquisition of a minimum 150 acres and a
maximum of 400 acres within the 2,300 acre university village. The potential
pretax gain to Alico, if the option is exercised, would vary from $8.5 million
to $24.5 million, depending on the time at which the option is exercised, and
the total number of acres selected.
In June of 1998, the Company announced the purchase of approximately 8,400 acres
in Hendry County, Florida, for $8.1 million. Funds for the purchase are
expected to come from current operations and unused credit availability.
<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 6. Exhibits and reports on Form 8-K.
(a) Exhibits:
A. Accountant's Report.
B. Computation of Weighted Average Shares Outstanding at
May 31, 1998.
C. Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALICO, INC.
(Registrant)
July , 1998 W. Bernard Lester
Date President
Chief Operating Officer
(Signature)
July , 1998 L. Craig Simmons
Date Vice President
Chief Financial Officer
(Signature)
July , 1998 Patrick W. Murphy
Date Controller
(Signature)
<PAGE>
EXHIBIT A
Independent Accountants' Review Report
______________________________________
The Stockholders and
Board of Directors
Alico, Inc:
We have reviewed the condensed consolidated balance sheet of Alico, Inc. and
subsidiary as of May 31, 1998, and the related condensed consolidated
statements of operations and retained earnings for the three-month and nine-
month periods ended May 31, 1998 and 1997, and the related condensed
consolidated statements of cash flows for the nine-month periods ended May 31,
1998 and 1997. 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,
stockholders' 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
June 24, 1998
<PAGE>
FORM 10-Q
ALICO, INC.
Computation of Weighted Average Shares Outstanding as of May 31, 1998:
Number of shares outstanding at August 31, 1997 7,027,827
_________
_________
Number of shares outstanding at May 31, 1998 7,027,827
_________
_________
Weighted Average 09/01/97 - 05/31/98 7,027,827
_________
_________
EXHIBIT B
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET OF ALICO, INC. AND SUBSIDIARY AS OF MAY 31, 1998 AND THE
RELATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS AND CASH FLOWS FOR
THE NINE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> MAY-31-1998
<CASH> 682333
<SECURITIES> 13392724
<RECEIVABLES> 10814471
<ALLOWANCES> 0
<INVENTORY> 14079153
<CURRENT-ASSETS> 39372403
<PP&E> 98972968
<DEPRECIATION> 28834146
<TOTAL-ASSETS> 119845606
<CURRENT-LIABILITIES> 4777038
<BONDS> 0
0
0
<COMMON> 7027827
<OTHER-SE> 81393953
<TOTAL-LIABILITY-AND-EQUITY> 119845606
<SALES> 34638314
<TOTAL-REVENUES> 35814205
<CGS> 26461412
<TOTAL-COSTS> 26461412
<OTHER-EXPENSES> 1897692
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 634436
<INCOME-PRETAX> 6820665
<INCOME-TAX> 2521055
<INCOME-CONTINUING> 4299610
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4299610
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
</TABLE>
