A L I C O I N C O R P O R A T E D
A L I C O I N C O R P O R A T E D
MANAGING THE ENVIRONMENT, THE LAND, RESOURCES AND PEOPLE
Post Office Box 338 • LaBelle, Florida 33975 • (863) 675-2966 • www.alicoinc.com
4 8 T H A N N U A L R E P O R T F O R Y E A R E N D E D A U G U S T 3 1 , 2 0 0 7
S T
Financial Information at a Glance
Fiscal years ended August 31
Board of Directors
John R. Alexander
Robert E. Lee Caswell
Evelyn D’An*
Chairman and Chief Executive Officer
Alico, Inc.
Operations Manager
PC Associates, LLC
CPA and President
D’An Financial Services, Inc.
Operating Revenues
(in thousands)
Earnings per Share
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
$
( 0.50)
$
( 1.00)
$
( 1.50)
$
( 2.00)
$
( 2.50)
2003
2004
2005
2006
2007
2003
2004
2005
2006
2007
Baxter G. Troutman
Representative District 66
Florida House of Representatives
Chief Executive Officer
Florida Labor Solutions, Inc.
Robert J. Viguet, Jr.*
Partner
Thompson & Knight, LLP
*Independent Directors
Per Share Dividends Declared
Ratio Analysis
14
12
10
8
6
4
2
0
Current
2003
2004
2005
2006
2007
Debt/equity
2003
8.91
72%
2004
12.42
64%
2005
7.24
72%
2006
6.14
86%
2007
7.26
136%
Phillip S. Dingle*
Managing Partner and Founder
Health Edge
Investment Partners, LLC
Gregory T. Mutz*
Charles L. Palmer*
Chairman of the Board
AMLI Residential Properties Trust
President and
Chief Executive Officer
North American Company, LLLP
Gordon Walker, PhD*
Chairman Department of
Strategy & Entrepreneurship
Southern Methodist University
Information
Physical Address
640 South Main Street
La Belle, Florida 33935
Mailing Address
Post Office Box 338
LaBelle, Florida 33975
Phone
(863) 675-2966
Fax
(863) 675-6928
Transfer Agent
Sue Hampton
Transfer Agent
Compushare
730 Peachtree Street, Suite 840
Atlanta, Georgia 30308
1 (800) 568-3476
Committees
Company Contact
Officers
John R. Alexander
Chairman of the Board and Chief Executive Officer
Dan L. Gunter
President and Chief Operating Officer
Patrick W. Murphy
Senior Vice President and Chief Financial Officer
Senior Vice President, Agricultural Operations
Senior Vice President, Non-Agricultural Operations
Steven M. Smith
Robert M. Bogart
Michael R. Talaga
Senior Vice President,
A. Denise Plair
Corporate Secretary
Human Resources and Information Technology
Audit Committee
Phillip S. Dingle Chairman
Evelyn D’An, Finacial Expert
Gregory T. Mutz
Dr. Gordon Walker
Compensation Committee
Charles L. Palmer, Chairman
Gregory T. Mutz
Robert J. Viguet, Jr.
Dr. Gordon Walker
Strategy And Business Development
Committee
Dr. Gordon Walker, Chairman
Phillip S. Dingle
Gregory T. Mutz
Charles L. Palmer
Baxter G. Troutman
Robert J. Viguet, Jr.
Nominating and Governance
Committee
Dr. Gordon Walker, Chairman
Evelyn D’An
Gregory T. Mutz
Charles L. Palmer
Robert J. Viguet, Jr.
$160,000
$140,000
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$0
$2.00
$1.50
$1.00
$.50
$0.00
Peer Group Information
Comparison of Cumulative Five Year Total Return
$3 0 0
$2 5 0
$2 0 0
$1 5 0
$1 0 0
$5 0
$0
Aug 02
Alico, Inc.
S&P 500
New Peer Group
Old Peer Group
Aug 03
Aug 04
Aug 05
Aug 06
Aug 07
Total Return to Shareholders
(Includes reinvestment of dividends)
Company Name / Index
Alico, Inc.
S&P 500 Index
New Peer Group
Old Peer Group
Company Name / Index
Alico, Inc.
S&P 500 Index
New Peer Group
Old Peer Group
Base Period
Aug 02
100
100
100
100
New Peer Group Companies
Alexander & Baldwin Inc
Consolidated Tomoka Land Co
St Joe Co
Tejon Ranch Co
Annual Return Percentage
Years Ending
Aug 03
Aug 04 Aug 05
Aug 06 Aug 07
0.49
12.07
23.55
32.23
58.48
11.46
31.36
13.40
20.40
12.56
60.44
66.60
15.39
8.88
-24.86
-14.17
-11.28
15.13
-15.21
12.45
Indexed Returns
Years Ending
Aug 03
100.49
112.07
123.55
132.23
Aug 04 Aug 05
Aug 06 Aug 07
159.26
124.90
162.29
149.94
191.75
140.59
260.38
249.80
221.26
153.08
195.64
214.42
196.31
176.24
165.88
241.11
Old Peer Group Companies
Alexander & Baldwin Inc
Consolidated Tomoka Land Co
Scheid Vineyards Inc CLA
Tejon Ranch Co
Letter to Shareholders
December 14, 2007
To Our Shareholders:
The Company made significant progress with implementation of its strategic plan during FY 2007. The new mission of the
company focused on increasing earnings and asset values to produce superior long term returns for shareholders. Our strategy
includes the management of real estate assets as an essential component of the Company's business which led to the establishment
of a real estate unit known as Alico Land Development Inc. The initial goal of this subsidiary is to entitle the Company's properties
which lie in the path of progress. Currently, the Company is working to entitle some of its Florida holdings in Collier, Glades,
Hendry, Lee and Polk counties. These projects should position these properties for development or sale when the real estate market
recovers.
The opening line of A Tale of Two Cities, “It was the best of times, it was the worst of times….”, comes to mind when reviewing the
2007 financial statements of the Company. The operating revenue increased to $134.8 million in FY 2007 compared with $77.4
million in FY 2006. Likewise, pre-tax income increased to $19.4 million in FY 2007 up from $12.6 million in FY 2006. Revenue and
pretax income from operations were at record highs. Despite these record achievements, the Company posted an after tax loss of
$13.8 million in FY 2007 compared with an after tax profit of $6.4 million in FY 2006. The after tax loss was due to the accrual and
payment of estimated taxes, interest and penalties in anticipation of settlement of the IRS tax matter related to the operation of an
offshore insurance company during 2001-2004. Final settlement with the IRS is expected by the second quarter of FY 2008.
During October 2007, the Company restructured one of its previously announced agreements with The Ginn Development
Companies (Ginn) for the sale of the Ginn East property in Lee County, Florida. The restructuring allows the Company to earn a
higher interest rate on the $54.5 million mortgage held on the parcel. Additionally, the higher interest rate was applied
retroactively to July 2005, the date the contract closed. The Company received a total of $11.1 million including the receipt of
interest and principal from the restructure, and interest and option extension proceeds from its other agreements with Ginn. We
believe that the contractual modifications were mutually beneficial to Ginn and the Alico shareholders.
Looking forward, the agribusiness enterprises of the Company face many challenges but we remain optimistic about the
opportunities for the growth of revenue and profits. The Company is systematically bringing new land into more intense
agriculture usage accommodating the expansion of the vegetable division and the growing market for leased land for farming.
The Company's agriculture lands are well suited for horticultural crops with the potential for higher returns per acre, and the
Company has established substantial marketing relationships for both vegetables and citrus. More importantly, the Company has
the management expertise in place to grow the agribusiness divisions. The Company began production of vegetables in 2006 with
1,000 acres devoted to green beans and sweet corn. In FY 2008, the Company is expecting to farm 3,174 acres of vegetables
including green beans, sweet corn, green peppers, eggplant, and squash. We are also planning to re-plant 400 acres of citrus in FY
2008 that was previously lost to citrus canker.
We believe that the Company's strategy of entitling land holdings and intensified agricultural uses will enable us to increase the
earnings and asset values for our shareholders. We remain focused and committed to this goal.
Thank you for your interest in Alico and your continued support.
Sincerely,
John R. Alexander
Chairman and CEO
Dan L. Gunter
Chief Operating Officer
STEWARDS OF THE LAND
Alico established a Real Estate unit as Alico
Land Development Inc. in FY 2007. The
initial goal of the subsidiary is to entitle the
company properties which lie in the path
of change.
Alico markets two
types of sod- St.
Augustine which is
used in
landscaping lawns
and Bahia which is
a pasture grass
used for
landscaping
roadways.
The company sold 12.5 million square feet of St. Augustine in FY
2007 and 51.9 million square feet of Bahia.
Alico has 10,582 acres of citrus and is planning to
replant 400 acres in FY 2008 that was previously lost
to citrus canker
Alico markets fill dirt
and rock from its
mine in Glades
County and is in the
process of permitting
a second mine in
Hendry County.
Alico is engaged in production of beef cattle with
a breeding herd of 11,400 head including cows,
bulls and replacement heifers
Alico produced just over 10,000 acres of
sugarcane in FY 2007 which is processed and the
finished products marketed by United States
Sugar Corporation.
Alico began production
of vegetables in FY
2006 with 1,000 acres of
green beans and
sweet corn.
The company is expecting to produce 3,174
acres in FY 2008 including green beans,
sweet corn, green peppers, eggplant
and squash
STEWARDS OF THE LAND
Alico established a Real Estate unit as Alico
Land Development Inc. in FY 2007. The
initial goal of the subsidiary is to entitle the
company properties which lie in the path
of change.
Alico markets two
types of sod- St.
Augustine which is
used in
landscaping lawns
and Bahia which is
a pasture grass
used for
landscaping
roadways.
The company sold 12.5 million square feet of St. Augustine in FY
2007 and 51.9 million square feet of Bahia.
Alico has 10,582 acres of citrus and is planning to
replant 400 acres in FY 2008 that was previously lost
to citrus canker
Alico markets fill dirt
and rock from its
mine in Glades
County and is in the
process of permitting
a second mine in
Hendry County.
Alico is engaged in production of beef cattle with
a breeding herd of 11,400 head including cows,
bulls and replacement heifers
Alico produced just over 10,000 acres of
sugarcane in FY 2007 which is processed and the
finished products marketed by United States
Sugar Corporation.
Alico began production
of vegetables in FY
2006 with 1,000 acres of
green beans and
sweet corn.
The company is expecting to produce 3,174
acres in FY 2008 including green beans,
sweet corn, green peppers, eggplant
and squash
$3 0 0
$2 5 0
$2 0 0
$1 5 0
$1 0 0
$5 0
$0
Aug 02
Peer Group Information
Comparison of Cumulative Five Year Total Return
Aug 03
Aug 04
Aug 05
Aug 06
Aug 07
Alico, Inc.
S&P 500
New Peer Group
Old Peer Group
Total Return to Shareholders
(Includes reinvestment of dividends)
Company Name / Index
Alico, Inc.
S&P 500 Index
New Peer Group
Old Peer Group
Company Name / Index
Alico, Inc.
S&P 500 Index
New Peer Group
Old Peer Group
Base Period
Aug 02
100
100
100
100
New Peer Group Companies
Alexander & Baldwin Inc
Consolidated Tomoka Land Co
St Joe Co
Tejon Ranch Co
Annual Return Percentage
Years Ending
Aug 04 Aug 05
20.40
12.56
60.44
66.60
58.48
11.46
31.36
13.40
Aug 06 Aug 07
-11.28
15.13
-15.21
12.45
15.39
8.88
-24.86
-14.17
Indexed Returns
Years Ending
Aug 04 Aug 05
191.75
159.26
140.59
124.90
260.38
162.29
249.80
149.94
Aug 06 Aug 07
196.31
221.26
176.24
153.08
165.88
195.64
241.11
214.42
Aug 03
0.49
12.07
23.55
32.23
Aug 03
100.49
112.07
123.55
132.23
Old Peer Group Companies
Alexander & Baldwin Inc
Consolidated Tomoka Land Co
Scheid Vineyards Inc CLA
Tejon Ranch Co
Letter to Shareholders
December 14, 2007
To Our Shareholders:
The Company made significant progress with implementation of its strategic plan during FY 2007. The new mission of the
company focused on increasing earnings and asset values to produce superior long term returns for shareholders. Our strategy
includes the management of real estate assets as an essential component of the Company's business which led to the establishment
of a real estate unit known as Alico Land Development Inc. The initial goal of this subsidiary is to entitle the Company's properties
which lie in the path of progress. Currently, the Company is working to entitle some of its Florida holdings in Collier, Glades,
Hendry, Lee and Polk counties. These projects should position these properties for development or sale when the real estate market
recovers.
The opening line of A Tale of Two Cities, “It was the best of times, it was the worst of times….”, comes to mind when reviewing the
2007 financial statements of the Company. The operating revenue increased to $134.8 million in FY 2007 compared with $77.4
million in FY 2006. Likewise, pre-tax income increased to $19.4 million in FY 2007 up from $12.6 million in FY 2006. Revenue and
pretax income from operations were at record highs. Despite these record achievements, the Company posted an after tax loss of
$13.8 million in FY 2007 compared with an after tax profit of $6.4 million in FY 2006. The after tax loss was due to the accrual and
payment of estimated taxes, interest and penalties in anticipation of settlement of the IRS tax matter related to the operation of an
offshore insurance company during 2001-2004. Final settlement with the IRS is expected by the second quarter of FY 2008.
During October 2007, the Company restructured one of its previously announced agreements with The Ginn Development
Companies (Ginn) for the sale of the Ginn East property in Lee County, Florida. The restructuring allows the Company to earn a
higher interest rate on the $54.5 million mortgage held on the parcel. Additionally, the higher interest rate was applied
retroactively to July 2005, the date the contract closed. The Company received a total of $11.1 million including the receipt of
interest and principal from the restructure, and interest and option extension proceeds from its other agreements with Ginn. We
believe that the contractual modifications were mutually beneficial to Ginn and the Alico shareholders.
Looking forward, the agribusiness enterprises of the Company face many challenges but we remain optimistic about the
opportunities for the growth of revenue and profits. The Company is systematically bringing new land into more intense
agriculture usage accommodating the expansion of the vegetable division and the growing market for leased land for farming.
The Company's agriculture lands are well suited for horticultural crops with the potential for higher returns per acre, and the
Company has established substantial marketing relationships for both vegetables and citrus. More importantly, the Company has
the management expertise in place to grow the agribusiness divisions. The Company began production of vegetables in 2006 with
1,000 acres devoted to green beans and sweet corn. In FY 2008, the Company is expecting to farm 3,174 acres of vegetables
including green beans, sweet corn, green peppers, eggplant, and squash. We are also planning to re-plant 400 acres of citrus in FY
2008 that was previously lost to citrus canker.
We believe that the Company's strategy of entitling land holdings and intensified agricultural uses will enable us to increase the
earnings and asset values for our shareholders. We remain focused and committed to this goal.
Thank you for your interest in Alico and your continued support.
Sincerely,
John R. Alexander
Chairman and CEO
Dan L. Gunter
Chief Operating Officer
Alico’s Mission
• Alico is a land management company.
• Alico will grow its earnings and asset values through
its agricultural and real estate activities to produce
superior long term returns for its shareholders.
• Alico will provide a progressive working environment
for its employees.
• Alico will be a responsible corporate citizen.
ALICO, INC
A Land Management Company
10-K Report
For Year Ended August 31, 2007
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
X
ANNUAL REPORT PURSUANT TO SECTION 3 OR 5(d) OF THE SECURITIES
EXCHANGE ACT OF 934
For the fiscal year ended August 31, 2007
OR
TRANSITION REPORT PURSUANT TO SECTION 3 OR 5(d) OF THE SECURITIES
EXCHANGE ACT OF 934
For the transition period from
to
Commission file number 0-261
ALICO, INC.
(Exact name of registrant as specified in its charter)
Florida
(State or other jurisdiction of incorporation
or organization) identification number
IRS Employer
59-0906081
P.O. Box 338, La Belle, Florida 33975
(Address of principal executive offices) Zip code
Registrant’s telephone number including
area code
(863) 675-2966
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of class:
COMMON CAPITAL STOCK, $1.00 Par value, Non-cumulative
on which registered:
NASDAQ
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405
of the Securities Act.
Yes
No X
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 5(d) of the Act.
Yes
No X
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 3 or 5(d) of the Securities Exchange Act of 934 during the preceding months (or
for such shorter period that such registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
X
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 or Regulation S-
K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this form 10-K.
Yes
No
X
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2
of the Exchange Act (Check one):
Large accelerated filer
Accelerated filer X Non-accelerated filer
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b of the
Exchange Act.)
Yes
No
X
The aggregate market value of the voting and nonvoting common equity held by non-affiliates
based on the closing price, as quoted on the NASDAQ as of February 28, 2007 (the last business
day of Alico’s most recently completed second fiscal quarter) was $173,611,502. There were
7,359,988 shares of stock outstanding at October 31, 2007.
Documents Incorporated by Reference:
Portions of the Proxy Statement of Registrant to be dated on or before December 31, 2007 are
incorporated by reference in Part III of this report.
INDEX
ALICO, INC.
FORM 10-K
For the year ended August 31, 2007
Part I
•
•
•
•
•
•
Item 1, business.
Item 1A, risk factors.
Item 1B, unresolved staff comments.
Item 2, properties.
Item 3, legal proceedings.
Item 4, submission of matters to a vote of security holders.
Part II
•
•
•
•
•
•
•
•
Item 5, market for registrant’s common equity, related stockholder matters and issuer
purchases of equity securities.
Item 6, selected financial data.
Item 7, management’s discussion and analysis of financial condition and results of
operations.
Item 7A, quantitative and qualitative disclosure about market risk.
Item 8, financial statements and supplementary data.
Item 9, changes in and disagreements with accountants on accounting and financial
disclosure.
Item 9A, control and procedures.
Item 9B, other information.
Part III
•
•
•
•
•
Item 10, directors, executive officers and corporate governance.
Item 11, executive compensation.
Item 12, security ownership of certain beneficial owners and management and related
stockholder matters.
Item 13, certain relationships and related transactions, and director independence.
Item 14, principal accountants’ fees and services.
Part IV
Item 15, exhibits and financial statement schedules.
•
• Signatures.
• Certifications
3
Item 1. Business.
PART I
Alico, Inc. (the “Company”), which was formed February 29, 1960 as a spin-off of the Atlantic
Coast Line Railroad Company, is a land management company operating in Central and
Southwest Florida. The Company’s primary asset is 135,466 acres of land located in Collier,
Glades, Hendry, Lee and Polk Counties. (See Item 2 for location and acreage by current primary
use.) The Company is involved in a variety of agribusiness pursuits in addition to land leasing and
rentals, rock and sand mining and real estate sales activities.
The Company’s land is managed for multiple uses wherever possible. For example, cattle
ranching, forestry and land leased for farming, grazing, recreation and oil exploration utilize the
same acreage in some instances.
The charts below outline the relative contribution of each operation to the operating revenue,
profit and total assets of the Company during the past three years (all revenues are from external
customers within the United States). For further information regarding the Company’s business
segments, please see Note 11 to the consolidated financial statements.
Fiscal years ended August 31,
2006
2005
2007
Revenues
Agriculture:
Bowen Brothers Fruit
Citrus groves
Sugarcane
Cattle
Alico Plant World
Vegetables
Sod
Native trees and shrubs
Agriculture operations revenue
Real estate activities
Land leasing and rentals
Mining royalties
$
52,716
47,484
9,432
9,977
2,832
3,803
2,180
49
128,673
3,329
1,495
1,340
$
30,869
22,188
8,926
5,700
3,270
2,389
1,528
4
75,012
3
1,369
940
-
$
26,231
9,323
11,017
2,587
-
402
3
49,791
810
1,933
2,991
Total operating revenue
$
134,837
$
77,434
$
55,525
4
Gross profit (loss):
Agriculture:
Bowen Brothers Fruit
Citrus groves
Sugarcane
Cattle
Alico Plant World
Vegetables
Sod
Native trees and shrubs
Gross profit from agricultural operations
Real estate activities
Land leasing and rentals
Mining royalties
Net casualty loss (recovery)
Net casualty (loss) recovery
Subtotal
Profits from the sale of bulk real estate
Net interest and investment income
Corporate general and administrative and other
Income before income taxes
Provision for income taxes
Net (loss) income
Total Assets:
Agriculture:
Bowen Brothers Fruit
Citrus groves
Sugarcane
Cattle
Alico Plant World
Vegetables
Sod
Subtotal Agriculture
Mining
Other Corporate assets
Total assets
Fiscal years ended August 31,
2006
2005
2007
$
930
24,057
599
55
17
496
862
49
27,465
(79)
1,102
1,214
-
29,702
1,257
1,719
(13,276)
19,402
33,246
$
(268)
7,614
360
786
(1,103)
985
688
4
9,204
5
917
940
3,628
14,741
4,369
4,987
(11,413)
12,684
6,215
$
-
6,247
499
2,109
459
-
(78)
3
9,467
482
1,294
2,991
(1,888)
12,346
5,465
2,148
(10,721)
9,238
3,148
$
(13,844)
$
6,469
$
6,090
$
3,042
54,558
46,053
20,813
6,711
2,766
5,362
139,305
10,487
131,095
$
3,096
59,464
47,894
23,919
6,515
1,981
4,191
147,060
10,568
105,125
$
280,887
$
262,753
The Company is not in the retail land sales and development business, except through its wholly
owned subsidiary, Alico Land Development, Inc. (formerly known as Saddlebag Lake Resorts,
Inc.) However, the Company has from time to time sold properties which, in the judgment of
Management and the Board of Directors, were surplus to the Company’s primary operations.
Additionally, the Company’s wholly owned subsidiary, Alico-Agri, Ltd., has also engaged in
bulk land sales. The Company has recently taken actions to enhance the planning and strategic
positioning of all Company owned land. These actions include seeking entitlement of the
Company’s land assets in order to preserve rights should the Company choose to develop
property in the future.
5
Subsidiary Operations
The Company has five wholly owned subsidiaries: Agri-Insurance Company, Ltd. (“Agri”),
Alico-Agri, Ltd. (“Alico-Agri”), Alico Plant World, LLC (“Plant World”), Bowen Brothers Fruit
LLC (“Bowen”), and Alico Land Development, Inc (formerly known as Saddlebag Lake Resorts,
Inc.).
Agri
Agri, formed during fiscal 2000, was created to write crop insurance against catastrophic losses
due to weather and disease. Independent third party actuaries compute premiums and coverage
amounts for policies issued by Agri.
Agri hires independent actuaries and underwriters to set premiums for indemnities quoted and to
establish underwriting considerations. Premiums vary depending upon the size of the property, its
age and revenue-producing history, and the proximity of the insured property to known disease-
prone areas or other insured hazards.
Agri directly underwrote catastrophic business interruption coverage for its parent company,
Alico, Inc., insuring all but two of Alico’s citrus groves during fiscal year 2005. The total
coverage under the policy was $34.0 million and the premiums charged for the policy was $1.5
million.
Alico-Agri
Alico-Agri, Ltd. was formed during fiscal year 2003 to manage the real estate holdings of Agri.
The partnership allows Alico to provide management and administrative services so that Agri can
focus on insurance issues. Agri transferred all of its property holdings and the related contracts to
Alico-Agri for a 99% partnership interest. Alico, the managing partner, transferred cash for a 1%
interest in the partnership.
Plant World
In September 2004, the Company, through Alico-Agri, purchased the assets of La Belle Plant
World, Inc. a wholesale grower and shipper of vegetable transplants to commercial farmers.
The purchase price was $4.9 million for the land, office building, greenhouses and associated
equipment. Alico Plant World, LLC was set up as a wholly owned subsidiary of Alico-Agri,
Ltd. The assets of Plant World were purchased to diversify Alico’s agricultural operations and to
leverage Alico’s existing relationships with the farming community.
Bowen
Alico, through its newly formed subsidiary Bowen, purchased the assets of Bowen Brothers
Fruit Co., Inc. for $1.9 million in February 2006. The purchase was made to provide Alico with
additional marketing expertise and the ability to harvest its own fruit crop.
6
Alico Land Development
Alico Land Development, Inc. (formerly known as Saddlebag Lake Resorts, Inc.) has been active
in the subdivision, development and sale of real estate since its inception in 1971. Alico Land
Development has developed and sold two subdivisions near Frostproof, Florida. The Company
has recently taken actions to enhance the planning and strategic positioning of all Company
owned land. These actions include seeking entitlement of the Company’s land assets in order to
preserve rights should the Company choose to develop property in the future.
The financial results of the operations of these subsidiaries are consolidated with those of the
Company. Intercompany activities and balances are eliminated in consolidation. (See Note 1 to
the Consolidated Financial Statements.)
Segments
The Company engages in a variety of agricultural pursuits as well as other land management
activities. For further information concerning segments please refer to Note to the
Consolidated Financial Statements.
Agricultural Operations
Bowen Brothers
Bowen’s operations include harvesting, hauling and marketing citrus for both Alico and other
outside growers. Bowen’s operations also include the purchase and resale of citrus fruit. Bowen
Brothers was purchased in February 2006 to provide Alico with additional marketing expertise
and the ability to harvest its own fruit crop. During fiscal year 2007 and 2006, Bowen harvested
approximately 2.3 million and 900 thousand boxes of Alico’s fruit, respectively. Bowen
harvested 2.0 million and 2.7 million boxes of fruit for third parties during fiscal years 2007 and
2006, respectively.
Citrus Groves
Alico’s Citrus Grove operations consist of cultivating citrus trees in order to produce citrus for
delivery to the fresh and processed citrus markets. Approximately 10,582 acres of citrus were
grown and harvested during the 2006-07 season. Since 1983 the Company had maintained a
marketing contract covering the majority of the Company’s citrus crop with Ben Hill Griffin,
Inc. (Griffin), a Florida corporation. The agreement provided for modifications to meet changing
market conditions and provides that either party could terminate the contract by furnishing
advance written notice prior to the first day of August before each fruit season. Notice was served
in a timely fashion in fiscal year 2005, and accordingly the fruit marketed under the terms of this
contract was completed during fiscal year 2007. Under the terms of the contract, the Company’s
fruit was packed and/or processed and sold along with fruit from other growers, including Ben
Hill Griffin, Inc. The proceeds, less costs and a profit margin, are distributed on a pro rata basis as
the finished product is sold.
During the year ended August 31, 2007, approximately 34% of the Company’s fruit crop was
marketed under this agreement, as compared to 78% for the year ended August 31, 2006 and 76%
for the year ended August 31, 2005.
7
Sugarcane
Alico’s sugarcane operations consist of cultivating sugarcane for sale to a sugar processor. The
crop is harvested by a co-op, proportionately owned by sugarcane growers, including Alico. The
Company had 10,254 acres, 10,138 acres, and 10,580 acres of sugarcane in production during
fiscal years 2007, 2006, and 2005, respectively. The 2007, 2006, and 2005 fiscal year crops
yielded approximately 290,000, 272,000 and 319,000 gross tons, respectively. An additional
3,007 acres of planted cane was not yet mature for harvest during fiscal year 2007. Since the
inception of its sugarcane program in 1988, the Company has sold 100% of its product through
a pooling agreement with United States Sugar Corporation, a local Florida sugar mill. Under
the terms of the pooling agreement, the Company’s sugarcane is processed and sold along with
sugarcane from other growers. The proceeds, less costs and a profit margin, are distributed on a
pro rata basis as the finished product is sold.
Cattle
The Company’s cattle operations, located in Hendry and Collier Counties, Florida, is engaged
primarily in the production of beef cattle and the raising of replacement heifers. The breeding
herd consists of approximately 11,444 cows, bulls and replacement heifers. Approximately 68%
of the herd is from one to five years old, while the remaining 32% are at least six years old. The
Company primarily sells to packing and processing plants in the United States. The Company
also sells cattle through local livestock auction markets and to contract cattle buyers in the
United States. These buyers provide ready markets for the Company’s cattle. In the opinion of
Management, the loss of any one or a few of these processing plants and/or buyers would not
have a material adverse effect on the Company’s cattle operation.
Plant World
In September 2004, in order to diversify Alico’s agricultural operations and to leverage Alico’s
existing relationships with the farming community, the Company formed a subsidiary, Alico
Plant World and purchased the assets of a wholesale grower and shipper of commercial vegetable
transplants to commercial farmers. Plant World’s infrastructure covers approximately 50 acres of
land. During fiscal years 2007, 2006 and 2005, Plant World shipped approximately 64.2 million,
85.8 million and 69.9 million vegetable transplants, respectively, to various farmers in several
states. The Company is also growing various ornamental varieties of plants in order to improve
margins in its nursery operations.
Vegetables
In fiscal year 2006 the Company began growing vegetables. In fiscal year 2007, the Company
harvested 218,063 crates of corn from 809 acres and 124,642 bushels of beans from 878
acres. During fiscal year 2006, the Company planted 500 acres of sweet corn and 500 acres of
green beans. The corn crop produced approximately 119,000 crates, and the beans produced
approximately 77,000 bushels.
In December of 2006, the Company entered into a joint venture with J&J Produce, Inc. of
Loxahatchee, Florida, to farm cucumbers, squash and zucchini on Company property. Under the
terms of the joint venture, Alico and J&J each own 50% of the newly formed Alico-J&J, LLC.
Each member shares equally in the management and profits of the venture. Approximately 140
acres were harvested by the joint venture in fiscal year 2007, producing a yield of 56,725 bushels.
Alico’s portion of the joint venture’s loss during fiscal year 2007 was $57 thousand and has been
included with the vegetable segment in the consolidated statement of operations.
8
Sod
The Company is also engaged in the cultivation of sod for landscaping purposes. The Company
had 463, 472 and 472 acres of sod in production during fiscal years 2007, 2006 and 2005,
respectively. The Company harvested approximately 12.5 million, 12.6 million, and 4.8 million
square feet of cultivated sod in fiscal years 2007, 2006 and 2005, respectively. The Company is
currently developing additional sod acreage. The Company entered into an agreement in fiscal
year 2006 with a United States sod wholesaler to market its crop. Additionally, the Company
began selling uncultivated sod (bahia) to local landscapers from its pastures in fiscal year 2005.
The Company harvested approximately 51.9 million, 15.9 million and 1.8 million square feet of
uncultivated sod during fiscal years 2007, 2006 and 2005, respectively.
Native trees and shrubs
A small percentage of the Company’s properties are classified as timberlands. Thinning of timber
began in fiscal year 2006 and was completed during fiscal year 2007. Additionally the Company
sells sabal palms, palm fans, oak trees and other horticultural commodities growing naturally on
the property. These products are sold to landscaping companies in Florida. The Company does not
incur any of the harvesting expenses for any of its tree or shrub sales.
Non Agricultural Operations
Mining Operations: Rock and Sand
Prior to July 2005, the Company leased a portion of its property in Lee County, Florida to CSR
America, Inc. of West Palm Beach, Florida for the mining and production of rock, aggregate,
sand, base rock and other road building and construction materials.
Royalties received for these products are based on a percentage of the F.O.B. plant sales price.
The Company sold the majority of the property in Lee County where the mines were located
in July 2005. A contract is pending for the sale of the remaining Lee County property. The
Company does not anticipate any additional royalties from this property.
In May 2006, the Company paid $10.6 million to purchase a 526 acre riverfront mine site for
rock and fill in Glades County, Florida. The Company has allocated approximately 54% of
the purchase price to the rock and sand reserves, with the remaining 46% of the purchase price
allocated as residual land value based on the present value of the expected rock royalties over 20
years and the expected residual value of the property after that time. Rock and sand reserves are
depleted and charged to cost of goods sold proportionately as the property is mined.
Additionally, the Company is currently seeking a permit for a rock mine on its Hendry County
property. Other properties are currently being evaluated for mine sites.
Land Rentals for Grazing, Agricultural, Oil Exploration and Other Uses
The Company rents land to others on a tenant-at-will basis, for grazing, farming, oil exploration
and recreational uses. The Company will continue to develop additional land to lease for
farming as strategically advantageous and profitable. There were no significant changes in the
method of rental for these purposes during the past fiscal year.
9
Competition
As indicated, the Company is primarily engaged in a variety of agricultural and nonagricultural
activities, all of which are in highly competitive markets. For instance, citrus is grown in foreign
countries and several states, the most notable of which are: Brazil, Florida, California, and Texas.
Beef cattle are produced throughout the United States and domestic beef sales also compete with
imported beef. Sugarcane products compete with products from sugar beets in the United States
as well as imported sugar and sugar products from foreign countries. Sod is produced throughout
the United States, as are vegetables and vegetable transplants. Forest and rock products are
produced in most parts of the United States. Leasing of land is also widespread.
The Company’s share of the United States market for citrus, sugarcane, cattle, sod, vegetables,
vegetable transplants, mining and forest products is less than 3%.
Environmental Regulations
The Company’s operations are subject to various federal, state and local laws regulating the
discharge of materials into the environment. Management believes the Company is in compliance
with all such rules and such compliance has not had a material effect upon capital expenditures,
earnings or the Company’s competitive position.
While compliance with environmental regulations has not had a material economic effect on
the Company’s operations, executive officers are required to spend a considerable amount of
time monitoring these matters. In addition, there are ongoing costs incurred in complying with
permitting and reporting requirements.
Employees
At August 31, 2007, the Company had a total of 228 full-time employees classified as follows:
Bowen 15; Citrus 82; Sugarcane 12; Ranch 13; Plant World 21; Vegetables 9; Sod 6; Real Estate
2; Leasing 1; Facilities Maintenance Support 40; General and Administrative 27. Management
is not aware of any efforts by employees or outside organizers to create any type of labor union.
Management believes that the employer/employee relationship environment is such that labor
organization activities are unlikely to occur.
Seasonal Nature of Business
The Company’s business operations are predominantly seasonal in nature. The harvest and sale of
citrus fruit generally occurs in all quarters, but is more concentrated during the second and third
fiscal quarters. Sugarcane is harvested during the first, second and third fiscal quarters. Vegetable
harvest and sales generally occur in the first, second and third fiscal quarters. Vegetable
transplant sales occur primarily in the first, second and third fiscal quarters. Other segments of the
Company’s business such as its cattle and sod sales, timber, mining and leasing operations, tend
to be recurring rather than seasonal in nature.
Capital resources and raw materials
Management believes that the Company will be able to meet its working capital requirements
for the foreseeable future with internally generated funds. Additionally, the Company has credit
commitments that provide for revolving credit that is available for the Company’s general use.
Raw materials needed to propagate the various crops grown by the Company are readily available
from local sources.
10
Available Information
The Company’s internet address is: http://www.alicoinc.com. The Company files reports with
the Securities Exchange Commission (“SEC”) as required by SEC rules and regulations on
Form 8-K, Form 10-Q, Form 10-K and the annual proxy statement. These reports are available
to the public to read and copy at the SEC’s Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C.
The Company is an electronic filer with the SEC and these reports are available through the
SEC internet site (http:www.sec.gov), and through the Company’s website as soon as reasonably
practicable after filing with the SEC. Copies of documents filed with the SEC are also available
free of charge upon request.
Item 1A. Risk Factors
The Company’s operations involve varying degrees of risk and each investor should consider
the specific risks and speculative features inherent in and affecting the business of the Company
before investing in the Company. In considering the following risk and speculative factors, an
investor should realize that there is a possibility of losing his or her entire investment.
The Company’s financial condition and results of operations could be affected by the risk factors
discussed below. These factors may also cause actual results to differ materially from the results
contemplated by the forward looking statements in Management’s Discussion and Analysis.
The list of risks below is not intended to be all inclusive. A complete listing of risks is beyond
the scope of this document. However, in contemplating the financial position and results
of operations of the Company, investors should carefully consider, among other factors, the
following risk factors:
General
The Company has not fully settled its appeal with the IRS.
The Company has been in negotiations with IRS Appeals regarding a thirty day letter issued by
the IRS pertaining to audits of Alico and its Agri Insurance subsidiary for the tax years 2000
through 2004. As a result of the negotiations, the Company has paid a total of $66.2 million,
representing $41.4 million of additional taxes, $20.7 million of interest, and $4.1 million of
penalties. The Company does not believe that any additional payments will be required to settle
the matter with the IRS and has submitted a closing agreement to IRS Appeals; however, IRS
Appeals has not yet executed the closing agreement and could take a position requiring the
Company to remit additional funds.
The Company has a 50.5% stockholder and a limited public float which could adversely
affect the price of its stock and restrict the ability of the minority shareholders to have a
voice in corporate governance.
Atlantic Blue Group, Inc. (Atlanticblue) (formerly Atlantic Blue Trust, Inc.) is the owner of
approximately 50.5% of the Company’s common stock. Accordingly, the Company’s common
stock is thinly traded and its market price may fluctuate significantly more than stocks with a
larger public float. Additionally by virtue of its ownership percentage, Atlanticblue is able to
elect all directors and, consequently, is deemed to control the Company. While Atlanticblue
has issued a governance letter dated September 29, 2006 reaffirming its commitment to
maintaining a majority of independent directors on Alico’s Board of Directors, this commitment
may be terminated at any time upon 30 days prior written notice. The Company does not have
cumulative voting. Accordingly, stockholders of the Company other than Atlanticblue have no
effective control over who the management and directors of the Company are or will be.
The Company manages its properties in an attempt to capture its highest and best use and
customarily does not sell property until it determines that the property is surplus to its
agricultural activities by reason of its potential for industrial, commercial or residential
use. The Company has little control over when this occurs as real estate sales are primarily
market driven.
The Company’s goal for its land management program is to manage and selectively improve its
lands for their most profitable use. To this end, the Company continually evaluates its properties
focusing on soil capabilities, subsurface composition, topography, transportation, availability of
markets for its crops and the climatic characteristics of each of the tracts. While the Company
is primarily engaged in agricultural activities, when land is determined to be better suited to
industrial, commercial or residential use, the Company has classified the property as surplus to
its agricultural activities and sold it. The Company’s land management strategy is thus a long
term strategy to acquire, hold and manage land for its best use, selling surplus land at opportune
times and in a manner that would maximize the Company’s profits from such surplus tracts. The
timing for when agricultural lands become best suited for industrial, commercial or residential use
depends upon a number of factors which are beyond the control of the Company such as:
n population migration;
n national, regional and local economic conditions;
n conditions in local real estate markets (e.g., supply of land verses demand);
n competition from other available property;
n current level of, or potential availability of roads and utilities;
n availability of governmental entitlements;
n government regulation and changes in real estate, zoning, land use,
environmental or tax laws;
n interest rates and the availability of financing, and;
n potential liability under environmental and other laws.
The Company is not able to predict when its properties will become best suited for non-
agricultural use and has limited ability to influence this process. Additionally, changes from time
to time in any or a combination of these factors could result in delays in sales, the Company’s
ability to sell tracts which are determined to be surplus or its ability to realize optimum pricing
from such sales.
The Company carries large receivables from seller-financed sales of large tracts of surplus
land the collectibility of which is subject to credit risk relating to debtors.
The Company’s sale of surplus lands often involves buyer financing provided by the Company.
In addition to the cash deposit paid by a buyer of surplus land, the Company at times takes a
mortgage for the unpaid balance of the purchase price of the land sales contract. The collectibility
of the amounts owed and the likelihood that the Company will achieve the profitability promised
by any sales contract is dependent on the creditworthiness of the mortgagors, which often
depends upon their continued financial success. The purchasers of the surplus tracts are often
developers, whose success is in turn directly affected by multiple factors in the national and local
real estate markets, including but not limited to interest rates, demand for housing, competition
from other available land, and unanticipated costs of construction. Depending on the magnitude
of its debt to the Company, a mortgagor’s default on a sales contract or the bankruptcy of any
material purchaser of surplus land could have a materially adverse effect on the Company.
The Company is subject to environmental liability by virtue of owning significant holdings
of real estate assets.
The Company faces a potential for environmental liability by virtue of its ownership of real
property. If hazardous substances (including herbicides and pesticides used by the Company or
by any persons leasing the Company’s lands) are discovered on or emanating from any of the
Company’s lands and the release of such substances presents a threat of harm to the public health
or the environment, the Company may be held strictly liable for the cost of remediation of these
hazardous substances. In addition, environmental laws that apply to a given site can vary greatly
according to the site’s location, its present and former uses, and other factors such as the presence
of wetlands or endangered species on the site. Although the Company purchases insurance when
it is available for environmental liability, these insurance contracts may not be adequate to cover
such costs or damages or may not continue to be available to the Company at prices and terms
that would be satisfactory. It is possible that in some cases the cost of compliance with these
environmental laws could exceed the value of a particular tract of land or be significant enough
that it would have a materially adverse effect on the Company.
The Company has three large customers that account for 46% of revenues.
For the fiscal year ended August 31, 2007, the Company’s three largest customers accounted
for approximately 46% of operating revenues, with its largest customer accounting for 21% of
operating revenue. The Company’s largest customer is U.S. Sugar, for whom the Company
grows raw sugarcane. Additionally, the Company sells citrus to Southern Gardens, a wholly
owned subsidiary of U.S. Sugar. The balance of the sales concentration is attributable to
citrus contracts with Tropicana (a subsidiary of PepsiCo) and Ben Hill Griffin, Inc. These
marketing arrangements involve marketing pools which allow the contracting party to market
the Company’s product in conjunction with the product of other entities in the pool and pay
the Company a proportionate share of the resulting revenue from the sale of the entire pooled
product. While the Company believes that it can replace these arrangements with other marketing
alternatives, it may not be able to do so quickly and the results may not be as favorable as the
current contracts.
Agricultural Risks - General
Agricultural operations generate a large portion of the Company’s revenues. Agriculture
operations are subject to a wide variety of risks including product pricing due to variations in
supply and demand, weather, disease, input costs and product liability.
3
Agricultural products are subject to supply and demand pricing which is not predictable.
Because the Company’s agricultural products are commodities, the Company is not able to predict
with certainty what price it will receive for its products; however, its costs are relatively fixed.
Additionally, the growth cycle of such products in many instances dictates when such products
must be marketed which may or may not be advantageous in obtaining the best price. Excessive
supplies tend to cause severe price competition and lower prices throughout the industry affected.
Conversely, shortages may cause higher prices. Shortages often result from adverse growing
conditions which can reduce available product of growers in affected growing areas while not
affecting others in non-affected growing areas. Since multiple variables which can affect pricing
are incurred before pricing and supply are known, the Company cannot accurately predict or
control from year to year what its profits or losses from agricultural operations will be.
The Company’s agricultural assets are concentrated and the effects of adverse weather
conditions such as hurricanes can be exaggerated.
The Company’s agricultural operations are concentrated in south Florida counties with more than
80% of its agricultural lands located at Alico Ranch in Hendry County. All of these areas are
subject to occasional periods of drought, excess rain, flooding, and freeze. Crops require water
in different quantities at different times during the growth cycle. Accordingly, too much or too
little water at any given point can adversely impact production. While the Company attempts to
mitigate controllable weather risks through water management and crop selection, its ability to
do so is limited. The Company’s operations in south and central Florida are also subject to the
risk of hurricanes. Hurricanes have the potential to destroy crops and impact citrus production
through the loss of fruit and destruction of trees either as a result of high winds or through the
spread of wind blown disease. The Company was impacted by hurricanes during fiscal years
2006, 2005 and 2004 and sustained losses relating to the storms during all three fiscal years. The
Company seeks to minimize hurricane risk by the purchase of insurance contracts, but a portion
of the Company’s crops remain uninsured. Because the Company’s agricultural properties are
located in relative close proximity to each other, the impact of adverse weather conditions may be
magnified in the Company’s results of operations.
Water Use Regulation restricts the Company’s access to water for agricultural use.
The Company’s agricultural operations are dependent upon the availability of adequate surface
and underground water needed to produce its crops. The availability of water for use in irrigation
is regulated by the State of Florida through water management districts which have jurisdiction
over various geographic regions in which the Company’s lands are located. Currently, the
Company has permits for the use of underground and surface water which are adequate for its
agricultural needs. Surface water in Hendry County, where much of the Company’s agricultural
land is located, comes from Lake Okeechobee via the Caloosahatchee River and the system
of canals used to irrigate such land. Since the Army Corps of Engineers controls the level of
Lake Okeechobee, this organization ultimately determines the availability of surface water even
though the use of water has been permitted by the State of Florida through the water management
district. Recently the Army Corps of Engineers decided to lower the permissible level of Lake
Okeechobee in response to concerns about the ability of the levees surrounding the lake to
restrain rising waters which could result from hurricanes. Changes in permitting for underground
or surface water use during times of drought, because of lower lake levels, may result in shortages
of water for agricultural use by the Company and could have a materially adverse effect on the
Company’s agricultural operations and financial results.
4
The Company’s citrus groves are subject to damage and loss from disease including but not
limited to citrus canker and citrus greening diseases.
The Company’s citrus groves are subject to damage and loss from diseases such as Citrus Canker
and Citrus Greening. Each of these diseases are widespread in Florida and the Company has
found instances of Citrus Canker and/or Citrus Greening in several of its groves. Both diseases
are present in areas where Company groves are located. There is no known cure for Citrus
Canker at the present time although some pesticides inhibit the development of the disease. The
disease is spread by contact with infected trees or by wind blown transmission. The Company’s
policy is to destroy trees which become infected with this disease or with Citrus Greening disease.
The Company maintains an inspection program to discover infestations early. Citrus Greening
destroys infected trees and is spread by psyllids. The Company utilizes a pesticide program to
control these hosts. There is no known pesticide or other treatment for Citrus Greening once trees
are infected at the present time. Both of these diseases pose a significant threat to the Florida
Citrus industry and to the Company’s citrus groves. Wide spread dissemination of these diseases
in the Company’s groves could cause a material adverse effect to the Company’s operating results
and citrus grove assets.
Pesticide and herbicide use by the Company or its lessees could create liability for the
Company.
The Company and some of the parties to whom the Company leases land for agricultural
purposes, use herbicides, pesticides and other hazardous substances in the operation of their
businesses. All pesticides and herbicides used by the Company have been approved for use by
the proper governmental agencies with the hazards attributable to each substance appropriately
labeled and described. The Company applies such chemicals strictly in accordance with the
labeling. However, the Company does not have any knowledge or control over the chemicals
used by third parties who lease the Company’s lands for cultivation. It is possible that some
of these herbicides and pesticides could be harmful to humans if used improperly, or that there
may be unknown hazards associated with such chemicals despite any contrary government or
manufacturer labels. The Company might have to pay the costs or damages associated with the
improper application, accidental release or the use or misuse of such substances.
Changes in immigration laws or enforcement of such laws could impact the ability of the
Company to harvest its crops.
The Company engages third parties to provide personnel for its harvesting operations. The
personnel engaged by such companies typically come from pools composed of immigrant labor.
The availability and number of such workers is subject to decrease if there are changes in the U.S.
immigration laws or by stricter enforcement of such laws. The scarcity of available personnel
to harvest the Company’s agricultural products could cause the Company’s harvesting costs
to increase or could lead to the loss of product that is not timely harvested which could have a
materially adverse effect upon the Company.
Changing public perceptions regarding the quality, safety or health risks of Alico’s
agricultural products can affect demand and pricing of such products.
The general public’s perception regarding the quality, safety or health risks associated with
particular food crops the Company grows and sells could reduce demand and prices for some of
the Company’s products. To the extent that consumer preferences evolve away from products
the Company produces for health or other reasons, and the Company is unable to modify its
products or to develop products that satisfy new customer preferences, there could be decreased
5
demand for the Company’s products. Even if market prices are unfavorable, produce items which
are ready to be or have been harvested must be brought to market. Additionally, the Company
has significant investments in its citrus groves and cannot easily shift to alternative products for
this land. A decrease in the selling price received for the Company’s products due to the factors
described above could have a materially adverse effect on the Company.
The Company faces significant competition in its agricultural operations.
The Company faces significant competition in its agricultural operations both from domestic
and foreign producers and does not have any branded products. Foreign growers generally
have lower cost of production, less environmental regulation and in some instances greater
resources and market flexibility than the Company. Because foreign growers have great flexibility
as to when they enter the U. S. market, the Company cannot always predict the impact these
competitors will have on its business and results of operations. The competition the Company
faces from foreign suppliers of sugar and orange juice is mitigated by quota restriction on sugar
imports imposed by the U. S. government and by a governmentally imposed tariff on U. S.
orange imports. A change in the government’s sugar policy allowing more imports or a reduction
in the U.S. orange juice tariff would adversely impact the Company and negatively impact the
Company’s results of operations.
Item 1B. Unresolved Staff Comments
None.
16
Item 2. Properties.
At August 31, 2007, the Company owned a total of 135,466 acres of land located in five counties
in Florida. Acreage in each county and the primary classification with respect to the present use of
these properties is shown in the following table:
Alico, Inc. & Subsidiaries
Land Use Summary
August 31, 2007
Total
Hendry
Polk
Collier
Glades
Lee
Citrus:
Producing acres
Support and nonproductive*
10,582
6,303
3,048
2,317
3,405
789
4,129
3,197
Total Citrus
Sugarcane:
16,885
5,365
4,194
7,326
Producing acres
Support and nonproductive*
10,254
11,541
10,254
11,541
Total Sugarcane
21,795
21,795
Ranch:
Improved pasture
Semi-improved pasture
Native pasture
Support and nonproductive*
21,201
21,752
19,513
24,263
20,906
20,038
11,846
23,207
-
-
-
95
602
5,949
376
-
-
-
-
1,112
1,718
680
Total Ranch
Farming:
86,729
75,997
7,222
3,510
Leased acres
Support and nonproductive*
4,886
1,008
4,886
1,008
Total farming
5,894
5,894
Sod:
Producing acres
Support and nonproductive*
2,193
363
2,193
363
Total sod
2,556
2,556
-
-
-
-
-
-
Rock and Sand Mining
Commercial & Residential
526
1,081
-
54
-
66
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
526
-
-
961
Total
135,466
111,661
11,482
10,836
526
961
* Includes buildings, roads, water management systems, fallow lands and wetlands.
17
Of the above lands, the Company utilizes approximately 21,000 acres of improved pasture plus
approximately 49,000 acres of semi-improved and native pasture for cattle production. Much of
the land is also leased for multi-purpose use such as oil exploration, farming and recreation.
From the inception of the Company’s initial development program in 1948, the goal has been
to develop the lands for their most profitable use. Prior to implementation of the development
program, detailed studies were made of the properties focusing on soil capabilities, topography,
transportation, availability of markets and the climatic characteristics of each of the tracts. Based
on these and later studies, the use of each tract was determined. Management believes that the
Company lands are suitable for agricultural, residential and commercial uses. In the past some of
the land was considered surplus to the agricultural needs of the Company and, as indicated under
Item 1 of this report, sales of such surplus property were made from time to time.
The Company utilizes consultants to work with senior management and the Board of Directors
to enhance the planning and strategic positioning of all Company owned land. These consultants
also oversee the entitlement of the Company’s land assets in order to preserve these rights should
the Company choose to develop the property in the future.
Management believes that each of the major agricultural programs is adequately supported by
equipment, buildings, fences, irrigation systems, drainage systems and other amenities required
for the operation of the projects.
Item 3. Legal proceedings
Alico formed a wholly owned insurance subsidiary, Agri in June of 2000. Agri was formed
in response to the lack of insurance availability, both in the traditional commercial insurance
markets and governmental sponsored insurance programs, suitable to provide coverage for the
increasing number and potential severity of agricultural events. Alico’s goal included not only
pre-funding its potential exposures but also to attempt to attract new underwriting capital if it was
successful in profitably underwriting its own potential risks as well as similar risks of its historic
business partners.
Alico capitalized Agri by contributing real estate located in Lee County, Florida. The real estate
was transferred at its historical cost basis. Agri received a determination letter from the Internal
Revenue Service (IRS) stating that Agri was exempt from taxation provided that net premium
levels, consisting only of premiums with third parties, were below an annual stated level ($350
thousand). Third party premiums remained below the stated annual level. As the Lee County
real estate was sold, substantial gains were generated in Agri, creating permanent book/tax
differences.
The Company has been in negotiations with IRS Appeals regarding a thirty day letter issued by
the IRS pertaining to audits of Alico and its Agri-Insurance subsidiary for the tax years 2000
through 2004. As a result of the negotiations, the Company has paid a total of $66.2 million,
representing $41.4 million of additional taxes, $20.7 million of interest, and $4.1 million of
penalties. The Company does not believe that any additional payments will be required to settle
the matter with the IRS and has submitted a closing agreement to IRS Appeals; however, IRS
Appeals has not yet executed the closing agreement and could take a position requiring the
Company to remit additional funds.
18
When the IRS issue is ultimately settled, the Company expects to remit approximately $6.4
million of state taxes. The interest on these taxes is estimated at $3.7 million at August 31, 2007
and will continue to accrue until full payment is made.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
9
PART II
Item 5. Market for the Registrant’s Common Stock and Related Stockholder Matters.
Common Stock Prices
The common stock of Alico, Inc. is traded on the NASDAQ Stock Market, LLC (“NASDAQ”)
under the symbol ALCO. The high and low prices as reported by NASDAQ, by fiscal quarter,
during the years ended August 31, 2007 and 2006 are presented below:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2007
Price
High
$62.92
$57.75
$62.24
$65.00
Low
$54.03
$47.04
$46.25
$45.86
2006
Price
High
$51.95
$47.50
$58.76
$59.35
Low
$42.06
$42.47
$42.04
$48.40
Approximate Number of Holders of Common Stock
As of October 31, 2007 there were approximately 417 holders of record of the Company’s
Common Stock as reported by the Company’s transfer agent.
Dividend Information
Dividends declared during the last two fiscal years were as follows:
Record Date
Payment Date
Amount Paid Per Share
September 30, 2005
December 31, 2005
March 31, 2006
June 30, 2006
September 29, 2006
December 29, 2006
March 30, 2007
June 29, 2007
October 15, 2005
January 15, 2006
April 15, 2006
July 15, 2006
October 15, 2006
January 15, 2007
April 16, 2007
July 16, 2007
$0.250
$0.250
$0.250
$0.250
$0.275
$0.275
$0.275
$0.275
On October 15, 2007, the Company paid a dividend of $0.275 per share to shareholders of record
as of September 28, 2007. At a Board of Directors meeting held on September 28, 2007 the
Directors declared a quarterly dividend of $0.275 per share payable to stockholders of record as
of December 29, 2007, with payment expected on or about January 15, 2008.
The Company’s ability to pay dividends in the immediate future is dependent on a variety of
factors including earnings and the financial condition of the Company. See Item 7, Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
20
Issuer Purchases of Equity Securities
The following table presents information with respect to purchases of common stock of the
Company made during the three months ended August 31, 2007 by the Company or any
“affiliated purchaser” of the Company as defined in rule 10B-18(a)(3) under the Exchange Act.
Total
number of
shares
purchased
-
-
7,000
7,000
Average
price paid
per share
-
-
51.98
51.98
$
Number of Shares
purchased as part
of publicly
announced plans or
programs () ()
Maximum number
of shares that can
yet be purchased
under the plan or
programs
-
-
7,000
7,000
-
-
87,230
87,230
Period
06/01/07 - 06/30/07
07/01/07 - 07/31/07
08/01/07 - 08/31/07
(1) On November 17, 2005 the Company publicly announced that its Board of Directors
had authorized a plan to purchase up to 31,000 shares of the Company’s common stock
through August 31, 2007 for the purpose of funding its Director Stock Compensation
Plan.
(2) During January 2007, Alico announced that its Board of Directors had authorized the
repurchase of up to 100,000 shares of the Company’s common stock through August 31,
2010, in addition to the previously announced repurchases, for the purpose of funding
restricted stock grants under its 1998 Incentive Equity Plan in order to provide restricted
stock to eligible Senior Managers to align their interests with those of the Company’s
shareholders.
Equity Compensation Arrangements
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 authorized grants of
shares or options to purchase up to 650,000 shares of authorized but unissued common stock.
On April 17, 2006 the Company hired a President and Chief Operating Officer. As a portion of
the total compensation package, the Board awarded 20,000 shares of restricted stock. Under the
terms of the agreement, the shares will vest 25% on April 17, 2010 and continue to vest 25% per
year until they are fully vested. The fair value per share was $45.25 on the date of the award.
On July 17, 2006 the Company hired a Vice President of Real Estate. As a portion of the total
compensation package, the Board awarded 13,000 shares of restricted stock. Under the terms of
the agreement, the shares were to vest 25% on July 17, 2010 and continue to vest 25% per year
until they were fully vested. The fair value per share was $53.13 on the date of the award. The
grant was forfeited due to the resignation of the individual during the third quarter of fiscal year
2007. Since none of the shares granted on July 17, 2006 had vested, the previously recognized
compensation cost of $93 thousand was reversed during the third quarter of fiscal year 2007.
On October 27, 2006, the Board awarded 20,000 shares of restricted stock to the Chief Executive
Officer as additional compensation. Under the terms of the agreement, 4,000 shares vested
effective August 31, 2006 and 4,000 vested effective August 31, 2007. The remaining shares will
vest 4,000 per year annually until they are fully vested. The fair value per share was $61.96 on
the date of the award.
During January 2007, Alico announced that its Board of Directors had authorized the repurchase
of up to 100,000 shares of the Company’s common stock through August 31, 2010, in addition
to previously announced repurchases, for the purpose of funding restricted stock grants under
its 1998 Incentive Equity Plan in order to provide restricted stock to eligible Senior Managers to
align their interests with those of the Company’s shareholders.
The stock repurchases will be made on a quarterly basis between January 2007 and August 31,
2010 through open market transactions, at times and in such amounts as the Company’s broker
determines, subject to the provisions of a 10b5-1 Plan which the Company has adopted for such
purchases. The timing and actual number of shares repurchased will depend on a variety of
factors including price, corporate and regulatory requirements and other market conditions. All
purchases will be made subject to restrictions of Rule 10b-18 relating to volume, price and timing
so as to minimize the impact upon the market of the purchases for the Company’s shares. The
Company does not anticipate that any purchases under the Plan will be made from any officer,
director or control person. There are currently no arrangements with any person for the purchase
of the shares. The Company will use internally generated funds to make the purchases. The
Company had previously announced the repurchase of 31,000 shares in order to fund its Director
Compensation plan. In accordance with the approved plans, the Company may purchase an
additional 87,230 shares. Pursuant to these plans, the Company purchased 7,000, 10,843 and
9,927 shares in the open market during the fourth, third and second quarter of fiscal year 2007,
respectively, at an average price of $53.45 per share.
The following schedules detail the various transactions outlined above:
Equity Compensation Plan Information
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a)
Weighted average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in
column (a)
(c)
44,158
$
17.90
273,815
-
-
-
Plan category
Equity compensation
plans approved by
security holders
Equity compensation
plans not approved
by security holders
Total
44,158
$
17.90
273,815
Item 6. Selected Financial Data
Equity Compensation Plan Information
Description
2007
$
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a)
$
Operating revenue
Operating expenses
Income from continuing operations
Plan category
Income from continuing operations
per weighted average common share
Equity compensation
Total Revenue
plans approved by
Total Costs and Expenses
security holders
Income Taxes
Net (loss) Income
Equity compensation
Average Number of Shares Outstanding
plans not approved
Net (loss) Income Per Share
by security holders
Cash Dividend Declared Per Share
Current Assets
Total
Total Assets
Current Liabilities
Item 6. Selected Financial Data
Ratio-Current Assets to Current Liabilities
Working Capital
Long-Term Obligations
Description
Total Liabilities
Stockholder's Equity
Years Ended August 31,
2005
(In Thousands, Except Per Share Amounts)
2004
2006
Number of securities
remaining available
2003
for future issuance
under equity
compensation plans
48,285
$
(excluding securities
43,582
reflected in
4,703
column (a)
(c)
$
44,158
44,158
$
$
$
$
$
$
17.90
134,837
105,135
16,228
55,525
43,179
2,321
52,057
39,306
6,667
77,434
62,693
2,982
Weighted average
exercise price of
outstanding options,
warrants and rights
(b)
0.40
92,594
79,910
6,215
6,469
7,368
0.88
1.03
110,913
262,753
18,078
6.14:1
92,835
103,572
2006
121,650
141,103
0.32
75,384
66,146
3,148
6,090
7,331
0.83
.5
128,977
247,694
17,819
7.24:1
111,158
Years Ended August 31,
85,689
2005
103,508
(In Thousands, Except Per Share Amounts)
144,186
0.92
87,779
59,979
9,987
17,813
7,219
2.47
0.60
125,925
238,242
10,136
12.42:1
115,789
82,908
2004
93,044
145,198
2.20
143,930
124,528
33,246
(13,844)
7,369
(1.88)
1.10
127,216
280,887
17,519
7.26:1
109,697
145,164
2007
161,941
118,946
17.90
$
-
-
$
0.66
66,532
47,448
273,815
6,425
12,659
7,106
1.78
-
0.35
90,204
273,815
216,545
10,124
8.91:1
80,080
80,239
2003
90,363
126,182
$
$
$
$
$
$
$
$
$
52,057
39,306
6,667
55,525
43,179
2,321
77,434
62,693
2,982
per weighted average common share
48,285
134,837
Operating revenue
Operating expenses
43,582
105,135
Alico, through its newly formed subsidiary Bowen, purchased the assets of Bowen Brothers
Income from continuing operations
4,703
16,228
Income from continuing operations
Fruit Co., Inc. for $1.9 million in February 2006. The purchase was made to provide Alico with
0.92
0.66
2.20
additional marketing expertise and the ability to harvest its own fruit crop. Results from Bowen
87,779
66,532
143,930
Total Revenue
have been included for fiscal years 2006 and 2007. For further information concerning Bowen’s
Total Costs and Expenses
47,448
59,979
124,528
operations and assets please refer to Note 11 of the consolidated financial statements.
6,425
9,987
33,246
Income Taxes
12,659
17,813
(13,844)
Net (loss) Income
7,106
7,219
7,369
Average Number of Shares Outstanding
1.78
2.47
(1.88)
Net (loss) Income Per Share
0.35
0.60
1.10
Cash Dividend Declared Per Share
90,204
125,925
127,216
Current Assets
216,545
238,242
280,887
Total Assets
10,124
10,136
17,519
Current Liabilities
8.91:1
12.42:1
7.26:1
Ratio-Current Assets to Current Liabilities
80,080
115,789
109,697
Working Capital
80,239
82,908
145,164
Long-Term Obligations
90,363
93,044
161,941
Total Liabilities
126,182
145,198
118,946
Stockholder's Equity
0.32
75,384
66,146
3,148
6,090
7,331
0.83
.5
128,977
247,694
17,819
7.24:1
111,158
85,689
103,508
144,186
0.40
92,594
79,910
6,215
6,469
7,368
0.88
1.03
110,913
262,753
18,078
6.14:1
92,835
103,572
121,650
141,103
$
Alico, through its newly formed subsidiary Bowen, purchased the assets of Bowen Brothers
Fruit Co., Inc. for $1.9 million in February 2006. The purchase was made to provide Alico with
additional marketing expertise and the ability to harvest its own fruit crop. Results from Bowen
have been included for fiscal years 2006 and 2007. For further information concerning on
Bowen’s operations and assets please refer to Note 11 of the consolidated financial statements.
3
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
Cautionary Statement
Some of the statements in this document include statements about future expectations. Statements
that are not historical facts are “forward-looking statements” for the purpose of the safe harbor
provided by Section 21E of the Exchange Act and Section 27A of the Securities Act. These
forward-looking statements, which include references to one or more potential transactions, and
strategic alternatives under consideration, are predictive in nature or depend upon or refer to
future events or conditions, are subject to known, as well as, unknown risks and uncertainties
that may cause actual results to differ materially from expectations. There can be no assurance
that any future transactions will occur or be structured in the manner suggested or that any such
transaction will be completed. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of future events, new information or otherwise.
When used in this document, or in the documents incorporated by reference herein, the words
anticipate, should, believe, estimate, may, intend, expect, 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 affect 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.
The following discussion focuses on the results of operations and the financial condition of the
Company. This section should be read in conjunction with the Consolidated Financial Statements
and Notes.
Liquidity and Capital Resources
Working capital increased to $109.7 million at August 31, 2007 from $92.8 million at August
31, 2006. As of August 31, 2007, the Company had cash and cash equivalents of $34.8 million
compared to $25.1 million at August 31, 2006. Marketable securities decreased to $46.2 million
from $50.1 million during the same period. The ratio of current assets to current liabilities
increased to 7.26 to 1 at August 31, 2007 from 6.14 to 1 at August 31, 2006. Total assets increased
by $18.1 million to $280.9 million at August 31, 2007, compared to $262.8 million at August 31,
2006.
Management believes that the Company will be able to meet its working capital requirements
for the foreseeable future with internally generated funds. In addition, the Company entered
into a credit facility in fiscal year 2006, which was amended during the fourth quarter of fiscal
year 2007. The commitments under the credit facility provides for revolving credit of up to
$175.0 million. Of the $175.0 million credit commitment, $46.6 million was available for the
Company’s general use at August 31, 2007 (see Note 6 to Consolidated Financial Statements).
4
The Internal Revenue Service (IRS) issued a thirty day letter dated August 14, 2006 pertaining
to audits of Alico for the tax years 2000 through 2004. In the thirty day letter, the IRS proposed
several alternative theories as a basis for its argument that Alico should have reported additional
taxable income in the years under audit. These theories principally related to the formation and
capitalization of the Company’s Agri Insurance subsidiary and its tax exempt status during the
years under audit. The total additional federal taxes, penalties and interest proposed by IRS
exams were in excess of $119.0 million. The Company has been working with IRS appeals to
settle the case and has reached a tentative agreement for the payment of federal taxes, penalties
and interest of approximately $66.2 million. In order to cease additional interest from accruing
on this liability, the Company has paid $66.2 million to the IRS from its revolving credit line.
Based on the contemplated settlement, the Company estimated additional state taxes and interest
of $10.1 million at August 31, 2007 which will be due and payable when the IRS audit is settled.
Further details regarding the settlement, including the future of Agri, are in ongoing negotiations
with the IRS and a proposed closing document has been prepared by the Company’s tax counsel
and provided to IRS Appeals for review. The Company expects full resolution of this matter by
January 2008; however, the Company has executed statute extensions with the IRS for the tax
returns affected until December 31, 2008.
In December 2006, the Company’s subsidiary, Alico-Agri, Ltd. restructured three contracts in
connection with the sale of property in Lee County, Florida. The original contracts were entered
into in 2001 and 2003, respectively, for approximately 5,609 acres. The Company received $7.5
million upon execution of the December 2006 restructured agreements.
Under the terms of the first restructured contract, $3.8 million of the closing proceeds were
applied to the existing mortgage receivable principal balance of $56.6 million and accrued
interest of $1.7 million was added back to the mortgage receivable as additional principal. Four
annual principal plus interest payments of the remaining $54.5 million mortgage will commence
with a scheduled payment of $13.6 million on September 28, 2007. The interest rate was
renegotiated from 2.5% annually to 4.0% annually. The Company is recognizing the gain on the
sale of this parcel under the installment method.
The second contract, for a gross sales price of $63.5 million, was renegotiated to a series of four
annual options with up to four annual extensions. The first option was extended on September
28, 2007. In order to extend the time to exercise the option, the buyer must pay an annual
extension fee equal to 6% of the remaining unexercised sales price.
A third contract, for a gross sales price of $12.0 million, was renegotiated as a sales contract with
a purchase money mortgage. The mortgage provides for interest payments only for a period of
four years followed by four equal annual payments of principal together with accrued interest
thereon. The annual interest rate under the note is 6%. In order to obtain an extension on the
second contract, the third contract must also be extended. There are up to four annual extensions.
The second contract was extended on September 28, 2007.
Due to complications in the permitting process and an overall slowdown in the real estate market,
the Company agreed to restructure the first contract again in September 2007, with the terms to be
effective as of the original closing in July 2005. Under the terms of the restructure, the Company
received $6.8 million on October 22, 2007 representing $445 thousand of principal with the
remaining classified as interest. Additionally, under the terms of the renegotiated agreement,
Alico will receive quarterly interest payments based upon LIBOR, plus a percentage, as well as
$3.5 million of principal on September 28, 2008, $12.0 million principal payments on September
28, 2009 & 2010, and the remaining principal of $26.6 million on September 28, 2011. Payments
due under the second and third contracts were made on September 28, 2007.
5
Overall, gross profits during fiscal year 2008 are expected to be significantly lower than those of
fiscal year 2007. Management expects continued profitability from the Company’s agricultural
operations during fiscal 2008, but at lower overall levels than experienced in fiscal year 2007.
Profits from citrus operations are expected to be reduced from fiscal 2007 levels due to a larger
expected Florida citrus crop. The final Florida orange production forecast for fiscal year 2007
was 128.9 million boxes, a year heavily impacted by hurricanes. The forecast for Florida orange
production is currently 168.0 million boxes. The higher production levels are expected to cause
unit prices and profits for citrus to decline in fiscal 2008.
The Company has implemented cost cutting measures in addition to improved crop rotation
measures in its sugarcane division. The Company has not planted any additional sugarcane
acreage. As a result, sugarcane profits are expected to be slightly lower in fiscal year 2008 than
fiscal year 2007.
A severe drought affected the Company’s ranch during the spring of fiscal year 2007 which
caused the Company to reduce its cattle herd in order to provide proper care for the remaining
animals. As a result, the cattle herd has been reduced by approximately 2,000 animals from
its fiscal year 2006 levels. This reduction in cattle herd size will reduce the number of animals
available for sale in fiscal year 2008. The Company is working to improve its pasture lands and
facilities to generate better conception rates and carrying capacity for the future. The results
of these efforts however, will not affect the Company’s cattle operations in fiscal year 2008.
Accordingly, the cattle division is expected to perform slightly better than breakeven in fiscal
year 2008.
The Company began farming vegetables in fiscal year 2006 and will continue to expand that
segment during fiscal year 2008. Vegetable profits have been strong during the past two fiscal
years, and are expected to increase during fiscal year 2008 as vegetable acreage is expanded. The
Company is increasing its vegetable operations through its 50% owned subsidiary, Alico-J&J,
LLC, which is a joint venture with an experienced produce marketer.
Sod profits are expected to decline in fiscal year 2008, due to decreased demand for cultivated
sod varieties caused by a slowdown in the housing market. General and administrative expenses
are expected to decrease during fiscal year 2008. The Company has hired an internal audit staff
in order to lower the cost of SOX compliance. Additionally, costs for legal and consulting fees
are expected to decrease after the conclusion of the IRS appeal. Upon final settlement of the IRS
appeal, the Company’s effective tax rate is expected to decrease.
Cash outlays for land, equipment, buildings, and other improvements totaled $9.1 million
during the year ended August 31, 2007, compared to $33.2 million during fiscal year 2006, and
$12.9 million in fiscal year 2005. In May 2006, Alico purchased 526 acres of riverfront mining
property in Glades County, Florida for $10.6 million. In February 2006, Alico, through its
newly formed subsidiary Bowen, purchased the assets of Bowen Brothers Fruit Co., Inc. for $1.9
million. In October 2005, the Company through Alico-Agri, purchased 291 acres of lake-front
property in Polk County, Florida, for $9.2 million. Due to damages incurred in the hurricane
in fiscal year 2006, the Company had to replace 9 large barns, cattle feed structures, several
employee houses and numerous greenhouses. Additionally, the Company incurred the normal
costs of capital maintenance of its sugarcane plantings, raising replacement heifers for the cattle
herd and replacing equipment. In September 2004, the Company, through Alico-Agri Ltd.,
purchased the assets of La Belle Plant World, Inc. The purchase price was $4.9 million for the
land, office building, greenhouses and associated equipment.
26
The Company paid quarterly dividends of $0.275 per share on October 15, 2006, January 15,
2007, April 16, 2007 and July 16, 2007. On October 15, 2007 the Company paid a quarterly
dividend of $0.275 per share to shareholders of record as of September 28, 2007. At its Board
meeting on September 28, 2007, the Board declared a quarterly dividend of $0.275 per share
payable to shareholders of record as of December 29, 2007 with payment expected on or about
January 15, 2008.
During January 2007, Alico announced that its Board of Directors has authorized the repurchase
of up to 100,000 Shares of the Company’s common stock through August 31, 2010, in addition to
its previously announced repurchase of 31,000 shares, for the purpose of funding restricted stock
grants under its 1998 Incentive Equity Plan in order to provide restricted stock to eligible Senior
Managers to align their interests with those of the Company’s shareholders.
The stock repurchases will be made on a quarterly basis between January 2007 and August 31,
2010 through open market transactions, at times and in such amounts as the Company’s broker
determines subject to the provisions of a 10b5-1 Plan which the Company has adopted for
such purchases. The timing and actual number of shares repurchased will depend on a variety
of factors including price, corporate and regulatory requirements and other market conditions.
All purchases will be made subject to restrictions of Rule 10b-18 relating to volume, price and
timing so as to minimize the impact of the purchases upon the market for the Company’s Shares.
The Company does not anticipate that any purchases under the Plan will be made from any
officer, director or control person. There are currently no arrangements with any person for the
purchase of the Shares. The Company will use internally generated funds to make the purchases.
The Company had previously announced the repurchase of 31,000 shares in order to fund its
Director Compensation plan. In accordance with the approved plans, the Company may purchase
an additional 87,230 shares. The Company purchased 27,770 shares in the open market at an
average price of $53.45 per share during fiscal year 2007.
27
Results of Operations
Summary of results (in thousands):
Operating revenue
Gross profit
General & administrative expenses
Income from operations
Profit on sale of real estate
Interest and investment income
Interest expense
Other income (expense)
Provision for income taxes
Effective income tax rate
Net (loss) income
Fiscal years ended August 31,
2005
2006
2007
$134,837
29,702
13,474
16,228
1,257
7,461
5,742
198
$33,246
171.3%
($13,844)
$77,434
14,741
11,759
2,982
4,369
9,053
4,066
346
$6,215
49.0%
$6,469
$55,525
12,346
10,025
2,321
5,465
4,443
2,295
(696)
$3,148
34.1%
$6,090
Overall, income from operations improved significantly in fiscal year 2007 compared with fiscal
year 2006. Net income declined, however, due to the imposition of additional taxes on prior year
activities following the IRS audits. Operations by segment are discussed separately below.
General and Administrative
General and administrative expenses increased by 14.6% to $13.5 million in fiscal year 2007
compared with $11.8 million in fiscal year 2006. The increase was primarily due to salaries
related to the hiring of additional staff ($0.6 million), Sarbanes Oxley (SOX) compliance
costs ($0.3 million), legal fees related to ongoing IRS audits ($0.3 million), adjustments to the
Company’s workers compensation reserve ($0.2 million), and increased depreciation expense
related to capital expenditures ($0.2 million).
General and administrative expenses increased by 17.3% to 11.8 million in fiscal year 2006
compared with $10.0 million in fiscal year 2005. An increase in pension expense due to normal
retirement benefits and a change in the discount rate used to value its defined benefit deferred
compensation plan was the largest component of the difference. The acquisitions of Bowen
and Plant World further contributed to the rise in general and administrative expenses, as did
increased consulting fees during fiscal year 2006 in connection with the ongoing IRS audits
compared with the prior fiscal year.
Profit from the Sale of Real Estate
The Company restructured several contracts for the sale of real estate during the second quarter
of fiscal year 2007. In connection with the restructuring, the Company recognized gains of
$1.3 million of installment proceeds on a prior sale that was recorded as non-operating income.
Additionally, the Company recorded income in connection with a restructuring of a second
contract of $1.9 million that was classified as operating revenue in the second quarter of fiscal
year 2007. A third restructuring resulted in an installment gain of approximately $0.4 million that
was recognized as operating revenue in the second quarter of fiscal 2007.
28
Due to changes in the market price of Florida real estate, the Company evaluated several of
its properties for impairment at August 31, 2007. In conducting its evaluation, the Company
reviewed the estimated non- discounted cash flows from each of the properties and obtained
independent third party appraisals from a qualified real estate appraiser. Based on this
information, the Company determined that a 291 acre lakefront property in Polk County, Florida
was impaired by approximately $1.9 million. The impairment loss was included as a charge to
real estate operating expenses during the fourth quarter of fiscal year 2007.
In the first quarter of fiscal year 2006, the Company sold approximately 280 acres of citrus grove
located south of LaBelle, Florida in Hendry County for $5.6 million cash for a net gain of $4.4
million. The Company has retained operating rights to the grove until residential development
begins.
The sale of a Lee County parcel closed in escrow during the fourth quarter of fiscal year 2005.
The sales price was $62.9 million consisting of $6.2 million in cash at closing with the balance
held as a 2.5% mortgage note receivable of $56.7 million. At the time of the sale, a gain of $5.3
million was recognized. The remainder of the gain will be recognized on the installment method
or when principal collections from the sale represent a continuing interest of at least 20% of the
purchase price of the property.
Provision for Income taxes
The effective tax rate in fiscal year 2007 was 171.3% compared with 49.0% in fiscal year 2006
and 34.1% in fiscal year 2005. The rate increase for fiscal year 2007 was caused by adjustments
totaling approximately $26.2 million related to the ongoing IRS proceedings for tax years 2000,
2001, 2002, 2003 and 2004 (see Notes 7 and 9 to the consolidated financial statements). The fiscal
year 2006 increase was due to an adjustment of the tax contingency previously accrued. The
Company recognized an additional accrual of $3.3 million for interest in its income tax provision
for fiscal year 2006 related to the contingency.
Interest and Investment Income
Interest and investment income is generated principally from investments in corporate and
municipal bonds, mutual funds, U.S. Treasury securities, and mortgages held on real estate sold
on the installment basis.
Interest income for fiscal year 2007 was $7.5 million compared with $9.1 million in fiscal
year 2006. In accordance with guidelines established by the Company’s Board of Directors,
the Company restructured its investment portfolio during the first quarter of fiscal year 2006,
focusing on high quality fixed income securities with original maturities of less than 12 months.
These sales resulted in a net realized gain of $3.3 million in fiscal year 2006. Additionally, the
Company recognized interest income in connection with an installment sale of approximately
$2.5 million in fiscal year 2006. This interest, in conjunction with the realized gains mentioned
above, was the primary reason that interest and investment income increased in fiscal year 2006
when compared to the prior year.
9
Interest Expense
Interest expense increased during fiscal years 2007 and 2006 when compared to the prior fiscal
years due to higher interest rates and debt levels. The majority of the Company’s borrowings are
based on the London Interbank Offered Rate (LIBOR). The LIBOR rates increased to 5.38% in
fiscal year 2007 from 5.33% in fiscal year 2006 and 3.69% in fiscal year 2005. Total debt levels
were $136.9 million at August 31, 2007, $64.0 million at August 31, 2006 and $51.3 million at
August 31, 2005.
Fiscal years ended August 31,
2006
2005
2007
Revenues
Agriculture:
Bowen Brothers Fruit
Citrus groves
Sugarcane
Cattle
Alico Plant World
Vegetables
Sod
Native trees and shrubs
Agriculture operations revenue
Real estate activities
Land leasing and rentals
Mining royalties
$
52,716
47,484
9,432
9,977
2,832
3,803
2,180
49
128,673
3,329
1,495
1,340
$
30,869
22,188
8,926
5,700
3,270
2,389
1,528
4
75,012
3
1,369
940
$
-
26,231
9,323
11,017
2,587
-
402
3
49,791
810
1,933
2,991
Total operating revenue
$
134,837
$
77,434
$
55,525
Operating revenues increased by 74.12% to $134.8 million in fiscal year 2007 compared with
$77.4 million in fiscal year 2006. The increase was primarily due to higher citrus prices realized
by Bowen and the Company’s citrus grove operations during fiscal year 2007.
Operating revenues increased by 39.5% to $77.4 million in fiscal year 2006 compared with $55.5
million in fiscal year 2005. The increase was primarily due to the Company’s purchase of Bowen
during the second quarter of fiscal 2006. Bowen’s operations generated revenues of $30.9 million
from the date of acquisition to August 31, 2006.
30
Fiscal years ended August 31,
2006
2005
2007
Gross profit (loss):
Agriculture:
Bowen Brothers Fruit
Citrus groves
Sugarcane
Cattle
Alico Plant World
Vegetables
Sod
Native trees and shrubs
Gross profit from agricultural operations
Real estate activities
Land leasing and rentals
Mining royalties
Net casualty loss (recovery)
Gross profit
Profits from the sale of bulk real estate
Net interest and investment income
Corporate general and administrative and other
$
930
24,057
599
55
17
496
862
49
27,465
(79)
1,102
1,214
-
29,702
1,257
1,719
(13,276)
$
(268)
7,614
360
786
(1,103)
985
688
4
9,204
5
917
940
3,628
14,741
4,369
4,987
(11,413)
$
-
6,247
499
2,109
459
-
(78)
3
9,467
482
1,294
2,991
(1,888)
12,346
5,465
2,148
(10,721)
Income before income taxes
$
19,402
$
12,684
$
9,238
Gross profit increased to $29.7 million for fiscal year 2007 compared with $14.7 million for
fiscal 2006. Profits from agriculture operations totaled $27.5 million in fiscal 2007, an increase
of $18.3 million from fiscal 2006. This increase was primarily due to higher citrus prices and
volume. Gross profit from agricultural operations was $9.2 million in fiscal year 2006, down
slightly from the prior year results of $9.5 million. Due to the cyclical nature of agriculture, the
Company is continuing to diversify its agricultural ventures.
Agricultural Operations
Agricultural operations generate a large portion of the Company’s revenues. Agricultural
operations are subject to a wide variety of risks including weather and disease. Additionally, it is
not unusual for agricultural commodities to experience wide variations in prices from year to year
or from season to season.
Bowen
Bowen’s operations generated revenues of $52.7 million and $30.9 million for the fiscal years
2007 and 2006, respectively. Gross profit recorded during fiscal year 2007 was $0.9 million
compared to a loss of $0.2 million for fiscal year 2006. By utilizing Bowen to harvest the
Company’s fruit during fiscal years 2006 and 2007, the Company was also able to reduce citrus
harvesting costs from traditional market rates. The normal profit margin on intercompany
harvesting was eliminated from Bowen’s results, and the cost savings was reflected in the
Company’s Citrus Grove segment.
3
Citrus Groves
The Citrus Groves division recorded gross revenues of $47.5 million, $22.2 million and $26.2
million and gross profits of $24.1 million, $7.6 million and $6.2 million, for the fiscal years ended
August 31, 2007, 2006 and 2005, respectively. Hurricanes, citrus diseases and increased real
estate development in the central and southern portions of Florida, where the majority of citrus
in the state is produced, have combined to reduce the supply of citrus for the past two years,
resulting in per unit price increases for citrus products across the industry. Revenue per box was
$13.29, $7.22 and $6.56 in fiscal years 2007, 2006 and 2005, respectively.
The Company has experienced reduced crops due to hurricanes and disease during the past two
fiscal years, harvesting 3.5 million, 3.3 million and 3.9 million 90 pound equivalent boxes of
citrus in fiscal years 2007, 2006 and 2005 respectively. The Company estimates that its fiscal
year 2008 crop will be approximately 4.0 million boxes.
The fiscal year 2008 crop forecast by the USDA indicates that the supply of Florida round
oranges will increase which in turn may lower prices. The USDA forecast is for 168.0 million
boxes for fiscal year 2008 compared with production of 128.9 million boxes in fiscal year 2007,
147.9 million boxes in fiscal year 2006 and 149.8 million boxes in fiscal year 2005.
Sugarcane
Sugarcane revenues were $9.4 million, $8.9 million and $9.3 million during fiscal years 2007,
2006 and 2005, respectively. Sugarcane generated gross profits of $0.6 million, $0.4 million and
$0.5 million during fiscal years 2007, 2006 and 2005, respectively. During fiscal years 2007,
2006 and 2005, approximately 381,000, 342,000, and 407,000 standard tons of sugarcane were
harvested. Average prices per standard ton were $24.76, $26.02 and $22.91 for fiscal years 2007,
2006 and 2005, respectively, and average yields were 37.14, 36.73 and 40.71 standard tons per
acre, respectively.
Cattle
Cattle revenues were $10.0 million, $5.7 million and $11.0 million and gross profits from the sale
of cattle were $0.3 million, $0.8 million and $2.1 million for the fiscal years ended August 31,
2007, 2006 and 2005, respectively.
During fiscal year 2007, the Company implemented a program designed to improve conception
rates and reduce the supplemental feed costs of its cattle herd. The initiatives included improving
the Company’s cattle pastures through fencing, grass plantings and reworking pastures where
native weed growth had reduced the forage available for the cattle. These projects will be
ongoing. It is the Company’s belief that those projects will allow the cattle herd to be sustained
to a greater degree by grazing and will reduce the amount of supplements such as corn silage
needed and thereby overall feeding costs. Furthermore, the Company is reducing the overall
number of cattle on the property to allow for more grazing area per animal. In fiscal year 2007,
the Company reduced its breeding herd by approximately 2,000 animals that were identified as
poor producers. The sale of these animals generated revenues of $1.5 million during fiscal year
2007.
The core business of the Company’s cattle operation is the sale of calves through western feedlots
to meat packing facilities, or if advantageous, to third parties directly from the ranch. Due to a
severe drought during fiscal year 2007 and the stress effect of prior hurricanes on the cattle herd,
3
fewer calves were born in fiscal year 2007 (8,488) than in fiscal year 2006 (9,029). The reduced
number of births resulted in increased unit costs to current year calves, causing overall profit
margins to decline in fiscal year 2007 when compared with fiscal year 2006.
During fiscal year 2005, in order to take advantage of record high prices for calves, the Company
sold a portion of its calf crop that would have normally been delivered to western feedlots.
Calves delivered to western feedlots require an additional nine months of preparation before
they are ready for sale. More animals were sold during fiscal year 2005 than in fiscal year 2006.
During fiscal year 2006, 7,454 animals were sold at an average price of $0.89 per pound. In fiscal
year 2005, 13,257 animals were sold at an average price of $0.90 per pound. Cattle prices tend to
run in cycles of approximately 15 years. The Company believes that the cattle market may have
peaked in fiscal year 2005.
The eye of Hurricane Wilma, a category 3 hurricane, passed over Alico’s cattle ranch on October
24, 2005, generally stressing the cattle herd. In its aftermath, many of the Company’s cattle
pastures were underwater for an extended period. Due to the stress of the hurricane and a
temporary reduction in nutrition, the number of calves born in fiscal years 2007 and 2006 were
reduced.
Plant World
In fiscal year 2007, Plant World sold 64.2 million vegetable transplants generating gross revenues
of $2.8 million. In fiscal year 2006, Plant World sold 85.8 million vegetable transplants and
generated gross revenues of $3.3 million. Plant World’s operations generated a profit of $17
thousand in fiscal 2007, a loss of $1.1 million in fiscal year 2006, and a profit of $0.5 million in
fiscal year 2005.
During the spring of 2005, Plant World’s off season, the Company began to inventory overhead
costs in anticipation of a verbal commitment for a large order. Subsequently, the customer
withdrew the offer, and Plant World was not able to replace the volume during fall growing
season of fiscal year 2006. This caused Plant World to reduce its inventory by $1.0 million to its
net realizable value caused by unused capacity within its facility, driving the unit cost of plants
higher. A further complication arose as fuel prices continued to rise. Plant World had made
commitments to deliver at set prices and in some cases, at very low margins. The increased
delivery expense reduced margins to below cost in many cases. Although Plant World was
eventually able to exceed its prior year volume, the additional plants were spring vegetable
varieties which traditionally have lower margins than fall varieties.
Plant World serves as an ancillary operation to Alico’s vegetable operations providing transplants.
The Company continues to take measures including customer evaluations, staff reductions and
other cost cutting actions to improve the profitability of this segment.
33
Vegetables
In fiscal year 2006 the Company began growing vegetables. In fiscal year 2007, the Company
harvested 218,063 crates of corn from 809 acres and 124,642 bushels of beans from 878 acres
generating revenues of $3.8 million and gross profits of $0.5 million. During fiscal year 2006, the
Company planted 500 acres of sweet corn and 500 acres of green beans. The corn crop produced
approximately 119,000 crates, and the beans produced approximately 77,000 bushels for total
revenues of $2.4 million and gross profits of $1.0 million. The vegetable market is highly volatile
and prices can vary greatly from crop to crop. While total revenues improved in fiscal year 2007
when compared with fiscal year 2006, gross profits declined due to decreased sweet corn prices
resulting in lower profit margins.
In December of 2006, the Company entered into a joint venture with J&J Produce, Inc. of
Loxahatchee, Florida, to farm cucumbers, squash, zucchini and other vegetables on Company
property. Under the terms of the venture, Alico and J&J each own 50% of the newly formed
Alico-J&J, LLC. Each member shares equally in the management and profits of the venture.
Approximately 140 acres were harvested by the venture in fiscal year 2007, producing a yield of
56,725 bushels. Alico’s portion of the venture’s loss during fiscal year 2007 was $57 thousand
and has been included with the vegetable segment in the consolidated statement of operations.
Sod
The Company had 463, 472 and 472 acres of cultivated sod in production during fiscal years
2007, 2006 and 2005. The company harvested approximately 12.5 million, 12.6 million and 4.8
million square feet of cultivated sod in fiscal years 2007, 2006 and 2005, respectively, generating
revenues of $1.0 million, $0.8 million and $0.3 million during each fiscal year respectively.
Additionally, the Company harvested 51.9 million, 15.9 million and 1.8 million square feet of
uncultivated sod generating revenues of $1.2 million, $0.7 million and $0.1 million during fiscal
years 2007, 2006 and 2005, respectively.
The Company is currently developing additional cultivated sod.
Native trees and shrubs
The Company sells sabal palms, palm fans, oak trees and other native horticultural commodities.
These products are sold to landscaping companies in Florida. The Company does not incur any
of the harvesting expenses for any of its tree or shrub sales. Gross profits from these operations
were $0.2 million, $0.1 million and $0.2 million during fiscal years 2007, 2006 and 2005,
respectively.
Non Agricultural Operations
Land leasing and rentals
Revenues from land rentals were $1.5 million, $1.4 million and $1.9 million during fiscal years
2007, 2006 and 2005, respectively, generating gross profits of $1.1 million, $0.9 million and
$1.3 million. The Company is committed to leasing more of its land when water and drainage
infrastructure are available.
34
Mining royalties
Gross revenues from mining royalties were $1.3 million, $0.9 million and $3.0 million for
fiscal years 2007, 2006 and 2005, respectively. Gross profit from the sale of rock products and
sand were $1.2 million, $0.9 million and $3.0 million during fiscal years 2007, 2006 and 2005,
respectively.
In May 2006, the Company purchased a 526 acre riverfront mine site for rock and fill in Glades
County, Florida for $10.6 million cash. The Company has allocated approximately 54% of
the purchase price to the rock and sand reserves with the remaining 46% of the purchase price
allocated as residual land value based on the present value of the expected rock royalties over 20
years and the expected residual value of the property after that time. Rock and sand reserves will
be depleted and charged to cost of goods sold proportionately as the property is mined.
Additionally, the Company is currently seeking a permit for a rock mine on its Hendry County
property. Other properties are currently being evaluated for additional mine sites.
Off Balance Sheet Arrangements
______________________________
The Company through its wholly owned subsidiary Bowen, enters into purchase contracts for
the purchase of citrus fruit during the normal course of its business. The obligations under
these purchase agreements totaled $5.6 million at August 31, 2007. All of these purchases were
covered by sales agreements at prices exceeding cost. In addition, Bowen had forward sales
contracts totaling $2.2 million at August 31, 2007, for which a purchaser had not been contracted.
Bowen management currently believes that all committed sales quantities can be purchased below
the committed sales price. All of these contracts will be fulfilled by the end of the fiscal year
2008.
During the second quarter of fiscal year 2007, the Company entered into a joint venture with J&J
Produce and formed a new company. Alico-J&J Farms, LLC is engaged in vegetable farming.
The initial crop covered 140 acres of property. Under the agreement, each member is responsible
for 50% of the obligations, capital and expenses of the company and each member is in turn
entitled to 50% of any profit or loss of the venture. Alico’s share of the loss was $57 thousand
in fiscal year 2007. During the fourth quarter of fiscal year 2007, the members determined
the acreage to be farmed for fiscal year 2008 would be 782. Alico’s portion of the estimated
expenses of the venture for fiscal year 2008 is estimated to be $4.6 million. The equipment
needed to operate the farm has been acquired using five year leases. Alico’s obligations under
the equipment lease, should the joint venture default, would be $48 thousand annually or $189
thousand in total less the proceeds received from the disposition plus disposition costs.
35
Disclosure of Contractual Obligations
_____________________________________
The contractual obligations of the Company at August 31, 2007 are set forth in the table below:
Contractual obligations
Long-term debt
Expected interest on debt
Commissions
Citrus purchase contracts
Retirement benefits
Deferred taxes
Building & equipment additions
Consulting contracts
Leases - operating
$
Total
136,889
28,634
3,205
5,650
5,433
15,089
550
93
831
Less than
year
$
1,350
9,397
5,650
39
282
550
727
59
$
1 - 3
years
130,992
18,532
747
-
784
10,506
-
186
54
3-5
years
5 +
years
$
2,542
5
2,149
-
784
3,456
-
-
58
$
2,005
183
288
-
3,473
845
-
-
-
Total
$
197,194
$
18,628
$
162,261
$
9,511
$
6,794
36
Critical Accounting Policies and Estimates
The preparation of the Company’s 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 the reported amounts of assets and liabilities, revenues
and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis,
management evaluates the estimates and assumptions based upon historical experience and
various other factors and circumstances. Management believes that the estimates and assumptions
are reasonable in the circumstances; however, actual results may vary from these estimates and
assumptions under different future circumstances. The following critical accounting policies have
been identified that affect the more significant judgments and estimates used in the preparation of
the consolidated financial statements.
Net Realizable Value - The Company records inventory at the lower of cost or net realizable
value. Management regularly assesses estimated inventory valuations based on current and
forecasted usage of the related commodity and any other relevant factors that may affect the net
realizable value.
Revenue Recognition- Income is recognized at the time the crop is harvested. Based on
fruit buyers’ and processors’ advances to growers, cash and futures markets combined with
experience in the industry, management reviews the reasonableness of the citrus revenue accrual.
Adjustments are made throughout the year to these estimates as more current relevant information
regarding the citrus market becomes available.
Income from sugarcane under a pooled agreement is recognized at the time the crop is harvested.
Based on the processor’s advance payment, past sugarcane prices and its experience in the
industry, management reviews the reasonableness of the sugarcane revenue accrual quarterly.
Adjustments are made as additional relevant information regarding the sugar market becomes
available.
For sales made through Bowen, the Company applies the provisions of Emerging Issues Task
Force (“EITF”) Issue No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an
Agent.” The Company’s application of EITF 99-19 includes evaluation of the terms of each
major customer contract relative to a number of criteria that management considers in making
its determination with respect to gross versus net reporting of revenue for transactions with its
customers. Management’s criteria for making these judgments place particular emphasis on
determining the primary obligor in a transaction and which party bears general inventory risk.
Bowen purchases and resells citrus fruit; in these transactions, Bowen (i) acts as principal; (ii)
takes title to the products; and (iii) has the risks and rewards of ownership, including the risk of
loss for collection, delivery or returns. For these transactions, Bowen recognizes revenues based
on the gross amounts due from customers.
In recognizing revenue from land sales, the Company follows the provisions in Financial
Accounting Standards Board, or FASB, Statement of Financial Accounting Standards, or SFAS,
No. 66, “Accounting for Sales of Real Estate,” to record these sales. SFAS No. 66 provides
specific sales recognition criteria to determine when land sales revenue can be recorded. For
example, SFAS No. 66 requires a land sale must be consummated with a sufficient down
payment of at least 20% to 25% of the sales price depending upon the type and timeframe for
development of the property sold, and that any receivable from the sale cannot be subject to
future subordination. In addition, the seller cannot retain any material continuing involvement in
the property sold.
37
Capitalized Costs - In accordance with Statement of Position 85-3 “Accounting by Agricultural
Producers and Agricultural Cooperatives”, the cost of growing crops 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.
Impairment of Long-Lived Assets – The Company evaluates property, equipment and capitalized
development costs for our sugarcane and citrus groves for impairment when events or changes
in circumstances indicate that the carrying value of assets contained in the Company’s financial
statements may not be recoverable. The impairment calculation compares the carrying value of
the asset to the asset’s estimated future cash flows (undiscounted and without interest charges).
If the estimated future cash flows are less than the carrying value of the asset, the Company
calculates an impairment loss. The Company recognizes an impairment loss if the amount
of the asset’s carrying value exceeds the asset’s estimated fair value. If an impairment loss is
recognized, the adjusted carrying amount of the asset will be its new cost basis. For a depreciable
long-lived asset, the new cost basis will be depreciated (amortized) over the remaining useful
life of that asset. Restoration of a previously recognized impairment loss is prohibited. For
further information concerning the impairment charges please refer to Note c to the consolidated
financial statements.
Defined Benefit Retirement Plans – The Company maintains a non-qualified defined benefit
deferred compensation plan, for key employees. Although the general assets of the Company
are used to fund the plan, the Company has purchased life insurance policies on the covered
employees to help fund the plan liabilities. The investments held by these life insurance
policies are valued using market quotations. Pension benefit obligations and the related effects
on operations are calculated using actuarial models. Two critical assumptions – discount rate
and expected return on assets – are important elements of plan expense and asset/liability
measurement. The Company evaluates these assumptions at least annually. Other assumptions
involving demographic factors such as retirement age, mortality and turnover are evaluated
periodically and are updated to reflect the Company’s experience. Actual results in any given
year will often differ from actuarial assumptions because of economic and other factors. The
discount rate enables the Company to state expected future cash flows at a present value on the
measurement date. In determining the discount rate, the Company utilizes the yield on high-
quality, fixed-income investments currently available with maturities corresponding to the
anticipated timing of the benefit payments and rates published by the Pension Benefit Guaranty
Corporation (PBGC). At August 31, 2007, the discount rate used to compute the Company’s
defined benefit deferred compensation plan was 5.35%.
Income Taxes - Deferred income taxes are recognized for the income tax effect of temporary
differences between financial statement carrying amounts and the income tax bases of assets
and liabilities. The Company regularly reviews its deferred income tax assets to determine
whether future taxable income will be sufficient to realize the benefits of these assets. A valuation
allowance is provided for deferred income tax assets for which it is deemed, more likely than not,
that future taxable income will not be sufficient to realize the related income tax benefits from
these assets. The amount of the net deferred income tax asset that is considered realizable could,
however, be adjusted if estimates of future taxable income are adjusted.
The Internal Revenue Service (IRS) issued a thirty day letter dated August 14, 2006 pertaining
to audits of Alico for the tax years 2000 through 2004. In the thirty day letter, the IRS proposed
several alternative theories as a basis for its argument that Alico should have reported additional
38
taxable income in the years under audit. These theories principally related to the formation and
capitalization of the Company’s Agri Insurance subsidiary and its tax exempt status during the
years under audit. The total additional federal taxes, penalties and interest proposed by IRS
exams were in excess of $119.0 million. The Company has been working with IRS appeals
to resolve the case and has reached a tentative agreement for the payment of federal taxes,
penalties and interest of approximately $66.2 million. In order to cease additional interest from
accruing on this liability, the Company has paid $66.2 million to the IRS from its revolving credit
line. Based on the contemplated settlement, the Company estimated additional state taxes and
interest of $10.1 million at August 31, 2007 which will be due and payable when the IRS audit is
concluded. Further details regarding the settlement, including the future of Agri, are in ongoing
negotiations with the IRS and a proposed closing document has been prepared by the Company’s
tax counsel and provided to IRS Appeals for review. The Company expects full resolution of this
matter by January 2008; however, the Company has executed statute extensions with the IRS for
the tax returns affected until December 31, 2008.
Alico capitalized Agri by contributing real estate located in Lee County Florida. The real estate
was transferred at its historical cost basis. As the Lee County real estate was sold, substantial
gains were generated in Agri, creating permanent book/tax differences.
For property transferred to Agri but not sold during the years under audit, the historical tax basis
will be stepped-up to the fair market value of the property at the time of transfer. The Company
has estimated the amount of basis step-up based on discussions with the IRS and classified the
step-ups resulting from the transfer of property not sold as of August 31, 2004 based on their
estimated tax benefits as a deferred tax asset at August 31, 2007. Should the actual outcome of
the IRS settlement differ from the estimated amounts, the deferred taxes related to the basis step-
ups could change.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Alico’s exposure to market rate risk and changes in interest rates relate primarily to its investment
portfolio and revolving credit lines. Investments are placed with high quality issuers and, by
policy, limit the amount of credit exposure to any one issuer. Alico is adverse to principal loss
and provides for the safety and preservation of invested funds by limiting default, market and
reinvestment risk. The Company classifies cash equivalents and short-term investments as fixed-
rate if the rate of return on such instruments remains fixed over their term. These fixed-rate
investments include fixed-rate U.S. government securities, municipal bonds, time deposits and
certificates of deposit. Cash equivalents and short-term investments are classified as variable-rate
if the rate of return on such investments varies based on the change in a predetermined index or
set of indices during their term. These variable-rate investments primarily include money market
accounts, mutual funds and equities held at various securities brokers and investment banks.
39
The table below presents the costs and estimated fair value of the investment portfolio at August
31, 2007:
Marketable Securities and
Short-term Investments (1)
Cost
Estimated
Fair Value
Fixed Rate
Variable Rate
$
$
37,837
8,374
$
$
37,870
8,372
() See definition in Notes and in Notes to Consolidated Financial Statements.
The aggregate fair value of investments in debt instruments (net of mutual funds of $2,000) as of
August 31, 2007, by contractual maturity date, consisted of the following:
Due in one year or less
Due between one and five years
Due between five and ten years
Due thereafter
Total
Aggregate
Fair
Values
$
30,341
6,420
1,500
5,981
$
44,242
Fixed rate securities tend to decline with market rate interest increases. Variable rate securities
are generally affected more by general market expectations and conditions. A 1% change in
interest rates on the Company’s portfolio would impact the Company’s annual interest revenue by
approximately $440 thousand. Additionally, the Company has debt with interest rates that vary
with LIBOR. A 1% increase in this rate would impact the Company’s annual interest expense by
approximately $1.3 million based on the Company’s outstanding debt under these agreements at
August 31, 2007.
40
Item 8.
Financial Statements and Supplementary Data.
Report of Independent Registered Certified Public Accounting Firm
To the Board of Directors and Stockholders
Alico, Inc.
LaBelle, Florida
We have audited the accompanying consolidated balance sheet of Alico, Inc. and Subsidiaries as
of August 31, 2007, and the related consolidated statements of operations, stockholders’ equity
and comprehensive income (loss), and cash flows for the year then ended. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management as well as evaluating the overall financial
statements presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Alico, Inc. and Subsidiaries as of August 31, 2007, and
the results of their operations and their cash flows for the year then ended in conformity with U.S.
generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of Alico, Inc. and Subsidiaries internal control
over financial reporting as of August 31, 2007, based on criteria established in Internal Control
– Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) and our report dated November 14, 2007 expressed an unqualified opinion
on management’s assessment of the effectiveness of Alico, Inc.’s internal control over financial
reporting and an unqualified opinion on the effectiveness of Alico, Inc.’s internal control over
financial reporting.
/s/MCGLADREY & PULLEN, LLP
Orlando, Florida
November 14, 2007
4
Report of Independent Registered Certified Public Accounting Firm
To the Stockholders and Board of Directors of Alico, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Alico, Inc. and Subsidiaries as
of August 31, 2006, and the related consolidated statements of operations, stockholders’ equity
and comprehensive income (loss), and cash flows for each of the two years in the period ended
August 31, 2006. These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of August 31, 2006, and the results
of their operations and their cash flows for each of the two years in the period ended August 31,
2006, in conformity with U.S. generally accepted accounting principles.
/s/TEDDER, JAMES, WORDEN & ASSOCIATES, P.A.
Orlando, Florida
November 17, 2006
4
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents
Marketable securities available for sale
Accounts receivable, net
Mortgage and notes receivable
Inventories
Deferred tax asset
Other current assets
Total current assets
Other assets:
Mortgages and notes receivable, net of current portion
Investment and deposits
Deferred tax asset
Cash surrender value of life insurance, designated
Total other assets
Property, buildings and equipment
Less accumulated depreciation
August 31,
2007
2006
$
34,825
46,242
15,738
487
25,214
2,312
2,398
$
25,065
50,100
8,679
47
24,545
-
2,477
127,216
110,913
9,939
3,262
3,950
7,530
10,977
2,919
-
6,593
24,681
20,489
178,917
(49,927)
179,689
(48,338)
Net property, buildings and equipment
128,990
131,351
Total assets
(Continued)
$ 280,887
$ 262,753
43
CONSOLIDATED BALANCE SHEETS
(in thousands)
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Income taxes payable
Current portion of notes payable
Accrued expenses
Dividends payable
Accrued ad valorem taxes
Deferred income taxes
Other current liabilities
Total current liabilities
Notes payable, net of current portion
Deferred income taxes, net of current portion
Deferred retirement benefits, net of current portion
Commissions payable, net of current portion, and deposits
Other non-current liability
August 31,
2007
2006
$
2,328
3,335
1,350
4,330
2,024
1,876
-
2,276
17,519
135,539
-
5,041
3,842
-
$
$
1,966
1,304
3,315
3,720
2,027
2,090
282
3,374
18,078
60,687
14,807
4,952
2,833
20,293
Total liabilities
161,941
121,650
Stockholders' equity:
Preferred stock, no par value. Authorized 1,000 shares;
issued, none
Common stock, $1 par value. Authorized 15,000 shares;
issued 7,376 shares; outstanding 7,357 in 2007
and 7,371 in 2006
Additional paid in capital
Treasury stock, at cost
Accumulated other comprehensive (loss) income
Retained earnings
-
7,376
9,691
(287)
(9)
124,352
7,376
10,169
(1,046)
45
102,402
Total stockholders' equity
118,946
141,103
Total liabilities and stockholders' equity
$
280,887
$
262,753
See accompanying Notes to Consolidated Financial Statements.
44
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
Years Ended August 31,
2006
2007
2005
Operating revenue
Agricultural operations
Non-agricultural operations
Real estate operations
Total operating revenue
Operating expenses
Agricultural operations
Non-agricultural operations
Real estate operations
Net casualty loss (recovery)
Total operating expenses
Gross profit
Corporate general and administrative
$
128,673
2,835
3,329
$
75,012
2,309
3
$
49,791
4,924
810
134,837
77,434
55,525
101,208
59
3,408
-
105,135
29,702
13,474
65,808
45
61
(3,628)
62,693
14,741
11,759
40,324
639
328
1,888
43,179
12,346
10,025
Income from operations
16,228
2,982
2,321
Other income (expenses):
Profit on sales of bulk real estate:
Sales
Cost of sales
Profit on sales of bulk real estate, net
Interest & investment income
Interest expense
Other
Total other income, net
Income before income taxes
Provision for income taxes
1,434
(177)
1,257
7,461
(5,742)
198
3,174
19,402
33,246
5,761
(1,392)
4,369
9,053
(4,066)
346
9,702
12,684
6,215
15,416
(9,951)
5,465
4,443
(2,295)
(696)
6,917
9,238
3,148
Net (loss) income
$
(13,844)
$
6,469
$
6,090
Weighted-average number of shares outstanding
7,369
7,368
7,331
Weighted-average number of shares outstanding
assuming dilution
7,377
7,379
7,347
Per share amounts:
Basic
Diluted
Dividends
$
$
$
(1.88)
(1.88)
1.10
$
$
$
0.88
0.88
1.03
$
$
$
0.83
0.83
.5
See accompanying Notes to Consolidated Financial Statements.
45
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
Common Stock
Amount
Additional
Paid in
Capital
Treasury
Stock
at cost
Accumulated
Other
Comprehensive
Income
Retained
Earnings
$
7,309
$
7,800
$
1,529
$
128,560
Total
145,198
$
Shares
Issued
7,309
-
-
-
60
-
7,369
-
-
-
-
Balances, August 31, 2004
Comprehensive income:
Net income
Unrealized gains on securities,
net of taxes of $ 234 and
reclassification adjustment
Total comprehensive income:
Dividends
Stock options exercised
Stock based compensation
Balances, August 31, 2005
Comprehensive income:
Net income
Unrealized gains on securities,
net of taxes of $ 408 and
reclassification adjustment
Total comprehensive income:
Dividends
Treasury Stock Purchased
Stock based compensation
- Directors
Employee:
Stock options exercised
Stock based compensation
Balances, August 31, 2006
Comprehensive income:
Net loss
Unrealized gains on securities,
net of taxes of $39 and
reclassification adjustment
Total comprehensive loss:
Dividends
Treasury Stock Purchased
Stock based compensation
- Directors
Employee:
Stock options exercised
Stock based compensation
Balances, August 31, 2007
-
-
-
60
-
7,369
-
-
-
-
-
-
-
964
49
9,183
-
-
-
(763)
5
476
7
-
7,376
7
-
7,376
127
39
9,691
(287)
-
-
-
-
-
-
-
-
-
(1,484)
37
478
-
6,090
6,090
666
-
-
-
2,195
-
-
(9,211)
-
-
125,439
666
6,756
(9,211)
1,024
49
144,186
6,469
6,469
(2,224)
-
-
-
-
-
(9)
(7,556)
-
-
-
124,352
(2,224)
4,245
(7,556)
(763)
528
34
39
141,103
-
-
(13,844)
(13,844)
74
-
(8,106)
74
(13,770)
(8,106)
(1,484)
55
-
-
7,376
-
-
7,376
$
(39)
480
10,169
$
55
9
(1,046)
-
-
$
45
-
-
102,402
$
16
672
118,946
$
Disclosure of reclassification amount:
Unrealized holding (losses) gains
arising during the period
Less: reclassification adjustment for realized gain (loss)
included in net income
Net unrealized (losses) gains on securities
2007
2006
2005
62
()
74
(9)
1,064
2,195
(2,224)
398
666
See accompanying Notes to Consolidated Financial Statements
46
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Increase (Decrease) in Cash and Cash equivalents:
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to cash (used for)
provided by operating activities:
Depreciation & amortization
Gain on breeding herd sales
Deferred income tax expense, net
Deferred retirement benefits
Net gain on sale of marketable securities
Loss on sale of property and equipment
Impairment write down
Loss from non consolidated joint venture
Gain on real estate sales
Stock based compensation
Imputed interest on mortgage note receivable
Cash provided by (used for) changes in:
Accounts receivable
Inventories
Other assets
Accounts payable & accrued expenses
Income taxes payable
Other non-current liability
Years Ended August 31,
2006
2007
2005
$
(13,844)
$
6,469
$
6,090
8,770
(59)
(21,351)
(1,026)
(3)
(20)
2,028
57
(1,257)
1,187
-
(7,059)
(669)
(163)
(756)
2,031
(20,293)
8,590
(162)
680
556
(3,254)
861
-
-
(4,369)
857
(2,891)
2,537
(4,159)
(1,585)
719
1,304
3,339
6,957
(209)
3,209
(88)
(2,083)
5,539
-
-
(5,465)
49
-
(2,098)
(692)
(765)
2,981
(1,741)
-
Net cash provided by (used for) operating activities
(52,925)
9,492
12,054
Cash flows from investing activities:
Increase in land inventories
Real Estate deposits and accrued commissions
Purchases of property and equipment
Purchase of other investments
Proceeds from disposals of property and equipment
Proceeds from sale of real estate
Purchases of marketable securities and investments
Proceeds from sales of marketable securities
Collection of mortgages and notes receivable
-
1,622
(9,138)
(878)
1,652
-
(54,882)
58,823
2,173
(793)
6,811
(33,172)
-
1,092
5,555
(92,583)
109,992
632
(498)
(11,106)
(12,877)
-
1,762
7,507
(28,351)
16,897
10,279
Net cash used for investing activities
$
(628)
$
(2,466)
$
(16,387)
(Continued)
47
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(in thousands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from financing activities:
Cash flows from financing activities:
Proceeds from issuing stock
Proceeds from issuing stock
Treasury stock purchases
Cash flows from financing activities:
Treasury stock purchases
Proceeds from bank loans
Proceeds from issuing stock
Proceeds from bank loans
Repayment of bank loans
Treasury stock purchases
Repayment of bank loans
Dividends paid
Proceeds from bank loans
Dividends paid
Repayment of bank loans
Net cash provided by (used for) financing activities
Dividends paid
Net cash provided by (used for) financing activities
Net increase (decrease) in cash and cash equivalents
Net cash provided by (used for) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents:
At beginning of year
At beginning of year
Cash and cash equivalents:
At end of year
At beginning of year
At end of year
Supplemental disclosures of cash flow information:
At end of year
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amount capitalized
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amount capitalized
Cash paid for interest, net of amount capitalized
Cash paid for income taxes, including related interest
Cash paid for income taxes, including related interest
Non-cash investing activities:
Cash paid for income taxes, including related interest
Non-cash investing activities:
2007
2007
2007
$
$
Years Ended August 31,
Years Ended August 31,
2006
2006
Years Ended August 31,
2006
$
$
2005
2005
2005
$
$
$
$
$
16
16
(1,484)
(1,484)
95,959
16
95,959
(23,072)
(1,484)
(23,072)
(8,106)
95,959
(8,106)
(23,072)
63,313
(8,106)
63,313
34
34
(763)
(763)
65,814
34
65,814
(53,160)
(763)
(53,160)
(7,370)
65,814
(7,370)
(53,160)
4,655
(7,370)
4,655
1,024
1,024
-
-
26,933
1,024
26,933
(27,170)
-
(27,170)
(7,369)
26,933
(7,369)
(27,170)
(6,582)
(7,369)
(6,582)
9,760
63,313
9,760
9,760
25,065
25,065
11,681
4,655
11,681
11,681
13,384
13,384
(10,915)
(6,582)
(10,915)
(10,915)
24,299
24,299
$
$
34,825
25,065
34,825
$
$
25,065
13,384
25,065
$
$
13,384
24,299
13,384
$
34,825
$
25,065
$
13,384
$
$
5,077
5,077
$
$
3,576
3,576
$
$
2,074
2,074
$
$
$
5,077
72,818
72,818
$
$
$
3,576
1,803
1,803
$
$
$
2,074
1,600
1,600
$
72,818
$
1,803
$
1,600
Fair value adjustments to securities available for sale
Non-cash investing activities:
Fair value adjustments to securities available for sale
$
$
3
3
$
$
(45)
(45)
$
$
1,074
1,074
Income tax effect related to fair value adjustments
Fair value adjustments to securities available for sale
Income tax effect related to fair value adjustments
$
$
$
39
3
39
$
$
$
(16)
(45)
(16)
$
$
$
408
1,074
408
Income tax effect related to fair value adjustments
Reclassification of breeding herd to Property & Equipment
Reclassification of breeding herd to Property & Equipment
$
$
$
39
594
594
$
$
$
(16)
516
516
$
$
$
408
562
562
See accompanying Notes to Consolidated Financial Statements.
Reclassification of breeding herd to Property & Equipment
See accompanying Notes to Consolidated Financial Statements.
See accompanying Notes to Consolidated Financial Statements.
$
594
$
516
$
562
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended August 31, 2007, 2006 and 2005
(in thousands except for unit data)
(1) Summary of Significant Accounting Policies
(a) Basis of Consolidated Financial Statement Presentation
The consolidated financial statements include the accounts of Alico, Inc. (Alico) and its wholly
owned subsidiaries, Alico Land Development Company (formally known as Saddlebag Lake
Resorts, Inc.), Agri-Insurance Company, Ltd. (Agri), Alico-Agri, Ltd., Alico Plant World, LLC
and Bowen Brothers Fruit, LLC (Bowen) (collectively referred to as the “Company”), after
elimination of all significant intercompany balances and transactions.
(b) Revenue Recognition
Income from the sale of citrus is recognized at the time the crop is harvested. Based on
fruit buyers’ and processors’ advances to growers, cash and futures markets combined with
experience in the industry, management reviews the reasonableness of the citrus revenue accrual.
Adjustments are made throughout the year to these estimates as relevant information regarding
the citrus market becomes available. Differences between the estimates and the final realization of
revenues can be significant, and the differences between estimated and final results can be either
positive or negative. Fluctuation in the market prices for citrus fruit has caused the Company to
recognize additional revenue from the prior years’ crops totaling $537 thousand, $838 thousand,
and $357 thousand during fiscal years 2007, 2006, and 2005, respectively.
Income from sugarcane under a pooled agreement is recognized at the time the crop is harvested.
Based on the processor’s advance payment, past sugarcane prices, and its experience in the
industry, management reviews the reasonableness of the sugarcane revenue accrual. Adjustments
are made as additional relevant information regarding the sugar market becomes available.
Market price changes to the sugar pool have caused the Company to adjust revenue from the prior
years’ crops by $4 thousand, $169 thousand, and ($198 thousand) during fiscal years 2007, 2006,
and 2005, respectively.
The Company recognizes revenue from cattle sales at the time the cattle are sold. The Company
recognizes revenue from the sale of vegetables and sod at the time of harvest. Revenue from the
sale of plants is recognized when the plants are shipped from the greenhouse.
For sales made through Bowen, the Company applies the provisions of Emerging Issues Task
Force (“EITF”) Issue No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an
Agent”. The Company’s application of EITF 99-19 includes evaluation of the terms of each
major customer contract relative to a number of criteria that management considers in making
its determination with respect to gross versus net reporting of revenue for transactions with its
customers. Management’s criteria for making these judgments place particular emphasis on
determining the primary obligor in a transaction and which party bears general inventory risk.
Bowen purchases and resells citrus fruit; in these transactions, Bowen (i) acts as a principal; (ii)
takes title to the products; and (iii) has the risks and rewards of ownership, including the risk
of loss for collection, delivery or returns. Due to the aforementioned factors, Bowen recognizes
revenue based on the gross amounts due from customers.
49
(c) Real Estate
Real estate sales are recorded under the accrual method of accounting. Residential retail land
sales made through Alico Land Development, Inc. are not recognized until the buyer’s initial
investment or cumulative payments of principal and interest equal or exceed 10% of the contract
sales price.
Gains from commercial or bulk land sales are not recognized until payments received for property
to be developed within two years after the sale equal 20%, or property to be developed after two
years equal 25% of the contract sales price according to the installment sales method.
Real estate costs incurred for the acquisition, development and construction of real estate projects
are capitalized. Additionally, costs to market real estate are capitalized if they are reasonably
expected to be recovered from the sale of the project.
Properties are tested for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. Impairment losses are recognized when the
carrying amount of a property exceeds its fair value. Such events or changes in circumstances
include significant decreases in the market price of such properties; significant adverse changes
in legal factors, the business climate or the extent or manner in which the asset is being used; an
accumulation of costs significantly in excess of amounts originally expected for the property;
continuing operating cash flow losses associated with the property or an expectation that it is
more likely than not that the property will be sold or otherwise disposed of significantly before
the end of its previously estimated useful life. Impairment losses are measured as the amount by
which the carrying amount of a property exceeds its fair value.
Due to changes in the market price of Florida real estate, the Company evaluated several of
its properties for impairment at August 31, 2007. In conducting its evaluation, the Company
reviewed the estimated non discounted cash flows from each of the properties and obtained
independent third party appraisals from a qualified real estate appraiser. Based on this
information, the Company determined that a 291 acre lakefront property in Polk County, Florida
was impaired by approximately $1.9 million. The impairment loss was included as a charge to
real estate operating expenses during the fourth quarter of fiscal year 2007.
(d) Marketable Securities Available for Sale
Marketable securities available for sale are carried at their fair value. Net unrealized investment
gains and losses are recorded net of related deferred taxes in accumulated other comprehensive
income within stockholders’ equity until realized. Unrealized losses determined to be other than
temporary are recognized in the statement of operations in the period the determination is made.
Fair value for debt and equity investments is based on quoted market prices at the reporting date.
The cost of all marketable securities available for sale is determined on the specific identification
method.
(e) Inventories
The costs of growing crops 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 expenses with the related revenue earned.
50
The Company states its inventories at the lower of cost or net realizable value. The cost for
unharvested crops is based on accumulated production costs incurred during the eight-month
period from January 1 through August 31. The cost of the beef cattle inventory is based on the
accumulated cost of developing such animals for sale. The cost of greenhouse plants is based on
the actual costs of production for such plants.
(f) Mortgages and notes receivable
Mortgages and notes receivable arise from real estate sales. Mortgages and notes receivable are
carried at their estimated net realizable value. In circumstances where the stated interest rate is
below the prevailing market rate, the note is discounted to yield the market rate of interest. The
discount offsets the carrying amount of the mortgages and notes receivable.
Under the installment method of accounting, gains from commercial or bulk land sales are not
recognized until payments received for property equal or exceed 20% of the contract sales price
for property to be developed within two years after the sale or 25% of the contract sales price for
property to be developed after two years. Such gains are recorded as deferred revenue and offset
the carrying amount of the mortgages and notes receivable.
(g) Accounts receivable
Accounts receivable are generated from the sale of citrus, sugarcane, sod, cattle, vegetables,
plants and other transactions. The Company provides an allowance for doubtful trade receivables
equal to the estimated uncollectible amounts. That estimate is based on historical collection
experience, current economic and market conditions, and a review of the current status of each
customer’s account.
(h) Property, Buildings and Equipment
Property, buildings and equipment are stated at cost. Properties acquired from the Company’s
predecessor corporation in exchange for common stock issued in 1960, at the inception of the
Company, are stated on the basis of cost to the predecessor corporation. Property acquired as part
of a land exchange trust, is valued at the carrying value of the property transferred to the trust.
All costs related to the development of citrus groves, through planting, are capitalized. Such costs
include land clearing, excavation and construction of ditches, dikes, roads, and reservoirs, etc.
After the planting, caretaking costs or pre-productive maintenance costs are capitalized for four
years. After four years, a grove is considered to have reached maturity and the accumulated costs,
except for land excavation, become the depreciable basis of a grove and depreciated over 25
years.
Development costs for sugarcane are capitalized the same as citrus. However, sugarcane matures
in one year and the Company is able to harvest an average of 3 crops (1 per year) from one
planting. As a result, cultivation/caretaking costs are expensed as the crop is harvested, while the
appropriate development and planting costs are depreciated over 3 years.
The breeding herd consists of purchased animals and animals raised on the ranch. Purchased
animals are stated at cost. The cost of animals raised on the ranch is based on the accumulated
cost of developing such animals for productive use.
5
Depreciation for financial reporting purposes is computed on straight-line or accelerated methods
over the estimated useful lives of the various classes of depreciable assets. See Note 5 to the
consolidated financial statements.
The Company accounts for long-lived assets in accordance with the provisions of Statement of
Financial Accountant Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal
of Long-Lived Assets”. This Statement requires 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 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.
(i) Land Inventories
Land inventories are carried at cost and consist of property located in Lee County, Florida owned
by Alico-Agri, Ltd. The Lee County property is held for sale as commercial real estate. Land
inventory is considered a current asset if sales contracts for the property are expected to close
within one year of the balance sheet date. Land inventory is grouped under the caption other
current assets.
(j) Investment and Deposits
Investments primarily include stock owned in agricultural cooperatives and loan origination
fees. Investments and deposits are carried at cost except for loan origination fees that are being
amortized over the life of the loan. The Company uses cooperatives to process and sell sugarcane
and citrus. Cooperatives typically require members to acquire stock ownership as a condition for
the use of its services.
During fiscal year 2006, the Company entered into and later amended a Credit Facility with a
commercial bank for a $175.0 million line of credit which matures on August 1, 2010. Loan
origination and other related fees included as investments and deposits were $551 thousand and
$740 thousand at August 31, 2007 and 2006, respectively and are being amortized over the life
of the Credit Facility. The amortization expense was $189 thousand and $124 thousand for fiscal
years 2007 and 2006, respectively.
(k) Income Taxes
The Company accounts for income taxes under the asset and liability method. Under this method,
deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment date. The Company
includes interest and penalties from taxing authorities as a component of income tax expense.
5
(l) Net Earnings Per Share
Outstanding stock options and restricted stock shares represent the only dilutive effects reflected
in the computation of weighted average shares outstanding assuming dilution. There were no
stock options issued that could potentially dilute basic earnings per share in the future that were
not included in the computation of earnings per share, assuming dilution.
(m) Cash Flows
For purposes of the cash flows, cash and cash equivalents include cash on hand and investments
with an original maturity of less than three months.
At various times throughout the year, and at August 31, 2007, some deposits held at financial
institutions were in excess of federally insured limits. However, the Company places its cash
deposits with high quality financial institutions and believes it is not exposed to significant credit
risk of these accounts.
(n) Use of Estimates
In preparing the consolidated financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities. Actual results could
differ significantly from those estimates. Although some variability is inherent in these estimates,
management believes that the amounts provided are adequate. The valuation of the Company’s
inventories, the estimated tax contingency and the recognition of citrus and sugarcane revenues
are some of the more significant estimates made by Management.
(o) Fair Value of Financial Instruments and Accruals
The carrying amounts in the consolidated balance sheets for accounts receivable, mortgages and
notes receivable, accounts payable and accrued expenses approximate fair value because of the
immediate or short term maturity of these items. Where stated interest rates are below market,
the Company has discounted mortgage notes receivable to reflect their estimated fair market
value. The Company carries its marketable securities available for sale at fair value. The carrying
amounts reported for the Company’s long-term debt approximates fair value because they are
transactions with commercial lenders at interest rates that vary with market conditions and fixed
rates that approximate market.
(p) Accumulated Other Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity of a business enterprise during a
period from transactions and other events and circumstances from non-owner sources. It includes
both net income and other comprehensive income or loss. Items included in other comprehensive
income or losses are classified based on their nature. The total of other comprehensive income or
loss for a period has been transferred to an equity account and displayed as “accumulated other
comprehensive income (loss)”.
53
(q) Stock-Based Compensation
Prior to the 2006 fiscal year, the Company accounted for its stock-based compensation under
the recognition and measurement principles of Accounting Principles Board Opinion No. 25,
“Accounting for Stock Issued to Employees and related interpretations (“APB 25”). Under APB
25, stock-based compensation cost was reflected in net income for grants of stock options based
on the difference between the exercise price and the fair market value of the stock on the date of
issue.
Effective September 1, 2005, the Company adopted Statement of Financial Accounting
Standards No. 123 (Revised 2004) “Share-Based Payment” (“SFAS 123R”), which requires the
measurement and recognition of compensation cost at fair value for all share-based payments,
including stock options and restricted share awards. Stock-based compensation recognized
for fiscal year’s 2007 and 2006 was approximately $672 thousand and $329 thousand, and was
included in general and administrative expenses in the consolidated statements of operations.
This expense includes compensation expense, recognized over the applicable vesting periods,
for new share-based awards and for share-based awards granted prior to, but not yet vested, as of
August 31, 2007. For further information concerning stock based compensation, please see Note
8 to the consolidated financial statements.
(r) Reclassifications
Certain amounts from 2006 and 2005 have been reclassified to conform to the 2007 presentation.
These reclassifications had no impact on net income or stockholders’ equity as previously
reported.
(s) Major customers
Alico is a producer of agricultural commodities. Due to the limited number of processors of its
raw products, geographic limitations and historic success, the Company’s citrus and sugarcane
sales are concentrated to a few customers. For 2007, the Company’s largest customer is
United States Sugar Corporation (USSC), for whom the Company grows raw sugarcane and its
wholly owned subsidiary, Southern Gardens, which purchases citrus from the Company. The
balance of the sales concentration is attributable to citrus contracts with Tropicana Products,
Inc. (“Tropicana”, a subsidiary of PepsiCo) and Ben Hill Griffin, Inc. (Griffin). These
marketing arrangements involve marketing pools which allow the contracting party to market
the Company’s product in conjunction with products from other entities in the pool and pay
the Company a proportionate share of the resulting revenue from the sale of all of the pooled
product. While the Company believes that it can replace these arrangements with other marketing
alternatives, it may not be able to do so quickly and the results or associated costs may not be
as favorable as the current contracts. Details concerning the sales and receivables from these
customers are as follows as of and for the years ended August 31:
54
Accounts receivable
2007
2006
2005
2007
Revenues
2006
2005
Citrus:
Griffin
Tropicana
Southern Gardens
Southern
$
4,765
-
4,294
$
4,435
-
83
$
5,811
116
-
$
14,748
18,342
19,517
$
17,203
9,656
2,133
$
19,810
3,720
-
Sugar cane:
USSC
$
1,872
$
1,740
$
2,466
$
9,432
$
8,926
$
9,323
Sales made through the citrus fruit marketers represented approximately 52%, 56% and 90% of
the Company’s revenues from citrus sales during fiscal years 2007, 2006 and 2005, respectively,
and approximately 39%, 37% and 42% of total operating revenues during fiscal years 2007, 2006
and 2005, respectively.
Sales made through the sugarcane processor represented 100% of the Company’s sugarcane
revenues during fiscal years 2007, 2006 and 2005 and 7%, 12% and 17% of total operating
revenues during fiscal years 2007, 2006 and 2005, respectively.
55
2) Marketable Securities Available for Sale
The Company has classified 100% of its investments in marketable securities as available for sale
and, as such, the securities are carried at fair value. Any unrealized gains and losses, net of related
deferred taxes, are recorded as a net amount in a separate component of stockholders’ equity until
realized. In accordance with the provisions of EITF Issue No. 03-1, which became effective
for reporting periods beginning after June 15, 2004, the Company identified those investments
at August 31, 2005 which were deemed to be other than temporarily impaired and included the
The cost and estimated fair values of marketable securities available for sale at August 31, 2007 and 2006
losses in the statement of operations for fiscal year 2005. No investments at August 31, 2007 or
were as follows:
2006 were deemed to be other than temporarily impaired.
2007
2006
The cost and estimated fair values of marketable securities available for sale at August 31, 2007 and 2006
were as follows:
Gross
Unrealized
2007
Estimated
Fair
Value
Cost
Gains
Losses
Cost
Gross
Unrealized
2006
Gains
Estimated
Fair
Value
Losses
Debt securities
Municipal bonds
Mutual funds
Debt securities
Fixed maturity funds
Corporate bonds
Municipal bonds
Mutual funds
Fixed maturity funds
Total debt securities
Corporate bonds
Marketable securities
Total debt securities
available for sale
Gross
Unrealized
Losses
$
Estimated
Fair
Value
$
Cost
$
28,881
2,000
12,656
2,673
28,881
2,000
12,656
46,210
2,673
Gains
6
$
-
55
6
$
-
55
62
(10)
-
(4)
(16)
(30)
(10)
-
(4)
(16)
28,877
2,000
12,707
2,658
46,242
28,877
2,000
12,707
2,658
$
$
$
$
Gross
Unrealized
Gains
Losses
9
$
$
-
9
$
-
44
$
-
()
(6)
(18)
(82)
63
44
-
Estimated
Fair
Value
$
()
(6)
(18)
(82)
$
21,186
364
19,712
8,838
21,186
364
19,712
8,838
(108)
50,100
Cost
$
21,169
370
19,686
8,920
50,145
21,169
370
19,686
8,920
46,210
46,210
$
62
$
62
(30)
$
(30)
46,242
$
46,242
50,145
$
50,145
63
$
63
(108)
$
(108)
50,100
$
50,100
Marketable securities
The aggregate fair value of investments in debt securities (net of mutual funds of $2,000) as of August 31, 2007 by
available for sale
(108)
$
contractual maturity date, consisted of the following:
$
50,145
46,242
46,210
$
$
$
$
$
(30)
63
62
The aggregate fair value of investments in debt securities (net of mutual funds of $2,000) as of August 31, 2007 by
contractual maturity date, consisted of the following:
Aggregate
Fair Value
Due in one year or less
Due between one and five years
Due in one year or less
Due between five and ten years
Due between one and five years
Due thereafter
Due between five and ten years
Due thereafter
Total
Total
Aggregate
Fair Value
$
$
30,341
6,420
1,500
5,981
44,242
30,341
6,420
1,500
5,981
44,242
$
$
Realized gains and losses on the disposition of securities were as follows:
Year ended August 31,
2007
2006
2005
Realized gains
Realized losses
$
71
(40)
$
4,962
(1,708)
$
2,606
(53)
Net
$
3
$
3,254
$
2,083
$
50,100
56
In evaluating whether a security was other than temporarily impaired, the Company considered
the severity and length of time impaired for each security in a loss position. Other qualitative
data was also considered including recent developments specific to the organization issuing the
security. The following table shows the gross unrealized losses and fair value of the Company’s
investments with unrealized losses that are not deemed to be other than temporarily impaired,
aggregated by investment category and length of time that individual securities have been in a
continuous unrealized loss position, at August 31, 2007:
Less than months
Fair
Value
Unrealized
Losses
months or greater
Fair
Value
Unrealized
Losses
Total
Fair
Value
Unrealized
Losses
Municipal bonds
Fixed maturity funds
Corporate bonds
$
14,336
3,075
-
$
10
4
$
- $
-
2,658
-
-
16
$
14,336
3,075
2,658
$
10
4
16
Total
$
17,411
$
4
$
2,658
$
16
$
20,069
$
30
Debt instruments and funds. The unrealized losses on municipal bonds, fixed maturity funds
and corporate bonds were primarily due to changes in interest rates. At August 31, 2007 the
Company held loss positions in 40 government backed bonds, 29 fixed maturity funds, consisting
mostly of certificates of deposit, and 2 corporate bond positions. Because the decline in market
values of these securities is attributable to changes in interest rates and not credit quality and
because the Company has the ability and intent to hold these investments until a recovery of
fair value, which may be maturity, the Company does not believe any of the unrealized losses
represent other than temporary impairment based on evaluations of available evidence as of
August 31, 2007.
57
(3) Mortgages and Notes Receivable
Mortgage and notes receivable arose from real estate sales. The balances are
as follows:
August 31,
2007
2006
Mortgage notes receivable on retail land sales
Mortgage notes receivable on bulk land sales
$
3
65,963
$
427
56,610
Total mortgages and notes receivable
Less: Deferred revenue
Discount on note to impute market interest
Current portion
66,274
(53,254)
(2,594)
(487)
57,037
(43,230)
(2,783)
(47)
Non-current portion
$
9,939
$
10,977
Maturities of the mortgages and notes receivable are as follows:
Maturities of the mortgages and notes receivable are as follows:
Due within 1 year
Due between 1 and 2 years
Due within 1 year
Due between 2 and 3 years
Due between 1 and 2 years
Due between 3 and 4 years
Due between 2 and 3 years
Due between 4 and 5 years
Due between 3 and 4 years
Due beyond five years
Due between 4 and 5 years
Due beyond five years
Less: Deferred Revenue
Discount on note to impute market interest
Less: Deferred Revenue
Net mortgages and notes receivable
Discount on note to impute market interest
Total mortgages and notes receivable
Total mortgages and notes receivable
$
$
487
3,550
487
12,046
3,550
14,896
12,046
29,496
14,896
5,799
29,496
66,274
5,799
(53,254)
66,274
(2,594)
(53,254)
10,426
(2,594)
$
Net mortgages and notes receivable
10,426
Real estate sales are recorded under the accrual method of accounting. Gains from commercial
or bulk land sales are not recognized until payments received for property to be developed within
two years after the sale equal 20% or property to be developed after two years equal 25% of the
contract sales price according to the installment sales method.
$
Profits from commercial real estate sales are discounted to reflect the market rate of interest when
the stated rate of the mortgage note is less than the market rate. The recorded imputed interest
discounts are realized as the balances due are collected. In the event of early liquidation, interest
is recognized on the simple interest method.
58
In July 2005, Alico-Agri sold property in Lee County, Florida for $62.9 million. At the time
of the sale, the Company received a down payment of $6.2 million and a 2.5% interest
bearing mortgage note of $56.6 million in exchange for the land sold. In December 2006, the
Company restructured this contract. The Company received $3.8 million upon execution of the
restructured agreement.
Under the terms of the renegotiated contract, $3.8 million of the closing proceeds were subtracted
from the existing mortgage receivable principal of $56.6 million and accrued interest of $1.7
million was added back to the mortgage receivable as additional principal. Four annual principal
plus interest payments of the remaining $54.5 million mortgage were scheduled to commence
with a payment of $13.6 million on September 28, 2007. The interest rate was renegotiated from
2.5% annually up to 4.0% annually. The note was further discounted to reflect the market rate
of interest based on the Company’s incremental borrowing rate of 6.625% annually. This was
recognized as a reduction of the sales proceeds during the second quarter of fiscal year 2007. The
Company again restructured the contract in September of 2007. Please see Note 16 for the details
concerning the second restructuring.
In December 2006, the Company sold property in Lee County, Florida for $12.0 million. The
Company recognized revenue of $0.6 million and recorded a mortgage note receivable for $11.4
million and deferred revenue of $10.2 million. The mortgage note receivable, which accrues
interest at the rate of 6% annually, was discounted by $0.3 million to adjust for the current market
rate of interest. Interest only will be collected annually for the first four years, followed by four
equal annual payments of principal and interest.
(4) Inventories
A summary of the Company's inventories at August 31, 2007 and 2006 is shown below:
Unharvested fruit crop on trees
Unharvested sugarcane
Beef cattle
Plants and vegetables
Sod
Other
2007
2006
$
12,177
4,922
5,429
1,086
1,449
5
$
10,709
5,168
7,063
588
1,017
-
Total inventories
$
25,214
$
24,545
The Company records its inventory at the lower of cost or net realizable value. At August 31,
2007, the Company wrote down cattle inventory by $11 thousand and sod by $158 thousand. At
August 31, 2006, the Company wrote down cattle inventory by $35 thousand.
Hurricane Wilma, a category three hurricane, swept through southwest Florida during the first
quarter of fiscal year 2006. The hurricane caused extensive damage to the Company’s crops and
infrastructure in Collier and Hendry Counties. Additionally, hurricanes in fiscal years 2005 and
2004 also caused damages to citrus crops, primarily in Polk County.
59
In fiscal year 2005, citrus canker was discovered in three of the Company’s citrus grove locations.
Citrus canker is a highly contagious bacterial disease of citrus that causes premature leaf and
fruit drop. Citrus canker causes no threat to humans, animals or plant life other than citrus. In
2005, Florida law required that infected and exposed trees within 1900 feet of the canker find be
removed and destroyed. The Company’s traditional policy has been to recognize a loss estimate
for the total destruction of all trees within 1,900 feet of the canker find as soon as canker was
confirmed. This estimate of loss damage preceded the actual destruction of the trees. During
the second quarter of fiscal year 2006, the USDA determined that due to the potential spread
of canker from hurricanes they did not believe that canker eradication was feasible. Due to
this determination, the rule requiring the destruction of citrus groves testing positive for canker
was suspended. Upon suspension of the rule requiring the destruction of citrus groves, those
portions of inventory that were previously estimated as lost but had not yet been destroyed were
reestablished, reducing the casualty loss accrued.
As a result of the hurricane and canker discoveries, the Company recognized casualty losses
related to inventoried costs as follows:
Inventory Damage
Unharvested citrus
Unharvested sugarcane
Unharvested vegetables
2007
2006
$
$
-
-
-
-
$
$
3,198
395
147
3,740
2005
$
786
-
-
$
786
For further information regarding the casualty losses, please refer to Note 12 of the consolidated
financial statements.
60
(5) Property, Buildings and Equipment
(5) Property, Buildings and Equipment
A summary of the Company's property, buildings and equipment at August 31, 2007 and
2006 is shown below:
Breeding herd
Buildings
Citrus trees
Sugarcane
Equipment and other facilities
Total depreciable properties
Less accumulated depreciation
Net depreciable properties
Land and land improvements
2007
2006
$
13,643
9,948
31,466
5,508
37,908
98,473
49,927
48,546
80,444
$
15,038
8,434
31,466
8,382
35,130
98,450
48,338
50,112
81,239
Estimated
Useful Lives
5-7 years
5-40 years
22-40 years
4-15 years
3-40 years
Net property, buildings and equipment
$
128,990
$
131,351
In fiscal year 2005, citrus canker was discovered in three of the Company’s citrus grove locations.
Citrus canker is a highly contagious bacterial disease of citrus that causes premature leaf and
fruit drop. Citrus canker causes no threat to humans, animals or plant life other than citrus. In
2005, Florida law required that infected and exposed trees within 1900 feet of the canker find be
removed and destroyed. In 2005, the Company wrote off the remaining basis of the trees, totaling
$4.4 million as a result of these discoveries. The remaining basis and inventoried costs, net of
expected insurance recoveries were charged to fiscal year 2005 operations as a casualty loss.
During the second quarter of fiscal year 2006, the USDA suspended the rule requiring the
destruction of canker. As a result, some of the trees that were scheduled for removal and had
been written off as a casualty loss in 2005 were reestablished during fiscal year 2006. Trees with
a basis of $1.3 million previously recognized as a casualty loss in fiscal year 2005 were added
back to fixed assets and credited to fiscal year 2006 operations as a casualty recovery (see Note
12 to the consolidated financial statements).
In December 2006, the Company sold approximately 80 acres located in Lee County for $12.0
million. Upon signing of the contract, the Company received a down payment of $600 thousand
and a purchase money mortgage for $11.4 million.
In December 2006, the Company also negotiated an option agreement for the sale of an additional
900 acres in Lee County for $63.5 million. Upon signing the agreement, the Company received a
non refundable option payment of $3.1 million. The option to purchase can be extended annually
for four years at an annual cost of 6% of the remaining unexercised sales price.
61
In November 2005, the Company sold approximately 280 acres of citrus grove land located south
of La Belle, Florida in Hendry County for $5.6 million cash. The Company will retain operating
rights to the grove until residential development begins. The Company recognized a net profit on
the sale of $4.4 million.
In October 2005, the Company, through Alico-Agri purchased 291 acres of lakefront property
in Polk County, Florida, for $9.2 million cash. Due to changes in the market price of Florida
real estate, the Company evaluated several of its properties for impairment at August 31, 2007.
In conducting its evaluation, the Company reviewed the estimated non discounted cash flows
from each of the properties and obtained independent third party appraisals from a qualified real
estate appraiser. Based on this information, the Company determined that the 291 acre lakefront
property in Polk County, Florida was impaired by approximately $1.9 million. The impairment
loss was included as a charge to real estate operating expenses during the fourth quarter of fiscal
year 2007.
In May 2006, the Company purchased a 526 acre riverfront mine site for rock and fill in Glades
County, Florida, for $10.6 million cash. The Company has allocated approximately 54% of
the purchase price to the rock and sand reserve with the remaining 46% of the purchase price
allocated as residual land value based on the present value of the expected rock royalties to be
received over 20 years and the expected value of the property after that time. Rock and sand
reserves are being charged to cost of goods sold proportionately as the property is mined.
62
(6) Indebtedness
Alico, Inc. has a Credit Facility with Farm Credit of Southwest Florida that provides a $175.0
million revolving line of credit which matures on August 1, 2010. Funds from the Credit Facility
may be used for general corporate purposes including: (i) the normal operating needs of the
Company and its operating divisions, (ii) the purchase of capital assets and (iii) the payment of
dividends. The Credit Facility also allows for an annual extension at the lender’s option.
Under the Credit Facility, revolving borrowings require quarterly interest payments at LIBOR
plus a variable rate between 0.8% and 1.5% depending on the Company’s debt ratio. The
Amended Credit Facility is partially collateralized by mortgages on two parcels of agricultural
property located in Hendry County, Florida consisting of 7,672 acres and 33,700 acres.
The Credit Facility contains numerous restrictive covenants including those requiring the
Company to maintain minimum levels of net worth, retain certain debt, current and fixed charge
coverage ratios, and sets limitations on the extension of loans or additional borrowings by the
Company or any subsidiary. The covenants also restrict the Company’s activities regarding
investments, liens, borrowing and leasing.
Under the Credit Facility, an event of default occurs if the Company fails to make the payments
required of it or otherwise fails to fulfill the provisions and covenants applicable to it. In the event
of default, the Credit Facility shall bear an increased interest rate of 2% in addition to the then-
current rate specified in the Credit Facility; the lender may alternatively at its option, terminate
its revolving credit commitment and require immediate payment of the entire unpaid principal
amount of the Credit Facility, accrued interest and declare all other obligations immediately due
and payable. As a result of the increase in the income tax contingency accrual (see Note 7),
at May 31, 2007, the Company was not in compliance with the current ratio and the net worth
financial covenants of the Credit Facility. The Company obtained a waiver from the lender
regarding the non-compliance at May 31, 2007 with these financial covenants and has negotiated
an amendment of the Credit Facility to adjust the financial covenants on a prospective basis. In
the opinion of Management, the Company was in compliance with all of the covenants and
provisions of the amended Credit Facility at August 31, 2007.
In July and August of 2007, with the consent of the Company’s lender, the Company borrowed
$66.2 million from its revolving line of credit. These funds were deposited with the U. S.
Treasury in order to mitigate the potential interest on the income tax contingency.
The Company’s Chief Executive Officer, John R. Alexander, is a member of the Board of
Directors of the Company’s primary lender, Farm Credit of Southwest Florida. Mr. Alexander
abstains from voting on matters that directly affect the Company.
63
Outstanding debts under the Company’s various loan agreements were as follows at August 31,
2007 and 2006:
August 31, 2007
August 31, 2007
a) Revolving Credit Facility
c) Mortgage note payable
d) Mortgage note payable
e) Vehicle financing
Total
August 31, 2006
Principal
Balance
$
128,419
8,339
5
79
136,889
$
Additional
Credit
Available
46,581
$
-
-
-
46,581
$
Interest
Rate (f)
Collateral
LIBOR +1.50% Real estate
6.68% Real estate
7.00% Real estate
0%-2.90% 3 Vehicles
Additional
August 31, 2006
a) Revolving Credit Facility
b) Term loan
c) Mortgage note payable
d) Mortgage note payable
Principal
Balance
$
52,296
2,000
9,606
100
Credit
Interest
Available
122,704
-
-
-
Rate (f)
LIBOR +1%
LIBOR +1%
Collateral
Real estate
5.80% Unsecured
6.68% Real estate
7.00% Real estate
Total
$
64,002
$
122,704
a) Terms described above.
b) 5-year fixed rate term loan with commercial lender. $2 million principal due annually.
Interest due quarterly. The note was paid in full during the second quarter of fiscal year 2007.
c) First mortgage on 7,680 acres of cane, citrus, pasture and improvements in Hendry
County, Florida with commercial lender. Monthly principal payments of $106 thousand
plus accrued interest.
d) First mortgage on a parcel of land in Polk County, Florida with private seller. Annual
equal payments of $55 thousand.
e) 3-5 year term loans. Monthly principal payments plus interest.
f) The LIBOR rate was 5.38% at August 31, 2007 and 5.33% at August 31, 2006. The Company's
variable interest rates, based on LIBOR at August 31, 2007 and 2006 were approximately 6.88%
and 6.33% respectively.
and 6.33% respectively.
64
Maturities of the Company's debt are as follows:
Due within 1 year
Due between 1 and 2 years
Due between 2 and 3 years
Due between 3 and 4 years
Due between 4 and 5 years
Due beyond five years
Total
August 31,
2007
$
1,350
1,298
129,695
1,273
1,269
2,004
$
136,889
Interest costs expensed and capitalized during the three years ended
August 31, 2007, 2006 and 2005 were as follows:
2007
2006
2005
Interest expense
Interest capitalized
$
5,742
43
$
4,066
77
$
2,295
35
Total interest cost
$
5,785
$
4,143
$
2,530
(7) Other non-current liability
Alico formed a wholly owned insurance subsidiary, Agri in June of 2000. Agri was formed
in response to the lack of insurance availability, both in the traditional commercial insurance
markets and governmental sponsored insurance programs, suitable to provide coverage for the
increasing number and potential severity of agricultural events. Alico’s goal included not only
pre-funding its potential exposures but also to attempt to attract new underwriting capital if it was
successful in profitably underwriting its own potential risks as well as similar risks of its historic
business partners.
Alico capitalized Agri by contributing real estate located in Lee County, Florida. The real estate
was transferred at its historical cost basis. Agri received a determination letter from the Internal
Revenue Service (IRS) stating that Agri was exempt from taxation provided that net premium
levels, consisting only of premiums with third parties, were below an annual stated level ($350
thousand). Third party premiums remained below the stated annual level. As the Lee County real
estate was sold, substantial gains were generated in Agri, creating book/tax differences which
were treated as permanent differences.
The Internal Revenue Service (IRS) issued a thirty day letter dated August 14, 2006 pertaining
to audits of Alico for the tax years 2000 through 2004. In the thirty day letter, the IRS proposed
several alternative theories as a basis for its argument that Alico should have reported additional
taxable income in the years under audit. These theories principally related to the formation and
capitalization of the Company’s Agri Insurance subsidiary and its tax exempt status during the
years under audit. The total additional federal taxes, penalties and interest proposed by IRS
65
exams were in excess of $119.0 million. The Company has been working with IRS Appeals to
resolve the case and has reached a tentative agreement for the payment of federal taxes, penalties
and interest of approximately $66.2 million. In order to cease additional interest from accruing
on this liability, the Company has paid $66.2 million to the IRS from its revolving credit line.
Based on the contemplated settlement, the Company estimated additional state taxes and interest
of approximately $10.1 million at August 31, 2007 which will be payable when the IRS audit is
concluded. Further details regarding the settlement, including the future of Agri, are in ongoing
negotiations with the IRS and a proposed closing document has been prepared by the Company’s
tax counsel and provided to IRS Appeals for review. The Company expects full resolution of this
matter by January 2008. However, the Company has executed statute extensions with the IRS for
the tax returns affected until December 31, 2008.
The Company accrued a liability as a contingency under the guidelines of Financial Accounting
Standard (FAS) 5 of $20.3 million as of August 31, 2006 for the contingency. The estimated total
settlement at August 31, 2007 was $76.3 million, representing $41.4 million of additional federal
taxes, $20.7 million of federal interest, $4.1 million of federal penalties, $6.6 million of state
taxes and $3.5 million of state interest. Of the additional $56.0 million accrual recognized in
fiscal year 2007, approximately $26.2 million was recognized as additional income tax expense,
with the remaining $29.8 million recognized as current and deferred tax benefits. The estimated
state taxes payable were netted with the estimated federal tax refunds and recorded as a current
liability at August 31, 2007.
(8) Stock Based Compensation
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 authorized grants of
shares or options to purchase up to 650,000 shares of authorized but unissued common stock.
Stock options granted have a strike price and vesting schedules that are at the discretion of the
Board of Directors and are determined on the effective date of the grant. The strike price cannot
be less than 55% of the market price. No stock options were granted during fiscal years 2007,
2006 or 2005.
The Company measures the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the award. The cost is recognized over
the period during which an employee is required to provide service in exchange for the award
(usually the vesting period). The grant date fair value of employee share options and similar
instruments are estimated using option-pricing models adjusted for the unique characteristics
of those instruments (unless observable market prices for the same or similar instruments are
available). If an equity award is modified after the grant date, incremental compensation cost will
be recognized in an amount equal to the excess of the fair value of the modified award over the
fair value of the original award immediately before the modification.
66
A summary of option activity under the Plan is as follows:
Shares Under
Option
Weighted average
exercise price
Weighted average
remaining contractual
life (in years)
Aggregate
Intrinsic
Value
Options outstanding,
August 31,2004
Granted
Exercised
Options outstanding,
August 31,2005
Granted
Exercised
Options outstanding,
August 31,2006
Granted
Exercised
Options outstanding,
August 31,2007
75,626
-
59,255
16,371
-
7,213
$
17.29
-
17.08
$
18.05
18.55
9,158
$
17.66
-
1,000
15.68
8,158
$
17.90
6
271,254
At August 31, 2007 and August 31, 2006, there were 8,158 and 9,158 stock options, respectively,
fully vested and exercisable and 273,815 and 292,844 shares, respectively, available for grant.
The 8,158 options outstanding as of August 31, 2007 had a fair value of $271 thousand. There
was no unrecognized compensation expense related to outstanding stock option grants at August
31, 2007.
In fiscal year 2007, 1,000 options were exercised having a total fair value of $33 thousand. In
fiscal year 2006, 7,213 options were exercised having a total fair value of $259 thousand. In
fiscal year 2005, 59,255 options were exercised having a total fair value of $1.9 million.
In fiscal year 2006, the Company began granting restricted shares to certain key employees as
long term incentives. The restricted shares vest in four equal annual installments. The payment
of each installment is subject to continued employment with the Company. In fiscal years 2007
and 2006, there were 4,000 and 4,000 restricted shares, respectively, vested in accordance with
these grants.
67
The table below summarizes the Company’s restricted share awards granted to date:
Fair Market Value
Compensation
Expense
Compensation
Expense
Grant Date
April 2006
July 2006
October 2006
Shares Granted on Date of Grant Recognized in 2007 Recognized in 2006
65
16
248
20,000
13,000
20,000
908
694
1,239
172
(16)
517
$
$
Weighted
Average
Grant date
Fair value
Per share
Total
53,000
$
2,841
$
673
$
39
$
53.60
The shares granted in April 2006 vest 25% in April 2010 and 25% annually thereafter until
fully vested. The shares granted in July 2006 were forfeited in fiscal 2007. Four thousand of
the shares granted in October 2006 related to past service and were immediately vested and an
additional 4,000 shares vested August 31, 2007. The remaining shares granted in October 2006
vest 33% effective August 31, 2008 and 33% annually thereafter until fully vested. Following the
guidelines established in FAS 123R, the Company is recognizing compensation cost equal to the
fair market value of the stock at the grant dates prorated over the vesting period of each award.
The fair value of the unvested restricted stock awards at August 31, 2007 was $1.6 million and
will be recognized over a weighted average period of 6 years.
(9) Income Taxes
The provision for income taxes for the fiscal years ended August 31, 2007, 2006 and 2005 is
summarized as follows:
Current:
Federal income tax
State income tax
Deferred:
Federal income tax
State income tax
Year ended August 31,
2006
2005
2007
$
46,097
8,507
54,604
$
2,640
282
2,922
$
1,121
120
1,241
(18,578)
(2,780)
(21,358)
2,975
318
3,293
1,725
182
1,907
Total provision for income taxes
$
33,246
$
6,215
$
3,148
68
Following is a reconciliation of the expected income tax expense computed at the U.S. Federal
statutory rate of 35% and the actual income tax provision for the years ended August 31, 2007,
2006 and 2005:
Expected income tax
Increase (decrease) resulting from:
State income taxes, net of federal benefit
Nontaxable interest and dividends
Federal and state impacts from IRS exam
Deferred rate adjustment
Other reconciling items, net
Ye ar e nde d August 31,
2006
2007
2005
$
6,791
$
4,313
$
3,141
3,723
(708)
22,272
397
771
396
(35)
2,204
-
(346)
198
(89)
-
-
(102)
Total provision for income taxes
$
33,246
$
6,215
$
3,148
Some items of revenue and expense included in the statement of operations may not be currently
taxable or deductible on the income tax returns. Therefore, income tax assets and liabilities are
divided into a current portion, which is the amount attributable to the current year’s tax return,
and a deferred portion, which is the amount attributable to another year’s tax return. The revenue
and expense items not currently taxable or deductible are called temporary differences.
69
The tax effects of temporary differences that give rise to significant portions of the deferred
tax assets and deferred tax liabilities are presented below:
Deferred Tax Assets:
Contribution carry forward
Deferred retirement benefits
Federal benefit of state tax reserve
Prepaid sales comissions
Land inventories
Stock options appreciation
Land basis step up
Interest on taxes accrued for State amended returns
Other
2007
2006
$
1,082
2,095
2,229
-
-
39
21,820
1,413
1,040
$
1,052
1,299
-
4
488
278
802
1,257
662
Total gross deferred tax assets
$
29,918
$
6,250
Deferred Tax Liabilities:
Revenue recognized from citrus and sugarcane
Property and equipment (principally due to depreciation and
soil and water deductions)
Inventories
Deferred real estate gains
Other
$
1,739
$
471
19,730
476
-
1,717
15,743
3
4,792
Total gross deferred tax liabilities
$
23,662
$
21,339
Net deferred income tax (benefit) liabilities
$
(6,256)
$
15,089
Based on the Company’s history of taxable earnings and its expectations for the future,
Management has determined that its taxable income will more likely than not be
sufficient to fully recognize all deferred tax assets.
Agri, a wholly owned insurance company subsidiary of Alico, is treated as a U.S. taxpayer,
pursuant to an election under Internal Revenue Code Section 953(d), for all purposes except for
consolidating an operating loss by virtue of the dual consolidated loss rules. (Dual consolidated
losses prevent operating losses [not capital losses] from occurring in insurance companies
domiciled outside of the United States from offsetting operating income irrespective of the fact
that the insurance company is a member of the consolidated return group).
70
The Internal Revenue Service (IRS) issued a thirty day letter dated August 14, 2006 pertaining
to audits of Alico for the tax years 2000 through 2004. In the thirty day letter, the IRS proposed
several alternative theories as a basis for its argument that Alico should have reported additional
taxable income in the years under audit. These theories principally related to the formation and
capitalization of the Company’s Agri Insurance subsidiary and its tax exempt status during the
years under audit. The total additional federal taxes, penalties and interest proposed by IRS
exams were in excess of $119.0 million. The Company has been working with IRS appeals to
resolve the case and has reached a tentative agreement for the payment of federal taxes, penalties
and interest of approximately $66.2 million. In order to cease additional interest from accruing
on this liability, the Company has paid $66.2 million to the IRS from its revolving credit line.
Based on the contemplated settlement, the Company estimated additional state taxes and interest
of approximately $10.1 million at August 31, 2007 which will be due and payable when the IRS
audit is concluded. Further details regarding the settlement, including the future of Agri, are in
ongoing negotiations with the IRS and a proposed closing document has been prepared by the
Company’s tax counsel and provided to IRS Appeals for review. The Company expects full
resolution of this matter by January 2008; however, the Company has executed statute extensions
with the IRS for the tax returns affected until December 31, 2008.
The Company accrued a liability as a contingency under the guidelines of Financial Accounting
Standard (FAS) 5 of $20.3 million as of August 31, 2006 for the contingency (see Note 7 to the
Consolidated Financial Statements). The estimated state taxes payable were netted with the
estimated federal tax refunds and recorded as a current liability at August 31, 2007.
Alico capitalized Agri by contributing real estate located in Lee County, Florida. The real estate
was transferred at its historical cost basis. As the Lee County real estate was sold, substantial
gains were generated in Agri, creating permanent book/tax differences.
For property transferred to Agri but not sold during the years under audit, the historical tax basis
will be stepped-up to the fair market value of the property at the time of transfer. The Company
has estimated the amount of basis step-up based on discussions with the IRS and classified the
step ups resulting from the transfer of property not sold as of August 31, 2004 based on their
estimated tax benefits as a deferred tax asset at August 31, 2007. Should the actual outcome of
the IRS settlement differ from the estimated amounts, the deferred taxes related to the basis step-
ups could change.
Since January 1, 2004 Agri has been filing as a taxable entity. This change in tax status is a direct
result of changes in the Internal Revenue Code increasing premium and other annual income
levels. Due to these changes, Agri no longer qualifies as a tax-exempt entity.
71
(10) Related Party Transactions
Citrus
Citrus revenues of $14.7 million, $17.2 million and $19.8 million were recognized for a portion
of citrus crops sold under a marketing agreement with Ben Hill Griffin, Inc. (Griffin) for the years
ended August 31, 2007, 2006 and 2005, respectively. Griffin and its subsidiaries are controlled
by Ben Hill Griffin, III, the brother-in-law of John R. Alexander, the Company’s Chief Executive
Officer, and was the owner of approximately 49.85 percent of the Company’s common stock
until February 26, 2004. Accounts receivable, resulting from citrus sales, include amounts due
from Griffin totaling $4.8 million at August 31, 2007 and $4.4 million at August 31, 2006. These
amounts represent estimated revenues to be received periodically under pooling agreements as
sale of pooled products is completed.
Harvesting, marketing, and processing costs, for fruit sold through Griffin, totaled $2.7
million, $5.5 million, and $6.6 million for the years ended August 31, 2007, 2006 and 2005,
respectively. In addition, Griffin provided the harvesting services for citrus sold to unrelated
processors in 2005. The aggregate cost of these services was $2.5 million. The accompanying
consolidated balance sheets include accounts payable to Griffin for citrus production, harvesting
and processing costs totaling $102 thousand and $219 thousand at August 31, 2007 and 2006,
respectively.
Other Transactions
The Company purchased fertilizer and other miscellaneous supplies, services, and operating
equipment from Griffin, on a competitive bid basis, for use in its cattle, sugarcane, sod and citrus
operations. Such purchases totaled $2.0 million, $3.3 million and $4.2 million during the years
ended August 31, 2007, 2006 and 2005, respectively.
During fiscal year 2006, Atlanticblue (formerly Atlantic Blue Trust, Inc.) increased its holdings
to approximately 50.5% of the Company’s common stock. By virtue of their ownership
percentage, Atlanticblue is able to elect all the directors and, consequently, to control the
Company. Atlanticblue has issued a letter dated September 29, 2006 reaffirming its commitment
to maintaining a majority of independent directors on Alico’s board.
(11) Reportable Segment Information
The Company has four reportable segments: Bowen, Citrus Groves, Sugarcane and Cattle.
Bowen provides harvesting and marketing services for citrus producers including Alico’s
Citrus Grove division. Additionally, Bowen purchases citrus fruit and resells the fruit to citrus
processors and fresh packing facilities. The Citrus Groves segment produces citrus fruit for sale
to citrus processors and fresh packing facilities. The Sugarcane segment produces sugarcane for
delivery to the sugar mill and refinery. The Cattle division raises beef cattle for sale to western
feedlots and meat packing facilities. The goods and services produced by these segments are sold
to wholesalers and processors in the United States who prepare the products for consumption. The
Company’s operations are located in Florida.
Although the Company’s Plant World, Vegetable and Sod segments do not meet the quantitative
thresholds to be considered as reportable segments, information about these segments may be
useful and has been included in the schedules below. For a description of the business activities
of the Plant World, Vegetables and Sod segments please refer to Item 1 of this report.
72
The accounting policies of the segments are the same as those described in the summary of
significant accounting policies. The Company evaluates performance based on direct margins
from operations before general and administrative costs and income taxes not including
nonrecurring gains and losses.
The Company accounts for intersegment sales and transfers as if the sales or transfers were to
third parties, that is, at current market prices.
The Company’s reportable segments are strategic business units that offer different products.
They are managed separately because each business requires different knowledge, skills and
marketing strategies.
Information concerning the various segments of the Company for the years ended August 31,
2007, 2006 and 2005 is summarized as follows:
73
Revenues (from external customers except as noted)
Bowen
Intersegment fruit sales through Bowen
Citrus groves
Sugarcane
Cattle
Real Estate
Alico Plant World
Vegetables
Sod
Revenue from segments
Other operations
Less: intersegment revenues eliminated
Total operating revenue
Operating expenses
Bowen
Intersegment fruit sold through Bowen
Citrus groves
Sugarcane
Cattle
Real Estate
Alico Plant World
Vegetables
Sod
Segment operating expenses
Other operations
Less: intersegment expenses eliminated
Net casualty loss (recovery)
Year ended August 31,
2007
2006
2005
$
52,716
5,383
47,484
9,432
9,977
3,329
2,832
3,803
2,180
137,136
3,084
(5,383)
$
30,869
1,723
22,188
8,926
5,700
3
3,270
2,389
1,528
76,706
2,451
(1,723)
$
-
-
26,231
9,323
11,017
810
2,587
-
402
50,370
5,155
-
$
134,837
$
77,434
$
55,525
$
51,786
5,383
23,427
8,833
9,722
3,408
2,815
3,307
1,318
109,999
59
(5,383)
-
$
31,137
1,723
14,574
8,566
4,914
61
4,373
1,404
840
67,592
45
(1,723)
(3,628)
-
$
-
19,984
8,824
8,908
328
2,128
-
480
40,652
639
-
1,888
Total operating expenses
$
105,135
$
62,693
$
43,179
Gross profit (loss):
Bowen Brothers Fruit
Citrus groves
Sugarcane
Cattle
Real Estate
Alico Plant World
Vegetables
Sod
Gross profit from segments
Other
$
930
24,057
599
55
(79)
17
496
862
27,137
(7,735)
$
(268)
7,614
360
786
5
(1,103)
985
688
9,114
3,570
$
-
6,247
499
2,109
482
459
-
(78)
9,718
(480)
Income before income taxes
$
19,402
$
12,684
$
9,238
74
Capital expenditures:
Bowen Brothers Fruit
Citrus Groves
Sugarcane
Cattle
Alico Plant World
Vegetables
Sod
Segment capital expenditures
Other capital expenditures
2007
Year ended August 31,
2006
2005
$
554
1,231
1,288
1,893
3
473
908
6,668
2,470
$
1,536
9,929
3,065
3,490
957
35
1,103
20,405
12,767
-
$
2,086
1,891
2,711
5,990
-
-
12,678
99
Total consolidated capital expenditures
$
9,138
$
33,172
$
12,877
Depreciation, depletion and amortization:
Bowen Brothers Fruit
Citrus Groves
Sugarcane
Cattle
Alico Plant World
Vegetables
Sod
Total segment depreciation and amortization
Other depreciation, depletion and amortization
$
344
2,381
2,083
1,887
640
68
220
7,623
1,147
$
93
2,540
1,918
1,817
578
17
43
7,926
664
$
-
2,454
2,072
1,484
43
-
-
6,441
516
Total depreciation, depletion and amortizations
$
8,770
$
8,590
$
6,957
Total Assets:
Bowen Brothers Fruit
Citrus groves
Sugarcane
Cattle
Alico Plant World
Vegetables
Sod
Segment assets
Other Corporate assets
$
3,042
54,558
46,053
20,813
6,711
2,766
5,362
139,305
141,582
$
3,096
59,464
47,894
23,919
6,515
1,981
4,191
147,060
115,693
Total assets
$
280,887
$
262,753
Identifiable assets represent assets on hand at year-end that are allocable to a particular segment
either by their direct use or by allocations when used jointly by two or more segments. Other assets
consist principally of cash, temporary investments, mortgage notes receivable, bulk land inventories
and property and equipment used in general corporate business.
75
(12) Casualty (Recoveries) Losses
Hurricane Wilma caused extensive damage to the Company’s crops and infrastructure in Collier
and Hendry Counties during the first quarter of fiscal year 2006. Also, canker was confirmed in
several groves in 2006 and 2005. Additionally, during August and September 2004, a series of
three hurricanes struck a portion of the Company’s citrus groves in Polk County, Florida.
Citrus canker is a highly contagious bacterial disease of citrus that causes premature leaf and fruit
drop. Citrus canker causes no threat to humans, animals or plant life other than citrus. Prior to
January 10, 2006, Florida law required infected and exposed trees within 1,900 feet of the canker
find to be removed and destroyed. The Company’s traditional policy has been to recognize a loss
estimate for the total destruction of all trees within 1,900 feet of the canker find as soon as canker
was confirmed. This estimate of loss damage preceded the actual destruction of the trees. During
the second quarter of fiscal year 2006, the USDA determined that due to the potential spread of
canker from hurricanes they did not believe that canker eradication was feasible. Due to this
determination, the rule requiring the destruction of citrus groves testing positive for canker was
suspended. Upon suspension of the rule requiring the destruction of citrus groves, those portions
of grove that were previously estimated as lost but had not yet been destroyed were reestablished,
reducing the casualty loss accrued.
The Company recognized (recoveries) and losses resulting from the hurricanes and canker as
follows:
Inventoried costs
Basis of property and equipment
Re-established groves
Payments for business interruption
Insurance proceeds received
Insurance reimbursements receivable
Net casualty (recovery) loss
2007
-
-
-
-
-
-
-
$
$
$
2006
3,740
1,410
(1,268)
(2,900)
(4,004)
(606)
2005
$
786
4,426
-
-
(1,062)
(2,262)
$
(3,628)
$
1,888
76
(13) Treasury Stock
The following table provides information relating to purchases of the Company’s common shares
by the Company on the open market pursuant to the Director Compensation Plan approved by the
Company’s shareholders on June 10, 2005 for fiscal 2006 and 2007:
Date
Total Number of
Shares Purchased
Average price
paid per share
Total Shares
Purchased as Part of
Publicly Announced
Plans or Programs()
Total Dollar value of shares
purchased
11/28/2005
5/9/2006
8/2/2006
1/16/2007
1/17/2007
1/19/2007
3/8/2007
5/7/2007
8/20/2007
10,000
3,000
3,000
2,106
5,628
2,193
843
10,000
7,000
$
$
$
$
$
$
$
$
$
43.30
54.46
55.62
47.93
48.30
50.54
47.69
59.67
51.98
10,000
13,000
16,000
18,106
23,734
25,927
26,770
36,770
43,770
$
$
$
$
$
$
$
$
$
433,000
163,380
166,867
100,931
271,836
110,830
40,199
596,654
363,841
1) The Company may purchase an additional 87,230 shares pursuant to the approved repurchase
agreement.
77
(14) Off Balance Sheet Arrangements
The Company through its wholly owned subsidiary Bowen enters into purchase contracts for the
purchase of citrus products during the normal course of its business. Typically, these purchases
are covered by sales contracts. The purchase obligations under these purchase agreements totaled
$5.6 million at August 31, 2007. All of these purchases were covered by sales agreements at
prices exceeding cost. In addition, Bowen had forward sales contracts totaling $2.2 million at
August 31, 2007 for which a purchaser had not been contracted. Bowen management currently
believes that all committed sales quantities can be purchased below the committed sales price.
All of these contracts will be fulfilled by the end of the fiscal year 2008.
During the second quarter of fiscal year 2007, Alico formed a joint venture. Alico-J&J Farms,
LLC is engaged in vegetable farming. The initial crop covered 140 acres of property. Under the
agreement, each member is responsible for 50% of the obligations, capital and expenses of the
company and each member is in turn entitled to 50% of any profit or loss of the venture. Alico’s
share of the loss was $57 thousand in fiscal year 2007. During the fourth quarter of fiscal year
2007, the members determined the acreage to be farmed for fiscal year 2008 would be 782.
Alico’s portions of the estimated expenses of the venture for fiscal year 2008 are estimated to
be $4.6 million. The equipment needed to operate the farm has been acquired using five year
leases. Alico’s obligations under the lease should the joint venture default would be $48 thousand
annually or $189 thousand in total less the proceeds received from the disposition plus disposition
costs.
(15) New Accounting Pronouncements
In June 2006, the FASB issued FASB Interpretation Number 48 (“FIN 48”), “Accounting for
Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109.” The interpretation
contains a two step approach to recognizing and measuring uncertain tax positions accounted for
in accordance with SFAS No. 109. The first step is to evaluate the tax position for recognition
by determining if the weight of available evidence indicates it is more likely than not that the
position will be sustained on audit, including resolution of related appeals or litigation processes,
if any. The second step is to measure the tax benefit as the largest amount which is more than
50% likely of being realized upon ultimate settlement. The Company is required to adopt FIN 48
at the beginning of fiscal year 2008. The Company is evaluating the impact this statement will
have on its consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS No.
157 defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. SFAS No. 157
applies under other accounting pronouncements that require or permit fair value measurements.
The Company is required to adopt SFAS No. 157 effective at the beginning of fiscal year 2009.
The Company is evaluating the impact this statement will have on its consolidated financial
statements.
78
(16) Subsequent events
At a Board of Directors meeting held on September 28, 2007, the Board declared a quarterly
dividend of $0.275 per share payable to stockholders of record as of December 29, 2007, with
payment expected on or about January 15, 2008.
At its Board of Directors meeting held on September 28, 2007, the Board elected to change the
fiscal year of the Company from August 31 to September 30 effective as of October 1, 2007.
In connection with the change, the Company will include the transition period of September 1
through September 30, 2007 with the Company’s first quarter 10-Q for fiscal year 2008, covering
the fiscal quarter from October 1, 2007 through December 31, 2007 and in subsequent filings,
including the annual report on Form 10-K.
In October 2007, the Company finalized the renegotiation of a sales contract and mortgage related
to a parcel of land in Lee County, Florida that closed in July 2005. Major provisions of the
renegotiation included a reduction of the scheduled principal payments due in September of 2008
and 2009; an increased interest rate based on LIBOR plus a percentage; and quarterly interest
payments equal to the applicable quarterly interest rate as described above on the outstanding
principal balance for the term of the note. Further provisions include increased flexibility of
the Company to receive lots in the event of default. In October 2007, the Company received a
payment of $6.8 million related to the renegotiated contract. This payment consisted of $0.4
million of principal, $6.1 million of interest and the balance as an expense reimbursement.
Additionally, the Company received payment of $3.6 million for a one year extension on an
option contract, and a payment of $0.7 million for interest due on a third sales contract, for total
receipts of $11.1 million.
79
(17) Selected Quarterly Financial Data (Unaudited)
SELECTED QUARTERLY FINANCIAL DATA
(UNAUDITED)
Summarized quarterly financial data (in thousands except for per share amounts) for the years ended
August 31, 2007 and August 31, 2006, is as follows:
Revenue:
Bowen
Citrus
Sugarcane
Cattle
Vegetables, plants & trees
Sod
Real estate
Interest
Other revenue
November 30,
2006
2005
February 28,
2007
2006
May 31,
August 31,
2007
2006
2007
2006
Quarters Ended
804
1,637
1,696
4,074
999
399
-
1,397
881
-
1,208
1,428
2,224
5
558
5,580
4,985
787
19,943
20,265
5,478
909
2,850
53
4,175
1,973
837
5,722
7,044
4,992
426
2,515
5
7
1,499
682
31,017
21,772
2,040
3,842
2,176
647
(5)
2,120
690
16,290
11,986
2,507
758
2,262
285
81
1,651
605
95
3,810
218
1,152
859
603
603
1,971
625
8,857
1,950
()
2,292
503
533
206
918
581
Total revenue
11,887 17,291
56,961
23,039
64,289
36,425
10,793
15,839
Costs and expenses:
Bowen
Citrus
Sugarcane
Cattle
Vegetables, plants & trees
Sod
Real estate
Interest
Other
1,049
918
2,140
3,596
1,156
4
220
1,183
3,237
-
588
2,174
1,711
875
449
1,171
99
7,533
18,695
10,772
4,921
850
2,120
246
1,064
1,302
3,347
5,720
5,241
4,763
318
2,122
75
5
793
(318)
30,922
10,489
1,747
3,672
2,232
201
(3)
1,321
3,592
16,479
7,407
1,738
671
2,162
128
4
1,055
3,111
1,120
1,248
5
1,604
614
629
2,324
1,936
3,817
8,938
1,338
(109)
2,214
618
188
35
1,227
(1,743)
Total costs and expenses
13,741 15,492
43,317
18,719
54,153
32,793
13,317
12,906
Income (loss) before income
taxes
Provision for income taxes
(1,854)
(883)
1,799
646
13,644
5,940
4,320
1,653
10,136
23,285
3,632
1,092
(2,524)
4,904
2,933
2,824
Net income (loss)
(971)
1,153
7,704
2,667
(13,149)
2,540
(7,428)
109
Basic earnings (loss) per share
$
(0.13)
$
0.16
$
1.05
$
0.36
$
(1.78)
$
0.34
$
(1.02)
$
0.02
80
Item 9.
Disclosure.
Changes in & Disagreements with Accountants on Accounting and Financial
There were no disagreements with accountants on accounting and financial disclosure matters.
Item 9A. Controls and Procedures
Attached as exhibits to this Form 10-K are certifications of our Chief Executive Officer and Chief
Financial Officer, which are required in accordance with Rule 13a-14 of the Securities Exchange
Act. This “Controls and Procedures” section includes information concerning the controls and
controls evaluation referred to in the certifications.
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended, referenced herein as the
Exchange Act. These disclosure controls and procedures are designed to ensure that information
required to be disclosed by the Company in the reports that it files or submits under the Exchange
Act is recorded, processed, summarized, and reported within the time periods specified in
the SEC’s rules and forms, and that such information is accumulated and communicated to
Company’s management, including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. The Company carried out,
under the supervision and with the participation of the Company’s management, including the
Company’s Chief Executive Officer and the Company’s Chief Financial Officer, an evaluation of
the effectiveness of the design and operation of the Company’s disclosure controls and procedures
performed pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as amended. Based
on their evaluation at the end of fiscal year 2007, the Company’s Chief Executive Officer and its
Chief Financial Officer concluded that, as of August 31, 2007, the Company’s disclosure controls
and procedures were effective.
Management assessed the effectiveness of the Company’s internal control over financial reporting
as of August 31, 2007. In making the assessment, Management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal
Control – Integrated Framework. Based on this assessment, the Management of Alico, Inc.
concluded that as of August 31, 2007, the Company’s disclosure controls and procedures were
effective.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over
financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-
15(f) promulgated under the Exchange Act as a process designed by, or under the supervision
of, the Company’s principal executive and principal financial officers and implemented by the
Company’s Board of Directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles and includes those
polices and procedures that:
81
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with Generally Accepted Accounting Principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the company’s assets that could have a material effect on the
financial statements.
Based on our evaluations of the internal controls, we have concluded that as of August 31, 2007,
the Company maintained effective internal control over financial reporting.
Management’s assessment of the effectiveness of internal control over financial reporting as
of August 31, 2007 has been audited by McGladrey & Pullen, LLP, an independent registered
certified public accounting firm, as stated in their report which is included below in Item 9A of
this Form 10-K.
Remediation of Prior Year’s Material Weakness
The Company had previously reported a material weakness in its internal controls for the years
ended August 31, 2005 and 2006. The material weakness related to a lack of qualified accounting
resources to properly account for complex transactions, specifically income taxes. Subsequent
to the year ended August 31, 2006, the Company added several qualified and experienced staff
members in its accounting department which allowed the controller and CFO additional time
to evaluate complex accounting transactions. Additionally, the Company engaged a national
accounting firm to review its tax calculations and provide accounting advice as needed.
Management’s internal control testing for the 2007 fiscal year indicates these changes were
sufficient to remediate the prior year’s reported weakness and to prevent the current period
occurrence of the deficiency noted above.
82
Report of Independent Registered Certified Public Accounting Firm
To the Board of Directors and Stockholders
Alico, Inc.
LaBelle, Florida
We have audited management’s assessment, included in the accompanying Management’s Annual
Report on Internal Control Over Financial Reporting, that Alico, Inc. and Subsidiaries maintained
effective internal control over financial reporting as of August 31, 2007, based on criteria
established in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Alico, Inc.’s management is responsible
for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility is to express an
opinion on management’s assessment and an opinion on the effectiveness of the Company’s
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management’s assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as
we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors
of the company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material
effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that Alico, Inc. and Subsidiaries maintained effective
internal control over financial reporting as of August 31, 2007, is fairly stated, in all material
respects, based on criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our
opinion, Alico, Inc. and Subsidiaries maintained, in all material respects, effective internal control
over financial reporting as of August 31, 2007, based on criteria established in Internal Control
83
– Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements of Alico, Inc. and
Subsidiaries as of and for the year ended August 31, 2007, and our report dated November 14,
2007, expressed an unqualified opinion.
/s/MCGLADREY & PULLEN, LLP
Orlando, Florida
November 14, 2007
Item 9B. Other Information.
None
84
PART III
Items 10 - 14 of Part three are incorporated by reference to the Company’s proxy expected to be
filed on or before December 31, 2007.
Item 15.
Exhibits, Financial Statement Schedules and Reports on Form 8-K.
PART IV
(a) 1. Financial Statements:
Included in Part II, Item 8 of this Report
Reports of Independent Registered Certified Public Accounting Firms
August 31, 2007, 2006 & 2005
Consolidated Balance Sheets - August 31, 2007 and 2006
Consolidated Statements of Operations - For the Years Ended August 31, 2007, 2006 and 2005
Consolidated Statements of Stockholders’ Equity and Comprehensive Income (loss) - For the
Years Ended August 31, 2007, 2006 and 2005
Consolidated Statements of Cash Flows - For the Years Ended August 31, 2007, 2006 and 2005
(b) 2. Financial Statement Schedules:
Selected Quarterly Financial Data - For the Years Ended August 31, 2007 and 2006 - Included in
Part II, Item 8
All other schedules not listed above are not submitted because they are not applicable or not
required or because the required information is included in the financial statements or notes
thereto.
85
(c) 3. Exhibits:
3(i) Articles of Incorporation:
3(i)1 Restated Certificate of Incorporation, Dated February 17, 1972 (incorporated by reference
to the Company’s Registration Statement on Form S-1 dated February 24, 1972, Registration No.
2-43156).
3(i)2 Certificate of Amendment to Certificate of Incorporation, Dated January 14, 1974
(incorporated by reference to the Company’s Registration Statement on Form S-8, dated
December 21, 2005, Registration No. 333-130575)
3(i)3 Amendment to Articles of Incorporation, Dated January 14, 1987 (incorporated by reference
to the Company’s Registration Statement on Form S-8, dated December 21, 2005, Registration
No. 333-130575)
3(i)4 Amendment to Articles of Incorporation, Dated December 27, 1988 (incorporated by
reference to the Company’s Registration Statement on Form S-8, dated December 21, 2005,
Registration No. 333-130575)
3(ii) Bylaws:
3(ii)(1) By-Laws of Alico, Inc., amended and restated (incorporated by reference to the
Company’s filing on Form 8-K dated October 4, 2007)
(10) Material Contracts:
(10.1) Citrus Processing and Marketing Agreement with Ben Hill Griffin, Inc., dated November
2, 1983, a Continuing Contract. (incorporated by reference to the Company’s filing on Form 10-K
dated November 28, 2006)
10.2) Cash Purchase Orange Agreement with Tropicana
(10.3) Fruit Purchase Agreement with Southern Gardens Citrus Processing Corporation
(10.4) Real Estate Sale Agreement with Ginn Development Corporation (incorporated by
reference to the Company’s filing on Form 10-Q/A dated January 6, 2005)
(10.5) First Amendment to Real Estate Sales Agreement with Ginn Development Corporation
(incorporated by reference to the Company’s filing on Form 8-K dated December 27, 2006)
(10.6) Second Amendement and restate Renewal Promissory Note (incorporated by reference to
the Company’s filing on Form8-K dated October 25, 2007)
(10.7) Second Amendment to Mortgage Deed (incorporated by reference to the Company’s filing
on Form 8-K dated October 25, 2007)
(10.8) Revolving Line of Credit Agreement (incorporated by reference to the Company’s filing on
Form 8-K dated October 17, 2005)
86
(10.9) Amendment to Line of Credit Agreement (incorporated by reference to the Company’s
filing on Form 8-K dated June 1, 2006)
(10.10) Amendment to Line of Credit Agreement
(11) Statement - Computation of Weighted Average Shares Outstanding and Per Share Earnings
(12) Statement - Computation of Ratios
(14.1) Code of Ethics amended September 28, 2007
(14.2) Whistleblower Policy amended September 28, 2007
(21) Subsidiaries of the Registrant – Alico Land Development Company, Inc. (formerly
Saddlebag Lake Resorts, Inc. (a Florida corporation incorporated in 1971));Agri-Insurance
Company, Ltd. (a company formed under the laws of the country of Bermuda incorporated in
2000), Alico-Agri, Ltd (a Florida limited partnership formed in 2003), Alico Plant World, LLC
(a Florida limited liability company organized in 2004), Bowen Brothers Fruit, LLC (a Florida
limited liability company organized in 2005) )(incorporated by reference to the Company’s filing
on Form 10-K dated November 28, 2006).
(31.1) Rule 13a-14(a) certification
(31.2) Rule 13a-14(a) certification
(32.1) Section 1350 certifications
87
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ALICO, INC.
(Registrant)
November 14, 2007
Date
November 14, 2007
Date
John R. Alexander
Chairman, President &
Chief Executive Officer
/s/ John R. Alexander
Patrick W. Murphy
Senior Vice President and
Chief Financial Officer
/s/ Patrick W. Murphy
88
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the date
indicated:
John R. Alexander Robert E. Lee Caswell
Chairman Director
/s/ John R. Alexander /s/ Robert E. Lee Caswell
Evelyn D’An Phillip Dingle
Director Director
/s/ Evelyn D’An /s/ Phillip Dingle
Gregory Mutz Charles Palmer
Director Director
/s/ Gregory Mutz /s/ Charles Palmer
Baxter G. Troutman Gordon Walker
Director Director
/s/ Baxter G. Troutman /s/ Gordon Walker
Robert J. Viguet
Director
/s/ Robert J. Viguet
November 14, 2007
Date
89
Financial Information at a Glance
Fiscal years ended August 31
Board of Directors
John R. Alexander
Robert E. Lee Caswell
Evelyn D’An*
Chairman and Chief Executive Officer
Alico, Inc.
Operations Manager
PC Associates, LLC
CPA and President
D’An Financial Services, Inc.
Operating Revenues
(in thousands)
Earnings per Share
$160,000
$140,000
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$0
$2.00
$1.50
$1.00
$.50
$0.00
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
$
( 0.50)
$
( 1.00)
$
( 1.50)
$
( 2.00)
$
( 2.50)
14
12
10
8
6
4
2
0
2003
2004
2005
2006
2007
2003
2004
2005
2006
2007
Per Share Dividends Declared
Ratio Analysis
2003
2004
2005
2006
2007
Current
Debt/equity
2003
8.91
72%
2004
12.42
64%
2005
7.24
72%
2006
6.14
86%
2007
7.26
136%
Phillip S. Dingle*
Managing Partner and Founder
Health Edge
Investment Partners, LLC
Gregory T. Mutz*
Charles L. Palmer*
Chairman of the Board
AMLI Residential Properties Trust
President and
Chief Executive Officer
North American Company, LLLP
Baxter G. Troutman
Representative District 66
Florida House of Representatives
Chief Executive Officer
Florida Labor Solutions, Inc.
Officers
John R. Alexander
Chairman of the Board and Chief Executive Officer
Dan L. Gunter
President and Chief Operating Officer
Patrick W. Murphy
Senior Vice President and Chief Financial Officer
Steven M. Smith
Senior Vice President, Agricultural Operations
Robert M. Bogart
Senior Vice President, Non-Agricultural Operations
Michael R. Talaga
Senior Vice President,
Human Resources and Information Technology
A. Denise Plair
Corporate Secretary
Robert J. Viguet, Jr.*
Partner
Thompson & Knight, LLP
*Independent Directors
Committees
Audit Committee
Phillip S. Dingle Chairman
Evelyn D’An, Finacial Expert
Gregory T. Mutz
Dr. Gordon Walker
Compensation Committee
Charles L. Palmer, Chairman
Gregory T. Mutz
Robert J. Viguet, Jr.
Dr. Gordon Walker
Strategy And Business Development
Committee
Dr. Gordon Walker, Chairman
Phillip S. Dingle
Gregory T. Mutz
Charles L. Palmer
Baxter G. Troutman
Robert J. Viguet, Jr.
Nominating and Governance
Committee
Dr. Gordon Walker, Chairman
Evelyn D’An
Gregory T. Mutz
Charles L. Palmer
Robert J. Viguet, Jr.
Gordon Walker, PhD*
Chairman Department of
Strategy & Entrepreneurship
Southern Methodist University
Company Contact
Information
Physical Address
640 South Main Street
La Belle, Florida 33935
Mailing Address
Post Office Box 338
LaBelle, Florida 33975
Phone
(863) 675-2966
Fax
(863) 675-6928
Transfer Agent
Sue Hampton
Transfer Agent
Compushare
730 Peachtree Street, Suite 840
Atlanta, Georgia 30308
1 (800) 568-3476
A L I C O I N C O R P O R A T E D
A L I C O I N C O R P O R A T E D
MANAGING THE ENVIRONMENT, THE LAND, RESOURCES AND PEOPLE
Post Office Box 338 • LaBelle, Florida 33975 • (863) 675-2966 • www.alicoinc.com
4 8 T H A N N U A L R E P O R T F O R Y E A R E N D E D A U G U S T 3 1 , 2 0 0 7
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