ALICO INC - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K

X	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934

	For the fiscal year ended August 31, 2004
	Or
	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934

	For the transition period from			to

	Commission file number 0-261

	ALICO, INC.
	(Exact name of registrant as specified in its charter)

	Florida				59-0906081
	(State or other jurisdiction of				IRS Employer
	incorporation or organization)				identification number

	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:

	None

	SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

	COMMON CAPITAL STOCK, $1.00 Par value, Non-cumulative
	Title of class

	Indicate by check mark whether the registrant (1) has filed all reports required to be filed
	by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
	months (or for such shorter period that 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 whether the registrant is an accelerated filer (as defined in rule
	12b-2 of the Exchange Act)

		Yes	X	No

	Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of
	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
	As of November 3, 2004 there were 7,319,357 shares of stock outstanding and the
	aggregate market value (based upon the average bid and asked price, as quoted on the
	NASDAQ) of the common stock held by non-affiliates was approximately $193,520,915.


		1

DOCUMENTS INCORPORATED BY REFERENCE

Form 8-K filed June 8, 2004

Form 8-K/A filed June 16, 2004


Index


Alico, Inc.
Form 10-K
For the year ended August 31, 2004

Part I
	Item 1. Business
	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 Stock & Related Stockholder matters
	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 & Disagreements with Accountants on Accounting
		and Financial Disclosure
	Item 9A. Controls and Procedures

Part III
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management
	Item 13. Certain Relationships and Related Transactions
	Item 14. Principal Accountant's Fees and Services

Part IV
	Item 15. Exhibits, Financial Statement Schedules and Reports on
		Form 8-K.


		2

PART I

Item 1. Business.

Alico, Inc. (the "Company"), was formed February 29, 1960 as a spinoff of the Atlantic Coast Line Railroad Company and is generally recognized as an agribusiness company operating in Central and Southwest Florida. The Company's primary asset is 141,067 acres of land located in Collier, Hendry, Lee and Polk Counties. (See table on Page 9 for location and acreage by current primary use.) The Company is involved in various operations and activities including citrus fruit production, cattle ranching, sugarcane and sod production, and forestry. The Company also leases land for farming, cattle grazing, recreation, and oil exploration.

The Company's land is managed for multiple use wherever possible. Cattle ranching, forestry and land leased for farming, grazing, recreation and oil exploration, in some instances, utilize the same acreage.

Agricultural operations have combined to produce from 90 to 95 percent of annual operating revenues during the past five years. Citrus groves generate the most gross operating revenue. Sugarcane ranks second in operating revenue production. While the cattle ranching operation utilizes the largest acreage, it ranks third in the production of operating revenue. Approximately 5,602 acres of the Company's property are classified as timberlands, however, the area in which these lands are located is not highly rated for timber production. These lands are also utilized as native range, in the ranching operation, and leased out for recreation and oil exploration.

Diversification of the Company's agricultural base was initiated with the development of a Sugarcane Division at the end of the 1988 fiscal year. The 11,131 acres in production during the 2004 fiscal year consisted of 2,444 acres planted in 2003, 2,685 acres planted in 2002, 2,495 acres planted in 2002 and 3,507 acres planted in 2001.

Leasing of lands for rock mining and oil and mineral exploration, rental of land for grazing, farming, recreation and other uses, while not classified as agricultural operations, are important components of the Company's land utilization and operation. Gross revenue from these activities during the past five years has ranged from 5 to 9 percent of annual operating revenue.

The Company is not in the retail land sales and development business, except through its wholly owned subsidiary, Saddlebag Lake Resorts, Inc. However, it does from time to time sell properties which, in the judgment of management, are surplus to the Company's primary operations. Additionally, the Company’s wholly owned subsidiary, Alico-Agri, Ltd., engages in bulk land sales in connection with the generation of underwriting capital.

For further discussion of the relative importance of the various segments of the Company's operations, including financial information regarding revenues, operating profits (losses) and assets attributable to each major segment of the Company's business, see Note 14 of Notes to Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this document.

Subsidiary Operations

The Company has three wholly owned subsidiaries; Saddlebag Lake Resorts, Inc. ("Saddlebag") Agri-Insurance Company, Ltd. ("Agri") and Alico-Agri, Ltd. (Alico-Agri).

Saddlebag has been active in the subdividing, development and sale of real estate since its inception in 1971. Saddlebag has two subdivisions near Frostproof, Florida that have been developed and are on the market. While one of the subdivisions has been sold out, approximately 79% of the lots in the second development have been sold.

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 insured catastrophic business interruption coverage for Ben Hill Griffin, Inc. Griffin purchased catastrophic business interruption coverage from Agri during fiscal 2003, 2002 and 2001. The total coverage under the policy was $3.5 million, $3.2 million and $3.2 million for the 2003, 2002 and 2001 calendar years, respectively. Each policy term was one year expiring in December. The premiums charged under this policy were $138 thousand, $110 thousand and $104 thousand for 2003, 2002 and 2001, respectively.

Agri began providing coverage for Tri-County, LLC, a subsidiary of Atlantic Blue Trust, Inc., the holder of approximately 47.7% of the Company’s common stock. The coverage term is from August 2004 to July 2005. Total coverage under the policy is $2.7 million and the premium charged was $45 thousand.

Additionally, Agri directly underwrote catastrophic business interruption coverage for its parent company, Alico, Inc., insuring all but two of Alico’s citrus groves. The coverage term was from August 2002 to August 2003. Total coverage under the policy was $12.7 million and the premium charged was $803 thousand. Alico, Inc., renewed the policy in August 2003, extending the coverage term to August 2004. The coverage under the renewal was $13.6 million and the premium charge was $858 thousand. The policy was renewed again in August 2004, extending the coverage term to August 2005. The coverage under the renewal was $28.5 million and the premium charged was $1.1 million.

Agri underwrote catastrophic business coverage for Alico’s remaining two groves under a policy covering the term from January 2003 to January 2004. Total coverage under the policy was $2.0 million, and the premium charged was $119 thousand. The policy was renewed in January 2004 extending the term to January 2005. The coverage under the policy is $3.7 million and the premium charged was $98 thousand.

Premiums for coverages quoted are set by independent actuaries/underwriters hired by Agri in Bermuda based on underwriting considerations established by them. Premiums vary depending upon the size of the property, its age and revenue-producing history as well as the proximity of the insured property to known disease-prone areas or other insured hazards.

Alico-Agri, Ltd. was formed during fiscal 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.

The financial results of the operation of these subsidiaries are consolidated with those of the Company. (See Note 1 of Notes to Consolidated Financial Statements.)

Citrus

Approximately 9,871 acres of citrus were harvested during the 2003/04 season. An additional 1,276 acres of citrus grove was not yet mature enough to produce a crop in fiscal 2004. Since 1983 the Company has maintained a marketing contract covering the majority of the Company's citrus crop with Ben Hill Griffin, Inc., a Florida corporation and major shareholder before February 2004. The agreement provides for modifications to meet changing market conditions and provides that either party may terminate the contract by giving notice prior to the first day of August preceding each fruit season. Under the terms of the contract, the Company's fruit is packed and/or processed and sold along with fruit from other growers, including Ben Hill Griffin, Inc. The proceeds are distributed on a pro rata basis as the finished prod uct is sold. In February 2004, Ben Hill Griffin, Inc. relinquished its stock holdings in the Company pursuant to the "Settlement Agreement" agreed upon with the Four Sisters Protectorate.

During the year ended August 31, 2004, approximately 77% of the Company's fruit crop was marketed under this agreement, as compared to 75% for the year ended August 31, 2003 and 77% for the year ended August 31, 2002. In addition, Ben Hill Griffin, Inc. provides harvesting services to the Company for citrus sold to unrelated processors. These sales accounted for the remaining 23% of total citrus revenue for the year ended August 31, 2004.


		3

Sugarcane

The Company had 11,131 acres, 11,840 acres, and 11,680 acres of sugarcane in production during the 2004, 2003, and 2002 fiscal years, respectively. The 2004, 2003, and 2002 fiscal year crops yielded approximately 346,000, 413,000 and 376,000 gross tons, respectively. An additional 1,952 acres of planted cane was not yet mature for harvest during fiscal 2004.

Ranch

The Company has a cattle operation located in Hendry and Collier Counties, Florida, which is engaged primarily in the production of beef cattle and the raising of replacement heifers. The breeding herd consists of approximately 13,400 cows, bulls and replacement heifers. Approximately 54% of the herd are from one to five years old, while the remaining 46% are six years old or older. The Company primarily sells to packing and processing plants. The Company also sells cattle through local livestock auction markets and to contract cattle buyers. These buyers provide ready markets for the Company's cattle. The loss of any one or a few of these plants and/or buyers would not, in management's view, have a material adverse effect on the Company's cattle operation. Subject to prevailing market conditions, the Company may h edge its beef inventory by entering into cattle futures contracts to reduce exposure to changes in market prices.

Forest Products

Approximately 4% of the Company's properties are classified as timberlands. The principal forest products sold by the Company are sabal palms and other horticultural commodities. These products are sold to various landscaping companies. The Company does not incur any of the harvesting expenses.

Part of the lands, from which the timber was removed, is being converted to semi-improved pasture and other uses.

Mining Operations: Rock and Sand

The Company leases approximately 5,732 acres in Lee County, Florida to CSR America, Inc. of West Palm Beach, Florida for mining and production of rock, aggregate, sand, baserock and other road building and construction materials.

Royalties which the company receives for these products are based on a percentage of the F.O.B. plant sales price.

Land Rental for Grazing, Agricultural and Other Uses

The Company rents land to others for grazing, farming and recreational uses, on a tenant-at-will basis, for an annual fee. The income is not significant when compared to overall gross income, however, it does help to offset the expense of carrying these properties until they are put to a more profitable use. The Company has developed additional land to lease for farming.

There were no significant changes in the method of rental for these purposes during the past fiscal year.

Leases for Oil and Mineral Exploration

The Company has leased subsurface rights to a portion of its properties for the purpose of oil and mineral exploration. Currently, there is one lease in effect.

Twenty-four wells have been drilled during the years that the Company has been leasing subsurface rights to oil companies. The drilling has resulted in twenty-one dry holes, one marginal producer, which has been abandoned, and two average producers, one of which is still producing.

Competition

As indicated, the Company is primarily engaged in a limited number of agricultural activities, all of which are highly competitive. For instance, citrus is grown in some foreign countries and several states, the most notable of which are: Brazil, Florida, California, and Texas. In addition, sugarcane products are imported from some foreign countries. Beef cattle are produced throughout the United States and domestic beef sales must also compete with sales of imported beef. Additionally, forest and rock products are produced in most parts of the United States. Leasing of land for oil exploration is also widespread.

The Company's share of the market for citrus, sugarcane, cattle and forest products in the United States is insignificant.

Environmental Regulations

The Company's operation is subject to various federal, state and local laws regulating the discharge of materials into the environment. The Company is in compliance with all such rules and such compliance has not had a material effect upon capital expenditures, earnings or the competitive position of the Company.

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 keeping current on these matters. In addition, there are ongoing costs incurred in complying with the permitting and reporting requirements.

Employees

At the end of August 2004, the Company had a total of 149 full-time employees classified as follows: Citrus 74; Ranch 16; Sugarcane 15; Facilities Maintenance Support 29; General and Administrative 15. There are no employees engaged in the development of new products or research. Management is not aware of any efforts by employees or outside organizers to create any type of labor union arrangement. Management believes that the employer/employee relationship environment is such that labor organization activities are unlikely to occur.

Seasonal Nature of Business

As with any agribusiness enterprise, the Company's business operations are predominantly seasonal in nature. The harvest and sale of citrus fruit generally occurs from October to June. Sugarcane is harvested during the first, second and third quarters. Other segments of the Company's business such as its cattle and sod sales, and its timber, mining and leasing operations, tend to be more recurring than seasonal in nature.

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 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 SEC filed documents are also available free of charge upon request.


		4

Item 2. Properties.

At August 31, 2004, the Company owned a total of 141,067 acres of land located in four counties in Florida. Acreage in each county and the primary classification with respect to present use of these properties is shown in the following table:

Alico, Inc. & Subsidiaries
Land Use Summary

	Total	Hendry	Polk	Collier	Lee
Citrus:
Producing acres	11,147	3,765	3,253	4,129	-
Support and nonproductive*	5,737	1,890	650	3,197	-

Total Citrus	16,884	5,655	3,903	7,326	-

Sugarcane:
Producing acres	13,083	13,083	-	-	-
Support and nonproductive*	10,796	10,796	-	-	-

Total Sugarcane	23,879	23,879	-	-	-

Ranch:
Improved pasture	22,922	22,627	295	-	-
Semi-improved pasture	21,752	20,038	602	1,112	-
Native pasture	19,513	11,846	5,949	1,718	-
Support and nonproductive*	25,522	23,302	1,540	680	-

Total Ranch	89,709	77,813	8,386	3,510	-

Farming:
Leased acres	2,932	2,802	-	-	130
Support and nonproductive*	1,029	1,008	-	-	21

Total farming	3,961	3,810	-	-	151

Sod:
Producing acres	500	500	-	-	-
Support and nonproductive*	335	335	-	-