ALICO, INC. — Annual Report 2002

Nov 15, 2002

Alico, Inc. P. O. Box 338 La Belle, FL 33975 November 15, 2002 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: Pursuant to the requirements of the Securities Exchange Act of 1934, we are transmitting herewith the attached Form 10-K for the year ending August 31, 2002. Sincerely, ALICO, INC. L. Craig Simmons L. Craig Simmons Vice President and Chief Financial Officer 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 (FEE REQUIRED) For the fiscal year ended August 31, 2002. OR _ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from _ to_. Commission file number 0-261. ALICO, INC. _______ (Exact name of registrant as specified in its charter) Florida 59-0906081 ____ ____ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P. O. Box 338, La Belle, Florida 33975 _____ _ (Address of principal executive offices) (Zip Code) (863)675-2966 Registrant's telephone number, including area code_ SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Name of each exchange on Title of each class which registered __ ___ None 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 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 eference in Part III of this Form 10-K or any amendment to this Form 10-K. As of October 11, 2002 there were 7,093,092 shares of stock outstanding and the aggregate market value (based upon the average bid and asked price, as quoted on NASDAQ) of the common stock held by non-affiliates was approximately $101,184,156. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Proxy Statement dated November 8, 2002 are incorporated by reference in Parts II and III, respectively. PART I Item 1. Business. _____ Alico, Inc. (the "Company") is generally recognized as an agribusiness company operating in Central and Southwest Florida. The Company's primary asset is 140,526 acres of land located in Collier, Hendry, Lee and Polk Counties. (See table on Page 7 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 farm- ing, grazing,recreation and oil exploration, in some instances, utilize the same acreage. Agricultural operations have combined to produce from 69 to 89 percent of annual revenues during the past five years. Citrus groves generate the most gross revenue. Sugarcane ranks second in revenue production. While the cattle ranching operation utilizes the largest acreage, it ranks third in the production of revenue. Approximately 9,197 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 11,680 acres in production during the 2002 fiscal year consisted of 1,520 acres planted in 1997, 3,326 acres planted in 1998, 4,152 acres planted in 1999 and 2,682 acres planted in 2000. Leasing of lands for rock mining and oil and mineral explor- ation, 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 4 to 5 percent of total 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, Agri-Insurance Company, Ltd., engages in bulk land sales in connection with the gene- ration of underwriting capital. Gains from sales of real estate during the past five years has ranged from 3 to 23 per- cent of total revenues. For further discussion of the relative importance of the various segments of the Company's operations, including finan- cial information regarding revenues, operating profits (losses) and assets attributable to each major segment of the Company's business, see Note 15 of Notes to Consolidated Financial State- ments and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this document. Subsidiary Operations ___ The Company has two wholly owned subsidiaries; Saddlebag Lake Resorts, Inc. ("Saddlebag") and Agri-Insurance Company, Ltd. ("Agri"). Saddlebag has been active in the subdividing, deve- lopment and sale of real estate since its inception in 1971. Saddlebag has two subdivisions near Frostproof, Florida which have been developed and are on the market. While one of the subdivisions has been sold out, approximately 62% 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. During fiscal 2002, Agri supplied reinsurance to an independent underwriter who insured catastrophic business interruption coverage for Ben Hill Griffin, Inc.. The total coverage under the policy was $3.2 million and the premium charged was $128 thousand. The coverage term was from Decem- ber 2001 to December 2002. The Company expects to renew the policy and appropriately adjust premium rates. Additionally, Agri directly underwrote catastrophic business interruption coverage for its parent company, Alico, Inc., insuring all of Alico's citrus groves. The coverage term was from August 31, 2002 to August 2003. Total coverage under the policy was $12.7 million and the premium charged was $803 thousand. 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 9,756 acres of citrus were harvested during the 2001/02 season. Since 1983 the Company has maintained a mar- keting contract covering the majority of the Company's citrus crop with Ben Hill Griffin, Inc., a Florida corporation and major shareholder. 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 product is sold. During the year ended August 31, 2002, approximately 77% of the Company's fruit crop was marketed under this agreement, the same percen- tage as in the year ended August 31, 2001. 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. For the year ended August 31, 2000, approximately 76% of the Company's fruit crop was marketed under this agreement. 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 13,755 cows, bulls and replacement heifers. Approximately 47% of the herd are from one to five years old, while the remaining 53% are six and 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 hedge its beef inventory by entering into cattle futures contracts to reduce exposure to changes in market prices. Sugarcane __ The Company had 11,680 acres, 11,722 acres, and 9,588 acres of sugarcane in production during the 2001/02,2000/01, and 1999/00 fiscal years, respectively. The 2001/02, 2000/01, and 1999/00 crops yielded approximately 376,000, 417,000, and 321,000 gross tons, respectively. Forest Products ___ Approximately 7% 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. 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 profit- able 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 are two leases 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, still producing. Mining Operations: Rock and Sand ____ The Company leases 6,143 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. 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 several states, the most notable of which are: Florida, California, Arizona and Texas. In addition, citrus and sugarcane products are im- ported 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, execu- tive 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 2002, the Company had a total of 152 full- time employees classified as follows: Citrus 73; Ranch 19; Sugarcane 16; Facilities Maintenance Support 27; General and Administrative 17. There are no employees engaged in the deve- lopment 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 quar- ters. Other segments of the Company's business such as its cattle and sod sales, and its timber, mining and leasing oper- ations, tend to be more successive than seasonal in nature. Item 2. Properties. ________ At August 31, 2002, the Company owned a total of 140,526 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:

Of the above lands, the Company utilizes 24,178 acres of imp- roved pasture plus approximately 46,000 acres of native pasture for cattle production and 6,143 acres are leased for rock mining operations. Much of the land is also leased for multi- purpose use such as cattle grazing, oil exploration, agriculture and recreation. In addition to the land shown in the above table, the Company owns full subsurface rights to 1,064 acres and fractional sub- surface rights to 18,707 acres located throughout the Counties referred to above. From the inception of the Company's initial development program in 1948, the goal has been to develop the lands for the 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. It is the opinion of Management that the lands are suitable for agricultural, residential and commercial uses. However, since the Company is primarily engaged in agri- cultural activities, some of the lands are considered surplus to its needs for this purpose and, as indicated under Item 1 of this report, sales of real property are made from time to time. Management believes that each of the major programs is adequately supported by agricultural equipment, buildings, fences, irrigation systems and other amenities required for the operation of the projects. Item 3. Legal Proceedings. _____ The Company has been informed by Ben Hill Griffin III, Chairman of the Board, that he is party to a lawsuit filed against him in Polk County, Florida Circuit Court by the families of his four sisters, most of the members of whom are beneficiaries of a trust, entitled the Ben Hill Griffin, Jr. Revocable Inter Vivos Trust #1 (the "Trust"). The plaintiffs in the lawsuit (The Four Sisters Protectorate, et al. v. Ben Hill Griffin, III, Trustee, Case No. GC-G-0054, Section 81) sought to impose judicial sanctions on Mr. Griffin III, including his removal as Trustee of the Trust based on allegations of over-compen- sation and receipt of an illegal bonus. On March 29, 2001, after court-ordered mediation pending completion of which the trial was adjourned, Mr. Griffin III and a representative of the Four Sisters Protectorate, joined by their respective counsel, executed a "Settlement Agreement" which set forth the basic elements of a settlement of the lawsuit, contingent upon several events, including Internal Revenue Service approval of the proposed transaction as a tax free split-off for federal income tax purposes, and the Court's judicial termination of the Trust. The terms contained in the Settle- ment Agreement were not intended, nor were they sufficient, to resolve all specific items necessary to consummate a settlement of the lawsuit. The Settlement Agreement provided that the shares of Alico, Inc., stock then owned by Ben Hill Griffin Investments Inc. would be utilized in the tax free split-off, along with other assets, as a means of allocating to the Four Sisters Protectorate assets approximating the value of their interests in Ben Hill Griffin Investments Inc., a holding company wholly owned by the Trust, Ben Hill Griffin III, The Four Sisters Protectorate and its members. Mr. Griffin III has indicated that following execution of the Settlement Agreement the parties disagreed as to its validity or enforceability on various grounds. On May 14, 2001, the Harris Family filed a motion in the Circuit Court of the 10th Judicial Circuit in and for Polk County, Florida (Case No. GC-G-0054) seeking to have the Settlement Agreement set aside as invalid and unenforceable. On November 2, 2001 the Court entered a written order that the Settlement Agreement is en- forceable. The Harris family has filed an Appeal in response to the order. Mr. Griffin, III has informed the Company that the issues related to the mechanism and terms of the proposed distribution of certain of the assets of the Trust to the families of the four sisters, including the Alico stock bene- ficially owned by the Trust, have been worked out between the representatives of the four sisters and Ben Hill Griffin III, and are set forth in a definitive separation agreement. The Company further understands that consummation of the settle- ment continues to be subject to certain conditions which are still pending, specifically, the Harris family litigation. The Company has been informed by Mr. Griffin III that the arties have received a favorable IRS Revenue Ruling. Neither the Company nor Mr. Griffin III or his attorneys know when the settlement will be implemented, but believe related litigation proceedings could take 6 months to a year to be resolved. Mr. Griffin III has also informed the Company that immediately before the hearing on the enforcement of the State court action, lawyers for the Harris family provided Mr. Griffin III's attorneys with copies of a federal court action naming among others as defendants, Mr. Griffin III, individually and as Trustee of the Ben Hill Griffin, Jr., revocable Inter Vivos Trust #1, and BHG Inc. According to Mr. Griffin III's attor- neys, this litigation was filed in the federal district court for the Northern District of Florida (Case No: 4:olcv 432-5PM). The complaint, among other things,seeks to set aside the settlement agreement based on alleged violations of the secur- ities laws, fraud, and negligence. This suit was filed on October 2, 2001. Mr. Griffin III's attorneys have indicated that they believe this suit is without merit, if not frivolous, and have stated that Mr. Griffin III will defend it vigorously. Since the Company opted out of the Florida Business Corporation Act's provisions on Affiliated Transactions and Control Share Acquisitions (currently FBCA s. 607.0901 and s. 607.0902) under the predecessor statutes to such sections, transactions contem- plated by the Settlement Agreement may not be subject to share- holder approval or review by the Company's Board of Directors. The Company is not a party to any of this litigation. Item 4. Submission of Matters to a Vote of Security Holders. _________ None. 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 over-the-counter on the NASDAQ National Market System under the symbol ALCO. The high and low sales prices, by fiscal quarter, during the years ended August 31, 2002 and 2001 are presented below:

Approximate Number of Holders of Common Stock ______ As of October 11, 2002, there were approximately 619 holders of record of the Company's Common Stock. Dividend Information __ Only year-end dividends have been paid and during the last three fiscal years the dividends were as follows: Amount Paid Record Date Payment Date Per Share __ _ _ October 18, 1999 November 5, 1999 $ .30 October 13, 2000 October 27, 2000 $ 1.00 October 12, 2001 October 26, 2001 $ 1.00 Dividends are paid at the discretion of the Company's Board of Directors. The Company foresees no change in its ability to pay annual dividends in the immediate future; nevertheless, there is no assurance that dividends will be paid in the future since they are dependent upon earnings, the financial condition of the Company, and other factors. Equity Compensation Plan Information _____ Number of securities Number of remaining securities available for to be future issuance issued upon Weighted under equity exercise of Average compensation outstanding exercise plans options, price of (excluding warrants outstanding securities and options, reflected in rights warrants column (a) Plan category and rights ___ __ __ __ (a) (b) (c) Equity compensation plans approved by security holders 117,847 $15.20 479,636 Equity compensation plans not approved by security holders - - - __ __ _ Total 117,847 $15.20 479,636 _ _ _ _ _____ ___ Item 6. Selected Financial Data. ___________

Item 7. Management's Discussion and Analysis of Financial __________ Condition and Results of Operations. ______ Cautionary Statement ___ Readers should note, in particular, that this document contains forward-looking Statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that involve substantial risks and uncertainties. When used in this document, or in the documents incorporated by reference herein, the words "anticipate", "believe", "esti- mate", "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 Com- pany 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 ____ The Company had cash and marketable securities of $31.6 million at August 31, 2002, compared with $25.0 million at August 31, 2001. Working capital was $56.7 million and $53.7 million at August 31, 2002 and August 31, 2001 respectively. Cash outlay for land, equipment, buildings, and other improve- ments totaled $9.3 million during fiscal 2002, compared to $8.5 million during fiscal 2001 and $10.0 million during fiscal 2000, respectively. Land preparation for citrus development and capital maintenance continued, as did expenditures for replace- ment equipment and raising of breeding cattle. Additional sod acreage also was developed. 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 has credit commitments which provide for revolving credit of up to $54.0 million, of which $13.0 million was available for the Company's general use at August 31, 2002 (see Note 6 of Notes to consolidated financial statements). Results of Operations ___ Summary of results (in thousands):

Operating Revenue __ Operating revenues for fiscal 2002 decreased compared to fiscal 2001. A decrease in revenues from agricultural activities was the most significant factor in the decline. Operating revenues for fiscal 2001 increased when compared to those of fiscal 2000. An increase in revenues from agricul- tural activities was the most significant factor in the rise. Income (loss) from Operations ____ Earnings from operations decreased significantly during fiscal 2002 when compared to the prior year ( $(1,127) in fiscal 2002 vs. $6,450 in fiscal 2001). The decrease was largely impacted by the Company's commitment to donate $5.0 million to Florida Gulf Coast University (the University) in December 2001, for a new athletic complex, scholarships and athletic programs. In accordance with the Company's agreement with the University, $1.0 million was donated in fiscal 2002, and $800 thousand will be donated each year over the next five years. The entire donation has been accrued and is included in general and administrative expenses in the current year. The remain- ing decline in gross profits from operations was due to a decline in earnings from agricultural activities. Income from operations decreased 7% during fiscal 2001 due to increased general and administrative expenses. Profit on Sale of Real Estate ______ Profit from retail land sales, made through Saddlebag, were at breakeven for fiscal 2002 and 2001. Profit from bulk land sales, increased from $11.4 million in fiscal 2001 to $11.6 million in fiscal 2002. Real estate profits decreased from $13.3 million in fiscal 2000 to $11.4 million during fiscal 2001. Interest and Investment Income ____ Interest and investment income is generated principally from investments in marketable equity securities, corporate and municipal bonds, mutual funds, U.S. Treasury securities and mortgages held on real estate sold on the installment basis. Realized investment earnings were reinvested throughout fiscal 2002, 2001 and 2000, increasing investment levels during each year. The decrease in fiscal 2002 and 2001 interest and realized and unrealized investment income resulted from unfa- vorable financial conditions. The rise in fiscal 2000 interest and realized and unrealized investment income resulted from favorable market conditions during the year. Interest Expense __ Interest expense declined during fiscal 2002 when compared to fiscal 2001, as interest rates on borrowings have declined. Interest expense increased during fiscal 2001 and 2000, compared to each respective prior year. This was primarily due to increased borrowings related to the acquisition of 7,680 acres of sugarcane, citrus and ranch during fiscal 1999. Total interest cost decreased slightly in 2001 while increasing 54% during fiscal 2000. Individual Operating Divisions ____ Gross profit for the individual operating divisions, for fiscal 2002, 2001 and 2000, is presented in the following schedule and is discussed in subsequent sections:

• Allocated cost includes ad valorem and payroll taxes, depreciation and insurance. ** Excludes capitalized maintenance cost of groves less than five years of age consisting of $2.5 million on 1,326 acres in 2002, $200 thousand on 570 acres in 2001, and $309 thousand on 411 acres in 2000. Citrus ______ Gross profit was $3.7 million in fiscal 2002, $5.1 million in fiscal 2001, and $6.7 million for fiscal 2000. Revenue from citrus sales decreased 9% during fiscal 2002, compared to fiscal 2001 ($25.1 million during fiscal 2002 vs. $27.6 million during fiscal 2001). Production decreased during fiscal 2002, compared to fiscal 2001, and was the primary cause of the decline. Harvesting and marketing costs decreased when compared to fis- cal 2001due to the decrease in boxes harvested during the year. Direct production and allocated costs decreased 3% due to a de- cline in the number of producing acres. Revenue from citrus sales decreased 2% during fiscal 2001, compared to fiscal 2000 ($27.6 million during fiscal 2001 vs. $28.2 million during fiscal 2000). Production improved during fiscal 2001, however, the average market price decreased compared to fiscal 2000. Harvesting and marketing costs increased in fiscal 2001 com- pared to fiscal 2000, corresponding with an increase in boxes harvested. Direct production and allocated costs increased 6% resulting from inflation and increased cultivation costs related to replanted trees. The final returns from citrus pools are not precisely deter- minable at year end. Returns are estimated each year based on the most current information available. Differences between the estimates and the final realization of revenues can be sig- nificant. Revenues collected in excess of prior year and year end estimates were $568 thousand, $617 thousand, and $1.8 million during fiscal 2002, 2001 and 2000, respectively.

Sugarcane _ Gross profit for fiscal 2002 was $2.1 million, compared to $2.6 million in fiscal 2001 and $1.5 million in fiscal 2000. Sales revenues from sugarcane decreased 5% during fiscal 2002, compared to fiscal 2001 ($11.3 million vs. $11.9 million, re- spectively). The decline inrevenue was the result of a de- creased yield per acre resulting from drought conditions during the growing season. Direct production costs decreased 2% during fiscal 2002, compared to fiscal 2001. However, allo- cated costs increased 8% during 2002 over 2001 levels due to an increase in ad valorem taxes. Sales revenues from sugarcane increased 40% during fiscal 2001, compared to fiscal 2000 ($11.9 million vs. $8.5 million, respectively). The rise in revenue and related costs was the result of the increase in the number of producing acres. Ranching _ The gross profit from ranch operations for fiscal 2002, 2001 and 2000 was $809 thousand, $1.6 million, and $739 thousand, respectively. Revenues from cattle sales increased 3% during fiscal 2002, compared to fiscal 2001 ($9.6 million in fiscal 2002 vs. $9.3 million in fiscal 2001). The proportion of animals sold from feedlots increased in the current year resulting in higher sales weights per head and higher revenues. The increase in revenues was offset, however, by a 14% rise in direct and allocated costs when compared to the prior year ($8.8 million during fiscal 2002 and $7.7 million during fiscal 2001). Revenues from cattle sales increased 54% during fiscal 2001, compared to fiscal 2000 ($9.3 million in fiscal 2001 vs. $6.1 million in fiscal 2000). The number of animals sold during the year increased 52% over the prior year due to increased sales of feeder cattle during the year and market prices for beef improved. Direct and allocated costs increased 45% when compared to the prior year ($7.7 million during fiscal 2001 and $5.3 million during fiscal 2000) corresponding to the increase in the number of animals sold. The Company's cattle marketing activities include retention of calves in western feedlots, contract and auction sales, and risk management contracts. Other Operations _______ Revenues from oil royalties and land rentals were $721 thousand in fiscal 2002 as compared to $770 thousand for fis- cal 2001 and $923 thousand for fiscal 2000. Returns from rock products and sand were $2.0 million for fis- cal 2002,$1.7 million for 2001 and $1.3 million during 2000. Rock and sand supplies are sufficient to meet current demand, and no major price changes have occurred over the past 3 years. Profits from the sale of sabal palms and other horticultural items, for landscaping purposes, during fiscal 2002 were $355 thousand compared to $91 thousand and $84 thousand for fiscal years 2001 and 2000, respectively. Direct and allocated expenses charged to the "Other" opera- tions category included general and administrative and other costs not charged directly to the citrus, ranching, sugarcane divisions. These expenses totaled $10.8 million during fiscal 2002, compared to $5.5 million during fiscal 2001 and to $4.4 million during fiscal 2000. In December 2001, the Company agreed to donate $5.0 million to the Florida Gulf Coast University for a new athletic complex, scholarships and athletic programs. As per the agreement with the University, $1.0 million was donated in fiscal 2002, and $800 thousand will be donated each year over the next five years. The net present value of the total donation was ac- crued and included in general and administrative expenses in fiscal 2002 and was the primary cause for the increase in general and administrative expenses for the year. General Corporate __ The Company is continuing its marketing and permitting activi- ties for its land which surrounds the Florida Gulf Coast Uni- versity site. There are sales contracts in place for more than 5,400 acres of the Lee County, Florida property totaling $146.0 million. The agreements are at various stages in the due diligence process with closing dates over the next ten years. The Company announced the formation of Agri-Insurance Company, Ltd. (Agri) a wholly owned subsidiary, during July of 2000. The insurance company was initially capitalized by transfer- ring cash and approximately 3,000 acres of the Lee County property. Through Agri, the Company has been able to under- write previously uninsurable risk related to catastrophic crop and other losses. Additionally, the insurance company will have access to reinsurance markets, otherwise inaccessible. The Federal Crop Insurance Program provides coverage for cer- tain perils such as freeze damage, windstorm damage, disease, etc. However, the current Federal Crop Insurance Program does not provide business interruption coverage. The coverages cur- rently underwritten by Agri will indemnify the insured for the loss of the revenue stream resulting from a catastrophic event that would cause a grove to be replanted. The insurance market is bifurcated into direct insurers and reinsurers. Reinsurers provide wholesale insurance coverage to direct insurers. Some specialized reinsurers will only deal with insurance companies. As a result, the only way to access the wholesale insurance market is through the formation of a captive insurance company. Reinsurers provide greater insurance coverage flexibility than can be found in the primary insurance market. Agri is a recently created entity. It would be difficult, if not impossible, to speculate about the impact that Agri could have on the Company's financial position, results of operations and liquidity in future periods. Since the cover- ages that will be written, as liquidity is generated, will be primarily for the benefit of Alico, the financial substance of this venture is to insure risk that is inherent in the Company's existing operations. To expedite the creation of the capital liquidity necessary to underwrite the Company's exposure to catastrophic losses, another 5,600 acres was trans- ferred during fiscal 2001. Agri underwrote a limited amount of coverage for Ben Hill Griffin, Inc. during fiscal 2002 and 2001 and in August 31, 2002 began insuring all of the Alico, Inc., citrus groves. As Agri gains underwriting experience and increases its liquidity, it will be able to increase its insurance program. During September of 1999, the Company announced a sale of 1,270 acres of land surrounding the University site in Lee County for $16.5 million. The contract called for 25 percent of the purchase price to be paid at closing, with the balance payable over the next four years. In July of 2000, Agri sold another 488 acres to the same buyer, also near the University, for $10.6 million. In connection with the sale, the purchaser agreed to pay off the $12.3 million mortgage related to the September 1999 sale and pay 10% of the contract price for their second purchase at closing, with the balance payable over the next four years. The first sale generated a pre-tax gain of $13.4 million. The gain related to the second sale was recognized during fiscal 2000, to the extent that 10% of the purchase price has been collected net of closing costs ($959 thousand). The remainder of the gain and related mort- gage were recognized during the 2001 fiscal year upon receipt of the first annual mortgage payment which, combined with the initial payment in fiscal 2000, exceeded 20% of the contract price. During November 2001, Agri began to close on a 2,500 acre, $30.0 million sale, of which 40 acres were transferred in November 2001 and 1,744 acres were transferred by the end of December 2001. However, upon mutual consent, 323 acres, representing $9.6 million were released from the contract and retained by Agri for sale at a future date. The remaining 393 acres are expected to be transferred by the end of fiscal 2003. The profits from portions of this transaction that have closed are included in the statement of operations under gain on sales of real estate. Also in December 2001, the Company agreed to donate $5.0 mil- lion to Florida Gulf Coast University for a new athletic com- plex, scholarships and athletic programs. The agreement called for $1.0 million to be donated in the current fiscal year, and $800 thousand to be donated each year over the next five years. The entire donation has been accrued and is in- cluded in general and administrative expenses in the statement of operations. During January 2002, the Company acquired 40 acres of Lee County, Florida property for $9.5 million. The property is located near one of the interstate highway access ramps to Florida Gulf Coast University and the Southwest Florida International Airport. Critical Accounting Policies and Estimates ______ The preparation of the Company's financial statements and rela- ted disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the re- ported amounts of assets and liabilities, revenues and ex- penses, 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 identi- fied that affect the more significant judgments and estimates used in the preparation of the consolidated financial statements. The Company records inventory at the lower of cost or market. Management regularly assesses estimated inventory valuations based on current and forecasted usage of the related commodity and any other relevant factors that affect the net realizable value. Based on fruit buyers' and processors' advances to growers, stated cash and futures markets combined 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. Fluctuation in the market prices for citrus fruit has caused the Company to recognize additional revenue from prior years' crop totaling $568 thousand, $617 thousand, and $1.8 million, during fiscal 2002, 2001 and 2000, respectively. In accordance with Statement of Position 85-3 "Accounting by Agricultural Producers and Agricultural Cooperatives", the cost of growing crops (citrus and sugarcane) 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. Alico formed a wholly owned insurance subsidiary, Agri Insurance Company, Ltd. (Bermuda) ("Agri") in June of 2000. Agri was formed in response to the lack of insurance avail- ability, both in the traditional commercial insurance markets and governmental sponsored insurance programs, suitable to pro- vide coverages for the increasing number and potential severity of agricultural related events. Such events include citrus canker, crop diseases, livestock related maladies and weather. Alico's goal included not only prefunding its poten- tial exposures related to the aforementioned events, but also to attempt to attract new underwriting capital if it is suc- cessful in profitably underwriting its own potential risks as well as similar risks of its historic business partners. Alico primarily utilized its inventory of land and additional contributed capital to bolster the underwriting capacity of Agri. As Agri has converted certain of the assets contributed by Alico to cash, book and tax differences have arisen result- ing from differing viewpoints related to the tax treatment of insurance companies for other federal and state tax purposes. Due to the historic nature of the primary assets contributed as capital to Agri and the timing of the sales of certain of those assets by Agri, management has decided to record a contingent liability, providing for potential differences in the tax treatment of sales of Agri's assets in its initial year of operation. Management's decision has been influenced by perceived changes in the regulatory environment. Item 7(a). Quantitative and Qualitative Disclosure About Market Risk ___________ Alico's exposure to market rate risk for changes in interest rates relates primarily to its investment portfolio. There are no derivative financial instruments in the investment port- folio. 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 ensures 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 in- vestments are classified as variable-rate if the rate of return on such investments varies based on the change in a pre- determined index or set of indices during their term. These variable-rate investments primarily include money market ac- counts, mutual funds and equities held at various securities brokers and investment banks. The table below presents the amounts (in thousands) and related weighted interest/dividend yield rates of the investment portfolio at August 31, 2002:

The aggregate fair value of investments in debt instruments (net of mutual funds of $4,768) as of August 31, 2002, by contractual maturity date, consisted of the following: Aggregate Fair Values __ (in thousands) Due in one year or less $ 118 Due between one and five years 234 Due between five and ten years 433 Due thereafter 851 __ $ 1,636 __ __ Item 8. Financial Statements and Supplementary Data. _________ Independent Auditors' Report ________ The Stockholders and Board of Directors Alico, Inc.: We have audited the consolidated balance sheets of Alico, Inc. and subsidiaries as of August 31, 2002 and 2001, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the three-year period ended August 31, 2002. In connection with our audits of the consolidated financial statements, we also have audited the related consolidated financial statement schedules as listed in Item 14(a)(2) herein. These consolidated financial statements and financial statements schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 Alico,Inc. and subsidiaries at August 31, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended August 31, 2002 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related consolidated financial statement schedules, when considered in relation to the consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. KPMG LLP (Signature) Orlando, Florida October 12, 2002

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended August 31, 2002, 2001 and 2000 (1) Summary of Significant Accounting Policies ______ (a) Basis of Consolidated Financial Statement Presentation ________ The consolidated financial statements include the accounts of Alico, Inc. (the Company) and its wholly owned subsidiaries,Saddlebag Lake Resorts, Inc. (Saddlebag), and Agri Insurance Company, Ltd. (Agri), after elimination of all significant intercompany balances and transactions. (b) Revenue Recognition __ Income from sales of citrus under marketing pool agreements is recognized at the time the crop is harvested. Based on fruit buyers' and processors' advances to growers, stated cash and futures markets, 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. Fluctuation in the market prices for citrus fruit has caused the Company to recognize additional revenue from the prior year's crop totaling $568 thousand, $617 thousand, and $1.8 million during fiscal years 2002, 2001 and 2000, respectively. Revenue from sugarcane is recognized when the har- vested product is taken for processing. The earnings process is complete at that time and the resulting revenue is determinable for the sugarcane crop as of year-end, therefore, no estimations are necessary. The Company recognizes revenue from cattle sales at the time the cattle are sold at auction. (c) Real Estate __ Real estate sales are recorded under the accrual method of accounting. Residential retail land sales made through Saddlebag are not recognized until the buyer's initial investment or cumulative payments of principal and interest equal or exceed 10 percent of the contract sales price Commercial or bulk land sales,made mostly through Agri, 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. At August 31, 2000, the Company did not recognize gross profit totaling $9.5 million related to commercial real estate which was sold subject to a mortgage note receivable (note 3). The terms of the sale called for 10% of the contract price of $10.6 million to be paid at closing. The $1.1 million less the land basis and closing costs was recognized as a gain on the sale of real estate totaling $288 thousand during August 31, 2000. During the year ended August 31, 2001, the purchaser made the first of four equal annual installments, required in the mortgage, totaling $2.4 million, plus interest. The deferred profit on the sale was then recognized as 32.5 percent of the contract price was received and the buyer's continuing invest- ment became adequate to demonstrate its commitment to pay for the property. Profits from commercial real estate sales are discounted to reflect the market rate of interest where the stated rate is less than the market rate. The recorded valuation discounts are realized as the balances due are collected. In the event of early liquidation, interest is recognized on the simple interest method. Tangible assets that are purchased during the period to aid in the sale of the project as well as costs for services performed to obtain regulatory approval of the sales are capitalized as land and land im- provements to the extent they are estimated to be recoverable from the sale of the property. Land and land improvement costs are allocated to individual parcels on a per lot basis using the relative sales value method. The Company has entered into an agreement with a real estate consultant to assist in obtaining the necessary regulatory approvals for the development and marketing of a tract of raw land. The marketing costs under this agreement are being expensed as in- curred. The costs incurred to obtain the necessary regulatory approvals are capitalized into land costs when paid. These costs will be expensed as cost of sales when the underlying real estate is sold. (d) Marketable Securities Available for Sale ______ Marketable securities available for sale are carried at their estimated 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. Fair value for debt and equity investments is based on quoted market prices at the reporting date for those or similar investments. The cost of all marketable securities available for sale are deter- mined on the specific identification method. (e) Inventories _ The costs of growing citrus and sugarcane are capitalized into inventory until the time of harvest. Once a given crop is harvested, the related inven- toried costs are recognized as a cost of sale to pro- vide an appropriate matching of costs incurred with the related revenue earned. Beef cattle inventories are stated at the lower of cost or market. The cost of the beef cattle inven- tory is based on the accumulated cost of developing such animals for sale. Unharvested crops are stated at the lower of cost or market. The cost for unhar- vested crops is based on accumulated production costs incurred during the eight month period from January 1 through August 31. (f) 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 construc- tion of ditches, dikes, roads, and reservoirs, etc. After the planting, caretaking costs or preproductive 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 are written off 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 re- sult, cultivation/caretaking costs are expensed as the crop is harvested, while the appropriate deve- lopment 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. Depreciation for financial reporting purposes is computed on straight-line and accelerated methods over the estimated useful lives of the various classes of depreciable assets. The Company accounts for long-lived assets in accor- dance with the provisions of SFAS No. 121, "Accoun- ting for the Impairment of Long-Lived Assets for Long-Lived Assets to be Disposed of". This Statement requires the long-lived assets and certain identifi- able 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. (g) Land Inventories Land inventories are carried at cost and consists of property located in Lee County, Florida and owned by Agri-Insurance Co., Ltd. The property is held for sale as commercial real estate. (h) Other Investments Other investments are carried at cost which primarily includes stock owned in cooperatives. The Company uses cooperatives to process and sell sugarcane and cattle. Cooperatives typically require members to ac- quire ownership as a term of use of its services. (i) 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 tem- porary 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. (j) Net Earnings Per Share ___ Outstanding stock options issued by the Company represent the only dilutive effect reflected in the computation of diluted weighted average shares outstanding assuming dilution. Options do not impact the numerator of the earnings per share computation. There were no stock options that could potentially dilute basic earnings per share in the future that were not included in the computation of earnings per share assuming dilution. (k) Cash Flows _ For purposes of the cash flows, cash and cash invest- ments include cash on hand and amounts due from financial institutions with an original maturity of less than three months. (l) Use of Estimates ___ In preparing the consolidated financial statements, management is required to make estimates and assump- tions that effect the reported amounts of assets and liabilities. Actual results could differ signifi- cantly from those estimates. Although some variability is inherent in these estimates, manage- ment believes that the amounts provided are adequate. (m) Financial Instruments and Accruals _____ The carrying amounts in the consolidated balance sheets for accounts receivable, mortgage and notes receivable, accounts payable and accrued expenses approximate fair value, because of the immediate or short term maturity of these items. The carrying amounts reported for the Company's long-term debts approximate fair value. (n) Derivative and Hedging Instruments ____ In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which establishes accounting and reporting standards for derivative instruments, including certain deriva- tive instruments embedded in other contracts (collec- tively referred to as derivatives), and for hedging activities. SFAS No. 133 was amended by SFAS No. 138 in June 2000, in part, to allow "normal purchases and normal sales" transactions to be excluded from SFAS 133. At September 1, 2000, the Company had no open derivatives. Accordingly, the Company's adoption of the provisions of SFAS No. 133, as amended, on September 1, 2000, did not result in a transition adjustment. The Company engages in cattle futures trading acti- vities for the purpose of economically hedging against price fluctuations. The Company records gains and losses related to economic hedges in costs of goods sold. At August 31, 2002 and 2001, the Company had no open positions. (o) Accumulated Other Comprehensive Income _____ Comprehensive income 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. Items included in other comprehensive income are classified based on their nature. The total of other comprehensive income for a period has been transferred to an equity account and displayed as "accumulated other comprehensive income". (p) Stock-Based Compensation ___ The Company applies Accounting Principles Board Opinion No. 25,"Accounting for Stock Issued to Employees" (APB 25) for stock options and other stock- based awards while disclosing pro forma net income and net income per share as if the fair value method had been applied in accordance with Statement of Financial Accounting Standards No. 123,"Accounting for Stock-based Compensation" (SFAS 123). (q) Reportable Segments __ The Company has three reportable segments: citrus, sugarcane, and ranch. The citrus segment produces fruit for both the fresh fruit and processed juice mar- kets. The sugarcane segment produces sugarcane for processing. The ranch segment raises beef cattle to be sold in the wholesale market. The Company's reportable segments are strategic busi- ness units that offer different products. They are managed separately because each business requires different operating strategies. (r) Reclassifications __ Certain amounts from 2001 have been reclassified to conform to the 2002 presentation. (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 estimated 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. The cost and estimated fair values of marketable securities available for sale at August 31, 2002 and 2001 (in thousands) were as follows:

At August 31, 2002, debt instruments (net of mutual funds of $4,768) are collectible as follows: $118 within one year, $234 between one and five years, $433 between five and ten years, and $851 there after. (3) Mortgage and Notes Receivable ____ Mortgage and notes receivable arose from real estate sales. The balances (in thousands) are as follows:

In July 2000, the Company received a mortgage note in exchange for land sold. The note totaled $9.5 million and principal payments of $2.4 million are due annually on July 14, bearing interest at LIBOR, over four years. (4) Inventories _____ A summary of the Company's inventories (in thousands) at August 31, 2002 and 2001 is shown below:

(5) Property, Buildings and Equipment _________ A summary of the Company's property, buildings and equip- ment (in thousands) at August 31, 2002 and 2001 is shown below:

The Company's citrus trees, fruit crop, unharvested sugarcane and cattle are partially uninsured. (6) Indebtedness ______ The Company has financial agreements with commercial banks that permit the Company to borrow up to $54 million. The financing agreements allow the Company to borrow up to $41 million which is due in 2004 and up to $3 million which is due on demand. In December 2001, the Company entered into an additional financing agreement to borrow $10 million to be paid in equal principal installments over five years with interest to be paid quarterly. The outstanding debt under these agreements was $41.0 million and $31.8 million at August 31, 2002 and 2001, respectively. In March 1999, the Company mortgaged 7,680 acres for $19 million in connection with a $22.5 million acquisition of producing citrus and sugarcane operations. The total amount of long-term debt at August 31, 2002 and 2001 was $52.7 million and $46.7 million, respectively. Maturities of the indebtedness of the Company over the next five years (in thousands) are as follows: 2003- $3,319; 2004- $34,321; 2005- $3,319; 2006- $3,312; 2007- $3,315 and $8,390 thereafter. Interest cost expensed and capitalized (in thousands) during the three years ended August 31, 2002, 2001 and 2000 was as follows:

(7) Commitments and Contingencies ____ The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management,the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position, results of operation or liquidity. (8) Other non-current liability _____ Alico formed a wholly owned insurance subsidiary, Agri Insurance Company, Ltd. (Bermuda) ("Agri") in June of 2000. Agri was formed in response to the lack of insur- ance availability, both in the traditional commercial in- surance markets and governmental sponsored insurance pro- grams, suitable to provide coverages for the increasing number and potential severity of agricultural related events. Such events include citrus canker, crop diseases, livestock related maladies and weather. Alico's goal in- cluded not only prefunding its potential exposures related to the aforementioned events, but also to attempt to at- tract new underwriting capital if it is successful in profitably underwriting its own potential risks as well as similar risks of its historic business partners. Alico primarily utilized its inventory of land and additional contributed capital to bolster the underwriting capacity of Agri. As Agri has converted certain of the assets contributed by Alico to cash, book and tax differences have arisen resulting from differing viewpoints related to the tax treatment of insurance companies for federal and state tax purposes. Due to the historic nature of the primary assets contributed as capital to Agri and the timing of the sales of certain of those as- sets by Agri,management has decided to record a contin- gent liability, providing for potential differences in the tax treatment of sales of Agri's assets in its initial year of operation. Management's decision has been influenced by perceived changes in the regulatory environment. (9) Stock Option Plan _ On November 3, 1998, the Company adopted the Alico, Inc., Incentive Equity Plan ("The Plan") pursuant to which the Board of Directors of the Company may grant options, stock appreciation rights, and/or restricted stock to certain directors and employees. The Plan authorizes grants of shares or options to purchase up to 650,000 shares of authorized but unissued common stock. Stock options have vesting schedules which are at the discretion of the Board of Directors and determined on the effective date of the grant.

On August 31, 2002 and 2001, there were 479,636 and 549,234 shares available for grant, respectively. The fair value of stock options granted was $819 thousand in 2002 and $79 thousand in 2001 on the date of the grant using the Black Scholes option-pricing model with the fol- lowing weighted average assumptions:

All stock options granted, except as noted in the para- graph below, have been granted to directors or employees with an exercise price equal to the fair value of the com- mon stock at the date of the grant. The Company applies APB Opinion No. 25 for issuances to directors and employees in accounting for its Plan. No compensation cost was recognized in the consolidated financial statements through August 31, 2000, as options were issued at or above fair value. On September 9, 1999, the Company granted 14,992 stock options with an exercise price of $14.62 and a fair value of $15.813. The Company recorded $18 thousand of unearned compensation at the date of the grant. On September 12, 2000, the Company granted an additional 51,074 stock options with an exercise price of $14.62 and a fair value of $16.313. The Company recorded $86 thousand of unearned compensation at the date of the grant. On September 11, 2001, the Company granted an additional 69,598 stock options with an exercise price of $15.68 and a fair value of $28.48. The Company recorded $891 thousand of unearned compensation at the date of the grant. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net income would have changed to the pro forma amounts indicated below:

(10) Employee Benefit Plans ____ The Company has a profit sharing plan covering substan- tially all employees. The plan was established under In- ternal Revenue Code Section 401(k). Contributions made to the profit sharing plan (in thousands) were $285, $444 and $430 for the years ended August 31, 2002, 2001 and 2000, respectively. Additionally, the Company implemented a nonqualified de- fined benefit retirement plan covering the officers and other key management personnel of the Company. The plan is being funded by the purchase of insurance contracts. The accrued pension liability for the nonqualified defined benefit retirement plan at August 31, 2002 and 2001 was $119,247 and $150,429, respectively. Pension expenses (in thousands) for the additional retire- ment benefits were $488, $395 and $128 for the years ended August 31, 2002, 2001 and 2000, respectively. (11) Income Taxes ______ The provision for income taxes (in thousands) for the years ended August 31, 2002, 2001 and 2000 is summarized as follows:

Following is a reconciliation of the expected income tax expense computed at the U.S. Federal statutory rate of 34% and the actual income tax provision (in thousands) for the years ended August 31, 2002, 2001 and 2000:

Some items of revenue and expense included in the state- ment of operations may not be currently taxable or de- ductible 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. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (in thousands):

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 suf- ficient to fully recognize all deferred tax assets. Agri Insurance Company, Ltd. (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 con- solidated 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.) Agri was established to provide agricultural insurance that falls outside of the Federal Crop Insurance Program, for catastrophic perils. Agri was domiciled in Bermuda because it offers easy access to reinsurance markets. Agri issued its initial policy in August 2000 to a third party. Agri's ability to underwrite insurance risks has been limited to its operational liquidity, by the Regis- trar of Companies in Bermuda. Agri will be able to under- write additional insurance as its liquidity is increased from additional asset sales and as payments are received on prior sales. For Federal income tax purposes, only premiums received by Agri from policies of insurance is- sued to parties other than its parent, Alico Inc., are considered insurance premiums. The preceding limiting factors resulted in Agri not incurring a tax liability on underwriting profits or investment income. Agri's tax status resulted in it filing its Federal tax return on a stand alone basis for the calendar year periods ending December 31, 2001 and 2000. (12) Related Party Transactions ____ Citrus _ Citrus revenues of $19.1 million, $19.9 million and $20.0 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, 2002, 2001 and 2000, respectively. Griffin and its subsidiaries is the owner of approximately 49.85 percent of the Company's com- mon stock. Accounts receivable, resulting from citrus sales, include amounts due from Griffin totaling $6.5 mil- lion and $6.9 million at August 31, 2002 and 2001, res- pectively. These amounts represent estimated revenues to be received periodically under pooling agreements as the sale of pooled products is completed. Harvesting, marketing, and processing costs, related to the citrus sales noted above, totaled $7.1 million, $7.6 million, and $7.5 million for the years ended August 31, 2002, 2001 and 2000, respectively. In addition, Griffin provided the harvesting services for citrus sold to unrelated processors. The aggregate cost of these services was $2.0 million, $2.2 million and $2.0 million for the years ended August 31, 2002, 2001 and 2000, respectively. The accompanying consolidated balance sheets include ac- counts payable to Griffin for citrus production, harvest- ing and processing costs in the amount of $594 thousand and $414 thousand at August 31, 2002 and 2001, 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, sugar- cane, sod and citrus operations. Such purchases totaled $6.2 million, $6.0 million and $5.5 million during the years ended August 31, 2002, 2001 and 2000, respectively. (13) Future Application of Accounting Standards ______ In June 2001, the Financial Accounting Standard Board (FASB) issued Financial Accounting Standards (SFAS) No. 141, "Business Combinations". This statement addresses financial accounting and reporting for business combina- tions and supersedes Accounting Principal Board (APB) Option No. 16, "Business Combinations", and FASB Statement No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises". All business combinations in the scope of this Statement are to be accounted for using one method, the purchase method. The provisions of this Statement apply to all business combinations initiated af- ter June 30, 2001. The Statement also applies to all business combinations accounted for using the purchase method which the date of acquisition is July 1, 2001, or later. Adoption of this Statement is not expected to have a significant impact on the financial position or results of operations of the Company. In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets". This Statement addresses finan- cial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets". It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. This Statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. Adoption of this Statement is not expected to have a significant impact on the financial position or results of operations of the Company. In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement Obligations." This statement addresses financial accounting and reporting for obligations asso- ciated with the retirement of tangible long-lived assets and the associated asset retirement costs. It applies to legal obligations associated with the retirement of long- lived assets that result from the acquisition, construc- tion, development and (or) the normal operation of a long- lived asset, except for certain obligations of lessees. This Statement is effective for financial statements with fiscal years beginning after June 15, 2002. Adoption of this Statement is not expected to have a significant im- pact on the financial position or results of operations of the Company. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This Statement addresses financial accounting and report- ing for the impairment or disposal of long-lived assets. This Statement supercedes both FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets to Be Disposed Of" and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects of Dis- posal of a Segment of a Business, and Extraordinary, Un- usual and Infrequently Occurring Events and Transactions of a Segment of a Business." This Statement is effective for financial statements with fiscal years beginning af- ter December 15, 2001. Adoption of this Statement is not expected to have a significant impact on the financial position or results of operations of the Company. (14) Recovery of Citrus Canker Eradication Costs in Excess of Basis ______________ The Company incurred losses during the years ended August 31, 2001 and 2000, related to citrus canker eradication. The eradication program called for the removal of 507 acres of citrus trees from a grove in Hendry County, Flo- rida. While the trees were insured under the Federal Crop Insurance Program, additional relief funding was available and secured by the Company from both Federal and State government sources. A summary of the recovery sources, related basis of the trees removed and the crop inventory losses are summarized (in thousands) as follows:

15) Reportable Segment Information ____ The Company is primarily engaged in agricultural opera- tions, which are subject to risk, including market prices, weather conditions and environmental concerns. The Company is also engaged in retail land sales and, from time to time, sells real estate considered surplus to its operating needs. Information about the Company's reportable segments (in thousands) for the years ended August 31, 2002, 2001 and 2000 is summarized as follows:

Identifiable assets represent assets on hand at year-end which are allocable to a particular segment either by their direct use or by allocation 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. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data (in thousands except for per share amounts) for the years ended August 31, 2002 and August 31, 2001, is as follows:

Item 9. Changes in & Disagreements with Accountants on Accounting and Financial Disclosure. __________ None PART III __ Item 10. Directors and Executive Officers of the Registrant. _________ Executive Officers of the Company ______ Information with respect to Directors and Executive Officers may be found under the captions "Nomination for Election as Directors" and "Executive Offices" of the Company's Proxy Statement for the Annual Meeting of Shareholders to be held December 5, 2002 (the "Proxy Statement"). Such information is incorporated herein by reference. Section 16 - Beneficial Ownership Reporting Compliance ________ Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company pursuant to Rule 16a-3(e) dur- ing the 2002 fiscal year and Forms 5 and amendments thereto furnished to the Company during fiscal year 1992 and certain written representations, if any, made to the Company, no offi- cer, director or beneficial owners of 10% or more of the Com- pany's common stock has failed to file on a timely basis any reports required by Section 16(a) of the Exchange Act to be filed during fiscal 2002. For information with respect to the executive officers of the registrant, see "Executive Officers of the Registrant" at the end of Part I of this report. The information called for regarding directors is incorporated by reference to the Company's Proxy Statement dated November 8, 2002. Item 11. Executive Compensation. ______ The information in the Proxy Statement set forth under the cap- tions "Executive Compensation" and "Directors' Compensation, Committees of the Board of Directors and certain meetings" is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. ________ Information called for by Items 12 is incorporated by reference to the Company's Proxy Statement dated November 8, 2002. Item 13. Certain Relationships and Related Transactions. ________ Information called for by Items 13 is incorporated by reference to the Company's Proxy Statement dated November 8, 2002. Item 14. Controls and Procedures ________ Evaluation of disclosure controls and procedures The Company maintans controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Secu- rities and Exchange Commission. Based upon their evaluation of those controls and procedures performed within 90 days of the filing date of this report, the Chief executive and Chief financial officers of the Company concluded that the Company's disclosure controls and procedures were adequate. Changes in internal controls The Company made no significant changes in its internal con- trols or in other factors that could significantly affect these controls subsequent to the date of the evaluation of those con- trols by the Chief Executive and Chief Financial officers. PART IV _ Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K. ________ (a)1. Financial Statements: __ Included in Part II, Item 8 of this Report Report of Independent Auditors' Consolidated Balance Sheets - August 31, 2002 and 2001 Consolidated Statements of Operations - For the Years Ended August 31, 2002, 2001 and 2000 Consolidated Statements of Stockholders' Equity - For the Years Ended August 31, 2002, 2001 and 2000 Consolidated Statements of Cash Flows - For the Years Ended August 31, 2002, 2001 and 2000 (a)2. Financial Statement Schedules: ____ Selected Quarterly Financial Data - For the Years Ended August 31, 2002 and 2001 - Included in Part II, Item 8 Schedule I - Marketable Securities and Other Investments - at August 31, 2002 Schedule V - Property, Plant and Equipment - For the Years Ended August 31, 2002, 2001 and 2000 Schedule VI - Reserves for Depreciation, Depletion and Amortization of Property, Plant and Equipment - For the Years Ended August 31, 2002, 2001 and 2000 Schedule IX - Supplementary Income Statement Information - For the Years Ended August 31, 2002, 2001 and 2000 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. (a)3. Exhibits: __ (3) Articles of Incorporation: * Schedule I - Restated Certificate of Incorporation, Dated February 17, 1972 Schedule II - Certificate of Amendment to Certificate of Incorporation, Dated January 14, 1974 Schedule III - Amendment to Articles of Incorporation, Dated January 14, 1987 Schedule IV - Amendment to Articles of Incorporation, Dated December 27, 1988 Schedule V - By-Laws of Alico, Inc., Amended to September 13, 1994 (4) Instruments Defining the Rights of Security Holders, Including Indentures - Not Applicable (10) Material Contracts - Citrus Processing and Marketing Agreement with Ben Hill Griffin, Inc., dated November 2, 1983, a Continuing Contract. * (11) Statement - Computation of Per Share Earnings (12) Statement - Computation of Ratios (19) Annual Report to Security Holders - By Reference (21) Subsidiaries of the Registrant - Sadddlebag Lake Resorts, Inc. (incorporated in 1971) and Agri-Insurance Company, Ltd.(incorporated in 2000). (22) Published Report Regarding Matters Submitted to Vote of Security Holders - Not Applicable (99) Additional Exhibits - None (b) Reports on Form 8-K: _____ Form 8-K dated September 17, 2002 regarding disposition of land. Form 8-K dated September 16, 2002 announcing new Director. Form 8-K dated February 25, 2002 regarding Chairman adopting a written sales plan. Form 8-K dated February 25, 2002 regarding amendment of sales plan. Form 8-K dated January 7, 2002 announcing of 13D/A filing by majority shareholder group. Form 8-K dated January 7, 2002 regarding purchase of land. Form 8-K dated January 31, 2002 regarding land disposition revision. Form 8-K dated December 12, 2001 announcing donation to Florida Gulf Coast University. Form 8-K dated December 7, 2001 announcing purchase of land. Form 8-K dated December 7, 2001 revising announcements of land purchase. Form 8-K dated December 6, 2001 regarding re-election of Directors and election of officers. Form 8-K dated December 4, 2001 regarding land disposition. Form 8-K dated November 20, 2001 regarding land disposition. Form 8-K dated October 26, 2001 regarding land disposition. Form 8-K dated October 9, 2001 regarding a settlement agreement and litigation in State Court, Polk County, Florida. Form 8-K dated October 2, 2001 announcing 13D/A filing by Majority shareholder group. Material has been filed with the Securities and Exchange Commission and NASDAQ and may be obtained upon request.

EXHIBIT 11 ALICO, INC. Computation of Weighted Average Shares Outstanding as of August 31, 2002: Number of shares outstanding at August 31, 2002: 7,080,344 _ _ Number of shares outstanding at August 31, 2001: 7,044,513 _ _ Weighted Average 9/1/01 - 8/31/02: 7,070,024 _ _ EXHIBIT 12 ALICO, INC. Computation of Ratios: 2002 Current Assets $66,267,326 Current Liabilities 9,543,009 66,267,326 divided by 9,543,009 = 6.94:1 2001 Current Assets $61,344,839 Current Liabilities 7,690,600 61,344,839 divided by 7,690,600 = 7.98:1 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 under- signed, thereunto duly authorized. ALICO, INC. (Registrant) November 12, 2002 /s/ Ben Hill Griffin, III __ ___ Ben Hill Griffin, III Date Chairman, Chief Executive Officer and Director November 12, 2002 /s/ W. Bernard Lester __ ___ W. Bernard Lester Date President, Chief Operating Officer and Director November 12, 2002 /s/ L. Craig Simmons __ ___ L. Craig Simmons Date Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following per- sons on behalf of the registrant and in the capacities and on the date indicated: /s/ Richard C. Ackert /s/ Ben Hill Griffin, IV ___ ____ Richard C. Ackert Ben Hill Griffin, IV Director Director /s/ K. E. Hartsaw /s/ Thomas E. Oakley ___ ___ K. E. Hartsaw Thomas E. Oakley Director Director /s/ William L. Barton /s/ Monterey Campbell, III ___ ____ William L. Barton Monterey Campbell, III Director Director /s/ Walker E. Blount, Jr. /s/ Amy Gravina ___ ___ Walker E. Blount, Jr. Amy Gravina Director Director November 12, 2002 __ Date Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following per- sons on behalf of the registrant and in the capacities and on the date indicated: I, Ben Hill Griffin, III, certify that: 1. I have reviewed this annual report on Form 10-K of Alico, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are respon- sible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report on September 10, 2002; and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the regist- rant's auditors and the audit committee of registrant's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the regist- rant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2003 __ /s/ Ben Hill Griffin, III _____ Ben Hill Griffin, III Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following per- sons on behalf of the registrant and in the capacities and on the date indicated: I, L. Craig Simmons, certify that: 1. I have reviewed this annual report on Form 10-K of Alico, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are respon- sible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report on September 10, 2002; and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the regist- rant's auditors and the audit committee of registrant's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the regist- rant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2003 ___ /s/ L. Craig Simmons ________ L. Craig Simmons Chief Financial Officer and Vice President