ALICO, INC. — Annual Report 2002

Jul 19, 2002

Alico, Inc. P. O. Box 338 La Belle, FL 33975 November 13, 2001 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, 2001. 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, 2001. 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 reference in Part III of this Form 10-K or any amendment to this Form 10-K. As of October 12, 2001 there were 7,059,039 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 $88,722,551. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Proxy Statement dated November 16, 2001 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 142,551 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 farming, grazing, recreation and oil exploration, in some instances, utilize the same acreage. Agricultural operations have combined to produce from 68 to 91 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 11,722 acres in production during the 2001 fiscal year consisted of 903 acres planted in 1995, 2,649 acres planted in 1996, 2,430 acres planted in 1997, 3,377 acres planted in 1998, 2,363 acres planted in 1999. 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 2 to 3 percent of total revenue. The Company is not in the 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. Gross revenue from land sales during the past five years has ranged from 1 to 24 percent of total revenues. 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 two wholly owned subsidiaries; Saddlebag Lake Resorts, Inc. ("Saddlebag") and Agri-Insurance Company, Ltd. ("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 which have been developed and are on the market. Approximately 61% of the lots have been sold. Agri, formed during fiscal 2000, was created to write crop insurance against catastrophic losses due to weather and disease. The subsidiary wrote minor policies during 2000. During fiscal 2001, 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 $3,143,537 and the premium charged was $126,860. The coverage term was from December 19, 2000 to December 19, 2001. There was a claim incurred during the year totaling $212,000. The Company expects to renew the policy and appropriately adjust premium rates. 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 10,371 acres of citrus were harvested during the 2000 season. 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. The agreement provides for modifications to meet changing market conditions and provides that either party may terminate the contract by giving notice prior to August 1st, preceding the fruit season immediately following. 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, 2001, approximately 77% of the Company's fruit crop was marketed under this agreement, as compared to 76% in 1999/00. 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. In fiscal year 1999, approximately 89% 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 14,000 cows, bulls and replacement heifers. Approximately 44% of the herd are from one to five years old, while the remaining 56% 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 11,722 acres, 9,588 acres, and 5,432 acres of sugarcane in production during the 2000/01,1999/00, and 1998/99 fiscal years, respectively. The 2000/01, 1999/00, and 1998/99 crops yielded approximately 417,000, 321,000, and 216,000 gross tons, respectively. Forest Products ___ Approximately 6% of the Company's properties are classified as timberlands. The principal forest products sold by the Company are pulpwood and sabal palms. These products are sold to a paper company and various landscaping companies, respectively. 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 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 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 7,927 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 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 substantial 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 2001, the Company had a total of 150 full-time employees classified as follows: Citrus 71; Ranch 22; Sugarcane 15; Facilities Maintenance Support 28; General and Administrative 14. 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 successive than seasonal in nature. Item 2. Properties. ________ At August 31, 2001, the Company owned a total of 142,551 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 improved pasture plus approximately 50,000 acres of native pasture for cattle production and 7,927 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 subsurface rights to 18,707 acres. 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 agricultural 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 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 Intervisos 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-compensation 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 Settlement 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 stock then owned by Ben Hill Griffin Investments 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, a holding company wholly owned by the Trust, Ben Hill Griffin III, and the families represented in the Four Sisters Protectorate. Mr. Griffin III has indicated that almost immediately 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 Polka 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 enforceable. Mr. Griffin III's attorneys indicate that a large number of 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 beneficially owned by the Trust, remain to be worked out between the representatives of the four sisters and Ben Hill Griffin III and are currently being negotiated. According to them these terms are expected to be set forth in a definitive separation agreement, which is still being negotiated by the parties to the litigation but is expected to be finalized shortly. The Company further understands that consummation of the settlement will be subject to various conditions which are still being discussed, but will include the requirement that the parties receive a favorable IRS Revenue Ruling. Mr. Griffin III's attorneys indicate that no ruling request has yet been submitted. Neither the Company nor Mr. Griffin III know when or if the settlement will be implemented but believe the IRS ruling process alone could take 6 months from the date a ruling request is submitted. 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 Intervisos Trust #1, and BHG Inc. According to Mr. Griffin III's attorneys, 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 securities laws, fraud, and negligence. Although this suit was filed on October 2, 2001, Mr. Griffin III's attorneys indicate that, as of this date, neither Mr. Griffin III nor BHG Inc. has been served in this action. Mr. Griffin III's attorneys have indicated that they believe this suit is without merit, if not frivolous, and have stated that if Mr. Griffin III is ever served, he 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 contemplated by the Settlement Agreement may not be subject to shareholder 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, 2001 and 2000 are presented below:

Approximate Number of Holders of Common Stock ______ As of October 12, 2001, there were approximately 680 holders of record of Alico, Inc. Common Stock. Dividend Information __ Only year-end dividends have been paid, and during the last three fiscal years were as follows: Amount Paid Record Date Payment Date Per Share __ __ ___ October 19, 1998 November 6, 1998 $ .50 October 18, 1999 November 5, 1999 $ .30 October 13, 2000 October 27, 2000 $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. Item 6. Selected Financial Data. ___________

Item 7. Management's Discussion and Analysis of Financial _________ Condition and Results of Operations. _____ The following discussion focuses on the results of operations and the financial condition of Alico. 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 $25.0 million at August 31, 2001 compared with $19.9 million at August 31, 2000. Working capital increased from $44.2 million at August 31, 2000 to $53.7 million at August 31, 2001. Cash outlay for land, equipment, building, and other improvements totaled $8.9 million during fiscal 2001, compared to $10.0 million during August 31, 2000 and $27.9 million in 1999, respectively. Land preparation for sugarcane development and capital maintenance continued, as did expenditures for replacement equipment and raising of breeding cattle. Capital projects for the upcoming year are expected to include development of additional sod acreage. 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 $44 million of which $12.2 million was available for the Company's general use at August 31, 2001 (see Note 6 of Notes to consolidated financial statements). 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", "estimate", "may", "intend" and other words of similar meaning, are likely to address the Company's growth strategy, financial results and/or product development programs. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein. The considerations listed herein represent certain important factors the Company believes could cause such results to differ. These considerations are not intended to represent a complete list of the general or specific risks that may affect the Company. It should be recognized that other risks, including general economic factors and expansion strategies, may be significant, presently or in the future, and the risks set forth herein may affect the Company to a greater extent than indicated. Results of Operations _______ Summary of results (in thousands):

Operating Revenue __ Operating revenues for fiscal 2001 increased compared to fiscal 2000. An increase in revenues from agricultural activities was the most significant factor in the rise. Operating revenues for fiscal 2000 increased when compared to those of fiscal 1999. An increase in revenues from agricultural activities was the most significant factor in the rise. Gross Profit _ Gross profit from operations increased 35% during fiscal 2001. Increased sugarcane production and cattle sales are, combined with improved market prices, the primary factors in the rise. Gross profit from operations increased 80% during fiscal 2000. Improved market prices for both citrus and beef combined with increased citrus production as the primary factors in the rise. Profit on Sale of Real Estate _____ Profit from the sale of real estate retail land sales, made through Saddlebag, decreased from $18 thousand 13.3 million in fiscal 2000 to $(2) thousand 11.4 million in fiscal 2001. Profit from the sale of bulk land sales, made through Agri, decreased from $13.3 million in fiscal 2000 to $11.4 million in fiscal 2001. The Company Additionally, Agri recognized a $9.54 million gain on the sale of 488 acres, sold during fiscal 2000, upon receipt of the first annual mortgage payment which, combined with the initial payment in fiscal 2000, exceeded 20 30% of the contract price. Real estate profits increased from $3.8 million to $13.3 million during fiscal 2000. The most significant factor in the increase was the sale of 1,270 acres in Lee County, Florida for $16.5 million. The sale generated a $13.4 million pre-tax gain. 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 2001, 2000 and 1999, increasing investment levels during each year. The decrease in fiscal 2001 interest and realized and unrealized investment income resulted from unfavorable market conditions. The rise in fiscal 2000 and 1999 interest and realized and unrealized investment income for the years presented resulted from reinvested investment income and favorable market conditions during each of the years. Interest Expense __ Interest expense increased during fiscal 2001, 2000 and 1999, 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 increased slightly in 2001 and increased 54% and 53% during 2000 and 1999, respectively. Individual Operating Divisions ____ Gross profit for the individual operating divisions, for fiscal 2001, 2000 and 1999, is presented in the following schedule and is discussed in subsequent sections:

• Allocated expense includes ad valorem and payroll taxes, depreciation and insurance. ** Excludes capitalized maintenance cost of groves less than five years of age consisting of $200 thousand on 570 acres in 2001 $309 thousand on 411 acres in 2000, and $434 thousand on 134 acres in 1999. Citrus ______ Gross profit was $ 5.1 million in fiscal 2001, $6.7 million in fiscal 2000, and $2.4 million for fiscal 1999. 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 increased during fiscal 2001, however, the average market price decreased, compared to fiscal 2000. Harvesting and marketing costs increased over the prior year due to the increase in boxes harvested during the year. Direct production and allocated costs increased 8% due to inflation and increased cultivation costs related to replanting trees. Revenue from citrus sales increased 20% during fiscal 2000, compared to fiscal 1999 ($28.2 million during fiscal 2000 vs. $23.5 million during fiscal 1999). Production and the average market price improved during fiscal 2000, compared to fiscal 1999. Harvesting and marketing costs increased over the prior year, corresponding with an increase in yields. Direct production and allocated costs decreased 13% resulting from more favorable growing conditions, requiring less caretaking expenses. The final returns from citrus pools are not precisely determinable 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 significant. Revenues collected in excess of prior year and year end estimates were $617 thousand, $1.8 million, and $160 thousand during fiscal 2001, 2000 and 1999, respectively.

Sugarcane _ Gross profit for fiscal 2001 was $2.6 million compared to $1.5 million in fiscal 2000, and $2.6 million in fiscal 1999. Sales revenues from sugarcane increased 40% during fiscal 2001, compared to fiscal 2000 ($11.9 million vs. $8.5 million, respectively). Direct production costs increased 37% during fiscal 2001, compared to fiscal 2000, respectively.) The rise in revenue and related costs was the result of the increase in the number of producing acres and improved market prices for sugar. Sales revenues from sugarcane increased 20% during fiscal 2000, compared to fiscal 1999 ($8.5 million vs. $7.1 million, respectively). The rise in revenue and related costs was the result of the increase in the number of producing acres. However, a decline in the market price for sugar and sugar yield per acre offset the increased production, creating a 42% decrease in division earnings. Ranching _ The gross profit (loss) from ranch operations for fiscal 2001, 2000 and 1999 was $1.6 million, $739 thousand, and ($8) thousand, respectively. 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 fiscal 2001 increased 52% over the prior year due to increased in the number of feeder cattle sold during the current year. The rise in revenue was also affected by improved market prices for beef. Direct and allocated costs increased 45% when compared to the prior year ($7.5 million during fiscal 2001 and $5.1 million during fiscal 2000) corresponding to the decrease in the number of animals sold. Revenues from cattle sales decreased 3% during fiscal 2000, compared to fiscal 1999 ($6.1 million in fiscal 2000 vs. $6.3 million in fiscal 1999). The number of animals sold during the year decreased 13% under the prior year due to decreased sales of feeder cattle during the year. However, a significant improvement in market prices for beef is the primary cause of the increase in earnings for the division. Direct and allocated costs decreased 16% when compared to the prior year ($5.3 million during fiscal 2000 and $6.3 million during fiscal 1999) corresponding to the decrease 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 $770 thousand as compared to $923 thousand for fiscal 2000 and $711 thousand for fiscal 1999. Returns from rock products and sand were $1.7 million for fiscal 2001, $1.3 million for 2000 and $1.3 million during 1999. 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, for landscaping purposes, during fiscal 2001 were $91 thousand compared to $84 thousand and $136 thousand for fiscal years 2000 and 1999, respectively. Direct and allocated expenses charged to the "Other" operations category included general and administrative and other costs not charged directly to the citrus, ranching, sugarcane divisions. These expenses totaled $5.5 million during fiscal 2001 compared to $4.4 million during fiscal 2000 and to $3.5 million during fiscal 1999. General Corporate __ The Company is continuing its marketing and permitting activities for its land which surrounds the Florida Gulf Coast University site. There are sales contracts in place for more than 7,400 acres of the Lee County, Florida property totaling $167 million. The agreements are at various stages of the due diligence periods 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 transferring cash and approximately 3,000 acres of the Lee County property (along with sales contracts totaling $8 million). Through Agri, the Company expects to be able to underwrite 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 certain perils e.g. freeze damage, windstorm, disease, etc. However, the current Federal Crop Insurance Program does not provide business interruption coverage. The coverages contemplated by Agri would 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 insurers and reinsurers. Reinsurers provide wholesale insurance coverage to the industry. 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 newly created entity. It would be difficult, if not impossible, to speculate about the impact that Agri could have on our financial position, results of operations and liquidity in future periods. Since the coverages 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 transferred during fiscal 2001. Agri underwrote a limited amount of coverage during fiscal 2001, and is expected to begin writing more significant coverages before the end of December 2001. As Agri gains underwriting experience and increases its liquidlity, 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 mortgage were recognized during the current 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. Critical Accounting Policies and Estimates ______ The preparation of our financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances. Management believes that our estimates and assumptions are reasonable in the circumstances; however, actual results may vary from these estimates and assumption under different future circumstances. We have identified the following critical accounting policies that affect the more significant judgments and estimates used in the preparation of our consolidated financial statements. Alico 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 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 $617,086, $1,839,642, and $159,748 during fiscal 2001, 2000, and 1999, 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. Item 7(a). Quantitative and Qualitative Disclosure About Market Risk __________ Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. We do not have derivative financial instruments in our investment portfolio. We place our investments with high quality issuers and, by policy, limit the amount of credit exposure to any one issuer. We are adverse to principal loss and ensure the safety and preservation of our invested funds by limiting default, market and reinvestment risk. We classify our 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. We classify our cash equivalents and short-term investments as variable-rate if the rate of return on such investments varies based on the change in a predetermined index or set of indices during their term. These variable-rate investments primarily include money market accounts, mutual funds and equities held at various securities brokers and investment banks. The table below presents the amounts (in thousands) and related weighted interest rates of our investment portfolio at August 31, 2001:

The aggregate fair value of our investment in debt instruments (net of mutual funds of $1,426) as of August 31, 2001, by contractual maturity date, consisted of the following: Aggregate Fair Values __ (in thousands) Due in one year or less $ 68 Due between one and five years 100 Due between five and ten years 242 Due thereafter 1,262 __ $ 1,672 __ __ 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, 2001 and 2000, 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, 2001. 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 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, 2001 and 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended August 31, 2001 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, 2001

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended August 31, 2001, 2000 and 1999 (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. The revenue is based on the Company's estimates of the amounts to be received as the sales of pooled products are completed. 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 $617,086, $1,839,642, and $159,748 during fiscal years 2001, 2000 and 1999, respectively. Revenue from sugarcane is recognized when the harvested 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 payments received, including interest, aggregate the buyer's initial investment or cumulative payments of principal and interest equal or exceed 10 percent of the contract sales price for residential real estate or 20 percent for commercial real estate. Commercial or bulk land sales, made 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 had deferred revenue of did not recognize gross profit totaling $9,540,000 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 $10,600,000 to be paid at closing. The $1,060,000 less the land basis and closing costs was recognized as a gain on the sale of real estate totaling $287,880 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 $2,385,000, 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 investment became adequate to demonstrate its commitment to pay for the property. Sales Profits from commercial real estate sales are discounted to yield 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 improvements 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 incurred. 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 the estimate fair value of the portfolio. Net unrealized investment gains and losses are recorded net of related deferred taxes in a separate component of 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 determined 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 inventoried costs are recognized as a cost of sale to provide 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 inventory 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 unharvested 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 construction of ditches, dikes, roads, and reservoirs, etc. After the planting, caretaking costs or pre-productive maintenance costs are capitalized for four years. After four years, a grove is considered to have reached maturity and the accumulated costs, except for land excavation become the depreciable basis of a grove and 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 result, cultivation/caretaking costs are expensed as the crop is harvested, while the appropriate development and planting costs are depreciated over 3 years. The breeding herd consists of purchased animals and animals raised on the ranch. Purchased animals are stated at cost. The cost of animals raised on the ranch is based on the accumulated cost of developing such animals for productive use. 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 accordance with the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets for Long-Lived Assets to be Disposed of". This Statement requires the long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. (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 acquire 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 temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (j) Basic Net Earnings Per Share ___ Earnings per share has been computed by dividing net income by the weighted average number of common shares outstanding during the year. The Company has no had 7,057,395 shares of dilutive securities. Outstanding stock options issued by the Company represent the only dilutive effect reflected in diluted weighted average shares outstanding. Options do not impact the numerator of the diluted 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 diluted earnings per share because to do so would have been antidilutive for the periods presented. (k) Cash Flows _ For purposes of the cash flows, cash and cash investments 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 assumptions that effect the reported amounts of assets and liabilities. Actual results could differ significantly from those estimates. Although some variability is inherent in these estimates, management believes that the amounts provided are adequate. (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 derivative instruments embedded in other contracts (collectively 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 activities 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, 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 Operating Segments __ Alico, Inc. The Company has three four reportable segments: citrus, sugarcane, and ranch and general corporate. The commodities produced by these segments are sold to wholesalers and processors who prepare the products for consumption. The Company's operations are all located in Florida. The citrus segment produces fruit for both the fresh fruit and processed juice markets. 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 business units that offer different products. They are managed separately because each business requires different operating strategies. (r) Reclassifications __ Certain amounts from 2000 have been reclassified to conform to the 2001 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, 2001 and 2000 (in thousands) were as follows:

At August 31, 2001, debt instruments (net of mutual funds of $1,426,046) are collectible as follows:$67,968 within one year, $100,250 between one and five years, $241,850 between five and ten years, and $1,261,609 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 $9,540,000 and principal payments of $2,385,000 are due annually on July 14, bearing interest at the LIBOR, over four years. (4) Inventories _____ A summary of the Company's inventories (in thousands) at August 31, 2001 and 2000 is shown below:

(5) Property, Buildings and Equipment _________ A summary of the Company's property, buildings and equipment (in thousands) at August 31, 2001 and 2000 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 $44 million. The financing agreements allow the Company to borrow up to $41 million which is due in 2003 and up to $3 million which is due on demand. The outstanding debt under these agreements was $31.8 million and $24.1 million at August 31, 2001 and 2000, 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 under these agreements at August 31, 2001 and 2000 was $46,704,954 and $40,302,855, respectively. Maturities of the indebtedness of the Company over the next five years are as follows: 2002- $1,301,146; 2003- $18,072,386; 2004- $1,306,142; 2005- $1,308,905; 2006- $1,311,862. Interest cost expensed and capitalized (in thousands) during the three years ended August 31, 2001, 2000 and 1999 was as follows:

(7) 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, 2001 and 2000, there were 549,234 and 600,308 shares available for grant, respectively. The fair value of stock options granted was $78,858 in 2001 and $15,667 in 2000 on the date of the grant using the Black Scholes option-pricing model with the following weighted average assumptions:

All stock options granted, except as noted in the paragraph below, have been granted to directors or employees with an exercise price equal to the fair value of the common 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 has been recognized in the consolidated financial statements through August 31, 1999, 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 $17,885 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 $86,468 of unearned compen- sation 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:

(8) Employee Benefit Plans ____ The Company has a profit sharing plan covering substantially all employees. The plan was established under Internal Revenue Code Section 401(k). Contributions made to the profit sharing plan were $443,942, $429,784 and $269,177 for the years ended August 31, 2001, 2000 and 1999, respectively. Additionally, the Company implemented a nonqualified defined 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, 2001 and 2000 was $147,108 and $249,488, respectively. Pension expenses for the additional retirement benefits were approximately $395,000, $128,000 and $213,000 for the years ended August 31, 2001, 2000 and 1999, respectively. (9) Income Taxes ______ The provision for income taxes (in thousands) for the years ended August 31, 2001, 2000 and 1999 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, 2001, 2000 and 1999:

Some items of revenue and expense included in the statement of operations may not be currently taxable or deductible on the income tax returns. Therefore, income tax assets and liabilities are divided into a current portion, which is the amount attributable to the current year's tax return, and a deferred portion, which is the amount attributable to another year's tax return. The revenue and expense items not currently taxable or deductible are called temporary differences. 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 sufficient 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 consolidated loss rules. (Dual consolidated losses prevent operating losses (not capital losses) from occurring in insurance companies domiciled outside of the United States from offsetting operating income irrespective of the fact that the insurance company is a member of the consolidated return group.) 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 Registrar of Companies in Bermuda. Agri will be able to underwrite 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 issued to parties other than its parent, Alico, 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 on a calendar year period ending December 31, 2000. It should be noted that during the fiscal year ending August 31, 2001, Agri incurred an underwriting loss of approximately $212,000. (10) Related Party Transactions ____ Citrus _ Citrus revenues of $19,908,087, $20,032,730 and $18,188,136 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, 2001, 2000 and 1999, respectively. Griffin and its subsidiaries is the owner of approximately 50.78 percent of the Company's common stock. Accounts receivable, resulting from citrus sales, include amounts due from Griffin totaling $6,901,275 and $7,717,325 at August 31, 2001 and 2000, respectively. 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 $7,614,788, $7,531,491, and $6,127,603 for the years ended August 31, 2001, 2000 and 1999, respectively. In addition, Griffin provided the harvesting services for citrus sold to unrelated processors. The aggregate cost of these services was $2,185,899, $1,987,660 and $791,932 for the years ended August 31, 2001, 2000 and 1999, respectively. The accompanying consolidated balance sheets include accounts payable to Griffin for citrus production, harvesting and processing costs in the amount of $414,126 and $616,430 at August 31, 2001 and 2000, respectively. Other Transactions __ The Company purchased fertilizer and other miscellaneous supplies, services, and operating equipment from Griffin, on a competitive bid basis, for use in its cattle, sugarcane, sod and citrus operations. Such purchases totaled $6,029,491, $5,518,087 and $6,019,927 during the years ended August 31, 2001, 2000 and 1999, respectively. (11) 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 combinations 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 after 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 financial 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 associated 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, construction, 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 impact 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 reporting 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 Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions of a Segment of a Business." This Statement is effective for financial statements with fiscal years beginning after 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. (12) 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. 13) 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, Florida. 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:

14) Business Reportable Segment Information ____ The Company is primarily engaged in agricultural operations, 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 operations reportable segments (in thousands) for the years ended August 31, 2001, 2000 and 1999 is summarized as follows:

Identifiable assets represents 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. General corporate 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, 2001 and August 31, 2000, 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 ____ Election of Executive Officers is held each year at the Annual Meeting of the Board of Directors following the Annual Meeting of the Stockholders. Name Title Age _ ___ Ben Hill Griffin, III Chairman of the Board (since March 1990), Chief Executive Officer (since January 1988) and Director (since March 1973) 59 W. Bernard Lester President (since December 1997) and Chief Operating Officer (since January 1988) and Director (since 1987), prior to July 1, 1986 was Executive Director of Florida Department of Citrus for over five years 62 L. Craig Simmons Vice President (effective February, 1995), Treasurer and Chief Financial Officer (effective September 1, 1992), prior thereto was Controller (from January 1 to August 31,1992) and Assistant Comptroller (from January 1 to December 31,1991),prior to September 1990 was Controller of Farm/Citrus Division, Collier Enterprises, Agribusiness Group 49 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) during the 2001 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 officer, director or beneficial owners of 10% or more of the Company'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 2001. 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 16, 2001. Item 11. Executive Compensation. _____ Information called for by Items 11 is incorporated by reference to the Company's Proxy Statement dated November 16, 2001. As disclosed in the Proxy Statement, on September 12, 2000, the Company granted options for 51,074 shares of the Company's common stock to its employees pursuant to the Company's Incentive Equity Plan, 23,302 of which were awarded to the Company's two most highest compensated employees. The options had an exercise price of $14.62 and fair market value of $16.313 at the time of the grant. 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 16, 2001. 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 16, 2001. PART IV _ Item 14. 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, 2001 and 2000 Consolidated Statements of Operations - For the Years Ended August 31, 2001, 2000 and 1999 Consolidated Statements of Stockholders' Equity - For the Years Ended August 31, 2001, 2000 and 1999 Consolidated Statements of Cash Flows - For the Years Ended August 31, 2001, 2000 and 1999 (a)2. Financial Statement Schedules: _____ Selected Quarterly Financial Data - For the Years Ended August 31, 2001 and 2000 - Included in Part II, Item 8 Schedule I - Marketable Securities and Other Investments - at August 31, 2001 Schedule V - Property, Plant and Equipment - For the Years Ended August 31, 2001, 2000 and 1999 Schedule VI - Reserves for Depreciation, Depletion and Amortization of Property, Plant and Equipment - For the Years Ended August 31, 2001, 2000 and 1999 Schedule IX - Supplementary Income Statement Information - For the Years Ended August 31, 2001, 2000 and 1999 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 (9) Voting Trust Agreement - 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 (18) Change in Accounting Principles - Not Applicable (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 (23) Consents of Experts and Counsel - Not Applicable (24) Power of Attorney - Not Applicable (28) Information From Reports Furnished to State Insurance Regulatory Authorities - Not Applicable (99) Additional Exhibits - None (b)3. Reports on Form 8-K: _____ Form 8-K dated December 15, 2000 regarding re-election of Directors and election of Officers. Form 8-K dated November 3, 2000 regarding disposition of land. Form 8-K dated December 14, 2000 regarding disposition of land. Form 8-K dated December 19, 2000 regarding disposition of land. Form 8-K dated December 21, 2000 regarding disposition of land. Form 8-K dated March 7, 2001 regarding election of new Director. Form 8-K dated March 23, 2001 regarding disposition of land. Form 8-K dated May 18, 2000 regarding disposition of land. Form 8-K dated June 12, 2001 regarding Chairman and CEO taking leave of absence. Form 8-K dated August 3, 2001 regarding Chairman and CEO returning from leave of absence. Form 8-K dated October 9, 2001 regarding a settlement agreement and litigation in State Court, Polk County, Florida. Form 8-K dated October 29, 2001 regarding disposition of land. Material has been filed with 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, 2001: Number of shares outstanding at August 31, 2001 7,044,513 _ _ Number of shares outstanding at August 31, 2000 7,027,827 _ _ Weighted Average 9/1/99 - 8/31/01 7,032,929 _ _ EXHIBIT 12 ALICO, INC. Computation of Ratios: 2001 Current Assets $61,344,839 Current Liabilities 7,690,600 61,344,839 divided by 7,690,600 = 7.98:1 2000 Current Assets $56,578,383 Current Liabilities 12,346,277 56,578,383 divided by 12,346,277 = 4.58:1 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 undersigned, thereunto duly authorized. ALICO, INC. (Registrant) November 13, 2001 Ben Hill Griffin, III Date Chairman, Chief Executive Officer and Director (Signature) November 13, 2001 W. Bernard Lester Date President, Chief Operating Officer and Director (Signature) November 13, 2001 L. Craig Simmons Date Vice President and Chief Financial Officer (Signature) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated: Richard C. Ackert Ben Hill Griffin, IV Director Director (Signature) (Signature) K. E. Hartsaw Thomas E. Oakley Director Director (Signature) (Signature) William L. Barton Monterey Campbell, III Director Director (Signature) (Signature) Walker E. Blount, Jr. Director (Signature) November 13, 2001 Date