The URL can be used to link to this page

CCPC Backup Docs 11/17/2011ccpc MEETING BACKUP DOCUMENTS NOVEMBER 17 , 2011 AGENDA COLLIER COUNTY PLANNING COMMISSION WILL MEET AT 9:00 A.M., THURSDAY, NOVEMBER 17, 2011, IN THE BOARD OF COUNTY COMMISSIONERS MEETING ROOM, ADMINISTRATION BUILDING, COUNTY GOVERNMENT CENTER, THIRD FLOOR, 3299 TAMIAMI TRAIL EAST, NAPLES, FLORIDA: NOTE: INDIVIDUAL SPEAKERS WILL BE LIMITED TO 5 MINUTES ON ANY ITEM. INDIVIDUALS SELECTED TO SPEAK ON BEHALF OF AN ORGANIZATION OR GROUP ARE ENCOURAGED AND MAY BE ALLOTTED 10 MINUTES TO SPEAK ON AN ITEM IF SO RECOGNIZED BY THE CHAIRMAN. PERSONS WISHING TO HAVE WRITTEN OR GRAPHIC MATERIALS INCLUDED IN THE CCPC AGENDA PACKETS MUST SUBMIT SAID MATERIAL A MINIMUM OF 10 DAYS PRIOR TO THE RESPECTIVE PUBLIC HEARING. IN ANY CASE, WRITTEN MATERIALS INTENDED TO BE CONSIDERED BY THE CCPC SHALL BE SUBMITTED TO THE APPROPRIATE COUNTY STAFF A MINIMUM OF SEVEN DAYS PRIOR TO THE PUBLIC HEARING. ALL MATERIAL USED IN PRESENTATIONS BEFORE THE CCPC WILL BECOME A PERMANENT PART OF THE RECORD AND WILL BE AVAILABLE FOR PRESENTATION TO THE BOARD OF COUNTY COMMISSIONERS IF APPLICABLE. ANY PERSON WHO DECIDES TO APPEAL A DECISION OF THE CCPC WILL NEED A RECORD OF THE PROCEEDINGS PERTAINING THERETO, AND THEREFORE MAY NEED TO ENSURE THAT A VERBATIM RECORD OF THE PROCEEDINGS IS MADE, WHICH RECORD INCLUDES THE TESTIMONY AND EVIDENCE UPON WHICH THE APPEAL IS TO BE BASED. 1. PLEDGE OF ALLEGIANCE 2. ROLL CALL BY SECRETARY 3. ADDENDA TO THE AGENDA 4. PLANNING COMMISSION ABSENCES 5. APPROVAL OF MINUTES October 20, 2011 6. BCC REPORT- RECAPS 7. CHAIRMAN'S REPORT 8. CONSENT AGENDA ITEMS 9. ADVERTISED PUBLIC HEARINGS A. Note: This item has been continued from the November 3, 2011 CCPC meeting: CU- PL2009 -1412: Alico Land Development, Inc. — A Resolution of the Board of Zoning Appeals of Collier County, Florida providing for the establishment of a Conditional Use to allow extraction or earthmining and related processing and production within a Rural Agricultural Zoning District with Mobile Home Overlay and Rural Land Stewardship Area (RLSA) Overlay pursuant to Subsection 2.03.0I.A. l .c.I of the Collier County Land Development Code for a project to be known as Lost Grove Mine located in Sections 5, 6, 7, 8 and 18, Township 46 South, Range 28 East, Collier County, Florida. [Coordinator: Kay Deselem, AICP, Principal Planner] 10. OLD BUSINESS A. Recommendation to accept the Master Mobility Plan Phase II Report and provide recommendations to the Board of County Commissioners [Coordinator: Nick Casalanguida, Deputy Administrator] 11. NEW BUSINESS 12. PUBLIC COMMENT ITEM 13. DISCUSSION OF ADDENDA 14. ADJOURN CCPC Agenda/Ray Bellows /jmp 20D ))Saturday, November 5, 2011 )) N A P L E S D A I LY NEWS Legals NOTICE OF MEETING Notice is hereby given that there will be a public Master Mobility Plan (Plan) presentation on Thursday November W, 2011 at the Collier County Plan- ning Commission (CCPC) meeting start ing at 9:00 a.m. After review and con- sideration of the Plan, the CCPC will make recommendations for considera- tion by the Board of County Commis- sioners (BCC). The Plan along with the CCPC recommendations shall be pres- ented to the BCC at a future date. The CCPC meeting will be held at the Board of County Commissioners Cham- bers, W. Harmon Turner Building (Bldg. F) located at 3299 E. Tamiami Trail, Naples, FL 34112. The meeting is open to the public. If you are a person with a disability who needs any accommodation in or- der to participate in this proceeding, you are entitled, at no cost to you, to the provision of certain assistance. Please contact the Collier County Fa- cilities Management Department lo- cated at 3335 Tamiami Trail East, • Naples, Florida, 34112, (239) 252 -8380 prior to the meeting; assisted listening devices for the hearing impaired are available in the County Commissioners' Office. For more information, call Debbie Armstrong in the Transportation Plan- ning section of the Land Development Services department at (239) 252 -5751. November 5, 2011 No. 1921410 urrr5t 9042 Falling Leaf Dr. Bonita Springs, FL 34135 November 17, 2011 Collier County Planning Commissioners Dear Commissioners: Cd vet' - CP--. k?Pyffr On October 18, 2011, 1 spent the better part of the day in your chambers awaiting my opportunity to testify against the Lost Grove Mine application. Unfortunately, I was not able to do so and I have a conflict which precludes my appearance on November 17. Therefore, I offer these written comments in place of my sworn testimony to express my profound concern over the Lost Grove Mine proposal. While I am not a Collier County resident, I, like you, am a resident of Southwest FL. I believe the Lost Grove Mine proposal threatens all of us who live and work in Southwest FL. Obviously, the operation of the proposed mine is totally incompatible with the homes that surround the property. The noise, dirt and vibration associated with such a mine are inconsistent with the current quality of life enjoyed by the nearby homeowners. Secondly, the use of Corkscrew Rd. by hundreds of dump trucks is inconsistent with the rural nature of the road and dangerous to motorists and school busses that use that road on a daily basis. Even more importantly, the threat to our Southwest FL water supply by allowing mining activity next to our wetlands and aquifer is reason enough to deny this application. The comment made by the President of Alico Land Development on October 18 that the "DR /GR is not relevant" demonstrates that he is not interested in protecting our water supply and natural resources. I urge you to demonstrate to Alico Land Development that you are serious about protecting our natural resources. Therefore, I urge you to DENY the Lost Grove Mine application. ReTectfully Suomi d; I i Robert P Liemes h Resident, Southwest FL ck- TESTIMONY BEFORE COLLIER COUNTY PLANNING COMMISSION Thursday, November 17, 2011 Collier County Administration Building 3299 Tamiami Trail East, Naples, FL RE: LOST GROVE MINE ROGER STRELOW My name is Roger Strelow. I teach environmental policy, law and sustainability at Florida Gulf Coast University. I was formerly an Assistant Administrator of the US Environmental Protection, appointed by the President to manage the nation's air and noise control programs. I am a resident of Estero in Lee County and a member of both the Brooks Concerned Citizens and the Estero Council of Community Leaders. In one of my previous private sector positions, I was Executive VP of the environmental services subsidiary of the global engineering and construction company, Bechtel Corp. There, among other things, we performed environmental services for a number of major mining companies such as Kennecott and FMC. Thus, I am not anti- mining or anti - industry at all. But I have never seen a substantial mining operation squeezed into such a residential, agricultural and special, environmentally sensitive area as Collier County is considering for the Lost Grove Mine. The mines I have seen and worked on have large buffer zones which they own and control. In the case of Lost Grove, excavation will come within a mere 150 feet of residential structures, of which there are a total of more than 450. The routes between the mining operations that I know of, and the nearest major highways, are largely on mine - owned land, not on small, two -lane roads intended for public use and already legally and in fact unable to meet traffic demands under established criteria. Now, if Collier County approves Mine operations, these already substandard roads, particularly Corkscrew Road and State Road 82, would be treated to an additional 2 large trucks per minute because of the planned 1,400 trips per day in and out of Lost Grove. The noise from blasting as well as from the enormous truck traffic and other machinery will rudely jar these local residents. I learned from my time at US EPA and in subsequent industry experience that noise is a far greater nuisance and health threat than you might suppose. It is particularly offensive to average citizens living and working in the quiet neighborhoods that they are accustomed to. CIL, I and others are here today, as we have been before, from Lee County — because a huge part of the adverse Lost Grove mine impacts will occur in our County. As you know, your own Growth Management Plan policies very reasonably require you to give great weight to such impacts. As others speaking up for Lee County explain in more detail, in the rural, agricultural district where this Mine is proposed to be inserted — very much like the proverbial "skunk at a garden party" — an activity such as this mine can be approved only as a "conditional" use, and that, in turn, can occur only if such activity is "compatible to agricultural uses" and "would not endanger or damage ... agricultural, environmental, potable water or wildlife resources." (CC Code 2.03.01) Such use must be found to "promote the public health, safety, welfare ... order, comfort, convenience, appearance [and] general welfare." (CC Code 10.08.00 (A)) An applicant such as Alico has the burden of enabling the County to make a credible finding that the proposed conditional use, ie, the Mine, "will not adversely affect the public interest" and that, among other things, ingress and egress -- with particular reference to automotive and pedestrian safety and convenience, traffic flow and control, and access in the case of fire or catastrophe -- are satisfactorily provided for. The applicant also must demonstrate that the conditional use would not have unacceptable effects on neighboring properties including noise, glare and economic or odor effects. (CC Code 10.08.00 (D)) Even more simply, your County's Growth Management Plan, in Policy 4, says that "new developments shall be compatible with, and complementary to, the surrounding land uses." As for the road problem, Policy 5 of your Plan says you should not approve any application that would "access a deficient roadway segment" or "impact an adjacent roadway segment that is currently operating or is projected to operate below adopted Level of Service standards." That is exactly the forbidden situation your approval would make much worse than it already is even without the mining! At the previous hearing, November 3, a representative of Alico testified about some —$90MM in improvements for these roads. It is my understanding that any such expenditures are by no means committed — as with Congressional "authorizations" which may never materialize into actual "appropriations" or, if so, possibly at far lower levels. Also, I understand that any such sums, at best, are not envisioned until several decades into the future. All the factors I've discussed must include consideration of impacts in adjacent jurisdictions. This means that Lee County's very substantial stake in this matter, and the significant adverse effects it would suffer, must be fully taken into account, just as you would expect — and receive, from Lee County -- if the shoe were on the other foot. 2 C(2, One area I have left to others, in the interest of time, is the huge threat this roposal would pose for area wildlife such as the endangered Florida Panther and for the region's waters and the marvelous Corkscrew Regional Ecosystem Watershed (CREW). Of course, these "environmental" issues affect all of us as people in the final analysis. In conclusion, I would simply ask you to consider honestly and carefully whether if each of YOU lived in the area, in one of those nearly 500 homes, or if YOU wanted to enjoy the marvelous CREW area which is an environmental and tourist jewel of this whole region, would YOU want your elected representatives to approve "shoehorning" a loud, dirty mining operation into this exact location ?? Or into other parts of the Naples area? There are plenty of undeveloped areas in this region and this state where a mine could operate as it should, as they do in other states, in some reasonable isolation from residential, agricultural, and ecologically special activities. We're not trying to ban mining, but your own very reasonable legal requirements, which I've quoted, mean that you shouldn't force -fit mining into this wholly incompatible area where there is no substantial buffer zone CfK- LOST GROVE MINE - INCONSISTENCIES WITH THE GMP SUBMITTED BY THE CONSERVANCY OF SOUTHWEST FLORIdA FOR COLLIER COUNTY PLANNING COMMISSION 1 /11 k1A Future Land Use Element Policy 5.4 — New developments shall be compatible with, and complementary to, the surrounding land uses. Transportation Element Policy 5.1 — The County shall review all rezone petitions, SRA designation applications, conditional use permits, and proposed amendments to the FLUE affecting the overall countywide density or intensity of permissible development, with consideration of their impacts on the overall County transportation system, and shall not approve any petition or application that would directly access a deficient roadway segment or if it impacts an adjacent roadway segment that is deficient, or which significantly impacts a roadway segment or adjacent roadway segment that is currently operating and /or is projected to operate below an adopted Level of Service Standards within the five year planning period, unless specific mitigation stipulations are also approved. Transportation Element Objective 6 — The County shall coordinate the transportation element with the plans and programs of the state, regional, and other local jurisdictions. Transportation Element Policy 6.2 — The Transportation Element shall consider any and all applicable roadway plans of the City of Naples, City of Marco Island, Everglades City, Florida Department of Transportation, Southwest Florida Regional Planning Council, City of Bonita Springs and Lee County. Conservation and Coastal Management Element Objective 6.4 — The County will protect, conserve and appropriately use ecological communities shared with or tangential to State and Federal lands and other local governments. Conservation and Coastal Management Element Policy 6.4.1 — The County shall coordinate with adjacent counties, State and Federal agencies, other owners of lands held in the public trust, and the Southwest Florida Regional Planning Council to protect unique communities located along the County's borders by controlling water levels and enforcing development regulations with regard thereto. Conservation and Coastal Management Element Policy 6.4.2 — Collier County shall continue to coordinate with adjacent Counties when reviewing proposed land development projects that would have an impact on ecological communities in one or more of the adjacent Counties. Intergovernmental Coordination Element Objective 2 — The County shall coordinate its land use planning strategy, including an assessment of proposed development, with that of other governmental and private entities. Intergovernmental Coordination Element Policy 2.2 — Collier County shall c ntinue to develop intergovernmental planning agreements, which shall include provisions for review ard comment(s) on Collier County land use plans and capital facility plans by neighboring governmental jurisdictions, regarding any proposed activities that may have an impact on such jurisdictions or cause inconsistencies with their respective comprehensive plans. CK Firm headed by State Sen. J.D. Alexander Alico Fights IRS Demand for $26.8 Million Land management company disputes claim that it owes money for back taxes and penalties from failed deal. Sen. J.D. Alexander R -Lake Wales By Kevin Bouffard THE LEDGER Published: Friday, March 18, 2011 at 11:41 p.m. Last Modified: Friday, March 18, 2011 at 11:41 p.m. HAINES CITY I Alico Inc., a land management company headed by state Sen. J.D. Alexander, R -Lake Wales, is disputing the Internal Revenue Service's demand for $26.8 million in back taxes and penalties connected with a failed land deal. The LaBelle -based company received an IRS letter March 9 demanding $13 million, including $8.7 million in back taxes and $4.3 million in penalties, after its audit, according to a company statement released late Thursday. It was the third such IRS letter the company has received since Sept. 9. CK The demands from all three letters total $14.5 million in back taxes and $12.3 million in penalties for Alico's 2005, 2006 and 2007 fiscal years, which end Aug. 31, and for the month of September 2007, the statement said. I The dispute stems from a $64.5 million settlement Alico made with the IRS in July 2008 for fiscal years 2000 through 2004, Alexander told The Ledger on Friday. It's also linked to the sale of 339 acres next to Florida Gulf Coast University in Lee County to a compan called Ginn -La Naples Ltd. through two Alico subsidiaries -- Agri - Insurance Co. Ltd., a Bermuda-based reinsurance company, and Alico -Agri Ltd. Alico got the property back at an Aug. 18 foreclosure auction. At issue in the current IRS dispute is whether Agri- Insurance can be treated as a "disregarded entity" for U.S. tax purposes, the statement said. A second related issue is whether Alico -Agri meets the federal tax code definition of a "real estate dealer," which would allow it to spread the proceeds from the land sale over multiple years. Alico Fights IRS Demand for $26.8 MillionBv KEVIN BOUFFARD Sen. J.D. Alexander R -Lake Wales TheLedger.comMarch 18, 2011 11:41 PM HAINES CITY I Alico Inc., a land management company headed by state Sen. J.D. Alexander, R -Lake Wales, is disputing the Internal Revenue Service's demand for $26.8 million in back taxes and penalties connected with a failed land deal. The LaBelle -based company received an IRS letter March 9 demanding $13 million, including $8.7 million in back taxes and $4.3 million in penalties, after its audit, according to a company statement released late Thursday. It was the third such IRS letter the company has received since Sept. 9. The demands from all three letters total $14.5 million in back taxes and $12.3 million in penalties for Alico's 2005, 2006 and 2007 fiscal years, which end Aug. 31, and for the month of September 2007, the statement said. The dispute stems from a $64.5 million settlement Alico made with the IRS in July 2008 for fiscal years 2000 through 2004, Alexander told The Ledger on Friday. It's also linked to the sale of 339 acres next to Florida Gulf Coast University in Lee WE County to a company called Ginn -La Naples Ltd. through two Alico subsidiaries -- Agri - Insurance Co. Ltd., a Bermuda -based reinsurance company, and Alico -Agri Lt . Alico got the property back at an Aug. 18 foreclosure auction. At issue in the current IRS dispute is whether Agri- Insurance can be treated as a "disregarded entity" for U.S. tax purposes, the statement said. A second related issue is whether Alico -Agri meets the federal tax code definition of a "real estate dealer," which would allow it to spread the proceed from the land sale over multiple years. Claiming a subsidiary as a disregarded entity is a common accounting technique, said Gary McGill, professor of accounting at the University of Florida in Gainesville. It means the subsidiary no longer exists as a separate company but as part of the parent company.The parent company can use the technique to lessen or reduce its tax burden, McGill said. Based on the IRS form used to declare a subsidiary as a disregarded entity, the practice is known as "checking the box. " If the subsidiary showed an annual profit but the parent company experienced a loss, the parent company would have no,, tax liability. However, the independent subsidiary would have to pay a tax on its profit, he said. But if the parent company "checks the box," declaring the subsidiary a disregarded entity, the two tax liabilities would combine, thus lessening or even eliminating a federal tax bill. "Most totally owned subsidiaries are disregarded entities," Alexander said. As part of the 2008 tax settlement, the IRS claimed Agri- Insurance was not an insurance company, he said. "The IRS is now asserting Agri- Insurance is in fact an insurance company, therefore it couldn't check the box and be treated as a disregarded entity," Alexander said. McGill agreed most U.S. companies commonly treat subsidiaries as disregarded entities, but he said the IRS rules are more complicated regarding foreign subsidiari Baxter Troutman, a shareholder in Alico and m— ember of t ie Florida House of Representatives until last year, said the issue of Agri - Insurance's status aros while he was a member of the board of directors. Before the 2008 settlement, the IRS -.laimed Agri - Insurance was not a legitimate insurance company because it had not written enough policies at the time, Troutman said. Troutman served on the Alico board until January 2008, when he was voted off. A judge's ruling on a lawsuit Troutman filed against J.D. Alexander and his father, board Chairman John Alexander, is pending following a December hearing. The second question regarding whether Alico -Agri acted as a real estate dealer in the Ginn -La Naples deal also has tax consequences, McGill said. The answer would determine whether Alico could use an accounting technique called the "installment method," which would allow it to spread its tax liability over many years, thus reducing total liability.Alico maintains it did not act as a dealer, but the IRS claims it did, Alexander said. Dealers and non - dealers, or investors, are treated differently for tax purposes, McGill said, but the rules are' murky. Alico reported a loss of $92,000, or 1 cent per share, for its firs quarter ending Dec. 31. That compares to a $1.4 million loss (19 cents) for a year earlier. For. the 2010 fiscal year, it lost $2.9 million (39 cents per share) compared to $6.1 million (83 cents) in 2009. [ Kevin Bouffard can be reached at kevin.bouffard @theledger.com or at 863 -422- 6800. Read more on Florida citrus on his Facebook page, Florida Citrus Witness, http: //bit.ly/baxWuU. ] Copyright 2011 TheLedger.com - All rights reserved Restricted use only. 0 Total Return To Shareholders (Includes reinvestment of dividends) Peer Group Companies CONSOLIDATED TOMOKA LAND CO ST JOE CO TEJON RANCH CO TEXAS PACIFIC LAND TRUST THOMAS PROPERTIES GROUP Item 6. Selected Financial Data. Description Operating revenue Income (loss) from continuing operations Income (loss) from continuing operations per weighted average common share Weighted average number of shares outstanding Cash Dividend Declared Per Share Total Assets Long -Term Obligations (1) (2) (3) September 30, 2010 2009 2008 2007(1) $ 79,792 $ 89,528 $116,382 $ 758 (623) (3,649) 5,603 (849) $ (0.08) $ (0.49) 7,374 7,377 $ 0.10 ANNUAL RETURN PERCENTAGE 188,817 200,235(3) $ 75,668 _ Years Ending Company Name / Index Aug 06 Aug 07 Aug 08 Sep 09 Sep 10 Alico, Inc. 15.39 -11.28 -13.32 -30.08 -20.55 S &P 500 Index 8.88 15.13 -11.14 -15.20 10.16 Peer Group -26.65 -21.12 -1.34 -24.11 -10.89 Base INDEXED RETURNS Period Years Ending Company Name / Index Aug 05 Aug 06 Aug 07 Aug 08 Sep 09 Sep 10 Alico, Inc. 100 115.39 102.38 88.74 62.05 49.30 S &P 500 Index 100 108.88 125.36 111.40 94.46 104.06 Peer Group 100 73.35 57.85 57.08 43.32 38.60 Peer Group Companies CONSOLIDATED TOMOKA LAND CO ST JOE CO TEJON RANCH CO TEXAS PACIFIC LAND TRUST THOMAS PROPERTIES GROUP Item 6. Selected Financial Data. Description Operating revenue Income (loss) from continuing operations Income (loss) from continuing operations per weighted average common share Weighted average number of shares outstanding Cash Dividend Declared Per Share Total Assets Long -Term Obligations (1) (2) (3) September 30, 2010 2009 2008 2007(1) $ 79,792 $ 89,528 $116,382 $ 758 (623) (3,649) 5,603 (849) $ (0.08) $ (0.49) 7,374 7,377 $ 0.10 $ 0.69 188,817 200,235(3) $ 75,668 $ 80,715(3) $ 0.76 $ (0.12) 7,390 7,377 $ 1.10 $ 0.28 273,932 285,349 $140,239 $143,265 August 31, 2007 2006 $132,005 $ 74,164'x" (13,395)(2) 8,021 7,391 $ 1.10 28 1,206 $143,790 1.09 7,375 $ 1.03 263,579 $103,601 Beginning with fiscal year 2008, Alico changed its year end from August 31 to September 30. Resu Its for September 30, 2007 are for the one month transition period created by the change. During the fiscal year ended August 31, 2007, the Company revised its estimate in connection with Et tax disagreement with the IRS which resulted in additional income tax expense of $25.6 million for that fiscal year. The effect of this transaction was to reduce income from continuing operations. Additionally, the Company utilized its revolving line of credit for funding to settle the dispute, causing long -term obligations to increase. For further information regarding the IRS settlement, please refer to Note 8 of the consolidated financial statements. During the fiscal year ended September 30, 2009, the Company utilized cash to reduce its outstanding debt by approximately $50.0 million, causing a reduction in total assets and long -term obligations. For further information Concerning the Company's long -term obligations, please refer to Note 6 of the consolidated financial statements. 15 C� Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operati ms. Cautionary Statement Some of the statements in this document include statements about future expectations. Statements that are not historical facts are "forward - looking statements" for the purpose of the safe harbor provided by Section 21E of the Exchange Act and Section 27A of the Securities Act. These forward - looking statements, which may include references to one or more potential transactions, strategic alternatives under consideration or projections of performance for the upcoming fiscal year, are predictive in nature or depend upon or refer to future events or conditions. These statements are subject to known, as well as unknown, risks and uncertainties that may cause actual results to differ materially from expectations. These risks include, but are not limited to those discussed in the risk factors section of this annual report whether or not such risks are repeated in connection with any forward looking statement. There can be no assurance that any anticipated performance or future transactions will occur or be structured in the manner suggested or that any such transaction will be completed. Alico undertakes no obligation to update publicly any forward - looking statements, whether as a result of future events, new information or otherwise. When used in this document, or in the documents incorporated by reference herein, the words anticipate, should, believe, estimate, may, intend, expect, and other words of similar meaning, are likely to address Alico'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 Alico 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 Alico. 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 Alico to a greater extent than indicated. 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 Dollar amounts listed in thousands: Cantam r 311. �'7 Management believes that Alico will be able to meet its working capital requirements for the foreseeable future with internally generated funds from operations and available credit. However, if the Company was required to pay a substantial portion of the amount claimed by the IRS in its audit of the Company's 2005 -2007 returns which is currently being cha lenged by the Company, this could materially and adversely affect the Company's liquidity. See "Risk Factors: Alico has drawn signif icant scrutiny from the Internal Revenue Service." Alico has credit commitments under a revolving line of credit that provides for revolving credit of up to $60.0 million. Of the $60.0 million credit commitment, $31.0 million was available for Alico's general u;e at September 30, 2010 (see Note 6 to consolidated financial statements). Cash flows from Operations Cash flows from operations were $7.1 million, $16.4 million and $13.8 million for the fiscal years ended September 30, 2010, 2009 and 2008. Alico refinanced its term loan and revolving line of credit in September 2010. As a result of the refinancing, Alico recognized approximately $3.4 million of additional interest expense during its fourth fiscal quarter, consisting of previously unamortized loan origination fees of $305 thousand, and prepayment penalties of $3.1 million. Loan origination fees of $1.2 million were paid as a result of the refinancing, and are being amortized over the 10 year term of the agreement. The refinancing is expected to benefit the 16 2010 2 2008 Cash & liquid investments $ 12,365 $ 22, 04 $ 78,637 Total current assets 37,441 51,335 123,130 Current liabilities 7,912 12,644 18,200 Working capital 29,529 38,691 104,930 Total assets 188,817 200,235 273,932 Notes payable $ 73,460 $ 78,928 $137,758 Current ratio 4.73 4.06 6.77 Management believes that Alico will be able to meet its working capital requirements for the foreseeable future with internally generated funds from operations and available credit. However, if the Company was required to pay a substantial portion of the amount claimed by the IRS in its audit of the Company's 2005 -2007 returns which is currently being cha lenged by the Company, this could materially and adversely affect the Company's liquidity. See "Risk Factors: Alico has drawn signif icant scrutiny from the Internal Revenue Service." Alico has credit commitments under a revolving line of credit that provides for revolving credit of up to $60.0 million. Of the $60.0 million credit commitment, $31.0 million was available for Alico's general u;e at September 30, 2010 (see Note 6 to consolidated financial statements). Cash flows from Operations Cash flows from operations were $7.1 million, $16.4 million and $13.8 million for the fiscal years ended September 30, 2010, 2009 and 2008. Alico refinanced its term loan and revolving line of credit in September 2010. As a result of the refinancing, Alico recognized approximately $3.4 million of additional interest expense during its fourth fiscal quarter, consisting of previously unamortized loan origination fees of $305 thousand, and prepayment penalties of $3.1 million. Loan origination fees of $1.2 million were paid as a result of the refinancing, and are being amortized over the 10 year term of the agreement. The refinancing is expected to benefit the 16 C Alico Updates Status on IRS Examinations Globe Newswire 4:38 PM Eastern Daylight Time Mar 17, 2011 Alico, Inc. LABELLE, Fla., March 17, 2011 (GLOBE NEWSWIRE) -- Alico, Inc. (Nasdaq:ALCO), a land management company, announced that it has received a Revenue Agent's Report ("RAR") from the Internal Revenue Service ( "IRS ") dated March 9, 2011 pertaining to previously disclosed examinations of Alico, Inc., Agri- Insurance Company, Ltd. and Alico -Agri, Ltd. tax returns for the tax years ended August 31, 2005, 2006, 2007 and the one month transition period ended September 30, 2007 (the "Dispute Period "). The March 9, 2011 RAR requires Alico and its subsidiaries to either remit $13.0 million, consisting of $8.7 million in taxes and $4.3 million in penalties, or file a response within 30 days of the notice. Alico previously reported that on September 9, 2010 and October 28, 2010, the IRS issued RARs pursuant to its examinations of Alico, Agri- Insurance and Alico -Agri for the Dispute Period. Based on the combined positions taken in the September 9, 2010, October 28, 2010 and March 9, 2011 RARs, the IRS has demanded additional taxes and penalties of $26.8 million, consisting of $14.5 million in taxes and $12.3 million in penalties. The RARs did not quantify the interest on the taxes. The September 9, 2010, October 28, 2010 and March 9, 2011 RJz.Rs principally challenge (i) the validity of an election made by Agri-Insurance to be treated as a disregarded entity for U.S. tax purposes; and (ii) Alico- Agri's ability to recognize income from real estate sales under the i stallment method of accounting by asserting that Alico -Agri was a dealer I lin real estate during the years under examination. The March 9, 2011 RAR pertains to withholding taxes that would be due by Alico -Agri if the IRS is successful in the assertion that Agri- Insurance and Alico -Agri are required to file separate tax returns during the Dispute Period. Alico does not agree with the positions taken by the IRS and filed its response to the September 9, 2010 and October 28, 2010 RARs on December 14, 2010. The Company intends to dispute the claims made in the March 9, 2011 RAR by filing a timely response that is consistent with prior positions taken. The cost of any potential settlement associated with the ultimate resolution of these matters has not been estimated at this time. About Alico, Inc. Alico, Inc., a land management company operating in Central and Southwest Florida, owns approximately 139,607 acres of land located in Collier, Glades, Hendry, Lee and Polk counties. Alico is involved in various agricultural operations and real estate activities. Alico's mission is to grow its asset values through its agricultural and real estate activities to produce superior long -term returns for its shareholders. Statements in this press release that are not statements of historical or CK current fact constitute "forward- looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward - looking statements involve known and unknown risks, uncertainties and ther unknown factors that could cause the actual results of the Company to e materially different from the historical results or from any future resul s expressed or implied by such forward - looking statements. The forward - lookin statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company's reports and registration statements filed with the Securities and Exchange ',Commission. CONTACT: JD Alexander LaBelle, Florida (863) 675 -2966 Copyright © 2011 Thomson Financial. All rights reserved. Category Codes: Farming & Fishing(I =PLN), Food & Beverage(I =FOB), Food Producers(I =FOA), Corporate News Release(T =CORPS cR Y9 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10 -K 0 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES For the fiscal year ended September 30, 2010 OR ❑ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURI'I For the transition period from to Commission file number 0 -261 ALICO, INC. (Exact name of registrant as specified in its charter) Florida (State or other jurisdiction of incorporation or organization) 59- 0906081 (IRS Employer identification number) P.O. Box 338, La Belle, Florida 33975 (Address of principal executive offices) (Zip code) Registrant's telephone number including area code (863) 675 -2%6 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE A Title of class: COMMON CAPITAL STOCK, $1.00 Par value, Non - cumulative SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE None C OF 1934 ACT OF 1934 Indicate by check mark if the registrant is a well -known seasoned issuer, as define in Rule 405 of the Securitie Act. Yes ❑ No 0 Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) o the Act. Yes ❑ No 0 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 filings requirements for the past 90 days. Yes 0 No ❑ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S -T ( §232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ❑. No ❑. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 or Regulation S -K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 -K or any amendment to this form 10 -K. Yes ❑ No 0 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non - accelerated filer or a smaller reporting company. See definition of "accelerated filer" "large accelerated filer" and "smaller reporting company" in Rule 12b -2 of the Exchange Act (Check one): Large accelerated filer ❑ Accelerated filer 0 Non - accelerated filer ❑ Smaller Reporting Company ❑ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b -2 of the Exchange Act.) Yes ❑ No 0 The aggregate market value of the voting and nonvoting common equity held by non - affiliates based on the closing price, as quoted on the NASDAQ as of March 31, 2010 (the last business day of Alico's most recently completed second fiscal quarter) was $89,814,502. There were 7,370,810 shares of stock outstanding at December 13, 2010. Documents Incorporated by Reference: Portions of the Proxy Statement of Registrant to be dated on or before January 14, 2011 are incorporated by reference in Part III of this report. wroll ON category. The transfer of the parcel from its previous designation allows for construction of up to 1,950 dwelling units and 1.5 million square feet of commercial/retail on the property to support the continued student growth at Florida Gulf Coast University. Alico's real estate revenues during the fiscal years ended September 30, 2009 and 2008 primarily resulted from three contracts with the Ginn Companies related to the sale of real estate in Lee County, Florida. The Company recognized a total of $3.0 million and $4.6 million of real estate revenue for the fiscal years ended September 30, 2009 and 2008, respectively, 'of which $1.6 million and $0.8 million were classified as non - operating revenues for the fiscal years ended September 30, 2009 and 2008, respectively. In October 2008, the three contracts were renegotiated, resulting in the Company retaking possession of one of the properties and a reduction of revenue during the fiscal year ended September 30, 2009 compared with the prior fiscal year. The purchaser failed to exercise its option on a second contract. In April 2009, the buyer defaulted on the third contract resulting in the Company foreclosing on the property in September 2010. Recent market conditions have depressed Florida real estate causing the predictability of real estate sales, including timing and market values, to be problematic. Alico continues to market parcels of its real estate holdings which are deemed by Management and the Board of Directors to be excess to the immediate needs of Alico's core operations. The sale of any of these parcels could be material to the operations and cash flows of Alico. Due to decreases in the market prices of Florida real estate, the Company evaluated several of its properties for impairment at September 30, 2010, 2009 and 2008. In conducting its evaluation, the Company reviewed the estimated non - discounted cash flows from each of the properties and obtained independent third party appraisals from a qualified real estate appraiser. Based on this information, the Company determined that a 291 acre lakefront property in Polk County, Florida, purchased in October 2005 for $9.2 million, was impaired by approximately $1.9 million at August 31, 2007, an additional $1.5 million at September 30, 2008, an additional $2.8 million at September 30, 2009 and an additional $980 thousand at September 30, 2010 due to declines in the Florida real estate market. The impairment losses were included as a charge to real estate operating expenses during the respective fiscal years. Alico's remaining adjusted carrying value in the property was $2.0 million at September 30, 2010. Additionally, the Company determined that a parcel of land in Hendry County, Florida with a cost basis of $3.6 million was impaired, by $1.5 million at September 30, 2009. Alico's remaining carrying value in this parcel was $2.0 million at September 30, 2010. Provision for Income taxes The Company's effective tax rate is impacted by IRS adjustments including penalties and interest, state ir come taxes, including penalties and interest, items which may be included in book income but are not taxable under current statutes, such as earnings from tax exempt bonds, items included in book expense that are not deductible under current statutes such as lobbying expenses and non qualified retirement plans, and the expiration of otherwise allowable deductions that do not meet recognition thresholds such as expired net operating losses and contribution carry forwards. Based on future performance expectations, the Company adjusted its valuation allowance for charitable contributions by $569 thousand in 2010 which was the primary reason that the effective rate differed from the expected combined tax rate of 38 %. On October 28, 2010, the Internal Revenue Service (IRS) issued Revenue Agent Reports (RAR) pursuant to its examinations of Alico and Agri- Insurance for the tax years 2005 through 2007 and its Alico -Agri subsidiary for the tax years 2005 through 2007 dated September 9, 2010. These reports propose changes to the Company's tax liabilities for each of these tax years and require the Company either to agree with the changes and remit the specified taxes and penalties due, or to submit a rebuttal by December 14, 2010. These RARs principally challenge (i) the ability of Agri- Insurance to elect to be treated as a United States taxpayer during the years under examination, (ii) assert that Alico -Agri was a dealer in real estate during the years under examination and challenges its ability to recognize income from real estate sales under the installment method. Based on the positions taken in the report, the IRS has calculated additional taxes and penalties due of $22.5 million. The reports do not quantify the interest on the taxes, but the Company estimates total Federal interest of approximately $4.9 million. If the IRS were to prevail on all of its assertions, it also would result in State income taxes of $2.5 million and interest related to the State taxes of $844 thousand. The Company maintains that Agri- Insurance was eligible to make the election to be treated as a United States taxpayer and that Alico did not meet the criteria for classification as a dealer in real estate during the years under examination. Alico plans to submit a rebuttal to the RARs and if necessary present its case to IRS Appeals for further consideration. Based on a review of the positions taken, the Company has not accrued a liability for the potential interest and penalties. With respect to the ability of Agri- Insurance to be treated as a disregarded entity and a U.S. taxpayer during the years of the examination, because the earnings from Agri- Insurance have been included in Alico's consolidated tax return, Alico's primary exposure on this issue is for the assessment of penalties and interest and 20 C K The total pounds of beef sold were 4.2 million, 9.3 million and 7.9 million during the fiscal years ended September 30, 2010, 2009 and 2008, respectively. The average price received per pound sold was $0.95, $0.89 and $0.86, for the fiscal years ended September 30, 2010, 2009 and 2008, respectively. The cattle industry has typically operated on a ten year cycle as cow -calf producers expand inventories i response to profits and reduce herd sizes in response to losses. Alico's strategy was historically based on reducing herd sizes d 'ng the expansion phase of the cycle and building herd size through opportunistic acquisitions during the contraction phase. Several !atypical factors combined to alter the cattle cycle in the past few years including the utilization of former pastures for corn production due to increased ethanol demand, and drought conditions in the Southeastern United States. Due to these changes, Alico has reevaluated its cattle strategy and has elected to go forward with a reduced cattle herd, focusing on keeping costs to an absolute minimum, selling all of its calves as opposed to retaining them for herd replenishment, and marketing them primarily to third parties directly from the ranch. Based on industry inventory levels and demand projections, Alico currently believes that the expansion cycle of the cattle industry has begun, and expects favorable pricing to continue for the next several years. The Company's expense per pound decreased during the fiscal year ended September 30, 2010 when compared with the prior year as a result of aggressive cost cutting measures. Staff reductions and reductions in non - pressing maintenance activities were two of the primary measures taken to achieve the results. Additionally, during the fiscal year ended September 30, 2010, the calves were sold directly to third parties, rather than retaining ownership through the feedlots. Due to a severe drought during fiscal year 2007, the stress effect from prior hurricanes on the cattle herd, and the aforementioned herd reduction, calf births have declined over the past several years, totaling 6,588, 7,402 and 7,763 during the fiscal years ended September 30, 2010, 2009 and 2008, respectively. The reduced number of births resulted in increased unit cost per calf during fiscal years ended September 30, 2009 and 2008. Additionally, during fiscal years 2009 and 2008, rising corn prices caused by increased demand for ethanol production caused feeding costs to increase and contributed to losses in fiscal years 2009 and 2008. In an effort to minimize risk related to its feeding efforts, during the fiscal year ended September 30, 2009 the Company purchased corn used for cattle feed. Subsequent declines in the price of corn after the purchase could not be realized causing the Company to realize substantial losses. Additionally, during the fourth quarter of the fiscal year ended September 30, 2009, the Company, through independent experts and willing third party buyers, valued its breeding herd and determined that it was impaired. The impairment adjustment of $813 thousand was included as a component of the cattle operating expenses for the year ended September 30, 2009. The Company has undertaken actions to reduce its cost of raising cattle. These actions have included increased fertility testing of the herd, aggressively culling unproductive animals, looking at alternative nutritional programs, staff reductions, changing pasture maintenance practices and utilizing outside expertise. The Company believes that the results of these efforts began to be realized during fiscal year 2010. The Company expects to continue its cattle operations until a more profitable use of the property can be identified. Results from the cattle operations are expected to continue to offset the carrying cost of such property, but are not likely to materially contribute or negatively impact the Company's consolidated operating results. Other Agricultural Operations Other agricultural operations of the Company include vegetable farming, sod production and the sale of native plants to local landscaping companies. During fiscal years 2010, 2009 and 2008, weather events caused severe damage to the Company's vegetable crops generating losses. Due to these recurring losses, the Company ceased its vegetable operations during the quarter ended June 30, 2010. The acreage and equipment previously utilized by the vegetable operations were redeployed as most advantageous between the Company's other operating divisions. Due to this redeployment of assets, the cessation of vegetable farming operations did not meet the GAAP criteria for classification as a discontinued operation. The cessation of vegetable farming and redeployment of assets is expected to positively impact cash flows and operating results. The Company's sale of sod and native plants are not significant to the overall cash flows, operating results or financial condition of the Company. Non Agricultural Operations Land leasing and rentals Alico rents land to others on a tenant -at -will basis, for grazing, farming, oil exploration and recreational uses. Revenues from land rentals were $2.4 million, $2.7 million and $2.3 million during the fiscal years ended September 30, 2010, 2009 and 2008, respectively, generating gross profits of $1.3 million, $1.6 million, and $1.7 million. Alico plans to increase its leasing activities as opportunity allows. 25 CR Disclosure of Contractual Obligations The contractual obligations of Alico at September 30, 2010 are set forth in the table below: Critical Accounting Policies and Estimates The preparation of Alico's financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on -going basis, management evaluates the estimates and assumptions based upon historical experience and various other factors and circumstances. Management believes that the estimates and assumptions are reasonable in the circumstances; however, actual results may vary from these estimates and assumptions under different future circumstances. The following critical accounting policies have been identified that affect the more significant judgments and estimates used in the preparation of the consolidated financial statements. Net Realizable Value of Inventory – Alico records inventory at the lower of cost or net realizable value. Management regularly assesses estimated inventory valuations based on current and forecasted usage of the related commodity, observable prices, estimated completion costs and other relevant factors that may affect the net realizable value. Revenue Recognition - Revenue from agricultural crops is recognized at the time the crop is harvested arid delivered to the customer. Based on buyers' and processors' advances to growers, cash and futures markets and combined with experience in the industry, management reviews the reasonableness of the revenue accruals quarterly. Adjustments are made throug out the year to these estimates as more current relevant information regarding the specific markets become available. Differences between the estimates and the final realization of revenue can be significant, and can be either positive or negative. During the periods presented, no material adjustments were noted to the reported revenues of Alico's crops for any of the periods covered by this report. Alico recognizes revenue from cattle sales at the time the cattle are sold. Alico recognizes revenue from the sale of vegetables and sod at the time of harvest and delivery to the customer. Bowen's operations primarily consist of providing harvesting, hauling and marketing services to Alico, as well as other citrus growers and processors in the State of Florida. Bowen purchases and resells citrus fruit; in these transactions, Bowen (i) acts as a principal; (ii) takes title to the products; and (iii) has the risks and rewards of ownership, including the risk of loss for collection, delivery or returns. Due to the aforementioned factors, Bowen recognizes revenue based on the gross amounts due from customers for its marketing activities. Harvesting and hauling revenues are recognized when the services are performed. In recognizing revenue from land sales, Ahco applies specific sales recognition criteria to determine when land sales revenue can be recorded. For example, in order to fully recognize gain resulting from a real estate transaction, the sale must be consummated with a down payment of at least 20% to 25% of the sales price depending upon the type and timeframe for development of the property sold, and that any receivable from the sale cannot be subject to future subordination. In addition, the seller cannot retain any material continuing involvement in the property sold. When these criteria are not met, based on the estimated collectability of the receivable and sufficiency of any down payment, the Company recognizes gain proportionate to collections utilizing either the installment method or deposit method as appropriate. 27 Payments d e by Period Contractual obligations Total Less than 1 year J-3 years 3-5 years 5 + years Long -term debt $ 73,460 $ 1,281 $ 6,546 $4,633 $61,000 Expected interest on debt 16,745 2,159 3,953 3,499 7,134 Citrus purchase contracts 28,336 23,654 4,682 — — Retirement benefits 3,792 303 605 688 2,196 Consulting contracts 158 158 — — Leases — operating 646 442 204 — — Total $123,137 $27,997 $15,990 $8,820 $70,330 Critical Accounting Policies and Estimates The preparation of Alico's financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on -going basis, management evaluates the estimates and assumptions based upon historical experience and various other factors and circumstances. Management believes that the estimates and assumptions are reasonable in the circumstances; however, actual results may vary from these estimates and assumptions under different future circumstances. The following critical accounting policies have been identified that affect the more significant judgments and estimates used in the preparation of the consolidated financial statements. Net Realizable Value of Inventory – Alico records inventory at the lower of cost or net realizable value. Management regularly assesses estimated inventory valuations based on current and forecasted usage of the related commodity, observable prices, estimated completion costs and other relevant factors that may affect the net realizable value. Revenue Recognition - Revenue from agricultural crops is recognized at the time the crop is harvested arid delivered to the customer. Based on buyers' and processors' advances to growers, cash and futures markets and combined with experience in the industry, management reviews the reasonableness of the revenue accruals quarterly. Adjustments are made throug out the year to these estimates as more current relevant information regarding the specific markets become available. Differences between the estimates and the final realization of revenue can be significant, and can be either positive or negative. During the periods presented, no material adjustments were noted to the reported revenues of Alico's crops for any of the periods covered by this report. Alico recognizes revenue from cattle sales at the time the cattle are sold. Alico recognizes revenue from the sale of vegetables and sod at the time of harvest and delivery to the customer. Bowen's operations primarily consist of providing harvesting, hauling and marketing services to Alico, as well as other citrus growers and processors in the State of Florida. Bowen purchases and resells citrus fruit; in these transactions, Bowen (i) acts as a principal; (ii) takes title to the products; and (iii) has the risks and rewards of ownership, including the risk of loss for collection, delivery or returns. Due to the aforementioned factors, Bowen recognizes revenue based on the gross amounts due from customers for its marketing activities. Harvesting and hauling revenues are recognized when the services are performed. In recognizing revenue from land sales, Ahco applies specific sales recognition criteria to determine when land sales revenue can be recorded. For example, in order to fully recognize gain resulting from a real estate transaction, the sale must be consummated with a down payment of at least 20% to 25% of the sales price depending upon the type and timeframe for development of the property sold, and that any receivable from the sale cannot be subject to future subordination. In addition, the seller cannot retain any material continuing involvement in the property sold. When these criteria are not met, based on the estimated collectability of the receivable and sufficiency of any down payment, the Company recognizes gain proportionate to collections utilizing either the installment method or deposit method as appropriate. 27 c� NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of September 30, 2010, 2009 and for the years ended September 30, 2010, 2009 and 2008 — (Continued) (in thousands except for unit data) (n) Fair Value of Financial Instruments and Accruals The carrying amounts in the consolidated balance sheets for accounts receivable, mortgages and notes receivable, accounts payable and accrued expenses approximate fair value because of the immediate or short term maturity of these items. Where stated interest rates are below market, Alico has discounted mortgage notes receivable to reflect their estimated fair value. Alico carries its investments available for sale at fair value. The carrying amounts reported for Alico's long -term debt approximates fair value because they are transactions with commercial lenders at interest rates that vary with market conditions and fixed rates that approximate market rates for similar obligations. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability (i.e. exit price) in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized into one of three different levels depending on the assumptions (i.e. inputs) used in the valuation. Assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The fair value hierarchy is defined as follows: Level 1- Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities. Level 2- Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly. Level 3- Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management's best estimate of what market participants would use in valuing the asset or liability at the measurement date. (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 or loss and other comprehensive income or loss. Items included in other comprehensive income or losses are classified based on their nature. The total of other comprehensive income or loss for a period has been transferred to an equity account and displayed as "accumulated other comprehensive income" in the accompanying consolidated balance sheets. (p) Stock -Based Compensation Alico measures and recognizes compensation cost at fair value for all share -based payments, including stock options and restricted share awards. Stock -based compensation costs were included in real estate and general and administrative expenses in the consolidated statements of operations. This expense includes compensation expense, recognized over the applicable vesting periods, for new share -based awards and for share -based awards granted prior to, but not yet vested, as of September 30, 2010. (q) Reclassifications Certain amounts from 2009 and 2008 have been reclassified to conform to the 2010 presentation. These rgclassifications had no impact on working capital, net income, stockholders' equity or cash flows as previously reported. (r) Major customers For the fiscal year ended September 30, 2010, Alico's largest customer accounted for 23% of operating revenue. Alico's largest customer is United States Sugar Corporation (USSC), for whom Alico grows raw sugarcane. Since the inception of its sugarcane program in 1988, Alico has sold 100% of its product through a pooling agreement with USSC, a local Florida sugar mill. Additionally, Alico sells citrus to Southern Gardens, a wholly owned subsidiary of USSC. These marketing arrangements involve marketing pools which allow the contracting party to market Alico's product in conjunction with the product of other entities in the pool and pay Alico a proportionate share of the resulting revenue from the sale of the entire pooled product. While Alico believes that it can replace the citrus processing portion of the contract with other customers, it may not be able to do so quickly and the results may not be as 39 C � NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of September 30, 2010, 2009 and for the years ended September 30, 2010, 2009 and 2008 - (Continued) (in thousands except for unit data) favorable as the current contracts. Due to the location of the Company's sugarcane fields relative to location of alternative processing plants, the loss of USSC as a customer would have a negative material impact on the Company's sugarcane operations. Details concerning sales and receivables from USSC and Alico's other major customers are as follows as of and for the fiscal years ended September 30: USSC Southern Gardens Cutrale Citrus Juices Florida Orange Marketers, Inc. Citrosuco North America, Inc. Accounts receivable Revenue 2008 2010 2009 2010 2009 2008 $ 697 $1,121 $ 4,097 $ 7,624 $ 9,671 1,795 - 14,471 14,031 15,041 - - 17,509 15,950 21,162 - - 14,362 13,490 13,396 - - 4,468 9,973 13,336 (s) Variable Interest and Equity Method Investments % of Total Revenue 2010 2009 2008 5% 9% 8% 18% 16% 13% 22% 18% 18% 18% 15% 12% 6 % 11% 1.1% Alico accounts for its investment in Magnolia under the equity method (see note 17). Alico evaluates investments for which the Company does not hold an equity interest of at least 50% based on the amount of control Alico exercises over the operations of the investee, Alico's exposure to losses in excess of its investment, its ability to significantly influence the investee and whether Alico is the primary beneficiary of the investee. Investments held not meeting the above criteria are accounted for under the equity method whereby Alico's ongoing investment in the entity, consisting of its initial investment adjusted for distributions, gains and losses of the entity are classified as a single line in the balance sheet and as a non- operating item in the income statement. (2) Investments, deposits and other assets The Company's investments, deposits and other assets consist of the following: Municipal bonds Auction rate mutual funds (municipals) U.S. Treasury notes and bonds Corporate bonds Available for sale securities Certificates of deposit Cooperative retains receivable, net Stock in agricultural cooperatives Escrowed funds Intangibles Tax certificates Other Total September 30, 2010 Current Non - current Total 1,439 119 - 1,454 - 374 - 150 - 1,231 - 164 - 174 $1,439 $ 3,666 1,558 1,454 374 150 1,231 164 174 September 30 2009 Current Non - current Total $ - $ 3,373 $ 3,373 1,108 1,108 2,003 2,003 1,407 $5,105 $ 3,410 4,481 117 1,286 595 150 557 1,305 493 $ 8,984 2,003 6,484 1,524 1,286 595 150 557 1,305 493 $12,394 The Company reports available for sale securities at estimated fair value. Unrealized gains and losses occurring solely due to changes in market interest rates are recorded as other comprehensive income, net of related deferred taxes, until realized. During the year ended September 30, 2009, the Company recognized losses totaling $816 thousand which were determined to be other than temporary impairments in fair values. These losses related to the auction rate municipal bonds and mutual funds held by the Company, for which there was not an active market. E,9] CjZ, NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of September 30, 2010, 2009 and for the years ended September 30, 2010, 2009 and 2008 — (Continued) (in thousands except for unit data) The table below summarizes impairments recorded to fixed assets during the past three fiscal years: Real estate impairments were included as real estate operating expense in the Statement of Operations, while the impairment to the breeding herd was included as agricultural operating expense in the Statement of Operations and as an operating expense of the cattle segment. (6) Indebtedness The Company's indebtedness was as follows: Polk County Plant World Mortgage note Property Property Breeding herd Acreage 290 50 N/A Remaining adjusted carrying value at September 30, 2007 $ 7,300 $ 3,610 $ 12,368 Less: Depreciation — (258) (371) Adjusted basis before impairments 7,300 3,352 11,997 Impairments recognized during fiscal years ended: $ 31,000 — — September 30, 2010 (980) — — September 30, 2009 (2,790) (1,460) (813) September 30, 2008 (1,480) — (260) Remaining adjusted carrying value at September 30, 2010 $ 2,050 $ 1,892 $ 10,924 Real estate impairments were included as real estate operating expense in the Statement of Operations, while the impairment to the breeding herd was included as agricultural operating expense in the Statement of Operations and as an operating expense of the cattle segment. (6) Indebtedness The Company's indebtedness was as follows: In September 2010, Alico entered into an agreement with Rabo -Agri Finance (Rabo) for $100 million to r finance its term note and revolving line of credit with Farm Credit of Southwest Florida (Farm Credit). Proceeds from the Agreem -It were used to extinguish the Company's term note and revolving line of credit with Farm Credit. Major provisions of the Agreement were as follows: Rabo will provide the Company with a Term Note of $40.0 million and a Revolving Line of Credit (RLOC) of $60.0 million. Among other requirements, the Agreement provides that Alico must maintain a current ratio of not less than 2 to 1, a debt ratio of not greater than 60 %, minimum tangible net worth of $80 million and a debt service coverage ratio of not less than 1.15 to 1. A breach of the debt service coverage ratio will not be considered an event of default unless the ratio is breached for two consecutive years. The 10 year $40.0 million Term Note bears interest at a floating rate of one month LIBOR plus 250 basis points payable quarterly beginning October 1, 2010. Quarterly principal payments of $500 thousand will commence beginning October 1, 2011. Thereafter, quarterly payments of $500 thousand principal plus accrued interest will be payable on the first day of January, April, July and October until the notes maturity on October 1, 2020, when the remaining principal balance and accrued interest shall be due and 43 Revolving line Mortgage note of Credit Term note payable All other Total September 30, 2010 Principal balance outstanding $ 29,000 $ 40,000 $ 4,433 $ 27 $73,460 Remaining available credit $ 31,000 — — $31,000 Effective interest rate 2.76% 2.76% 6.68% Various Scheduled maturity date Oct. 2020 Oct. 2020 March 2014 Various Collateral Real Estate Real Estate Real Estate Various September 30, 2009 Principal balance outstanding $ 27,340 $ 45,828 $ 5,700 $ 60 $78,928 Remaining available credit $ 47,660 — Effective interest rate 2.63% 6.79% — 6.68% — Various 47,660 Scheduled maturity date Aug. 2012 Sept. 2018 Mar. 201 Various Collateral Real estate Real estate Real estate Various In September 2010, Alico entered into an agreement with Rabo -Agri Finance (Rabo) for $100 million to r finance its term note and revolving line of credit with Farm Credit of Southwest Florida (Farm Credit). Proceeds from the Agreem -It were used to extinguish the Company's term note and revolving line of credit with Farm Credit. Major provisions of the Agreement were as follows: Rabo will provide the Company with a Term Note of $40.0 million and a Revolving Line of Credit (RLOC) of $60.0 million. Among other requirements, the Agreement provides that Alico must maintain a current ratio of not less than 2 to 1, a debt ratio of not greater than 60 %, minimum tangible net worth of $80 million and a debt service coverage ratio of not less than 1.15 to 1. A breach of the debt service coverage ratio will not be considered an event of default unless the ratio is breached for two consecutive years. The 10 year $40.0 million Term Note bears interest at a floating rate of one month LIBOR plus 250 basis points payable quarterly beginning October 1, 2010. Quarterly principal payments of $500 thousand will commence beginning October 1, 2011. Thereafter, quarterly payments of $500 thousand principal plus accrued interest will be payable on the first day of January, April, July and October until the notes maturity on October 1, 2020, when the remaining principal balance and accrued interest shall be due and 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of September 30, 2010, 2009 and for the years ended September 30, 2010, 2009 and 2008 — (Continued) (in thousands except for unit data) payable. The Term Note is collateralized by 12,280 acres of property containing approximately 8,600 acres of producing citrus groves with a third party appraised value of $81.6 million. The Agreement also provides a 10 year $60.0 million RLOC which bears interest at a floating rate equal to one month LIBOR plus 250 basis points on the outstanding balance payable quarterly beginning October 1, 2010. Thereafter, quarterly interest will be payable on the first day of January, April, July and October until the RLOC matures on October 1, 2020, when the remaining principal balance and accrued interest shall be due and payable. Proceeds from the RLOC may be used for general corporate purposes including: (i) the normal operating needs of Alien and its operating divisions, �ii) the purchase of capital assets and (iii) the payment of dividends. The RLOC is collateralized by 44,277 acres of farmland with a third party appraised value of $126.5 million currently utilized by the Company's sugarcane, leasing and cattle operations. The prepayment of the Term Loan with Farm Credit resulted in the Company incurring a one -time charge of $3.1 million and the recognition of approximately $305 thousand of unamortized loan origination fees, which were charged to interest expense during the Company's fourth quarter ended September 30, 2010. Loan origination fees incurred as a result of entry into the Agreement, including appraisal fees, document stamps, legal fees and lender fees of approximately $1.2 million, were capitalized and will be amortized over the remaining term of the Agreement. Farm Credit released approximately 43,847 of property utilized by Alico's cattle and leasing operations in connection with the refinance. Alico, Inc. has a Mortgage with Farm Credit of Southwest Florida collateralized by 7,680 acres of real for farm leases, sugarcane and citrus production. Maturities of the Company's debt were as follows at September 30, 2010: Due within 1 year Due between 1 and 2 years Due between 2 and 3 years Due between 3 and 4 years Due between 4 and 5 years Due beyond five years Total Interest costs expensed and capitalized were as follows: Interest expense Interest capitalized Total interest cost estate in Hendry County used 1,281 3,279 3,267 2,633 2,000 61,000 $73,460 Fiscal years ended September 30 2010 2009 2008 $6,879 $5,430 $6,565 98 51 36 $6,977 $5,481 $6,601 The interest expense for the fiscal year ended September 30, 2010 includes a prepayment penalty of $3.1 million and $305 thousand of loan fees as noted earlier. 44 Cif NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of September 30, 2010, 2009 and for the years ended September 30, 2010, 2009 and 2 08— (Continued) (in thousands except for unit data) As a result of the taxation of real property contributions to Agri, the Company increased its basis in those properties to their taxed values, creating deferred tax assets. The deferred tax assets will be ultimately realized when the Company sells the parcels and pays the associated taxes resulting from the sale. The Company applies a "more likely than not" threshold to the recognition and non - recognition of tax positions. A change in judgment related to prior years' tax positions is recognized in the quarter of such change. The Company had no reserve for uncertain tax positions at September 30, 2010. On October 28, 2010, the Internal Revenue Service (IRS) issued Revenue Agent Reports (RAR) pursuant to its examinations of Alico, Inc. and Agri- Insurance Co., Ltd for the tax years 2005 through 2007. On September 9, 2010 the IRS issued a RAR pursuant to its examination of Alico -Agri, Ltd for the tax years 2005 through 2007. These reports propose changes to the Company's tax liabilities for each of these tax years and require the Company either to agree with the changes and remit the specified taxes and penalties, or to submit a rebuttal. The Company has obtained extensions from the IRS, allowing Alico until December 14, 2010 to submit its rebuttal. These reports principally challenge the ability of Agri- Insurance Co., Ltd to elect to be treated as a United States taxpayer and claims that Alico -Agri was a dealer in real estate during the years under examination and therefore was prohibited from recognizing income from real estate sales under the installment method. Based on the positions taken in the report , the IRS has calculated taxes of $14.5 million and penalties due of $8.0 million dollars. The reports did not quantify the interest on the taxes, but the Company estimates that if the IRS were to prevail on all of its positions, Federal interest of $4.9 million would be due. Additionally, were the IRS to prevail on all of its positions, State taxes of $2.5 million along with associated interest of $844 thousand would also be due. The total cash outlay due upon settlement, should the IRS prevail, of combined Federal and State amounts due would be $30.7 million. The Company maintains that Agri- Insurance Co., Ltd was eligible to make the election to be treated as a Jnited States taxpayer and that Alico did not meet the criteria for classification as a dealer in real estate during the years under exam nation. Alico plans to submit a rebuttal to the RAR and if necessary present its case to IRS Appeals for further consideration. Because i he earnings of Agri- Insurance Co., Ltd were included in Alico, Inc.'s consolidated returns during the years under audit, and b cause the purchaser subsequently defaulted on the real estate transactions for which the installment method was utilized, the issues raised by the IRS are primarily timing related and will be reflected in the Company's deferred tax accounts at September 30, 2010. Penalties and interest would represent the Company's only additional income statement exposure related to the examinations. Combined Federal and State penalties and interest related to the RARs is $13.7 million. The state income tax returns for the years under audit by the IRS have not been audited by the Florida Department of Revenue and other State jurisdictions and are subject to audit for the same tax periods open for federal tax purposes. Additionally, the Company has executed statute extensions with the IRS for the years currently under audit until June 2012. (9) Related Party Transactions Atlantic Blue Group, Inc. Atlantic Blue Group, Inc. (formerly Atlantic Blue Trust, Inc.) (Atlanticblue) owns approximately 51% of Alico's common stock. By virtue of its ownership percentage, Atlanticblue is able to elect all the directors and, consequently, to control Alico. Directors which also serve on Atlanticblue's board are referred to as "affiliated directors ". Atlanticblue issued a letter dated December 3, 2009 reaffirming its commitment to maintaining a majority of independent directors (which may include affiliated directors) on Alico's board. John R. Alexander, a major shareholder in Atlanticblue, served as Alico's Chief Executive Officer from February 2005 through June 2008. 48 l�V2 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of September 30, 2010, 2009 and for the years ended September 30, 2010, 2009 and 2008 — (Continued) (in thousands except for unit data) 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 expected to be realized within the next twelve months, 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 as of September 30, 2010 and 2009 are presented below: Based on Alico's history of taxable earnings and its expectations for the future, with the exception of the contribution carry forward for which an allowance of $82 thousand was made, management has determined that its taxable income will more likely than not be sufficient to fully recognize all deferred tax assets. In June 2008, the Internal Revenue Service (IRS) issued a final Settlement Agreement regarding audits of Alico for the tax years 2000 through 2004. Pursuant to the agreement, the Company and the IRS agreed to final taxes resulting from th audits of $41.1 million, penalties of $4.1 million and interest of $20.0 million. The Company had previously paid and accrued taxes of $42.2 million, penalties of $4.2 million and interest of $19.8 million related to an anticipated settlement in the fourth quarter of fis al year 2007. The differences between the final settlement amount (including taxes, penalties and interest) and the previousl estimated settlement resulted in a reduction in income tax expense for the fiscal year ended September 30, 2008. The reductions to the previous tax liability estimate resulted from the allowance of expenses by IRS Appeals that were previously not allowed by IRS Exams. As a result of the settlement, the Company has filed amended tax returns for tax years 2005 through 2007. The Company paid additional State income taxes pursuant to the final settlement of $6.2 million along with $4.3 million of related interest during the fiscal year ended September 30, 2008. 47 2010 2009 Deferred Tax Assets: Contribution carry forward $ 523 $ 873 Deferred retirement benefits 1,409 1,326 Inventories 167 698 Stock options compensation 44 154 Property and Equipment 5,720 5,129 Net operating losses 1,991 682 Other 337 1,064 Total gross deferred tax assets 10,191 I 9,926 Less: Contribution carry forward allowance (82)1 (651) $10,109' $9,275 2010 2009 Deferred Tax Liabilities: Revenue recognized from citrus and sugarcane $ 236 $ 4 Patronage Dividends 619 484 Inventories 208 — Other _ Total gross deferred tax liabilities $1,063 $ 488 Net deferred income tax asset $9,046 $8,787 Based on Alico's history of taxable earnings and its expectations for the future, with the exception of the contribution carry forward for which an allowance of $82 thousand was made, management has determined that its taxable income will more likely than not be sufficient to fully recognize all deferred tax assets. In June 2008, the Internal Revenue Service (IRS) issued a final Settlement Agreement regarding audits of Alico for the tax years 2000 through 2004. Pursuant to the agreement, the Company and the IRS agreed to final taxes resulting from th audits of $41.1 million, penalties of $4.1 million and interest of $20.0 million. The Company had previously paid and accrued taxes of $42.2 million, penalties of $4.2 million and interest of $19.8 million related to an anticipated settlement in the fourth quarter of fis al year 2007. The differences between the final settlement amount (including taxes, penalties and interest) and the previousl estimated settlement resulted in a reduction in income tax expense for the fiscal year ended September 30, 2008. The reductions to the previous tax liability estimate resulted from the allowance of expenses by IRS Appeals that were previously not allowed by IRS Exams. As a result of the settlement, the Company has filed amended tax returns for tax years 2005 through 2007. The Company paid additional State income taxes pursuant to the final settlement of $6.2 million along with $4.3 million of related interest during the fiscal year ended September 30, 2008. 47 C� NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of September 30, 2010, 2009 and for the years ended September 30, 2010, 2009 and 2008— (Continued) (in thousands except for unit data) John R. Alexander continues to serve on the Company's Board of Directors as Chairman. Mr. Alexander's son, JD Alexander, serves as President and Chief Executive Officer of Atlanticblue and in February 2010, was appointed as Alico's President and Chief Executive Officer. JD Alexander also continues to serve on Alico's Board of Directors. Robert E. Lee Caswell, Mr. John R. Alexander's son -in -law, also serves on the Alico Board of Directors, as does Robert J. Viguet, Jr., who is also a Director of Atlanticblue (the "Affiliated Directors "). Mr. JD Alexander is receiving compensation for his services to Alico as its CEO and President. Dr. Ken Smith, Alico's COO, was formerly employed by Atlanticblue until July 1, 2010. Per the terms of his employment, Dr. Smith may continue to provide consulting services to Atlanticblue during a transition period. Atlanticblue is to reimburse Alico for all services performed by Dr. Smith. Atlanticblue reimbursed Alico $5 thousand during the fiscal year ended September 30, 2010 for services performed on its behalf by Dr. Smith. The transactions listed below have all been approved by Alico's Board of Directors and a majority of the Unaffiliated Directors. As Directors of Alico, the Affiliated Directors receive compensation for their services and reimbursement of travel expenses in accordance with the general policies of the Company the same as the Unaffiliated directors. Director compensation policies are disclosed in Alico's annual proxy. Bowen is currently marketing citrus fruit from Tri County Groves, a wholly owned subsidiary of Atlanticblue. During the fiscal years ended September 30, 2010, 2009, and 2008, Bowen marketed 265,586, 236,971 and 310,000 boxes of fruit, respectively, at a gross value of $2.5 million, $2.0 million and $2.9 million, respectively. The Company's Chairman of the Board of Directors, John R. Alexander, was a member of the Board of > irectors of the Company's lender, Farm Credit of Southwest Florida from 1992 to April 2009. On January 18, 2008 the Company's Board of Directors approved an unaccountable expense allowance o $5 thousand per month to Scenic Highlands Enterprises LLC. The Company's former Chief Executive Officer and current Chairman of the Board, John R. Alexander, serves as the owner and Chief Executive Officer of Scenic Highlands Enterprises. Per the Board's Action by Written Consent, payments are to be used for office space, an administrative assistant's salary, and utilities. Alico paid $60 thousand, $60 thousand and $30 thousand during the fiscal years ended September 30, 2010, 2009 and 2008, respectively, pursuant to this agreement. The agreement will continue to be in effect throughout Mr. Alexander's tenure as Chairman. During the fiscal years ended September 30, 2010 and 2009, Bowen Brothers marketed 2,670 and 2,928 of fruit from Alexander a Properties at a total value of $20 thousand and $19 thousand, respectively. Alexander Properties is com any owned by Mr. John R. Alexander and Mr. JD Alexander. During the fiscal year ended September 30, 2010, Alico sold equipment to Trevino Equipment, LLC in w ich John R. Alexander held a financial interest. Trevino Equipment was chosen to purchase the equipment after they submitted the hi hest bid in a closed bidding process. The transaction totaled $28 thousand. Effective June 30, 2008 the Board approved a transition, consulting, severance and non - compete agreement with John R. Alexander providing for total payments of $600,000 over a three year period. Alico paid $188 thousand, $238 thousand and $62 thousand to Mr. Alexander during the fiscal years ended September 30, 2010, 2009 and 2008, respectively, pursuant to this agreement. Mr. Wayne Collier (an Atlanticblue shareholder) has a financial interest in a grazing lease in Polk County, FL. The lease was negotiated at arms length and at customary terms. Former director Baxter Troutman has filed suit against John R. and JD Alexander. The Company is reimb 'rsing Messrs.'. Alexander for legal fees to defend the suit in accordance with the Board's indemnification agreement. All reimbursen ents are being approved by the Special Committee of the Board comprised of independent directors. Reimbursements pursuant to the I tigation were $85 thousand and $38 thousand on behalf of John R. Alexander and $65 thousand and $121 thousand on behalf of JD Alexander during the fiscal years ended September 30, 2010 and 2009, respectively. 49 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of September 30, 2010, 2009 and for the years ended September 30, 2010, 2009 and (in thousands except for unit data) Ben Hill Griffin, Inc. C�Z Citrus revenues of $793 thousand, $357 thousand, and $2.0 million were recognized for a portion of citrus crops sold under a marketing agreement with Ben Hill Griffin, Inc. (Griffin) for the years ended September 30, 2010, 2009, and 2008, respectively. Griffin and its subsidiaries are controlled by Ben Hill Griffin, III, and the brother -in -law of John R. Alexander, Alico's Chairman and former Chief Executive Officer. Accounts receivable, resulting from citrus sales, include amounts due from Griffin of $90 thousand and $50 thousand at September 30, 2010, and 2009, 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, for fruit sold through Griffin, totaled $266 thousand, $153 thousand, and $623 thousand for the fiscal years ended September 30, 2010, 2009, and 2008, respectively. The accompanying consolidated balance sheets include accounts payable to Griffin for citrus production, harvesting and processing costs and supplies totaling $44 thousand and $21 thousand at September 30, 2010 and 2009, respectively. Alico 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 $1.6 million, $1.8 million, and $2.3 million during the fiscal years ended September 30, 2010, 2009, and 2008, respectively. During the fiscal year ended September 30, 2010, Bowen marketed 5,127 boxes of fruit for Ben Hill Griffin, Inc. at a value of $62 thousand. Other Mr. Charles Palmer, an independent Board Member, and Mr. Steve Smith, the Company's former President and Principal Executive Officer, held recreational leases with the Company during the fiscal year ended September 30, 2010 and 2009 at the customary terms and rates the Company extends to third parties. Jim Shuford, President of Bowen Brothers, also serves as the President of Florida Orange Marketers, Inc. (FOM), a major marketer of the Company's citrus fruit. See Note 1 ( r). Alico's participation in FOM's Fruit Marketing Agreement was negotiated and executed by Alico's CEO prior to Mr. Shuford's appointment at FOM. (10) Reportable Segment Information Alico has six reportable segments: Bowen, Citrus Groves, Sugarcane, Cattle, Real Estate and Leasing. Alico's operations are located in Florida. Alico accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices. Bowen's operations include harvesting, hauling and marketing citrus for both Alico and other outside growers in the state of Florida. Bowen's operations also include the purchase and resale of citrus fruit. Alico's Citrus Grove operations consist of cultivating citrus trees in order to produce citrus for delivery to the fresh and processed citrus markets in the state of Florida. Alico's sugarcane operations consist of cultivating sugarcane for sale to a sugar processor. Alico's cattle operation is engage primarily in the production of beef cattle, feeding cattle at western feedlots and the raising of replacement heifers. The goods and services produced by these segments are sold to wholesalers and processors in the United States who prepare the products for consumption. Alico's real estate segment, ALDI is engaged in the planning and strategic positioning of all Company owned land. These actions include seeking entitlement of Alico's land assets in order to preserve rights should Alico choose to develop property in the future. The real estate segment is also responsible for negotiating and renegotiating sales contracts. Alico's leasing segment rents land to others on a tenant -at -will basis for grazing, farming, oil exploration and recreational uses. The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies. Alico evaluates performance based on direct margins from operations before general and administrative costs, interest expense and income taxes not including nonrecurring gains and losses. Alico's reportable segments are strategic business units that offer different products. They are managed separately because each business requires different knowledge, skills and marketing strategies. 50 Holders of the Securities with questions may contact the Trustee by eniail at iohn.guiliano@bnymellon.com. Holders should not rely on the Trustee as their sole source of information. Holders of Securities may access pleadings filed in the Bankruptcy Proceeding, including the Plan and Disclosure Statement, at httpI /chapterl l.epigsystems com. Additional information is also available on the website of the Official Committee of Unsecured Creditors (www.lehm'ancreditors.com). Holders of Securities that would like to participate in the Bankruptcy Proceeding should consult with their own legal advisors. The Bank of New York Mellon as Trustee W02- EAST:7GGM1\200435471.2 -3- �,77 (PLEASE PRINT CLEARLY) Agenda Item # � MEETING DATE / )7— / / (Circle Meeting Type) Regular Special Workshop Budget �x- �- - T AGENDA ITEM TITLE vL 1 NAME $ 1 G k ADDRESS��,� Representing/ Petitioner: v �l✓rl� L° / Other: COLLIER COUNTY ORDINANCE NO. 2003 -531 AS AMENDED BY OR AN E 2004 -05 AND 2007 -24, REQUIRES THAT ALL LOBBYISTS SHALL, BEFORE ENGAGING IN ANY LOBBYING ACTIVITIES (INCLUDING, BUT NOT LIMITED TO, ADDRESSING THE BOARD OF COUNTY COMMISSIONERS), REGISTER WITH THE CLERK TO THE BOARD AT THE BOARD MINUTES AND RECORDS DEPARTMENT. %rt%lI AnC I TMTYrr%'M TupFF: I'll MInnrrFS FnR Ynu cnmmFNTS AND ARE TO ADDRESS ONLY THE CHAIR (PLEASE PRINT CLEARLY) Agenda Item # 6f � I MEETING DATE I l r I I (Circle Meeting Type) Regular Special Workshop Budget AGEN NAME Repre COLLIER COUNTY ORDINANCE NO. 2003 -53, AS AMENDED BY ORDINANCE 2004 -05 AND 2007 -24, REQUIRES THAT ALL LOBBYISTS SHALL, BEFORE ENGAGING IN ANY LOBBYING ACTIVITIES (INCLUDING, BUT NOT LIMITED TO, ADDRESSING THE BOARD OF COUNTY COMMISSIONERS), REGISTER WITH THE CLERK TO THE BOARD AT THE BOARD MINUTES AND RECORDS DEPARTMENT. YOU ARE LIMITED TO THREE (3) MINUTES FOR YOU COMMENTS AND ARE TO ADDRESS ONLY THE CHAIR PLACE COMPLETED FORM ON THE TABLE LEFT OF THE DIAS IN THE BOARD ROOM PRIOR TO THE SUBJECT BEING HEARD (PLEASE PRINT CLEARLY) 1 Agenda Item ## MEETING DATE �1 (Circle Meeting Type) Regular Special Workshop Budget AGENDA ITEM TITLE NAME O Representing/ Petitioner: ADDRESS H i r-7u- Other: of '10 1 M-10" COLLIER COUNTY ORDINANCE NO. 2003 -53, AS AMENDED BY ORDINANCE 2004 -05 AND 2007 -24, REQUIRES THAT ALL LOBBYISTS SHALL, BEFORE ENGAGING IN ANY LOBBYING ACTIVITIES (INCLUDING, BUT NOT LIMITED TO, ADDRESSING THE BOARD OF COUNTY COMMISSIONERS), REGISTER WITH THE CLERK TO THE BOARD AT THE BOARD MINUTES AND RECORDS DEPARTMENT. YOU ARE LIMITED TO THREE (3) MINUTES FOR YOU COMMENTS AND ARE TO ADDRESS ONLY THE CHAIR (PLEASE PRINT CLEARLY) �`` t MEETING DATE I I AGENDA ITEM TITLE NAME Repre: Agenda Item # (Circle Meeting Typ Regular ' pecial Workshop Budget COLLIER COUNTY ORDINANCE NO. 2003 -53, AS AMENDED BY ORDINANCE 2004 -05 AND 2007 -24, REQUIRES THAT ALL LOBBYISTS SHALL, BEFORE ENGAGING IN ANY LOBBYING ACTIVITIES (INCLUDING, BUT NOT LIMITED TO, ADDRESSING THE BOARD OF COUNTY COMMISSIONERS), REGISTER WITH THE CLERK TO THE BOARD AT THE BOARD MINUTES AND RECORDS DEPARTMENT. YOU ARE LIMITED TO THREE (3) MINUTES FOR YOU COMMENTS AND ARE TO ADDRESS ONLY THE CHAIR PLACE COMPLETED FORM ON THE TABLE LEFT OF THE DIAS IN THE BOARD ROOM PRIOR TO THE SUBJECT BEING HEARD (PLEASE PRINT CLEARLY) Agenda Item # MEETING DATE �Uf (Circle Meeting Type) Regular Special Workshop Budget AGENDA ITEM TITLE L O 5 K NAME t S ADDRESS S--r S Representing/ Petitioner: ---r v v Other: COLLIER COUNTY ORDINANCE NO. 2003 -53, AS AMENDED BY ORDINANCE 2004 -05 AND 2007 -24, REQUIRES THAT ALL LOBBYISTS SHALL, BEFORE ENGAGING IN ANY LOBBYING ACTIVITIES (INCLUDING, BUT NOT LIMITED TO, ADDRESSING THE BOARD OF COUNTY COMMISSIONERS), REGISTER WITH THE CLERK TO THE BOARD AT THE BOARD MINUTES AND RECORDS DEPARTMENT. (PLEASE PRINT CLEARLY) Agenda Item # 9 4 MEETING DATE !� / /7/l/ (Circle Meeting Type) Regular Special Workshop Budget AGENDA ITEM TITLE NAME 0 "-� ADDRESS Representing/ Petitioner: z- F�6''' �¢`` "�� '"`-'`� `"z Other: COLLIER COUNTY ORDINANCE NO. 2003 -53, AS AMENDED BY ORDINANCE 2004 -05 AND 2007 -24, REQUIRES THAT ALL LOBBYISTS SHALL, BEFORE ENGAGING IN ANY LOBBYING ACTIVITIES (INCLUDING, BUT NOT LIMITED TO, ADDRESSING THE BOARD OF COUNTY COMMISSIONERS), REGISTER WITH THE CLERK TO THE BOARD AT THE BOARD MINUTES AND RECORDS DEPARTMENT. YOU ARE LIMITED TO THREE (3) MINUTES FOR YOU COMMENTS AND ARE TO ADDRESS ONLY THE CHAIR PLACE COMPLETED FORM ON THE TABLE LEFT OF THE DIAS IN THE BOARD ROOM PRIOR TO THE SUBJECT BEING HEARD (PLEASE PRINT CLEARLY) Agenda Item # j - _ L- MEETING DATE / - !-7 - �)'o ) ) (Circle Meeting Type) Regular Special Workshop AGENDA ITEM TITLE i - r NAME _ ADDRESS Representing/ Petitioner: ,ea,�,�`,y,, *,. Other: Budget COLLIER COUNTY ORDINANCE NO. 2003 -53, AS AMENDED BY ORDINANCE 2004 -05 AND 2007 -24, REQUIRES THAT ALL LOBBYISTS SHALL, BEFORE ENGAGING IN ANY LOBBYING ACTIVITIES (INCLUDING, BUT NOT LIMITED TO, ADDRESSING THE BOARD OF COUNTY COMMISSIONERS), REGISTER WITH THE CLERK TO THE BOARD AT THE BOARD MINUTES AND RECORDS DEPARTMENT. YOU ARE LIMITED TO THREE (3) MINUTES FOR YOU COMMENTS AND ARE TO ADDRESS ONLY THE CHAIR PLACE COMPLETED FORM ON THE TABLE LEFT OF THE DIAS IN THE BOARD RnnM PRrnR Tn T14P ci [RirrT RPTKIr. MIPADn (PLEASE PRINT CLEARLY) Agenda Item # LJ PL z6oc?- -. MEETING DATE //� /`� /.2��! (Circle Meeting Type) Regular Special Workshop Budget AGENDA ITEM TITLE �S7- 4W Q5- NAME C /k i f cQ ADDRESS -2v7 �t ! T ti Lc •c)u d .� Cr S7 rta� �L Representing /Petitio - <246t- A �p Other: COLLIER COUNTY ORDINANCE NO. 2003 -53, AS AMENDED BY ORDINANCE 2004 -05 AND 2007 -24, REQUIRES THAT ALL LOBBYISTS SHALL, BEFORE ENGAGING IN ANY LOBBYING ACTIVITIES (INCLUDING, BUT NOT LIMITED TO, ADDRESSING THE BOARD OF COUNTY COMMISSIONERS), REGISTER WITH THE CLERK TO THE BOARD AT THE BOARD MINUTES AND RECORDS DEPARTMENT. YOU ARE LIMITED TO THREE (3) MINUTES FOR YOU COMMENTS AND ARE TO ADDRESS ONLY THE CHAIR PLACE COMPLETED FORM ON THE TABLE LEFT OF THE DIAS IN THE BOARD ROOM PRIOR TO THE SUBJECT BEING HEARD (PLEASE PRINT CLEARLY) MEETING DATE AGENDA ITEM TITLE f vl/ NAME Representing/ Petitioner: V,e Agenda Item # (Circle Meeting Type) Regular Special ADDRESS Other: Workshop Budget COLLIER COUNTY ORDINANCE N0. 2003 -53, AS AMENDED BY ORDINANCE 2004 -05 AND 2007 -24, REQUIRES THAT ALL LOBBYISTS SHALL, BEFORE ENGAGNG IN ANY LOBBYING ACTIVITIES (INCLUDING, BUT NOT LIMITED TO, ADDRESSING THE BOARD OF COUNTY COMMISSIONERS), REG[STER WITH THE CLERK TO THE BOARD AT THE BOARD MINUTES AND RECORDS DEPARTMENT. YOU ARE LIMITED TO THREE (3) MINUTES FOR YOU COMMENTS AND ARE TO ADDRESS ONLY THE CHAIR PLACE COMPLETED FOtM ON THE TABLE LEFT OF THE DIAS IN THE BOARD ROOM PRIOR TO THE SUBJECT BEING HFeoF% (PLEASE PRINT CLEARLY) Agenda Item # IEETING DATE % % (Circle Meeting Type) Regula Special Workshop Budget 'END. IT TITLE 1ME E 1/i N ADDRESS ZS0v � presenting /Petitioner: Cam '' &AL, CaAM11t, 7N Other: 'LIER COUNTY ORDINANCE NO. 2003 -53 AS AMENDED BY ORDINANCE 2004 -05 AND 2007 -24, REQUIRES THAT ALL LOBBYISTS LL, BEFpRE ENGAGING IN ANY LOBBYING ACTIVITIES (INCLUDING, BUT NOT LIMITED TO, ADDRESSING THE BOARD OF COUNTY ►MISSIpNERS), REGISTER WITH THE CLERK TO THE BOARD AT THE BOARD MINUTES AND RECORDS DEPARTMENT. YGU ARE LIMITED TO THREE (3) MINUTES FOR YOU COMMENTS AND ARE TO ADDRESS ONLY THE CHAIR ' COM PLS.rED FORM ON THE TABLE LEFT OF THE DIAS IN THE BOARD ROOM PRIOR TO THE SUBJECT BEING HEARD (PLEASE PRINT CLEARLY) MEETING DATE It "'l /, AGENDA ITEM TITLE NAME Agenda Item # (Circle Meeting Type) Regular Special Workshop Budget ADDRESS -V Representing /Petitioner: Other: COLLIER COUNTY ORDINANCE NO. 2003 -53, AS AMENDED BY ORDINANCE 2004 -05 AND 2007 -24, REQUIRES THAT ALL LOBBYISTS SHALL, BEFORE ENGAGING IN ANY LOBBYING ACTIVITIES (INCLUDING, BUT NOT LIMITED TO, ADDRESSING THE BOARD OF COUNTY COMMISSIONERS), REGISTER WITH THE CLERK TO THE BOARD AT THE BOARD MINUTES AND RECORDS DEPARTMENT. YOU ARE LIMITED TO THREE (3) MINUTES FOR YOU COMMENTS AND ARE TO ADDRESS ONLY THE CHAIR PLACE COMPLETED FORM ON THE TABLE LEFT OF THE DIAS IN THE BOORn Rf'if%m +.+_•••- __ __ __ (PLEASE PRINT CLEARLY) MEETING DATE AGENDA ITEM TITLE NAME A� *1 C-% �- � ZLO Representing/ Petitioner: Agenda Item # (Circle Meeting Ty Reg �t� Special Workshop Budget ADDRESS I "( a) 4 Other: L COLLIER COUNTY ORDINANCE NO. 2003 -53, AS AMENDED BY ORDINANCE 2004 -05 AND 2007 -24, REQUIRES THAT A4L LOBBYISTS SHALL, BEFORE ENGAGING IN ANY LOBBYING ACTIVITIES (INCLUDING, BUT NOT LIMITED TO, ADDRESSING THE BOARD OF COUNTY COMMISSIONERS), REGISTER WITH THE CLERK TO THE BOARD AT THE BOARD MINUTES AND RECORDS DEPARTMENT. YOU ARE LIMITED TO THREE (3) MINUTES FOR YOU COMMENTS AND ARE TO ADDRESS ONLY THE CHAIR PLACE COMPLETED FORM ON THE TABLE LEFT OF THE DIAS IN THE BOARD ROOM PRIOR TO THE SUBJECT BEING HEARD (PLEASE PRINT CLEARLY) Agenda Item # foi MEETING DATE 1-17 ( Circle Meeting T ype ) Regular Special Workshop Budget AGENDA ITEM TITLE � NAME 'PQ �l1 ADDRESS Representing/ Petitioner: Other: aT 5!f Vu to - ewf- COLLIER COUNTY ORDINANCE NO. 2003 -53, AS AMENDED BY ORDINANCE 2004 -05 AND 2007 -24, REQUIRES THAT ALL LOBBYISTS SHALL, BEFORE ENGAGING IN ANY LOBBYING ACTIVITIES (INCLUDING, BUT NOT LIMITED TO, ADDRESSING THE BOARD OF COUNTY COMMISSIONERS), REGISTER WITH THE CLERK TO THE BOARD AT THE BOARD MINUTES AND RECORDS DEPARTMENT. YOU ARE LIMITED TO THREE (3) MINUTES FOR YOU COMMENTS AND ARE TO ADDRESS ONLY THE CHAIR (PLEASE PRINT CLEARLY) MEETING DATE 06 y AGENDA ITEM TITLE NAMES Representing/ Petitioner: l'j 0 �j Agenda Item # _ (Circle Meeting Type) Regular Special Workshop Budget ADDRESS 6 (fx-,/ Other: AVM U Lei, cl h P( COLLIER COUNTY ORDINANCE NO. 2003 -531 AS AMENDED BY ORDINANCE 2004 -05 AND 2007 -24, REQUIRES THAT ALL LOBBYISTS SHALL, BEFORE ENGAGING IN ANY LOBBYING ACTIVITIES (INCLUDING, BUT NOT LIMITED TO, ADDRESSING THE BOARD OF COUNTY COMMISSIONERS), REGISTER WITH THE CLERK TO THE BOARD AT THE BOARD MINUTES AND RECORDS DEPARTMENT. YOU ARE LIMITED TO THREE (3) MINUTES FOR YOU COMMENTS AND ARE TO ADDRESS ONLY THE CHAIR PLACE COMPLETED FORM ON THE TABLE LEFT OF THE DIAS IN THE BOARD ROOM PRIOR TO THE SUBJECT BEING HEARD (PLEASE PRINT CLEARLY) Agenda Item # MEETING DATE / l (Circle Meeting AGENQA-7EM TITLE �r, �?� �✓ NAME ADDRESS Representing /Petitioner:/ Other: Regular Special Workshop Budget COLLIER COUNTY ORDINANCE NO. 2003 -53, AS AMENDED BY ORDINANCE 2004 -05 AND 2007 -24, REQUIRES THAT ALL LOBBYISTS SHALL, BEFORE ENGAGING IN ANY LOBBYING ACTIVITIES (INCLUDING, BUT NOT LIMITED TO, ADDRESSING THE BOARD OF COUNTY COMMISSIONERS), REGISTER WITH THE CLERK TO THE BOARD AT THE BOARD MINUTES AND RECORDS DEPARTMENT. YOU ARE LIMITED TO THREE (3) MINUTES FOR YOU COMMENTS AND ARE TO ADDRESS ONLY THE CHAIR (PLEASE PRINT CLEARLY) MEETING DATE /" !' AGENDA ITEM TITLE hOsf G-Mv e- M I n NAME /Y�l I'6W -7ti- Representing/ Petitioner: Agenda Item # '?A (Circle Meeting Type) Regular Special Workshop Budget ADDRESS � V - Sl rPO va� )Cl Other: COLLIER COUNTY ORDINANCE NO. 2003 -53, AS AMENDED BY ORDINANCE 2004 -05 AND 2007 -24, REQUIRES THAT ALL LOBBYISTS SHALL, BEFORE ENGAGING IN ANY LOBBYING ACTIVITIES (INCLUDING, BUT NOT LIMITED TO, ADDRESSING THE BOARD OF COUNTY COMMISSIONERS), REGISTER WITH THE CLERK TO THE BOARD AT THE BOARD MINUTES AND RECORDS DEPARTMENT. YOU ARE LIMITED TO THREE (3) MINUTES FOR YOU COMMENTS AND ARE TO ADDRESS ONLY THE CHAIR PLACE COMPLETED FORM ON THE TABLE LEFT OF THE DIAS IN THE BOARD ROOM PRIOR TO THE SUBJECT BEING HEARD