June 30,       September 30,
                                            2009             2008
              Cash & liquid investments   $  28,869     $        78,637
              Total current assets           56,133             123,130
              Current liabilities            13,625              18,200
              Working capital                42,508             104,930
              Total assets                  209,492             273,932
              Notes payable               $  81,332     $       137,758
              Current ratio                  4.12:1              6.77:1

Management believes that Alico will be able to meet its working capital requirements for the foreseeable future with internally generated funds and credit availability. Alico has credit commitments under a revolving line of credit that provides for revolving credit of up to $75.0 million. Of the $75.0 million credit commitment, $46.5 million was available for Alico's general use at June 30, 2009 (see Note 6 to the Unaudited Condensed Consolidated Financial Statements).
Cash flows from Operations
Cash flows from operations were $18.6 million and $26.6 million for the nine months ended June 30, 2009 and 2008, respectively. Overall, revenues and gross profits during fiscal year 2009 are expected to remain lower than those of fiscal year 2008 due to a decrease in returns from agricultural operations. The market prices Alico receives for citrus products, typically Alico's largest source of gross profit, have declined due to increased Florida citrus production and carryover inventories at citrus processing plants.

During the last week of January and the first week of February 2009, a cold front swept through Florida causing temperatures to drop into the mid 20's causing damage to Alico's sugarcane and vegetable crops of approximately $1.4 million.
Alico experienced increases in the cost of fertilizer, herbicides, insecticides and fuel during the fiscal year ended September 30, 2008. A large portion of these costs related to the production of fiscal year 2009 crops and were inventoried. These costs are being charged to fiscal year 2009 operating expenses as crops are harvested. While several input costs, including fuel, have recently declined from higher levels, significant reductions will not be realized through gross profit until the fiscal year 2010 crops are harvested, assuming the lower costs continue.
A Settlement Agreement with a vendor resulted in a $7.0 million payment to Alico on March 20, 2009. Under the agreement, the vendor admits no wrongdoing and stipulates that Alico cannot divulge the vendor's name or the agreement's circumstances. Alico recognized the payment as other income during the second fiscal quarter ended March 31, 2009.
In December 2008, Alico offered an option to former and retired employees who were covered under a non-qualified defined benefit deferred compensation plan to terminate future benefits under the plan in exchange for cash equal to the net present value of future vested benefits. Participants with future discounted vested benefits of $1.4 million elected to receive cash pursuant to the option and were paid in January 2009. Life insurance policies used to fund the liability were liquidated to fund the distributions. Cash flows from Investing Activities
Alico is currently working to dissolve its Agri-Insurance subsidiary. Proceeds received from the liquidation of investments held by Agri, enabled Alico to pay $50.0 million on its RLOC in January 2009.
In November 2008, Alico's subsidiary, Alico-Agri, Ltd., received a payment of $2.5 million, consisting of principal, interest and fees, in connection with the restructure of a real estate contract ("East") with Ginn- LA Naples, Ltd, LLLP ("Ginn").
Recent market conditions have depressed Florida real estate markets causing the predictability of real estate sales including timing and market values to be problematic. Alico, through its subsidiary Alico Land Development, 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 future operations and cash flows of Alico.
Cash flows from Financing Activities
On March 30, 2009, the Company modified its Revolving Line of Credit (RLOC) with Farm Credit of Southwest Florida. According to the terms of the modification, the total availability of funds under the RLOC was reduced to $75.0 million from $125.0 million. Additionally, several covenants were modified as follows: a) the covenant requiring the Company to maintain stockholder equity of at least $110 million was eliminated in its entirety b) the minimum current ratio was increased to 2.5 to 1 from 2.0 to 1 and c) the fixed charge coverage ratio was replaced by a debt coverage ratio requiring the Company to maintain a debt coverage of not less than 1.10 to 1 on a rolling four quarter basis. The maturity date of the RLOC was extended from August 1, 2011 to August 1, 2012. The interest rate index was changed from 3 month LIBOR to 1 month LIBOR, and the interest rate spreads increased by 100 basis points. The Company also pledged an additional 10,147 acres of real estate in Hendry County, Florida. In addition to the covenants discussed above, the agreements set limitations on the extension of loans or additional borrowings by Alico or any subsidiary. The covenants also restrict Alico's activities regarding investments, liens, borrowing and leasing.

Alico is currently working to dissolve its Agri-Insurance subsidiary. Proceeds received from Agri in the form of pre-liquidation distributions enabled Alico to pay $50.0 million on its Revolving Line of Credit in January 2009.
Alico's Board of Directors has authorized the repurchase of up to 131,000 shares of Alico's common stock through August 31, 2010, for the purpose of funding restricted stock grants under its Incentive Equity Plans in order to provide restricted stock to eligible Directors and Senior Managers to align their interests with those of Alico's shareholders. All purchases will be made subject to restrictions of Rule 10b-18 relating to volume, price and timing so as to minimize the impact of the purchases upon the market for Alico's shares. The stock repurchases will be made on a quarterly basis until August 31, 2010 through open market transactions. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements and other market conditions. Alico will use internally generated funds and available working capital to make the purchases. In accordance with the approved plans, at June 30, 2009 an additional 33,762 shares were available for acquisition. Alico purchased 3,000 and 25,500 shares in the open market during the three and nine months ended June 30, 2009 at an average price of $27.21 and $36.63 per share, respectively, and purchased 9,768 and 27,968 shares in the open market during the three and nine months ended June 30, 2008 at an average price of $40.32 and $42.76 per share, respectively. Alico paid quarterly dividends of $0.1375 per share on May 15, 2009 and $0.275 per share on February 15, 2009, November 15, 2008, August 15, 2008, May 16, 2008, January 15, 2008 and October 15, 2007. At its meeting on June 5, 2009, the Board of Directors declared a quarterly dividend of $0.1375 per share payable to stockholders of record as of July 31, 2009 with payment expected on or around August 15, 2009. At its meeting on July 31, 2009, the Board of Directors declared a quarterly dividend of $0.1375 per share payable to shareholders of record as of October 31, 2009 with payment expected on or about November 15, 2009. The Board will continue to assess financial condition, compliance with debt covenants, and earnings to determine future dividends.
Cash outlays for land, equipment, buildings, and other improvements totaled $5.1 million and $4.4 million during the nine months ended June 30, 2009 and 2008, respectively.

Results from Operations
Unaudited results for the quarters ended June 30, 2009 and 2008 were as follows
(dollars in thousands):

                                             Three months ended          Nine months ended
                                                  June 30,                    June 30,
                                              2009          2008         2009         2008

Operating revenue                          $   31,181       42,147       84,821       112,981
Gross profit                                    3,743        6,357        7,085        16,783
General & administrative expenses               1,671        3,568        7,483        10,365
(Loss) profit from continuing operations        2,072        2,789         (398 )       6,418
Profit on sale of real estate                       -            -        1,546           817
Interest and investment income                   (151 )      1,184          826         6,582
Interest expense                               (1,122 )     (1,400 )     (4,459 )      (4,969 )
Other income (expense)                            (33 )         97        6,985            82
Income tax provision                             (157 )      3,129       (2,010 )         752
Effective income tax rate                        20.5 %     -117.2 %       44.7 %        -8.4 %
Income from continuing operations          $      609        5,799        2,490         9,682

Alico's agricultural and real estate operations generally combine to produce the majority of operating revenue, gross profit and income from operations. The decrease in income from continuing operations for the quarter and nine months ended June 30, 2009 compared with the quarter and nine months ended June 30, 2008 was primarily due to reduced profit from agricultural activities. General and Administrative Expenses
Alico has taken aggressive steps to reduce its general and administrative expenses. These actions have included staff reductions, self imposed director fee reductions, and reducing employee benefit programs. Accordingly, general and administrative expenses declined by 53% and 28% for the three and nine months ended June 30, 2009 when compared with the three and nine months ended June 30, 2008, respectively.
Profit from the Sale of Real Estate
Beginning in the fiscal year ended August 31, 2006, Alico, through its Alico Land Development subsidiary, intensified its efforts toward the planning and strategic positioning of all Company owned land. These actions included the hiring of a real estate professional and seeking entitlement of Alico's land assets in order to preserve rights should Alico choose to develop property in the future. Proceeds from the contracts negotiated or substantially renegotiated subsequent to August 31, 2006 are classified as operating items, while proceeds from sales that originated prior to that time and are not deemed to be substantially modified according to U.S. GAAP, are classified as non-operating. Real estate sales are recorded under the accrual method of accounting. Gains from commercial or bulk land sales are not recognized until payments received for property to be developed within two years after the sale equal 20%, or property to be developed after two years equal 25% of the contract sales price according to the installment sales method.
Alico's real estate revenues during the quarters ended June 30, 2009 and 2008 have primarily resulted from three contracts with the Ginn Companies for real estate in Lee County Florida referred to as "East", "West" and "Crockett". In October 2008, the three contracts were renegotiated, with Ginn choosing not to exercise its option on the West property, and relinquishing any claim it might have had on the Crockett property.

In connection with the restructure, Alico's Alico-Agri subsidiary received a principal payment of $1.8 million on the East contract in November of 2008. Alico-Agri recognized a profit of $1.5 million as non-operating revenue under the installment method related to the receipt. Additionally, the Company recognized $1.2 million of operating revenue in October 2008 upon the expiration of the West contract option that had previously been deferred.
On April 22, 2009, Alico-Agri announced that the Ginn Companies had defaulted on its contract with the Company's subsidiary, Alico-Agri Ltd, related to the purchase of property in Lee County, Florida. Under the terms of the contract, a quarterly interest payment of $283 thousand was due on March 30, 2009 but was not received. Alico-Agri has initiated foreclosure proceedings. The property consists of a 4,538 acre parcel located next to Florida Gulf Coast University in Lee County, Florida a portion of which was a former rock mine. A development order for the property allows up to 336 residential units. Pursuant to the contract, Ginn is entitled to receive a release of 399 acres in exchange for prior principal payments. When the foreclosure becomes final, the net mortgage note receivable of $7.1 million (consisting of the note balance of $52.3 million less deferred revenue of $45.2 million), plus accrued interest of $0.3 million, reduced by the associated commissions payable account of $2.6 will be reclassified as basis in the property.
During the nine months ended June 30, 2008, Alico-Agri recognized a profit of $0.8 million under the installment method on the East contract and $3.9 million profit related to extension payments received pursuant to the West and Crockett contracts.
Recent market conditions have depressed Florida real estate markets causing the predictability of real estate sales including timing and market values to be problematic. Alico, through its Alico Land Development subsidiary, 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 future operations and cash flows of Alico.
At its meeting on July 31, 2009, the Board directed Management and the Board's Real Estate Committee to begin a search process for parties interested in purchasing or leasing portions of the Corporation's real estate assets including but not limited to parts of its ranch properties in Hendry County currently devoted to its cattle operations. The purpose of the strategy is to redeploy those assets into properties with higher current returns. Interest and Investment Income
Interest and investment income is generated principally from mortgages held on real estate sold on the installment basis, investments in corporate and municipal bonds, mutual funds, and U.S. Treasury securities. Alico is currently working to dissolve its Agri-Insurance subsidiary. In connection with this activity, a substantial portion of marketable securities were converted to cash, resulting in lower interest earnings for the quarter ended June 30, 2009 when compared to the quarter ended June 30, 2008. Additionally, market interest rates for municipal bonds, which comprise a substantial portion of the marketable securities portfolio, have declined over the same time period.
Alico currently holds several auction rate securities having a total face value of $5.5 million. These securities are highly rated and continue to pay interest, but are not currently liquid. Due to the current state of the markets for these securities, Alico recognized an impairment of $0.2 million and $0.5 million for the quarter and nine months ended June 30, 2009, respectively and recognized the charges as a reduction of investment income. The impaired securities were classified as non-current investments at June 30, 2009 and September 30, 2008. Interest Expense
Interest expense for the three and nine months ended June 30, 2009 was slightly below prior year amounts. The overall debt level of the Company has declined over the past nine months as the Company has made efforts to reduce the outstanding principal balance of its RLOC.

Provision for Income taxes
Alico's effective tax rate was 44.7% and (8.4% ) for the nine months ended June 30, 2009 and 2008, respectively. The June 2008 rate was impacted by adjustments related to IRS proceedings for the tax years 2000, 2001, 2002, 2003 and 2004. The IRS proceedings for those years have been fully settled. The IRS is currently auditing the Company's tax returns for 2005, 2006, 2007 and the transition return for the month ended September 30, 2007.

Operating Revenue

                                        Three months ended          Nine months ended
                                             June 30,                    June 30,
                                         2009          2008         2009         2008
     Revenues
     Agriculture:
     Bowen Brothers Fruit             $   10,818     $ 17,451     $ 27,461     $  44,294
     Citrus groves                        14,876       17,528       35,698        40,679
     Sugarcane                               307        1,581        7,368         9,341
     Cattle                                2,838        3,049        5,207         6,451
     Vegetables                            1,378        1,522        4,670         5,460
     Sod and native plants                   207          404          501           877

     Agriculture operations revenue       30,424       41,535       80,905       107,102
     Real estate operations                    -            1        1,372         3,870
     Land leasing and rentals                703          504        2,249         1,617
     Mining royalties                         54          107          295           392


     Total operating revenue          $   31,181     $ 42,147     $ 84,821     $ 112,981

Operating revenues declined by 26% and 25% during the quarter and nine months ended June 30, 2009, respectively, when compared with the quarter and nine months ended June 30, 2008, primarily due to reduced revenues from agricultural activities.

Gross Profit

                                           Three months ended              Nine months ended
                                                June 30,                       June 30,
                                          2009            2008            2009           2008
Gross profit (loss):
Agriculture:
Bowen Brothers Fruit                   $       858      $     856      $    1,599      $   1,715
Citrus groves                                4,025          6,052           8,493         13,054
Sugarcane                                     (416 )          (41 )        (2,335 )          101
Cattle                                         133           (363 )          (885 )       (1,290 )
Vegetables                                  (1,039 )          130          (1,971 )          (45 )
Sod and native plants                          (10 )         (391 )            (6 )         (456 )

Gross profit from agricultural
operations                                   3,551          6,243           4,895         13,079
Real estate activities                        (231 )         (293 )           553          2,143
Land leasing and rentals                       392            358           1,419          1,302
Mining royalties                                31             49             218            259

Gross Profit                                 3,743          6,357           7,085         16,783

Alico measures gross profit from its operations before any allocation of corporate overhead or interest charges. Gross profit is dependent upon the prices received for each of the Company's products, less harvesting, marketing and delivery costs and the direct costs of producing the products. These prices are based on market factors and are largely out of the Company's control. The decline in gross profit during the quarter and nine months ended June 30, 2009 compared with the quarter and nine months ended June 30, 2008 was primarily due to reduced profit from agricultural operations.

Agricultural Operations
Agricultural operations generate a large portion of Alico's revenues. Agricultural operations are subject to a wide variety of risks including weather and disease. As a producer of agricultural products, Alico's ability to control the prices it receives from its products is limited, and prices for agricultural products can be volatile. Operating results are largely dictated by market conditions.
Bowen
Bowen revenues declined both for the quarter and nine months ended June 30, 2009 when compared with the prior year. Citrus prices have declined this season due to consumer price resistance and large amounts of juice inventories throughout the industry. Bowen's operations include providing harvesting, hauling and marketing services for growers for a fee, as well as purchasing fruit from growers and reselling to processors at a slight margin. Because of the marginal nature of the business, Bowen has been able to maintain profitability at a somewhat consistent level compared with the prior year despite the revenue decline.
Citrus Groves
The Company experienced lower prices for its citrus product during the quarter and nine months ended June 30, 2009 when compared with the corresponding periods in the prior year, due to consumer price resistance and large amounts of juice inventories throughout the industry. The price decline caused reductions in both citrus revenues and gross profits for the three and nine month periods ended June 30, 2009 when compared with the corresponding periods in the prior year. Sugarcane
Sugarcane operations generated losses of $0.4 million and $2.3 million during the quarter and nine months ended June 30, 2009, respectively, compared with a loss of $0.0 million and a profit of $0.1 million during the corresponding periods of the prior year.
During the last week of January and the first week of February 2009, a cold front swept through Florida causing temperatures to drop into the mid 20's and causing damage to Alico's sugarcane crop of approximately $1.1 million, which was recognized during the quarter ended March 31, 2009.
Sugarcane plantings must be rotated on a three year cycle in order to sustain profitable yields. In fiscal year 2007, the Company did not plant additional sugarcane due to the market outlook at that time and uncertainty surrounding the sugar mill to which the Company delivers its product. Due to the age of current sugarcane plantings, the Company expects a significant yield reduction during fiscal year 2010. Because of the reduced yield expectation, the Company has recognized total inventory impairments of $1.3 million related to its 2010 crop during the nine months ended June 30, 2009.
Based on expected improved pricing resulting from recent contract negotiations, the Company is currently evaluating its future options regarding its sugarcane operations.

Cattle
In an effort to minimize risk related to its feeding efforts, the Company utilized forward purchase contracts for corn used as cattle feed during the nine months ended June 30, 2009. Subsequent declines in the price of corn after the execution of the contract could not be realized due to the forward purchases, causing the Company to realize substantial losses. Additionally, the cost of raising and delivering calves to market have increased significantly during the past several years, largely the result of increased cost of feeding and fuel. The cattle industry has typically operated on a ten year cycle as cow-calf producers expand inventories in response to profits and reduce herd sizes in response to decreased profitability. Alico's cattle strategy has been to reduce herd sizes during the expansion phase of the cycle and building herd size through opportunistic acquisitions during the contraction phase. Several atypical factors have 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 is revaluating its cattle strategy to determine the most profitable course of action in the current environment. Vegetables
During the last week of January and the first week of February 2009, a cold front swept through Florida causing temperatures to drop into the mid 20's causing damage to Alico's vegetable crops. Additionally, increased production costs together with a decline in prices received for corn and beans caused the Company to recognize losses from its vegetable division during the quarter and nine months ended June 30, 2009.
Off Balance Sheet Arrangements
Alico through its wholly owned subsidiary Bowen, enters into purchase contracts for the purchase of citrus fruit during the normal course of its business. The remaining obligations under these purchase agreements totaled $0.3 million at June 30, 2009. In addition, Bowen had sales contracts totaling $1.4 million at June 30, 2009 for which purchases had not been contracted. Bowen management currently believes that all committed sales quantities can be purchased below committed sales price.
During the second quarter of fiscal year 2007, the Company formed a new company, Alico-J&J, LLC and entered into a joint venture with J&J Produce to produce vegetables on land owned by Alico, Inc. Under the terms of the joint venture, Alico served as a guarantor for five-year equipment leases to the joint venture. Effective June 30, 2008, the Company discontinued its participation in Alico-J&J, LLC. J&J Farms continued to utilize the equipment and make the monthly lease payments through June 2009. Alico, J&J and the lessor of the equipment have agreed to an orderly disposal of the equipment which will . . .