Forward-Looking Statements

We make forward-looking statements in this Quarterly Report, particularly in this Management's Discussion and Analysis, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Any statements in this Quarterly Report that are not historical facts are forward-looking statements. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on our current expectations, estimates and projections about our business based, in part, on assumptions made by our management. These assumptions are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those risks factors described in our Annual Report on Form 10-K for the year ended September 30, 2011 and our Quarterly Reports on Form 10-Q.

Overview

We are a land management company operating in Central and Southwest Florida. Our primary asset is approximately 135,590 acres of land located in Collier, Glades, Hendry, Lee and Polk Counties. We are engaged in a variety of agribusiness pursuits in addition to land leasing, rock and sand mining and real estate operations.

We have six reportable segments: Bowen Brothers Fruit, LLC ("Bowen"), Citrus Groves, Sugarcane, Cattle, Real Estate and Land Leasing and Rentals.

• Bowen operations include supply chain management (harvest and haul) for Alico's citrus crop and other growers. Bowen's operations also include the purchase and resale of citrus fruit.

• Citrus Groves operations consist of cultivating citrus trees in order to produce citrus fruit for delivery to the fresh and processed citrus markets.

• Sugarcane operations consist of cultivating sugarcane for sale to a sugar processor.

• Cattle operations primarily include production of beef cattle for sale and raising replacement heifers.

• The Real Estate segment, operated on behalf of Alico by ALDI, is engaged in the planning and strategic positioning of all our land, which includes seeking entitlement of our land assets in order to obtain, enhance and preserve rights to develop the property in the future and negotiating and/or renegotiating sales contracts.

• The Land Leasing and Rentals segment leases land to others on a tenant-at-will basis for grazing, farming, oil and mineral exploration, recreational and other uses.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of these financial statements requires us 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. We base these estimates on historical experience, available current market information and on various other assumptions that management believes are reasonable under the circumstances. Additionally, we evaluate the results of these estimates on an on-going basis. Management's estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no significant changes during this reporting period to the policies and disclosures set forth in Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended September 30, 2011.

Recently Issued Accounting Standards

See Item 1. Financial Statements, Note 1. Description of Business and Basis of Presentation in the Notes to Condensed Consolidated Financial Statements (Unaudited) included in this report for recently issued accounting standards, including the expected dates of adoption and estimated effects on our consolidated financial statements.

Results of Operations



Consolidated Results



The following table sets forth a comparison of results of operations for the
three and nine months ended June 30, 2012 and 2011:



(dollars in thousands)                  Three months ended June 30,                             Nine months ended June 30,
                               2012         2011       Difference     % Change        2012          2011       Difference     % Change
Operating revenue           $ 40,420     $ 39,341     $   1,079           2.8 %    $ 120,628     $ 92,386     $  28,242         30.6 %
Operating expense             29,892       27,502         2,390           8.7 %       90,284       69,986        20,298         29.0 %
Gross profit                  10,528       11,839        (1,311 )       (11.1 )%      30,344       22,400         7,944         35.5 %
General and
administrative expenses        1,890        1,766           124           7.1 %        5,751        5,374           377          7.1 %
Income from operations         8,638       10,073        (1,435 )       (14.3 )%      24,593       17,026         7,567         44.5 %
Interest and investment
(loss) income, net               (16 )         57           (73 )      (128.1 )%          26       (1,657 )       1,683        101.6 %
Interest expense                (354 )       (502 )         148          29.5 %       (1,290 )     (1,572 )         282         18.0 %
Gain on sale of real
estate                         9,124            -         9,124             -          9,124            -         9,124            -
Impairment on assets held
for sale                      (1,868 )          -        (1,868 )           -         (1,868 )          -        (1,868 )          -
Other income, net                  2          114          (112 )       (98.3 )%          34          171          (137 )      (80.2 )%
Income tax expense             5,919        3,771         2,148          57.0 %       11,665        5,378         6,287        116.9 %
Net income                  $  9,607     $  5,971     $   3,636          60.9 %    $  18,954     $  8,590     $  10,364        120.7 %
Effective income tax rate       38.1 %       38.7 %        (0.6 )%       (1.6 )%        38.1 %       38.5 %        (0.4 )%      (1.1 )%

Operating Revenue

The increase in operating revenue of $1,079,000 for the three months ended June 30, 2012, as compared to the three months ended June 30, 2011, is primarily due to an increase in fruit sales by Bowen and, to a lesser extent, increases in harvest and haul revenues at Bowen and favorable market pricing received for sugarcane.

The increase in operating revenues of $28,242,000 for the nine months ended June 30, 2012, as compared to the nine months ended June 30, 2011, is primarily due to an increase in fruit sales by Bowen, increases in citrus and sugarcane production and, to a lesser extent, increases in harvest and haul revenues at Bowen and favorable market pricing of sugarcane. See Segment Results below for further discussion of our revenues from agricultural and non-agricultural operations.

Gross Profit

Gross profit decreased by 11.1% and increased by 35.5% for the three and nine months ended June 30, 2012, respectively, as compared to gross profits for the three and nine months ended June 30, 2011. The decrease in gross profit quarter-over-quarter was primarily attributable to the decrease in the market price for Valencias and increases in the harvest and haul costs of our citrus together with certain costs that were incurred in the third quarter of fiscal year 2012 that were incurred in the fourth quarter of fiscal year 2011. The increase for the nine months ended June 30, 2012, as compared with the same period last fiscal year was primarily attributable to an increase in the production of our agricultural products and to a lesser extent, favorable market pricing of sugarcane. See Segment Results below for further discussion of our revenues and expenses from agricultural and non-agricultural operations.

General and administrative expenses

General and administrative expenses increased by 7.1% for each of the three and nine months ended June 30, 2012, respectively, as compared to the three and nine months ended June 30, 2011. The increase was primarily attributable to legal fees. General and administrative expenses include $66,000 and $346,000 in legal fees incurred as a result of the IRS audit and appeals process and $170,000 and $556,000 in legal fees incurred in defense of the shareholder derivative action complaint for the three and nine months ended June 30, 2012, respectively. For the three and nine months ended June 30, 2011, $195,000 and $341,000 in legal fees were incurred as a result of the IRS audit and appeals process, respectively and $23,000 and $456,000 in legal fees were incurred in the defense of the shareholder derivative action complaint, respectively.

Interest and investment income, net

Interest and investment income results primarily from interest bearing bank accounts and our investment in Magnolia. Interest and investment income, net decreased by $73,000 or 128.1% for the quarter ended June 30, 2012, as compared with the same period in fiscal year 2011. Interest and investment income, net increased by $1,683,000 or 101.6% for the nine months ended June 30, 2012, as compared to the nine months ended June 30, 2011. During fiscal year 2011, we fully reserved our patronage interest in Farm Credit of Florida totaling $1,685,000; the expense was recorded in interest and investment income.

In May 2010, we invested $12,150,000 to obtain a 39% limited partner equity interest in Magnolia. Alico is accounting for the investment in Magnolia in accordance with the equity method of accounting in which we record our 39% interest in the reported income or loss of Magnolia each quarter. For the three months ended June 30, 2012, we recorded an investment loss of $8,000 as compared to investment income of $23,000 during the quarter ended June 30, 2011. We recorded investment income of $2,000 for the nine months ended June 30, 2012 as compared to an investment loss of $31,000 for the comparable period in 2011. See Item 1. Financial Statements, Note 3. Investment in Magnolia in the Notes to Condensed Consolidated Financial Statements (Unaudited).

Interest Expense

Interest expense decreased by approximately $148,000 or 29.5% for the three months ended June 30, 2012 as compared with the three months ended June 30, 2011. For the nine months ended June 30, 2012, interest expense decreased by $282,000 or 18.0% as compared to the nine months ended June 30, 2011. The decrease in interest expense is primarily due to the reduction of our outstanding debt and, to a lesser extent, a decrease in the weighted average interest rates for the nine months ended June 30, 2012 as compared to the same period in fiscal year 2011. The weighted average interest rate for the three and nine months ended June 30, 2012, were 2.94% and 2.93%, respectively, as compared to 2.94% and 2.97% for the three and nine months ended June 30, 2011, respectively. See Item 1. Financial Statements, Note 6. Long-Term Debt in the Notes to Condensed Consolidated Financial Statements (Unaudited).

Gain on sale of real estate

The sales of the two parcels of land in Polk County, FL were included in gain on sale of real estate at June 30, 2012. The sale of the two parcels resulted in pre-tax gains totaling approximately $9,124,000. We received cash of approximately $9,768,000 of which approximately $8,747,000 was classified as restricted cash on our condensed consolidated balance sheet as the funds were being held in an escrow account while we considered a potential like kind exchange transaction. See Item 1. Financial Statements, Note 4. Property, Building and Equipment, Net in the Notes to Condensed Consolidated Financial Statements (Unaudited).

Impairment on assets held for sale

We recorded an impairment of $1,868,000 on three parcels of land held for sale in Lee County, FL at June 30, 2012. See Item 1. Financial Statements, Note 4. Property, Building and Equipment, Net in the Notes to Condensed Consolidated Financial Statements (Unaudited).

Provision for income taxes

Income tax expense was approximately $5,919,000 and $3,771,000 for the three months ended June 30, 2012 and 2011, respectively. Alico's effective tax rate was 38.1% and 38.7% for the three months ended June 30, 2012 and 2011, respectively. Income tax expense was $11,665,000 and $5,378,000 with an effective tax rate of 38.1% and 38.5% for the nine months ended June 30, 2012 and 2011, respectively.

The IRS examined the returns of Alico, Agri-Insurance and Alico-Agri for the tax years 2005 through 2007. We contested issues raised by the IRS during the examinations and pursued resolution through the IRS Appeals process. On May 16, 2012, we finalized an agreement to settle all outstanding issues. Federal taxes due as a result of the settlement totaled $613,000 and have been paid in full. Federal interest due as a result of the settlement is approximately $225,000. All Federal penalties were waived. State tax, penalties and interest due as a result of the settlement are estimated at approximately $435,000. See Item 1. Financial Statements, Note 5. Income Taxes and Note 12. Subsequent Events in the Notes to Condensed Consolidated Financial Statements (Unaudited).