Maui Land & Pineapple Company, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Financial statements are unaudited. The company owns approximately 22,000 acres on Maui and operates in real estate, leasing, and resort amenities.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Operating revenue | $2.298 million | $2.248 million, up 2% |
| Operating loss | $1.370 million | $0.502 million loss |
| Net loss | $1.364 million; $0.07 per share | $0.618 million loss; $0.03 per share |
| Operating margin | (59.6%) | (22.3%) |
| Operating cash flow | $0.731 million | $2.817 million |
| Cash and cash equivalents | $8.653 million | $8.499 million at December 31, 2022 |
| Investments | $3.014 million amortized cost | $2.983 million at December 31, 2022 |
| Total assets / liabilities | $42.327 million / $8.940 million | $42.406 million / $8.634 million at December 31, 2022 |
Operating margin is calculated as operating loss divided by revenue. Cash, cash equivalents, and investments totaled approximately $11.7 million at quarter-end. The company had no borrowings outstanding on its $15 million revolving credit facility, which matures December 31, 2025, and reported compliance with its covenants. Current assets were $15.9 million versus current liabilities of $2.7 million.
Material changes and operating performance
- Despite slightly higher revenue, operating loss widened by $0.868 million. General and administrative expense rose to $1.025 million from $0.756 million, and share-based compensation increased to $0.964 million from $0.379 million.
- The company attributed higher administrative and share-based compensation costs to leadership changes. Approximately $0.7 million of share-based expense resulted from the former Chairman and CEO’s grants becoming fully vested upon resignation; hiring and onboarding the new CEO cost approximately $0.2 million.
- Leasing revenue rose to $2.077 million from $2.031 million; segment operating income was $1.283 million versus $1.290 million. Higher percentage rents as visitor traffic recovered were offset by increased insurance and landscaping costs.
- Resort amenities and other revenue was $0.221 million, while the segment loss widened to $0.328 million from $0.293 million, mainly due to higher golf course fees. Kapalua Club membership was 156, down from 168 a year earlier.
- There were no real estate sales in either quarter. The company allowed the agreement to sell the 46-acre Kapalua Central Resort project for $40 million to expire on April 11, 2023, and said it would continue pursuing an extension of the project’s Special Management Area permit.
- Net cash increased by $0.154 million during the quarter, compared with a $2.535 million increase in Q1 2022. Financing cash use of $0.544 million primarily reflected share-related costs.
Outlook, risks, and contingencies
- Management stated that cash, operating cash flows, and available credit should provide sufficient flexibility for working capital and capital expenditures through the next 12 months and the foreseeable future. No specific earnings or revenue guidance was provided.
- Management cited real estate demand, interest rates and economic conditions, tourism and visitor activity, development timelines and entitlements, access to capital, and the ability to refinance or comply with debt terms as risks. It also noted potential weather, natural-disaster, environmental, and other operational risks.
- The company faces a Hawaii Department of Health order concerning alleged wastewater effluent violations at its Upcountry Maui facility. The order includes a proposed $230,000 penalty and development of a new treatment plant; it was deferred while corrective actions proceeded. Monitoring results were within allowable ranges, and an administrative hearing was scheduled for July 2023.
- The credit facility requires at least $2.0 million of defined liquidity and limits total liabilities to $45.0 million, among other covenants. The company reported compliance at March 31, 2023.
- Other claims and legal actions were not expected by management, after consultation with counsel, to have a material adverse effect. The company reported effective disclosure controls and no material changes in internal control over financial reporting.
Investor verification points
- Track the Central Resort project’s permit-extension process and the implications of the expired $40 million sale agreement.
- Assess whether leasing income and visitor activity can offset property operating costs and the resort amenities segment’s losses.
- Monitor cash generation against the higher year-over-year operating loss and the company’s planned development and infrastructure spending.
- Review the wastewater proceeding, corrective-action progress, and potential penalty or treatment-plant obligations.
- Check the effects of leadership-transition and share-based compensation costs in subsequent periods, and confirm ongoing compliance with credit-facility covenants.