Maui Land & Pineapple Company, Inc. — Q2 2015 Form 10-Q
Reporting period: Three and six months ended June 30, 2015. The company owns approximately 23,000 acres on Maui and operates real estate, leasing, utilities, and resort amenities businesses. Amounts below are in millions of dollars unless noted.
Financial performance
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Operating revenue | $2.765 | $5.009 | $5.559 | $7.478 |
| Operating income (loss) | $(0.202) | $1.069 | $(0.706) | $0.637 |
| Net income (loss) | $(0.818) | $0.477 | $(1.919) | $(0.432) |
| Net income (loss) per share | $(0.04) | $0.03 | $(0.10) | $(0.02) |
- Revenue fell 45% in Q2 and 26% for the six-month period year over year. Real estate revenue was $0.211 million in Q2 and $0.323 million for six months, versus $2.453 million and $2.536 million, respectively, in 2014.
- Leasing revenue rose to $2.837 million for six months, from $2.721 million; management cited higher occupancy in Kapalua Resort and Hali’imaile Town. Utilities revenue increased to $1.623 million from $1.551 million, mainly on higher non-potable water sales in drier weather. Resort amenities revenue was $0.776 million, up from $0.670 million.
- The 2014 comparison included a $2.3 million sale of a golf-course maintenance parcel, which produced a $1.5 million gain. Management identified this prior-year sale as the principal reason for the year-over-year earnings decline. Six-month share-based compensation increased to $0.692 million from $0.295 million, primarily due to management incentive stock awards.
- Six-month operating cash flow was $(0.478) million, versus $0.689 million provided in 2014. Cash decreased $0.178 million to $0.237 million. Cash paid for interest was $1.222 million.
Financial position and debt
- At June 30, cash was $0.237 million, current assets $2.112 million, and current liabilities $3.360 million. Total assets were $48.314 million and stockholders’ deficiency was $16.237 million.
- Borrowings under three facilities totaled $50.776 million: Wells Fargo $30.843 million, American AgCredit $19.533 million, and First Hawaiian Bank $0.400 million. The facilities mature August 1, 2016. Interest expense for the first half was $1.213 million, versus $1.069 million.
- The company reported $3.1 million of available credit under its First Hawaiian Bank facility and said it believed it was in compliance with loan covenants at quarter-end. Facilities generally require minimum liquidity of $3 million and limit additional indebtedness. Real estate sale proceeds are subject to mandatory debt repayment provisions.
Outlook, risks, and unusual items
- Going concern: Management said substantial doubt exists about the company’s ability to continue as a going concern. It does not expect to repay the debt at maturity without real estate sales, refinancing, or maturity extensions. Failure to meet covenants could allow lenders to accelerate repayment, and the company says it would not have sufficient liquidity to repay the borrowings.
- Cash outlook and covenant compliance over the next twelve months depend heavily on selling real estate at acceptable prices. Management’s actions include leasing assets, pursuing property sales, and reducing costs; no assurance was given that sales or refinancing will be achieved. Proceeds from asset sales are principally expected to repay debt.
- Assets held for sale at June 30 included a 630-acre agricultural parcel, an entitled five-acre, 42-unit workforce housing project, and the 26-acre Kapalua Golf Academy. No significant development or capital expenditures were planned; management did not expect minimum pension contributions in 2015.
- In April 2015, American AgCredit amended its loan to eliminate scheduled principal reductions, change interest terms, and add collateral. The loan requires the company by May 1, 2016 to provide refinancing, escrowed sale contracts, an equity offering registration statement, or a combination sufficient to repay the loan at maturity. Interest terms can increase if specified loan-balance reduction thresholds are not met.
- Other disclosed risks include real estate and tourism demand, competition, development and entitlement uncertainty, weather and natural disasters, environmental obligations, pension funding, and access to capital. Management reported effective disclosure controls and no material quarter-period change in internal control over financial reporting.
Important facts for investors to verify
- Progress on real estate sales, expected proceeds, and the portion required to repay lenders.
- Refinancing or other repayment arrangements for the August 1, 2016 debt maturities, including American AgCredit’s May 1, 2016 deliverables.
- Liquidity covenant calculations, available credit, and continued compliance with all facility covenants.
- Cash needs and operating performance if asset sales are delayed or do not occur at acceptable prices.
- Valuation, timing, and sale status of the three assets held for sale.