Maui Land & Pineapple Company, Inc. — Q3 2021 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three and nine months ended September 30, 2021. The company owns approximately 23,000 acres on Maui and operates in real estate, leasing, and resort amenities.
Financial results and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Operating revenue | $2.437 million | $1.697 million | $9.446 million | $5.441 million |
| Operating income (loss) | $5,000 | ($454,000) | $1.449 million | ($2.210 million) |
| Net income (loss) | ($139,000) | ($633,000) | $806,000 | ($1.864 million) |
| Basic and diluted earnings (loss) per share | ($0.01) | ($0.03) | $0.04 | ($0.10) |
| Operating cash flow | Not separately reported for the quarter | $583,000 | $545,000 |
Q3 operating margin was approximately 0.2%, versus negative 26.8% a year earlier; the nine-month margin was approximately 15.3%, versus negative 40.6%. The nine-month 2021 result included $13,000 of other income, compared with $894,000 in 2020. Cash flow from investing was $4.123 million, including $4.203 million of asset-sale proceeds; financing used $716,000. Cash rose to $4.859 million from $869,000 at year-end 2020. The MD&A describes operating cash flow as approximately $585,000, while the cash-flow statement reports $583,000.
At September 30, 2021, total assets were $37.237 million, total liabilities $14.943 million, and stockholders’ equity $22.294 million. Current assets of $9.779 million included $4.859 million in cash; current liabilities were $1.920 million. The company had no balance outstanding on its $15 million revolving credit facility. The facility matures December 31, 2021; management expected renewal or extension in December. Borrowings bear interest at LIBOR plus 3.50%. Total accrued retirement benefits were $9.114 million, including a $6.863 million defined-benefit pension obligation.
Material changes versus prior periods
- Nine-month revenue increased 74%, led by leasing and real estate. Leasing revenue rose to $5.947 million from $4.620 million, primarily due to higher commercial rents, including percentage rent of $1.1 million versus $304,000.
- Real estate revenue was $2.700 million for the nine months, versus $173,000. 2021 activity included the $1.7 million sale of the Steeple House and approximately $949,000 for a conservation easement. There were no real estate sales in Q3.
- In May 2021, the company received $4.2 million net proceeds from selling Kapalua Water Company and Kapalua Waste Treatment Company assets. These operations are reported as discontinued; their nine-month loss was $214,000, versus $84,000.
- Q3 leasing revenue growth helped bring operating results close to break-even, while the nine-month period moved from a loss to income. The prior-year nine-month result included the $894,000 KBH distribution.
- Cash increased substantially, supported by asset-sale proceeds; the revolving facility balance was reduced to zero. The company contributed $553,000 to its pension plan in January and an additional $1.0 million in August; it reported no further required 2021 contributions.
Outlook, risks, contingencies, and unusual items
No quantified earnings or revenue guidance is provided. Management said a credit-facility renewal or extension was expected in December 2021 and that it might borrow if COVID-19 adversely affects future economic conditions. Management emphasized uncertainty from COVID-19, variants, travel restrictions, tourism demand, and potential impacts on leasing, resort activity, real estate sales, cash flows, and asset values. Maui passenger volume for the first nine months of 2021 was approximately 1.79 million, versus 460,000 in the comparable 2020 period.
The prospective buyer terminated the agreement to purchase the 46-acre Kapalua Central Resort project in September 2021. The original agreed price was $43.9 million; the property remained among assets held for sale, carried at $2.979 million. The company’s $2.0 million minimum-liquidity covenant and other credit-facility covenants were reported satisfied at quarter-end.
A Hawaii Department of Health order concerning alleged wastewater-effluent violations at the Upcountry Maui facility calls for a $230,000 administrative penalty and development of a new treatment plant, among other requirements. The order was deferred while corrective work and discussions continued. The company could not estimate probable liability and recorded no provision. Other legal matters were not expected to have a material adverse effect. The company also identified risks involving land-use entitlements, project execution, environmental obligations, pension funding, refinancing, asset-sale capacity, and access to capital.
Important facts for investors to verify
- Whether the revolving credit facility was renewed or extended before its December 31, 2021 maturity, and on what terms.
- Whether the terminated Central Resort sale agreement was replaced, and the timing and potential proceeds from future real estate dispositions.
- Progress and any eventual financial exposure related to the wastewater order and corrective-action review.
- Future leasing and resort performance as tourism conditions, tenant sales, and COVID-related measures change.
- Ongoing pension funding needs and the company’s ability to maintain liquidity and covenant compliance.