Maui Land & Pineapple Company, Inc. — Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2018. Unaudited results; amounts below are in millions of dollars unless stated otherwise. The company owns about 23,000 acres on Maui and operates real estate, leasing, utilities, and resort-amenities businesses.
Financial results and position
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Operating revenue | $2.810 | $2.840 | $8.312 | $21.859 |
| Operating income (loss) | $(1.488) | $(0.243) | $(2.744) | $12.587 |
| Net income (loss) | $(1.627) | $(0.484) | $(3.161) | $11.829 |
| Basic and diluted EPS | $(0.09) | $(0.03) | $(0.17) | $0.62 |
| Operating cash flow | Not stated separately | Not stated separately | $1.072 | $7.746 |
Q3 operating and net margins were approximately (53%) and (58%), respectively; nine-month margins were approximately (33%) and (38%). These reflect operating losses, not a company-provided non-GAAP measure.
- At September 30, cash was $1.243; total current assets were $2.472 and current liabilities $3.208. Total assets were $43.856 and stockholders’ equity $29.253.
- Long-term debt was $1.235 under a $15.0 revolving facility; the company reported $13.8 of available credit. The facility bears LIBOR plus 3.50% (5.61% at quarter-end) and matures December 31, 2019, with two optional one-year extensions.
- Accrued retirement benefits totaled $7.746, including $5.495 for defined-benefit pension plans. Nine-month investing cash use was $0.326; financing cash use was $0.532. Cash rose by $0.214 from year-end 2017.
Material changes and operating drivers
- Nine-month revenue fell $13.547 year over year, and results shifted from $11.829 net income to a $3.161 net loss. The comparison is heavily affected by 2017 items: a $7.0 golf-course sale that generated a $6.4 gain, and approximately $6.7 of land improvements conveyed to the company.
- Q3 revenue was nearly flat year over year, but operating loss widened to $1.488 from $0.243. Management attributed higher operating costs to defense, mediation, and settlement costs in Kapalua Bay litigation; higher general and administrative expense primarily reflected strategic-planning and consulting costs.
- Nine-month leasing revenue increased to $4.605 from $4.309, which management linked to higher occupancy and improved renegotiated lease terms. Utility revenue was stable, while utility costs rose, primarily due to deferred maintenance. Real-estate revenue was only $0.402 versus $14.281 in 2017, largely reflecting the prior-year items above.
Outlook, risks, and contingencies
- No quantitative earnings or revenue guidance was provided. Near-term initiatives include investment in operating infrastructure and continued planning and entitlement work on development projects; management said this may require borrowing or asset sales.
- The company reported compliance with its credit-facility covenants, which include minimum defined liquidity of $1.5, maximum total liabilities of $45.0, and limits on new indebtedness. Its stated cash balance is below the minimum-liquidity figure, but the filing does not clearly define the covenant calculation in this summary; the company nevertheless reported compliance.
- In October 2018, the company made an undisclosed payment under a settlement of one Kapalua Bay lawsuit. It also settled with the remaining plaintiffs in a second lawsuit; the insurer is to make an undisclosed payment and reimburse certain defense costs. A third lawsuit was scheduled for trial January 14, 2019; the company could not estimate any probable liability and recorded no provision.
- Key disclosed risks include Hawaii real-estate and tourism demand, development and entitlement execution, weather and natural disasters, pension funding, access to capital, real-estate asset sales, and refinancing or complying with debt terms.
Important facts for investors to verify
- Review the settlement terms and eventual cash and insurance impacts of the Kapalua Bay litigation, especially the unresolved lawsuit and trial outcome.
- Assess the quality and sustainability of operating cash flow and liquidity, including the facility’s covenant definitions, availability, and 2019 maturity.
- Separate recurring operating performance from the large 2017 property-related revenue and gain when comparing periods; monitor real-estate sales, lease occupancy, and maintenance spending.
- Check progress and funding needs for development, planning, and entitlement initiatives, as well as pension obligations and any future borrowing or land sales.