Maui Land & Pineapple Company, Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. The company owns about 23,000 acres on Maui and operates real estate, leasing, utilities, and resort amenities businesses. Amounts below are in millions of dollars unless stated otherwise.
Financial performance and position
- Revenue: $2.542 million, down from $9.683 million in Q1 2017. Real estate revenue was $36,000; leasing $1.495 million; utilities $704,000; and resort amenities and other $307,000.
- Profitability: Operating loss was $825,000 versus operating income of $6.128 million. Net loss was $964,000, or $0.05 per share, compared with net income of $5.832 million, or $0.31 per share. Gross margin is not presented.
- Cash flow: Operating activities provided $522,000, versus $7.052 million a year earlier. Investing activities used $90,000 and financing activities used $411,000. Cash increased $21,000 to $1.050 million.
- Liquidity and debt: Current assets were $2.426 million and current liabilities $1.878 million. Long-term debt was $1.235 million; $13.8 million of the $15 million revolving credit facility was available. The facility matures December 31, 2019, with two optional one-year extensions. Management reported compliance with its covenants, including minimum defined liquidity of $1.5 million.
- Other balance-sheet items: Total assets were $44.514 million, total liabilities approximately $13.595 million, and stockholders’ equity $30.919 million. Accrued retirement benefits totaled $7.949 million.
Changes versus Q1 2017
- The sharp revenue and earnings decline primarily reflects the prior-year sale of the 15-acre Kapalua Golf Academy practice course. The February 2017 sale generated $7.0 million of proceeds and an approximately $6.4 million gain; $5.6 million of proceeds repaid revolving debt. There was no comparable real estate sale in Q1 2018.
- Leasing operating income fell to $917,000 from $1.117 million, with higher repairs and maintenance and timing of tenant reimbursements cited. Average occupancy declined in other West Maui (79% from 95%) and Upcountry Maui (73% from 90%).
- Utilities operating income rose to $183,000 from $123,000, helped by higher resort occupancy and visitor activity. General and administrative expense increased to $831,000 from $489,000, primarily due to legal and outside consultant fees.
Outlook, risks, and notable items
- For the next nine months, management planned investment in operating infrastructure and continued planning and entitlement work on development projects. These initiatives may require borrowing; repayment could depend on selling real estate assets at acceptable prices within condensed timeframes. No numerical earnings or revenue guidance was provided.
- Management cited risks including real estate demand and tourism, development execution and entitlements, competition, weather and natural disasters, environmental obligations, pension funding, access to capital, asset-sale proceeds, and compliance with debt covenants and refinancing needs.
- Various claims and legal actions are pending; management, after consulting counsel, did not expect their resolution to materially adversely affect financial position or results. No changes to previously reported commitments and contingencies were noted.
- The company adopted the new revenue recognition standard using the modified retrospective method on January 1, 2018, with no retained-earnings adjustment or significant change in revenue-recognition patterns. Management reported effective disclosure controls.
Important facts for investors to verify
- Whether the company remained in compliance with the credit facility’s minimum-liquidity covenant and how “liquidity” is defined, given cash of $1.050 million and reported available credit of $13.8 million.
- Progress and expected costs for planned infrastructure work, land entitlements, and renovation or repurposing of Upcountry properties.
- Whether leasing occupancy and tenant reimbursements recover, and whether higher legal, consulting, and repair costs persist.
- Potential pension funding needs, the status of pending claims, and the company’s ability to refinance or repay debt before maturity.