Maui Land & Pineapple Company, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unaudited financial amounts are in thousands of dollars unless otherwise noted.
Business context
The company owns approximately 22,000 acres on Maui and operates commercial leasing and resort-amenity businesses. Management is reviewing its land and commercial assets for ways to improve utilization, occupancy and recurring income. The August 8, 2023 Maui wildfires did not damage company property, but affected tenants, tourism and resort operations.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Operating revenue | $2.101 million | $2.551 million | $6.872 million | $18.787 million |
| Operating income (loss) | $(1.189) million | $(0.008) million | $(3.902) million | $10.131 million |
| Net income (loss) | $(1.192) million | $(0.124) million | $(3.673) million | $9.783 million |
| Net income (loss) per share | $(0.06) | $(0.01) | $(0.19) | $0.50 |
| Operating cash flow | Not provided for the quarter | Not provided for the quarter | $(0.197) million | $6.064 million |
At September 30, 2023, cash and cash equivalents were $6.771 million and investments were $3.085 million, including $2.752 million due within one year. The company had no borrowings outstanding on its $15 million revolving credit facility, which matures December 31, 2025, and reported covenant compliance. Total liabilities were $9.008 million; stockholders’ equity was $32.438 million. The filing gives no consolidated operating-margin percentage.
Material changes versus the prior comparable period
- Nine-month revenue fell by $11.915 million, chiefly because the company recorded no material land sales in 2023 versus $11.6 million of real estate revenue in 2022. 2022 included sales of two parcels for $2.0 million and $9.6 million.
- Leasing revenue was lower: $1.931 million versus $2.330 million in Q3 and $6.249 million versus $6.559 million for the nine-month period. Management attributed lost percentage rents in August and September to the wildfires; insurance premiums and water-system maintenance costs also increased.
- Share-based compensation rose to $2.472 million for the first nine months from $0.958 million, and general and administrative expense increased to $2.996 million from $2.177 million. Management cited executive/director transitions and the vesting of grants held by departed executives.
- Cash declined by $1.728 million from December 31, 2022. Operating cash flow shifted from a $6.064 million inflow in the prior-year period to a $0.197 million outflow.
Outlook, risks and unusual items
- Management expects cash on hand, operating receipts and available credit to fund working capital and capital expenditures for the next 12 months and foreseeable future. It provided no numerical earnings or revenue guidance.
- The company plans to invest in tenant improvements, repositioning, planning and engineering to improve occupancy and develop land for community needs, including agriculture and housing. Management cautioned that repositioning costs may weigh on near-term earnings.
- The 46-acre Kapalua Central Resort project remains marketed for sale or joint venture while the company pursues an extension of its Special Management Area permit. A proposed $40 million sale agreement expired April 11, 2023.
- A Hawaii Department of Health order concerning alleged wastewater-effluent violations requires a technical solution for the Upcountry Maui facility and includes a proposed $230,000 administrative penalty. The hearing was postponed amid negotiations; the company committed to present a formal technical solution by February 15, 2024.
- The Board approved termination of the defined-benefit pension and non-qualified retirement plans; final settlements are expected in 2024. No pension contributions were required in 2023.
- Risks include further wildfire effects on tenants, tourism and rents; real-estate demand and financing conditions; development and entitlement execution; environmental obligations; and compliance with credit-facility covenants. The company said its property was not damaged by the fires but was still evaluating potential effects on tenants, partners and communities.
Important facts for investors to verify
- Whether wildfire-related disruptions continue to affect percentage rents, club revenue, tenant occupancy and operating costs.
- Progress on the Central Resort permit and any sale or joint-venture outcome, including expected timing and proceeds.
- The wastewater-order negotiations, selected technical solution, potential costs and status of the proposed penalty.
- Execution costs and timing for management’s occupancy and land-utilization plans, and whether available liquidity remains adequate.
- Settlement amounts and timing for the retirement-plan terminations in 2024.