Maui Land & Pineapple Company, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Unaudited consolidated financial statements. The company owns approximately 22,000 acres on Maui and operates in real estate, leasing, and resort amenities.
Financial performance and liquidity
Amounts below are in millions of dollars except per-share data.
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Operating revenue | $2.473 | $13.987 | $4.770 | $16.234 |
| Operating income (loss) | $(1.344) | $10.641 | $(2.714) | $10.139 |
| Net income (loss) | $(1.117) | $10.525 | $(2.481) | $9.907 |
| Diluted EPS | $(0.06) | $0.54 | $(0.13) | $0.51 |
| Operating cash flow | — | $(0.444) | $11.948 |
- Revenue decline was principally due to no real estate sales in 2023. In Q2 2022, the company sold approximately 50 West Maui acres for $2.0 million and 646 Upcountry Maui acres for $9.6 million. Real estate revenue was $19,000 in each 2023 period.
- Leasing revenue increased to $2.241 million in Q2 and $4.318 million for the first half, from $2.198 million and $4.228 million, respectively. Six-month leasing segment operating income was essentially flat at $2.485 million versus $2.489 million.
- Higher general and administrative expense and share-based compensation contributed to losses. Share-based compensation was $806,000 in Q2 and $1.772 million for the first half, versus $276,000 and $654,000 a year earlier. Management attributed the increase mainly to director and management transitions and vesting of former executives’ outstanding awards.
- At June 30, cash and cash equivalents were $7.246 million, investments were $3.059 million, total assets were $41.455 million, and total liabilities were $8.498 million. Cash and cash equivalents declined from $8.499 million at year-end 2022.
- Six-month investing cash flow was $(0.272) million and financing cash flow was $(0.547) million. Cash and restricted cash decreased by $1.263 million to $7.246 million.
- No borrowings were outstanding on the $15 million First Hawaiian Bank credit facility, which matures December 31, 2025. The company reported covenant compliance and $15 million of availability. Its bond investments yielded approximately 5.3% at June 30, 2023.
Material changes, outlook, and risks
- Compared with 2022, the sharp revenue and earnings reversal reflects the prior-year land sales and their absence in 2023. Leasing remained comparatively steady. Insurance premiums and water-system maintenance costs increased; resort amenities costs also rose, primarily because of higher golf course fees.
- The company allowed the $40 million agreement to sell the 46-acre Kapalua Central Resort project to expire on April 11, 2023. It continues pursuing an extension of the project’s Special Management Area permit and is marketing the project for sale or a joint venture.
- Management stated that cash, operating receipts, and available credit should provide sufficient flexibility for working capital and capital expenditures through the next 12 months and the foreseeable future. It may borrow if economic conditions deteriorate. No specific earnings or revenue guidance was provided.
- A wastewater facility serving Upcountry Maui is subject to a 2018 State of Hawaii order concerning alleged effluent violations. The order includes a proposed $230,000 penalty and a requirement to develop a new treatment plant. A hearing scheduled for July 2023 was postponed during negotiations; the company committed to present a technical solution by December 31, 2023 and provide a progress update at the end of August.
- On August 18, 2023, wildfires severely affected Maui, including Lahaina. The filing states that the company’s land and property holdings were not affected, while noting support for impacted tenants, partners, residents, and communities. The fires disrupted company operations and contributed to the late filing; the filing text does not quantify any resulting financial effects.
- Other stated risks include real estate demand and tourism, development entitlements and costs, weather and natural disasters, insurance coverage, credit and deposit concentration, access to capital, and compliance with debt terms. Management reported no material change in previously disclosed risk factors during the six months.
Important facts for investors to verify
- Progress on the wastewater technical solution, negotiations with the State, and the potential cost and scope of remediation.
- Whether the Central Resort project obtains the required permit extension and is sold or placed into a joint venture.
- Potential indirect wildfire impacts on tenants, leasing activity, tourism, operations, and the company’s financial outlook despite no reported direct property damage.
- Future cash use, operating cash generation, and any borrowing needs under the credit facility.
- The effect of executive and director transitions and elevated share-based compensation on future expenses and share dilution.