Maui Land & Pineapple Company, Inc. — Q1 2020 10-Q
Reporting period: Three months ended March 31, 2020. Unaudited results; amounts below are in millions unless otherwise stated. The company owns approximately 23,000 acres on Maui and operates real estate, leasing, and resort amenities businesses.
Financial performance and position
- Revenue: $2.035, down 12.8% from $2.334 in Q1 2019. Leasing revenue was $1.736 (down $0.180); real estate revenue was $0.069 (down $0.088); resort amenities and other revenue was $0.230 (down $0.031).
- Profitability: Operating loss widened to $0.994 from $0.784. Loss from continuing operations was $1.157 versus $1.084; net loss was $1.074 versus $1.095. Basic and diluted loss per share remained $0.06. Comprehensive loss was $0.868.
- Cash flow: Operating activities provided $1.453, versus $0.555 in Q1 2019. Investing activities used $0.048. Financing activities used $1.322, including $1.500 of debt repayments and $0.700 of new borrowings. Cash rose $0.083 to $0.766.
- Liquidity and debt: The company reported approximately $14.8 available on its $15.0 revolving credit facility; outstanding debt was $0.235, down from $1.035 at year-end. The facility matures December 31, 2021, bears interest at LIBOR plus 3.50% (5.08% at quarter-end), and is secured by specified property. The company said it was compliant with covenants, including minimum liquidity of $2.0 and maximum total liabilities of $45.0.
- Balance sheet: Cash was $0.766; assets held for sale were $7.607; total assets were $38.822, compared with $39.119 at December 31, 2019. Accrued retirement benefits totaled $9.742, including $7.547 for the defined benefit pension plan. Stockholders’ equity was $22.353.
Changes and management commentary
- Leasing operating income fell to $0.960 from $1.196, reflecting lower percentage rents associated with tenants’ sales activity and a larger allowance for doubtful accounts. Management warned that restrictions and tenant payment difficulties could further affect rent.
- Resort amenities and other recorded an operating loss of $0.340, versus $0.050. Management cited higher golf course rates in 2020; the prior-year comparison included the Plantation Golf Course closure for renovations.
- Real estate operating loss was nearly unchanged at $0.106. There were no real estate sales in either comparative quarter; lower legal costs offset lower revenue.
- In March, the company received $2.0 for a trademark license effective April 1, 2020, recorded as deferred revenue at quarter-end. Operating cash flow should be considered alongside this advance payment.
Outlook, risks, and unusual items
- Management said COVID-19 travel restrictions, stay-at-home orders, business closures, and reduced tourism could materially affect operations, cash flows, and financial position. It said the duration and ultimate impact were not reasonably estimable and that borrowings may increase if conditions persist.
- In February 2020, the company agreed to sell the 46-acre Kapalua Central Resort project for $43.9. Closing remains subject to conditions, including due diligence through July 31, 2020, with closing scheduled 45 days after that period. Separately, the proposed sale of Kapalua Water and Waste Treatment assets remains subject to conditions, including regulatory approval. COVID-related uncertainty could affect either transaction.
- In April 2020, the company received approximately $0.246 under the CARES Act Paycheck Protection Program. The loan bears 1% interest, matures in April 2022, and may be forgiven to the extent eligible costs are documented.
- A state environmental order concerns alleged wastewater effluent violations at the Upcountry Maui treatment facility. The company said it could not estimate any probable liability and recorded no provision. COVID-19 extended the relevant deadline and postponed ongoing claims to May 15, 2020.
- The company reported no material exposure to interest-rate or foreign-currency changes, but identified tourism, tenant deferrals or abatements, real estate demand, development and entitlement execution, pension funding, and credit-facility compliance/refinancing as risks. No specific financial guidance was provided.
Important facts for investors to verify
- Progress and closing conditions for both asset-sale transactions, including the $43.9 Kapalua Central Resort agreement and required approvals for the utility assets.
- COVID-19 effects on tourism, tenant rent collections, leasing revenue, resort operations, and future cash needs.
- Credit-facility covenant calculations and liquidity headroom, particularly the $2.0 minimum-liquidity requirement versus reported cash of $0.766.
- Potential cost or liability from the wastewater order; the filing provides no clear estimate.
- Recognition period and future earnings contribution from the $2.0 trademark license payment, as well as PPP loan forgiveness eligibility.