Maui Land & Pineapple Company, Inc. — Q2 2021 Form 10-Q
Business context and reporting period. The company owns approximately 23,000 acres on Maui and operates in real estate, leasing, and resort amenities. This unaudited report covers the three and six months ended June 30, 2021; comparisons are with the same 2020 periods. Amounts below are in millions unless noted.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $4.950 | $1.710 | $7.009 | $3.744 |
| Operating income (loss) | $2.096 | $(0.762) | $1.438 | $(1.756) |
| Net income (loss) | $1.879 | $(0.157) | $0.945 | $(1.231) |
| Operating margin | 42.3% | (44.6%) | 20.5% | (46.9%) |
| Basic and diluted EPS | $0.10 | $(0.01) | $0.05 | $(0.06) |
| Operating cash flow | Not provided by quarter | Not provided by quarter | $1.691 | $0.435 |
Cash was $6.005 million at June 30, up from $0.869 million at year-end 2020. Current assets were $10.642 million and current liabilities $2.159 million, or working capital of approximately $8.483 million. The company had no balance outstanding under its $15 million revolving credit facility at quarter-end; the facility matures December 31, 2021. It reported covenant compliance and $15 million available. Total assets were $38.453 million, total liabilities approximately $16.380 million, and stockholders’ equity $22.073 million. Accrued retirement benefits totaled $10.256 million.
Six-month investing cash flow was $4.122 million, including $4.203 million net proceeds from the sale of the Kapalua water and wastewater utility assets. Financing cash flow was a $0.677 million use, including $0.800 million of debt repayments and $0.600 million of new debt proceeds. The filing reports $8,000 of interest paid in the cash flow note, while MD&A reports $10,000; the text does not reconcile the difference.
Material changes and drivers
- Q2 revenue increased $3.240 million year over year. Real estate revenue was $2.700 million versus $0.090 million, reflecting 2021 sales; leasing revenue rose to $1.962 million from $1.436 million, and resort amenities and other revenue rose to $0.288 million from $0.184 million.
- For the six months, operating income improved to $1.438 million from a $1.756 million loss. The company attributed stronger leasing results largely to increased percentage rent as commercial tenants’ sales recovered. Percentage rent was $0.417 million for Q2 and $0.534 million for the half-year; none was recognized in Q2 2020.
- 2021 real estate activity included the May sale of the Steeple House for $1.7 million and a June conservation easement transaction for approximately $0.9 million. The utility-asset sale generated $4.2 million in net proceeds in May and is reflected as discontinued operations.
- 2020 comparative results included $0.894 million of other income from a return of cash collateral; 2021 other income was $0.013 million for the half-year. Discontinued operations recorded losses of $0.069 million in Q2 and $0.209 million for the half-year in 2021.
Outlook, risks, and unusual items
- The filing gives no specific earnings or revenue guidance. Management said the duration and effects of COVID-19, variants, travel restrictions, and public-health measures remain uncertain and could significantly affect operations, cash flows, and financial position. Maui County visitor arrivals rose to approximately 791,000 in Q2 2021 from approximately 4,000 in Q2 2020, according to the company.
- The company had a pending agreement to sell its 46-acre Kapalua Central Resort project for $43.9 million. Closing remained contingent on customary conditions, including due diligence ending August 31, 2021; the expected closing was 30 days after that period. These proceeds were not reported as received.
- The revolving credit facility’s LIBOR-based rate and December 2021 maturity create refinancing and reference-rate transition considerations. Management said it might borrow if pandemic-related economic conditions worsen; repayment could depend on real estate sales at acceptable prices.
- A Hawaii Department of Health order concerning alleged wastewater-effluent violations at the Upcountry Maui facility includes a $230,000 administrative penalty and a requirement to develop a new treatment plant. Corrective-action work was completed through June 30, 2021, and the department was reviewing test results. The company could not estimate any probable liability and recorded no provision.
- The company made a $0.553 million minimum pension contribution in January 2021 and said no further 2021 contributions were required. CFO Michael Hotta notified the company on August 10 that he would resign effective September 3, 2021.
Important facts for investors to verify
- Whether the $43.9 million Kapalua Central Resort transaction satisfied its due-diligence and closing conditions, and its eventual timing and proceeds.
- Current status of the wastewater order, remediation review, and any resulting penalty or treatment-plant obligation.
- Extension, refinancing, or repayment plans for the credit facility before its December 31, 2021 maturity, including the LIBOR transition.
- Whether post-quarter visitor trends and tenant sales sustained leasing and resort activity, and how much 2021 profitability depends on property transactions.
- The reason for the difference between the filing’s $8,000 and $10,000 disclosures of six-month interest paid.