Business context and reporting period
Maui Land & Pineapple Company, Inc. filed this unaudited Form 10-Q for the quarter ended March 31, 2019. The company owns approximately 23,000 acres on Maui and reports four operating segments: real estate, leasing, utilities, and resort amenities.
Financial performance and position
Amounts below are in millions of dollars unless otherwise noted; quarterly results compare Q1 2019 with Q1 2018.
- Revenue: $2.843 million, up 11.8% from $2.542 million. Leasing contributed $1.677 million, utilities $0.748 million, resort amenities and other $0.261 million, and real estate $0.157 million.
- Operating results: Operating loss was $0.795 million versus $0.825 million. Net loss widened to $1.095 million from $0.964 million; diluted loss per share was $0.06 versus $0.05. Comprehensive loss was $0.884 million versus $0.779 million.
- Segment results: Leasing income rose to $1.109 million from $0.917 million; utilities income fell to $0.147 million from $0.183 million. Real estate recorded a $0.107 million loss versus $0.030 million, and resort amenities and other lost $0.050 million versus $0.046 million.
- Cash flow: Operating cash flow was $0.555 million, investing cash use was $0.146 million, and financing cash provided was $0.100 million. Cash increased to $1.133 million from $0.624 million at year-end.
- Liquidity and debt: The company reported $13.3 million of available capacity on its $15 million revolving credit facility and $1.1 million cash. Debt outstanding was $1.735 million, up from $1.235 million at December 31, 2018. The facility bears interest at LIBOR plus 3.50% (5.99% at quarter-end) and matures December 31, 2019, with two optional one-year extensions. The company said it was compliant with facility covenants.
- Balance sheet: Total assets were $48.659 million; stockholders’ equity was $30.862 million. Accrued retirement benefits totaled $10.054 million, including defined-benefit pension and non-qualified retirement obligations.
Material changes versus the prior comparable period
- Revenue increased $0.301 million, led by higher leasing revenue from new Upcountry Maui tenants. Leasing segment income improved.
- Utilities revenue increased, but higher deferred maintenance, repair, and maintenance costs reduced segment income.
- Real estate costs rose due to legal defense expenses related to litigation concerning the former Ritz-Carlton Club and Residences, Kapalua Bay project and impairment of a 33-acre Upcountry Maui parcel and wastewater treatment facility, written down to zero.
- Pension and other post-retirement expense increased to $0.253 million from $0.102 million, contributing to the higher net loss. Interest expense also increased modestly.
- The company received $0.5 million in credit-facility proceeds during the quarter. It adopted new lease accounting guidance effective January 1, 2019 and reported no material financial-statement impact.
Outlook, risks, and unusual items
No quantified earnings or revenue guidance was provided. For the remaining nine months of 2019, management expects to invest in operating infrastructure and continue planning and entitlement work on development projects. It cautioned that these initiatives may require additional borrowing and that repayment may depend on selling real estate at acceptable prices within compressed timeframes.
Risks cited include real-estate and tourism demand, obtaining development entitlements, project cost and timing, weather and natural disasters, environmental obligations, pension funding, debt covenant compliance and refinancing, access to capital, and the ability to sell assets. Management said other pending claims and legal actions are not expected to materially adversely affect financial position or results, but disclosed ongoing litigation expenses relating to the former Kapalua Bay project. The filing also notes that $2.5 million of income tax receivable is expected in 2019, with the remaining $2.5 million of the recognized AMT credit expected over the following two years. Management reported effective disclosure controls and no significant change in internal control over financial reporting.
Important facts for investors to verify
- Whether the revolving facility is extended, refinanced, or repaid before its December 2019 maturity, and whether covenant liquidity requirements remain satisfied.
- Timing and collection of the $2.5 million income tax refund expected in 2019, and subsequent collection of the remaining credit.
- Progress and potential costs or outcomes of the Kapalua Bay litigation and the impaired Upcountry Maui property.
- Whether development plans, asset sales, maintenance spending, and pension obligations affect future cash needs.
- Whether leasing growth continues and utilities costs or resort amenities results change in subsequent periods.