Maui Land & Pineapple Company, Inc. — FY 2012 Form 10-K
Reporting period: Fiscal year ended December 31, 2012. Unless stated otherwise, financial figures below are in U.S. dollars and millions. The company owns approximately 23,300 acres on Maui and operates real estate, leasing, utilities, and resort amenities businesses. Former agriculture, golf, and retail operations are reported as discontinued operations.
Financial results and position
| Metric | 2012 | 2011 |
|---|---|---|
| Revenue | $16.164 | $14.542 |
| Operating loss | $(2.393) | $(7.282) |
| Loss from continuing operations | $(4.956) | $(9.550) |
| Discontinued-operations income | $0.354 | $14.628 |
| Net income (loss) | $(4.602) | $5.078 |
| Net loss per share | $(0.25) | Net income per share $0.27 |
| Cash used in operating activities | $(3.773) | $(10.225) |
| Cash and cash equivalents at year-end | $0.829 | $0.890 |
| Total debt at year-end | $49.268 | $45.521 |
- Revenue increased 11.2%; operating loss narrowed substantially, reflecting improved segment results and cost reductions. Operating loss was about 14.8% of revenue in 2012.
- 2011 net income included a $15.1 million gain on the Bay Course sale, recognized in discontinued operations. The 2012 parcel sale generated a reported gain of approximately $1.4 million.
- 2012 segment revenue and operating results: Real Estate $2.545 million and $(0.338) million; Leasing $5.806 million and $0.428 million; Utilities $3.541 million and $0.624 million; Resort Amenities $4.228 million and $(0.181) million.
- General and administrative expense fell to $3.029 million from $6.271 million; selling and marketing expense fell to $0.168 million from $0.792 million. Interest expense was $2.577 million versus $2.429 million.
- Current assets were $4.916 million and current liabilities $14.685 million, a $9.769 million working-capital deficit. Stockholders’ deficiency was $34.363 million. The company reported $8.8 million of available revolver capacity at year-end.
- Investing activities provided $0.102 million and financing activities provided $3.610 million. The company had no significant capital expenditures planned for 2013.
Material changes and developments
- Leasing and Utilities moved from operating losses in 2011 to operating profits in 2012; Resort Amenities and Real Estate remained loss-making but improved.
- The company sold an 89-acre Upcountry Maui parcel for $1.5 million in January 2012 and applied $0.353 million of proceeds to term-loan principal. Assets held for sale at year-end included a 7-acre parcel and a 630-acre parcel.
- Both principal credit facilities were extended in February 2013 from May 1, 2013 to May 1, 2014. The American AgCredit amendment requires a $4.1 million principal repayment by December 31, 2013.
- Bay Holdings’ project lender foreclosure auction occurred in December 2012; a non-affiliated investment company was confirmed as successful bidder on January 31, 2013. The company’s 51% investment had been written down to zero.
- The NYSE notified the company of noncompliance with continued listing standards in October 2012. The exchange accepted the company’s remediation plan in January 2013, with a stated 18-month period to achieve compliance.
Outlook, risks, and unusual items
- Going concern: Management and the auditor state that recurring negative operating cash flows and stockholders’ deficiency raise substantial doubt about the company’s ability to continue as a going concern. The auditor’s opinion on the financial statements was unqualified, with a going-concern explanatory paragraph.
- Management’s 12-month cash outlook and covenant compliance depend heavily on selling real estate at acceptable prices, continuing cost reductions, and other cash-generation initiatives. No assurance is given that asset sales or refinancing will be achieved. Covenant breaches could accelerate debt, which the company says it could not repay with available liquidity.
- Credit agreements require at least $4 million of defined liquidity and include other financial covenants. Significant land assets are pledged as collateral; sale proceeds may be subject to mandatory debt repayments.
- The company had a $35 million commitment to purchase the Kapalua Bay spa, beach club improvements, and sundry store, but lacked liquidity to complete the purchase. It recorded $4.1 million for estimated exposure under completion and recourse guarantees; the purchase commitment itself was not accrued. Negotiations with lenders were ongoing.
- The defined-benefit pension liability was $30.3 million at year-end, up from $27.6 million, mainly due to a lower discount rate. Expected 2013 plan contributions were $2.4 million; approximately 7,000 acres were pledged as additional PBGC security under a 2012 settlement.
- Pending matters include an EEOC lawsuit concerning former agricultural operations and two lawsuits relating to Kapalua Bay residences. The company disputes the allegations and says potential liabilities cannot be reasonably estimated; no provisions were recorded for these matters.
- Key business risks include Maui real-estate and tourism cyclicality, financing and liquidity constraints, entitlement and development delays, joint-venture exposure, environmental obligations, natural disasters, pension funding, and NYSE listing compliance. The filing provides no specific earnings or revenue guidance.
Most important facts for investors to verify
- Whether the company can generate sufficient cash through asset sales and operations to meet the $4.1 million required loan repayment, maintain liquidity covenants, and address debt maturity in May 2014.
- The ultimate resolution and financial exposure from the Kapalua Bay foreclosure, amenities purchase commitment, and $4.1 million guarantee accrual.
- Progress toward NYSE listing compliance and the status of the accepted remediation plan.
- Actual pension contributions and any changes in the $30.3 million pension deficit or PBGC collateral obligations.
- Developments in the EEOC and Kapalua Bay lawsuits, including any changes in estimated exposure or required accruals.