Maui Land & Pineapple Company, Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. Unaudited results. The company owns approximately 23,000 acres on Maui and operates real estate, leasing, utilities, and resort-amenities businesses.
Financial performance and position
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Operating revenue | $3.105 million | $2.960 million | $5.948 million | $5.502 million |
| Operating income (loss) | $138,000 | $(431,000) | $(656,000) | $(1.256) million |
| Net loss | $(181,000) | $(570,000) | $(1.275) million | $(1.534) million |
| Net loss per share | $(0.01) | $(0.03) | $(0.07) | $(0.08) |
Amounts are in U.S. dollars; financial statement amounts are reported in thousands unless indicated otherwise.
- Revenue and segments: Q2 revenue rose about 5% year over year, led by leasing and utilities. For the first half, revenue rose about 8%. First-half leasing operating income increased to $2.218 million from $1.769 million; utilities operating income was $490,000 versus $473,000. Real estate remained loss-making, while resort amenities posted a first-half operating loss of $24,000.
- Cash flow: First-half operating cash flow was $(91,000), compared with $805,000 provided in 2018. Investing outflows were $256,000; financing provided $345,000, including $800,000 of debt proceeds and $455,000 of debt/common-stock issuance costs and other outflows. Cash declined $2,000 to $622,000.
- Balance sheet and liquidity: At June 30, total assets were $47.637 million, stockholders’ equity $31.021 million, and current liabilities $4.030 million. Cash was $622,000; current assets included $2.499 million of income-tax receivable. The company reported $13.0 million available under its $15 million revolving credit facility. Recorded debt was $2.035 million, classified as current.
- Debt and obligations: The First Hawaiian Bank facility matures December 31, 2019, with two optional one-year extensions; its June 30 rate was 5.94% (LIBOR plus 3.50%). It is secured by the 800-acre Kapalua Mauka project and commercial space. The company said it was covenant-compliant; covenants include minimum defined liquidity of $2.0 million and maximum total liabilities of $45.0 million. Accrued retirement benefits totaled $10.051 million.
Changes, outlook, and risks
- Q2 operating results improved to income from a loss, while the six-month operating and net losses narrowed. The company attributed lower real-estate costs in Q2 to reduced legal-defense costs. Leasing gains reflected increased percentage rent and improved renegotiated lease terms.
- Utilities expenses increased due mainly to deferred maintenance and repairs. Resort amenities revenue and costs declined primarily because the Kapalua Plantation Golf Course closed for renovations in February 2019.
- Pension and other postretirement expense increased to $509,000 for the first half from $204,000 a year earlier. The company made no required defined-benefit pension contributions during the period.
- Management’s next-six-month initiatives include operating-infrastructure investment and continued planning and entitlement work on development projects. These activities may require facility borrowings or other debt; repayment could depend on selling real estate at acceptable prices within constrained timeframes. No quantified earnings or revenue guidance was provided.
- The company expects $2.5 million of AMT credits in 2020 and the remaining balance over the following two years. A 33-acre agricultural parcel and wastewater facility was written down to zero in Q1 2019; the 630-acre parcel remained held for sale at $156,000.
- Management cited risks including real-estate and tourism demand, development approvals and costs, weather and natural disasters, pension funding, capital availability, and the ability to extend or refinance debt. Various claims and legal actions are pending; management does not expect them to materially affect financial position or results. No change in previously reported commitments and contingencies was noted.
- Adoption of the new lease accounting standard on January 1, 2019 had no material impact. Management reported disclosure controls effective and no significant change in internal controls over financial reporting.
Key facts for investors to verify
- Facility maturity and extension status, covenant liquidity calculation, and the company’s plan to refinance or repay debt before maturity.
- Cash-flow trajectory and reliance on asset sales, available borrowing capacity, and the timing and collectability of the $5.0 million income-tax receivable.
- Progress on development entitlements and real-estate sales, and the sustainability of leasing revenue improvements.
- Future pension costs and funding requirements, utility maintenance needs, and any material developments in pending legal matters.