Maui Land & Pineapple Company, Inc. — Q2 2022 Form 10-Q
Business context and reporting period. The unaudited filing covers the quarter and six months ended June 30, 2022. The company owns approximately 22,000 acres on Maui and operates in real estate, leasing, and resort amenities. Unless noted otherwise, amounts below are in millions of dollars.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Operating revenue | $13.987 | $4.950 | $16.234 | $7.009 |
| Operating income | $10.641 | $2.096 | $10.139 | $1.438 |
| Net income | $10.525 | $1.879 | $9.907 | $0.945 |
| Diluted earnings per share | $0.54 | $0.10 | $0.51 | $0.05 |
| Operating cash flow | Not separately provided for the quarter | $11.948 | $1.691 |
- Q2 operating margin was approximately 76% versus 42% a year earlier; first-half operating margin was approximately 62% versus 21%. Higher real estate sales drove the improvement.
- At June 30, cash was $16.949, restricted cash $0.273, and current assets $21.726. Cash at December 31, 2021 was $5.596. The company reported $15.0 of availability under its revolving credit facility and no outstanding borrowings.
- Total liabilities were $14.457, including $7.931 of accrued retirement benefits. Stockholders’ equity was $34.456. The $15.0 credit facility matures December 31, 2025; the company reported compliance with its covenants.
Material changes and drivers
- Real estate revenue was $11.6 in both Q2 and the first half of 2022, compared with $2.7 in each 2021 comparable period. The company reported a $2.0 sale of approximately 50 acres to Maui County in June and received $9.2 net proceeds from closing a 646-acre Upcountry parcel sale in May.
- Leasing revenue rose to $2.198 in Q2 from $1.962, and to $4.228 in the first half from $3.763. Management attributed higher commercial leasing income partly to increased visitor traffic; percentage rentals were $0.6 in Q2 and $1.0 for the first half.
- Resort amenities revenue declined to $0.189 in Q2 from $0.288 and to $0.406 for the first half from $0.546. Management cited lower Kapalua Club membership; segment costs also increased, including higher golf course fees.
- First-half operating cash flow was $11.948; investing activities used $0.031 and financing activities used $0.291. Cash and restricted cash rose by $11.626 to $17.222.
Outlook, risks, contingencies, and unusual items
- No quantitative earnings or revenue guidance is provided. Management said cash, operating receipts, and available credit are expected to provide flexibility for working capital and capital expenditures through the next 12 months and foreseeable future. Planned initiatives include infrastructure investment and development planning and entitlement work.
- A $40.0 agreement to sell the 46-acre Kapalua Central Resort project remains contingent on Maui Planning Commission approval, by April 10, 2023, of a five-year extension to the Special Management Area permit. If not approved, the agreement terminates. Closing is expected within 30 days after approval. The buyer may use $0.290 of the $0.300 escrow deposit for permit-extension costs.
- A state Department of Health order concerning alleged wastewater effluent violations at the Upcountry facility includes a $0.230 administrative penalty and a requirement to develop a new treatment plant. The order is deferred while corrective-action discussions continue; testing reportedly remains within allowable ranges. $0.023 was accrued, and any further probable liability could not be estimated.
- Management cited exposure to COVID-19 and its effects on operations, tourism and property demand; macroeconomic conditions, interest rates and energy costs; real estate demand and entitlements; weather and natural disasters; pension funding; and the ability to meet debt terms or raise capital. No material risk-factor changes were reported for the six months.
- Shareholders approved reincorporation from Hawaii to Delaware on June 29; conversion was completed July 18, 2022, after quarter-end. Management reported no change in ownership or ticker symbol.
Important facts for investors to verify
- Progress toward the permit extension and closing conditions for the $40.0 Kapalua Central Resort sale.
- Whether the property-sale-driven earnings and cash generation are repeatable, given the cyclical nature of real estate sales.
- Developments in the wastewater order, including potential remediation costs beyond the amount accrued.
- Liquidity and covenant compliance, pension obligations, and any borrowing or capital needs if planned projects proceed.
- Effects of tourism, tenant sales, club membership, and broader economic conditions on recurring leasing and resort-amenity results.