Maui Land & Pineapple Company, Inc. — 2018 Form 10-K
Business context and reporting period. This annual report covers the year ended December 31, 2018, compared with 2017. The Hawaii-based company owns approximately 22,800 acres on Maui and operates real estate, leasing, utilities, and resort amenities businesses. Leasing and utilities are its largest recurring revenue sources.
Key financial results
| Metric | 2018 | 2017 |
|---|---|---|
| Operating revenue | $11.037 million | $24.582 million |
| Operating income (loss) | $(3.831) million | $11.961 million |
| Net income | $0.498 million | $10.900 million |
| Net income per share | $0.03 | $0.57 |
| Cash from operating activities | $0.882 million | $8.350 million |
| Cash at year-end | $0.624 million | $1.029 million |
| Outstanding credit-facility borrowings | $1.235 million | $1.235 million |
- Revenue declined about 55%; 2017 included a $7.0 million sale of the Kapalua Golf Academy practice course, producing an approximately $6.4 million gain. No comparable real estate sale occurred in 2018.
- 2018 operating margin was approximately negative 35%, versus approximately 49% in 2017; the prior-year result benefited substantially from the property sale. The 2018 net profit depended on a $5.0 million income-tax benefit related to expected refunds of AMT credits.
- Recurring segment revenue increased modestly: leasing was $6.223 million, utilities $3.220 million, and resort amenities $1.148 million. Real estate revenue was $0.446 million, consisting of commissions, with no land-sale revenue.
- Operating cash flow fell to $0.882 million. Year-end total assets were $48.1 million, total liabilities approximately $17.2 million, and stockholders’ equity $30.9 million. Accrued retirement benefits were $10.0 million; the defined-benefit pension plan was underfunded by $10.0 million.
Liquidity, debt, and capital resources
At December 31, 2018, the company had $0.624 million of cash and $13.8 million available under its $15.0 million revolving facility with First Hawaiian Bank. The facility matured December 31, 2019, with two optional one-year extensions, and carried interest at LIBOR plus 3.50%. The company reported compliance with its covenants, including minimum defined liquidity of $2.0 million and maximum total liabilities of $45.0 million. Kapalua Mauka land and approximately 30,000 square feet of commercial space secure the facility. The filing reports no regular cash dividends and no plans to pay them in the foreseeable future.
Material changes, outlook, and risks
- Real estate operations swung from $13.118 million of segment operating income in 2017 to a $2.324 million loss in 2018. The company cited the absence of the prior-year land sale and higher legal defense, mediation, and settlement costs. Leasing operating income rose to $3.653 million; utilities operating income was $1.007 million, and resort amenities operating income was $0.039 million.
- Management’s next-12-month priorities were operating-infrastructure investment and continued development planning and entitlement work. No numerical earnings or revenue guidance was provided. Development spending may require borrowing or real estate sales, potentially on compressed timelines.
- Planned developments include Kapalua Resort projects and Hali’imaile Town. The company cited projected costs to complete of $500 million–$1 billion for Kapalua Resort and $100 million–$200 million for Hali’imaile Town; timing, financing, entitlements, and execution remain uncertain.
- The Hawaii Department of Health issued an order alleging wastewater effluent violations at the Upcountry facility. It called for a $230,000 penalty and a new treatment plant. The company requested a hearing scheduled for September 2019 and said it could not estimate any probable liability; no provision was recorded.
- Several Kapalua Bay-related lawsuits were settled in 2018 or early 2019 for undisclosed amounts. The company paid one settlement, insurance paid another and reimbursed certain defense costs, and a further undisclosed payment was accrued at year-end.
- Key risks include Maui tourism and real estate cycles, financing and covenant constraints, long entitlement timelines and development costs, weather and natural disasters, environmental regulation, and pension-asset and interest-rate volatility. The company reported $10.8 million of deferred development costs, which management considered recoverable; no impairment was recorded in 2018.
- The company recorded a $1.55 million pension-related other comprehensive loss in 2018. It expected no required minimum pension contribution in 2019. Auditors issued unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Whether the $5.0 million AMT-credit refund is received as expected: $2.5 million was expected in 2019, with the remainder over the following two years.
- Outcome and financial impact of the wastewater hearing, required remediation, and any treatment-plant construction costs.
- Settlement amounts, insurance recoveries, and any remaining exposure from Kapalua Bay litigation.
- Credit-facility renewal or extension terms, covenant headroom, and the company’s ability to fund infrastructure and development plans without pressured asset sales.
- Progress, approvals, financing, and updated cost estimates for major development projects, along with recoverability of deferred development costs.