Maui Land & Pineapple Company, Inc. — 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013; comparisons are with 2012. This is an annual filing, not a standalone fourth-quarter report. The company owns approximately 23,300 acres on Maui and operates real estate, leasing, regulated utilities and resort amenities businesses.
Financial performance
| Metric | 2013 | 2012 |
|---|---|---|
| Operating revenue | $15.2 million | $13.6 million |
| Operating loss | $0.5 million | $1.3 million |
| Loss from continuing operations | $3.0 million | $3.8 million |
| Net loss | $1.2 million ($0.06/share) | $4.6 million ($0.25/share) |
| Net cash used in operating activities | $3.6 million | $3.8 million |
| Cash and cash equivalents at year-end | $0.36 million | $0.83 million |
| Total debt at year-end | $49.0 million | $49.3 million |
Revenue increased about 12%, while the operating loss narrowed; the company remained loss-making. The improvement in net loss chiefly reflected real estate sale gains and discontinued-operations income, rather than positive operating cash generation. Operating margin was approximately negative 3.5%, versus negative 9.2% in 2012. Interest expense was $2.5 million, compared with $2.6 million.
Segment results: real estate operating income was $0.36 million, including a $2.1 million gain on a parcel sale; leasing recorded a $0.41 million loss; utilities earned $0.88 million; and resort amenities earned $0.33 million. Leasing revenue fell to $4.9 million from $5.8 million, while utilities revenue rose to $3.7 million from $3.5 million. Resort amenities revenue declined to $1.2 million from $1.6 million. The company reported $1.9 million of income from discontinued operations, including a gain on sale of former agricultural property and a tax-related reversal.
Liquidity, debt and pension obligations
Year-end current assets were $2.9 million against current liabilities of $54.6 million, a $51.7 million working-capital deficit; substantially all $49.0 million of debt was classified as current. Cash was $0.36 million, and operating cash flow remained negative. Both secured credit facilities—$29.0 million drawn on a Wells Fargo revolver and a $20.0 million American AgCredit term loan—were scheduled to mature May 1, 2014. The company said it could not repay them at maturity absent asset sales or refinancing and was negotiating extensions. Covenants included minimum liquidity requirements, and noncompliance could accelerate repayment.
Management stated that liquidity and going-concern prospects depended heavily on selling real estate at acceptable prices, extending or refinancing the debt, reducing costs and generating cash. The filing and auditor’s report 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 issued an unmodified opinion but included a going-concern emphasis. The company reported stockholders’ deficiency of $27.2 million.
The defined-benefit pension liability declined to $20.9 million from $30.3 million, principally due to a higher discount rate and increased plan assets. The company contributed $2.4 million in 2013 and expected to contribute approximately $2.8 million in 2014. A proposed state-directed purchase of the 270-acre Lipoa Point property was not binding on either party, and no sale was assured.
Material developments, outlook and risks
- In November 2013, the company settled disputes involving The Residences at Kapalua Bay. It was released from an approximately $35 million obligation to purchase project amenities in exchange for a $2.4 million deferred-maintenance payment, transfer of eight acres of land and a further $0.6 million payable over four years. It also received release from construction-loan guarantees and continued club access for $29,000 monthly. The settlement produced a $0.8 million gain on transferred land and a $0.3 million reduction in accrued contract-termination costs.
- Asset sales included a 10-acre parcel sold for $5.4 million and a former agricultural facility sold for $4.0 million. Proceeds supported settlement costs and debt reduction; some proceeds were deferred or subject to mandatory lender repayment.
- There is no quantified earnings or revenue guidance. Development activity was limited to planning, permitting and maintaining entitlements. Management’s near-term plan centered on asset sales, leasing, cost reductions and lender negotiations; success was not assured.
- Key risks include real estate and tourism cyclicality, development and entitlement delays, access to capital, debt covenants and refinancing, pension funding, environmental obligations, weather and natural disasters, and litigation. Several Kapalua Bay-related lawsuits seek unspecified damages; the company said it could not estimate probable exposure and recorded no provision. An EEOC case involving a former subsidiary also remained unresolved with no estimated liability.
- NYSE listing compliance was regained in May 2013 after a prior deficiency notice. The company paid no dividends in 2013 or 2012 and did not anticipate near-term cash dividends.
Investor facts to verify
- Whether the May 2014 debt maturities were extended or refinanced, and the resulting terms, covenants and collateral.
- Subsequent asset sales, actual net proceeds after mandatory debt repayments, and whether proceeds met liquidity needs.
- Actual 2014 pension contributions and any completed Lipoa Point transaction or other pension-funding measures.
- Cash burn, covenant compliance and developments affecting the stated going-concern uncertainty.
- Progress, outcomes and potential financial exposure from Kapalua Bay and EEOC litigation.