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| MLP > SEC Filings for MLP > Form 10-Q on 6-May-2009 | All Recent SEC Filings |
6-May-2009
Quarterly Report
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2008 and the unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. Depending upon the context, the terms the "Company," "we," "our," and "us," refers to either Maui Land & Pineapple Company, Inc. alone, or the Company and its subsidiaries.
Overview of the Company
Maui Land & Pineapple Company, Inc. is a Hawaii corporation and the successor to a business organized in 1909. We operate as a landholding and operating parent company for our principal subsidiaries, including Maui Pineapple Company, Ltd., a producer and marketer of Maui-grown pineapple, and Kapalua Land Company, Ltd., the operator of Kapalua Resort, a master-planned community in West Maui. Our reportable operating segments are Agriculture, Resort and Community Development.
The Agriculture segment primarily includes growing, packing, and marketing of fresh pineapple. Our pineapple is sold under the brand names Maui Gold® and Hawaiian Gold™. We also grow and market fresh organic pineapple. Prior to 2008, a portion of our business included processing (canning) pineapple; however, we ceased substantially all canning and processing of solid-pack product in June 2007.
The fresh fruit market is a year-round business, which requires consistency of supply. Over the past several years, we have made significant progress in changing our agronomic practices and planting schedules to produce a more consistent and predictable supply of fruit throughout the year. In addition, we have made significant progress in implementing improved crop maintenance and agronomic practices that we believe will improve our plant yields (tons of fruit per acre) and fruit quality.
The Kapalua Resort is part of approximately 22,000 contiguous acres owned by us in West Maui, most of which remains as open space. The Kapalua Resort borders the ocean with five white sand beaches and includes The Ritz-Carlton, Kapalua hotel, the Ritz-Carlton Club and Residences at Kapalua Bay, eight residential subdivisions, two championship golf courses (The Bay and The Plantation), a ten-court tennis facility, the first phase of commercial space in the central area of the Kapalua Resort, several restaurants, and over 800 condominiums, single-family homes and residential lots. We operate Kapalua Resort's two golf courses, the tennis facility, several retail shops, the Kapalua Villas, a vacation rental program, and provide certain services to the Kapalua Resort. We currently have approximately 204 units in our Kapalua Villas vacation rental program. Our Resort operations also include a Mountain Outpost, which is comprised of zip-lines stretching over scenic ravines in the West Maui mountains, a high ropes challenge course, a climbing wall and other activities.
The Community Development segment includes our real estate entitlement, development, construction, sales, leasing, and conservation activities. Our projects are focused primarily on the luxury real estate market in and surrounding the Kapalua Resort and affordable and moderately priced residential and mixed use projects in West Maui and Upcountry Maui. This segment also includes the operations of Kapalua Realty Company, our general brokerage real estate company located within the Resort, and Kapalua Water Company and Kapalua Waste Treatment Company our Public Utilities Commission-regulated water and sewage operations that service the Kapalua Resort and adjacent communities.
The Community Development segment also includes our 51% equity interest in Bay Holdings, the limited liability company that purchased the Kapalua Bay Hotel in August 2004 (see Note 10 to condensed consolidated financial statements). Bay Holdings demolished the Kapalua Bay Hotel and the adjacent shops in order to develop new whole and fractional residential units, an ocean-side spa, and a beach club at that location. As of March 31, 2009, the project was about 96% complete.
We have approximately 1,800 acres of land in Maui that are at various stages in the land entitlement process. We must obtain appropriate entitlements for land that we intend to develop or use for construction. Securing proper land entitlement is a process that requires obtaining county, state and federal approvals, which can take several years to complete, if at all, and entails a variety of risks.
In the latter part of 2008, we concluded that we should delay the start of construction of new development projects because of the global recession, the uncertainty in the national and local economies, the continuing turmoil in the financial and credit markets, and our cash flow constraints. However, we have continued to engage in planning, permitting and entitlement activities for our development projects, and we intend to proceed with construction and sales of the following projects, among others, when internal and external factors permit:
º •
º Kapalua Mauka: As presently planned, this project is comprised of 690
single and multi-family residential units and commercial components,
five acres of commercial space and up to 27 holes of golf on a total
of 925 acres.
º •
º The Village at Kapalua: This is the commercial component of the
central area of the Kapalua Resort. It is planned to be built in two
phases and will add approximately 30,000 square feet of new retail
space to the Kapalua Resort. The Village will also include apartments,
condominiums and other resort-related facilities. The first phase of
the commercial component opened in October 2006.
º •
º Pulelehua: This project is designed to be a new traditional community
for working families in West Maui. It encompasses 312 acres and is
currently planned to include 13 acres for an
elementary school, 882 dwelling units, 91 acres of usable open space, and a traditional village center with a mix of residential and neighborhood-serving commercial uses. We are currently in the process of securing a hearing for the project with the Maui County Council Land Use Committee.
º •
º Hali'imaile Town: This project is contemplated to be a new town in
Upcountry Maui, a holistic traditional community with agriculture,
education, and sustainability as core design elements. Community
design workshops were held to involve the Maui community in
determining the vision for this community. The public approval process
for any plan to develop this area is expected to take several years
and will be subject to urban growth boundary determination by the
County of Maui as it updates the County General Plan over the next two
years.
Current Developments
In the first quarter of 2009, all of our operations continued to be negatively affected by the global recession, and a significant amount of management's efforts were directed toward various initiatives to improve our liquidity. In the first quarter of 2009, we incurred a net loss of $13.2 million and had negative cash flows from operations of $9.9 million. In March 2009, we consummated the $50 million sale and leaseback transaction of the Plantation Golf Course (Note 9 to condensed consolidated financial statements) and applied $45 million of the sales proceeds to partially repay outstanding borrowings that were partially collateralized by the golf course. We amended our two revolving lines of credit to suspend or eliminate certain financial covenants for 2009 and to change the maturities of these lines to March 2010, one of which was previously due in November 2009 (Note 1 to condensed consolidated financial statements).
In March 2009, in an effort to reduce our costs, we eliminated approximately 100 employees from our workforce, primarily in the Resort and Community Development segments and in corporate services. We are currently in discussions with the lenders to restructure our revolving line of credit agreements to extend the maturities beyond March 2010 and to increase the amount of available credit. We are actively in the process of attempting to sell several real estate assets and to continue to reduce the net cash outflows from operations which will be critical to providing additional liquidity and to further reducing debt.
In February 2009, Bay Holdings entered into an amended and restated construction loan for completion of the Kapalua Bay project, after the default by Lehman Brothers Holdings, Inc. on the original construction loan in September 2008 (Note 10 to condensed consolidated financial statements).
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of accounting estimates. Changes in these estimates and assumptions are considered reasonably possible and may have a material effect on the consolidated financial statements and thus actual results could differ from the amounts reported and disclosed herein. Our critical accounting policies that require the use of estimates and assumptions were discussed in detail in our most recently filed Form 10-K. There have been no significant changes in our critical accounting policies during 2009.
There are no accounting pronouncements or interpretations that have been issued but not yet applied by us that we believe will have a material impact on our consolidated financial statements.
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