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| MLP > SEC Filings for MLP > Form 10-Q on 4-Aug-2009 | All Recent SEC Filings |
4-Aug-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 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 201 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 11 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. Construction was completed and the sale of 15 units closed escrow in June 2009.
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: The long-planned expansion of the Kapalua Resort, this
project is entitled for up to 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. This property has the
necessary land use entitlements to proceed.
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. This project has received the necessary State Land
Use Commission Urban designation, but has not received the appropriate
County zoning. 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
For the six months ended June 30, 2009, we incurred a net loss of $67.4 million and had negative cash flows from operations of $15.1 million. At June 30, 2009, we had amounts outstanding under borrowing agreements of approximately $102 million; and approximately $10.7 million available under existing lines of credit and $1.5 million in cash and cash equivalents. As a result of the continued poor operating results in 2009, we also had negative working capital of $42.7 million and a deficiency in stockholders' equity (total liabilities exceeded total assets) of $34.9 million. In March 2010, $58.8 million of borrowings under our two lines of credit are scheduled to mature. If we are unable to extend the maturity date of our lines of credit or are unable to meet financial covenants resulting in our borrowings becoming immediately due, we may not have sufficient liquidity to repay such outstanding borrowings. These circumstances raised substantial doubt about our ability to continue as a going concern and there can be no assurance that we will be able to successfully achieve our initiatives in order to continue as a going concern. See Note 1 to condensed consolidated financial statements.
Some of our significant events in the second quarter of 2009 were as follows:
º •
º In April, we hired John P. Durkin to serve as our Chief Financial
Officer.
º •
º In May, at our Annual Meeting of Shareholders, Stephen M. Case, David
C. Cole, Walter A. Dods Jr. and Fred E. Trotter III, were re-elected
as Class I Directors.
º •
º In May, our Board of Directors appointed Warren H. Haruki to serve as
Interim Chief Executive Officer in addition to his position as
Executive Chairman after Robert I. Webber resigned from his positions
as our President and Chief Executive Officer.
º •
º In June, construction of the Residences at Kapalua Bay project was
completed and we closed escrow on the sale of 15 units. The beach club
and the spa opened in July.
º •
º In June, we announced that we would not be able to host the October
2009 LPGA golf tournament.
º •
º In June, we recorded impairment charges of $37.5 million related to
(i) our investment in Bay Holdings (Note 11 to condensed consolidated
financial statements) and (ii) development plans and real estate held
for sale (Note 7 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.
FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R), will be effective for us on January 1, 2010. We are currently evaluating whether this pronouncement will require us to consolidate any of our unconsolidated affiliates. There are no other 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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