SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-6510 MAUI LAND & PINEAPPLE COMPANY, INC. (Exact name of registrant as specified in its charter) HAWAII 99-0107542 (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) P. O. BOX 187, KAHULUI, MAUI, HAWAII 96733-6687 (Address of principal executive offices) Registrant's telephone number, including area code: (808) 877-3351 NONE Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 1, 2000 Common Stock, no par value 7,195,800 shares
MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheets, June 30, 2000 (Unaudited) and December 31, 1999 3 Condensed Statements of Operations and Retained Earnings, Three Months Ended June 30, 2000 and 1999 (Unaudited) 4 Condensed Statements of Operations and Retained Earnings, Six Months Ended June 30, 2000 and 1999 (Unaudited) 5 Condensed Statements of Cash Flows, Six Months Ended June 30, 2000 and 1999 (Unaudited) 6 Notes to Condensed Financial Statements (Unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 4. Submission of Matters to a Vote of Security-Holders 13 Item 6. Exhibits and Reports on Form 8-K 13
PART I FINANCIAL INFORMATION Item 1. Financial Statements MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES CONDENSED BALANCE SHEETS Unaudited 6/30/00 12/31/99 (Dollars in Thousands) ASSETS Current Assets Cash and cash equivalents $ 674 $ 2,657 Accounts and notes receivable 11,061 15,098 Inventories 27,032 16,925 Other current assets 4,372 4,779 Total current assets 43,139 39,459 Property 232,804 224,958 Accumulated depreciation (128,878) (123,982) Property - net 103,926 100,976 Other Assets 13,752 12,952 Total 160,817 153,387 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current portion of long-term debt and capital lease obligations 2,435 3,056 Trade accounts payable 5,626 12,492 Other current liabilities 7,615 10,987 Total current liabilities 15,676 26,535 Long-Term Liabilities Long-term debt and capital lease obligations 41,542 25,497 Accrued retirement benefits 23,298 23,204 Equity in losses of joint venture 9,434 8,944 Other long-term liabilities 2,669 2,361 Total long-term liabilities 76,943 60,006 Minority Interest in Subsidiary 452 446 Stockholders' Equity Common stock, no par value - 7,200,000 shares authorized, 7,195,800 issued and outstanding 12,455 12,455 Retained earnings 55,291 53,945 Stockholders' equity 67,746 66,400 Total $160,817 $ 153,387 See accompanying Notes to Condensed Financial Statements.
MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (UNAUDITED) Three Months Ended 6/30/00 6/30/99 (Dollars in Thousands Except Share Amounts) Revenues Net sales $21,135 $22,013 Operating income 9,405 8,032 Other income 381 326 Total Revenues 30,921 30,371 Costs and Expenses Cost of goods sold 14,341 13,776 Operating expenses 7,551 6,946 Shipping and marketing 3,845 3,603 General and administrative 3,858 4,773 Interest 738 401 Equity in losses of joint ventures 226 268 Total Costs and Expenses 30,559 29,767 Income Before Income Taxes 362 604 Income Tax Expense 62 223 Net Income 300 381 Retained Earnings, Beginning of Period 54,991 50,899 Retained Earnings, End of Period 55,291 51,280 Per Common Share Net income $ .04 $ .05 See accompanying Notes to Condensed Financial Statements.
MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (UNAUDITED) Six Months Ended 6/30/00 6/30/99 (Dollars in Thousands Except Share Amounts) Revenues Net sales $45,273 $45,297 Operating income 19,796 18,196 Other income 627 525 Total Revenues 65,696 64,018 Costs and Expenses Cost of goods sold 30,060 28,518 Operating expenses 15,053 13,422 Shipping and marketing 8,062 9,367 General and administrative 7,470 8,220 Interest 1,206 892 Equity in losses of joint ventures 444 417 Total Costs and Expenses 62,295 60,836 Income Before Income Taxes 3,401 3,182 Income Tax Expense 1,156 1,177 Net Income 2,245 2,005 Retained Earnings, Beginning of Period 53,945 50,174 Cash Dividends (899) (899) Retained Earnings, End of Period 55,291 51,280 Per Common Share Net income .31 .28 Dividends $ .125 $ .125 See accompanying Notes to Condensed Financial Statements.
MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended 6/30/00 6/30/99 (Dollars in Thousands) Net Cash Provided by (Used in) Operating Activities $(6,230) $ 7,852 Investing Activities Purchases of property (9,988) (7,027) Proceeds from disposal of property 112 122 Contributions to joint ventures -- (300) Increases in deferred costs and other (279) (1,462) Net Cash Used in Investing Activities (10,155) (8,667) Financing Activities Payments of long-term debt and capital lease obligations (4,080) (954) Proceeds from long-term debt 19,300 932 Proceeds from short-term debt 75 273 Dividend paid (899) (899) Other 6 270 Net Cash Provided by (Used in) Financing Activities 14,402 (378) Net Decrease in Cash (1,983) (1,193) Cash and Cash Equivalents at Beginning of Period 2,657 3,447 Cash and Cash Equivalents at End of Period $ 674 $ 2,254 Supplemental Disclosure and Cash Flow Information - Interest (net of amounts capitalized) of $1,054,000 and $844,000 was paid during the six months ended June 30, 2000 and 1999, respectively. Income taxes of $1,622,000 and $1,036,000 were paid during the six months ended June 30, 2000 and 1999, respectively. See accompanying Notes to Condensed Financial Statements.
MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 1. In the opinion of management, the accompanying condensed financial statements contain all normal and recurring adjustments necessary to present a fair statement of financial position, results of operations and cash flows for the interim periods ended June 30, 2000 and 1999. 2. The Company's reports for interim periods utilize numerous estimates of production cost, general and administrative expenses, and other costs for the full year. Consequently, amounts in the interim reports are not necessarily indicative of results for the full year. 3. The effective tax rate for 2000 and 1999 differs from the statutory federal rate of 34% primarily because of the state tax provision and refundable state tax credits. 4. Accounts and notes receivable are reflected net of allowance for doubtful accounts of $748,000 and $783,000 at June 30, 2000 and December 31, 1999, respectively. 5. Inventories as of June 30, 2000 and December 31, 1999 were as follows (in thousands): 6/30/00 12/31/99 Pineapple products Finished goods $14,516 $ 7,399 Work in progress 1,092 839 Raw materials 3,385 1,476 Real estate held for sale 804 577 Merchandise, materials and supplies 7,235 6,634 Total Inventories $27,032 $16,925
6. Business Segment Information (in thousands): Three Months Ended Six Months Ended June 30 June 30 2000 1999 2000 1999 Revenues Pineapple $ 17,692 $ 19,249 $ 34,463 $ 39,168 Resort 11,762 10,057 28,580 22,801 Commercial & Property 1,222 1,031 2,397 1,954 Other 245 34 256 95 Total Revenues 30,921 30,371 65,696 64,018 Operating Profit (Loss) Pineapple (784) 1,399 (1,050) 3,242 Resort 1,983 1,101 6,076 2,759 Commercial & Property (84) (166) (122) (381) Other (15) (1,329) (297) (1,546) Total Operating Profit1,100 1,005 4,607 4,074 Interest Expense (738) (401) (1,206) (892) Income Tax Expense (62) (223) (1,156) (1,177) Net Income $ 300 $ 381 $ 2,245 $ 2,005 7. Average common shares outstanding for the interim periods ended June 30, 2000 and 1999 were 7,195,800 and 7,188,500, respectively.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Consolidated The Company reported consolidated net income of $300,000 for the second quarter of 2000 compared to $381,000 for the second quarter of 1999. For the first half of 2000 the Company's net income was $2,245,000 compared to $2,005,000 for the first half of 1999. Consolidated revenues were $30.9 million and $65.7 for the second quarter and first half of 2000, respectively, compared to $30.4 million and $64 million for the second quarter and first half of 1999, respectively. General and administrative expenses were lower in the second quarter and first half of 2000 by $915,000 and $750,000, respectively, compared to the same periods in 1999. These expenses were lower in 2000 primarily because in 1999 the Company wrote off $1.1 million of deferred costs for consultants who were engaged to analyze and develop strategic plans for the Company. Pension and post retirement expenses also decreased in 2000 primarily because of an increase in the discount rate and favorable investment returns on the pension plan assets. Partially offsetting these cost reductions were increased employment related expenses. Interest expense increased by 84% and 35%, respectively, in the second quarter and first half of 2000 compared to the same periods in 1999. The increases were primarily due to higher average borrowings and higher interest rates in 2000. Part of the expense increase was offset by interest capitalized in 2000 on major construction projects, in particular the Kapalua Village Course Clubhouse and Plantation Estates Phase II subdivision. Pineapple The Pineapple segment incurred operating losses of $784,000 and $1,050,000 in the second quarter and first half of 2000, respectively, compared to operating profits of $1,399,000 and $3,242,000 in the comparable periods of 1999. Revenues of $17.7 million and $34.5 million for the second quarter and first half of 2000, respectively, were 8% and 12% lower than the same periods last year. The overall case volume of imports of canned pineapple products into the U.S. was lower in the first five months of 2000 compared to the same period in 1999. However, an increase in imports by the Company's principal U. S. competitors, combined with aggressive pricing and promotional activity has resulted in the Company's Pineapple segment realizing lower case sales volume and lower average prices for canned pineapple products. Preliminary results of the fourth annual administrative review of duties on pineapple imports from Thailand covering the period from July 1, 1998 to June 30, 1999, were released by the Department of Commerce on August 1, 2000. The nine Thai pineapple companies reviewed were found to have lower dumping margins than those currently being assessed. The Department of Commerce recently initiated the proceedings for the "sunset review" of antidumping duties on imports of canned pineapple products from Thailand. This review is expected to take approximately one year. If a ruling is made to keep the antidumping duties in place, they will be renewed for an additional five years. In June 2000, the Department of Commerce issued a final determination concluding that tin mill products from Japan are being, or are likely to be, sold in the U.S. at less than fair value. The final determination specifically excludes from duties tin-coated steel with the specifications used by the Company to make cans. The exclusion was made as a result of requests by the Company and by other interested parties. Resort Kapalua Resort produced an operating profit of $1,983,000 in the second quarter of 2000 compared to $1,101,000 in the second quarter of 1999. For the first half of 2000 Kapalua had an operating profit of $6,076,000 compared to $2,759,000 for the same period a year ago. Revenues for the second quarter and first half of 2000 increased by 17% and 25%, respectively, compared to the same periods in 1999. Real estate sales accounted for approximately 20% and 30% of Resort operating profit for the second quarter and first half of 2000, respectively. There was no profit from real estate sales for the comparable periods in 1999. Higher occupancies at the hotels and villas in the Kapalua Resort and higher average green fees also contributed to the improved Resort operating results for the second quarter and first half of 2000. On a consolidated basis, lower shipping and marketing expense for the first half of 2000 was largely the result of the Company absorbing a reduced amount of expense for the 2000 Mercedes Championships. Such reduction was offset by a similar decrease in the tournament operations fee that is reflected in consolidated operating revenue for the same period. All 36 luxury beachfront condominiums under construction by the Company's joint venture with Lend Lease Real Estate Investment Inc., called The Coconut Grove on Kapalua Bay are now under binding sales contracts. Sales are anticipated to close beginning in the first quarter of 2001 as construction of the buildings is completed and title is delivered to the buyers. The Company has obtained the necessary zoning and entitlements for construction of the 31 half-acre residential lot subdivision on Site 19, and is presently awaiting final subdivision approval from the County of Maui. Sales are expected to begin in October 2000 after State and Federal registrations are completed. The Company does not expect to record profits from this project until 2001. Commercial & Property The Commercial & Property segment produced operating losses of $84,000 and $122,000 for the second quarter and first half of 2000, respectively, compared to $166,000 and $381,000 for the same periods in 1999. Revenues increased by $191,000 and $443,000 for the second quarter and the first half of 2000, respectively, compared to the same periods in 1999. Increased revenues and lower operating losses were due to improved operating results and increased electricity revenues from Kaahumanu Center. LIQUIDITY, CAPITAL RESOURCES AND OTHER At June 30, 2000, total debt including capital leases was $44 million, an increase of $15.4 million from year-end 1999. The increase in debt was primarily due to negative cash flows from operating activities and to capital expenditures. Increased pineapple inventories reflecting the seasonal pineapple canning activity coupled with lower sales volume, and expenditures for construction of Plantation Estates Phase II were largely responsible for the negative operating cash flows. Cash flow from operating activities is expected to improve after the pineapple canning season peaks in the third quarter. At the end of the second quarter of 2000, the Company had $15 million in unused short- and long-term credit facilities available. These credit facilities and operating cash flows are expected to be sufficient to finance the Company's remaining cash requirements in 2000. Consolidated expenditures in 2000 for fixed assets and deferred development costs are expected to approximate $21.9 million of which $8 million is for replacement of equipment and facilities for Pineapple and Resort operations. Capital expenditures for 2000 includes $7.3 million for construction of the Village Course Clubhouse, which is expected to be completed by the end of August 2000 and the Kapalua Golf Academy that opened in January 2000. In July 2000, the Company's Board of Directors approved $3.1 million for an integrated accounting and information technology system. Installation and implementation of the system will begin in August 2000 and is expected to take approximately one year. Capital expenditures for 2000 include $1.5 million of the cost for this project. The Company's information and non-information technology systems encountered no significant date-related problems since the year 2000 began. The Company anticipates that its Information Services personnel will spend approximately 5% of their time in 2000 to monitor business critical systems for any date-related problems that may occur during the year and through year-end 2000. No material future expenditures for date-related problems have been identified. This report contains forward-looking statements, within the meaning of Private Securities Litigation Reform Act of 1995, as to the Company's expectations regarding the adequacy of credit facilities, the closing of lot sales at The Coconut Grove on Kapalua Bay and sale of lots at Site 19. Forward-looking statements contained in this report or otherwise made by the Company are subject to certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Potential risks and uncertainties include, but are not limited to, those risks and uncertainties as disclosed in the Company's Annual Report to Shareholders and Form 10-K filing with the Securities and Exchange Commission. Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company's primary market risk exposure with regard to financial instruments is to changes in interest rates. The Company manages this risk by monitoring interest rates and future cash requirements, and evaluating opportunities to refinance borrowings at various maturities and interest rates. There were no material changes to the Company's market risk exposure during the first six months of 2000. PART II OTHER INFORMATION Item 1. Legal Proceedings Chemical Litigation - On July 10, 2000, Maui Land & Pineapple Company, Inc. v. Occidental Chemical Corporation, civil No. 97- 0867 (Second Circuit Court, State of Hawaii) was dismissed without prejudice. Item 4. Submission of Matters to a Vote of Security-Holders On April 26, 2000, the annual meeting of the Company's shareholders was held. Proxies for the meeting were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934. The number of outstanding shares as of March 1, 2000, the record date of the annual meeting, was 7,195,800. The results of the voting were as follows: Election of Class One Directors for a three-year term: Shares Voted For Shares Withheld Randolph G. Moore 6,417,785 18,735 Fred E. Trotter, III 6,410,480 26,040 Election of the firm Deloitte & Touche LLP as auditor of the Company for the fiscal year 2000: Shares voted for: 6,425,388 Shares voted against: 1,503 Shares abstained: 9,629 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (4) Instruments Defining the Rights of Security Holders *A. 2000 Loan Modification Agreement effective as of June 30, 2000. (27) Financial Data Schedule *As of June 30, 2000 and for the six months then ended. *Filed Herewith (b) Reports on Form 8-K The Company filed no reports on Form 8-K for the period covered by this report.
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MAUI LAND & PINEAPPLE COMPANY, INC. AUGUST 7, 2000 /S/ PAUL J. MEYER Date Paul J. Meyer Executive Vice President/Finance (Principal Financial Officer)