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 SEPTEMBER 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 November 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, September 30, 2000 (Unaudited) and December 31, 1999 3 Condensed Statements of Operations and Retained Earnings, Three Months Ended September 30, 2000 and 1999 (Unaudited) 4 Condensed Statements of Operations and Retained Earnings, Nine Months Ended September 30, 2000 and 1999 (Unaudited) 5 Condensed Statements of Cash Flows, Nine Months Ended September 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 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 9/30/00 12/31/99 (Dollars in Thousands) ASSETS Current Assets Cash and cash equivalents $ 1,079 $ 2,657 Accounts and notes receivable 19,541 15,098 Inventories 27,957 16,925 Other current assets 4,315 4,779 Total current assets 52,892 39,459 Property 237,898 224,958 Accumulated depreciation (130,880) (123,982) Property - net 107,018 100,976 Other Assets 14,378 12,952 Total 174,288 153,387 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current portion of long-term debt and capital lease obligations 9,146 3,056 Trade accounts payable 8,868 12,492 Other current liabilities 8,892 10,987 Total current liabilities 26,906 26,535 Long-Term Liabilities Long-term debt and capital lease obligations 42,990 25,497 Accrued retirement benefits 23,246 23,204 Equity in losses of joint venture 9,784 8,944 Other long-term liabilities 2,635 2,361 Total long-term liabilities 78,655 60,006 Minority Interest in Subsidiary 425 446 Stockholders' Equity Common stock, no par value - 7,200,000 shares authorized, 7,195,800 issued and outstanding 12,455 12,455 Retained earnings 55,847 53,945 Stockholders' equity 68,302 66,400 Total $174,288 $ 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 9/30/00 9/30/99 (Dollars in Thousands Except Share Amounts) Revenues Net sales $28,279 $31,277 Operating income 8,595 8,077 Other income 321 305 Total Revenues 37,195 39,659 Costs and Expenses Cost of goods sold 19,675 21,592 Operating expenses 7,167 6,769 Shipping and marketing 4,511 4,484 General and administrative 3,855 4,089 Interest 808 457 Equity in losses of joint ventures 327 237 Total Costs and Expenses 36,343 37,628 Income Before Income Taxes 852 2,031 Income Tax Expense 296 761 Net Income 556 1,270 Retained Earnings, Beginning of Period 55,291 51,280 Retained Earnings, End of Period 55,847 52,550 Per Common Share Net income $ .08 $ .18 See accompanying Notes to Condensed Financial Statements. MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (UNAUDITED) Nine Months Ended 9/30/00 9/30/99 (Dollars in Thousands Except Share Amounts) Revenues Net sales $73,552 $76,574 Operating income 28,391 26,273 Other income 948 830 Total Revenues 102,891 103,677 Costs and Expenses Cost of goods sold 49,735 50,110 Operating expenses 22,220 20,191 Shipping and marketing 12,573 13,851 General and administrative 11,325 12,309 Interest 2,014 1,349 Equity in losses of joint ventures 771 654 Total Costs and Expenses 98,638 98,464 Income Before Income Taxes 4,253 5,213 Income Tax Expense 1,452 1,938 Net Income 2,801 3,275 Retained Earnings, Beginning of Period 53,945 50,174 Cash Dividends (899) (899) Retained Earnings, End of Period 55,847 52,550 Per Common Share Net income .39 .46 Dividends $ .125 $ .125 See accompanying Notes to Condensed Financial Statements. MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended 9/30/00 9/30/99 (Dollars in Thousands) Net Cash Provided by (Used in) Operating Activities $(9,214) $ 1,331 Investing Activities Purchases of property (14,813) (10,713) Proceeds from disposal of property 199 418 Distributions from (Contributions to) joint ventures 46 (575) Increases in deferred costs and other (326) (1,979) Net Cash Used in Investing Activities (14,894) (12,849) Financing Activities Payments of long-term debt and capital lease obligations (4,745) (1,726) Proceeds from long-term debt 28,100 11,131 Proceeds from short-term debt 95 498 Dividend paid (899) (899) Other (21) 339 Net Cash Provided by Financing Activities 22,530 9,343 Net Decrease in Cash (1,578) (2,175) Cash and Cash Equivalents at Beginning of Period 2,657 3,447 Cash and Cash Equivalents at End of Period $ 1,079 $ 1,272 Supplemental Disclosure and Cash Flow Information - Interest (net of amounts capitalized) of $1,747,000 and $1,235,000 was paid during the nine months ended September 30, 2000 and 1999, respectively. Income taxes of $1,622,000 and $1,493,000 were paid during the nine months ended September 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 September 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 $685,000 and $783,000 at September 30, 2000 and December 31, 1999, respectively. 5. Inventories as of September 30, 2000 and December 31, 1999 were as follows (in thousands): 9/30/00 12/31/99 Pineapple products Finished goods $16,037 $ 7,399 Work in progress 1,043 839 Raw materials 2,564 1,476 Real estate held for sale 774 577 Merchandise, materials and supplies 7,539 6,634 Total Inventories $27,957 $16,925 6. Business Segment Information (in thousands): Three Months Ended Nine Months Ended September 30 September 30 2000 1999 2000 1999 Revenues Pineapple $ 24,810 $ 28,337 $ 59,273 $ 67,505 Resort 11,061 10,118 39,641 32,919 Commercial & Property 1,302 1,201 3,699 3,155 Other 22 3 278 98 Total Revenues 37,195 39,659 102,891 103,677 Operating Profit (Loss) Pineapple 822 2,034 (228) 5,276 Resort 1,317 799 7,393 3,558 Commercial & Property (171) (76) (293) (457) Other (308) (269) (605) (1,815) Total Operating Profit 1,660 2,488 6,267 6,562 Interest Expense (808) (457) (2,014) (1,349) Income Tax Expense (296) (761) (1,452) (1,938) Net Income $ 556 $ 1,270 $ 2,801 $ 3,275 7. Average common shares outstanding for the interim periods ended September 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 Consolidated net income for the third quarter of 2000 was $556,000 as compared to $1,270,000 for the third quarter of 1999. Revenues of $37 million for the third quarter of 2000 were 6% lower than the third quarter of 1999. For the first nine months of 2000 the Company produced consolidated net income of $2,801,000 compared to $3,275,000 for the first nine months of 1999. Revenues of $103 million for the first nine months of 2000 were lower by 1% than the same period in 1999. General and administrative expenses were lower in the third quarter and first nine months of 2000 by $234,000 and $984,000, respectively, compared to the same periods in 1999. In 2000, the Company's pension and post retirement expenses decreased primarily because of an increase in the discount rate and favorable investment returns on the pension plan assets. These cost reductions were partially offset by increased employment- related expenses and expenses for the analysis and selection of an integrated accounting and information technology system which the Company will be implementing. 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. Interest expense was higher by 77% and 49%, respectively, in the third quarter and first nine months of 2000 compared to the same periods in 1999 due to higher average borrowings and higher interest rates in 2000. The higher interest expense was partially offset by interest capitalized in 2000 on major construction projects at the Company's Kapalua Resort. Pineapple Revenues from Pineapple operations were lower by 12% for the third quarter of 2000 and for the first nine months of 2000 compared to the same period in 1999. Pineapple operations produced an operating profit of $822,000 for the third quarter of 2000 as compared to $2,034,000 for the third quarter of 1999. For the first nine months of 2000, the pineapple operations incurred an operating loss of $228,000 compared to an operating profit of $5,276,000 for the first nine months of 1999. Lower operating profits are primarily the result of lower average prices and case sales volume. This is in part attributed to an increase in imports by the Company's principal U. S. competitors, combined with aggressive pricing and promotional activity. Promotional activity by the Company is anticipated to improve case sales volume in the last quarter of 2000, but results for 2000 are expected to continue to lag 1999. The Department of Commerce released preliminary results of the fourth annual administrative review of antidumping duties on pineapple imports from Thailand covering the period from July 1, 1998 to June 30, 1999. The preliminary results found the nine Thai pineapple companies reviewed to have lower dumping margins than those reflected in the antidumping duties currently being assessed. A final determination is expected to be released by November 30, 2000. Preliminary results of the "sunset review" released by the Department of Commerce indicate that the revocation of the antidumping duty on canned pineapple from Thailand would likely result in continued dumping by these companies. For a continuation of existing duties, the Company must convince the U.S. International Trade Commission that elimination of the duties will potentially cause injury to the domestic industry. The International Trade Commission is expected to meet in the first half of 2001 to determine whether or not the antidumping duties should be extended for another five years. Resort Revenues from the Company's Kapalua Resort operations were $11.1 million for the third quarter of 2000 compared to $10.1 million for the third quarter of 1999. For the first nine months of 2000, Resort revenues were $39.6 million compared to $32.9 million for the first nine months of 1999. The resort's operating profit was $1.3 million for the third quarter compared to $799,000 for the third quarter of 1999. For the first nine months of 2000, the resort's operating profit was $7.4 million compared to $3.6 million for the first nine months of 1999. Real estate sales accounted for 27% of Resort operating profit for the first nine months of 2000. There was no profit from real estate sales for the comparable period in 1999. Kapalua's operating results overall benefited from increased room occupancies at the hotels and villas. Hotel ground lease rents also increased because of higher average room rates and rent percentage. Improved Kapalua Villa results were partially due to general excise tax refunds related to prior years. The opening of the Golf Academy earlier in the year and the Village Clubhouse in the third quarter also contributed to improved Resort revenues. Lower consolidated shipping and marketing expenses were largely the result of the Company absorbing a reduced amount of expenses relating to the Mercedes Championships for the first nine months of 2000. This reduction was offset by a similar decrease for the same period in the tournament operations fee that is recorded in Resort revenue. The Company's joint venture with Lend Lease Real Estate Investment Inc., called The Coconut Grove on Kapalua Bay was formed to develop and sell 36 luxury beachfront condominiums. The condominium units are scheduled for completion in April 2001. 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 received final County of Maui approval for the construction of the 31 half-acre residential lot subdivision called Pineapple Hills Estates (previously called Site 19). State and Federal registrations have also been completed and the Company began sales of the project in November 2000. The Company expects to report profits from lot sales in 2001 with profits being accounted for using the percentage of completion method. Commercial & Property Revenue from the Commercial & Property segment was $1.3 million for the third quarter of 2000 compared to $1.2 million for the third quarter of 1999. For the first nine months of 2000, the segment reported revenues of $3.7 million compared to $3.2 million for the same period in 1999. The segment produced operating losses of $171,000 for the third quarter of 2000 compared to $76,000 for the third quarter of 1999. For the first nine months of 2000 the segment reported operating losses of $293,000 compared to $457,000 for the same period in 1999. Increased revenues were primarily due to improved tenant sales and improved operating results at Kaahumanu Center. LIQUIDITY, CAPITAL RESOURCES AND OTHER Total debt including capital leases was $52.1 million at September 30, 2000, compared to $28.6 million at December 31, 1999. The increase in outstanding debt was primarily due to negative cash flows from operating activities and capital expenditures. The seasonal increase in pineapple inventories because of pineapple canning activity during the summer, combined with lower pineapple sales volume, and expenditures for construction of Plantation Estates Phase II were largely responsible for the negative operating cash flows. Outstanding debt is expected to decrease in the last quarter of 2000 as pineapple inventory levels are reduced, accounts receivable are collected and sales of lots in the Pineapple Hill Estates subdivision are closed. Unused short and long-term lines of credit of $5.7 million were available to the Company at September 30, 2000. These credit facilities and fourth quarter operating cash flows are expected to be sufficient to finance the Company's remaining cash requirements in 2000. Expenditures for fixed assets, real estate planning and other pre- development costs are expected to approximate $21.6 million in 2000. This amount includes $7.4 million for the construction and completion of the Village Course Clubhouse and Kapalua Golf Academy and $7.7 million for replacement of equipment and facilities for Pineapple and Resort operations. Capital expenditures in 2000 also include $1.5 million for the implementation and installation of an integrated accounting and information technology system. 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 and operating cash flows, pineapple promotional activities, the closing of condominium sales at The Coconut Grove on Kapalua Bay and the closing of lot sales at Pineapple Hill Estates. 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 nine months of 2000. PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (27) Financial Data Schedule *As of September 30, 2000 and for the nine 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. NOVEMBER 10, 2000 /S/ PAUL J. MEYER Date Paul J. Meyer Executive Vice President/Finance (Principal Financial Officer)