UNITED STATES 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, 2001 OR [ ] 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, 2001 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, 2001 (Unaudited) and December 31, 2000 3 Condensed Statements of Operations and Retained Earnings, Three Months Ended June 30, 2001 and 2000 (Unaudited) 4 Condensed Statements of Operations and Retained Earnings, Six Months Ended June 30, 2001 and 2000 (Unaudited) 5 Condensed Statements of Comprehensive Income, Three Months Ended June 30, 2001 and 2000 (Unaudited) 6 Condensed Statements of Comprehensive Income, Six Months Ended June 30, 2001 and 2000 (Unaudited) 6 Condensed Statements of Cash Flows, Six Months Ended June 30, 2001 and 2000 (Unaudited) 7 Notes to Condensed Financial Statements (Unaudited) 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 4. Submission of Matters to a Vote of Security-Holders 14 Item 6. Exhibits and Reports on Form 8-K 14 PART I FINANCIAL INFORMATION Item 1. Financial Statements MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES CONDENSED BALANCE SHEETS Unaudited 6/30/01 12/31/00 (Dollars in Thousands) ASSETS Current Assets Cash and cash equivalents $ 646 $ 351 Accounts and notes receivable 11,606 16,032 Inventories 29,740 24,256 Other current assets 5,167 5,498 Total current assets 47,159 46,137 Property 250,508 242,177 Accumulated depreciation (137,910) (132,452) Property - net 112,598 109,725 Other Assets 15,063 14,089 Total 174,820 169,951 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current portion of long-term debt and capital lease obligations 10,859 3,508 Trade accounts payable 9,864 8,476 Other current liabilities 12,439 14,849 Total current liabilities 33,162 26,833 Long-Term Liabilities Long-term debt and capital lease obligations 37,677 41,012 Accrued retirement benefits 23,785 23,575 Equity in losses of joint venture 10,408 9,990 Other long-term liabilities 2,222 2,215 Total long-term liabilities 74,092 76,792 Minority Interest in Subsidiary 616 404 Stockholders' Equity Common stock, no par value - 7,200,000 shares authorized, 7,195,800 issued and outstanding 12,455 12,455 Retained earnings 54,542 53,498 Accumulated other comprehensive loss (47) (31) Stockholders' equity 66,950 65,922 Total $174,820 $ 169,951 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 6/30/01 6/30/00 (Dollars in Thousands Except Share Amounts) Revenues Net sales $29,367 $21,135 Operating income 9,202 9,405 Other income 654 381 Total Revenues 39,223 30,921 Costs and Expenses Cost of goods sold 19,705 14,341 Operating expenses 8,677 7,551 Shipping and marketing 4,701 3,845 General and administrative 4,971 3,858 Interest 678 738 Equity in losses of joint ventures 73 226 Total Costs and Expenses 38,805 30,559 Income Before Income Taxes 418 362 Income Tax Expense 153 62 Net Income 265 300 Retained Earnings, Beginning of Period 54,277 54,991 Retained Earnings, End of Period 54,542 55,291 Per Common Share Net income $ .04 $ .04 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 6/30/01 6/30/00 (Dollars in Thousands Except Share Amounts) Revenues Net sales $56,784 $45,273 Operating income 20,322 19,796 Other income 847 627 Total Revenues 77,953 65,696 Costs and Expenses Cost of goods sold 38,622 30,060 Operating expenses 17,509 15,053 Shipping and marketing 9,093 8,062 General and administrative 9,368 7,470 Interest 1,550 1,206 Equity in losses of joint ventures 141 444 Total Costs and Expenses 76,283 62,295 Income Before Income Taxes 1,670 3,401 Income Tax Expense 626 1,156 Net Income 1,044 2,245 Retained Earnings, Beginning of Period 53,498 53,945 Cash Dividends -- (899) Retained Earnings, End of Period 54,542 55,291 Per Common Share Net income .15 .31 Dividends $ -- $ .125 See accompanying Notes to Condensed Financial Statements. MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) Three Months Ended 6/30/01 6/30/00 (Dollars in Thousands) Net Income $ 265 $ 300 Other Comprehensive Loss - Foreign Currency Translation Adjustment (13) -- Comprehensive Income $ 252 $ 300 Six Months Ended 6/30/01 6/30/00 (Dollars in Thousands) Net Income $ 1,044 $ 2,245 Other Comprehensive Loss - Foreign Currency Translation Adjustment (16) -- Comprehensive Income $ 1,028 $ 2,245 See accompanying Notes to Condensed Financial Statements. MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended 6/30/01 6/30/00 (Dollars in Thousands) Net Cash Provided by (Used in) Operating Activities $ 5,011 $ (5,944) Investing Activities Purchases of property (8,483) (9,988) Proceeds from disposal of property 407 112 Increases in other assets (57) (565) Net Cash Used in Investing Activities (8,133) (10,441) Financing Activities Payments of long-term debt and capital lease obligations (21,939) (4,080) Proceeds from long-term debt 25,134 19,300 Proceeds from short-term debt 10 75 Dividends paid -- (899) Other 212 6 Net Cash Provided by Financing Activities 3,417 14,402 Net Increase (Decrease) in Cash 295 (1,983) Cash and Cash Equivalents at Beginning of Period 351 2,657 Cash and Cash Equivalents at End of Period $ 646 $ 674 Supplemental Disclosure of Cash Flow Information - Interest (net of amounts capitalized) of $1,637,000 and $1,054,000 was paid during the six months ended June 30, 2001 and 2000,respectively. Income taxes of $627,000 and $1,622,000 were paid during the six months ended June 30, 2001 and 2000, respectively. Capital lease obligations of $811,000 and $134,000 were incurred for new equipment during the six months ended June 30, 2001 and 2000, 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, 2001 and 2000. 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 2001 and 2000 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 $802,000 and $1,028,000 at June 30, 2001 and December 31, 2000, respectively. 5. Inventories as of June 30, 2001 and December 31, 2000 were as follows: 6/30/01 12/31/00 (dollars in thousands) Pineapple products Finished goods $10,896 $12,855 Work in progress 5,835 1,030 Raw materials 1,525 1,447 Real estate held for sale 3,524 1,592 Merchandise, materials and supplies 7,960 7,332 Total Inventories $29,740 $24,256 6. Business Segment Information (in thousands): Three Months Ended Six Months Ended June 30 June 30 2001 2000 2001 2000 Revenues Pineapple $ 22,043 $ 17,692 $ 43,149 $ 34,463 Resort 16,005 11,762 32,349 28,580 Commercial & Property 1,169 1,222 2,448 2,397 Other 6 245 7 256 Total Revenues 39,223 30,921 77,953 65,696 Operating Profit (Loss) Pineapple (989) (784) (1,956) (1,050) Resort 2,804 1,983 6,176 6,076 Commercial & Property (404) (84) (378) (122) Other (315) (15) (622) (297) Total Operating Profit 1,096 1,100 3,220 4,607 Interest Expense (678) (738) (1,550) (1,206) Income Tax Expense (153) (62) (626) (1,156) Net Income $ 265 $ 300 $ 1,044 $ 2,245 7. At June 30, 2001, the Company did not meet the minimum current ratio required by two equipment loans totaling $3.0 million. The lenders subsequently waived the violations. 8. Average common shares outstanding for the interim periods ended June 30, 2001 and 2000 were 7,195,800. 9. At June 30, 2001, the Company did not hold derivative instruments and did not enter into hedging transactions. 10. Certain amounts from the prior year have been reclassified to conform to the current presentation. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Consolidated The Company reported net income of $265,000 for the second quarter of 2001 compared to net income of $300,000 for the second quarter of 2000. For the first half of 2001, the Company reported net income of $1.0 million compared to $2.2 million for the first half of 2000. The decline in net income for the second quarter and first half of 2001 was primarily attributed to lower earnings contribution from the Pineapple and Commercial & Property segments. Consolidated revenues for the second quarter and first half of 2001 were higher by 27% and 19%, respectively, compared to the same periods in 2000. General and administrative expenses (including amounts allocated to the business segments) were higher by 29% and 25%, respectively, in the second quarter and first half of 2001 compared to the same periods in 2000. These increases were largely due to increased expenses for outside consultants and higher pension expenses and medical insurance premiums. Interest expense was $678,000 for the second quarter of 2001 compared to $738,000 for the second quarter of 2000. For the first six months of 2001, interest expense was $1.6 million compared to $1.2 million for the same period of 2000. Lower average interest rates in the second quarter of 2001 offset higher average borrowings resulting in an 8% reduction of interest expense. For the first six months of 2001, higher average borrowings more than offset lower average interest rates, resulting in a 29% increase in interest expense. Average borrowings were higher in the first half of 2001 primarily because debt at December 31, 2000 was higher by $16 million as compared to year-end 1999. Pineapple The Pineapple segment reported an operating loss of $989,000 for the second quarter of 2001 compared to an operating loss of $784,000 for the second quarter of 2000. For the first half of 2001, Pineapple reported an operating loss of $2.0 million compared to an operating loss of $1.1 million for the first half of 2000. Revenues from Pineapple operations were higher by 25% in the second quarter and first half of 2001 compared to the second quarter and first half of 2000, reflecting higher average sales prices due to the mix of products sold and higher case sales volume. However, increased marketing and general and administrative expenses and higher per unit production costs reduced the 2001 earnings contributions from this segment. Case volume of canned pineapple fruit imported into the United States decreased in the first four months of 2001 as compared to the same period in 2000, which management believes had a positive effect on the Company's 2001 sales volume. However, the average unit value of imported canned pineapple fruit decreased through April 2001, which resulted in downward pressure on market pricing. In August 2001, the Department of Commerce is scheduled to release final antidumping duties pursuant to the fifth annual administrative review of antidumping duties on pineapple imports from Thailand. The Company has challenged the preliminary results that were released in April 2001, which would lower the current duties for three Thai companies. Resort Kapalua Resort produced an operating profit of $2.8 million for the second quarter of 2001 compared to $2.0 million for the second quarter of 2000. For the first six months of 2001, the Resort reported an operating profit of $6.2 million compared to $6.1 million for the same period in 2000. Revenues generated by the Resort were higher by 36% for the second quarter and 13% for the first half of 2001 compared to the same periods a year ago. The improved 2001 results from Kapalua were attributed to the recognition of income from lot sales at Pineapple Hill Estates and to the closing of sales at The Coconut Grove on Kapalua Bay. Four of the 36 units in The Coconut Grove luxury condominium apartment project were completed and sales began closing in June of 2001. The remaining units are scheduled to be completed and the sales closed by November 2001. The Kapalua Coconut Grove LLC is a joint venture in which the Company has a 50% interest. Construction of subdivision improvements for Pineapple Hill Estates began in March 2001 and revenues on the closed sales are being recognized on the percentage-of-completion method. The sale of Pineapple Hill Estates lots began in November 2000 and, through June 30, 2001, 18 sales had closed escrow. Increased revenues and profit from real estate sales were partially offset by lower overall results from other operations at Kapalua. Lower hotel and villa occupancies in 2001 negatively affected Resort operations. Increased expenses and the lower volume of activity at the resort in 2001, more than offset higher average green fees and increased retail sales from the new Village Clubhouse, which opened in August 2000. Commercial & Property The Commercial & Property segment reported operating losses of $404,000 and $378,000 for the second quarter and first half of 2001, respectively, compared to losses of $84,000 and $122,000 for the same periods a year ago. The lower 2001 results were primarily due to higher operating expenses at Queen Kaahumanu Center. Other Revenues for the second quarter and first half of 2000 include $240,000 of non-recurring gains related to common stock received from the insurer of certain Company-owned life insurance policies. LIQUIDITY, CAPITAL RESOURCES AND OTHER At June 30, 2001, total debt, including capital leases, was $48.5 million, an increase of $4.0 million from year-end 2000. The increased debt level primarily reflects the seasonal pineapple canning activity of the summer months coupled with expenditures for construction activity at the Pineapple Hill Estates subdivision. Unused long- and short-term credit lines, including non-revolving equipment financing commitments, totaled $3.9 million at June 30, 2001. In July 2001, the Company secured additional short-term credit lines of $3.0 million to finance working capital through the peak pineapple-canning season. These credit facilities and cash flows from operating activities are estimated to be sufficient to cover the Company's cash requirements. In June 2001, four units in The Coconut Grove at Kapalua Bay were completed and the sales closed. The remaining 32 units are under binding sales contract and are expected to close through November 2001. The Company expects to realize cash distributions from the Coconut Grove joint venture of approximately $12.0 million from September 2001 through November 2001. At June 30, 2001, the Company had commitments of approximately $5.0 million for the completion of construction of the Pineapple Hill Estates subdivision improvements. Consolidated expenditures for fixed assets and deferred development costs are expected to total $17.0 million in 2001. This amount includes $3.1 million for implementation and installation of an integrated accounting and information system. Replacement of equipment and facilities for the Company's Pineapple and Resort operations total $8.0 million including $2.5 million for renovations and replacement of the irrigation system for the Kapalua Bay Course. Some of the 2001 capital expenditures will be financed with capital leases. At June 30, 2001, the Company was in violation of the minimum current ratio requirement for two equipment loans totaling $3.0 million. The lenders subsequently waived the violation with respect to June 30, 2001. The Company believes that the conditions causing the violations are temporary. At June 30, 2001, current liabilities included deferred revenues totaling $4.7 million. The deferred revenues represent proceeds from closed sales at Pineapple Hill Estates, which are being recognized on the percentage-of-completion method as construction of the improvements take place. In addition, current liabilities at June 30, 2001 included construction payables related to this project of approximately $2.2 million. Construction of this 31- lot subdivision is expected to be substantially complete in September 2001. 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, the decrease in debt level, improvement in current ratio, receipt of cash distributions from Kapalua Coconut Grove LLC, 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 six months of 2001. PART II OTHER INFORMATION Item 1. Legal Proceedings See Part II, Item 1. of Form 10-Q for the quarter ending March 31, 2001 for background information on the following legal proceedings. On June 7, 2001, the defendants in Maui Pineapple Company, Ltd., et al. v. Del Monte Fresh Produce (Hawaii), Inc., et al. Civil No. 01-1-0173(1), (Circuit Court of the Second Circuit, State of Hawaii) filed a Motion to Dismiss for Lack of Subject Matter Jurisdiction and Forum Non Conveniens or, Alternatively, for a Stay Pending Disposition of Related Federal Action and a Motion to Dismiss for Lack of Personal Jurisdiction. A hearing was held on July 17, 2001 and all motions were denied with prejudice. The defendants have requested reconsideration of the Court's denial of the Motion to Dismiss for Lack of Subject Matter Jurisdiction. Discovery has commenced and no trial date has been set. On June 7, 2001, the defendants in Maui Pineapple Company, Ltd., et al. v. Del Monte Corporation, et al., Case No: C 01-01449 CRB, in the United States District Court For the Northern District of California (San Francisco Division) filed an Answer, Affirmative Defenses and Counterclaim. The counterclaim alleges that the Company infringed on Del Monte's patent rights relating to the pineapple hybrid that Del Monte refers to as "CO-2." The Company believes the counterclaim is without merit. On July 3, 2001, the Company filed a Reply to Counterclaim and a Counterclaim for Declaratory Relief against the defendants. Also on June 7, 2001, the defendants filed a Motion to Dismiss defendants Fresh Del Monte Produce Inc., a Cayman Islands corporation, and Del Monte Fresh Produce Company, a Delaware corporation, for Lack of Personal Jurisdiction. A hearing on the motion is scheduled to be held on August 31, 2001. Discovery has not commenced and no trial date has been set. Item 4. Submission of Matters to a Vote of Security-Holders On May 2, 2001, 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 7, 2001, the record date of the annual meeting, was 7,195,800. The results of the voting were as follows: Election of Class Two Directors for a three-year term: Shares Voted For Shares Withheld David A. Heenan 6,315,037 21,525 Claire C. Sanford 6,319,730 16,832 Election of the firm Deloitte & Touche LLP as auditor of the Company for the fiscal year 2001: Shares voted for: 6,301,475 Shares voted against: 24,607 Shares abstained: 10,480 Item 6. Exhibits and Reports on Form 8-K (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 10, 2001 /S/ PAUL J. MEYER Date Paul J. Meyer Executive Vice President/Finance (Principal Financial Officer)