SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 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 May 1, 1997 Common Stock, no par value 1,797,125 shares MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES INDEX Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheets - March 31, 1997 (Unaudited) & December 31, 1996 3 Condensed Statements of Operations and Retained Earnings, Three Months Ended March 31, 1997 & 1996 (Unaudited) 4 Condensed Statements of Cash Flows Three Months Ended March 31, 1997 & 1996 (Unaudited) 5 Notes to Condensed Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION Item 1. Legal Proceedings 9 Item 5. Other Information 9 Item 6. Exhibits and Reports on Form 8-K 10 PART I. - FINANCIAL INFORMATION Item 1. Financial Statements MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES CONDENSED BALANCE SHEETS Unaudited 3/31/97 12/31/96 (Dollars in Thousands) ASSETS Current Assets Cash $ 358 $ 453 Accounts and notes receivable 10,611 14,343 Inventories 17,442 16,484 Other current assets 3,625 4,028 Total current assets 32,036 35,308 Property 193,969 190,999 Accumulated depreciation (106,499) (104,389) Property - net 87,470 86,610 Other Assets 11,081 10,933 TOTAL 130,587 132,851 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current portion of long-term debt 58 53 Trade accounts payable 5,195 7,661 Other current liabilities 7,113 8,127 Total current liabilities 12,366 15,841 Long-Term Liabilities Long-term debt and capital lease obligations 30,572 28,898 Accrued retirement benefits 22,063 21,983 Other long-term liabilities 7,449 8,096 Total long-term liabilities 60,084 58,977 Stockholders' Equity Common stock, no par value - 1,800,000 shares authorized, 1,797,125 issued and outstanding 12,318 12,318 Retained earnings 45,819 45,715 Stockholders' Equity 58,137 58,033 TOTAL $130,587 $132,851 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 3/31/97 3/31/96 (Dollars in Thousands Except Share Amounts) REVENUES Net sales $21,052 $22,014 Operating income 7,453 7,023 Other income 383 795 Total Revenues 28,888 29,832 COSTS AND EXPENSES Cost of goods sold 14,531 15,015 Operating expenses 6,026 5,767 Shipping and marketing 3,375 3,194 General and administrative 3,877 3,649 Equity in losses of joint ventures 243 293 Interest 671 930 Total Costs and Expenses 28,723 28,848 INCOME BEFORE INCOME TAXES 165 984 INCOME TAXES 61 364 NET INCOME 104 620 RETAINED EARNINGS, BEGINNING OF PERIOD 45,715 46,552 RETAINED EARNINGS, END OF PERIOD 45,819 47,172 PER COMMON SHARE Net Income $ .06 $ .34 See accompanying Notes to Condensed Financial Statements. MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended 3/31/97 3/31/96 (Dollars in Thousands) Net Cash Provided By Operating Activities $ 1,510 $ 1,412 Investing Activities Purchases of property (2,205) (1,592) Proceeds from disposal of property -- 504 Contribution to joint venture (830) -- Other (255) 165 Net Cash Used in Investing activities (3,290) (923) Financing Activities Payments of long-term debt and capital lease obligations (1,215) (2,168) Proceeds from long-term debt 2,900 1,750 Net Cash Provided By (Used In) Financing Activities 1,685 (418) Net Increase (Decrease) in Cash (95) 71 Cash At Beginning of Period 453 166 Cash At End of Period $ 358 $ 237 Supplemental Disclosure and Cash Flow Information - Interest (net of amounts capitalized) of $1,424,000 and $1,536,000 was paid during the three months ended March 31, 1997and 1996, 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 and results of operations for the interim periods ended March 31, 1997 and 1996. 2. The Company's reports for interim periods utilize numerous estimates of production, 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 1997 and 1996 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 were net of allowance for doubtful accounts of $691,000 and $698,000 at March 31, 1997 and December 31, 1996, respectively. 5. Inventories as of March 31, 1997 and December 31, 1996 were as follows (in thousands): 03/31/97 12/31/96 Pineapple products Finished goods $ 8,201 $ 7,306 Work in progress 1,426 1,645 Raw materials 680 789 Real estate held for sale 339 339 Merchandise, materials and supplies 6,796 6,405 Total Inventories $17,442 $16,484 6. Average common shares outstanding for the interim periods ended March 31, 1997 and 1996 were 1,797,125. 7. Certain prior period amounts have been reclassified to conform with the presentation for the current period. 8. In April 1997, YCP, the owners of the Kapalua Bay Hotel, exercised their option to purchase a 50% interest in the 12-acre parcel adjacent to the hotel for $4.5 million, subject to certain agreements and understandings, including finalization of a joint venture agreement. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Consolidated Consolidated net income for the first quarter of 1997 was $104,000 compared to $620,000 for the first quarter of 1996. Revenues for the first quarter of 1997 of $28.9 million were lower by 3% compared to last year's first quarter. Lower net income and revenues in the first quarter of 1997 was attributable to a land sale which contributed approximately $320,000 to net income in 1996, and to lower earnings from the Company's Pineapple and Resort operations. Interest expense for the first quarter of 1997 was 28% lower than the first quarter of 1996. The reduction in interest expense was the result of lower average borrowings in the first quarter of 1997. The Company's debt was reduced in the fourth quarter of 1996 as a result of cash flows from operating activities, in particular Pineapple operations. Average interest rates on the Company's borrowings were about the same in the first quarters of 1997 and 1996. General and Administrative expenses increased by 6% for the first quarter of 1997 compared to the first quarter of 1996. Higher expenses in 1997 was due primarily to increased staffing and wage adjustments and higher costs for consultants. Pineapple Revenue from Pineapple operations was $18.4 million for the first quarter of 1997 compared to $19 million for the first quarter of 1996. The operating profit from this segment was $340,000 for the first quarter of 1997 compared to $644,000 for last year's first quarter. Higher average prices in 1997 produced revenue increases of approximately $300,000. However a change in product mix sold (fruit, juice, concentrate) and reduced fresh fruit sales combined to result in lower revenue and operating profits. Resort The Company's Resort segment contributed revenue of $9.39 million in the first quarter of 1997 compared to $9.42 million for last year's first quarter. Operating profits for the first quarter of 1997 was $1.7 million compared to $2 million for the first quarter of 1996. Revenue from the Kapalua Villa program increased in 1997 as a result of the higher number of units in the program since September of 1996. The Resort membership program contributed increased revenue in 1997 and the overall Resort occupancy increased in 1997. These increases did not offset lower merchandise sales, fewer paid golf rounds and a planned reduction in ground lease rent to accommodate the restoration of The Kapalua Bay Hotel. The hotel closed on April 1, 1997 and is scheduled to reopen in the fall. Increased expenses related to the Kapalua Villa program and higher marketing costs also contributed to the reduction in Resort operating profits. Commercial & Property Revenue from the Commercial & Property segment was $1.1 million for the first quarter of 1997 compared to $1.4 million for the first quarter of 1996. These operations produced an operating loss of $90,000 in the first quarter of 1997 compared to an operating profit of $236,000 in the first quarter of 1996. The lower results in 1997 was largely due to a land sale in 1996 which contributed approximately $500,000 to revenues and operating profits in 1996. The Company's equity in losses of Kaahumanu Center Associates decreased by 17% in the first quarter of 1997 compared to the first quarter of 1996. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1997 the Company's total debt including capital leases was $31.8 million compared to $30.2 million at December 31, 1996. The increase in debt and positive cash flows from operating activities was principally used to finance capital expenditures and the Company's share of cash calls by Kaahumanu Center Associates. Unused short- and long-term lines of credit were $11.9 million at the end of the first quarter of 1997. In April of 1997 the Company entered into a $5 million loan agreement with Pacific Coast Farm Credit Services. Advances under this loan are to be used to purchase assets for the Company's pineapple operations. The loan includes a revolving period of approximately two years and a final maturity date of January 1, 2002. At the Company's option, interest on advances are to be based on the prime rate, a Western Farm Credit Bank rate, or a Eurodollar rate. Consolidated capital expenditures are expected to be approximately $9.8 million in 1997 of which approximately 54% are for the replacement of existing equipment. The Company expects to finance approximately $2.6 million of these expenditures with capital leases and the remainder will be financed with operating cash flows. PART II OTHER INFORMATION Item 1. Legal Proceedings DBCP. In 1985, the U.S. Environmental Protection Agency banned the use to dibromochlorapropane (DBCP). Prior to 1985, the Company used DBCP to retard nematode growth on its pineapple plantations. The Company's use of DBCP was in accordance with the manufacturer's directions and appropriate Federal rules. In recent years DBCP has been detected in a County drinking water well on Maui. In May of 1996, the County of Maui filed a lawsuit against certain manufacturers and distributors of DBCP in connection with drinking water contamination. On March 31, 1997, one of the DBCP manufacturers, Occidental Chemical Corporation (Occidental), tendered its defense of Maui County's suit to the Company based on a 1978 indemnity agreement. The Company has tendered Occidental's claim to its insurers and reserved all of its defenses to Occidental's claims under the indemnity agreement. The primary insurer has accepted the Company's tender on terms that have yet to be determined. At this time, it is not possible to determine the extent, if any, of potential liability to the Company. Item 5. Other Information Cannery Waste Water Disposal System. In May of 1997, the Company expects to complete a system for disposal of cooling water and waste water from its cannery operation which will transmit the water to an agricultural area in central Maui and recycle the water for irrigation purposes. This new system will allow the Company to discontinue its previous method of disposing of the water using underground injection wells. Construction of the new system began in 1994, and its total cost will be approximately $2.6 million. The new system will comply with current Federal and State regulations; the previous system did not. The Company and the Department of Health, State of Hawaii, are negotiating a settlement of penalties that the Department of Health might impose against the Company for (i) the discharge of condenser and can cooling water from the Company's Kahului Cannery into Kahului harbor, and (ii) the disposal of effluent from the Company's Kahului Cannery into an injection well. The Company is in the process of collecting information requested by the State of Hawaii which will be used to evaluate the amount of a penalty for non-compliance, if any. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (10) Material Contracts A. Third Amendment To Note Purchase Agreement, (between John Hancock Mutual Life Insurance Company and Maui Land & Pineapple Company, Inc.) issued as of March 31, 1997.* B. Loan Agreement Between Pacific Coast Farm Credit Services, ACA and Maui Land & Pineapple Company, Inc., dated as of April 18, 1997.* (27) Financial Data Schedule A. As of March 31, 1997 and for the three months then ended.* *Filed Herewith (b) Reports on Form 8-K There were no reports on Form 8-K filed 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. May 14, 1997 /S/ PAUL J. MEYER Date Paul J. Meyer Executive Vice President/Finance (Principal Financial Officer)