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 SEPTEMBER 30, 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 November 3, 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 - September 30, 1997 (Unaudited) & December 31, 1996 3 Condensed Statements of Operations and Retained Earnings, Three Months Ended September 30, 1997 & 1996 (Unaudited) 4 Condensed Statements of Operations and Retained Earnings, Nine Months Ended September 30, 1997 & 1996 (Unaudited) 5 Condensed Statements of Cash Flows Nine Months Ended September 30, 1997 & 1996 (Unaudited) 6 Notes to Condensed Financial Statements (Unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings 10 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 9/30/97 12/31/96 (Dollars in Thousands) ASSETS Current Assets Cash $ 970 $ 453 Accounts and notes receivable 17,196 14,343 Inventories 20,953 16,484 Other current assets 4,455 4,028 Total current assets 43,574 35,308 Property 197,792 190,999 Accumulated depreciation (110,132) (104,389) Property - net 87,660 86,610 Other Assets 10,696 10,933 TOTAL 141,930 132,851 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current portion of long-term debt and capital lease obligations1,571 1,254 Trade accounts payable 3,375 7,661 Other current liabilities 7,912 6,926 Total current liabilities 12,858 15,841 Long-Term Liabilities Long-term debt and capital lease obligations 39,056 28,898 Accrued retirement benefits 21,430 21,983 Other long-term liabilities 7,932 8,096 Total long-term liabilities 68,418 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 48,336 45,715 Stockholders' Equity 60,654 58,033 TOTAL $141,930 $ 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 9/30/97 9/30/96 (Dollars in Thousands Except Share Amounts) REVENUES Net sales $29,082 $30,435 Operating income 7,088 6,229 Other income 1,206 340 Total Revenues 37,376 37,004 COSTS AND EXPENSES Cost of goods sold 20,887 20,977 Operating expenses 6,722 6,258 Shipping and marketing 3,705 4,341 General and administrative 3,541 3,515 Equity in losses of joint ventures 263 88 Interest 799 937 Total Costs and Expenses 35,917 36,116 INCOME BEFORE INCOME TAXES 1,459 888 INCOME TAXES 499 370 NET INCOME 960 518 RETAINED EARNINGS, BEGINNING OF PERIOD 47,376 46,696 RETAINED EARNINGS, END OF PERIOD 48,336 47,214 PER COMMON SHARE Net Income $ .54 $ .29 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 9/30/97 9/30/96 (Dollars in Thousands Except Share Amounts) REVENUES Net sales $72,551 $74,750 Operating income 20,937 19,161 Other income 5,886 1,224 Total Revenues 99,374 95,135 COSTS AND EXPENSES Cost of goods sold 51,300 51,076 Operating expenses 19,452 17,566 Shipping and marketing 10,516 11,155 General and administrative 11,005 10,875 Equity in losses of joint ventures 776 646 Interest 2,230 2,708 Total Costs and Expenses 95,279 94,026 INCOME BEFORE INCOME TAXES 4,095 1,109 INCOME TAXES 1,474 447 NET INCOME 2,621 662 RETAINED EARNINGS, BEGINNING OF PERIOD 45,715 46,552 RETAINED EARNINGS, END OF PERIOD 48,336 47,214 PER COMMON SHARE Net Income $ 1.46 $ .37 See accompanying Notes to Condensed Financial Statements. MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended 9/30/97 9/30/96 (Dollars in Thousands) Net Cash Used In Operating Activities $(7,189) $(3,071) Investing Activities Purchases of property (6,684) (3,288) Proceeds from disposal of property 5,339 789 Contributions to joint ventures (1,145) -- Distributions from joint venture 1,950 -- Proceeds from surrender of insurance policies -- 3,246 Increase in deferred costs and other (1,489) 400 Net Cash Provided By (Used In) Investing Activities (2,029) 1,147 Financing Activities Payments of long-term debt and capital lease obligations (8,470) (10,177) Proceeds from long-term debt 18,205 12,400 Net Cash Provided By Financing Activities 9,735 2,223 Net Increase in Cash 517 299 Cash at Beginning of Period 453 166 Cash at End of Period $ 970 $ 465 Supplemental Disclosure and Cash Flow Information - Interest (net of amounts capitalized) of $2,848,000 and $3,276,000 was paid during the nine months ended September 30, 1997 and 1996, respectively. Income taxes of $110,000 and $306,000 were paid during the nine months ended September 30, 1997 and 1996, respectively. Capital lease obligations of $740,000 and $848,000 were incurred during the nine months ended September 30, 1997 and 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 September 30, 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 are reflected net of allowance for doubtful accounts of $573,000 and $698,000 at September 30, 1997 and December 31, 1996, respectively. 5. Inventories as of September 30, 1997 and December 31, 1996 were as follows (in thousands): 9/30/97 12/31/96 Pineapple products Finished goods $13,308 $ 7,306 Work in progress 934 1,645 Raw materials 525 789 Real estate held for sale -- 339 Merchandise, materials and supplies 6,186 6,405 Total Inventories $20,953 $16,484 6. Average common shares outstanding for the interim periods ended September 30, 1997 and 1996 were 1,797,125. 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 1997 was $960,000 compared to $518,000 for the third quarter of 1996. Revenues were higher by 1% for the same periods respectively. Other income for the third quarters of 1997 and 1996 included revenues from land sales of $1 million and $200,000, respectively. For the first nine months of 1997 net income was $2,621,000 compared to $662,000 for the first nine months of 1996. Revenues of $99 million for the first nine months of 1997 were 4% higher than the same period in 1996. Other income for the first nine months of 1997 and 1996 included revenues from land sales of $5.2 million and $700,000, respectively. The sale of two land parcels in the Company's Commercial & Property segment contributed approximately $700,000 to the 1997 third quarter net income. The sale of a 50% interest in the 12- acre parcel adjacent to the Kapalua Bay Hotel in June of 1997 also contributed approximately $2.6 million to net income for the first nine months of 1997. Interest expense for the third quarter and first nine months of 1997 were lower by 15% and 18%, respectively, compared to the same periods in 1996 due principally to lower average borrowings. Pineapple Revenue from Pineapple operations was $26.5 million for the third quarter of 1997 compared to $27.7 million for the third quarter of 1996. For the first nine months of 1997 revenue was $64.9 million compared to $66.4 million for the same period in 1996. This segment generated operating profits of $2,210,000 for the third quarter of 1997 compared to $2,512,000 for the third quarter of 1996; and $3.2 million for the first nine months of 1997 compared to $4.1 million for the first nine months of 1996. Higher average prices in 1997 compared to 1996, contributed approximately $630,000 and $1.4 million to revenue for the third quarter and first nine months of 1997, respectively. Lower sales volume of canned pineapple products reduced revenues by $2.3 million and $2.4 million for the third quarter and first nine months of 1997 respectively. A change in product mix sold (fruit, juice, concentrate) and a higher average cost per case sold was also responsible for the lower operating profits in 1997. Resort Revenue from the Kapalua Resort was $8.7 million for the third quarter of 1997 compared to $8 million for the third quarter of 1996. For the first nine months of 1997 revenue from this segment was $30 million compared to $25 million for the same period in 1996. Operating profit from the Resort segment was $173,000 for the third quarter of 1997 compared to $546,000 for the third quarter of 1996; and $5.6 million for the first nine months of 1997 compared to $2.7 million for the first nine months of 1996. Golf course operations, Villa Rentals and realty operations contributed to higher revenues in the third quarter and first nine months of 1997. Revenues and operating profits for first nine months of 1997 also includes $4.2 million from the sale of a 50% interest in the 12-acre parcel adjacent to the Kapalua Bay Hotel. These increases were partially offset by planned ground lease rent concessions allowances which were made to accommodate the temporary closure of the Kapalua Bay Hotel for major restoration work from April through mid-August of 1997., and decreases in other resort revenues related to the Hotel closure. Higher operating costs and marketing expenses resulted in a reduction of operating profits from Kapalua's ongoing resort operations. Other Resort revenues also experienced decreases, again related to the Hotel closure. These revenue decreases coupled with higher operating costs, resulted in reduced operating profits from Kapalua's ongoing operations. Commercial & Property Revenue from the Commercial & Property segment was $2.2 million for the third quarter of 1997 compared to $1.3 million for the third quarter of 1996. For the first nine months of 1997 revenues were $4.4 million compared to $3.7 million for the first nine months of 1996. The segment generated an operating profit of $1.1 million for the third quarter of 1997 compared to an operating loss of $1,000 for the same period in 1996. For the first nine months of 1997 these operations produced an operating profit of $851,000 compared to an operating profit of $88,000 for the same period a year earlier. Land sales contributed $1 million to revenues and operating profits for the third quarter and first nine months of 1997. The third quarter and first nine months of 1996 includes revenue and operating profits from land sales of $200,000 and $700,000, respectively. The Company's Kaahumanu Center operations produced lower operating losses for the third quarter and first nine months of 1997. Napili Plaza reported lower operating results of the third quarter of 1997, but improved results for the first nine months as compared to the same periods in 1996. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1997 the Company's total debt including capital leases was $40.6 million, an increase of $10.5 million compared to December 31, 1996. Cash flows used for operating activities for the first nine months of 1997 was $7.2 million. The increase in debt and operating cash flow use largely reflects the peak pineapple canning months during the summer and a lag in accounts receivable collections. Positive operating cash flows are expected during the fourth quarter and the Company's outstanding debt is expected to be reduced. The Company had approximately $14 million in unused short- and long-term revolving credit and equipment financing lines available at September 30,1997. Consolidated capital expenditures are expected to be approximately $9.3 million in 1997 of which approximately 50% are for the replacement of existing equipment. The Company expects to finance approximately $4.2 million of the 1997 capital expenditures with capital leases or other equipment financing arrangements and the remainder will be financed with operating cash flows and cash from property disposals. PART II OTHER INFORMATION Item 1. Legal Proceedings Arosi Litigation On July 10, 1996, Arosi Hawaii, Inc. ("Arosi") filed a complaint against Maui Land & Pineapple Company, Inc. ("MLP") and two of its officers, Don Young and Paul J. Meyer, entitled Arosi Hawaii, Inc. v. Maui Land & Pineapple Company, Inc., et al., Civil No. 96-0871(1) (Circuit Court of the Second Circuit, State of Hawaii). The complaint alleged that MLP's exercise of a contractual first refusal right tortuously interfered with Arosi's attempt to purchase the Kapalua Bay Hotel and Villas. Effective August 22, 1997, the parties executed a Settlement, Release and Indemnity Agreement, and on October 29, 1997, the case was dismissed with prejudice. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (10) Material Contracts (A) Partnership Redemption Agreement Among Plantation Club Associates, Rolfing Partners and Kapalua Land Company, Ltd.* (27) Financial Data Schedule As of September 30, 1997 and for the nine 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. NOVEMBER 12, 1997 /S/ PAUL J. MEYER Date Paul J. Meyer Executive Vice President/Finance (Principal Financial Officer)