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, 2002
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 2, 2002
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, 2002 (Unaudited) and December 31, 2001 3
Condensed Statements of Operations and Retained Earnings,
Three Months Ended June 30, 2002 and 2001 (Unaudited) 4
Condensed Statements of Operations and Retained Earnings,
Six Months Ended June 30, 2002 and 2001 (Unaudited) 5
Condensed Statements of Comprehensive Income (Loss),
Three Months Ended June 30, 2002 and 2001 (Unaudited) 6
Condensed Statements of Comprehensive Income (Loss),
Six Months Ended June 30, 2002 and 2001 (Unaudited) 6
Condensed Statements of Cash Flows,
Six Months Ended June 30, 2002 and 2001 (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 14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
Unaudited
6/30/02 12/31/01
(Dollars in Thousands)
ASSETS
Current Assets
Cash and cash equivalents $ 908 $ 2,173
Accounts and notes receivable 13,728 15,992
Inventories 31,930 26,425
Other current assets 5,524 4,510
Total current assets 52,090 49,100
Investment and other assets 13,712 14,287
Property 260,563 255,306
Accumulated depreciation (147,729) (142,260)
Property - net 112,834 113,046
Total 178,636 176,433
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt
and capital lease obligations 5,407 3,759
Trade accounts payable 8,241 10,534
Other current liabilities 6,981 9,344
Total current liabilities 20,629 23,637
Long-Term Liabilities
Long-term debt and capital lease obligations 44,262 39,581
Accrued retirement benefits 24,401 24,072
Equity in losses of joint venture 12,209 11,518
Other long-term liabilities 4,015 3,636
Total long-term liabilities 84,887 78,807
Minority Interest in Subsidiary 975 570
Stockholders' Equity
Common stock, no par value - 7,200,000 shares
authorized, 7,195,800 issued and outstanding 12,455 12,455
Retained earnings 59,776 61,066
Accumulated other comprehensive loss (86) (102)
Stockholders' equity 72,145 73,419
Total $178,636 $ 176,433
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
6/30/02 6/30/01
(Dollars in Thousands
Except Share Amounts)
Revenues
Net sales $25,227 $29,367
Operating income 8,092 9,202
Other income 242 654
Total Revenues 33,561 39,223
Costs and Expenses
Cost of goods sold 16,814 19,705
Operating expenses 8,316 8,677
Shipping and marketing 4,761 4,701
General and administrative 5,830 4,971
Interest 572 678
Equity in losses of joint ventures 388 73
Total Costs and Expenses 36,681 38,805
Income (Loss) Before Income Taxes (3,120) 418
Income Tax Expense (Credit) (1,054) 153
Net Income (Loss) (2,066) 265
Retained Earnings, Beginning of Period 61,842 54,277
Retained Earnings, End of Period 59,776 54,542
Per Common Share
Net Income (Loss) $ (0.29) $ .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
6/30/02 6/30/01
(Dollars in Thousands
Except Share Amounts)
Revenues
Net sales $50,337 $56,784
Operating income 18,451 20,322
Other income 1,058 847
Total Revenues 69,846 77,953
Costs and Expenses
Cost of goods sold 32,870 38,622
Operating expenses 16,660 17,509
Shipping and marketing 9,509 9,093
General and administrative 10,953 9,368
Interest 1,153 1,550
Equity in losses of joint ventures 628 141
Total Costs and Expenses 71,773 76,283
Income (Loss) Before Income Taxes (1,927) 1,670
Income Tax Expense (Credit) (637) 626
Net Income (Loss) (1,290) 1,044
Retained Earnings, Beginning of Period 61,066 53,498
Retained Earnings, End of Period 59,776 54,542
Per Common Share
Net Income (Loss) $ (.18) $ .15
See accompanying Notes to Condensed Financial Statements.
MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
Three Months Ended
6/30/02 6/30/01
(Dollars in Thousands)
Net Income (Loss) $(2,066) $ 265
Other Comprehensive Loss - Foreign Currency
Translation Adjustment (8) (13)
Comprehensive Income (Loss) $(2,074) $ 252
Six Months Ended
6/30/02 6/30/01
(Dollars in Thousands)
Net Income (Loss) $(1,290) $ 1,044
Other Comprehensive Income (Loss) - Foreign
Currency Translation Adjustment 16 (16)
Comprehensive Income (Loss) $(1,274) $ 1,028
See accompanying Notes to Condensed Financial Statements.
MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
6/30/02 6/30/01
(Dollars in Thousands)
Net Cash Provided by (Used in)
Operating Activities $(2,217) $ 5,011
Investing Activities
Purchases of property (5,416) (8,483)
Proceeds from disposal of property 630 407
Increases in other assets (996) (57)
Net Cash Used in Investing Activities (5,782) (8,133)
Financing Activities
Payments of long-term debt and capital
lease obligations (8,823) (21,939)
Proceeds from long-term debt 14,389 25,134
Proceeds from short-term debt 1,000 10
Other 168 212
Net Cash Provided by Financing Activities 6,734 3,417
Net Increase (Decrease) in Cash (1,265) 295
Cash and Cash Equivalents
at Beginning of Period 2,173 351
Cash and Cash Equivalents
at End of Period $ 908 $ 646
Supplemental Disclosure of Cash Flow Information - Interest (net
of amounts capitalized) of $1,137,000 and $1,637,000 was paid
during the six months ended June 30, 2002 and 2001, respectively.
Income taxes of $1,483,000 and $627,000 were paid during the six
months ended June 30, 2002 and 2001, 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 fairly present that statement of financial position,
results of operations and cash flows for the interim periods
ended June 30, 2002 and 2001.
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. Future actual
amounts may differ from the estimates. Amounts in the interim
reports are not necessarily indicative of results for the full
year.
3. The effective tax rate for 2002 and 2001 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 $694,000 and $689,000 at June 30, 2002
and December 31, 2001, respectively.
5. Inventories as of June 30, 2002 and December 31, 2001 were
as follows (in thousands):
6/30/02 12/31/01
Pineapple products
Finished goods $10,663 $13,968
Work in progress 9,334 663
Raw materials 1,936 1,191
Real estate held for sale 3,039 3,709
Merchandise, materials and supplies 6,958 6,894
Total Inventories $31,930 $26,425
6. Business Segment Information (in thousands):
Three Months Ended Six Months Ended
June 30 June 30
2002 2001 2002 2001
Revenues
Pineapple $ 22,163 $ 22,043 $ 41,505 $ 43,149
Resort 10,309 16,005 25,529 32,349
Commercial &
Property 1,088 1,169 2,811 2,448
Other 1 6 1 7
Total Revenues 33,561 39,223 69,846 77,953
Operating Profit (Loss)
Pineapple (1,322) (989) (2,463) (1,956)
Resort (400) 2,804 2,556 6,176
Commercial &
Property (458) (404) (139) (378)
Other (368) (315) (728) (622)
Total Operating Profit
(Loss) (2,548) 1,096 (774) 3,220
Interest Expense (572) (678) (1,153) (1,550)
Income Tax (Expense)
Credit 1,054 (153) 637 (626)
Net Income (Loss) $ (2,066) $ 265 $ (1,290) $ 1,044
7. Average common shares outstanding for the interim periods
ended June 30, 2002 and 2001 were 7,195,800. The Company has no
securities outstanding that would potentially dilute common
shares outstanding.
8. At June 30, 2002 and 2001, the Company did not hold
derivative instruments and did not enter into hedging
transactions.
9. The Company adopted FASB Statement No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets," effective
January 1, 2002. Such adoption did not have a material impact on
the financial position, results of operations and cash flows of
the Company for the interim period ended June 30, 2002.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Consolidated
The Company reported a consolidated net loss of $2.1 million for
the second quarter of 2002 compared to net income of $265,000 for
the second quarter of 2001. For the first half of 2002 the
Company generated a net loss of $1,290,000 compared to net income
of $1,044,000 for the first half of 2001. Consolidated revenues
were lower by 14% and 10%, respectively, for the second quarter
and first half of 2002 compared to the same periods in 2001.
General and administrative expenses (including amounts allocated
to the business segments) for the second quarter and first half
of 2002 were higher by 17% for both periods as compared to the
same periods in 2001. Increased payroll expenses primarily
reflecting wage adjustments; higher pension costs largely due to
poor investment results in 2001; increased legal fees related to
lawsuits in the Pineapple segment; and increases in general
insurance costs all contributed to the increased expense in 2002.
Insurance costs have increased significantly in 2002 due in part
to the impact of the events of September 11, 2001 on the
insurance industry.
Interest expense was lower by 16% and 26%, respectively, for the
second quarter and first half of 2002 compared to the same
periods in 2001 primarily because of lower average interest
rates. Average borrowings were also lower in 2002 compared to
2001, because cash flows from operating activities in the fourth
quarter of 2001 were used to reduce borrowings.
Pineapple
The Pineapple segment reported an operating loss of $1,322,000
for the second quarter of 2002 compared to an operating loss of
$989,000 for the second quarter of 2001. For the first half of
2002, the Pineapple segment produced an operating loss of
$2,463,000 compared to an operating loss of $1,956,000 for the
first half of 2001. Revenues of $22.2 million for the second
quarter of 2002 were slightly higher than the second quarter of
2001. For the first half of 2002, revenues of $41.5 million were
4% lower than the same period a year earlier.
Case sales volume of canned pineapple was lower in the second
quarter and first half of 2002 compared to the same periods in
2001 reflecting highly competitive market conditions. The
Company's average cost per case sold was slightly lower in the
second quarter and first half of 2002 compared with the same
periods in 2001. Higher shipping and selling expenses primarily
because of airfreight surcharges, which were effective as of
December 2001, and the increased general and administrative costs
discussed above contributed to the increased operating loss from
the Pineapple segment.
The average sales price for the Company's canned pineapple
products for the second quarter of 2002 was comparable to the
second quarter of 2001, but the average sales price for the first
half of 2002 was lower than the same period in 2001. Revenues
from fresh pineapple products were higher in the second quarter
and the first half of 2002, which partially offset the reduction
in revenues from canned product sales.
For the first five months of 2002, the volume of imports of
canned pineapple into the United States increased and the average
unit value of these imports also increased as compared to the
same period in 2001. While the increase in average unit value is
consistent with the Company's understanding that the availability
of canned pineapple from certain foreign countries may be
tightening, the increase in volume continues to negatively affect
the market for the Company's products.
In June 2002, the tin-coated steel used by the Company to
manufacture cans in its Kahului cannery was exempted from
increased tariffs that the United States is currently imposing on
steel imports.
Resort
Kapalua Resort reported an operating loss of $400,000 for the
second quarter of 2002 compared an operating profit of $2.8
million for the second quarter of 2001. For the first half of
2002, the Resort segment produced an operating profit of $2.6
million as compared to an operating profit of $6.2 million for
the first half of 2001. Revenues for the second quarter and
first half of 2002 were lower by 36% and 21%, respectively, as
compared to the same periods in 2001. The reduction in revenues
and operating profit from the Resort segment was due to lower
contributions from real estate sales, reduced golf play, lower
merchandise sales and reductions in contributions from other
Resort operations due to fewer visitors to Kapalua as reflected
by lower room occupancies.
Partially offsetting declines resulting from lower occupancies
was a higher average room rate in 2002 at the Company's Kapalua
Villas (short-term rental program). Also, real estate
commissions on property resales increased in 2002, principally
reflecting higher sales prices for the properties.
Resort operating profit from the sale of real estate development
projects for the second quarter and first half of 2002 was lower
by $2.5 million and $2.2 million, respectively, as compared to
the same periods in 2001.
In the first half of 2002, the sale of two lots at Pineapple Hill
Estates and two lots at Plantation Estates closed escrow. The
aggregate sales price of these four lots was $2.8 million. In
early July 2002, four additional Pineapple Hill Estates sales
contracts with aggregate sales price of approximately $2.4
million were concluded and in escrow. These lot sales are
expected to close in the third quarter.
The first half of 2001 included the recognition of profit of $3.0
million for the sale of 18 lots at Pineapple Hill Estates, on the
percentage-of-completion method. Construction of subdivision
improvements for Pineapple Hill Estates began in March 2001 and
was completed in November 2001. In June 2001, sales of units in
The Coconut Grove luxury condominium project began to close
escrow resulting in approximately $700,000 of operating profit
recognized by the Resort segment in the second quarter of 2001.
The closing of sales for all units in this condominium project
were completed by year-end 2001. The Kapalua Coconut Grove LLC
was a joint venture in which the Company had a 50% interest.
Hotel room occupancies for the State of Hawaii increased in June
2002 for the second consecutive month since January 2001.
However, for the first half of 2002 room occupancies for the
State were lower than the same period a year ago. June 2002
hotel room occupancies for the island of Maui as well as for
Kapalua continued to decline compared to the same periods in
2001.
Resort real estate sales are cyclical and depend on a number of
factors. Results of real estate sales activity for the second
quarter of 2002 are not necessarily indicative of future
performance trends for this segment.
Commercial & Property
The Commercial & Property segment reported an operating loss of
$458,000 for the second quarter of 2002 compared to an operating
loss of $404,000 for the second quarter of 2001. For the first
half of 2002, the segment produced an operating loss of $139,000
compared to an operating loss of $378,000 for the same period a
year earlier. Results for the first half of 2002 included a non-
recurring $622,000 gain on the sale of a real estate parcel.
Revenues of $1.1 million for the second quarter of 2002 were 7%
lower than the second quarter of 2001. For the first half of
2002, revenues of $2.8 million were 15% higher than the
comparable period in 2001.
Excluding the foregoing land sale, lower results for this segment
were primarily attributable to losses from the Queen Kaahumanu
Center. The operating loss from Queen Kaahumanu Center for the
second quarter and first half of 2002 increased as compared to
the same periods in 2001, primarily due to lower tenant sales,
higher insurance costs and increased bad debt expense.
In the second quarter of 2002, the Company began construction of
a 45-lot employee housing subdivision in West Maui with a total
sales price of approximately $4.2 million. The Company has non-
binding signed contracts of sale on all of the lots. The buyers
will have a seven-day rescission period after receiving notice
from the Company that it has the final subdivision registration
from the State of Hawaii. The Company expects to receive the
registration in October of 2002 and the sales are expected to
close before year-end.
LIQUIDITY, CAPITAL RESOURCES AND OTHER
At June 30, 2002, total debt including capital leases was $49.7
million, an increase of $6.3 million from year-end 2001. The
increased debt level primarily reflects the seasonal pineapple
canning activity of the summer months. The Company's debt level
is expected to increase through the third quarter of 2002, but
should decrease in the fourth quarter, which is historically when
canned pineapple revenues are highest and canning activity is
relatively low. Unused long- and short-term credit lines totaled
$9.7 million at June 30, 2002. These credit facilities and cash
flows from operating activities are estimated to be sufficient to
cover the Company's cash requirements through 2002. However,
should additional funds become necessary, the Company anticipates
that it would seek additional financing.
For the six months ended June 30, 2002, net cash used by
operating activities was $2.2 million compared to net cash of
$5.0 million provided by operating activities for the same period
in 2001. Apart from the net loss of $1.3 million for the first
half of 2002 compared to net income of $1.0 million for the first
half of 2001, the decreased cash flows is primarily due to normal
variations in the timing of cash receipts and disbursements.
The Company's capital expenditures and expenditures for general
planning and land entitlements are expected to be approximately
$11.8 million in 2002. Approximately $3.2 million is estimated
to be for replacement of existing equipment and facilities. Some
of these expenditures may be funded with capital leases or new
equipment financing. In the second quarter of 2002 the Company
closed $3 million in equipment financing.
This report contains forward-looking statements, within the
meaning of Private Securities Litigation Reform Act of 1995,
which are provided to assist in the understanding of certain
aspects of the Company's anticipated future financial
performance. The words "estimate," "project," "intend,"
"expect," "believe" and similar expressions are intended to
identify forward-looking statements. Among other things, the
forward-looking statements in this report address the Company's
expectations regarding the closing of lot sales at Pineapple Hill
Estates and an employee housing subdivision, and the adequacy of
credit facilities and operating cash flows. Forward-looking
statements contained in this report or otherwise made by the
Company are subject to significant risks and uncertainties, many
of which are outside of the Company's control. Although the
Company believes that the assumptions underlying its forward-
looking statements are reasonable, any assumption could prove to
be inaccurate and 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. Unless expressly stated, the
Company does not undertake and specifically disclaims any
obligation to update any forward-looking statements to reflect
events or circumstances after the date of such statements.
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 attempts to manage 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 2002.
Part II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
On May 1, 2002, 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 6, 2002, the record date
of the annual meeting, was 7,195,800.
The results of the voting were as follows:
Election of Class Three Directors for a three-year term:
Shares Voted For Shares Withheld
Richard H. Cameron 6,680,793 6,020
John H. Agee 6,681,024 5,789
Election of the firm Deloitte & Touche LLP as auditor of the
Company for the fiscal year 2002:
Shares voted for: 6,601,463
Shares voted against: 52,026
Shares abstained: 33,324
There were no broker non-votes on the matters voted upon at the
meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 99.1 - Certification Pursuant To 18 U.S.C.
Section 1350, As Adopted Pursuant To Section 906
Of The Sarbanes-Oxley Act Of 2002
Exhibit 99.2 - Certification Pursuant To 18 U.S.C.
Section 1350, As Adopted Pursuant To Section 906
Of The Sarbanes-Oxley Act Of 2002
(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 2, 2002 /S/ PAUL J. MEYER
Date Paul J. Meyer
Executive Vice President/Finance
(Principal Financial Officer)