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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 SEPTEMBER 30, 2003
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 by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [x]
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 7, 2003
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, 2003 (Unaudited)
and December 31, 2002 3
Condensed Statements of Operations and Retained Earnings,
Three Months Ended September 30, 2003 and 2002 (Unaudited) 4
Condensed Statements of Operations and Retained Earnings,
Nine Months Ended September 30, 2003 and 2002 (Unaudited) 5
Condensed Statements of Comprehensive Income
Three Months Ended September 30, 2003 and 2002 (Unaudited) 6
Condensed Statements of Comprehensive Income
Nine Months Ended September 30, 2003 and 2002 (Unaudited) 6
Condensed Statements of Cash Flows,
Nine Months Ended September 30, 2003 and 2002 (Unaudited) 7
Notes to Condensed Financial Statements (Unaudited) 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 17
Item 4. Controls and Procedures 17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
Unaudited
9/30/03 12/31/02
(Dollars in Thousands)
ASSETS
Current Assets
Cash and cash equivalents $ 1,696 $ 658
Accounts and notes receivable 17,372 22,315
Inventories 24,372 23,365
Other current assets 7,362 8,385
Total current assets 50,802 54,723
Property 260,012 264,647
Accumulated depreciation (155,931) (152,449)
Property - net 104,081 112,198
Other Assets 17,577 17,274
Total 172,460 184,195
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt and
capital lease obligations 6,512 6,846
Trade accounts payable 11,705 13,057
Other current liabilities 13,141 9,318
Total current liabilities 31,358 29,221
Long-Term Liabilities
Long-term debt and capital lease obligations 35,424 43,252
Accrued retirement benefits 34,506 33,089
Equity in losses of joint venture -- 12,840
Other long-term liabilities 1,442 1,867
Total long-term liabilities 71,372 91,048
Minority Interest in Subsidiary 2,261 1,187
Stockholders' Equity
Common stock, no par value - 7,200,000 shares
authorized, 7,195,800 issued and outstanding 12,455 12,455
Retained earnings 60,147 55,357
Accumulated other comprehensive loss (5,133) (5,073)
Stockholders' equity 67,469 62,739
Total $ 172,460 $ 184,195
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
9/30/03 9/30/02
(Dollars in Thousands
Except Share Amounts)
Revenues
Net sales $ 28,884 $ 29,622
Operating income 8,041 8,283
Equity in earnings of joint ventures 13,340 --
Other income 2,315 315
Total Revenues 52,580 38,220
Costs and Expenses
Cost of goods sold 18,823 21,489
Operating expenses 8,213 8,178
Shipping and marketing 5,795 5,192
General and administrative 6,468 6,060
Interest 819 709
Equity in losses of joint ventures -- 382
Total Costs and Expenses 40,118 42,010
Income (Loss) From Continuing Operations
Before Income Taxes and Minority
Interest 12,462 (3,790)
Income Tax (Expense) Benefit (4,275) 1,692
Minority Interest in Income of
Consolidated Subsidiary (87) (96)
Income (Loss) From Continuing Operations 8,100 (2,194)
Income (Loss) From Discontinued Operations
(net of income tax expense of
$606 and $2) 1,348 (5)
Net Income (Loss) 9,448 (2,199)
Retained Earnings, Beginning of Period 50,699 59,776
Retained Earnings, End of Period 60,147 57,577
Per Common Share
Income (Loss) From Continuing
Operations 1.12 (.31)
Income From Discontinued Operations .19 --
Net Income (Loss) $ 1.31 $ (.31)
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
9/30/03 9/30/02
(Dollars in Thousands
Except Share Amounts)
Revenues
Net sales $ 82,630 $ 79,959
Operating income 26,101 26,187
Equity in earnings of joint venture 12,651 --
Other income 3,705 1,362
Total Revenues 125,087 107,508
Costs and Expenses
Cost of goods sold 53,570 54,359
Operating expenses 25,091 24,644
Shipping and marketing 15,909 14,701
General and administrative 21,648 16,571
Interest 2,108 1,862
Equity in losses of joint ventures 19 1,010
Total Costs and Expenses 118,345 113,147
Income (Loss) From Continuing Operations
Before Income Taxes and Minority
Interest 6,742 (5,639)
Income Tax (Expense) Benefit (2,528) 2,340
Minority Interest in Income of
Consolidated Subsidiary (783) (215)
Income (Loss) From Continuing Operations 3,431 (3,514)
Income From Discontinued Operations
(net of income tax of $612 and $13) 1,359 25
Net Income (Loss) 4,790 (3,489)
Retained Earnings, Beginning of Period 55,357 61,066
Retained Earnings, End of Period 60,147 57,577
Per Common Share
Income (Loss) From Continuing Operations .48 (.48)
Income From Discontinued Operations .19 --
Net Income (Loss) $ .67 $ (.48)
See accompanying Notes to Condensed Financial Statements.
MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended
9/30/03 9/30/02
(Dollars in Thousands)
Net Income (Loss) $ 9,448 $ (2,199)
Other Comprehensive Income (Loss) -
Foreign Currency Translation Adjustment (49) 5
Comprehensive Income (Loss) $ 9,399 $ (2,194)
Nine Months Ended
9/30/03 9/30/02
(Dollars in Thousands)
Net Income (Loss) $ 4,790 $ (3,489)
Other Comprehensive Income (Loss) -
Foreign Currency Translation Adjustment (60) 21
Comprehensive Income (Loss) $ 4,730 $ (3,468)
See accompanying Notes to Condensed Financial Statements.
MAUI LAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
9/30/03 9/30/02
(Dollars in Thousands)
Net Cash Provided by (Used in)
Operating Activities $ 6,991 $ (5,988)
Investing Activities
Purchases of property (6,345) (7,711)
Proceeds from disposal of property 6,720 668
(Increases) decreases in other assets 1,344 (1,112)
Net Cash Provided by (Used in)
Investing Activities 1,719 (8,155)
Financing Activities
Payments of long-term debt and capital
lease obligations (25,870) (11,695)
Proceeds from long-term debt 18,347 23,462
Proceeds from (payment of)
short-term debt (420) 1,050
Other 271 48
Net Cash Provided by (Used in)
Financing Activities (7,672) 12,865
Net Increase (Decrease) in Cash 1,038 (1,278)
Cash and Cash Equivalents
at Beginning of Period 658 2,173
Cash and Cash Equivalents
at End of Period $ 1,696 $ 895
Supplemental Disclosures of Cash Flow Information - Interest (net
of amounts capitalized) of $1,897,000 and $1,824,000 was paid
during the nine months ended September 30, 2003 and 2002,
respectively. Income taxes of $(2,164,000) and $1,483,000
were (received) paid during the nine months ended September 30,
2003 and 2002, 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 the statement of financial position,
results of operations and cash flows for the interim periods
ended September 30, 2003 and 2002.
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 2003 and 2002 differs from the
statutory federal rate of 34% primarily because of the state tax
provision, refundable state tax credits and foreign taxes.
4. Accounts and notes receivable are reflected net of allowance
for doubtful accounts of $1,025,000 and $572,000 at September 30,
2003 and December 31, 2002, respectively.
5. Inventories as of September 30, 2003 and December 31, 2002
were as follows (in thousands):
9/30/03 12/31/02
Pineapple products
Finished goods $12,160 $11,829
Work in progress 1,510 963
Raw materials 3,510 1,696
Real estate held for sale 72 2,134
Merchandise, materials and supplies 7,120 6,743
Total Inventories $24,372 $23,365
6. Business Segment Information (in thousands):
Three Months Ended Nine Months Ended
9/30/03 9/30/02 9/30/03 9/30/02
Revenues
Pineapple $27,716 $25,599 $72,485 $67,104
Resort 10,950 11,595 34,776 37,124
Commercial & Property 15,885 1,286 20,383 4,097
Less discontinued
operations (2,021) (261) (2,588) (819)
Other 50 1 31 2
Total Revenues 52,580 38,220 125,087 107,508
Operating Profit (Loss)
Pineapple 225 (2,183) (4,191) (4,646)
Resort (152) (207) 114 2,349
Commercial & Property 15,301 (340) 15,511 (479)
Less discontinued
operations (1,954) 3 (1,971) (38)
Other (226) (450) (1,396) (1,178)
Total Operating Income
(Loss) 13,194 (3,177) 8,067 (3,992)
Interest Expense (819) (709) (2,108) (1,862)
Income Tax (Expense)
Benefit (4,275) 1,692 (2,528) 2,340
Income (Loss) - Continuing
Operations 8,100 (2,194) 3,431 (3,514)
Income (Loss) - Discontinued
Operations 1,348 (5) 1,359 25
Net Income (Loss) $ 9,448 $(2,199) $ 4,790 $(3,489)
7. On August 1, 2003, the $7.1 million sale of Napili Plaza was
concluded and the Company's $4.5 million mortgage loan on the
property was repaid. The operating results of Napili Plaza
prior to its sale and the $1.9 million gain from its sale have
been reported as discontinued operations. Prior period results
have been restated to reflect such classification.
On September 18, 2003, the $75 million sale of Queen Kaahumanu
Center by Kaahumanu Center Associates ("KCA") to Somera
Investment Partners, LLC, closed escrow. Upon closing of the
sale, the Company received cash of $3.3 million, which
primarily represented the repayment of cash advances,
management fees, electricity and reimbursable costs. The
Company had guaranteed the payment of up to $10 million of the
$57 million mortgage loan of KCA. Upon closing of the sale,
the mortgage was repaid and the guaranty was released.
By agreement between the partners of KCA, the partnership was
dissolved upon the closing of the sale and the Company as
managing partner has proceeded to wind up the affairs of the
partnership. The winding up period, as defined by agreement,
will run for thirteen months following the closing of the sale.
As a result of the dissolution of the partnership, the
Company's accumulated losses of KCA in excess of its investment
were reversed in the third quarter of 2003. Operating profit
for the Commercial & Property segment for the quarter and nine
months ended September 30, 2003 includes $13.5 million
attributable to the sale of Queen Kaahumanu Center, primarily
representing the reversal of the accumulated losses of joint
venture in excess of investment.
8. Average common shares outstanding for the interim periods
ended September 30, 2003 and 2002 were 7,195,800. The Company
has no securities outstanding that would potentially dilute
common shares outstanding.
9. At September 30, 2003 and 2002, the Company did not hold
derivative instruments and did not enter into hedging
transactions.
10. On January 1, 2003, the Company adopted Statement of
Financial Accounting Standard No. 146, Accounting for Costs
Associated with Exit or Disposal Activities ("SFAS No. 146").
SFAS No. 146 requires that a liability for a cost associated
with an exit or disposal activity be recognized when the
liability is incurred, and not at the date of an entity's
commitment to an exit plan, as was previously required. The
adoption of SFAS No. 146 did not have a material effect on the
Company's financial statements.
On January 1, 2003, the Company adopted Financial Accounting
Standards Board Interpretation No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others ("FIN No. 45"). FIN No.
45 requires an entity to disclose in its financial statement
footnotes many of the guarantees or indemnification agreements
that it issues. In addition, under certain circumstances, an
entity will have to recognize a liability at the time it enters
into the guarantee. The adoption of FIN No. 45 did not have a
material impact on the Company's financial statements.
11. Certain amounts for the prior year have been reclassified to
conform to the current year presentation.
12. Contingencies
Pursuant to a 1999 settlement agreement resulting from a
lawsuit filed by the County of Maui, the Company and several
chemical manufacturers have agreed that until December 1, 2039,
they will pay for 90% of the capital cost to install filtration
systems in any future water wells if the presence of a
nematocide commonly known as DBCP exceeds specified levels, and
for the ongoing maintenance and operating cost for filtration
systems on existing and future wells. To secure its
obligations, the Company and the other defendants in the
lawsuit are required to furnish to the County of Maui an
irrevocable standby letter of credit throughout the entire term
of the agreement. The Company had estimated a range of its
share of the cost to operate and maintain the filtration
systems for the existing wells and its share of the cost of the
letter of credit, and recorded a reserve for this liability in
1999. The reserve recorded in 1999 and adjustments thereto
through September 30, 2003 did not have a material effect on
the Company's financial statements. The Company is unable to
estimate the range of potential financial impact for the
possible filtration cost for any future wells acquired or
drilled by the County of Maui and, therefore, has not made a
provision in its financial statements for such costs. The
level of DBCP in the existing wells should decline over time as
the wells are pumped, which may end the requirement for
filtration before 2039. There are procedures in the settlement
agreement to minimize the DBCP impact on future wells by
relocating the wells to areas unaffected by DBCP or by using
less costly methods to remove DBCP from the water.
In connection with pre-development planning for a land parcel
in Upcountry Maui, pesticide residues in the parcel's soil were
discovered in levels that are in excess of Federal and Hawaii
State limits. Studies by environmental consultants, in
consultation with the State Department of Health, indicate that
remediation probably will be necessary. The cost of
remediation will depend on the various alternatives as to the
use of the property and the method of remediation. Until the
Company makes further progress on obtaining proper entitlements
for the parcel, the ultimate use of the property remains
uncertain and, therefore, an estimate of the remediation cost
cannot be made.
In addition to the matters noted above, there are various other
claims and legal actions pending against the Company. In the
opinion of management, after consultation with legal counsel,
the resolution of these other matters will not have a material
adverse effect on the Company's financial position or results
of operations.
Premium Tropicals International, LLC (PTI) is a joint venture
between Royal Coast Tropical Fruit Company, Inc. (a wholly
owned subsidiary of Maui Pineapple Company, Ltd.) and an
Indonesian pineapple grower and canner. The joint venture
markets and sells Indonesian canned pineapple in the United
States. The Company is a guarantor of a $3 million line of
credit, which supports letters of credit to be issued on behalf
of PTI for import trading purposes and a $250,000 line of
credit used for working capital purposes. Both lines expire on
August 31, 2004.
The Company, as a partner in various partnerships, may under
particular circumstances be called upon to make additional
capital contributions.
At September 30, 2003, the Company had purchase commitments
under signed contacts totaling $6 million, which relate
primarily to pineapple purchases for its Costa Rican operations
and to real estate projects on Maui.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Consolidated
The Company reported net income of $9,448,000 ($1.31 per share)
for the third quarter of 2003 compared to a net loss of
$2,199,000 ($.31 per share) for the third quarter of 2002.
Consolidated revenues for the third quarter of 2003 were $52.6
million compared to $38.2 million for the third quarter of 2002.
For the first nine months of 2003, the Company's net income was
$4,790,000 ($.67 per share) compared to a net loss of $3,489,000
($.48 per share) for the first nine months of 2002. Revenues for
the first nine months of 2003 of $125.1 million were higher by
$17.6 million than the same period in 2002.
Increased net income for the third quarter and first nine months
of 2003 was primarily due to the sale of the Napili Plaza in
August 2003 and the sale of the Queen Kaahumanu Center in
September 2003. See Note 7 to Condensed Financial Statements.
Consolidated general and administrative expenses increased by 7%
and 31% for the third quarter and first nine months of 2003,
respectively, compared to the same periods in 2002. Higher
general and administrative expense for the third quarter of 2003
was largely due to increased pension expense and medical
insurance premiums. For the first nine months of 2003,
approximately 37% of the increase in general and administrative
expense was due to management changes at the corporate level and
in the Pineapple segment and employee layoffs in the Pineapple
segment. Also contributing to higher general and administrative
expense for the first nine months of 2003 were increased pension
expense and depreciation expense, and legal expenses incurred in
the Pineapple segment. General and administrative expenses are
incurred at the segment level and at the corporate level.
Approximately 70% of the general and administrative expenses
incurred at the corporate level were allocated to the business
segments in 2003 and 2002. Operating profit (loss) reported for
the business segment is after allocation of corporate general and
administrative expense, but before interest expense and income
taxes.
Consolidated pension expense for the year 2003 is expected to be
$2.7 million, an increase of approximately 100% over 2002. This
increase reflects the decline in pension asset values in 2002 and
a decrease in assumed discount rate as of December 31, 2002.
While pension asset values have improved in the first nine months
of 2003, fixed long-term interest rates have declined. Depending
on the discount rate used to record pension liabilities at
year-end 2003, the Company could be required to recognize an
additional minimum liability as prescribed by SFAS No. 87,
Employers' Accounting for Pensions. The liability would not
affect net income, but would be recorded as a reduction of equity
through a non-cash charge to accumulated other comprehensive income.
Interest expense was higher in the third quarter and first nine
months of 2003 by 16% and 13%, respectively, compared to the same
periods in 2002. The increase for the third quarter of 2003 was
largely due to interest expense on prior year Federal income tax
adjustments that were settled in 2003. These income tax
adjustments did not result in a material adjustment to income tax
expense in 2003. For the first nine months of 2003, the increase
in interest expense was also due to higher average borrowings.
Lower average interest rates in the third quarter and first nine
months of 2003 partially offset the increased expense.
Pineapple
Pineapple operations reported an operating profit of $225,000 for
the third quarter of 2003 compared to an operating loss of $2.2
million for the third quarter of 2002. For the first nine months
of 2003, Pineapple operations produced an operating loss of $4.2
million compared to an operating loss of $4.6 million for first
nine months of 2002. Revenues for the third quarter and first
nine months of 2003 were $27.7 million and $72.5 million,
respectively, an increase of approximately 8% in both periods
compared to the same periods in 2002.
Increased revenues for the third quarter and first nine months of
2003 were primarily attributable to higher average sales prices
for the Company's canned pineapple products, higher sales volume
of Hawaiian Gold (trademark)(fresh whole pineapple grown on Maui)
and higher sales volume of pineapple from Costa Rica by the
Company's 100% owned subsidiary, Royal Coast Tropical Fruit
Company, Inc. In addition, pineapple revenues included
nonrecurring cash receipts for the third quarter and first nine
months of 2003 of $2 million and $3 million, respectively. In
the third quarter of 2003, average sales prices for fresh
pineapple were lower than the third quarter of 2002, but for the
first nine months of 2003 average sales prices for the Company's
pineapple from Costa Rica increased over the same period in 2002.
Sales volume of canned pineapple products were lower in the third
quarter and first nine months of 2003, which partially offset the
improved results as compared to the same periods in 2002.
Cost of sales as a percentage of sales was lower in the third
quarter and first nine months of 2003 compared to 2002 primarily
because of the larger proportion of fresh pineapple sales, which
generally have a higher profit margin than canned sales, and
because of lower production cost (primarily at the plantations)
in 2003. Sales of fresh pineapple as a percentage of total
pineapple sales increased by approximately 5% and 8%,
respectively, for the third quarter and first nine months of 2003
as compared to the same periods in 2002.
General and administrative expenses incurred by and allocated to
the Pineapple segment increased by $700,000 and $4.1 million,
respectively, for the third quarter and first nine months of 2003
compared to the same periods in 2002. The increase for the first
nine months of 2003 includes significant litigation cost to
defend the Company's right to grow certain hybrid pineapple
varieties. Litigation costs are not expected to continue at this
level in the fourth quarter of 2003 because these claims were
settled in the third quarter of 2003. Higher depreciation and
other expense related to the integrated accounting system that
was fully placed in service as of January 2003 also resulted in
increased expenses in 2003. Cumulative depreciation expense and
other charges related to this system are expected to total
approximately $7.3 million through 2007.
Production costs are expected to be lower in 2003 because of a
reduction in the number of acres that will be planted as compared
to 2002. In accordance with Hawaii industry practice, the
Company's policy is to charge the costs of growing pineapple to
production in the year incurred rather than deferring these costs
until the year of harvest. This reduction in acres to be planted
in 2003 as compared to 2002 is expected to reduce cost of sales
for the year 2003 by approximately $1.4 million.
In October 2003, the Company reached a strategic decision to
cease production of its fresh-cut pineapple products and to
abandon that product line. Approximately 1% of Pineapple segment
revenues for the first nine months of 2003 were from fresh-cut
pineapple products. The Pineapple segment expects to incur
charges totaling approximately $1.5 million in the fourth quarter
of 2003 for the write off of assets and inventory related to this
product line.
The Company's canned pineapple is sold in competition with
product produced in foreign countries; thus, the volume of
imports of canned pineapple and the average unit value declared
on these imports influence the competitive environment of the
market for the Company's products. The effect on the marketplace
of a change in the volume or average unit value is not
necessarily immediate, and other factors also influence the
market, but the import statistics may be indicative of future
market condition. For the first eight months of 2003, the volume
of imports of canned pineapple into the United States increased
by 8% and the average unit value increased by 5%.
Antidumping duties ranging from less than 1% up to 51% have been
in effect on canned pineapple fruit imported from Thailand since
mid-1995. At the request of either the Company or a Thai
producer, the amount of duties on pineapple imports from Thailand
is subject to annual administrative reviews by the U. S.
Department of Commerce. Based on the preliminary results of the
seventh annual administrative review announced in June 2003,
three Thai importers have dumping margins that are considered "de
minimis." A determination of a de minimis dumping margin for
three consecutive years will result in an importer being exempt
from the anti-dumping duty order. In 2001, the Company had
appealed a determination that one large Thai producers' dumping
margin was de minimis, and in April 2003, the margin was
recomputed to an amount in excess of the de minimis threshold.
Over the last several years, the Company has been reducing the
acreage planted in Champaka pineapple (primarily a canning
variety) and increasing the acreage in Hawaiian Gold (trademark)
pineapple (primarily sold as fresh whole fruit), resulting in a
net reduction in the total planted acreage. This reduction in
planted acreage has resulted in a gradual reduction in the need
for seasonal labor as well as reductions in the full-time labor
force. The first nine months of 2003 includes approximately
$500,000 of employment severance charges. Acceleration of the
reduction in canned pineapple production will result in further
decreases to the size of the workforce. The Company's labor
force needs are being evaluated and additional charges for
severance and termination benefits may be necessary in future
periods. The Company is also evaluating the fixed assets used in
its Pineapple operations in an effort to determine the most
efficient usage of its assets based on an overall reduction in
canned pineapple production. This evaluation may result in
additional depreciation charges.
Resort
Kapalua Resort reported an operating loss for the third quarter
of 2003 of $152,000 compared to an operating loss of $207,000 for
the third quarter of 2002. For the first nine months of 2003,
Kapalua produced an operating profit of $114,000 compared to an
operating profit of $2,349,000 for the first nine months of 2002.
Revenues for the third quarter and first nine months of 2003 of
$11.0 million and $34.8 million, respectively, were lower by 6%
in both periods as compared to the same periods in 2002. Lower
revenues for the third quarter and the first nine months of 2003
and lower operating profit for the first nine months of 2003 were
largely attributable to fewer sales of new real estate product.
The operating loss for the third quarter of 2003 was less than
the third quarter of 2002 largely because operating profit from
real estate sales in the third quarter of 2002 was more than
offset by a provision to adjust the estimated cost of completing
certain offsite work related to properties sold in prior years.
Revenues from merchandise sales and the villa operations
increased in the third quarter and first nine months of 2003
compared to the same periods in 2002, along with increased hotel
and villa room occupancies at Kapalua. Revenues from Kapalua's
golf operations increased in the third quarter and first nine
months of 2003 as compared to the same periods in 2002, as a
decline in the number of paid rounds of golf were more than
offset by an increase in the average green fees. Kapalua Realty
commission income increased in 2003 reflecting a higher volume of
property resales.
The decrease in revenues from the sale of new real estate product
in the third quarter and first nine months of 2003 compared to
the same periods in 2002 partially reflects the low inventory of
new Kapalua real estate product available for sale. Real estate
sales for the first nine months of 2002 includes the sale of four
lots at Pineapple Hill Estates and two lots at Plantation
Estates. Two of the Pineapple Hill Estates lot sales took place
in the third quarter of 2002. In the first quarter of 2003, a
lot at Pineapple Hill Estates was sold. The only remaining new
real estate product available for sale in 2003 includes a custom
home at Pineapple Hill Estates that the Company constructed
through a joint venture and a 6.5 acre ocean front conservation-
zoned parcel.
While there appears to be substantial interest in the Company's
joint ventured residence at Pineapple Hill Estates, the property
remains in inventory. The 6.5-acre conservation-zoned parcel is
in escrow and the sale is estimated to close in the first quarter
of 2004. The Company continues its efforts to secure the
entitlements for the next phase of Plantation Estates at Kapalua
and it is estimated that these single-family home lots will be
available for sale in the first quarter of 2004. Revenues from
this subdivision would be recognized as subdivision improvements
are completed, so revenues probably would not be recognized until
later in 2004.
Resort real estate sales are cyclical and depend on a number of
factors. Results of real estate sales activity for the third
quarter and first nine months of 2003 are not necessarily
indicative of future performance trends for this segment.
Hotel and condominium room occupancies for the first eight months
of 2003 compared to the same period in 2002 increased by
approximately 4% for the State of Hawaii, and for the island of
Maui room occupancies increased by approximately 6%. Room
occupancies at the Kapalua Resort increased by almost 9% for the
third quarter of 2003 and by approximately 4% for the first nine
months of 2003 compared to the same periods in 2002. Advanced
bookings for the last quarter of 2003 indicate that Kapalua
Resort occupancies for the full year 2003 may slightly exceed
2002.
Commercial & Property
Commercial & Property operations produced revenues of $15.9
million and an operating profit of $15.3 million for the third
quarter of 2003 compared to revenues of $1.3 million and an
operating loss of $340,000 for the third quarter of 2002. For
the first nine months of 2003, the segment produced revenues of
$20.4 million and an operating profit of $15.5 million compared
to revenues of $4.1 million and an operating loss of $479,000 for
the same period in 2002. Revenues and operating profit for 2003
include the sale of Napili Plaza and results of the sale of Queen
Kaahumanu Center. See Note 7 to Condensed Financial Statements.
The sale of 32 single-family home lots at the Kapua Village
employee subdivision provided revenues of $2.9 million and
operating profit of $1.0 million in the first nine months of
2003. The closing of these lot sales began in December 2002 and
the final lot sale took place in the third quarter of 2003.
Revenues and operating profit for the first nine months of 2002
included a $624,000 gain on the sale of a land parcel.
LIQUIDITY, CAPITAL RESOURCES AND OTHER
At September 30, 2003, total debt including capital leases was
$41.9 million, a reduction of $8.2 million from year-end 2002 and
a reduction of $8.6 million from June 30, 2003. On August 1,
2003, the Napili Plaza was sold for $7.1 million and the $4.5
million mortgage loan on that property was repaid. In the third
quarter of 2003, the Company received $3.3 million from Kaahumanu
Center Associates, primarily representing the repayment of cash
advances, management fees and reimbursable costs, $1.9 million
from federal income tax refunds and $2.0 million of non-recurring
cash receipts in the Pineapple segment. Some of these third
quarter cash receipts were used to reduce debt.
Cash flows from operating activities for the first nine months of
2003 was $7.0 million compared to a negative $6.0 million for the
same period in 2002. Cash flows from operating activities for
the first nine months of 2003 includes $2.2 million from income
tax refunds and $3.0 million from Pineapple segment non-recurring
cash receipts. The improvement in cash from operating activities
for the first nine months of 2003 compared to the same period in
2002 also reflects a lower cash requirement for the seasonal
pineapple canning activity of the summer months because of
planned reductions in pineapple canning and planting.
At September 30, 2003, the Company had unused short- and long-
term lines of credit available of $7.1 million. Pursuant to the
loan agreement, the commitment under the Company's $25 million
revolving credit agreement was reduced by $3.3 million on
August 1, 2003 following the sale of the Napili Plaza. It is
anticipated that cash flows from operating activities together
with the credit lines currently available to the Company will be
sufficient to fund the Company's cash requirements for the
remainder of 2003. Should additional credit become necessary the
Company would seek additional credit from its lenders, although
no assurance can be given that such credit would be available or
on acceptable terms.
The Company's capital expenditures and expenditures for general
planning and land entitlements are expected to be approximately
$9.1 million in 2003. Approximately $3.7 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 loans.
This report contains forward-looking statements, within the
meaning of Private Securities Litigation Reform Act of 1995,
which are provided in an effort 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
belief regarding the effect of imports on canned pineapple
pricing; the Company's expectations as to depreciation expense,
pineapple production costs, and capital expenditures; the
Company's expectations as to the write off of fresh-cut pineapple
assets and inventories; the Company's expectations as to the
closing of the sale of the 6.5-acre parcel at Kapalua and the
timing as to availability for sale of the next phase of
Plantation Estates; the Company's expectations as to Resort room
occupancies; and the Company's expectations regarding 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 nine months of 2003.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. The
Company's principal executive officer and principal financial
officer evaluated the effectiveness of the Company's disclosure
controls and procedures as of September 30, 2003. Based on this
evaluation, it was concluded that the Company's disclosure
controls and procedures are effective in timely identifying
material information that should be disclosed in this report.
(b) Changes in internal controls. There were no changes in the
Company's internal control over financial reporting that occurred
during the Company's last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(31) Rule 13a - 14(a) Certifications
(32) Section 1350 Certifications
(b) Reports on Form 8-K
(1) A report on Form 8-K dated August 5, 2003, and filed on
August 8, 2003, included Item 7, Financial Statements, Pro
Forma Financial Information and Exhibits and Item 12,
Results of Operations.
(2) A report on Form 8-K dated September 18, 2003, and filed
on October 3, 2003, included Item 2, Acquisition or Disposition
of Assets and Item 7, Financial Statements, Pro Forma Financial
Information and Exhibits.
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, 2003 /S/ PAUL J. MEYER
Date Paul J. Meyer
Executive Vice President/Finance
(Principal Financial Officer)