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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One) | ||
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2012 |
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OR |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
Commission file number 001-06510
MAUI LAND & PINEAPPLE COMPANY, INC.
(Exact name of registrant as specified in its charter)
HAWAII (State or other jurisdiction of incorporation or organization) |
99-0107542 (IRS Employer Identification number) |
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200 VILLAGE ROAD, LAHAINA, MAUI, HAWAII (Address of principal executive offices) |
96761 (Zip Code) |
Registrant's telephone number, including area code (808) 877-3351
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Name of Each Exchange on Which Registered | |
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Common Stock, without Par Value | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý
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 ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company ý |
Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
The aggregate market value of the registrant's common stock held by non-affiliates of the registrant on June 30, 2012, the last business day of the registrant's most recently completed second fiscal quarter, computed by reference to the last sale price of the registrant's common stock as reported by the New York Stock Exchange on such date, was approximately $25,531,000. This computation assumes that all directors, executive officers and persons known to the Company to be the beneficial owners of more than ten percent of the Company's common stock are affiliates of the Company. Such assumption should not be deemed conclusive for any other purpose.
At March 1, 2013, the number of shares outstanding of the registrant's common stock was 18,763,511.
Documents incorporated by reference:
In accordance with General Instruction G(3) to Form 10-K, certain information required by Part III of Form 10-K is incorporated into this Annual Report on Form 10-K by reference to the registrant's definitive proxy statement for its 2013 annual meeting of stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the close of its fiscal year ended December 31, 2012. Only those portions of the proxy statement that are specifically incorporated by reference herein shall constitute a part of this annual report on Form 10-K.
FORWARD-LOOKING STATEMENTS AND RISKS
This Annual Report on Form 10-K filed by Maui Land & Pineapple Company, Inc. with the Securities and Exchange Commission, or SEC, contains forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They contain words such as "may," "will," "project," "might," "expect," "believe," "anticipate," "intend," "could," "would," "estimate," "continue," or "pursue," or the negative or other variations thereof or comparable terminology. Actual results could differ materially from those projected in forward-looking statements as a result of the following factors, among others:
Such risks and uncertainties also include those risks and uncertainties discussed under the headings "Business," "Risk Factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this annual report, as well as other factors described from time to time in our other reports filed with the SEC. Although we believe that our opinions and expectations reflected in the forward-looking statements are reasonable as of the date of this report, we cannot guarantee future results, levels of activity, performance or achievements, and our actual results may differ substantially from the views and expectations set forth in this report. Thus, you should not place undue
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reliance on any forward-looking statements. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Further, any forward-looking statements speak only as of the date made and, except as required by law, we undertake no obligation to publicly revise our forward-looking statements to reflect events or circumstances that arise after the date of this report.
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Forward Looking Statements and Risks
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Overview
Maui Land & Pineapple Company, Inc. is a Hawaii corporation and the successor to a business organized in 1909. Depending upon the context, the terms the "Company," "we," "our," and "us," refer to either Maui Land & Pineapple Company, Inc. alone, or to Maui Land & Pineapple Company, Inc. and its subsidiaries collectively. The Company consists of a landholding and operating parent company, its principal subsidiary, Kapalua Land Company, Ltd. and certain other subsidiaries of the Company.
The Company owns approximately 23,300 acres of land on Maui and develops, sells, and manages residential, resort, commercial, and industrial real estate through the following business segments:
Additional information and operating results pertaining to the above business segments can be found under the heading "Description of Business" in this Item 1 and in Note 12 of our Notes to Consolidated Financial Statements in Item 8 of this annual report.
Fiscal Year 2012 Business Developments
The following highlights several of our significant business developments during 2012.
Bay HoldingsOn June 13, 2012, the lenders of the Residences at Kapalua Bay construction loan filed for foreclosure against Bay Holdings, the sole member of Kapalua Bay LLC ("Kapalua Bay"), and other entities related to the project. In September 2012, three of the lenders assigned their loans and other interests to a non-affiliated investment company. A public auction for the foreclosure proceeding was held on December 3, 2012 and on January 31, 2013, the investment company was confirmed as the successful bidder of Kapalua Bay's assets.
Land Use EntitlementsOn December 21, 2012, the Maui County Council gave final approval of the county's general plan, which outlines and directs the future growth areas on Maui. Several of our landholdings received favorable treatment including the designation of approximately 290 acres in Upcountry Maui as a "Small Town."
Asset SaleIn January 2012, we sold 89 acres comprising a portion of our former agricultural land in Upcountry Maui for $1.5 million.
Utility CompaniesIn February 2012, the operations of Kapalua Water Company, Ltd. and Kapalua Waste Treatment Company, Ltd. were outsourced to a management company which specializes in operating water systems in Hawaii.
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Ladies Professional Golf Association (LPGA)In January 2012, we reached a settlement of our dispute with the LPGA regarding a contractual obligation to sponsor annual golf tournaments through October 2013. We paid $1 million to the LPGA during 2012 in settlement of all claims.
Defined Benefit Pension PlansIn November 2012, we reached a settlement with the Pension Benefit Guaranty Corporation (PBGC) regarding additional collateral that was required to secure our unfunded pension liability as a result of the cessation of our golf operations in 2011.
New York Stock Exchange (NYSE)In October 2012, we received notification from the NYSE that we were not in compliance with the NYSE's continued listing standards because our average market capitalization was less than $50 million over a 30 trading-day period and our most recently reported shareholders' equity was less than $50 million. As prescribed by NYSE procedures, on December 3, 2012 we submitted a business plan to the NYSE demonstrating our ability to achieve compliance with the continued listing standards within 18 months. On January 11, 2013, we were informed that the NYSE accepted our business plan.
For a further discussion about our business developments in 2012, see "Management's Discussion and Analysis of Financial Condition and Results of Operations," in Item 7 of this annual report.
Description of Business
Real Estate
Our Real Estate segment includes all land planning and entitlement, development and sales activities for our landholdings on Maui. Our principal real estate development is the Kapalua Resort, a master-planned, destination resort community located in West Maui encompassing approximately 1,650 acres.
Real Estate Planning and EntitlementsAppropriate entitlements must be obtained for land that is intended for development. Securing proper land entitlement is a process that requires obtaining county, state and federal approvals, which can take many years to complete and entails a variety of risks. The entitlement process requires that we satisfy all conditions and restrictions imposed in connection with such governmental approvals, including, among other things, construction of infrastructure improvements, payment of impact feesfor conditions such as parks and traffic mitigationrestrictions on permitted uses of the land, and provision of affordable housing. We actively work with the community, regulatory agencies, and legislative bodies at all levels of government in an effort to obtain necessary entitlements consistent with the needs of the community.
We have approximately 1,500 acres of land in Maui that are in various stages of the development process. The breakdown of these acres is as follows:
Location
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Number of Acres |
Zoned for Planned Use |
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Kapalua Resort |
900 | Yes | |||
Other West Maui |
300 | Yes | |||
Upcountry |
300 | No |
We are engaged in planning, permitting and entitlement activities for our development projects, and we intend to proceed with construction and sales of the following projects, among others, when internal and external factors permit:
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Village at Kapalua as well as other projects. Design and permitting for various components of the master plan are underway.
Real Estate DevelopmentWe are currently engaged in engineering and design activities for our development projects.
Real Estate SalesIn 2012, we sold an 89-acre parcel in Upcountry Maui for $1.5 million. We have a general brokerage subsidiary, Kapalua Realty Company, Ltd., which is located in the Kapalua Resort. Revenues from this operating segment for 2012 consisted of real estate sales and commissions recognized mainly from sales of existing real estate within the resort and totaled $2.5 million, or approximately 16% of consolidated revenues for the year ended December 31, 2012.
The price and market for luxury and other real estate in Maui is highly cyclical based principally upon interest rates, the general real estate markets in the mainland United States and specifically the West Coast, the popularity of Hawaii as a vacation destination and second-home market, the general condition of the economy in the United States and Asia, and the relationship of the dollar to foreign currencies. Our real estate business faces substantial competition from other land developers on the island of Maui, as well as in other parts of Hawaii and the mainland United States.
Leasing
Our Leasing segment activities include commercial, light industrial and agricultural land leases, licensing of our registered trademarks and trade names, and stewardship and conservation efforts.
Commercial and Industrial LeasesWe are the lessor of approximately 155,000 square feet of commercial retail and light industrial space leases, mainly in the Kapalua Resort and West Maui areas. We manage the leases of the majority of the restaurants, retail outlets and activities in the Kapalua Resort.
Agricultural LeasesWe are the lessor of 1,900 acres of diversified agriculture land leases in West and Upcountry Maui.
Trademark and Trade Name LicensingWe currently have licensing agreements for the use of our registered Kapalua trademarks and trade names with several different companies, mainly in conjunction with the leasing of our commercial spaces and agricultural lands.
Stewardship and ConservationWe manage the conservation of an 8,600-acre nature and watershed preserve in West Maui. A portion of our stewardship and conservation efforts is subsidized by the State of Hawaii and other organizations.
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Revenues from our Leasing segment totaled $5.8 million, or approximately 36% of consolidated revenues for the year ended December 31, 2012.
Our leasing operations face substantial competition from other property owners in Maui and Hawaii.
Utilities
Our Utilities segment includes the operations of our two Hawaii Public Utilities Commission-regulated subsidiaries, Kapalua Water Company, Ltd. and Kapalua Waste Treatment Company, Ltd. In addition, we also manage non-potable irrigation water systems in West and Upcountry Maui areas.
Kapalua Water Company, Ltd. provides potable and non-potable water utility services in the Kapalua Resort area, including the Kapalua Plantation Golf Course (PGC) and the Kapalua Bay Golf Course (Bay Course), The Ritz-Carlton Kapalua hotel, the Residences at Kapalua Bay, and landscaped common areas.
Kapalua Waste Treatment Company, Ltd. provides sewage collection and transmission services in the Kapalua Resort area. Waste water treatment is processed by the County of Maui's facility in neighboring Lahaina, Maui.
In February 2012, the operations of Kapalua Water Company, Ltd. and Kapalua Waste Treatment Company, Ltd were outsourced to a management company which specializes in operating water systems in Hawaii.
Non-Potable Irrigation Water SystemWe also own and operate several non-potable ditch, reservoir and well systems, which provide irrigation water primarily to the County of Maui, the PGC and Bay Course, and agricultural users in West and Upcountry Maui areas.
Revenues from our Utilities segment totaled $3.5 million, or approximately 22% of consolidated revenues for the year ended December 31, 2012.
Our utility services are primarily affected by the amount of rainfall and the level of development and volume of visitors in the Kapalua Resort area. In addition, our water and sewage system infrastructure requires periodic and ongoing maintenance, which in some cases can involve significant capital expenditures. Due to the regulated nature surrounding water sources and transmission infrastructure on Maui, we do not face any substantial competition for our water utility services.
Resort Amenities
Our Resort Amenities segment includes operating the Kapalua Spa, the Beach Club, and the Kapalua Club membership program.
Kapalua Spa is a 30,000 square foot full-service spa that opened in July 2009 as part of the Residences at Kapalua Bay. The Kapalua Spa is owned by Kapalua Bay , and is leased by us on a month-to-month basis. It is open to guests of the resort.
Beach Club is a private pool-side dining facility that opened in July 2009 for members of the Kapalua Club. It is located in the Residences at Kapalua Bay. The Beach Club is owned by Kapalua Bay and is leased by us on a month-to-month basis.
Kapalua Club is a private non-equity club membership program which provides certain benefits and privileges within the Kapalua Resort for its members.
Revenues from our Resort Amenities segment totaled $4.2 million, or approximately 26% of consolidated revenues for the year ended December 31, 2012.
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The viability of our resort amenities and the club membership program are principally dependent on the overall appeal and success of the Kapalua Resort. The resort faces competition from other resort destination communities on Maui and other parts of Hawaii, including Kaanapali, and Wailea.
Discontinued Operations
In December 2009, we ceased all agriculture operations. In April 2011, we ceased management of the PGC and Bay Course after the owner engaged a new operator. During 2011, we entered into long-term lease arrangements for our retail stores in the Kapalua Resort and in September 2011, we ceased our retail operations. Our former agriculture, golf and retail businesses are reported as discontinued operations in this annual report.
Employees
As of December 31, 2012, we had 17 employees, none of whom are members of a collective bargaining group.
Available Information
Our Internet address is www.mauiland.com. Information about the Company is also available on www.kapalua.com. Reference in this annual report to these website addresses does not constitute incorporation by reference of the information contained on the websites. We make available free of charge on or through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and other reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We also make available through our website all filings of our executive officers and directors on Forms 3, 4 and 5 pursuant to Section 16 of the Exchange Act. These filings are also available on the SEC's website at www.sec.gov.
Executive Officers of the Company
The names, ages and certain biographical information about our executive officers, as of February 28, 2013, are provided below.
Warren H. Haruki (60) | Mr. Haruki has been Chief Executive Officer of the Company since May 2011 and Executive Chairman of our Board since January 2009. He has been a director on our Board since 2006. Mr. Haruki has served as President and Chief Executive Officer of Grove Farm Company, Inc., a land development company located on Kauai, Hawaii since February 2005. He was President of GTE Hawaiian Tel and Verizon Hawaii, communications providers, from 1991 to 2003. Mr. Haruki serves on the Board of Hawaiian Telcom, a communications provider, and on the Boards of several privately-held companies. |
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Ryan L. Churchill (41) | Mr. Churchill has served as President and Chief Operating Officer of the Company since February 2010 and as Senior Vice President-Corporate Development of the Company since March 2007. He served as Vice President-Community Development from November 2005 to March 2007. Mr. Churchill was Vice President/Planning of Kapalua Land Company, Ltd., the operating subsidiary responsible for the Company's Community Development and Resort segments, from June 2004 to November 2005, and Development Manager from October 2000 to June 2004. Mr. Churchill serves on the Boards of various non-profit organizations. | |
Tim T. Esaki (50) |
Mr. Esaki has served as Chief Financial Officer of the Company since May 2010. Mr. Esaki was appointed as the Deputy Director of the Department of Public Works for the County of Hawaii from 2009 to April 2010. From 2003 to 2009, he was Senior Vice President of Finance and Accounting for 1250 Oceanside Partners, the developer and operator of a 1,500-acre, master-planned, residential golf and country club community in Kona, Hawaii. |
The following is a summary of certain risks we face in our business. They are not the only risks we face. Additional risks that we do not yet know of or that we currently believe are immaterial may also impair our business operations. If any of the events or circumstances described in the following risks actually occurs, our business, financial condition or results of operations could suffer, and the trading price of our common stock could decline. In assessing these risks, investors should also refer to the other information contained or incorporated by reference in our other filings with the SEC.
Unstable macroeconomic market conditions could continue to materially and adversely affect our operating results.
Our operations and performance depend significantly on worldwide economic conditions. Uncertainty about current global economic conditions poses a risk to our business as consumers, tourists and real estate investors postpone or reduce spending in response to tighter credit markets, higher energy costs, negative financial news, reduced consumer confidence, and/or declines in income or asset values, which could have a material negative effect on the demand for our products and services. Other factors that could influence demand include increases in fuel and other energy costs, conditions in the residential real estate and mortgage markets, interest rates, labor costs, access to credit on reasonable terms, and other macroeconomic factors affecting consumer spending behavior. These and other economic factors could have a material adverse effect on demand for our products and services and on our financial condition and operating results.
In addition, although economic conditions appear to be improving, if the current equity and credit markets do not continue to improve or further deteriorate, or if our expenses increase unexpectedly, it may become necessary for us to raise additional capital in the form of a debt or equity financing, or a combination of the two. If economic conditions do not improve, it could make any debt or equity financing more difficult, more costly, and, in the case of an equity financing, more dilutive to our existing stockholders. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our ability to execute our current business strategy, as well as our financial performance and stock price.
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Real estate investments are subject to numerous risks and we are negatively impacted by the downturns in the real estate market.
We are subject to the risks that generally relate to investments in real property because we develop and sell real property, primarily for residential use. The market for real estate on Maui and in Hawaii generally tends to be highly cyclical and is typically affected by numerous changes in local, national and worldwide conditions, especially economic conditions, many of which are beyond our control, including the following:
Changes in any of the foregoing could have a material adverse effect on our business by causing a more significant general decline in the number of residential or luxury real estate sales and/or prices of the units available for sale, which, in turn, could adversely affect our revenues and profitability. During low periods of demand, real estate product may remain in inventory for much longer than expected or be sold at lower than expected returns, or even at a loss, which could impair our liquidity and ability to proceed with additional land development projects and negatively affect our operating results. Sustained adverse changes to our development plans could result in additional impairment charges or write-offs of deferred development costs, which could have a material adverse impact on our financial condition and results of operations. In addition, in the current economic environment, equity real estate investments may be difficult to sell quickly and we may not be able to adjust our portfolio of properties quickly in response to economic or other conditions.
Because we are located in Hawaii and therefore apart from the mainland United States, our financial results are more sensitive to certain economic factors, such as spending on tourism and increased fuel and travel costs, which may adversely impact and materially affect our business, financial condition and results of operations.
Our businesses are dependent on attracting visitors to the Kapalua Resort, to Maui, and to the State of Hawaii as a whole. Economic factors that affect the number of visitors, their length of stay or expenditure levels will affect our financial performance. Factors such as the continuing worldwide economic uncertainty and weakness, continuing high unemployment rates in Hawaii and the mainland
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United States, natural disasters, substantial increases in the cost of energy, including fuel costs, and events in the airline industry that may reduce passenger capacity or increase traveling costs could reduce the number of visitors to the Kapalua Resort and negatively affect a potential buyer's demand for our ongoing and future property developments, each of which could have a material adverse impact on our business, financial condition and results of operations. In addition, the threat, or perceived threat, of heightened terrorist activity in the United States or other geopolitical events, or the spread of contagious diseases could negatively affect a potential visitor's choice of vacation destination or second home location and as a result, have a material adverse impact on our business, financial condition and results of operations.
We are involved in joint ventures and are subject to risks associated with joint venture relationships.
We are involved in partnerships, joint ventures and other joint business relationships, and may initiate future joint venture projects. We currently have a 51% interest in Bay Holdings, the joint venture that constructed the Residences at Kapalua Bay.
A joint venture involves certain risks such as:
In connection with our joint venture projects, we may be asked to guarantee the joint venture's obligations, or to indemnify third parties in connection with a joint venture's contractual arrangements. If we were to become obligated under such arrangement or become subject to the risks associated with joint venture relationships, our business, financial condition and results of operations may be adversely affected.
We have purchase commitments related to the amenities at the Residences at Kapalua Bay project and have entered into limited guarantees for completion of the project and certain limited recourse obligations of Bay Holdings.
Bay Holdings, constructed a new project consisting of residential development on land that it owns at the site of the former Kapalua Bay Hotel, and a spa on an adjacent parcel of land that is owned by us and leased to Bay Holdings. In connection with the construction loan agreement, we and other members of Bay Holdings, entered into a completion guaranty and a recourse guaranty. Under the completion guaranty, members of Bay Holdings agreed to guarantee substantial completion of the project. Under the recourse guaranty, members of Bay Holdings agreed to reimburse the lenders for losses incurred due to specified actions of Bay Holdings, including, without limitation, fraud or intentional misrepresentation, gross negligence, physical waste of project assets, and breach of certain environmental provisions of the construction loan agreement. Our guarantees do not include payment in full of the loan. Construction of the project was completed by the end of 2009, but the completion guaranty will remain in place until all construction contracts have been fully settled and paid. Pursuant to a previous agreement, we have a commitment to purchase the spa, beach club improvements and the sundry store (the "Amenities") from Bay Holdings at the actual construction cost of approximately $35 million. As of December 31, 2012, we have recorded an estimated liability under the completion
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and recourse guarantees of $4.1 million, and we and the other members of Bay Holdings are working with the lenders to settle the terms of the loan agreement and the purchase and payment terms of the Amenities. We do not have sufficient liquidity to purchase the Amenities at the actual construction costs. In June 2012, the lenders of the Residences at Kapalua Bay construction loan filed for foreclosure against Bay Holdings and other entities related to the project. A public auction for the foreclosure proceeding was held on December 3, 2012 and on January 31, 2013, a third-party investment company was confirmed as the successful bidder of Kapalua Bay's assets.
If we are unable to complete land development projects within forecasted time and budget expectations, if at all, our financial results may be negatively affected.
We intend to develop resort and other properties as suitable opportunities arise, taking into consideration the general economic climate. New project developments have a number of risks, including risks associated with:
If any development project is not completed on time or within budget, this could have a material adverse effect on our financial results.
If we are unable to obtain required land use entitlements at reasonable costs, or at all, our operating results would be adversely affected.
The financial performance of our Real Estate segment is closely related to our success in obtaining land use entitlements for proposed development projects. Obtaining all of the necessary entitlements to develop a parcel of land is often difficult, costly and may take several years, or more, to complete. In some situations, we may be unable to obtain the necessary entitlements to proceed with a real estate development or may be required to alter our plans for the development. Delays or failures to obtain these entitlements may have a material adverse effect on our financial results.
If we are unable to successfully compete with other developers of real estate in Maui, our financial results could be materially adversely affected.
Our real estate products face significant competition from other luxury resort real estate properties on Maui, and from other residential property in Hawaii and the mainland United States. In many cases, our competitors are larger than us and have greater access to capital. If we are unable to compete with these competitors, our financial results could be materially adversely affected.
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We may be subject to certain environmental regulations under which we may have additional liability and experience additional costs for land development.
Various federal, state, and local environmental laws, ordinances and regulations regulate our properties and could make us liable for the costs of removing or cleaning up hazardous or toxic substances on, under, or in property we currently own or operate or that we previously owned or operated. These laws could impose liability without regard to whether we knew of, or were responsible for, the presence of hazardous or toxic substances. The presence of hazardous or toxic substances, or the failure to properly clean up such substances when present, could jeopardize our ability to develop, use, sell or rent the real property or to borrow using the real property as collateral. If we arrange for the disposal or treatment of hazardous or toxic wastes, we could be liable for the costs of removing or cleaning up wastes at the disposal or treatment facility, even if we never owned or operated that facility. Certain laws, ordinances and regulations, particularly those governing the management or preservation of wetlands, coastal zones and threatened or endangered species, could limit our ability to develop, use, sell or rent our real property.
Changes in weather conditions or natural disasters could adversely impact and materially affect our business, financial condition and results of operations.
Natural disasters could damage our resort and real estate holdings, resulting in substantial repair or replacement costs to the extent not covered by insurance, a reduction in property values, or a loss of revenue, each of which could have a material adverse impact on our business, financial condition and results of operations. Our competitors may be affected differently by such changes in weather conditions or natural disasters depending on the location of their assets or operations.
Unauthorized use of our trademarks could negatively impact our businesses.
We have several trademarks that we have registered in the United States and in several foreign countries. To the extent that our exclusive use of these trademarks is challenged, we intend to vigorously defend our rights. If we are not successful in defending our rights, our businesses could be adversely impacted.
Market volatility of asset values and interest rates affect the funded status of our defined benefit pension plans and could, under certain circumstances, have a material adverse effect on our financial condition.
No additional benefits are accruing for participants in our defined benefit pension plans, however, the funded status for these plans as of December 31, 2012 is a liability of approximately $30.3 million. Contributions to our defined benefit pension plans are expected to be approximately $2.4 million in 2013. Changes in interest rates and the fair value of the plan assets drive the annual funding short-fall or gain and affect the minimum cash contributions that must be paid to the plans. Therefore, under certain circumstances, changes in asset values or interest rates could have a material adverse effect on our financial condition.
Risks Related to Indebtedness and Liquidity
We have incurred a significant amount of indebtedness and are subject to certain covenants under our credit agreements. Failure to satisfy the covenants under these agreements could accelerate our repayment obligations, which could adversely affect our operations and financial results and impact our ability to satisfy our other financial obligations and ability to continue as a going concern.
We had approximately $49.3 million of indebtedness as of December 31, 2012, consisting of a secured revolving line of credit with Wells Fargo for up to $34.5 million, of which we had $8.8 million in availability as of December 31, 2012, and a secured term loan with American AgCredit for
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$24.1 million. Both credit facilities were scheduled to mature on May 1, 2013. In February 2013, we extended the maturity date of both credit facilities to May 1, 2014.
We have pledged a significant portion of our real estate holdings as security for borrowings under our credit facilities, limiting our ability to borrow additional funds.
Both of our credit agreements contain financial and other covenants that we must satisfy. Our ability to continue to borrow under these agreements and to fund our cash requirements depends upon our ability to comply with those covenants. If we fail to satisfy any of our covenants, each lender may elect to accelerate our payment obligations under such lender's credit agreement.
Our indebtedness could have the effect of, among other things, increasing our exposure to general adverse economic and industry conditions, limiting our flexibility in planning for, or reacting to, changes in our business and industry, and limiting our ability to borrow additional funds.
Our cash outlook for the next twelve months and our ability to continue to meet our loan covenants and to continue as a going concern is highly dependent on successfully implementing our business initiatives and selling real estate assets at acceptable prices.
In 2012, we had negative cash flows from operations of $3.8 million and at December 31, 2012, we had borrowings outstanding of $49.3 million. Our cash outlook for the next twelve months and our ability to continue to meet our financial covenants is highly dependent on selling certain real estate assets at acceptable prices. If we are unable to meet our loan covenants resulting in our borrowings becoming immediately due, we would not have sufficient liquidity to repay such outstanding borrowings. In addition, we are subject to several commitments and contingencies that could negatively impact our future cash flows, including purchase commitments related to our investment in Bay Holdings, a U.S. Equal Employment Opportunity Commission (EEOC) matter related to our discontinued agricultural operations, and funding requirements related to our defined benefit pension plans. In response to these circumstances, we are undertaking several business initiatives to reduce cash commitments, to generate cash flow, to reduce costs, and to sell real estate assets and pay down our debt. However, there can be no assurance that we will be able to successfully achieve these initiatives, which raises substantial doubt about our ability to continue as a going concern.
In connection with the sale of any real property, our credit agreements require us to pay a portion of the proceeds received from any such sale to our lenders as mandatory principal payments. The amount of proceeds paid to our lenders will reduce net proceeds from any such sale and negatively impact our cash flow.
Our stock price has been subject to significant volatility.
In 2012, the daily closing price per share of our common stock has ranged from a high of $4.49 per share to a low of $1.83 per share. Our stock price has been, and may continue to be, subject to significant volatility. Among others, including the risks and uncertainties discussed in this annual report, the following factors, some of which are out of our control, may cause the market price of our common stock to continue to be volatile:
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Fluctuations in the price of our common stock may also be exacerbated by economic and other conditions in Maui in particular, or conditions in the financial markets generally.
Trading in our stock over the last twelve months has been limited, so investors may not be able to sell as much stock as they want at prevailing prices.
The average daily trading volume in our common stock for the year ended December 31, 2012 was approximately 8,772 shares. If limited trading in our stock continues, it may be difficult for investors to sell their shares in the public market at any given time at prevailing prices. Moreover, the market price for shares of our common stock may be made more volatile because of the relatively low volume of trading in our common stock. When trading volume is low, significant price movement can be caused by the trading in a relatively small number of shares. Volatility in our common stock could cause stockholders to incur substantial losses.
We do not anticipate declaring any cash dividends on our common stock.
We have not declared or paid regular cash dividends on our common stock and do not plan to pay any cash dividends in the near future. Our current policy is to retain all funds and any earnings for use in the operation and expansion of our business. The payment of cash dividends by us is restricted by certain of our credit facilities, which contains covenants prohibiting us from paying any cash dividends without the lender's prior approval. If we do not pay dividends, our stock may be less valuable to you because a return on your investment will only occur if our stock price appreciates.
If we do not meet the continued listing requirements of the NYSE, our common stock may be delisted.
Our common stock is currently listed on the NYSE. On October 23, 2012 we received notification from the NYSE that we were not in compliance with the NYSE's continued listing standards because our average market capitalization was less than $50 million over a 30 trading-day period and our most recently reported shareholders' equity was less than $50 million. As prescribed by NYSE procedures, on December 3, 2012 we submitted a business plan to the NYSE demonstrating our ability to achieve compliance with the continued listing standards within 18 months. On January 11, 2013, we were informed that the NYSE accepted our business plan.
If we are unable to maintain compliance with the NYSE's continued listing standards the NYSE may take action to delist our common stock. Delisting could negatively impact us by, among other things, reducing the liquidity and market price of our common stock, reducing the number of investors willing to hold or acquire our common stock, and limiting our ability to issue additional securities or obtain additional financing in the future, and might negatively impact our reputation and, as a consequence, our business. In addition, if our common stock is delisted, it would violate the provisions of our credit agreements.
We may need additional funds which, if available, could result in significant dilution to our stockholders, have superior rights to our common stock and contain covenants that restrict our operations.
If we continue to operate unprofitably, if unanticipated contingencies arise or if we are required to retire any significant portion of our outstanding indebtedness, it will be necessary for us to raise additional capital either through public or private equity or debt financing. We cannot say with any certainty that we will be able to obtain the additional needed funds on reasonable terms, or at all. If we were to raise capital through the issuance of our common stock or securities convertible or exercisable into our common stock, our existing stockholders may suffer significant dilution. If we issued preferred equity or debt securities, these securities could have rights superior to holders of our common stock and could contain covenants that will restrict our operations. If additional funds are raised through a bank credit facility or the issuance of debt securities, the holder of such indebtedness would have rights
12
senior to the rights of equity holders and the terms of such indebtedness could impose restrictions on our operations.
Item 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
We own approximately 23,300 acres of land on Maui. Approximately 3,700 acres are used directly or indirectly in our operations; approximately 11,800 acres are in conservation and the remainder, approximately 7,800 acres, is not currently being used. This land, most of which was acquired from 1911 to 1932, is carried on our consolidated balance sheet at cost. We believe we have clear and unencumbered marketable title to all such property, except for the following:
A summary of the current use of our land holdings as of December 31, 2012 follows:
|
Acres | |||
---|---|---|---|---|
Conservation |
11,800 | |||
Agriculture zoned (not used) |
7,800 | |||
Operations |
2,300 | |||
Planned development |
1,400 | |||
|
23,300 | |||
Approximately 21,300 acres of our land are located in West Maui, approximately 2,000 acres are located in Upcountry Maui and approximately 7 acres are located in Kahului, Maui.
We currently have approximately 7,800 acres that are not in the current development plans or held for sale, and are not used in our other operations or planned or used in conservation. These properties will be evaluated in the future to determine the appropriate use or disposition of the acreage.
The 21,300 acres in West Maui comprise a largely contiguous parcel that extends from the sea to an elevation of approximately 5,700 feet and includes 10.6 miles of ocean frontage with approximately 3,300 lineal feet along sandy beaches, as well as agricultural and grazing lands, gulches, and heavily forested areas. The West Maui acreage includes approximately 1,650 acres designated for the Kapalua Resort.
13
The Upcountry Maui property is situated at elevations between 1,000 and 2,000 feet above sea level on the slopes of Haleakala, a volcanic-formed mountain on the island that rises above 10,000 feet in elevation.
The Kahului acreage includes the last lot that was our former pineapple cannery site. This acreage is currently held for sale.
We believe our facilities are suitable and adequate for our business and have sufficient capacity for the purposes for which they are currently being used or intended to be used.
On May 23, 2011, a lawsuit was filed against Kapalua Bay; the Company; The Ritz-Carlton Hotel Company, LLC; Kapalua Realty Co. Ltd.; and other John and Jane Does; by Virendra Nath, Nancy Makowski, Krishna Narayan and Sherrie Narayan, purchasers of two units at the Ritz-Carlton Residences at Kapalua Bay. The lawsuit was filed in the Circuit Court of the Second Circuit, State of Hawaii pursuant to Civil No. 11-1-0216-(3). The lawsuit alleges deceptive acts, intentional misrepresentation, concealment, and negligent misrepresentation, among other allegations with regard to the sale of the two residential units and seeks unspecified damages, treble damages and other relief. The Company disagrees with the allegations and plans to vigorously defend itself. The Company is presently unable to reasonably estimate the amount of probable liability, if any, related to this matter and, accordingly, has made no provision in the accompanying consolidated financial statements.
On April 19, 2011, a lawsuit was filed against the Company's wholly owned subsidiary, MPC and several other Hawaii based farmers by the EEOC. The lawsuit was filed in the United States District Court, District of Hawaii, pursuant to Civil Action No. 11-00257. The lawsuit alleges unlawful employment practices on the basis of national origin and race discrimination, harassment and retaliation and seeks injunctive relief, unspecified compensatory and punitive damages and other relief. The Company believes it has not been involved in any wrongdoing, disagrees with the charges and plans to vigorously defend itself. The Company is presently unable to reasonably estimate the amount of probable liability, if any, related to this matter and, accordingly, has made no provision in the accompanying consolidated financial statements.
On June 7, 2012, a group of owners of 11 whole-ownership units at the Ritz-Carlton Club and Residences, Kapalua Bay filed a lawsuit against multiple parties including the Company. The Company believes it has not been involved in any wrongdoing, disagrees with the charges and plans to vigorously defend itself. The Company is presently unable to reasonably estimate the amount of probable liability, if any, related to this matter and, accordingly, has made no provision in the accompanying consolidated financial statements.
We are a party to various claims, complaints and other legal actions that have arisen in the normal course of business from time to time. We believe the outcome of these pending legal proceedings, in the aggregate, is not likely to have a material adverse effect on our operations, financial position or cash flows.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
14
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on the NYSE under the symbol "MLP." We did not declare any dividends in 2012 and 2011. Our ability to declare dividends is restricted by the terms of our credit agreements. We do not intend to pay any cash dividends on our common stock in the foreseeable future. As of December 31, 2012, there were 322 shareholders of record of our common stock.
The following chart reflects high and low sales prices during each of the quarters in 2012 and 2011:
|
|
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2012 |
High | $ | 4.25 | $ | 4.49 | $ | 3.84 | $ | 4.24 | ||||||
|
Low | 3.70 | 3.09 | 2.26 | 1.83 | ||||||||||
2011 |
High |
$ |
7.55 |
$ |
6.13 |
$ |
5.49 |
$ |
4.65 |
||||||
|
Low | 4.47 | 4.38 | 3.81 | 3.68 |
We did not repurchase any shares of common stock during the fiscal year ended December 31, 2012.
Securities Authorized For Issuance Under Equity Compensation Plans
The information regarding securities authorized for issuance under our equity compensation plans is set forth in Item 12 of this annual report.
Item 6. SELECTED FINANCIAL DATA
Because we qualify as a smaller reporting company, as defined in Item 10(f)(1) of Regulation S-K, we are not required to provide the information required by this Item.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the forward-looking statements disclaimer set forth at the beginning of this annual report, the risk factors set forth in Item 1A of this annual report, and our Consolidated Financial Statements and the Notes to those statements set forth in Item 8 of this annual report.
RESULTS OF OPERATIONS
Comparison of Years Ended December 31, 2012 and 2011
CONSOLIDATED
|
Year Ended December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2012 | 2011 | |||||
Consolidated Revenues |
$ | 16,164 | $ | 14,542 | |||
Loss From Continuing Operations |
$ | (4,956 | ) | $ | (9,550 | ) | |
Income From Discontinued Operations |
$ | 354 | $ | 14,628 | |||
Net Income (Loss) |
$ | (4,602 | ) | $ | 5,078 | ||
Net Income (Loss) Per Common Share |
$ | (0.25 | ) | $ | 0.27 |
15
We reported net loss of $4.6 million or $0.25 per share for 2012 compared to net income of $5.1 million or $0.27 per share for 2011. Consolidated revenues for 2012 include the January 2012 sale of an 89-acre parcel in Upcountry Maui for $1.5 million. The lower loss from continuing operations in 2012 reflects improved performance from our business segments and continuing cost reduction efforts. Income from discontinued operations for 2011 included a gain of $15.1 million recognized in March 2011 from sale of the Bay Course.
REAL ESTATE
|
Year Ended December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2012 | 2011 | |||||
Revenues |
$ | 2,545 | $ | 1,070 | |||
Operating Loss |
$ | (338 | ) | $ | (661 | ) |
Revenues for 2012 include the January 2012 sale of an 89-acre parcel in Upcountry Maui for $1.5 million. We had no sales of real estate inventory in 2011. The other revenues included in this operating segment were real estate sales commissions from Kapalua Realty Company totaling $1.0 million for 2012 and $1.1 million for 2011.
Real estate development and sales are cyclical and depend on a number of factors. Results for one period are therefore not necessarily indicative of future performance trends in this segment.
LEASING
|
Year Ended December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2012 | 2011 | |||||
Revenues |
$ | 5,806 | $ | 5,144 | |||
Operating Profit (Loss) |
$ | 428 | $ | (1,000 | ) |
The increase in leasing revenues in 2012 is primarily due to improved operating performance of our resort tenants and new commercial space and agricultural land leases. The increase in operating profit for 2012 is attributed to lower general and administrative expenses and improved performance from outsourcing the management of our commercial property portfolio in 2011.
UTILITIES
|
Year Ended December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2012 | 2011 | |||||
Revenues |
$ | 3,541 | $ | 3,418 | |||
Operating Profit (Loss) |
$ | 624 | $ | (319 | ) |
The increase in operating profit for 2012 is primarily due to lower general and administrative expenses and improved performance from the outsourcing of our utilities companies' operations in February 2012.
16
RESORT AMENITIES
|
Year Ended December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2012 | 2011 | |||||
Revenues |
$ | 4,228 | $ | 3,854 | |||
Operating Loss |
$ | (181 | ) | $ | (803 | ) |
Increased revenues in 2012 were due to higher spa service and treatment revenues and increased membership dues from growth in the Kapalua Club's membership base. Reduced operating losses for 2012 are primarily due to lower general and administrative expenses.
GENERAL AND ADMINISTRATIVE
|
Year Ended December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2012 | 2011 | |||||
General and Administrative |
$ | 3,029 | $ | 6,271 |
General and administrative expenses are incurred at the corporate level and at the operating segment level. Results of operations presented above for the reportable operating segments include an allocation of a portion of the general and administrative expenses at the corporate level. Such allocations are made on the basis of our evaluation of the level of services provided to the operating segments.
Lower general and administrative expenses in 2012 were primarily due to reduced staffing levels, and lower professional services and outside consultant costs. General and administrative expenses for 2011 include a $1.5 million contribution of approximately 22 acres to Maui Preparatory Academy.
Selling and marketing expenses decreased from $792,000 in 2011 to $168,000 in 2012, as we discontinued operating certain businesses, and the lessees and licensees of our properties and trade names assumed the responsibility for marketing.
DISCONTINUED OPERATIONS
|
Year Ended December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2012 | 2011 | |||||
Income From Discontinued Operations Before Income Taxes |
$ | 354 | $ | 14,628 |
Our former retail, golf and agriculture operations are reported as discontinued operations. Income from discontinued operations for 2011 includes a $15.1 million gain from the sale of the Bay Course. See Note 6 to Consolidated Financial Statements in Item 8 of this annual report.
INTEREST EXPENSE
Interest expense was $2.6 million for 2012 compared to $2.7 million for 2011, of which $300,000 was included in discontinued operations in 2011. Our average interest rates on borrowings was 4.7% for 2012, compared to 4.8% for 2011, and average borrowings were $47 million in 2012 compared to $45 million in 2011.
17
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2012, our total debt was $49.3 million compared to $45.5 million at December 31, 2011. At December 31, 2012, we had approximately $8.8 million available under our revolving line of credit and $829,000 in cash and cash equivalents.
Revolving Line of Credit with Wells Fargo
We have a $34.5 million revolving line of credit with Wells Fargo that was scheduled to mature on May 1, 2013. In February 2013, we exercised our option to extend the maturity date to May 1, 2014. Interest rates on borrowings are at LIBOR plus 3.8% and the line of credit is collateralized by approximately 880 acres of our real estate holdings at the Kapalua Resort. The line of credit agreement contains various representations, warranties, affirmative, negative and financial covenants and events of default customary for financings of this type. Financial covenants include a required minimum liquidity (as defined) of $4 million, maximum total liabilities of $175 million, and a limitation on new indebtedness. The credit agreement includes predetermined release prices for the real property securing the credit facility. There are no commitment fees on the unused portion of the revolving facility. Absent the sale of some of our real estate holdings or refinancing, we do not expect to be able to repay any significant amount of borrowings under the credit line.
As of December 31, 2012, we had $25.2 million of borrowings outstanding under our revolving line of credit, $8.8 million available borrowing capacity and irrevocable letters of credit totaling $0.5 million that were secured by the line of credit.
Term Loan with American AgCredit
We have a $24.1 million term loan with American AgCredit that was scheduled to mature on May 1, 2013. In February 2013, we amended our term loan agreement to extend the maturity date to May 1, 2014. The interest rate on this credit facility is based on the greater of 1.00% or the 30-day LIBOR rate, plus an applicable spread of 4.25%. The loan agreement provides for tiered reductions in the applicable spread to 3.75%, subject to corresponding reductions in the principal balance of the loan. The loan requires a mandatory principal repayment of $4.1 million by December 31, 2013. The loan agreement contains various representations, warranties, affirmative, negative and financial covenants and events of default customary for financings of this type. Financial covenants include a required minimum liquidity (as defined) of $4 million, maximum total liabilities of $175 million and a limitation on new indebtedness. It also requires mandatory principal repayments of 100% of the net proceeds of the sale of any real property pledged as collateral for the loan and tiered mandatory principal repayments based on predetermined percentages ranging from 10% to 75% of the net proceeds from the sale of non-collateralized real property. In accordance with this provision, we made a $353,000 principal repayment in January 2012, in conjunction with a sale of a non-collateralized real estate parcel in Upcountry Maui for $1.5 million. The loan is collateralized by approximately 3,100 acres of our real estate holdings in West Maui and Upcountry Maui. Absent the sale of some of our real estate holdings or refinancing, we do not expect to be able to pay the outstanding balance under the term loan on the maturity date.
Cash Flows
Net cash used in operating activities for 2012 was $3.8 million compared to $10.2 million in 2011. The decrease in net cash used in operating activities was primarily due to our initiatives to reduce cash commitments, mainly by implementing cost reduction measures.
During 2012, net borrowings from our Wells Fargo revolving line of credit were $4.1 million. In 2012, repayments of our American AgCredit term loan were $353,000. Interest paid in 2012 and 2011
18
was $2.2 million and $2.0 million, respectively. Mandatory funding contributions to our retirement plans totaled $2.4 million for both 2012 and 2011.
Future Cash Inflows and Outflows
Our plans for 2013 include the possible sale of certain operating and non-operating real estate assets that could result in net cash proceeds which would be partially used to repay outstanding indebtedness and for general working capital. There can be no assurance that we will be able to sell any of our real estate assets on acceptable terms, if at all.
Our cash outlook for the next twelve months and our ability to continue to meet our loan covenants and to continue as a going concern is highly dependent on successfully implementing our business initiatives and selling real estate assets at acceptable prices. If we are unable to meet our loan covenants resulting in our loan borrowings becoming immediately due, we would not have sufficient liquidity to repay such outstanding borrowings.
We are subject to several commitments and contingencies that could negatively impact our future cash flows, including purchase commitments up to $35 million related to our investment in Bay Holdings to purchase the Amenities, an EEOC matter related to our discontinued agricultural operations, and funding requirements related to our defined benefit pension plans. These matters are further described in Notes 3, 8 and 14 to the accompanying consolidated financial statements. The aforementioned circumstances raise substantial doubt about our ability to continue as a going concern. There can be no assurance that we will be able to successfully achieve the initiatives discussed below in order to continue as a going concern.
In response to these circumstances, we continue to undertake significant efforts to generate cash flow by employing our real estate assets in leasing and other arrangements, by the sale of several real estate assets and by continued cost reduction efforts. We are in active negotiations with the lenders of the Residences at Kapalua Bay project to resolve our limited guarantees and purchase commitment for the Amenities.
Contributions to our defined benefit pension plans are expected to be approximately $2.4 million in 2013.
We do not anticipate any significant capital expenditures in 2013.
CRITICAL ACCOUNTING POLICIES
Our accounting policies are described in Summary of Significant Accounting Policies, Note 1 to our Consolidated Financial Statements (included in Item 8 of this annual report). The preparation of financial statements in conformity with generally accepted accounting principles requires the use of accounting estimates. Some of these estimates and assumptions involve a high level of subjectivity and judgment and therefore the impact of a change in these estimates and assumptions could materially affect the amounts reported in our financial statements. The accounting policies and estimates that we have identified as critical to the Consolidated Financial Statements are as follows:
19
part, on our current and future evaluation of economic conditions in general, as well as Bay Holdings' current and future plans. These impairment calculations contain additional uncertainties because they also require management to make assumptions and apply judgments to, among others, estimates of future cash flows, probabilities related to various cash flow scenarios, and appropriate discount rates. The impairment losses recorded by Bay Holdings required Bay Holdings' management to estimate total sales revenues that will be received by the project, as well as estimating the number of buyers of units from which nonrefundable deposits have been received that will not close on the purchase of their units.
20
As of December 31, 2012, valuation allowances of $66.2 million have been established primarily for tax credits, net operating loss carry forwards, and accrued retirement benefits to reduce future tax benefits expected to be realized.
IMPACT OF INFLATION AND CHANGING PRICES
Most of the land owned by us was acquired from 1911 to 1932 and is carried at cost. At the Kapalua Resort, some of the fixed assets were constructed and placed in service in the mid-to-late 1970s. Depreciation expense would be considerably higher if fixed assets were stated at current cost.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Because we qualify as a smaller reporting company, as defined in Item 10(f)(1) of Regulation S-K, we are not required to provide the information required by this Item.
21
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of
Maui Land & Pineapple Company, Inc.
Lahaina, Hawaii
We have audited the accompanying consolidated balance sheets of Maui Land & Pineapple Company, Inc. and subsidiaries (the "Company") as of December 31, 2012 and 2011, and the related consolidated statements of operations and comprehensive loss, stockholders' deficiency, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Maui Land & Pineapple Company, Inc. and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company's recurring negative cash flows from operations and deficiency in stockholders' equity raise substantial doubt about the Company's ability to continue as a going concern. Management's plans concerning to these matters are also described in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ DELOITTE & TOUCHE LLP
Honolulu,
Hawaii
March 1, 2013
22
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2012 | 2011 | |||||
|
(in thousands) |
||||||
ASSETS |
|||||||
CURRENT ASSETS |
|||||||
Cash and cash equivalents |
$ | 829 | $ | 890 | |||
Accounts receivable, less allowance of $262 and $519 for doubtful accounts |
1,138 | 1,464 | |||||
Prepaid expenses and other assets |
466 | 684 | |||||
Assets held for sale |
2,483 | 2,280 | |||||
Total Current Assets |
4,916 | 5,318 | |||||
PROPERTY |
|||||||
Land |
7,382 | 7,518 | |||||
Land improvements |
25,702 | 25,680 | |||||
Buildings |
35,649 | 35,649 | |||||
Machinery and equipment |
12,799 | 13,572 | |||||
Construction in progress |
1,637 | 1,864 | |||||
Total Property |
83,169 | 84,283 | |||||
Less accumulated depreciation |
37,668 | 35,642 | |||||
Net Property |
45,501 | 48,641 | |||||
OTHER ASSETS |
|||||||
Deferred development costs |
7,612 | 7,436 | |||||
Other noncurrent assets |
3,456 | 2,677 | |||||
Total Other Assets |
11,068 | 10,113 | |||||
TOTAL |
$ | 61,485 | $ | 64,072 | |||
LIABILITIES & STOCKHOLDERS' DEFICIENCY |
|||||||
CURRENT LIABILITIES |
|||||||
Current portion of long-term debt |
$ | 4,068 | $ | | |||
Trade accounts payable |
1,341 | 1,217 | |||||
Payroll and employee benefits |
151 | 288 | |||||
Current portion of accrued retirement benefits |
626 | 1,129 | |||||
Income taxes payable |
2,457 | 2,766 | |||||
Accrued contract terminations |
4,094 | 5,094 | |||||
Other accrued liabilities |
1,948 | 2,003 | |||||
Total Current Liabilities |
14,685 | 12,497 | |||||
LONG-TERM LIABILITIES |
|||||||
Long-term debt |
45,200 | 45,521 | |||||
Accrued retirement benefits |
30,394 | 27,882 | |||||
Other noncurrent liabilities |
5,569 | 4,425 | |||||
Total Long-Term Liabilities |
81,163 | 77,828 | |||||
COMMITMENTS & CONTINGENCIES (Note 14) |
|||||||
STOCKHOLDERS' DEFICIENCY |
|||||||
Common stockno par value, 43,000,000 shares authorized; 18,664,068 and 18,582,954 shares issued and outstanding |
76,410 | 75,933 | |||||
Additional paid in capital |
9,236 | 9,211 | |||||
Accumulated deficit |
(92,430 | ) | (87,828 | ) | |||
Accumulated other comprehensive loss |
(27,579 | ) | (23,569 | ) | |||
Stockholders' Deficiency |
(34,363 | ) | (26,253 | ) | |||
TOTAL |
$ | 61,485 | $ | 64,072 | |||
See Notes to Consolidated Financial Statements
23
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
|
Years Ended December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2012 | 2011 | |||||
|
(in thousands except share amounts) |
||||||
OPERATING REVENUES |
|||||||
Real estate |
|||||||
Sales |
$ | 1,500 | $ | | |||
Commissions |
1,045 | 1,070 | |||||
Leasing |
5,806 | 5,144 | |||||
Utilities |
3,541 | 3,418 | |||||
Resort amenities and other |
4,272 | 4,910 | |||||
Total Operating Revenues |
16,164 | 14,542 | |||||
OPERATING COSTS AND EXPENSES |
|||||||
Real estate |
|||||||
Cost of sales |
149 | | |||||
Other |
2,135 | 1,060 | |||||
Leasing |
2,852 | 2,956 | |||||
Utilities |
2,280 | 2,225 | |||||
Resort amenities and other |
4,223 | 4,315 | |||||
Selling and marketing |
168 | 792 | |||||
General and administrative |
3,029 | 6,271 | |||||
Depreciation |
2,889 | 3,390 | |||||
Impairmentlong-lived assets |
| 921 | |||||
Pension and other post-retirement expenses (Note 8) |
1,064 | 1,157 | |||||
Gain on asset dispositions |
(232 | ) | (1,263 | ) | |||
Total Operating Costs and Expenses |
18,557 | 21,824 | |||||
Operating Loss |
(2,393 | ) | (7,282 | ) | |||
Interest expense |
(2,577 | ) | (2,429 | ) | |||
Interest income |
14 | 27 | |||||
Loss from Continuing Operations before income taxes |
(4,956 | ) | (9,684 | ) | |||
Income tax benefit |
| (134 | ) | ||||
Loss from Continuing Operations |
(4,956 | ) | (9,550 | ) | |||
Income from Discontinued Operations (Note 6) net of income tax benefit of $88 and $211 |
354 | 14,628 | |||||
NET INCOME (LOSS) |
(4,602 | ) | 5,078 | ||||
Pension Benefit Adjustment net of income taxes of $0 |
(4,010 | ) | (6,675 | ) | |||
COMPREHENSIVE LOSS |
$ | (8,612 | ) | $ | (1,597 | ) | |
NET INCOME (LOSS) PER COMMON SHAREBASIC AND DILUTED |
|||||||
Continuing Operations |
$ | (0.27 | ) | $ | (0.52 | ) | |
Discontinued Operations |
0.02 | 0.79 | |||||
Net Income (Loss) |
$ | (0.25 | ) | $ | 0.27 | ||
See Notes to Consolidated Financial Statements
24
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
For the Years Ended
December 31, 2012 and 2011
(in thousands)
|
Common Stock | |
|
Accumulated Other Comprehensive Loss |
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Additional Paid in Capital |
Acumulated Deficit |
|
||||||||||||||||
|
Shares | Amount | Total | ||||||||||||||||
Balance, January 1, 2011 |
18,516 | $ | 75,461 | $ | 9,159 | $ | (92,906 | ) | $ | (16,894 | ) | $ | (25,180 | ) | |||||
Share-based compensation expense |
646 |
646 |
|||||||||||||||||
Vested restricted stock issued |
92 | 594 | (594 | ) | | ||||||||||||||
Shares cancelled to pay tax liability |
(25 | ) | (122 | ) | (122 | ) | |||||||||||||
Other comprehensive loss-pension (Note 8) |
(6,675 | ) | (6,675 | ) | |||||||||||||||
Net income |
5,078 | 5,078 | |||||||||||||||||
Balance, December 31, 2011 |
18,583 | $ | 75,933 | $ | 9,211 | $ | (87,828 | ) | $ | (23,569 | ) | $ | (26,253 | ) | |||||
Share-based compensation expense |
489 | 489 | |||||||||||||||||
Issuance of shares for incentive plan |
39 | 150 | 150 | ||||||||||||||||
Vested restricted stock issued |
79 | 464 | (464 | ) | | ||||||||||||||
Shares cancelled to pay tax liability |
(37 | ) | (137 | ) | (137 | ) | |||||||||||||
Other comprehensive loss-pension (Note 8) |
(4,010 | ) | (4,010 | ) | |||||||||||||||
Net loss |
(4,602 | ) | (4,602 | ) | |||||||||||||||
Balance, December 31, 2012 |
18,664 | $ | 76,410 | $ | 9,236 | $ | (92,430 | ) | $ | (27,579 | ) | $ | (34,363 | ) | |||||
See Notes to Consolidated Financial Statements
25
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
2012 and 2011
|
Years Ended December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2012 | 2011 | |||||
|
(in thousands) |
||||||
OPERATING ACTIVITIES |
|||||||
Net income (loss) |
$ | (4,602 | ) | $ | 5,078 | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities |
|||||||
Depreciation and amortization |
3,219 | 4,028 | |||||
Share based compensation |
489 | 646 | |||||
Gain on property disposals |
(232 | ) | (15,600 | ) | |||
Change in retirement liabilities |
(2,001 | ) | (1,342 | ) | |||
Impairment charges |
1,115 | ||||||
Changes in operating assets and liabilities: |
|||||||
Accounts receivable |
326 | 131 | |||||
Inventories |
| 1,558 | |||||
Trade accounts payable |
257 | (3,392 | ) | ||||
Income taxes payable |
(309 | ) | (632 | ) | |||
Other operating assets and liabilities |
(920 | ) | (1,815 | ) | |||
NET CASH USED IN OPERATING ACTIVITIES |
(3,773 | ) | (10,225 | ) | |||
INVESTING ACTIVITIES |
|||||||
Purchases of property |
(209 | ) | (1,025 | ) | |||
Proceeds from disposals of property |
425 | 11,450 | |||||
Proceeds from escrow |
| 4,117 | |||||
Payments for other assets |
(114 | ) | (5,368 | ) | |||
NET CASH PROVIDED BY INVESTING ACTIVITIES |
102 | 9,174 | |||||
FINANCING ACTIVITIES |
|||||||
Proceeds from long-term debt |
5,200 | 10,700 | |||||
Payments of long-term debt |
(1,453 | ) | (10,379 | ) | |||
Payments on capital lease obligations |
| (174 | ) | ||||
Debt and common stock issuance cost and other |
(137 | ) | (301 | ) | |||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
3,610 | (154 | ) | ||||
NET DECREASE IN CASH AND CASH EQUIVALENTS |
(61 | ) | (1,205 | ) | |||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR |
890 | 2,095 | |||||
CASH AND CASH EQUIVALENTS AT END OF YEAR |
$ | 829 | $ | 890 | |||
Cash paid (received) during the year: |
|||||||
Interest |
$ | 2,163 | $ | 1,998 | |||
Income taxes |
$ | | $ | (55 | ) |
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
See Notes to Consolidated Financial Statements
26
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of Maui Land & Pineapple Company, Inc. and its principal subsidiary Kapalua Land Company, Ltd. and other subsidiaries (collectively, the "Company"). The Company's principal operations include the development, sale and leasing of real estate, water and waste transmission services, and the management of certain resort amenities at the Kapalua Resort. Significant intercompany balances and transactions have been eliminated. The Company's golf, retail and agriculture operations are reported as discontinued operations (Note 6).
LIQUIDITY
The Company reported net loss of $4.6 million for the year ended December 31, 2012. Included in net loss was a profit of $1,351,000 recognized from the sale of a real estate parcel in January 2012. The Company reported negative cash flows from operations of $3.8 million for the year ended December 31, 2012. The Company had an excess of current liabilities over current assets of $9.8 million and a stockholders' deficiency of $34.4 million at December 31, 2012.
The Company has two primary credit facilities that have financial covenants requiring among other things, a minimum of $4 million in liquidity (as defined), a maximum of $175 million in total liabilities, and a limitation on new indebtedness. The Company has pledged a significant portion of its real estate holdings as security for borrowings under these credit facilities. Both facilities were scheduled to mature in May 2013. In February 2013, the Company extended the maturity date of both credit facilities to May 1, 2014. The Company is required to make a mandatory principal repayment of $4.1 million by December 31, 2013 under the American AgCredit credit facility as required by the amendment.
The Company's cash outlook for the next twelve months and its ability to continue to meet its loan covenants is highly dependent on selling certain real estate assets at acceptable prices. If the Company is unable to meet its loan covenants, borrowings under the Company's credit facilities may become immediately due, and the Company would not have sufficient liquidity to repay such outstanding borrowings. In addition, the Company is subject to several purchase commitments and contingencies that could negatively impact its future cash flows, including commitments of up to $35 million to purchase the spa, beach club improvements and the sundry store (the "Amenities") of Kapalua Bay Holdings, LLC (Bay Holdings), a U.S. Equal Employment Opportunity Commission (EEOC) matter related to the Company's discontinued agricultural operations, and funding requirements related to the Company's defined benefit pension plans. These matters are further described in Notes 3, 8 and 14.
The aforementioned circumstances raise substantial doubt about the Company's ability to continue as a going concern. There can be no assurance that the Company will be able to successfully achieve its initiatives discussed below in order to continue as a going concern. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern and do not include any adjustments that might result should the Company be unable to continue as a going concern.
In response to these circumstances, the Company continues to undertake efforts to generate cash flow by employing its real estate assets in leasing and other arrangements, by the sale of several real estate assets, and by continued cost reduction efforts. The Company is in active negotiations with the
27
lenders of the Residences at Kapalua Bay project to resolve its limited guarantees with respect to the completion of the project and purchase commitment for the Amenities.
COMPREHENSIVE LOSS
Comprehensive loss includes all changes in stockholders' deficiency, except those resulting from capital stock transactions. Comprehensive loss includes the pension benefit adjustment (Note 8).
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and deposits in banks.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Receivables are recorded net of an allowance for doubtful accounts. The Company estimates future write-offs based on delinquencies, credit ratings, aging trends, and historical experience. The Company believes the allowance for doubtful accounts is adequate to cover anticipated losses; however, significant deterioration in any of the aforementioned factors or in general economic conditions could change these expectations, and accordingly, the Company's financial condition and/or its future operating results could be materially impacted. Credit is extended after evaluating creditworthiness and no collateral is generally required from customers.
ASSETS HELD FOR SALE
Assets are reported as held for sale when they are being actively marketed and available for immediate sale in their present condition, the sale is probable and the transfer of the asset is expected to qualify for recognition as a completed sale within one year. Assets held for sale are stated at the lower of net book value or estimated fair value less cost to sell.
DEFERRED DEVELOPMENT COSTS
Deferred development costs are primarily real estate development costs related to various projects at the Kapalua Resort that will be allocated to future development projects. Deferred costs are written off if management decides that it is no longer probable that the Company will proceed with the related development project.
PROPERTY AND DEPRECIATION
Property is stated at cost. Major replacements, renewals and betterments are capitalized while maintenance and repairs that do not improve or extend the life of an asset are charged to expense as incurred. When property is retired or otherwise disposed of, the cost of the property and the related accumulated depreciation are written off and the resulting gains or losses are included in income. Depreciation is provided over the estimated useful lives of the respective assets using the straight-line method generally over three to 40 years. Depreciation expense was $2,889,000 and $3,719,000 for the years ended December 31, 2012 and 2011, respectively.
LONG-LIVED ASSETS
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When such events or changes occur, an estimate of the future cash flows expected to result from the use of the assets and their eventual disposition is made. If the sum of such expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized in an amount by which the assets' net book values exceed their fair value. These asset impairment loss analyses require management to make assumptions and apply considerable judgments regarding, among others, estimates of the timing and amount of future cash flows, expected useful lives of the assets,
28
uncertainty about future events, including changes in economic conditions, changes in operating performance, changes in the use of the assets, and ongoing cost of maintenance and improvements of the assets, and thus, the accounting estimates may change from period to period. If management uses different assumptions or if different conditions occur in future periods, the Company's financial condition or its future operating results could be materially impacted. The Company had impairment charges for its long-lived assets of $1.1 million in 2011. There were no impairment charges recorded in 2012.
EMPLOYEE BENEFIT PLANS
The Company's policy is to fund pension costs at a level at least equal to the minimum amount required under federal law, but not more than the maximum amount deductible for federal income tax purposes.
The over-funded or under-funded status of the Company's defined benefit post-retirement plans are recorded as an asset or liability in its balance sheet and changes in the funded status of the plans are recorded in the year in which the changes occur, through comprehensive income. A pension asset or liability is recognized for the difference between the fair value of plan assets and the projected benefit obligation as of year-end.
Deferred compensation plans for certain management employees provide for specified payments after retirement. The present value of estimated payments to be made is accrued over the period of active employment.
REVENUE RECOGNITION
Real estate revenues are recognized in the period in which sufficient cash has been received, collection of the balance is reasonably assured and risks of ownership have passed to the buyer.
Lease revenues are recognized on a straight-line basis over the terms of the leases. Also included in lease income are certain percentage rents determined in accordance with the terms of the leases. Lease income arising from tenant rents that are contingent upon the sales of the tenant exceeding a defined threshold are recognized only after the defined sales thresholds are achieved.
Other revenues are recognized when delivery has occurred or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured.
OPERATING COSTS AND EXPENSES
Real estate, leasing, utilities, resort amenities, selling and marketing, and general and administrative costs and expenses are reflected exclusive of depreciation and pension and other post-retirement expenses.
ADVERTISING
The costs of advertising activities are expensed as incurred. Advertising costs are included in selling and marketing costs in the consolidated statements of operations and comprehensive loss. Advertising expenses in 2012 and 2011 were $39,000 and $340,000, respectively.
LEASES
Leases that transfer substantially all of the benefits and risks of ownership of the property are accounted for as capital leases. Amortization of property under capital leases is included in depreciation expense. Other leases are accounted for as operating leases. Rentals under operating leases are recognized on a straight-line basis over the life of the lease.
29
INCOME TAXES
The Company accounts for uncertain tax positions in accordance with the provisions of Financial Accounting Standard Board (FASB) Accounting Standards Codification (ASC) Topic 740. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return (Note 11).
The Company's provision for income taxes is calculated using the liability method. Deferred income taxes are provided for all temporary differences between the financial statement and income tax bases of assets and liabilities using tax rates enacted by law or regulation. A valuation allowance is established for deferred income tax assets if management believes that it is more likely than not that some portion or all of the asset will not be realized through future taxable income.
SHARE-BASED COMPENSATION PLANS
The Company accounts for share-based compensation, including grants of employee stock options, as compensation expense over the service period (generally the vesting period) in the consolidated financial statements based on their fair values. The impact of forfeitures that may occur prior to vesting is estimated and considered in the amount recognized.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Future actual amounts could differ from these estimates.
RISKS AND UNCERTAINTIES
Factors that could adversely impact the Company's future operations or financial results include, but are not limited to the following: continued economic weakness and uncertainty in Hawaii and the mainland United States; continued high unemployment rates and low consumer confidence; the current sovereign debt crises affecting several countries in the European Union and concerns about sovereign debt in the United States; the general availability of mortgage financing, including the effect of more stringent lending standards for mortgages and perceived or actual changes in interest rates; risks related to the Company's investments in real property, the value and salability of which could be impacted by the economic factors discussed above or other factors; the popularity of Maui in particular and Hawaii in general as a vacation destination or second-home market; increased energy costs, including fuel costs, which effect tourism on Maui and Hawaii generally; untimely completion of land development projects within forecasted time and budget expectations; inability to obtain land use entitlements at a reasonable cost or in a timely manner; unfavorable legislative decisions by state and local governmental agencies; the cyclical market demand for luxury real estate on Maui and in Hawaii generally; increased competition from other luxury real estate developers on Maui and in Hawaii generally; the Company's limited guarantees to complete development of the Residences at Kapalua Bay project; failure of joint venture partners to perform in accordance with their contractual agreements; environmental regulations; acts of God, such as tsunamis, hurricanes, earthquakes and other natural disasters; the Company's location apart from the mainland United States, which results in the Company's financial performance being more sensitive to the aforementioned economic risks; failure to comply with restrictive financial covenants in the Company's credit arrangements; and an inability to achieve the Company's short and long-term goals and cash flow requirements. See additional discussion of the risks and uncertainties applicable to our business under the heading "Forward-Looking Statements and Risks" at the beginning of this annual report and "Risk Factors" in Item 1A of this annual report.
30
ENVIRONMENTAL REMEDIATION COSTS
The Company accrues for environmental remediation costs when such losses are probable and reasonably estimable. Such accruals are adjusted as further information develops or circumstances change. When the remediation cost is expected to be incurred within a relatively short period of time, the obligations are not discounted to their present value.
NEW ACCOUNTING PRONOUNCEMENTS
In February 2013, the FASB issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220)Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This ASU adds new disclosure requirements for items reclassified out of accumulated other comprehensive income and requires entities to present information about significant items reclassified out of accumulated other comprehensive income by component either (1) on the face of the statement where net income is presented or (2) as a separate disclosure in the notes to the financial statements. The amendments in this ASU should be applied prospectively, and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. The adoption of this guidance is not anticipated to have a material impact on the Company's consolidated financial statements.
INCOME (LOSS) PER COMMON SHARE
Basic income (loss) per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding. Diluted income (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares from share-based compensation arrangements had been issued.
Potentially dilutive shares arise from non-qualified stock options to purchase common stock and non-vested restricted stock. The treasury stock method is applied to determine the number of potentially dilutive shares for non-vested restricted stock and stock options assuming that the shares of non-vested restricted stock are issued for an amount based on the grant date market price of the shares and that the outstanding stock options are exercised. These amounts were excluded because the effect would be anti-dilutive.
|
Year Ended December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2012 | 2011 | |||||
Basic and diluted |
18,618,356 | 18,539,591 | |||||
Potentially dilutive |
173,137 | 309,500 |
2. ASSETS HELD FOR SALE AND REAL ESTATE SALES
At December 31, 2012, assets held for sale included a 7-acre parcel in Kahului and a 630-acre parcel in Upcountry Maui.
In January 2012, the Company sold an 89-acre parcel in Upcountry Maui for $1.5 million. The sale resulted in a gain of $1.4 million and the Company utilized $353,000 of the proceeds to repay its term loan with American AgCredit, in accordance with the terms of its credit agreement.
In September 2010, the Company sold the land, improvements, structures and fixtures comprising the Kapalua Bay Golf Course (Bay Course) and the adjacent maintenance facility for a total of $24.1 million in cash. Concurrent with the sale, the Company entered into an agreement to lease back the assets through March 31, 2011, and due to certain construction work required by the lease back arrangement and other continuing involvement, the sale was accounted for as a financing transaction.
31
At the conclusion of the lease back period, the Company recognized a $15.1 million gain from the sale which has been reported in discontinued operations for the year ended December 31, 2011.
3. INVESTMENT IN AFFILIATES
The Company has a 51% ownership interest in Bay Holdings, which is the sole member of Kapalua Bay. The other members of Bay Holdings are MH Kapalua Venture, LLC, 34%, and ER Kapalua Investors Fund, LLC, 15%. Bay Holdings is not a variable interest entity, as defined in GAAP. The Company accounts for its investment in Bay Holdings using the equity method of accounting because, although it has the ability to exercise significant influence over operating and financial policies, it does not control Bay Holdings through a majority voting interest or other means. Under the LLC agreement, major decisions require the approval of either 75% or 100% of the membership interests. The Company has been designated as the managing member of Bay Holdings. Profits and losses of Bay Holdings were allocated in proportion to the members' ownership interests, which approximated the estimated cash distributions to the members.
Kapalua Bay constructed a residential and timeshare development on land that it owns at the site of the former Kapalua Bay Hotel, and a spa on an adjacent parcel of land that is owned by the Company and leased to Kapalua Bay. Through December 31, 2012, the sale of 28 (84 total) whole-ownership units and 177 (744 total) fractional units have closed escrow.
As a result of the 2009 losses incurred by Bay Holdings, the Company's carrying value of its investment in Bay Holdings was written down to zero in 2009. The Company does not expect to recover any amounts from its investment in Bay Holdings. The Company will not recognize any additional equity in the earnings (losses) of Bay Holdings until the Company's income attributable to Bay Holdings exceeds its accumulated losses. The Company had made cash contributions to Bay Holdings of $53.2 million and non-monetary contributions of land valued at $25 million.
Kapalua Bay has a construction loan agreement under which $285 million was outstanding at December 31, 2012, and that matured on August 1, 2011. The loan is collateralized by the project assets including the land that is owned by Kapalua Bay that underlies the project. The Company and the other members of Bay Holdings have guaranteed to the lenders completion of the project and recourse with regard to certain acts, but have not guaranteed repayment of the loan. On March 13, 2012, the lenders notified Kapalua Bay that the loan was in default and on June 13, 2012, the lenders filed for foreclosure against Kapalua Bay, Bay Holdings and other entities related to the project. On September 27, 2012, Kapalua Bay was notified that three of its five lenders assigned their loans and other interests to a non-affiliated investment firm. The public auction for the foreclosure proceeding was held on December 3, 2012 and on January 31, 2013, the investment firm was confirmed as the successful bidder of Kapalua Bay's assets.
Pursuant to a previous agreement, the Company agreed to purchase from Kapalua Bay the Amenities that were completed in 2009 at the actual construction cost of approximately $35 million. Through December 31, 2010, Bay Holdings recorded impairment charges in its consolidated financial statements of approximately $23 million related to the Amenities. In 2012 and 2011, loss from the operations of the Amenities was $566,000 and $432,000, respectively. The Company does not have sufficient liquidity to purchase the Amenities at the actual construction cost of approximately $35 million and is in active negotiations with lenders of the project to resolve its limited guarantees with respect to the completion of the project and purchase commitment for the Amenities. No provision has been recorded in the accompanying consolidated financial statements with respect to the Company's executory contract to purchase the Amenities. If the Amenities are subsequently acquired, they will be evaluated for impairment and could result in a loss.
A group of owners of 11 whole-ownership units filed a lawsuit on June 7, 2012 against multiple parties, including Kapalua Bay and the Company. The lawsuit alleges that the defendant parties breached their fiduciary duties to the Association of Apartment Owners of Kapalua Bay Condominium
32
(AOAO) and the plaintiffs. In addition, the lawsuit seeks certain injunctive and declaratory relief regarding the management and operations of the AOAO and the project. On December 31, 2012, The Ritz-Carlton Management Company, LLC (RCMC) terminated its management agreement with the AOAO and Kapalua Bay Vacation Owners Association (VOA). The AOAO and VOA entered into a management agreement with an entity controlled by Timbers Resorts effective January 1, 2013. The Company is presently unable to reasonably determine the impact, if any, of these matters on the accompanying consolidated financial statements.
On May 23, 2011, a lawsuit was filed against Kapalua Bay; the Company; The Ritz-Carlton Hotel Company, LLC; Kapalua Realty Co. Ltd.; and other John and Jane Does; by purchasers of two units at the Ritz-Carlton Residences at Kapalua Bay. The lawsuit was filed in the Circuit Court of the Second Circuit, State of Hawaii pursuant to Civil No. 11-1-0216-(3). The lawsuit alleges deceptive acts, intentional misrepresentation, concealment, and negligent misrepresentation, among other allegations with regard to the sale of the two residential units and seeks unspecified damages, treble damages and other relief. The Company disagrees with the allegations and plans to vigorously defend itself. The Company is presently unable to reasonably estimate the amount of probable liability, if any, related to this matter and, accordingly, has made no provision in the accompanying consolidated financial statements.
The Company has recorded $4.1 million in accrued contract terminations in the consolidated balance sheets representing the remaining expected exposure to loss related to our involvement with the project.
Summarized balance sheet and operating information for Bay Holdings as of December 31, 2012 and 2011 and for the years then ended are as follows:
|
2012 | 2011 | |||||
---|---|---|---|---|---|---|---|
|
(in thousands) |
||||||
Restricted cash |
$ | 3,241 | $ | 5,264 | |||
Real estate inventories |
149,774 | 151,034 | |||||
Other assets, net |
10,712 | 15,598 | |||||
Total Assets |
$ | 163,727 | $ | 171,896 | |||
Construction loan payable and other member loans |
$ | 375,441 | $ | 351,455 | |||
Other liabilities |
46,408 | 26,991 | |||||
Total Liabilities |
$ | 421,849 | $ | 378,446 | |||
Members' Deficiency |
$ | (258,122 | ) | $ | (206,550 | ) | |
|
2012 | 2011 | |||||
---|---|---|---|---|---|---|---|
|
(in thousands) |
||||||
Revenues |
$ | (745 | ) | $ | 17,965 | ||
Costs and Expenses |
50,827 | 49,892 | |||||
Net Loss |
$ | (51,572 | ) | $ | (31,927 | ) | |
During 2012, Bay Holdings recorded cancellations of contracts that will no longer be closed as scheduled. Bay Holdings has not recognized any impairment of the project's assets during 2012. As discussed above, the Company's carrying value of its investment in Bay Holdings was written down to zero in the past, and the Company does not recognize any equity in the losses of Bay Holdings. As a result, management does not believe an adjustment for impairment charges, if any, would have a material impact to the consolidated financial statements. On January 31, 2013, a non-affiliated investment company foreclosed on the assets of Bay Holdings. As a result, subsequent to January 31, 2013, there are no significant ongoing operations in this joint venture.
33
4. LONG-TERM DEBT
Long-term debt at December 31, 2012 and 2011 consisted of the following:
|
2012 | 2011 | |||||
---|---|---|---|---|---|---|---|
|
(in thousands) |
||||||
Wells Fargo revolving loans, 4.05% and 4.12%, respectively |
$ | 25,200 | $ | 21,100 | |||
American AgCredit term loan, 5.25% |
24,068 | 24,421 | |||||
Total |
49,268 | 45,521 | |||||
Less current portion |
4,068 | | |||||
Long-term debt |
$ | 45,200 | $ | 45,521 | |||
WELLS FARGO
The Company has a $34.5 million revolving line of credit with Wells Fargo that was scheduled to mature on May 1, 2013. In February 2013, the Company exercised its option to extend the maturity date to May 1, 2014. Interest rates on borrowings are at LIBOR plus 3.8% and the line of credit is collateralized by approximately 880 acres of its real estate holdings at the Kapalua Resort. The line of credit agreement contains various representations, warranties, affirmative, negative and financial covenants and events of default customary for financings of this type. Financial covenants include a required minimum liquidity (as defined) of $4 million, maximum total liabilities of $175 million, and a limitation on new indebtedness. The credit agreement includes predetermined release prices for the real property securing the credit facility. There are no commitment fees on the unused portion of the revolving facility. Absent the sale of some of its real estate holdings or refinancing, the Company does not expect to be able to repay any significant amount of borrowings under the credit line.
As of December 31, 2012, the Company had $25.2 million of borrowings outstanding under its revolving line of credit, $8.8 million available borrowing capacity and irrevocable letters of credit totaling $0.5 million that were secured by the line of credit.
AMERICAN AGCREDIT
The Company has a $24.1 million term loan with American AgCredit that was scheduled to mature on May 1, 2013. In February 2013, the Company amended its term loan agreement to extend the maturity date to May 1, 2014. The interest rate on this credit facility is based on the greater of 1.00% or the 30-day LIBOR rate, plus an applicable spread of 4.25%. The loan agreement provides for tiered reductions in the applicable spread to 3.75%, subject to corresponding reductions in the principal balance of the loan. The loan requires a mandatory principal repayment of $4.1 million by December 31, 2013. The loan agreement contains various representations, warranties, affirmative, negative and financial covenants and events of default customary for financings of this type. Financial covenants include a required minimum liquidity (as defined) of $4 million, maximum total liabilities of $175 million and a limitation on new indebtedness. It also requires mandatory principal repayments of 100% of the net proceeds of the sale of any real property pledged as collateral for the loan and tiered mandatory principal repayments based on predetermined percentages ranging from 10% to 75% of the net proceeds from the sale of non-collateralized real property. In accordance with this provision, the Company made a $353,000 principal repayment in January 2012, in conjunction with a sale of a non-collateralized real estate parcel in Upcountry Maui for $1.5 million. The loan is collateralized by approximately 3,100 acres of the Company's real estate holdings in West Maui and Upcountry Maui. Absent the sale of some of its real estate holdings or refinancing, the Company does not expect to be able to pay the outstanding balance under the term loan on the maturity date.
34
As of December 31, 2012, the Company believes it is in compliance with the covenants under the Wells Fargo and American AgCredit credit facilities.
5. FAIR VALUE MEASUREMENTS
GAAP establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements to enable the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. GAAP requires that financial assets and liabilities be classified and disclosed in one of the following three categories:
Level 1: |
Quoted market prices in active markets for identical assets or liabilities. | |
Level 2: |
Observable market based inputs or unobservable inputs that are corroborated by market data. |
|
Level 3: |
Unobservable inputs that are not corroborated by market data. |
The fair value of cash, receivables and payables approximate their carrying value due to the short-term nature of the instruments. The valuation is based on settlements of similar financial instruments all of which are short-term in nature and are generally settled at or near cost. The fair value of debt was estimated based on borrowing rates currently available to the Company for debt with similar terms and maturities. The carrying amount of debt at December 31, 2012 and 2011 was $49,268,000 and $45,521,000, respectively, which approximated fair value. The fair value of cash and debt has been classified as level 1 and level 2 measurements, respectively. See Note 8 for the classification of the fair value of pension assets.
6. DISCONTINUED OPERATIONS
In September 2011, the Company ceased all retail operations at the Kapalua Resort. In March 2011, the Company ceased operating the two championship golf courses at the Kapalua Resort. In December 2009, the Company ceased all agriculture operations. Accordingly, the operating results including any gains or losses from the disposal of assets related to these former operations have been reported as discontinued operations in the accompanying consolidated financial statements.
The revenues and income (loss) before income taxes for the discontinued operations were as follows:
|
2012 | 2011 | |||||
---|---|---|---|---|---|---|---|
|
(in thousands) |
||||||
Revenues |
|||||||
Golf courses |
$ | | $ | 3,375 | |||
Retail |
| 4,278 | |||||
Total |
$ | | $ | 7,653 | |||
Income (loss) from Discontinued Operations |
|||||||
Golf courses |
$ | (89 | ) | $ | 13,762 | ||
Retail |
(3 | ) | 462 | ||||
Agriculture |
446 | 193 | |||||
Total |
$ | 354 | $ | 14,417 | |||
35
7. LEASING ARRANGEMENTS
LESSEE
The Company has various operating leases which expire in 2013 and 2014. Total rental expense under operating leases was $18,000 in 2012 and $286,000 in 2011. Future minimum rental payments due under operating leases total $23,000 in 2013, $3,000 in 2014, $3,000 in 2015, and $2,000 in 2016.
LESSOR
The Company leases land primarily to agriculture operators and space in commercial buildings, primarily to retail tenants. These operating leases generally provide for minimum rents and, in most cases, percentage rentals based on tenant revenues. In addition, the leases generally provide for reimbursement of common area maintenance and other expenses. Total rental income under these operating leases was as follows:
|
2012 | 2011 | |||||
---|---|---|---|---|---|---|---|
|
(in thousands) |
||||||
Minimum rentals |
$ | 2,639 | $ | 2,397 | |||
Percentage rentals |
1,182 | 1,603 | |||||
Other (primarily common area recoveries) |
1,985 | 1,144 | |||||
|
$ | 5,806 | $ | 5,144 | |||
Property at December 31, 2012 and 2011 includes leased property, primarily buildings, of $46,778,000 and $47,381,000, respectively (before accumulated depreciation of $19,915,000 and $18,417,000, respectively). Management determined that the amounts previously disclosed for leased property and the related accumulated depreciation as of December 31, 2011 were understated by $18,108,000 and $8,118,000, respectively; accordingly, such amounts for 2011 have been corrected in the previous sentence. This had no impact on the previously reported amounts in the 2011 consolidated balance sheet or consolidated statement of operations and comprehensive loss.
Future minimum rental income receivable during the next five years is as follows:
|
(in thousands) | |||
---|---|---|---|---|
2013 |
$ | 2,435 | ||
2014 |
2,354 | |||
2015 |
2,290 | |||
2016 |
1,886 | |||
2017 |
1,834 | |||
Thereafter |
8,513 |
8. EMPLOYEE BENEFIT PLANS
The Company had defined benefit pension plans covering substantially all full-time, part-time and intermittent employees. Effective as of January 1, 2010, the defined benefit pension plan covering non-bargaining salaried employees was frozen, and effective January 1, 2011, pension benefits for non-bargaining hourly employees were also frozen and no further pension benefits will accrue to the affected employees. Effective April 1, 2011, the Company did not have any active employees accruing pension benefits as the remaining employees who were covered under the Pension Plan for Bargaining Unit and Hourly Employees (Bargaining Plan) were terminated when the Company's golf course operations ceased.
36
The measurement date for the Company's benefit plan disclosures is December 31st of each year. The changes in benefit obligations and plan assets for 2012 and 2011, and the funded status of the plans, and assumptions used to determine benefit information at December 31, 2012 and 2011 were as follows:
|
Pension Benefits | ||||||
---|---|---|---|---|---|---|---|
|
2012 | 2011 | |||||
|
(in thousands) |
||||||
Change in benefit obligations: |
|||||||
Benefit obligations at beginning of year |
$ | 66,645 | $ | 63,306 | |||
Service cost |
| 18 | |||||
Interest cost |
3,189 | 3,338 | |||||
Actuarial loss |
7,218 | 4,034 | |||||
Benefits paid |
(4,228 | ) | (4,051 | ) | |||
Benefit obligations at end of year |
72,824 | 66,645 | |||||
Change in plan assets: |
|||||||
Fair value of plan assets at beginning of year |
39,053 | 41,255 | |||||
Actual return on plan assets |
5,336 | (443 | ) | ||||
Employer contributions |
2,357 | 2,292 | |||||
Benefits paid |
(4,228 | ) | (4,051 | ) | |||
Fair value of plan assets at end of year |
42,518 | 39,053 | |||||
Funded status |
$ | (30,306 | ) | $ | (27,592 | ) | |
Accumulated Benefit Obligations |
$ | 72,824 | $ | 66,645 | |||
Weighted average assumption used to determine benefit obligations at December 31: |
|||||||
Discount rate |
3.87% - 4.16 | % | 4.79% - 4.98 | % | |||
Expected long-term return on plan assets |
7.50 | % | 7.50 | % | |||
Rate of compensation increase |
n/a | n/a |
The amounts recognized for pension benefits on the Company's consolidated balance sheets as of December 31, 2012 and 2011 were as follows:
|
2012 | 2011 | |||||
---|---|---|---|---|---|---|---|
|
(in thousands) |
||||||
Current Liability |
$ | 306 | $ | 300 | |||
Noncurrent Liability |
30,000 | 27,292 | |||||
Net amounts recognized |
$ | 30,306 | $ | 27,592 | |||
Amounts recognized for pension benefits in accumulated other comprehensive loss (before income tax effect of $0) at December 31, 2012 and 2011 are as follows:
|
2012 | 2011 | |||||
---|---|---|---|---|---|---|---|
|
(in thousands) |
||||||
Net loss |
$ | 27,579 | $ | 23,569 | |||
Net amounts recognized |
$ | 27,579 | $ | 23,569 | |||
In 2013, $873,000 of the net loss included in other comprehensive loss at December 31, 2012 is expected to be recognized as a component of net periodic pension cost.
37
Components of net periodic benefit cost and other amounts recognized in other comprehensive loss were as follows:
|
Pension Benefits | ||||||
---|---|---|---|---|---|---|---|
|
2012 | 2011 | |||||
|
(in thousands) |
||||||
Pension and other benefits: |
|||||||
Service cost |
$ | | $ | 18 | |||
Interest cost |
3,189 | 3,338 | |||||
Expected return on plan assets |
(2,864 | ) | (3,027 | ) | |||
Recognized net actuarial (gain) loss |
739 | 809 | |||||
Amortization of obligation |
| 5 | |||||
Amortization of prior service cost |
| 2 | |||||
Recognition of (gain) loss due to curtailment |
| 12 | |||||
Net expense |
$ | 1,064 | $ | 1,157 | |||
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Loss: |
|||||||
Net loss |
$ | 4,749 | $ | 7,503 | |||
Recognized gain (loss) |
(739 | ) | (809 | ) | |||
Recognized prior service cost |
| (8 | ) | ||||
Recognized net initial obligation |
| (11 | ) | ||||
Total recognized in other comprehensive loss |
$ | 4,010 | $ | 6,675 | |||
|
2012 | 2011 | ||
---|---|---|---|---|
Weighed average assumptions used to determine net periodic cost: |
||||
Pension benefits: |
||||
Discount rate |
4.79% - 4.98% | 5.25% - 5.47% | ||
Expected long-term return on plan assets |
7.50% | 7.50% | ||
Rate of compensation increase |
n/a | n/a |
The expected long-term rate of return on plan assets was based on a building-block approach. Historical markets are studied and long-term historical relationships between equities and fixed income are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors, such as inflation and interest rates, are evaluated before long-term capital markets are determined. Diversification and rebalancing of the plan assets are properly considered as part of establishing the long-term portfolio returns.
38
The fair values of the Company's pension plan assets at December 31, 2012 and 2011, by asset category, were as follows:
|
2012 Fair Value Measurements (in thousands) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Total | |||||||
AHGT Pooled equity funds |
$ | | $ | 23,706 | $ | 23,706 | ||||
AHGT Pooled fixed income funds |
| 17,671 | 17,671 | |||||||
Cash management funds |
| 1,141 | 1,141 | |||||||
|
$ | | $ | 42,518 | $ | 42,518 | ||||
|
2011 Fair Value Measurements (in thousands) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Total | |||||||
Pooled equity funds |
$ | 14,851 | $ | | $ | 14,851 | ||||
Common stock |
11,470 | | 11,470 | |||||||
U.S. government securities |
2,630 | 3,126 | 5,756 | |||||||
Pooled fixed income funds |
4,814 | | 4,814 | |||||||
Cash management funds |
1,870 | | 1,870 | |||||||
Other investments |
245 | 47 | 292 | |||||||
|
$ | 35,880 | $ | 3,173 | $ | 39,053 | ||||
Aon Hewitt Group Trust (AHGT) Pooled equity and fixed income funds: Pooled equity and fixed income funds consist of various AHGT Funds offered through a private placement. The units are valued daily using the net asset value (NAV). The NAVs are based on the fair value of each fund's underlying investments. Level 1 assets are priced using quotes for trades occurring in active markets for the identical asset. Level 2 assets are priced using observable inputs for the asset (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates) or inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).
An administrative committee consisting of certain senior management employees administers the Company's defined benefit pension plans. The pension plan assets are allocated among approved asset types based on the plans current funded status and other characteristics set by the administrative committee, and subject to liquidity requirements of the plans.
The Company expects to contribute $2.4 million to its defined benefit pension plans in 2013. Estimated future benefit payments are as follows (in thousands):
2013 |
$ | 4,317 | ||
2014 |
4,269 | |||
2015 |
4,251 | |||
2016 |
4,330 | |||
2017 |
4,368 | |||
2018 - 2022 |
22,216 |
39
The Company's cessation of its pineapple operations at the end of 2009 and the corresponding reduction in the active participant count for the Pension Plan for Bargaining Unit and Hourly Employees (Bargaining Plan) triggered the requirement that the Company provide security to the Pension Benefits Guaranty Corporation (PBGC) of approximately $5.2 million to support the unfunded liabilities of the Bargaining Plan. In April 2011, the Company executed a settlement agreement with the PBGC and pledged security of approximately 1,400 acres in West Maui that will be released in five years if the Company does not otherwise default on the agreement. The Company was advised in October 2011 that the cessation of its golf operations and the corresponding reduction in the active participant count for the Bargaining Plan and the Pension Plan for Non-Bargaining Unit Employees triggered the requirement that the Company provide additional security to the PBGC of approximately $18.7 million to support the unfunded liabilities of the two pension plans or to make contributions to the plans in excess of the minimum required amounts. In November 2012, the Company executed a settlement agreement with the PBGC and pledged security of approximately 7,000 acres in West Maui that will be released in five years if the Company does not otherwise default on the agreement.
The Company has investment and savings plans that allow eligible employees on a voluntary basis to make pre-tax contributions of their cash compensation. Substantially all employees are eligible to participate in one or more plans. No Company contributions were made to these plans in 2012 or 2011.
On October 1, 1998, deferred compensation plans that provided for specified payments after retirement for certain management employees were amended to eliminate future benefits. At the termination date, these employees were given credit for existing years of service and the future vesting of additional benefits was discontinued. The present value of the benefits to be paid was being accrued over the period of active employment. As of December 31, 2012 and 2011, deferred compensation plan liabilities totaled $512,000 and $697,000, respectively.
9. SHARE-BASED COMPENSATION
The Company accounts for share-based compensation arrangements, including grants of employee stock options, as compensation expense over the service period (generally the vesting period) in the consolidated financial statements based on their fair values. The impact of forfeitures that may occur prior to vesting is also estimated and considered in the amount recognized. Excess tax benefits are reported as a financing cash inflow rather than as a reduction of taxes paid.
The total compensation expense recognized for share-based compensation was $489,000 and $646,000 for 2012 and 2011, respectively. There was no tax benefit or expense related thereto. Recognized share-based compensation was reduced for estimated forfeitures prior to vesting based primarily on historical annual forfeiture rates of approximately 3.2% and 3.5%, for 2012 and 2011, respectively. Estimated forfeitures will be reassessed in subsequent periods and may change based on new facts and circumstances. In February 2012, executive officers and management were awarded an incentive bonus of $150,300 based on meeting certain performance metrics included in the Executive and Key Management Compensation Plan. In accordance with the plan, the incentive award was settled through the issuance of 39,294 shares of common stock.
Stock Options
In May 2006, the Company's shareholders approved the 2006 Equity and Incentive Award Plan (the "2006 Plan") and an increase in the number of shares of common stock authorized under the Articles of Association by 1,000,000 shares, all of which have been reserved for issuance under the 2006 Plan. The 2006 Plan provides that the administrator can grant stock options and other equity instruments. The terms of certain grant types follow general guidelines, but the term and conditions of each award can vary at the discretion of the administrator. With respect to awards granted to non-employee directors, the administrator of the 2006 Plan is the Board of Directors. The
40
Compensation Committee of the Board is the administrator of the 2006 Plan for all other persons, unless the Board assumes authority for administration.
A summary of stock option award activity as of and for the year ended December 31, 2012 is presented below:
|
Shares | Weighted Average Exercise Price |
Weighted Average Grant-Date Fair Value |
Weighted Average Remaining Contractual Term (years) |
Aggregate Intrinsic Value $(000)(1) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Outstanding at December 31, 2011 |
86,500 | $ | 24.08 | |||||||||||||
Forfeited or Cancelled |
(7,500 | ) | $ | 29.94 | $ | 12.02 | ||||||||||
Outstanding at December 31, 2012 |
79,000 | $ | 23.52 | $ | 8.53 | 3.3 | $ | | ||||||||
Exercisable at December 31, 2012 |
69,000 | $ | 26.18 | $ | 9.40 | 2.9 | $ | | ||||||||
Expected to Vest at December 31, 2012(2) |
7,200 | $ | 5.20 | $ | 2.48 | 6.2 | $ | | ||||||||
There were no stock option awards granted in 2012 or 2011. The fair value of stock options vested in 2012 and 2011 was $35,000 and $129,000, respectively.
As of December 31, 2012, there was $14,700 of total unrecognized compensation for awards granted under the stock options plans that is expected to be recognized over a weighted average period of 1.2 years.
Restricted Stock
In 2012, 21,277 restricted shares that vest as service requirements are met were granted to management employees and the Company's Board of Directors, and 78,769 shares of restricted stock vested as directors' and management service requirements were met. In 2011, 120,304 restricted shares that vest as service requirements are met were granted to management employees and the Company's Board of Directors, and 92,289 shares of restricted stock vested as directors' and management service requirements were met. All restricted shares granted in 2012 and 2011 were granted under the 2006 Plan. The weighted average grant-date fair value of restricted stock granted during 2012 and 2011 was $3.54 and $5.37 per share, respectively.
A summary of the activity for nonvested restricted stock awards as of and for the year ended December 31, 2012 is presented below:
|
Shares | Weighted Average Grant-Date Fair Value |
|||||
---|---|---|---|---|---|---|---|
Nonvested balance at December 31, 2011 |
218,929 | $ | 8.92 | ||||
Granted |
21,377 | $ | 3.54 | ||||
Vested |
(78,769 | ) | $ | 5.23 | |||
Forfeited or Cancelled |
(67,400 | ) | $ | 4.56 | |||
Nonvested balance at December 31, 2012 |
94,137 | $ | 5.56 | ||||
41
10. RELATED PARTY TRANSACTIONS
The Company has a 51% ownership interest in Bay Holdings, the owner and developer of The Residences at Kapalua Bay. The other members of Bay Holdings, through wholly owned affiliates, are Marriott, which owns a 34% interest in Bay Holdings, and ER which owns the remaining 15% interest in Bay Holdings. Stephen M. Case, who is a director and a 65% shareholder of the Company as of February 2013, is the Chairman, Chief Executive Officer, and indirect beneficial owner of Revolution LLC, which is the indirect majority owner of ER, and thus Mr. Case may be deemed to have a beneficial interest in Bay Holdings.
11. INCOME TAXES
GAAP prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In 2012, tax liability on uncertain tax positions was reduced by $378,000 because of expiration of statutes of limitations and a proposed IRS settlement. As of December 31, 2012 and 2011, total accrued interest for uncertain income tax positions was $899,000 and $830,000, respectively.
The Company recognizes accrued interest related to unrecognized tax benefits as interest expense and penalties in general and administrative expense in its consolidated statement of operations and such amounts are included in income taxes payable on the Company's consolidated balance sheet. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
2012 | 2011 | |||||
---|---|---|---|---|---|---|---|
|
(in thousands) |
||||||
Balance at beginning of year |
$ | 626 | $ | 952 | |||
Adjustments for tax provisions of prior years |
(290 | ) | (211 | ) | |||
Expiration of statutes of limitations |
(88 | ) | (115 | ) | |||
Balance at end of year |
$ | 248 | $ | 626 | |||
At December 31, 2012 there were no unrecognized tax benefits for which the liability for such taxes was recognized as deferred tax liabilities because such unrecognized revenue items have reversed. At December 31, 2012 and 2011, there were $144,000 and $232,000 of unrecognized tax benefits that, if recognized, would affect the effective tax rate.
The components of the income tax benefit for 2011 were as follows:
|
2011 | |||
---|---|---|---|---|
|
(in thousands) |
|||
Current |
||||
Federal |
$ | (134 | ) | |
State |
| |||
Total |
(134 | ) | ||
Income tax benefitcontinuing operations |
$ | (134 | ) | |
In 2012, the income tax benefit from the reversal of tax liability discussed above were included in income from discontinued operations as they relate to the Company's former agriculture operations that were discontinued in 2009.
42
Reconciliations between the total income tax benefit and the amount computed using the statutory federal rate of 35% was as follows:
|
2012 | 2011 | |||||
---|---|---|---|---|---|---|---|
|
(in thousands) |
||||||
Federal income tax benefit at statutory rate |
$ | (1,735 | ) | $ | (3,389 | ) | |
Adjusted for: |
|||||||
Valuation allowance |
1,674 | 3,871 | |||||
Provision for uncertain tax positions |
| (134 | ) | ||||
Permanent differences and other |
61 | (482 | ) | ||||
Income tax benefitcontinuing operations |
$ | | $ | (134 | ) | ||
Deferred tax assets (liabilities) were comprised of the following temporary differences as of December 31, 2012 and 2011:
|
2012 | 2011 | |||||
---|---|---|---|---|---|---|---|
|
(in thousands) |
||||||
Net operating loss and tax credit carryforwards |
$ | 49,205 | $ | 35,917 | |||
Joint venture and other investments |
2,440 | 11,242 | |||||
Accrued retirement benefits |
10,815 | 9,448 | |||||
Property net book value |
4,304 | 4,168 | |||||
Deferred revenue |
1,280 | 1,358 | |||||
Stock compensation |
145 | 253 | |||||
Reserves and other |
663 | 1,385 | |||||
Total deferred tax assets |
68,852 | 63,771 | |||||
Valuation Allowance |
(66,467 | ) | (61,386 | ) | |||
Deferred condemnation proceeds |
(2,385 | ) | (2,385 | ) | |||
Total deferred tax liabilities |
(2,385 | ) | (2,385 | ) | |||
Net deferred tax assets (liabilities) |
$ | | $ | | |||
Valuation allowances have been established to reduce future tax benefits expected to be realized. The Company had $109.9 million in federal net operating loss carry forwards at December 31, 2012, that expire from 2028 through 2032. Net operating loss for state income tax purposes that expire from 2028 through 2031 totaled $125.5 million at December 31, 2012. The Company's federal income tax returns for 2005 through 2008 are currently under examination and the Internal Revenue Service has proposed approximately $11.6 million of additional taxable income. The Company has sufficient net operating loss carry forwards to offset the proposed additional taxable income.
12. SEGMENT INFORMATION
The Company's presentation of its reportable operating segments is consistent with how the Company's chief operating decision maker determines the allocation of resources. Reportable segments are as follows:
43
parties, and the cost of maintaining the Company's real estate assets, including conservation activities.
Financial information for each of the Company's reportable segments for 2012 and 2011 follows:
|
Real Estate |
Leasing | Utilities | Resort Amenities |
Other(6) | Consolidated | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2012 |
|||||||||||||||||||
Operating revenues(1) |
$ | 2,545 | $ | 5,806 | $ | 3,541 | $ | 4,228 | $ | 44 | $ | 16,164 | |||||||
Operating loss(2) |
(338 | ) | 428 | 624 | (181 | ) | (2,926 | ) | $ | (2,393 | ) | ||||||||
Interest expense, net |
(2,563 | ) | |||||||||||||||||
Loss from continuing operations before income tax benefit |
$ | (4,956 | ) | ||||||||||||||||
Depreciation expense |
| 2,240 | 461 | 12 | 176 | 2,889 | |||||||||||||
Capital expenditures(3) |
109 | 22 | 54 | | | 185 | |||||||||||||
Assets relating to continuing operations(4) |
6,736 | 37,421 | 6,437 | 1,752 | 5,190 | 57,536 | |||||||||||||
Other assets(5) |
3,949 | ||||||||||||||||||
|
$ | 61,485 | |||||||||||||||||
|
Real Estate |
Leasing | Utilities | Resort Amenities |
Other(6) | Consolidated | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2011 |
|||||||||||||||||||
Operating revenues(1) |
$ | 1,070 | $ | 5,144 | $ | 3,418 | $ | 3,854 | $ | 1,056 | $ | 14,542 | |||||||
Operating loss(2) |
(661 | ) | (1,000 | ) | (319 | ) | (803 | ) | (4,499 | ) | $ | (7,282 | ) | ||||||
Interest expense, net |
(2,402 | ) | |||||||||||||||||
Loss from continuing operations before income tax benefit |
$ | (9,684 | ) | ||||||||||||||||
Depreciation expense |
313 | 1,535 | 459 | 23 | 1,060 | 3,390 | |||||||||||||
Capital expenditures(3) |
89 | 487 | 6 | | 244 | 826 | |||||||||||||
Assets relating to continuing operations(4) |
10,844 | 38,744 | 6,977 | 1,138 | 3,873 | 61,576 | |||||||||||||
Other assets(5) |
2,496 | ||||||||||||||||||
|
$ | 64,072 | |||||||||||||||||
44
13. RESERVES
Allowance for doubtful accounts and reserves for environmental liability for 2012 and 2011 are as follows:
Description
|
Balance at Beginning of Period |
Additions | Deductions | Balance at End of Period |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in thousands) |
||||||||||||
Allowance for Doubtful Accounts |
|||||||||||||
2012 |
$ | 519 | $ | 212 | $ | (469 | ) | $ | 262 | ||||
2011 |
$ | 460 | $ | 90 | $ | (31 | ) | $ | 519 |
Description
|
Balance at Beginning of Period |
Additions | Deductions | Balance at End of Period |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in thousands) |
||||||||||||
Reserve for Environmental Liability |
|||||||||||||
2012 |
$ | 866 | $ | | $ | (191 | ) | $ | 675 | ||||
2011 |
$ | 1,187 | $ | 4 | $ | (325 | ) | $ | 866 |
14. COMMITMENTS AND CONTINGENCIES
Discontinued Operations
On April 19, 2011, a lawsuit was filed against the Company's wholly owned subsidiary Maui Pineapple Company, Ltd. and several other Hawaii based farmers by the EEOC. The lawsuit was filed in the United States District Court, District of Hawaii, pursuant to Civil Action No. 11-00257. The lawsuit alleges unlawful employment practices on the basis of national origin and race discrimination, harassment and retaliation and seeks injunctive relief, unspecified compensatory and punitive damages and other relief. The Company believes it has not been involved in any wrongdoing, disagrees with the charges and plans to vigorously defend itself. The Company is presently unable to reasonably estimate the amount of probable liability, if any, related to this matter and, accordingly, has made no provision in the accompanying consolidated financial statements.
Pursuant to a 1999 settlement agreement with 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 costs 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. The Company estimated its share of the cost to operate and maintain the filtration systems for the existing wells, and its share of the cost of a letter of credit used to secure its obligations, and as of December 31, 2012 has recorded a liability of $105,000. The Company is presently not aware of any plans by the County of Maui to install other filtration systems or to drill any water wells in areas affected by agricultural chemicals. Accordingly, a reserve for costs relating to any future wells has not been recorded because the Company is not able to reasonably estimate the amount of liability, if any.
45
Investments in Affiliates
Pursuant to a previous agreement, the Company agreed to purchase from Kapalua Bay the Amenities that were completed in 2009 at the actual construction cost of approximately $35 million. Through December 31, 2010, Bay Holdings recorded impairment charges in its consolidated financial statements of approximately $23 million related to the Amenities. In 2012 and 2011, loss from the operations of the Amenities was $566,000 and $432,000, respectively. The Company does not have sufficient liquidity to purchase the Amenities at the actual construction cost of approximately $35 million and has been in discussions with the other members of Bay Holdings and the lenders to negotiate the terms of the purchase and sale. No provision has been recorded in the accompanying consolidated financial statements with respect to the Company's executory contract to purchase the Amenities. If the Amenities are subsequently acquired, they will be evaluated for impairment and could result in a loss.
Pursuant to loan agreements related to certain equity investments, the Company and the other members of the respective joint ventures have guaranteed to lenders each investors' pro rata share of costs and losses that may be incurred by the lender as a result of the occurrence of specified triggering events. These guarantees do not include full payment of the loans. At December 31, 2012, the Company has recognized the fair value of its obligations under these agreements (Note 3).
On June 7, 2012, a group of owners of 11 whole-ownership units at the Ritz-Carlton Club and Residences, Kapalua Bay filed a lawsuit against multiple parties including the Company. The Company believes it has not been involved in any wrongdoing, disagrees with the charges and plans to vigorously defend itself. The Company is presently unable to reasonably estimate the amount of probable liability, if any, related to this matter and, accordingly, has made no provision in the accompanying consolidated financial statements.
On May 23, 2011, a lawsuit was filed against Kapalua Bay; the Company; The Ritz-Carlton Hotel Company, LLC; Kapalua Realty Co. Ltd.; and other John and Jane Does; by purchasers of two units at the Ritz-Carlton Residences at Kapalua Bay. The lawsuit was filed in the Circuit Court of the Second Circuit, State of Hawaii pursuant to Civil No. 11-1-0216-(3). The lawsuit alleges deceptive acts, intentional misrepresentation, concealment, and negligent misrepresentation, among other allegations with regard to the sale of the two residential units and seeks unspecified damages, treble damages and other relief. The Company disagrees with the allegations and plans to vigorously defend itself. The Company is presently unable to reasonably estimate the amount of probable liability, if any, related to this matter and, accordingly, has made no provision in the accompanying consolidated financial statements.
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 is not expected to have a material adverse effect on the Company's financial position or results of operations.
46
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2012. We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2012, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management has the responsibility for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act, as a process designed by, or under the supervision of, the Company's principal executive and principal financial officer and effected by our board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Our internal controls over financial reporting includes those policies and procedures that:
Because of its inherent limitations, internal control over financial reporting only provides reasonable assurance with respect to financial statement presentation and preparation. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2012. In making this assessment, management used the criteria set forth by the
47
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal ControlIntegrated Framework. Based on its assessments, management believes that, as of December 31, 2012, the Company's internal control over financial reporting is effective.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
In February 2012, management completed the implementation of a new accounting and financial reporting software system. The new accounting and financial reporting system is a significant component of internal control over financial reporting. Management believes that it has taken the necessary steps to monitor and maintain appropriate internal controls during the implementation process.
None.
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information set forth under "Section 16(a) Beneficial Ownership Reporting Compliance" and "Election of Directors" in the Maui Land & Pineapple Company, Inc. Proxy Statement, to be filed no later than 120 days after the close of our fiscal year ended December 31, 2012, is incorporated herein by reference. Certain information concerning our executive officers is contained in Item 1 of this annual report.
Code of Ethics
Our Board of Directors approved the Amended and Restated Code of Ethics in March 2008. The Code of Ethics is applicable to our Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer and all other employees of the Company. The Code of Ethics is intended to qualify as a "code of ethics" for purposes of Item 406(b) of Regulation S-K. The Code of Ethics is posted on our website at http://mauiland.com/investor.shtml. We will satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any amendment to, or waiver from, any applicable provision (related to elements listed under Item 406(b) of Regulation S-K) of the Code of Ethics by posting such information on our website.
Item 11. EXECUTIVE COMPENSATION
The information set forth under "Executive Compensation," and "Director Compensation" in the Maui Land & Pineapple Company, Inc. Proxy Statement, to be filed no later than 120 days after the close of our fiscal year ended December 31, 2012, is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information set forth under "Security Ownership of Certain Beneficial Owners" in the Maui Land & Pineapple Company, Inc. Proxy Statement, to be filed no later than 120 days after the close of our fiscal year ended December 31, 2012, is incorporated herein by reference, which is set forth below.
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Securities Authorized For Issuance Under Equity Compensation Plans
The following table provides summary information as of December 31, 2012, for our equity compensation plans:
Plan Category
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted-average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
|
(a) |
(b) |
(c) |
|||||||
Equity compensation plans approved by security holders |
173,137 | 23.52 | 450,824 |
With the exception of the information regarding securities authorized for issuance under our equity compensation plans set forth above, the information required by this Item 12 is incorporated herein by reference to the Maui Land & Pineapple Company, Inc. Proxy Statement, to be filed no later than 120 days after the close of our fiscal year ended December 31, 2012.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information set forth under "Certain Relationship and Related Transactions," and "Director Independence" in the Maui Land & Pineapple Company, Inc. Proxy Statement, to be filed no later than 120 days after the close of our fiscal year ended December 31, 2012, is incorporated herein by reference.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information set forth under "Independent Registered Public Accounting Firm" in the Maui Land & Pineapple Company, Inc. Proxy Statement, to be filed no later than 120 days after the close of our fiscal year ended December 31, 2012, is incorporated herein by reference.
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)1. Financial Statements
The following Financial Statements of Maui Land & Pineapple Company, Inc. and subsidiaries and Report of Independent Registered Public Accounting Firm are included in Item 8 of this annual report:
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2012 and 2011 |
||||
Consolidated Balance Sheets as of December 31, 2012 and 2011 |
||||
Consolidated Statements of Stockholders' Deficiency for the Years Ended December 31, 2012 and 2011 |
||||
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012 and 2011 |
||||
Notes to Consolidated Financial Statements |
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(a)3. Exhibits
Exhibit No | |
||
---|---|---|---|
3.1 | Restated Articles of Association, as of May 13, 2010 (filed as Exhibit 3.1 to Form 10-Q for the quarter ended June 30, 2010, filed August 4, 2010, and incorporated herein by reference). | ||
3.2 | Amended Bylaws, as of February 17, 2012. (filed as Exhibit 3.2 to Form 10-K for the year ended December 31, 2011, filed March 2, 2012 and incorporated herein by reference). | ||
10.1 | Loan Agreement by and between American AgCredit, FLCA and Maui Land & Pineapple Company, Inc., entered into as of December 22, 2010 (filed as exhibit 10.23 to Form 10-K for the year ended December 31, 2010, filed March 14, 2011 and incorporated heein by reference). | ||
10.2 | Fee and Leasehold Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing, entered into on November 15, 2007 (filed as Exhibit 10.2 to Form 8-K, filed November 19, 2007 and incorporated herein by reference). | ||
10.3 | Amended and Restated Credit Agreement, dated as of October 9, 2009, by and among Maui Land & Pineapple Company, Inc., and each of the financial institutions initially a signatory thereto, and Wells Fargo Bank, National Association, as Administrative Agent (filed as Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 2009, filed November 3, 2009 and incorporated herein by reference). | ||
10.4 | First Modification Agreement dated as of September 17, 2010, entered into by and among Maui Land & Pineapple Company, Inc., and each of the financial institutions initially a signatory thereto (filed as Exhibit 10.4 to Form 10-Q for the quarter ended September 30, 2010, filed November 2, 2010 and incorporated herein by reference). | ||
10.5 | Second Modification Agreement and Waiver dated as of December 22, 2010, entered into by and among Maui Land & Pineapple Company, Inc. and Wells Fargo Bank, National Association (filed as exhibit 10.21 to Form 10-K for the year ended December 31, 2010, filed March 14, 2011 and incorporated herein by reference). | ||
10.6 | Third Modification Agreement and Waiver dated as of February 23, 2011, entered into by and among Maui Land & Pineapple Company, Inc. and Wells Fargo Bank, National Association (filed as exhibit 10.22 to Form 10-K for the year ended December 31, 2010, filed March 14, 2011 and incorporated herein by reference). | ||
10.7 | Fourth Modification Agreement dated as of August 1, 2011, entered into by and among Maui Land & Pineapple Company, Inc. and Wells Fargo Bank, National Association (filed as Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 2011, filed November 3, 2011 and incorporated herein by reference). | ||
10.8 | * | Second Amendment Agreement dated February 26, 2013, entered into by and among Maui Land & Pineapple Company, Inc. and American AgCredit, FLCA. | |
10.9 | | Supplemental Executive Retirement Plan (effective as of January 1, 1988) (filed as Exhibit (10)B to Form 10-K for the year ended December 31, 1988 (SEC File No. 001-06510), and incorporated herein by reference). | |
10.10 | | Maui Land & Pineapple Company, Inc. 2003 Stock and Incentive Compensation Plan (incorporated by reference to Appendix B of the Definitive Proxy Statement on Schedule 14A filed on November 10, 2003 (SEC File No. 001-06510)). | |
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Exhibit No | |
||
---|---|---|---|
10.11 | | Maui Land & Pineapple Company, Inc. 2006 Equity and Incentive Award Plan (incorporated by reference to Appendix B of the Definitive Proxy Statement on Schedule 14A filed on March 27, 2006 (SEC File No. 001-06510)). | |
10.12 | | Form of Stock Option Grant Notice and Form of Stock Option Agreement, pursuant to the Maui Land & Pineapple Company, Inc. 2006 Equity and Incentive Award Plan (filed as Exhibit 10.9 to Form 10-Q for the quarter ended June 30, 2006, filed August 8, 2006 (SEC File No. 001-06510), and incorporated herein by reference). | |
10.13 | | Form of Restricted Stock Award Grant Notice and Form of Restricted Stock Award Agreement, pursuant to the Maui Land & Pineapple Company, Inc. 2006 Equity and Incentive Award Plan (filed as Exhibit 10.10 to Form 10-Q for the quarter ended June 30, 2006, filed August 8, 2006 (SEC File No. 001-06510), and incorporated herein by reference). | |
10.14 | Limited Liability Company Agreement of Kapalua Bay Holdings, LLC, dated August 31, 2004 (filed as Exhibit 10(A) to Form 10-Q for the quarter ended September 30, 2004, filed November 12, 2004 (SEC File No. 001-06510), and incorporated herein by reference). | ||
10.15 | Fee and Leasehold Mortgage, Security Agreement and Fixture Filing made by Kapalua Bay, LLC in favor of Lehman Brothers Holdings, Inc. (filed as Exhibit 10.2 to Form 8-K filed July 20, 2006 (SEC File No. 001-06510) and incorporated herein by reference). | ||
10.16 | Completion Guaranty made by Maui Land & Pineapple Company, Inc., The Ritz-Carlton Development Company, Inc. and Exclusive Resorts Development Company, LLC in favor of Lehman Brothers Holdings, Inc. (filed as Exhibit 10.4 to Form 8-K filed July 20, 2006 (SEC File No. 001-06510) and incorporated herein by reference). | ||
10.17 | Recourse Guaranty made by Maui Land & Pineapple Company, Inc., The Ritz-Carlton Development Company, Inc. and Exclusive Resorts Development Company, LLC in favor of Lehman Brothers Holdings, Inc. (filed as Exhibit 10.5 to Form 8-K filed July 20, 2006 (SEC File No. 001-06510) and incorporated herein by reference). | ||
10.18 | Amended and Restated Construction Loan Agreement, dated as of February 11, 2009, by and among Kapalua Bay, LLC, Lehman Brothers Holdings Inc., Central Pacific Bank, Landesbank Baden-Württemberg, Deutsche Hypothek AB, New York Branch, and MH Kapalua Venture, LLC (filed as Exhibit 10.55 to Form 10-K for the year ended December 31, 2008, filed March 31, 2009 and incorporated herein by reference). | ||
10.19 | Master Assignment and Assumption and Modification Agreement, dated as of February 11, 2009, by and among Kapalua Bay, LLC, Lehman Brothers Holdings Inc., Central Pacific Bank, Landesbank Baden-Württemberg, Deutsche Hypothek AB, New York Branch, and MH Kapalua Venture, LLC (filed as Exhibit 10.56 to Form 10-K for the year ended December 31, 2008, filed March 31, 2009 and incorporated herein by reference). | ||
10.20 | Second Omnibus Amendment to Construction Loan Documents, dated as of February 11, 2009, by and among Kapalua Bay, LLC, Lehman Brothers Holdings Inc., Central Pacific Bank, Landesbank Baden-Württemberg, Deutsche Hypothek AB, New York Branch, and MH Kapalua Venture, LLC (filed as Exhibit 10.57 to Form 10-K for the year ended December 31, 2008, filed March 31, 2009 and incorporated herein by reference). | ||
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Exhibit No | |
||
---|---|---|---|
10.21 | ± | Sale, Purchase and Lease Termination Agreement, entered into on March 28, 2007 (filed as Exhibit 10.1 to Form 10-Q for the quarter ended March 31, 2007, filed May 9, 2007 and incorporated herein by reference). | |
10.22 | ± | Second Amended and Restated Limited Liability Company Agreement of W2005 Kapalua/Gengate Hotel Holdings L.L.C., entered into on March 28, 2007 (filed as Exhibit 10.2 to Form 10-Q for the quarter ended March 31, 2007, filed May 9, 2007 and incorporated herein by reference). | |
10.23 | Settlement Agreement entered into on April 19, 2011, by and between Maui Land & Pineapple Company, Inc. and the Pension Benefit Guaranty Corporation. (filed as Exhibit 10.22 to Form 10-K for the year ended December 31, 2011, filed March 2, 2012 and incorporated herein by reference). | ||
10.24 | Mortgage, Security Agreement, Assignment of Rents, Fixture Filing and Financing Statement effective April 19, 2011. (filed as Exhibit 10.23 to Form 10-K for the year ended December 31, 2011, filed March 2, 2012 and incorporated herein by reference). | ||
10.25 | * | Settlement Agreement entered into on November 19, 2012, by and between Maui Land & Pineapple Company, Inc. and the Pension Benefit Guaranty Corporation. | |
10.26 | Kapalua Bay Course Sale, Purchase and Escrow Agreement dated September 16, 2010 (filed as Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 2010, filed November 2, 2010 and incorporated herein by reference). | ||
10.27 | Bay Golf Course Lease made and entered into effective September 30, 2010 (filed as Exhibit 10.2 to Form 10-Q for the quarter ended September 30, 2010, filed November 2, 2010 and incorporated herein by reference). | ||
10.28 | Golf Academy Lease, made and entered into effective October 1, 2010 (filed as Exhibit 10.3 to Form 10-Q for the quarter ended September 30, 2010, filed November 2, 2010 and incorporated herein by reference). | ||
10.29 | Settlement Agreement and Release of All Claims (Board of Water Supply of the County of Maui vs. Shell Oil Company, et al.) (filed as Exhibit 10.5(i) to Form 10-K for the year ended December 31, 1999 (SEC File No. 001-06510), filed March 24, 2000 and incorporated herein by reference). | ||
21. | * | Subsidiaries of Maui Land & Pineapple Company, Inc. | |
23.1 | * | Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm, dated March 1, 2013. | |
31.1 | * | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934. | |
31.2 | * | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934. | |
32.1 | ** | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | ** | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS | XBRL Instance Document | ||
101.SCH | XBRL Taxonomy Extension Schema Document |
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Exhibit No | |
||
---|---|---|---|
101.CAL | XBRL Taxonomy Extension Calculation document | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase | ||
101.LAB | XBRL Taxonomy Extension labels Linkbase Document | ||
101.PRE | XBRL Taxonomy Extension Presentation Link Document |
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 1, 2013.
MAUI LAND & PINEAPPLE COMPANY, INC. | ||||
By: |
/s/ WARREN H. HARUKI Warren H. Haruki Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By | /s/ WARREN H. HARUKI Warren H. Haruki, Chairman of the Board & |
Date March 1, 2013 | ||
Chief Executive Officer (Principal Executive Officer) | ||||
By |
/s/ STEPHEN M. CASE Stephen M. Case, Director |
Date March 1, 2013 |
||
By |
/s/ DAVID A. HEENAN David A. Heenan, Director |
Date March 1, 2013 |
||
By |
/s/ KENT T. LUCIEN Kent T. Lucien, Director |
Date March 1, 2013 |
||
By |
/s/ DUNCAN MACNAUGHTON Duncan MacNaughton, Director |
Date March 1, 2013 |
||
By |
/s/ ARTHUR C. TOKIN Arthur C. Tokin, Director |
Date March 1, 2013 |
||
By |
/s/ TIM T. ESAKI Tim T. Esaki, Chief Financial Officer |
Date March 1, 2013 |
||
(Principal Financial Officer) | ||||
By |
/s/ PAULUS SUBRATA Paulus Subrata, Interim Controller (Principal Accounting Officer) |
Date March 1, 2013 |
54
Exhibit 10.8
SECOND AMENDMENT TO
LOAN AGREEMENT
This Second Amendment to Loan Agreement (as amended, restated, supplemented or otherwise modified, this Agreement) is entered into as of February 26, 2013 (the Effective Date) by and among Maui Land & Pineapple Company, Inc., a Hawaii corporation (Borrower), Kapalua Land Company, Ltd., a Hawaii corporation and Maui Pineapple Company, Ltd., a Hawaii corporation (referred to herein collectively as Guarantor and, together with Borrower, the Credit Parties), and American AgCredit, FLCA (Lender).
RECITALS
A. Borrower and Lender are party to that certain Loan Agreement dated as of December 22, 2010, as amended by a First Amendment to Loan Agreement dated as of May 10, 2011 (as it may be further amended, restated, supplemented or otherwise modified, the Loan Agreement), pursuant to which Lender has agreed to provide loans and other financial accommodations to Borrower upon the terms and conditions set forth in the Loan Agreement. Capitalized terms used in this Agreement but not defined in this Agreement shall have the meanings given to them in the Loan Agreement.
B. The Credit Parties have requested that Lender agree to amend the terms of the Loan Agreement.
C. Lender is willing to do so on the terms and conditions set forth in this Agreement.
In consideration of the foregoing, the parties agree as follows:
ARTICLE I
ACKNOWLEDGMENTS AND CONSENTS
Section 1.1 Affirmation of Recitals. Each Credit Party acknowledges and confirms that each of the recitals set forth above is true and correct.
Section 1.2 Outstanding Indebtedness. Each Credit Party acknowledges and confirms (a) that Exhibit A hereto sets forth, as of the date specified in Exhibit A, the aggregate principal amount of the Loan, and (b) that such amount is not subject to any defense, counterclaim, recoupment or offset of any kind.
Section 1.3 Consent to Amendment of Wells Fargo Loan Documents. Lender consents to Borrower entering into an amendment (the Wells Fargo Amendment) to the Wells Fargo Loan Documents, to be effective concurrently with this Agreement, providing for an extension of the maturity date to May 1, 2014 with a revolving loan commitment not less than $32,000,000, and containing no other substantive changes.
ARTICLE II
AMENDMENTS TO LOAN AGREEMENT
Section 2.1 Amendment to Section 1(a). The following definition in Section 1(a) of the Loan Agreement is hereby amended and restated to read as follows:
Maturity Date shall mean May 1, 2014.
Section 2.2 Amendment to Section 4(b). Section 4(b) of the Loan Agreement is hereby amended and restated to read as follows:
(b) Principal Payments; Maturity Date. Except as provided in Section 6(a) Section 6(b), or Section 6(c), the principal balance of the Loan shall be due and payable in full on the Maturity Date; provided, that (i) if the principal balance of the Loan exceeds Twenty Million Dollars ($20,000,000) on December 31, 2013, Borrower shall make a principal payment to Lender on December 31, 2013 in such amount as will reduce the principal balance of the Loan to Twenty Million Dollars ($20,000,000), and (ii) if the Obligations shall become due and payable in accordance with Section 14 or any other provision of this Agreement prior to the scheduled Maturity Date, then the Maturity Date shall be the date on which the Obligations become due and payable.
Section 2.3 Amendment Fee. In consideration of Lenders entering into this Agreement, on the Effective Date, Borrower shall pay to Lender a fee (the Amendment Fee) in the amount of $60,170. The Amendment Fee shall be fully earned and non-refundable upon the Effective Date.
ARTICLE III
CONDITIONS TO EFFECTIVENESS
Section 3.1 Conditions Precedent. This Agreement shall become effective as of the Effective Date upon the satisfaction of each of the following conditions:
(a) receipt by Lender of duly executed counterparts of this Agreement from Borrower and each Guarantor;
(b) receipt by Lender of the Amendment Fee;
(c) Borrower shall have entered into the Wells Fargo Amendment and delivered a copy thereof to Lender; and
(d) if required by Lender, Borrower shall have paid all costs and expenses of Lender in connection with this Agreement, the Loan Documents and the transactions contemplated hereby including an estimate of anticipated closing costs (it being understood that if Lender elects not to require payment prior to closing, Borrower shall pay such amounts upon being billed therefor by Lender).
ARTICLE IV
MISCELLANEOUS
Section 4.1 Representations and Warranties. Each Credit Party hereby represents and warrants to Lender that (a) each Credit Party has the legal power and authority to execute and deliver this Agreement; (b) the officers of each Credit Party executing this Agreement have been duly authorized to execute and deliver the same and bind each Credit Party with respect to the provisions hereof; (c) the execution and delivery hereof by each Credit Party and the performance and observance by each Credit Party of the provisions hereof do not violate or conflict with any organizational document of any Person party hereto or any law applicable to any Credit Party or result in a breach of any provision of or constitute a default under any other agreement, instrument or document binding upon or enforceable against any Credit Party; (d) no Default or Event of Default exists under the Loan Agreement, nor will any occur immediately after the execution and delivery of this Agreement or by the performance or observance of any provision hereof; (e) no Credit Party is aware of any claim or offset against, or defense or counterclaim to, any of their obligations or liabilities under the Loan Agreement or any other Loan Document; and (f) this Agreement and each document executed by any Credit Party in connection herewith constitute valid and binding obligations of the applicable Person in every respect, enforceable in accordance with their terms.
Section 4.2 Release. Each Credit Party hereby releases, remises, acquits and forever discharges Lender and its employees, agents, representatives, consultants, attorneys, fiduciaries, officers, directors, partners, predecessors, successors and assigns, subsidiary corporations, parent corporations, and related corporate divisions (collectively, the Released Parties), from any and all actions and causes of action, judgments, executions, suits, debts, claims, demands, liabilities, obligations, damages and expenses of any and every character, known or unknown, direct and/or indirect, at law or in equity, of whatsoever kind or nature, for or because of any matter or things done, omitted or suffered to be done by any of the Released Parties prior to and including the effectiveness of this Agreement, and in any way directly or indirectly arising out of or in any way connected to the Loan Agreement or the Loan Documents (collectively, the Released Matters). Each Credit Party acknowledges that the agreements in this paragraph are intended to be in full satisfaction of all or any alleged injuries or damages arising in connection with the Released Matters.
Each Credit Party hereby waives the provisions of any statute or doctrine to the effect that a general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. Without limiting the generality of the foregoing, each Credit Party hereby waives the provisions of any statute that prevents a general release from extending to claims unknown by the releasing party, including Section 1542 of the California Civil Code which provides:
A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.
Each Credit Party acknowledges and understands the rights and benefits conferred by such a statute or doctrine and the risks associated with waiver thereof, and after receiving advice of counsel, hereby consciously and voluntarily waives, relinquishes and releases any and all rights and benefits available thereunder, insofar as they apply, or may be construed to apply, to each release set forth herein or contemplated hereby. In so doing, each Credit Party expressly acknowledges and understands that it may hereafter discover facts in addition to or different from those that it now believes to be true with respect to the subject matter of the disputes, claims and other matters released herein, but expressly agrees that it has taken these facts and possibilities into account in electing to make and to enter into this release, and that the releases given herein shall be and remain in effect as full and complete releases notwithstanding the discovery or existence of any such additional or different facts or possibilities.
This release may be pleaded as a full and complete defense and/ or as a cross-complaint or counterclaim against any action, suit, or other proceeding that may be instituted, prosecuted or attempted in breach of this release. Each Credit Party acknowledges that the release contained herein constitutes a material inducement to Lender to enter into this Agreement and that Lender would not have done so but for Lenders expectation that such release is valid and enforceable in all events.
Section 4.3 Covenant Not to Sue. Each Credit Party, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Released Party that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Released Party on the basis of any claim released, remised and discharged by such Credit Party pursuant to Section 4.2 above. If any Credit Party or any of its successors, assigns or other legal representatives violates the foregoing covenant, such Credit Party, for itself and its successors, assigns and legal representatives, agrees to pay, in addition to such other damages as any Released Party may sustain as a result of such violation, all attorneys fees and costs incurred by any Released Party as a result of such violation.
Section 4.4 Loan Documents Unaffected. Except as otherwise specifically provided herein, all provisions of the Loan Agreement and the other Loan Documents shall remain in full force and effect and be unaffected hereby. The parties hereto acknowledge and agree that this Agreement constitutes a Loan Document under the terms of the Loan Agreement.
Section 4.5 Guarantor Acknowledgement. Each Guarantor, by signing this Agreement:
(a) consents and agrees to and acknowledges the terms of this Agreement;
(b) acknowledges and agrees that all of the Loan Documents to which such Guarantor is a party or otherwise bound shall continue in full force and effect and that all of such Guarantors obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Agreement;
(c) represents and warrants to Lender that all representations and warranties made by such Guarantor and contained in this Agreement or any other Loan Document to which it is a party are true and correct in all material respects on and as of the date of this Agreement to the same extent as though made on and as of such date, except to the extent that any thereof expressly relate to an earlier date; and
(d) acknowledges and agrees that (i) notwithstanding the conditions to effectiveness set forth in this Agreement, such Guarantor consent to this Agreement is not required under the terms of the Loan Agreement or any other Loan Document or as a matter of law, and (ii) nothing in the Loan Agreement, this Agreement or any other Loan Document shall be deemed to require the consent of such Guarantor to any future amendments to, modifications of, consents under, or forbearances or waivers with regard to, the Loan Agreement.
Section 4.6 Costs, Expenses and Taxes. Borrower agrees to pay on demand all costs and expenses of Lender in connection with the preparation, execution, delivery, administration, modification and amendment of this Agreement and the other instruments and documents to be delivered hereunder, including the reasonable fees and out-of-pocket expenses of counsel for Lender with respect thereto and with respect to advising Lender as to its rights and responsibilities hereunder and thereunder. Borrower further agrees to pay on demand all costs and expenses, if any (including reasonable counsel fees and expenses), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement and any other instruments and documents to be delivered hereunder, including reasonable counsel fees and expenses in connection with the enforcement of rights under this section. In addition, Borrower shall pay any and all stamp and other taxes payable or determined to be payable in connection with the execution and delivery of this Agreement and any other instruments and documents to be delivered hereunder, and agrees to save Lender harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such taxes. The foregoing agreements shall be in addition to and not in lieu of any similar obligations under the Loan Documents.
Section 4.7 No Other Promises or Inducements. There are no promises or inducements that have been made to any party hereto to cause such party to enter into this Agreement other than those that are set forth in this Agreement. This Agreement has been entered into by each Credit Party freely, voluntarily, with full knowledge, and without duress, and, in executing this Agreement, no Credit Party is relying on any other representations, either written or oral, express or implied, made to any Credit Party by Lender. Each Credit Party agrees that the consideration received by each Credit Party under this Agreement has been actual and adequate.
Section 4.8 No Course of Dealing. Each Credit Party acknowledges and agrees that, (a) this Agreement is not intended to, nor shall it, establish any course of dealing between the Credit Parties and Lender that is inconsistent with the express terms of the Loan Agreement or any other Loan Document, (b) notwithstanding any course of dealing between the Credit Parties and Lender prior to the date hereof, except as set forth herein, Lender shall not be obligated to make any Loan, except in accordance with the terms and conditions of this Agreement and the Loan Agreement, and (c) Lender shall be under any obligation to forbear from exercising any of its rights or remedies upon the occurrence of any Default or Event of Default.
Section 4.9 No Waiver. Each Credit Party acknowledges and agrees that (a) except as expressly provided herein, this Agreement shall not operate as a waiver of any right, power or remedy of Lender under the Loan Agreement or any other Loan Document, nor shall it constitute a continuing waiver at any time, and (b) nothing herein shall in any way prejudice the rights and remedies of Lender under the Loan Agreement, any Loan Document or applicable law. In addition, Lender shall have the right to waive any condition or conditions set forth in this Agreement, the Loan Agreement or any other Loan Document, in its sole discretion, and any such waiver shall not prejudice, waive or reduce any other right or remedy that Lender may have against any Credit Party.
Section 4.10 Reaffirmation. Each Credit Party, as debtor, grantor, pledgor, guarantor, assignor, or in other any other similar capacity in which such Credit Party grants liens or security interests in its property or otherwise acts as accommodation party or guarantor, as the case may be, hereby (i) ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise, under each of the Loan Documents to which it is a party (after giving effect hereto) and (ii) to the extent such Person granted liens on or security interests in any of its property pursuant to any such Loan Document as security for the Obligations under or with respect to the Loan Documents, ratifies and reaffirms such grant of security interests and liens and confirms and agrees that such security interests and liens hereafter secure all of the Obligations as amended hereby. Each Credit Party hereby acknowledges that each of the Loan Documents remains in full force and effect and is hereby ratified and reaffirmed. The execution of this Amendment shall not operate as a waiver of any right, power or remedy of Lender, constitute a waiver of any provision of any of the Loan Documents or serve to effect a novation of the Obligations. Each Credit Party acknowledges that all references in the Loan Agreement to the Agreement or the Loan Agreement shall mean the Loan Agreement, as amended hereby, and all references in the Loan Documents to the Loan Agreement shall mean the Loan Agreement, as amended hereby.
Section 4.11 Survival. All representations, warranties, covenants, agreements, releases and waivers made by or on behalf of any Credit Party under this Agreement shall survive and continue.
Section 4.12 Modification; Waiver. This Agreement may not be modified orally, but only by an agreement in writing signed by the parties hereto. Any provision of this Agreement can be waived, amended, supplemented or modified by written agreement of the parties hereto.
Section 4.13 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS.
Section 4.14 Entire Agreement. This Agreement sets forth the entire agreement and understanding among the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements, and undertakings of every kind and nature among them with respect to the subject matter hereof.
Section 4.15 Counterparts; Facsimile or Electronic Transmission of Signature. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. The manual signature of any party hereto that is transmitted to any other party or its counsel by facsimile or electronic transmission shall be deemed for all purposes to be an original signature.
Section 4.16 Severability Of Provisions; Captions; Attachments; Interpretation. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. The captions to Sections and subsections herein are inserted for convenience only and shall be ignored in interpreting the provisions of this Agreement. Each schedule or exhibit attached to this Agreement shall be incorporated herein and shall be deemed to be a part hereof. Words in the singular include the plural and words in the plural include the singular. Use of the term includes or including, shall mean including, but not limited to.
Section 4.17 JURY TRIAL WAIVER. EACH OF THE UNDERSIGNED, HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM HEREIN
[Remainder of page intentionally left blank; signatures begin on following page.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.
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BORROWER: | |
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MAUI LAND & PINEAPPLE COMPANY, INC. | |
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By: |
/s/ TIM T ESAKI |
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Name: |
Tim T Esaki |
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Title: |
Chief Financial Officer |
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By: |
/s/ RYAN C CHURCHILL |
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Name: |
Ryan C Churchill |
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Title: |
President & Chief Operating Officer |
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GUARANTORS: | |
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KAPALUA LAND COMPANY, LTD. | |
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By: |
/s/ TIM T ESAKI |
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Name: |
Tim T Esaki |
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Title: |
Chief Financial Officer |
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By: |
/s/ RYAN C CHURCHILL |
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Name: |
Ryan C Churchill |
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Title: |
President & Chief Operating Officer |
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MAUI PINEAPPLE COMPANY, LTD. | |
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By: |
/s/ TIM T ESAKI |
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Name: |
Tim T Esaki |
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Title: |
Chief Financial Officer |
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By: |
/s/ RYAN C CHURCHILL |
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Name: |
Ryan C Churchill |
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Title: |
President & Chief Operating Officer |
[Signature Pages Continue]
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LENDER: | |
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AMERICAN AGCREDIT, FLCA | |
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By: |
/s/ GARY VAN SCHUYVER |
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Name: |
Gary Van Schuyver |
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Title: |
Vice President |
[Signature Pages Continue]
Exhibit 10.25
SETTLEMENT AGREEMENT
This Agreement (the Agreement), is entered into this 19th day of November, 2012 (the Effective Date), by and between Maui Land & Pineapple Company, Inc. (MAUI) and the Pension Benefit Guaranty Corporation, a United States government corporation (the PBGC; and, collectively with MAUI, the Parties).
WITNESSETH
WHEREAS, PBGC is a wholly-owned United States government corporation established under section 4002 of the Employee Retirement Income Security Act of 1974, as amended (ERISA), 29 U.S.C. § 1302 (2006 & Supp. IV 2010) to administer the pension plan termination insurance program created by Title IV of ERISA, 29 U.S.C. §§ 1301-1461; and
WHEREAS, MAUI is a corporation incorporated under the laws of the state of Hawaii; and
WHEREAS, MAUI is, and has been at all relevant times, the contributing sponsor (as that term is defined in 29 U.S.C. § 1301(a)(13)) of the Maui Land & Pineapple Company, Inc. Pension Plan for Bargaining Unit and Hourly Employees (BU Plan) and the Maui Land & Pineapple Company Inc. Pension Plan for Non-Bargaining Unit Employees (Non-BU Plan collectively with BU Plan, the Pension Plans); and
WHEREAS, the PBGC asserts that MAUI ceased operations on or about March 31, 2011 at its facility located in Maui, Hawaii, and as a result, certain employees who are participants in the Pension Plans were separated from employment (the Cessation of Operations or the Event); and
WHEREAS, the PBGC asserts that the Cessation of Operations is an event described in ERISA §4062(e), and that MAUI and any other members of its controlled group (as defined in ERISA §4001(a)(14)) (MAUI or any other such member, a Controlled Group Member) are therefore subject to the provisions of ERISA §4063 and liable thereunder to PBGC with respect to the Plans; and
WHEREAS, PBGC has estimated that MAUIs liability under ERISA §4063(b) as a result of the Event is $18,713,067 (the Event Liability); and
WHEREAS, in lieu of the PBGC attempting to apply the provisions of subsections 4063(b), (c) or (d) of ERISA, 29 U.S.C. § 1363(b), (c) and (d), or otherwise enforcing against MAUI such liability that has resulted from the Cessation of Operations, the PBGC and MAUI have reached an understanding with respect to the Event and such liability, under which MAUI will provide security to PBGC.
NOW THEREFORE, MAUI and PBGC, for good and valuable consideration set out herein, the receipt and sufficiency of which are hereby acknowledged, agree as follows:
1. Mortgage Security
1.1 To secure up to $18,713,067 of liability under 29 U.S.C. § 1362(a)(1) incurred upon any termination of the Pension Plans under 29 U.S.C. § 1341(c) or 29 U.S.C. § 1342 on or before the Agreement Termination Date (as defined in Section 3.1 below), MAUI will, on or before the thirtieth (30th) day following the Effective Date, execute a first lien mortgage in favor of PBGC (the First PBGC Mortgage) on the real properties described in Exhibit A hereto (Mortgaged Property A) and execute a second lien mortgage in favor of PBGC (the Second PBGC Mortgage, collectively with the First PBGC Mortgage, the PBGC Mortgages) on the real property described in Exhibit B hereto (Mortgaged Property B, collectively with Mortgaged Property A, the Mortgaged Properties).
1.2 Following the Agreement Termination Date, and at MAUIs sole expense, MAUI will provide to PBGC recordable discharges and releases of the PBGC Mortgages. PBGC shall promptly execute and record such discharges and releases. PBGC agrees, following the Agreement Termination Date, to execute such other documents as may be necessary to effect and evidence the termination, discharge and release of such PBGC Mortgages.
2. Notice Requirements
2.1 During the term of the Agreement, MAUI will provide notices and information to PBGC as follows:
(a) Each of the Pension Plans actuarial valuation reports by October 31 of each plan year;
(b) Written notice no later than ten (10) days after the due date of any quarterly installment or other contribution to any of the Pension Plans required under 26 U.S.C § 430(j) (a Required Contribution) that MAUI has failed to timely pay; and
(c) Copies of all Internal Revenue Service (IRS) Forms 5310-A on the date filed with the IRS for any plan merger or consolidation, spinoff, or transfer of plan assets or liabilities to another plan that involves any of the Pension Plans. In the event that any such Form 5310-A will not be timely filed with the IRS, MAUI will notify PBGC at least 30 days before any plan merger or consolidation, spinoff, or transfer of plan assets or liabilities to another plan that involves any of the Pension Plans.
3. Termination of the Agreement
3.1 This Agreement will terminate upon the later of ( the Agreement Termination Date):
(a) the fifth anniversary of the effective date of this Agreement (the Fifth Anniversary); or
(b) if an Event of Default (as defined in Section 5.1 below) that has not been waived by the PBGC in writing exists on the Fifth Anniversary, the date upon which such Event of Default is cured.
3.2 Effective on the Agreement Termination Date and in consideration of the terms, conditions, mutual covenants and agreements set forth herein, the adequacy and sufficiency of which are hereby acknowledged, the PBGC, on its own behalf, and in every other capacity in which it may now or in the future act, will be deemed to release and forever discharge each Controlled Group Member, from any claim whatsoever with respect to any and all of such members liability and/or obligations under sections 4062(e) and/or 4063 of ERISA with regard to the Cessation of Operations.
4. Representations and Warranties
4.1 MAUI hereby represents and warrants to PBGC that each of the following is true and correct as of the Effective Date:
(a) MAUI has full power and authority to enter into and perform its obligations under the Agreement and to carry out and consummate the transactions contemplated by the Agreement;
(b) MAUIs execution, delivery and performance of the Agreement and all other Settlement Documents executed or to be executed by MAUI in connection with the Agreement have been duly authorized by all necessary corporate action; and
(c) This Agreement has been duly executed by authorized officers or other representatives of MAUI. This Agreement shall constitute a legal, valid and binding contract and agreement of MAUI enforceable by PBGC, and only by PBGC, against MAUI in accordance with its terms.
4.2 PBGC hereby represents and warrants to MAUI that each of the following is true and correct as of the Effective Date:
(a) PBGC has full power and authority to enter into and perform its obligations under the Agreement and to carry out and consummate the transactions contemplated by the Agreement;
(b) PBGCs execution, delivery and performance of the Agreement have been duly authorized by all necessary corporate action and are within PBGCs statutory authorization and authority; and
(c) This Agreement shall be duly executed by authorized officers or other representatives of PBGC. This Agreement shall constitute a legal, valid and binding contract and agreement of PBGC enforceable against PBGC in accordance with its terms.
5. Default; Remedies
5.1 Event of Default. Each of the following shall constitute an Event of Default under this Agreement:
(a) MAUI fails to make any Required Contributions in accordance with the minimum funding standards of ERISA and the Internal Revenue Code (the Code);
(b) MAUI materially breaches any other covenant, term or condition of this Agreement and, if curable, fails to cure such breach within thirty (30) days after such breach provided, however, that if the breach cannot by its nature be cured within the thirty (30) day period, but is susceptible to being cured within a reasonable time greater than thirty (30) days, then MAUI shall have an additional period (which shall not in any case exceed thirty (30) days, for a maximum total of sixty (60) days) to attempt to cure such breach, and within any such additional period the failure to cure the breach shall not be deemed an Event of Default;
(c) Any representation or warranty made by MAUI in Section 4.1 above is untrue in any material respect as of the Effective Date;
(d) MAUI (i) becomes insolvent; or (ii) is unable, or admits in writing its inability to pay debts as they generally mature; or (iii) makes a general assignment for the benefit of creditors or to an agent authorized to liquidate any of its property; or (iv) makes or sends notice of a bulk transfer; or (v) files or, consents to the filing against it, of a petition or other papers commencing a proceeding under Title 11 of the United States Code or any similar type of insolvency proceeding (Insolvency Proceeding); or (vi) has an Insolvency Proceeding filed or instituted against it which has not been dismissed within forty-five (45) days after its commencement, or in which an order for relief has been entered against it, or (vii) applies to a court for appointment of a receiver, trustee or custodian for any of its property; or (viii) has a receiver, trustee or custodian appointed for any of its property (with or without its consent);
(e) MAUI dissolves or discontinues (other than on a temporary basis) doing business;
(f) Any of the Pension Plans terminate under 29 U.S.C. § 1341(c) or 29 U.S.C. § 1342;
(g) The occurrence of a default (as defined therein) under the PBGC Mortgages.
5.2 Notice. MAUI shall immediately give written notice to PBGC upon the occurrence of any Event of Default.
5.3 General Remedies. If any Event of Default occurs, then PBGC may take any one or more of the following actions:
(a) exercise any or all of the rights and remedies available to it as a secured party under the UCC or any other applicable law, including (but not limited to) the right to repossess the Mortgaged Properties and the right to sell the Mortgaged Properties;
(b) foreclose on the Mortgaged Properties non-judicially, to the fullest extent permitted by law, or proceed by a suit or suits at law or in equity to foreclose on the Mortgaged Properties.
5.4 Forbearance. So long as no Event of Default exists and remains uncured, the PBGC will forbear during the term of this Agreement from taking any action against MAUI or other Controlled Group Member to enforce sections 4062(e) and/or 4063 of ERISA, 29 U.S.C. §§ 1362(e), 1363, on account of the Cessation of Operations.
5.5 Remedies Not Exclusive. No remedy recited in this Agreement with respect to the occurrence of an Event of Default shall limit the PBGC in any manner from pursuing after the occurrence of an Event of Default any and all remedies provided under the UCC, ERISA, the Code, or other applicable law. The rights and remedies provided for in this Agreement or which PBGC may otherwise have at law or in equity shall be distinct, separate, and cumulative. The rights and remedies shall not be deemed to be inconsistent with each other, and none of them, whether or not exercised by PBGC, shall be deemed to be in exclusion of any other. Any two or more of such rights and remedies may be exercised at the same time, all to the fullest extent permitted by law.
6. General Provisions
6.1 Compliance with ERISA. Nothing in this Agreement affects MAUIs obligations to comply with ERISA and the Code, including, without limitation, MAUIs obligation to make all Required Contributions in accordance with the minimum funding standards of ERISA and the Code.
6.2 Limitation of Rights. This Agreement is intended to be and is for the sole and exclusive benefit of PBGC and MAUI. Nothing expressed or mentioned in or to be implied from the Agreement gives any person other than PBGC or MAUI any legal or equitable right, remedy, or claim against PBGC or MAUI under or in respect of this Agreement.
6.3 Notices. All notices, demands, instructions and other communications required or permitted under the Agreement to any Party shall be in writing and shall be personally delivered or sent by registered, certified, or express mail, postage prepaid, return receipt requested, facsimile (which shall be immediately followed by the original of such communication), or pre-paid overnight delivery service with confirmed receipt, and shall be deemed to be given for purposes of this Agreement on the date the writing is personally delivered or sent to the intended recipient, or in the case of facsimile, on the date transmitted to the intended recipient. Unless otherwise specified in a notice sent or delivered in accordance with the foregoing provisions of this Section, all such notices, demands, instructions and other communications shall be sent to the Parties as indicated below:
To MAUI: Tim Esaki
Chief Financial Officer
Maui Land & Pineapple Co., Inc.
200 Village Road
Lahaina, Hawaii 96761
Telephone: (808) 665-5480
Facsimile: (808) 442-1114
tesaki@mlpmaui.com
Robert Katz
Torkildson, Katz, Moore, Hetherington & Harris
700 Bishop Street, 15th Floor
Honolulu, Hawaii 96813
Telephone: (808) 523-6000
Facsimile: (808) 523-6001
RSK@torkildson.com
To PBGC: Corporate Finance and Restructuring Department
Pension Benefit Guaranty Corporation
1200 K Street, N.W.
Washington, D.C. 20005-4026
Telephone: (202) 326-4070
Facsimile: (202) 842-2643
Gran.Christopher@pbgc.gov
Office of the Chief Counsel
Pension Benefit Guaranty Corporation
1200 K Street, N.W.
Washington, D.C. 20005-4026
Telephone: (202) 326-4020
Facsimile: (202) 326-4112
Hansen.Courtney@pbgc.gov and efile@pbgc.gov
6.4 Counterparts. This Agreement may be executed and delivered (including by facsimile or electronic pdf transmission) in one or more counterparts and by different Parties on separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
6.5 Entire Agreement. This Agreement, including the PBGC Mortgages, contains the complete and exclusive statement of the agreement and understanding by and among the Parties and supersedes all prior agreements, understandings, commitments, representations, communications, and proposals, oral or written, among the Parties or any of them relating to the subject matter of this Agreement. This Agreement may not be amended, modified, or supplemented except by an instrument in writing executed by the Parties hereto.
6.6 No Waivers. The failure of any Party to enforce a provision of the Agreement shall not constitute a waiver of such Partys right to enforce that provision of the Agreement.
6.7 Headings. The section and paragraph headings contained in this Agreement are for convenience only and shall not affect the meaning or interpretation of this Agreement.
6.8 Governing Law. Except to any extent preempted by federal law, the laws of the State of Hawaii, without giving effect to Hawaiis rules concerning conflicts of law, shall govern all disputes arising out of or relating to this Agreement.
6.9 Jurisdiction; Venue. Any action, suit or proceeding arising out of or relating to this Agreement, except for one brought with respect to the Mortgaged Properties, shall be brought in the United States District Court for the District of Columbia.
6.10 Construction. The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party hereto, nor shall any rule of construction that favors a non-draftsman be applied. A reference to any statute shall be deemed also to refer to all rules and regulations promulgated under the statute, unless the context requires otherwise.
6.11 Assignment. No Party may assign this Agreement in whole or in part, or delegate any of its duties hereunder, without the express prior written consent of the other Party. Any such assignment or delegation made without such express prior written consent shall be null and void ab initio.
6.12 Unenforceable, Invalid Provisions. If any provision in this Agreement shall be invalid, inoperative or unenforceable as applied in any particular case, this shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance. If any provision of this Agreement shall be invalid, inoperative or unenforceable in all cases, this shall not have the effect of rendering any other provision of the Agreement invalid, inoperative, or unenforceable. The invalidity of any portion of this Agreement shall not affect the remaining portions of the Agreement.
6.13 Inapplicability to Pension Plans. This Agreement is not a document or instrument governing the Pension Plans, nor does anything in this Agreement amend, supplement or derogate from the documents and instruments governing the Pension Plans. Further, nothing in this Agreement alters, amends or otherwise modifies the operation or administration of the Pension Plans.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed and delivered by their respective duly authorized officers as of the Effective Date.
MAUI LAND & PINEAPPLE COMPANY, INC. |
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PENSION BENEFIT GUARANTY CORPORATION | ||
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By: |
/s/ RYAN CHURCHILL |
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By: |
/s/ JENNIFER MESSINA |
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Ryan Churchill |
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Jennifer Messina |
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Title: |
President & COO |
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Title: |
Director, Corporate Finance and |
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Restructuring Department |
Date: |
November 13, 2012 |
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Date: |
November 19, 2012 |
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By: |
/s/ TIM ESAKI |
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Tim T. Esaki |
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Title: |
CFO |
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Date: |
November 13, 2012 |
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Exhibit 21
Maui Land & Pineapple Company, Inc.Subsidiaries
As of December 31, 2012
Name |
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State of |
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Percentage |
Maui Pineapple Company, Ltd. |
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Hawaii |
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100 |
Kapalua Land Company, Ltd. |
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Hawaii |
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100 |
Kapalua Realty Company, Ltd. |
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Hawaii |
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100 |
Kapalua Advertising Company, Ltd. |
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Hawaii |
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100 |
Kapalua Water Company, Ltd. |
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Hawaii |
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100 |
Kapalua Waste Treatment Company, Ltd. |
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Hawaii |
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100 |
Kapalua Bay Holdings, LLC |
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Delaware |
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51 |
Kapalua Bay, LLC |
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Delaware |
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100 |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statements No. 333-133898 and No. 333-112932 on Form S-8, and Amendment No. 1 to Registration Statement No. 333-150244 on Form S-3 of our report dated March 1, 2013, relating to the consolidated financial statements of Maui Land & Pineapple Company, Inc. and subsidiaries (which report expresses an unqualified opinion and includes an explanatory paragraph regarding going concern uncertainty), appearing in this Annual Report on Form 10-K of Maui Land & Pineapple Company, Inc. and subsidiaries for the year ended December 31, 2012.
/s/ DELOITTE & TOUCHE LLP |
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Honolulu, Hawaii |
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March 1, 2013 |
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Exhibit 31.1
CERTIFICATION
I, Warren H. Haruki, certify that:
1. I have reviewed this Annual Report on Form 10-K of Maui Land & Pineapple Company, Inc. (the Registrant);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrants internal control over financial reporting that occurred during the Registrants most recent fiscal quarter (the Registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting; and
5. The Registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrants auditors and the audit committee of the Registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal control over financial reporting.
Date: March 1, 2013 |
By: |
/s/ WARREN H. HARUKI |
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Warren H. Haruki |
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Chairman of the Board & |
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Chief Executive Officer |
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Maui Land & Pineapple Company, Inc. |
Exhibit 31.2
CERTIFICATION
I, Tim T. Esaki, certify that:
1. I have reviewed this Annual Report on Form 10-K of Maui Land & Pineapple Company, Inc. (the Registrant);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrants internal control over financial reporting that occurred during the Registrants most recent fiscal quarter (the Registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting; and
5. The Registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrants auditors and the audit committee of the Registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal control over financial reporting.
Date: March 1, 2013 |
By: |
/s/ TIM T. ESAKI |
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Tim T. Esaki |
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Chief Financial Officer |
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Maui Land & Pineapple Company, Inc. |
EXHIBIT 32.1
CERTIFICATION
In connection with the Annual Report of Maui Land & Pineapple Company, Inc. (the Company) on Form 10-K for the fiscal year ended December 31, 2012, as filed with the Securities and Exchange Commission on March 1, 2013 (the Report), I, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 780(d)) and 18 U.S.C. Section 1350, that to the best of my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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By: |
/s/ WARREN H. HARUKI |
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Warren H. Haruki |
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Chairman of the Board |
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Chief Executive Officer |
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March 1, 2013 |
This certification accompanies this Report pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934.
EXHIBIT 32.2
CERTIFICATION
In connection with the Annual Report of Maui Land & Pineapple Company, Inc. (the Company) on Form 10-K for the fiscal year ended December 31, 2012, as filed with the Securities and Exchange Commission on March 1, 2013 (the Report), I, Tim T. Esaki, Chief Financial Officer of the Company, certify, pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 780(d)) and 18 U.S.C. Section 1350, that to the best of my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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By: |
/s/ TIM T. ESAKI |
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Tim T. Esaki |
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Chief Financial Officer |
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March 1, 2013 |
This certification accompanies this Report pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934.
FAIR VALUE MEASUREMENTS (Details) (USD $)
In Thousands, unless otherwise specified |
Dec. 31, 2012
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Dec. 31, 2011
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FAIR VALUE MEASUREMENTS | ||
Carrying amount of debt | $ 49,268 | $ 45,521 |
INCOME TAXES (Details 2) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended |
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Dec. 31, 2011
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Current | |
Federal | $ (134) |
Total | (134) |
Income tax benefit-continuing operations | $ (134) |
RELATED PARTY TRANSACTIONS (Details)
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1 Months Ended | |||
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Feb. 28, 2013
Stephen M. Case
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Dec. 31, 2012
Bay Holdings
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Dec. 31, 2012
Bay Holdings
Marriot
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Dec. 31, 2012
Bay Holdings
ER
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RELATED PARTY TRANSACTIONS | ||||
Ownership interest (as a percent) | 51.00% | 34.00% | 15.00% | |
Percentage of holding at the time of rights offering | 65.00% |
LONG-TERM DEBT (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2012
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LONG-TERM DEBT | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt |
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INCOME TAXES (Details 4) (USD $)
In Millions, unless otherwise specified |
12 Months Ended |
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Dec. 31, 2012
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Federal income tax returns currently under examination | |
Proposed additional taxable income by the Internal Revenue Service | $ 11.6 |
Federal
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Operating loss carryforwards | |
Net operating loss carry forwards | 109.9 |
State
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Operating loss carryforwards | |
Net operating loss carry forwards | $ 125.5 |
INVESTMENT IN AFFILIATES (Details) (USD $)
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0 Months Ended | 12 Months Ended | 0 Months Ended | 12 Months Ended | 0 Months Ended | 12 Months Ended | |||||||||||||
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Jun. 07, 2012
item
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Dec. 31, 2012
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Dec. 31, 2011
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Dec. 31, 2012
Amenities
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Sep. 27, 2012
Kapalua Bay
item
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Dec. 31, 2012
Kapalua Bay
item
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Dec. 31, 2012
Kapalua Bay
Amenities
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Dec. 31, 2011
Kapalua Bay
Amenities
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May 23, 2011
Lawsuit pertaining to sale of residential units at the Ritz-Carlton Residences
Kapalua Bay
item
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Dec. 31, 2012
Bay Holdings
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Dec. 31, 2011
Bay Holdings
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Dec. 31, 2009
Bay Holdings
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Dec. 31, 2012
Bay Holdings
Minimum
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Dec. 31, 2012
Bay Holdings
Maximum
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Dec. 31, 2010
Bay Holdings
Kapalua Bay
Amenities
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Dec. 31, 2012
Bay Holdings
Kapalua Venture
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Dec. 31, 2012
Bay Holdings
Kapalua Investors Fund
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Dec. 31, 2012
Bay Holdings
Marriot
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Dec. 31, 2012
Bay Holdings
ER
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Investments in Affiliates | |||||||||||||||||||
Ownership interest (as a percent) | 51.00% | 34.00% | 15.00% | 34.00% | 15.00% | ||||||||||||||
Percentage of membership interest required for approval of major decision | 75.00% | 100.00% | |||||||||||||||||
Number of whole-ownership units sold, that have closed escrow | 28 | ||||||||||||||||||
Number of whole-ownership units sold | 84 | ||||||||||||||||||
Number of fractional units sold that have closed escrow | 177 | ||||||||||||||||||
Carrying value of investment | $ 0 | ||||||||||||||||||
Number of fractional units sold | 744 | ||||||||||||||||||
Cash contributions | 53,200,000 | ||||||||||||||||||
Non-monetary contributions of land | 25,000,000 | ||||||||||||||||||
Construction loan outstanding | 285,000,000 | ||||||||||||||||||
Number of lenders who assigned their loans and other interests to a non-affiliated investment firm | 3 | ||||||||||||||||||
Number of lenders | 5 | ||||||||||||||||||
Number of residential units sold to plaintiffs | 2 | ||||||||||||||||||
Accrued contract terminations | 4,094,000 | 5,094,000 | 4,100,000 | ||||||||||||||||
Purchase of amenities at actual construction cost | 35,000,000 | 35,000,000 | |||||||||||||||||
Impairment charges recorded | 23,000,000 | ||||||||||||||||||
Number of whole-ownership units owned by group of owners who filed lawsuit against multiple parties | 11 | ||||||||||||||||||
Summary of balance sheet | |||||||||||||||||||
Restricted cash | 3,241,000 | 5,264,000 | |||||||||||||||||
Real estate inventories | 149,774,000 | 151,034,000 | |||||||||||||||||
Other assets, net | 10,712,000 | 15,598,000 | |||||||||||||||||
Total Assets | 163,727,000 | 171,896,000 | |||||||||||||||||
Construction loan payable and other member loans | 375,441,000 | 351,455,000 | |||||||||||||||||
Other liabilities | 46,408,000 | 26,991,000 | |||||||||||||||||
Total Liabilities | 421,849,000 | 378,446,000 | |||||||||||||||||
Members' Deficiency | (258,122,000) | (206,550,000) | |||||||||||||||||
Summary of operating information | |||||||||||||||||||
Revenues | (745,000) | 17,965,000 | |||||||||||||||||
Costs and Expenses | 50,827,000 | 49,892,000 | |||||||||||||||||
Net Loss | $ (566,000) | $ (432,000) | $ (51,572,000) | $ (31,927,000) |
RESERVES (Details) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended | |
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Dec. 31, 2012
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Dec. 31, 2011
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Allowance for Doubtful Accounts
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Change in balance | ||
Balance at Beginning of Period | $ 519 | $ 460 |
Additions | 212 | 90 |
Deductions | (469) | (31) |
Balance at End of Period | 262 | 519 |
Reserve for Environmental Liability
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Change in balance | ||
Balance at Beginning of Period | 866 | 1,187 |
Additions | 4 | |
Deductions | (191) | (325) |
Balance at End of Period | $ 675 | $ 866 |
INCOME TAXES (Details) (USD $)
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12 Months Ended | |
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Dec. 31, 2012
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Dec. 31, 2011
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INCOME TAXES | ||
Reduction in tax liability on uncertain tax positions because of expiration of statutes of limitations and a proposed IRS settlement | $ 378,000 | |
Total accrued interest for uncertain income tax positions | 899,000 | 830,000 |
Reconciliation of the beginning and ending amount of unrecognized tax benefits | ||
Balance at beginning of year | 626,000 | 952,000 |
Adjustments for tax provisions of prior years | (290,000) | (211,000) |
Expiration of statutes of limitations | (88,000) | (115,000) |
Balance at end of year | 248,000 | 626,000 |
Unrecognized tax benefits that would affect the effective tax rate if recognized | $ 144,000 | $ 232,000 |
ASSETS HELD FOR SALE AND REAL ESTATE SALES
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12 Months Ended |
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Dec. 31, 2012
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ASSETS HELD FOR SALE AND REAL ESTATE SALES | |
ASSETS HELD FOR SALE AND REAL ESTATE SALES | 2. ASSETS HELD FOR SALE AND REAL ESTATE SALES At December 31, 2012, assets held for sale included a 7-acre parcel in Kahului and a 630-acre parcel in Upcountry Maui. In January 2012, the Company sold an 89-acre parcel in Upcountry Maui for $1.5 million. The sale resulted in a gain of $1.4 million and the Company utilized $353,000 of the proceeds to repay its term loan with American AgCredit, in accordance with the terms of its credit agreement. In September 2010, the Company sold the land, improvements, structures and fixtures comprising the Kapalua Bay Golf Course (Bay Course) and the adjacent maintenance facility for a total of $24.1 million in cash. Concurrent with the sale, the Company entered into an agreement to lease back the assets through March 31, 2011, and due to certain construction work required by the lease back arrangement and other continuing involvement, the sale was accounted for as a financing transaction. At the conclusion of the lease back period, the Company recognized a $15.1 million gain from the sale which has been reported in discontinued operations for the year ended December 31, 2011. |