<PAGE>
MAUI LAND & PINEAPPLE COMPANY, INC.
ANNUAL REPORT
1994
<PAGE>
CONTENTS
Letter to Shareholders 2
Pineapple 4
Kapalua 5
Commercial & Property 6
Independent Auditors' Report 7
Consolidated Balance Sheets 8
Consolidated Statements of Operations and Retained Earnings 10
Consolidated Statements of Cash Flows 11
Notes to Consolidated Financial Statements 12
Common Stock 19
Selected Financial Data 20
Management's Discussion and Analysis of
Results of Operations and Financial Condition 21
Officers and Directors 24
Cover Photos: Kaahumanu Center, renovated and expanded in 1994, is Maui's
largest regional shopping mall with 112 tenants, including three major anchor
stores.
<PAGE>
THE COMPANY
Maui Land & Pineapple Company, Inc., a Hawaii corporation organized in
1909, is a land-holding and operating company with several wholly-owned
subsidiaries, including two major operating companies, Maui Pineapple Company,
Ltd. and Kapalua Land Company, Ltd. The Company, as used herein, refers to
the parent and its wholly-owned subsidiaries. The Company's principal
business activities are Pineapple, Resort and Commercial & Property.
The Company owns approximately 28,700 acres on the island of Maui, of
which about 8,000 acres are used directly or indirectly in the Company's
operations. Approximately 2,000 people were employed by the Company in 1994
on a year-round or seasonal basis.
Maui Pineapple Company, Ltd. is the operating subsidiary for pineapple.
It is the sole supplier of private label, 100% Hawaiian canned pineapple
products to United States supermarkets. It also sells its products to food
service suppliers and food processors.
Kapalua Land Company, Ltd. is the developer of a destination resort
community in West Maui. The Kapalua resort is located on approximately 1,500
acres bordering the ocean, including three beaches.
Commercial & Property includes Kaahumanu Center, Napili Plaza and other
non-resort property rentals and sales.
10-K REPORT
Shareholders who wish to receive, free of charge, a copy of the Company's 10-K
Report to the U.S. Securities and Exchange Commission may write to:
Corporate Secretary
Maui Land & Pineapple Company, Inc.
P. O. Box 187
Kahului, Hawaii 96732-0187
ANNUAL MEETING
The Annual Meeting of Shareholders of the Company will be held at 9:00 a.m. on
Friday, May 5, 1995, in the Corporate Office courtyard of Maui Land &
Pineapple Company, Inc., 120 Kane Street, Kahului, Hawaii.
OFFICES
Corporate Offices Pineapple Marketing Office
Maui Land & Pineapple Company, Inc. Maui Pineapple Company, Ltd.
P. O. Box 187 P. O. Box 4003
Kahului, Hawaii 96732-0187 Concord, California 94524-4003
Telephone: 808-877-3351 Telephone: 510-798-0240
Fax: 808-871-0953 Fax: 510-798-0252
Maui Pineapple Company, Ltd.
P. O. Box 187
Kahului, Hawaii 96732-0187
Telephone: 808-877-3351
Fax: 808-871-0953
Kapalua Land Company, Ltd. Transfer Agent & Registrar
1000 Kapalua Drive Chemical Trust Co. of California
Kapalua, Hawaii 96761-9028 300 South Grand Avenue
Telephone: 808-669-5622 Los Angeles, California 90071
Fax: 808-669-5454
<PAGE>
<TABLE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
FINANCIAL HIGHLIGHTS
<CAPTION>
1994 1993
(Dollars in Thousands
Except Share Amounts)
<S> <C> <C>
REVENUES
Pineapple $ 81,044 $ 86,033
Resort 34,109 31,455
Commercial & Property 10,617 13,635
Corporate 112 49
-------- --------
Total 125,882 131,172
======== ========
INCOME (LOSS) BEFORE INCOME TAXES
Pineapple (4,430) (19,688)
Resort (4,870) (4,399)
Commercial & Property 3,535 6,577
Corporate (973) (972)
-------- ---------
Total (6,738) (18,482)
======== =========
NET LOSS (3,909) (11,059)
======== ========
NET LOSS PER COMMON SHARE $ (2.18) $ (6.15)
======== ========
Average Common Shares Outstanding 1,797,125 1,797,125
FINANCIAL POSITION AT DECEMBER 31
Total Assets $235,411 $211,588
Stockholders' Equity 60,429 64,321
Stockholders' Equity Per Common Share $ 33.63 $ 35.79
</TABLE>
<PAGE>
TO OUR SHAREHOLDERS AND EMPLOYEES
The Company continued to have a difficult time in 1994, primarily as a
result of the continued highly competitive conditions in the marketplace for
pineapple products. The Company's net loss in the fourth quarter of $1.5
million and for the full year of $3.9 million are, however, dramatic
improvements from the losses suffered for the fourth quarter of 1993 of $5.9
million and for the full year of $11 million. The improvements reflect a
dedicated effort to reduce operating costs and to improve productivity on the
part of all our employees. We are convinced that with some improvement in
market conditions for pineapple products and with an increased volume of
visitors to Maui and to Kapalua, the Company will show continued improvement
in its financial results in 1995 and thereafter.
In 1994, on revenues of $126 million, the Company incurred a pretax loss
of $6.7 million compared to a pretax loss in 1993 of $18.5 million. After an
income tax credit of $2.8 million, the Company's net loss was $3.9 million or
$2.18 per share. The operating results in 1994 from our major business
segments, pineapple, resort and commercial & property, were a $867,000 loss, a
$2.2 million loss and a $5.4 million profit, respectively. This compares to
operating results of a $16.2 million loss, a $1.6 million loss and a $9
million profit, respectively, for pineapple, resort and commercial & property
in 1993.
The 1993 and 1994 results for commercial & property include the proceeds
of certain property sales. It is important to note that the operating loss
from our resort segment includes the Company's equity share in certain
partnership losses which totaled $4.9 million in 1994 and $1 million in 1993.
These partnership losses had no effect on the Company's operating cash flow,
although the Company did receive some tax benefit from its share of the
losses. Excluding these partnership losses, resort operations produced an
operating profit in 1994 compared to an operating loss in 1993.
Returning our pineapple business to profitability continues to be a
primary focus. We did not receive any relief in 1994 from the very low price
levels experienced in 1993. Imports of Thai pineapple products into the U.S.
in 1994 totaled 11.3 million cases, a ten percent reduction from 1993, but
prices were not significantly impacted by this modest decline. Our net
revenue per case for the year was about the same as 1993 on a slightly lower
sales volume. The publicly disclosed financial reports of Thai producers
continue to show large losses and higher debt levels for 1994. We believe
these losses are indicative of the results and financial condition of the Thai
pineapple industry. We would expect some pressure for reduced production by
the industry as a result. In the interim, we are continuing to reduce costs
and increase productivity.
In addition, we are aggressively prosecuting an anti-dumping petition
before the International Trade Commission and the U.S. Department of Commerce
to the fullest extent possible. As indicated to you last year, we believe
that with fair competition, our pineapple business can produce a positive cash
flow and profits. The confidence and support we continue to receive from the
community, our customers, suppliers, lenders and government officials at all
levels has been truly excellent and gratifying. We are confident that with
this support our pineapple business will prosper in the future.
Nineteen ninety four was a year of improvement for Hawaii's visitor
industry due to improving economic conditions in the U.S. and abroad. We
expect these conditions will continue to improve in the next few years,
resulting in increasing numbers of visitors to Hawaii and to Kapalua. Our
resort operations showed substantially improved results in 1994 in all
categories. The contribution from resort operations is expected to continue
to improve over the next few years. Confidence in and the reputation of
Kapalua as a golf resort also continues to improve. We are very pleased that
Lincoln-Mercury extended its sponsorship of our ESPN and ABC televised golf
tournament for an additional three years.
The Ritz-Carlton Kapalua Hotel has been a wonderful addition to the
resort experience at Kapalua. Unfortunately, the hotel opened at a difficult
time, both in terms of economic and competitive conditions on Maui for luxury
hotels. We are hopeful that our major partner in the hotel, Nissho Iwai
Corporation, and the consortium of mortgage lenders can arrive at an agreement
which will allow the hotel to take full advantage of the improving visitor
market. As mentioned later in this report, the partners are currently
attempting to negotiate a refinancing of the hotel.
We are very pleased to report that the largest project undertaken by our
Company was completed on schedule in November, although modestly over its
budget. The Kaahumanu Center, in its expanded and renovated form, formally
reopened in November with a
<PAGE>
number of new tenants in an exciting and pleasant new shopping environment.
We are also pleased to report that the Maui community seems to have
overwhelmingly accepted and supported the new Center. The installation of the
centerpiece of the Center, a bronze sculpture of Queen Kaahumanu, was
accomplished on March 17, a fitting culmination of this ambitious project.
At year-end 1994, the Company's consolidated debt, including capital
leases, stood at $129 million, a $31 million increase from year-end 1993.
This year-end debt level included $71.6 million associated with the Kaahumanu
Center project. Upon conversion by the Employees' Retirement System of the
State of Hawaii (ERS) of its $30.6 million construction loan to additional
equity ownership in the Center, the Company will convert to the equity
accounting method for recording its interest in the Kaahumanu Center project.
This will effectively remove the Kaahumanu Center debt from the Company's
balance sheet. We expect to finalize the permanent financing for the Center
in late March with a consortium of lenders including Bank of Hawaii, First
Hawaiian Bank and Central Pacific Bank. Conversion by the ERS of its loan to
additional equity in the Center is also anticipated to be accomplished on or
about March 31.
After giving effect to the equity accounting method, the Company's
consolidated debt position at year-end 1994 would stand at approximately $57
million. This would represent a $41 million reduction from debt levels at
year-end 1993. At year-end 1993 $33 million in debt was associated with the
Kaahumanu Center project. During 1994, the Company's operating activities
provided $11.5 million of the cash flow for this reduction, $3 million was
provided from sales of property and a net amount of $6.5 million was used in
the Company for other investment and financing activities.
This substantial reduction in our debt obligations was one of our
primary objectives for 1994. We have additional reductions in debt to
accomplish before the Company reaches a prudent level of financial leverage.
This further reduction in debt will be a major goal for us in 1995 and once it
is accomplished, we will be in a position to consider resuming payment of
dividends to our shareholders.
Lastly, we are pleased to report that Gary L. Gifford has been appointed
President and Chief Executive Officer, succeeding Joseph W. Hartley, Jr. who
retired on March 31 after more than 36 years of service to the Company. Gary
has been a Hawaii resident for 24 years. Since 1987 he has served as
President of Kapalua Land Company, Ltd.
/s/ MARY C. SANFORD /s/ JOSEPH W. HARTLEY, JR.
Chairman President & CEO
March 21, 1995
<PAGE>
PINEAPPLE
In 1994 Maui Pineapple Company recorded an $867,000 operating loss.
After allocations for interest and corporate expenses, the total loss was $4.4
million. This was a significant improvement over 1993 financial results and
was primarily a result of severe cost cutting in operations.
Due to the continuing worldwide oversupply of canned pineapple, the
marketplace for canned pineapple did not improve. Imports of canned
pineapple, although lower than in 1993, remained at high levels. This has put
extreme downward pressure on the Company's case sales volume and pricing
structure. Case sales volume was down 7% from 1993 and pricing was at the
same low level as 1993. In the face of stiff competition from national brands
and imports, the Company was able to maintain its broad distribution base.
While there was only minor attrition, we still lost sales volume at some
points of distribution.
The retail and institutional categories are the areas of the business
most seriously affected by imports. Case sales volume for fruit and juice was
down 11% from 1993 and pricing was flat in both categories. Sales to the
government, export sales and juice concentrate, however, recorded increases in
case volume of 35%, 12% and 8%, respectively. Prices in government and export
sales remained flat, while concentrate prices improved slightly from 1993
levels.
Our Jet Fresh program to the U.S. mainland showed growth and made a
positive income contribution for 1994. Case sales increased by 10% and total
revenues grew 7% from 1993. Local fresh fruit sales posted a 7% increase in
revenues.
Shipping and selling expenses, which include ocean, rail, and truck
freight as well as warehousing and brokerage costs, decreased by 17% from the
prior year. The decrease reflects a lower case volume of sales and lower
average mainland inventories in 1994. We ended the year 1992 with higher than
normal inventory levels, which resulted in increased warehousing and other
holding costs in 1993 that could not be recovered from customers.
In 1994 the Company continued the cost cutting efforts begun in 1993.
However, the expected level of cost cutting measures increased throughout the
year as market conditions worsened.
In June of 1994 Maui Pineapple Company, Ltd., along with the
International Longshoremen's and Warehousemen's Union, filed an anti-dumping
petition with the International Trade Commission. The petition alleged that
Thailand canned pineapple producers were breaking U.S. and international trade
laws by selling in the U.S. below their production costs. This below cost
pricing resulted in extremely low prices in 1993 and 1994, which greatly
affected our Company, its employees, stockholders and the companies with whom
we do business. Preliminary decisions in the Company's favor have been made
by the International Trade Commission and the U.S. Department of Commerce for
both injury and anti-dumping duties.
By May of 1995 we expect to receive final decisions on injury and anti-
dumping duties. The Company is seeking final duties which are higher than
those announced in the January 1995 preliminary decisions. We believe that
action taken by the U.S. Department of Commerce will help stabilize the
pineapple industry and that certain Thai pineapple companies could benefit as
well. At the very least, we expect this action to serve as a pricing
discipline in the marketplace.
Continued cooperation from our employees, the ILWU, and local and
national officials is helping us get through one of the most prolonged
downturns the pineapple industry has faced.
Looking forward to 1995 we continue to see an extremely competitive
market, regardless of the anti-dumping petition outcome. The Company has
changed its strategic direction to further reduce its exposure to oversupply
because of lower cost foreign producers. This change of strategy involves
entry into new business segments, product line additions, strategic alliances,
and improved customized product packaging capabilities to meet niche business
opportunities in the marketplace where we enjoy a competitive advantage. This
action should offset the pressure we have felt in retail grocery and
institutional sales, our core business. In 1994 we made substantial progress
in identifying these opportunities. We are preparing for entry into these new
markets in 1995.
Financial and volume objectives for these new business opportunities are
modest in our 1995 plan, but we expect them to grow to be a meaningful part of
our business in 1996 and beyond.
In 1994 we increased our emphasis on marketing. Our goal is a
transition from trade-oriented marketing to a trade and consumer-oriented
marketing. The Company enjoys advantages in terms of its reputation for
service and quality and its uniqueness as the sole supplier of canned U.S.A.,
100% Hawaiian pineapple. Modest consumer advertising efforts were successful
in 1994. We plan to expand consumer-oriented advertising in 1995. The focal
point of all our marketing activities will be our "100% Hawaiian U.S.A."
message.
We anticipate 1995 to be a year for repositioning our business for
growth and improved financial performance.
<PAGE>
KAPALUA
Kapalua Land Company had a loss, before allocated interest and corporate
expenses, of $2.2 million in 1994 compared to a loss of $1.6 million in 1993.
Increased losses from development-related activities more than offset
substantial profit improvement from Kapalua's on-going resort operations.
Development activities, in total, showed a loss of $5 million in 1994
compared to a loss of $1.6 million the year before. Most of this increase was
from Kaptel Associates, the Ritz-Carlton Kapalua Hotel joint venture. The
loss allocation increased in 1994 because there were no loss allocations to
the Company until the last quarter of 1993. The Ritz-Carlton Kapalua reported
significantly improved profits from operations in 1994 as compared to 1993;
however, debt service continued to result in substantial losses and cash flow
deficits.
In February and March of 1995 Kaptel was only able to make partial
payment on its debt service. The lenders have notified Kaptel that partial
payment constituted an event of default, but as of March 15, 1995, the lenders
have not accelerated the loan. The Kaptel partners are presently attempting
to work with the lenders to restructure the hotel financing. At this stage
the resolution of this situation cannot be predicted.
Most of the remaining loss for development activities in 1994 was from
the Plantation Estates joint venture. After two years without any sales, we
closed two contracts in 1994, including the award-winning model home.
Construction is presently underway for a large residence on the lot sold last
February. Overall, the resort luxury real estate market in Hawaii has
continued to show increased activity and prices appear to have stabilized.
One of the remaining five lots in Phase I of Plantation Estates Subdivision
was recently put under contract and is expected to close escrow in the second
quarter of 1995.
Capital expenditures for development last year included $3.4 million as
partial payments for two non-discretionary infrastructure projects related to
water and sewer. As part of the plan for compliance with the Environmental
Protection Agency Safe Drinking Water Act, a dual waterline system for the
resort was completed last year. Also, in order to provide the required sewage
capacity for the resort development, we are participating in the cost of the
Lahaina Sewage Treatment Plant expansion.
For the second consecutive year our on-going resort operations showed a
significant improvement in profits and cash flow. For 1994 the operations
posted a profit of $2.8 million for an increase of over $3 million from the
loss in 1993 and an improvement of over $5 million from the loss in 1992.
Cash flow from resort operations increased in 1994 to a positive $4.4 million.
The improved financial performance in 1994 was helped only slightly by
better market conditions in both the visitor industry and resort real estate
markets. After three consecutive years of decline, the visitor industry
reported a 5% increase in the number of total visitors to Hawaii with both the
eastbound and westbound markets showing single digit growth. Average hotel
occupancy for Hawaii increased 6% last year with Maui showing the strongest
growth of any island. Both the visitor industry and real estate markets,
however, are just beginning to recover and remain well below their peak levels
of four years ago.
Resort occupancy at Kapalua increased for the second consecutive year to
just over 56%. This was well below the average occupancy for Maui, primarily
because we are competing in the over-supplied luxury hotel market.
Most of the 1994 profit improvement in operations came from internal
efforts to reduce costs throughout the Company and to develop new revenues.
More than half of this improvement came from recreation and retail activities
with the largest single increase from the new resort membership program called
The Kapalua Club. With 192 memberships in its first year, The Kapalua Club
made a significant financial contribution, but, more importantly, represents a
major step toward a long-term commitment to develop the sense of community and
enhance the life style of Kapalua's property owners.
Revenues for golf, tennis and merchandise sales increased less than 2%
in 1994. Unusually wet and windy weather during our busy season resulted in
lower golf and tennis play. Despite the modest revenue increase, these
operations had a profit improvement of over $900,000, primarily due to
reductions in operating costs and some improvement in retail margins.
Resort general administrative costs were reduced $900,000 in 1994
largely from savings in fringe benefits and payroll related costs. Savings
were achieved in almost every category of administrative expenses.
Two departments which did show strong growth in 1994 were our short-term
villa rental operations and realty activities. The Kapalua Villas produced
its first profit from a 17% increase in gross revenues and a 22% increase in
the number of villas in the rental program. Kapalua Realty had its best year
since the downturn in the real estate market four years ago. Total resale
volume more than doubled and the net loss was reduced by over $100,000.
In addition to the financial improvement in 1994, Kapalua received
numerous national awards of recognition. Kapalua was again recognized by Golf
Digest as one of the twelve best golf resorts in the country while Tennis
Magazine ranked Kapalua among the Top 50 tennis resorts in the United States.
In addition, our Bay, Village and Plantation golf courses were fully certified
as Cooperative Audubon Sanctuaries by the Audubon Society of New York.
Overall, we expect Hawaii's visitor industry and resort real estate
markets to show continued but modest growth in 1995. With our on-going effort
to control costs while maintaining the necessary high standard of resort
experience, Kapalua is well positioned to show continued financial and
operating improvement.
<PAGE>
COMMERCIAL & PROPERTY
The Company's commercial & property business segment produced
substantially lower revenues and operating profits in 1994 compared to 1993.
Revenues decreased from $13.6 million to $10.6 million in 1994 and operating
profits decreased by $3.7 million from $9.1 million in 1993 to $5.4 million in
1994. The decreases result primarily from lower revenues from land sales and
from proceeds of a condemnation which were included in revenues and operating
profit for 1993.
Revenues at Kaahumanu Center, the Company's largest commercial property,
were up substantially in 1994, particularly in the fourth quarter of the year,
compared to 1993. The increase in revenues was due to completion of the
Center's renovation and expansion project and the installation of a number of
new tenants. The operating profit contribution from Kaahumanu Center was
slightly lower in 1994 than 1993, due in part to the construction activity.
Napili Plaza, the Company's second largest commercial property, experienced
slightly higher revenues in 1994 and contributed about the same level of
operating profit as in 1993.
In late October of 1994 the Company received final approval from the
County of Maui to open the redeveloped Kaahumanu Center for business. The
expanded and renovated Liberty House and Sears department stores and the new
J.C. Penney store were open for the Christmas season, together with a number
of new tenants. Kaahumanu Center is currently over 90% leased.
Our partner in the redevelopment project, the Employees' Retirement
System of the State of Hawaii (ERS) was scheduled to convert its $30.6 million
construction loan on this project into additional partnership equity upon
completion of the construction period. It is now anticipated that the ERS
will convert its loan in late March. During the sixteen month redevelopment
project, we received excellent cooperation from the Center's tenants. We are
grateful for their understanding and cooperation.
Napili Plaza, the Company's 44,000 square foot shopping center in West
Maui, continues to experience a vacancy level of approximately 25% due to
highly competitive leasing conditions for commercial property in West Maui and
the continued relatively low visitor count. We expect conditions to generally
improve in 1995.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Directors of Maui Land & Pineapple Company, Inc.:
We have audited the accompanying consolidated balance sheets of Maui
Land & Pineapple Company, Inc. and its subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of operations and retained
earnings and of cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of Kaptel Associates, the Company's investment in which is
accounted for by the equity method. The Company's share of losses in excess
of its investment in Kaptel Associates of $4,990,000 and $871,000 as of
December 31, 1994 and 1993, respectively, and its share of losses from Kaptel
Associates of $4,119,000 and $871,000 for the years then ended are included in
the accompanying financial statements. The financial statements of Kaptel
Associates were audited by other auditors whose report has been furnished to
us, and our opinion, insofar as it relates to the amounts included for Kaptel
Associates, is based solely on the report of such other auditors. The other
auditors' report includes a paragraph which indicates that Kaptel's recurring
losses from operations, net capital deficiency and the event of default on its
construction loan (described in Note 3 to the consolidated financial
statements) raise substantial doubt about its ability to continue as a going
concern unless additional debt or capital infusions are obtained. The report
indicates that the Kaptel financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes 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, based on our audits and the report of the other
auditors, such consolidated financial statements present fairly, in all
material respects, the financial position of the Companies as of December 31,
1994 and 1993, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1994 in conformity
with generally accepted accounting principles.
As discussed in the Notes 2, 6 and 11 to the consolidated financial
statements, in 1992 the Company changed its method of (1) calculating the
value of inventories on the last-in, first-out (LIFO) method, (2) accounting
for postretirement benefits other than pensions to conform with Statement of
Financial Accounting Standards (SFAS) No. 106 and (3) accounting for income
taxes to conform with SFAS No. 109. The financial statements for years prior
to 1992 were not restated for these changes.
/s/ DELOITTE & TOUCHE LLP
Honolulu, Hawaii
February 10, 1995
(March 15, 1995 as to paragraphs 11 and 12 in Note 3 and March 21, 1995 as to
paragraph 4 in Note 5 to consolidated financial statements)
<PAGE>
<TABLE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
<CAPTION> 1994 1993
(Dollars in Thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 2,269 $ 1,223
Accounts receivable 13,249 12,916
Notes receivable 258 2,563
Refundable income taxes 1,910 7,964
Inventories
Pineapple products 15,261 15,507
Real estate held for sale 336 300
Merchandise, materials and supplies 4,940 5,305
Prepaid expenses and other assets 2,737 3,682
-------- --------
Total current assets 40,960 49,460
-------- --------
NOTES RECEIVABLE--REAL ESTATE SALES 541 583
-------- --------
INVESTMENTS AND OTHER ASSETS 13,716 12,771
-------- --------
PROPERTY
Land 6,936 4,501
Land improvements 50,386 45,976
Buildings 124,046 61,642
Machinery and equipment 92,442 85,612
Construction in progress 680 35,007
-------- --------
Total property 274,490 232,738
Less accumulated depreciation 94,296 83,964
-------- --------
Net property 180,194 148,774
-------- --------
TOTAL $235,411 $211,588
======== ========<PAGE>
<PAGE>
</TABLE>
<TABLE>
<CAPTION> 1994 1993
(Dollars in Thousands)
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 27,951 $ 182
Capital lease obligations 1,439 1,672
Trade accounts payable 5,596 9,685
Payroll and employee benefits 3,178 3,066
Accrued interest 2,379 1,783
Deferred income taxes -- 862
Other accrued liabilities 1,514 2,812
-------- --------
Total current liabilities 42,057 20,062
-------- --------
LONG-TERM LIABILITIES
Long-term debt 96,138 92,789
Capital lease obligations 3,042 3,319
Deferred income taxes 1,847 1,835
Accrued retirement benefits 22,077 21,320
Other non-current liabilities 9,821 7,942
-------- --------
Total long-term liabilities 132,925 127,205
-------- --------
COMMITMENTS AND CONTINGENT LIABILITIES (see Notes)
STOCKHOLDERS' EQUITY
Common stock--no par value, 1,800,000 shares
authorized, 1,797,125 shares issued
and outstanding 12,318 12,301
Retained earnings 48,111 52,020
-------- --------
Stockholders' equity 60,429 64,321
-------- --------
TOTAL $235,411 $211,588
======== ========
<FN>
See Notes to Consolidated Financial Statements
</FN>
</TABLE>
<PAGE>
<TABLE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Years Ended December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
(Dollars in Thousands Except Share Amounts)
<S> <C> <C> <C>
REVENUES
Net sales $ 91,158 $ 96,208 $107,204
Operating revenue 30,760 27,330 24,815
Other income 3,964 7,634 15,030
-------- -------- --------
Total Revenues 125,882 131,172 147,049
-------- -------- --------
COST AND EXPENSES
Cost of goods sold 67,623 84,932 81,147
Operating expenses 23,551 22,577 20,762
Shipping and marketing 16,568 17,673 15,917
General and administrative 14,352 18,657 16,578
Equity in losses of joint ventures 4,844 1,018 11
Interest 5,682 4,797 4,031
-------- -------- --------
Total Costs and Expenses 132,620 149,654 138,446
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF
ACCOUNTING CHANGES (6,738) (18,482) 8,603
INCOME TAXES (CREDIT) (2,829) (7,423) 2,183
-------- -------- --------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES (3,909) (11,059) 6,420
-------- -------- --------
CUMULATIVE EFFECT OF ACCOUNTING CHANGES
Inventory -- -- 885
Income Taxes -- -- 949
Postretirement Benefits -- -- (9,507)
-------- -------- --------
Total -- -- (7,673)
-------- -------- --------
NET LOSS (3,909) (11,059) (1,253)
RETAINED EARNINGS, BEGINNING OF YEAR 52,020 64,427 67,477
CASH DIVIDENDS DECLARED -- 1,348 1,797
-------- -------- --------
RETAINED EARNINGS, END OF YEAR 48,111 52,020 64,427
======== ======== ========
PER COMMON SHARE
Income (Loss) Before Cumulative Effect
of Accounting Changes (2.18) (6.15) 3.57
Cumulative Effect of
Accounting Changes -- -- (4.27)
-------- -------- --------
Net Loss (2.18) (6.15) (.70)
======== ======== ========
Cash Dividends -- .75 1.00
======== ======== ========
PROFORMA AMOUNTS ASSUMING INVENTORY
ACCOUNTING PRINCIPLE WAS APPLIED RETROACTIVELY
Net Loss -- -- (2,138)
Net Loss Per Common Share $ -- $ -- $ (1.19)
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
(Dollars in Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Loss $ (3,909) $(11,059) $ (1,253)
Adjustments to reconcile net loss to cash
provided by operating activities
Depreciation 10,851 10,315 9,774
Cumulative effect of
accounting changes -- -- 7,673
Deferred income taxes (851) 1,066 2,308
Gain on property disposals (2,966) (6,517) (11,766)
Equity in losses of joint ventures 4,844 1,018 11
Increase in accounts
and notes receivable (469) (2,179) (1,253)
Decrease (increase) in refundable
income taxes 6,054 (7,064) (900)
Decrease (increase) in inventories 575 5,113 (5,421)
Increase (decrease) in
trade payables (4,207) 2,821 (2,786)
Net change in other current assets
and liabilities 1,134 1,609 115
Other 480 2,517 2,160
-------- -------- --------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 11,536 (2,360) (1,338)
-------- -------- --------
INVESTING ACTIVITIES
Purchases of property (43,488) (30,211) (15,389)
Proceeds from sale of property 3,062 6,866 12,132
Payments for other investments (137) (1,288) (657)
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES (40,563) (24,633) (3,914)
-------- -------- --------
FINANCING ACTIVITIES
Payments of long-term debt (24,632) (16,490) (1,149)
Proceeds from long-term borrowings 56,558 50,474 5,347
Proceeds (payments) of short-term borrowings -- (3,750) 3,750
Dividends paid -- (1,797) (1,348)
Payments on capital lease obligations (1,853) (1,526) (1,145)
Contribution by joint venture partner -- 312 --
-------- -------- --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 30,073 27,223 5,455
-------- -------- --------
NET INCREASE IN CASH 1,046 230 203
CASH AT BEGINNING OF YEAR 1,223 993 790
-------- -------- --------
CASH AT END OF YEAR $ 2,269 $ 1,223 $ 993
======== ======== ========
Supplemental Disclosures of Cash Flow Information and Non-Cash Investing and Financing
Activities:
1. Cash paid (received) during the year for (in thousands):
Interest (net of
amount capitalized) $ 5,753 $ 3,265 $ 3,748
Income taxes (refunds) $ (7,967) $ (851) $ 17
2. Capital lease obligations of $1,343,000 in 1994 and $3,533,000 in
1993 were incurred for new equipment.
3. Accrued and unpaid dividends were $449,000 as of December 31, 1992.
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The significant accounting policies of Maui Land & Pineapple Company,
Inc. and its subsidiaries are described herein in bold type to assist readers
in understanding the financial statements.
1. CONSOLIDATION
THE CONSOLIDATED FINANCIAL STATEMENTS INCLUDE THE ACCOUNTS OF MAUI LAND
& PINEAPPLE COMPANY, INC., ITS SUBSIDIARIES, PRIMARILY MAUI PINEAPPLE COMPANY,
LTD. AND KAPALUA LAND COMPANY, LTD. AND THE MAJORITY-OWNED PARTNERSHIP,
KAAHUMANU CENTER ASSOCIATES. SIGNIFICANT INTERCOMPANY BALANCES AND
TRANSACTIONS ARE ELIMINATED.
2. INVENTORIES
INVENTORIES OF TINPLATE, CANS, ENDS AND CANNED PINEAPPLE PRODUCTS ARE
STATED AT COST, NOT IN EXCESS OF MARKET VALUE, USING THE DOLLAR VALUE LAST-IN,
FIRST-OUT METHOD (LIFO). In 1992, the Company adopted a change in the method
of accounting for these inventories. Previously, these inventories were
accounted for under a single pool LIFO method. The change reflected the
splitting of the single pool into two pools--one for tinplate, empty cans and
ends and another for finished goods. The cumulative effect of the change on
retained earnings to January 1, 1992 was an increase of $885,000 (net of
deferred income taxes of $546,000) or $.49 per share.
THE COSTS OF GROWING PINEAPPLE ARE CHARGED TO PRODUCTION IN THE YEAR
INCURRED RATHER THAN DEFERRED UNTIL THE YEAR OF HARVEST. FOR FINANCIAL
REPORTING PURPOSES, EACH YEAR'S TOTAL COST OF GROWING AND HARVESTING PINEAPPLE
IS ALLOCATED TO PRODUCTS ON THE BASIS OF THEIR RESPECTIVE MARKET VALUES; FOR
INCOME TAX PURPOSES, THE ALLOCATION IS BASED UPON THE WEIGHT OF FRUIT INCLUDED
IN EACH PRODUCT.
The replacement cost of pineapple product inventories at year-end
approximated $26 million in 1994 and $29 million in 1993. In 1993 there was
a partial liquidation of LIFO inventories; thus, cost of sales included prior
years' inventory costs which were lower than current costs. Had current costs
been charged to cost of sales, the net loss for 1993 would have increased by
$515,000 or $.29 per share.
REAL ESTATE HELD FOR SALE IS STATED AT IDENTIFIED COST, NOT IN EXCESS OF
NET REALIZABLE VALUE.
MERCHANDISE, MATERIALS AND SUPPLIES ARE STATED AT COST, NOT IN EXCESS OF
MARKET VALUE, USING RETAIL AND AVERAGE COST METHODS.
3. INVESTMENTS AND OTHER ASSETS
Investments and Other Assets at December 31, 1994 and 1993 consisted of
the following:
1994 1993
(Dollars in Thousands)
Plantation Club Associates $ 3,996 $ 6,476
Cash Surrender Value of Life
Insurance Policies 761 1,149
Deferred Costs 7,344 3,392
Other 1,615 1,754
------- -------
Total $13,716 $12,771
======= =======
CASH SURRENDER VALUE OF LIFE INSURANCE POLICIES ARE STATED NET OF LOANS
AGAINST THESE POLICIES of $3,088,000 and $2,280,000 at December 31, 1994 and
1993, respectively. Other income for 1992 includes proceeds of $2 million
from the Company's life insurance program.
Deferred costs are primarily offsite construction costs incurred for the
Kapalua resort, which will be allocated to future development projects and
tenant improvement allowances for the Kaahumanu Center, which are being
amortized over the life of the related leases.
Plantation Club Associates (PCA) is an unincorporated joint venture
between Kapalua Land Company, Ltd. (Kapalua) and Rolfing Partners (Rolfing).
It was formed in November of 1988 to finance and develop a third 18-hole golf
course and two residential development projects at the Kapalua resort.
Kapalua and Rolfing each contributed $9.3 million in cash to the joint
venture. Kapalua also contributed the fee interest in approximately 230 acres
of land to be used for the residential projects. Kapalua's basis in the land
was nominal and PCA did not assign any cost to the land contributed. Profits
and losses of the joint venture are allocated based on the estimated
distributions to the partners, which are 85% to Kapalua and 15% to Rolfing.
The partnership agreement requires that all major decisions receive unanimous
approval of the partners; accordingly, THE INVESTMENT IN PCA IS ACCOUNTED FOR
USING THE EQUITY METHOD.
Summarized balance sheet information for PCA as of December 31, 1994 and
1993 and operating information for the three years ended December 31, 1994
follows (in thousands):
<TABLE>
1994 1993
<S> <C> <C> <C>
Real estate inventories $3,207 $8,584
Other assets 2,185 136
------ ------
Total Assets 5,392 8,720
Less: Total Liabilities 519 582
------ ------
Partners' Capital $4,873 $8,138
====== ======
1994 1993 1992
Revenues $5,155 $ 1 $ 48
Costs and expenses 5,965 174 61
------ ------ -----
Net Loss $ 810 $ 173 $ 13
====== ====== =====
</TABLE>
Real estate inventories as of December 31, 1994 consist of five
residential lots in Plantation Estates Phase I and allocated planning and
offsite costs related to Plantation Estates Phase II.
Kapalua's pre-tax share of the joint venture's net loss was $766,000,
$147,000 and $11,000 for 1994, 1993 and 1992, respectively. The Company's
share of the joint venture's loss includes expenses related to the investment
(primarily amortization of capitalized interest cost).
Kapalua Investment Corp., a wholly-owned subsidiary of Maui Land &
Pineapple Company, Inc. (KIC), Maui Hotels, a subsidiary of The Ritz-Carlton
Hotel Company (Ritz-Carlton), and NI Hawaii Resort, Inc., a subsidiary of
Nissho Iwai Corp. (NIC), are the general partners of Kaptel Associates. The
partnership owns The Ritz-Carlton Kapalua Hotel, which opened in October of
1992.
<PAGE>
The ownership interests are 25% for KIC and Ritz-Carlton and 50% for
NIC. NIC contributed $20 million in cash to the partnership. In addition NIC
provided two letters of credit totaling $35 million as security for the hotel
financing. KIC and Ritz-Carlton made no cash contribution for their
investments. The Company is leasing the 36-acre hotel site to the partnership
under a long-term lease. The Company's fee interest in the property and the
partnership's leasehold interest have been mortgaged to secure the hotel
financing. The fee interest is carried in the Company's financial statements
at a nominal amount.
The partnership has a $186 million non-recourse financing arrangement
which matures in September of 1997. The lender has the right, commencing in
July of 1995, to require the partnership to make a one-time principal payment
equal to the amount by which the outstanding loan exceeds the aggregate of 75%
of the appraised value of the secured property and the undrawn balance of the
$35 million letters of credit.
Kaptel does not anticipate that operating cash flow in 1995 will be
sufficient to meet debt service requirements. In February and March of 1995
Kaptel was only able to pay part of its debt service. The lender notified
Kaptel that partial payment constituted an event of default. The lender
requested immediate payment of the $3 million interest and stated that
interest at the default rate would be assessed until the default was cured.
As of March 15, 1995 the required payments had not been made and the lender
had not drawn upon the letters of credit or notified Kaptel that it was
exercising foreclosure or other remedies. The partners of Kaptel are
presently attempting to negotiate a restructuring of the hotel financing. The
final outcome of these discussions and negotiations cannot presently be
predicted.
In January of 1995 Kaptel requested additional capital contributions
from its partners. As of March 15, 1995 none of the partners have made
additional capital contributions to the partnership. Provisions in the
partnership agreement provide that partners who meet a cash call may cause a
reduction, pursuant to a formula, of the partnership interest of a partner who
fails to satisfy the cash call. A draw upon the letters of credit would
constitute an automatic cash call in the amount of the draw. Hence, a failure
by KIC to satisfy cash calls or to pay its allocable share of draws upon the
letters of credit could result in the reduction or elimination of KIC's
partnership interest.
The Company borrowed $4,750,000 from the partnership for the
construction of certain off-site improvements related to the hotel. Interest
rates on the loan have varied monthly and are the same as rates charged on the
hotel's financing arrangement (7.69% at December 31, 1994). Principal and
interest payments are payable solely from rental income receivable by the
Company under the hotel ground lease, which requires rental payments based on
a percentage of hotel gross revenues, as defined in the partnership agreement.
During 1994, 1993 and 1992 such rental income aggregated $464,000, $212,000
and $12,000, respectively.
Summarized balance sheet information for Kaptel Associates as of
December 31, 1994 and 1993 and operating information for 1994 and 1993 and the
portion of 1992 since opening follows (in thousands):
1994 1993
Current assets $ 3,507 $ 4,298
Property and equipment, net 155,985 164,749
Other assets, net 14,681 18,208
-------- --------
Total Assets 174,173 187,255
======== ========
Current liabilities 8,355 12,886
Financing 185,786 177,861
-------- --------
Total Liabilities 194,141 190,747
======== ========
Partners' Deficit $(19,968) $ (3,492)
======== ========
1994 1993 1992
Revenues $ 39,750 $ 33,434 $ 2,307
Costs and expenses 56,226 51,435 7,798
-------- -------- --------
Net Loss $ 16,476 $ 18,001 $ 5,491
======== ======== ========
Profits of the partnership are allocated first on the basis of cash flow
distributions and subsequently in proportion to each partner's interest. NIC
has an 8% cumulative preference as to partnership cash flows and profits on
its $20 million capital contribution. The accumulated amount of the
preference (not recorded in the partnership's financial statements) at
December 31, 1994 aggregated $7,638,000. Losses of the partnership in excess
of defined amounts (which are allocated in proportion to partnership
interests) are first allocated to partners with positive capital up to such
positive amounts and then in proportion to partnership interests. THE COMPANY
ACCOUNTS FOR ITS OWNERSHIP INTEREST IN THE PARTNERSHIP BY THE EQUITY METHOD
AND RECOGNIZES ITS SHARE OF PROFITS AND LOSSES AS ALLOCATED IN COMPLIANCE WITH
THE PARTNERSHIP AGREEMENT. The Company's share of the partnership's loss for
1994 and 1993 was $4,119,000 and $871,000, respectively. The Company reported
no loss on its investment in the partnership for the year ended December 31,
1992. The Company's share of accumulated losses is included in other non-
current liabilities.
In June of 1993 Kaahumanu Center Associates (KCA) was formed to finance
the expansion and renovation of and to own and operate Kaahumanu Center. KCA
is a partnership between the Company, as general partner, and the Employees'
Retirement System of the State of Hawaii (ERS), as a limited partner. The
Company contributed the existing shopping center, subject to the existing
first mortgage, and approximately nine acres of adjacent land. ERS
contributed $312,000 and made a $30.6 million loan to the partnership. The
$40 million balance of the construction cost was funded principally by bank
loans.
The interest rate on the loan from the ERS to KCA is 9%. The loan is
collateralized by certain resort property, the Napili Plaza and the Kaahumanu
Center. Upon completion of the expansion and the satisfaction of certain
conditions, ERS will contribute its loan to the capital of the partnership.
The initial ownership interest in the partnership is 99% for the Company
<PAGE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and 1% for ERS. The partnership agreement provides that upon contribution of
the ERS loan to the capital of the partnership, the Company and the ERS will
each have a 50% interest in the partnership.
The expansion and renovation was substantially complete by the end of
November 1994. Negotiations are continuing to effect the conversion of the
ERS debt to equity. Once the conversion has been accomplished, the Company
will account for its investment in KCA by the equity method. The consolidated
assets and consolidated debt of the Company will decrease by approximately $76
million when its investment in KCA is accounted for under the equity method.
The Company, on behalf of KCA, has secured a $65 million fixed rate term
loan commitment from a group of banks to refinance the construction loans and
the existing first mortgage. The Company is targeting the end of March of
1995 to close and fund the loan.
4. PROPERTY AND DEPRECIATION
PROPERTY IS STATED AT COST. MAJOR REPLACEMENTS, RENEWALS AND
BETTERMENTS ARE CHARGED TO PROPERTY ACCOUNTS 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 ESTIMATED USEFUL LIVES USING THE STRAIGHT-LINE METHOD.
5. BORROWING ARRANGEMENTS
Short-term bank lines of credit available to the Company at December 31,
1994 were $2 million. These lines provide for interest at the prime rate
(8.5% at December 31, 1994) plus 3/4% to 1%. There were no borrowings under
these lines at December 31, 1994.
During 1994, 1993 and 1992, the Company had average borrowings
outstanding of $114.2 million, $80 million and $65 million, respectively, at
average interest rates of 8.5%, 7.1% and 6.7%, respectively.
Long-term debt at December 31, 1994 and 1993 consisted of the following
(interest rates represent the rates at December 31):
1994 1993
(Dollars in Thousands)
Revolving credit agreement, 9% and 6% $27,750 $35,000
Mortgage loan, 10%, due through 1996 13,890 14,072
Kaptel Associates, 7.7% and 4.8% 4,750 4,750
Employees' Retirement System of the
State of Hawaii, 9%, due 1996 30,588 19,149
Senior unsecured notes, 8.86% 20,000 20,000
Construction Loan, 8.75%, due 1996 27,111 --
------- -------
Total 124,089 92,971
Less portion classified as current 27,951 182
------- -------
Long-term debt $ 96,138 $92,789
======== =======
The Company has a revolving credit agreement with participating banks
under which it may borrow up to $27.8 million in revolving loans through March
31, 1995. The agreement was amended on March 21, 1995, retroactive to
December 31, 1994. The commitment reduces to $23 million as of March 31, 1995
and terminates on June 30, 1995. The Company is presently negotiating an
extension of the commitment to June 30, 1997. Commitment fees of 1/2% are
payable on the unused portions of this credit line. As of December 31, 1994,
the interest rate on this loan was at the prime rate plus 1/2%. The agreement
contains certain financial covenants, including the maintenance of
consolidated net worth and working capital at certain levels and limits on the
incurrence of other indebtedness and capital expenditures. The loan is
collateralized by the Company's three golf courses at the Kapalua resort. The
agreement currently prohibits the Company from declaring any dividends.
The loan from Kaptel Associates is for the construction of certain
offsite improvements related to The Ritz-Carlton Kapalua Hotel (see Note 3).
The loan from the Employees' Retirement System of the State of Hawaii
(ERS) and the construction loan relate to the expansion and renovation of
Kaahumanu Center (see Note 3). After the conversion of the ERS loan to equity
in KCA, the Company will equity account for its investment in KCA. The 10%
mortgage loan and 8.75 construction loan will then be reflected on KCA's
separate financial statements.
In September of 1993 the Company concluded a private placement of $20
million in ten-year, 8.86% senior unsecured notes. Mandatory annual principal
payments of 20% of the original principal amount will begin in 1999. The
agreement includes certain financial covenants which are similar to the
Company's revolving credit agreement.
Maturities of long-term debt during the next five years, from 1995
through 1999, are as follows: $27,951,000, $72,034,000, $2,390,000,
$1,714,000, $4,000,000.
6. EMPLOYEE BENEFIT PLANS
In February of 1979 the Company sold 205,533 shares of common stock to
the Employee Stock Ownership Trust (ESOT) for clerical personnel and regular
non-bargaining unit employees. The ESOT financed the acquisition of the stock
with a $4,500,000 Federal Land Bank loan which was guaranteed by the Company.
In October of 1990 the ESOT repaid the loan with funds borrowed from the
Company. THE COMPANY'S RECEIVABLE FROM THE ESOT WAS RECORDED AS A REDUCTION
OF STOCKHOLDERS' EQUITY AND WAS CHARGED TO EXPENSE AS THE UNALLOCATED SHARES
HELD BY THE ESOT WERE ALLOCATED TO THE PARTICIPANTS' ACCOUNTS. As of December
31, 1993, there were no unallocated shares.
Contributions to the ESOT are based on the debt service requirements of
the ESOT loan payable to the Company. Information for 1994, 1993 and 1992
follows:
1994 1993 1992
(Dollars in Thousands)
Contributions paid $574 $571 $551
Employee benefit expense -- $520 468
The Company has defined benefit pension plans covering substantially all
regular employees. Pension benefits are based primarily on years of service
and compensation levels. THE COMPANY'S POLICY IS TO FUND PENSION COST AT A
LEVEL AT LEAST
<PAGE>
EQUAL TO THE MINIMUM AMOUNT REQUIRED UNDER FEDERAL LAW, BUT NOT MORE THAN THE
MAXIMUM AMOUNT DEDUCTIBLE FOR FEDERAL INCOME TAX PURPOSES.
Net pension cost for 1994, 1993 and 1992 included the following
components:
<TABLE>
1994 1993 1992
(Dollars in Thousands)
<S> <C> <C> <C>
Service cost--benefits earned during
the year $1,078 $ 972 $ 881
Interest cost on projected benefit obligation 1,963 1,955 1,904
Actual return on plan assets 490 (2,403) (923)
Net amortization and deferral (3,070) (140) (1,709)
------ ------ -------
Net pension expense $ 461 $ 384 $ 153
====== ====== =======
</TABLE>
The following table sets forth the funded status of the pension plans and
the amounts recognized in the balance sheets at December 31:
<TABLE>
1994 1993
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations
Vested benefits $22,882 $ 1,038 $24,069 $ 1,051
Nonvested benefits 298 60 295 50
------- ------- ------- -------
Accumulated benefit
obligation 23,180 1,098 24,364 1,101
Effect of assumed increase in
compensation levels 2,577 255 3,292 373
------- ------- ------- -------
Projected benefit obligation for
services rendered to date 25,757 1,353 27,656 1,474
Assets of plans at fair value 26,374 533 28,276 401
------- ------- ------- -------
Assets over (under) projected
benefit obligation 617 (820) 620 (1,073)
Unrecognized net (gain) loss 3,836 20 4,460 210
Unrecognized net transition
(asset) obligation (3,913) 451 (4,477) 476
Unrecognized prior service cost 404 83 453 91
Adjustment required to
recognize minimum liability -- (299) -- (404)
------- ------- ------- -------
Pension asset (liability)
recognized in
balance sheets $ 944 $ (565) $ 1,056 $ (700)
======= ======= ======= =======
</TABLE>
The projected benefit obligations were determined using discount rates
of 8% and 7% as of December 31, 1994 and 1993, respectively, and compensation
increases ranging up to 4.5%. The expected long-term rate of return on assets
was 8% for 1994 and 1993. The assets of the plans consist primarily of
stocks, bonds, real estate and short-term investments.
DEFERRED COMPENSATION PLANS FOR CERTAIN MANAGEMENT EMPLOYEES PROVIDE FOR
SPECIFIED PAYMENTS AFTER RETIREMENT. THE PRESENT VALUE OF ESTIMATED PAYMENTS
TO BE MADE ARE ACCRUED OVER THE PERIOD OF ACTIVE EMPLOYMENT.
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits to substantially all retirees. In
1992, the Company adopted Statement of Financial Accounting Standards (SFAS)
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions"
and elected to immediately recognize the accumulated benefit obligation as of
January 1, 1992. The cumulative effect on retained earnings, as of January 1,
1992, of adopting this statement was a reduction of $9,507,000 (net of
deferred tax benefit of $5.8 million) or $5.29 per share. THE ESTIMATED COST
OF PROVIDING POSTRETIREMENT BENEFITS IS ACCRUED OVER THE PERIOD EMPLOYEES
RENDER THE NECESSARY SERVICE.
The net periodic cost of these benefits for 1994, 1993 and 1992 consists
of the following components:
<TABLE>
1994 1993 1992
(Dollars in Thousands)
<S> <C> <C> <C>
Service cost $ 433 $ 694 $ 642
Interest cost 1,056 1,318 1,225
Actual return on plan assets 59 (36) (34)
Net amortization and deferral (219) 19 13
------ ------ ------
Net expense $1,329 $1,995 $1,846
====== ====== ======
</TABLE>
<PAGE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The funded status of these plans as of December 31, 1994 and 1993 was as
follows:
1994 1993
(Dollars in Thousands)
Accumulated postretirement
benefit obligation:
Retirees $ 6,940 $ 6,552
Fully eligible active
plan participants 3,027 4,531
Other active plan participants 4,335 6,197
------- -------
Total 14,302 17,280
Plan assets at fair value 63 202
------- -------
Accumulated postretirement benefit obligation
in excess of plan assets 14,239 17,078
Unrecognized prior service cost 1,913 934
Unrecognized net gain (loss) 2,559 (79)
------- -------
Accrued postretirement benefit obligation
recognized in balance sheets $18,711 $17,933
======= =======
Plan assets relate to the life insurance plans for retirees. The
assumed rate of return on the plan assets was 8% for 1994 and 1993.
Measurements of the accumulated postretirement benefit obligation as of
December 31, 1994 and 1993 were determined using discount rates of 8% and 7%,
respectively, and compensation increases ranging up to 4.5%.
The accumulated postretirement benefit obligation as of December 31,
1994 and 1993 was determined using a health care cost trend rate of 10% from
1994 through 2003 and 5% thereafter. The effect of a 1% annual increase in
these assumed cost trend rates would increase the accumulated postretirement
benefit obligation by approximately $2,340,000 as of December 31, 1994 and the
aggregate of the service and interest cost for 1994 by approximately $313,000.
As of December 1, 1994, certain reductions to the postretirement health
care benefit for the Company's prospective pineapple bargaining unit retirees
became effective. These benefit reductions resulted in a $1 million reduction
of the accumulated benefit obligation, which is being amortized over 14 years
beginning in 1994.
In the fourth quarter of 1993 the Company amended its postretirement
health care plan for non-bargaining unit employees. The amendment was
effective as of January 1, 1994 and resulted in a $934,000 reduction of the
accumulated benefit obligation, which is being amortized over 14 years
beginning in 1994.
7. REVENUE RECOGNITION
SALES OF REAL ESTATE ARE ACCOUNTED FOR AS REVENUES OF THE PERIOD IN
WHICH SUFFICIENT CASH IS RECEIVED, COLLECTION OF THE BALANCE IS REASONABLY
ASSURED, AND RISKS OF OWNERSHIP HAVE PASSED TO THE BUYER. Other income for
1994, 1993 and 1992 includes $3 million, $6.8 million and $12.6 million,
respectively, attributable to real estate sales.
8. NET LOSS PER COMMON SHARE
NET LOSS PER COMMON SHARE IS COMPUTED USING THE WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING DURING THE PERIOD. Average common shares outstanding
were 1,797,125 in 1994, 1993 and 1992.
9. INTEREST CAPITALIZATION
INTEREST COSTS ARE CAPITALIZED DURING THE CONSTRUCTION PERIOD OF MAJOR
CAPITAL PROJECTS. Total interest cost incurred for 1994, 1993 and 1992 was
$10,208,000, $6,223,000 and $4,792,000, respectively, of which $4,526,000,
$1,426,000 and $761,000, respectively, was capitalized.
10. LEASES
Lessee
LEASES THAT TRANSFER SUBSTANTIALLY ALL OF THE BENEFITS AND RISKS
INCIDENT TO THE OWNERSHIP OF PROPERTY ARE ACCOUNTED FOR AS CAPITAL LEASES.
OTHER LEASES ARE ACCOUNTED FOR AS OPERATING LEASES.
Property at December 31, 1994 and 1993 includes capital leases of
$14,452,000 and $13,108,000, respectively, (accumulated depreciation of
$6,886,000 and $5,752,000, respectively). AMORTIZATION OF CAPITAL LEASES IS
INCLUDED IN DEPRECIATION EXPENSE.
Total rental expense under operating leases was $837,000 in 1994,
$1,109,000 in 1993 and $1,021,000 in 1992. A major operating lease covers
approximately 1,500 acres used primarily for pineapple operations.
Future minimum rental payments under operating leases aggregate
$2,848,000 and are payable during the next five years (1995 to 1999) as
follows: $666,000, $611,000, $572,000, $453,000, $348,000, respectively, and
$198,000 thereafter.
Future minimum rental payments under capital leases aggregate $5,078,000
(includes $597,000 representing interest) and are payable from 1995 to 1999 as
follows: $1,739,000, $1,431,000, $1,085,000, $707,000, $116,000, respectively.
Lessor
The Company leases land, buildings and land improvements. Total rental
income under these operating leases were as follows:
1994 1993 1992
(Dollars in Thousands)
Minimum rentals $5,323 $5,004 $4,918
Contingent rentals
(based on sales volume) 2,048 1,590 2,396
------ ------ ------
Total $7,371 $6,594 $7,314
====== ====== ======
Property at December 31, 1994 and 1993 includes leased property of
$95,295,000 and $32,988,000, respectively (accumulated depreciation of
$12,193,000 and $10,767,000, respectively), accounted for as operating leases
.
Future minimum rental income aggregates $120,048,000 and is receivable
during the next five years (1995 to 1999) as follows: $7,222,000, $7,142,000,
$6,903,000, $6,585,000, $6,085,000, respectively, and $86,111,000 thereafter.
<PAGE>
11. INCOME TAXES
In 1992, the Company adopted Statement of Financial Accounting Standards
(SFAS) 109, "Accounting for Income Taxes." The cumulative effect of adopting
SFAS 109 on retained earnings to January 1, 1992 was an increase of $949,000
or $.53 per share and a corresponding decrease in deferred tax liabilities.
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 TAX BASES OF ASSETS AND LIABILITIES USING
ENACTED TAX RATES.
The components of the income tax provision (credit) were as follows:
1994 1993 1992
(Dollars in Thousands)
Current $(1,978) $(8,489) $ (125)
Deferred (851) 1,066 2,308
------- ------- ------
Total $(2,829) $(7,423) $2,183
======= ======= ======
A reconciliation between the total provision (credit) and the amount
computed using the statutory federal rate of 34% follows:
1994 1993 1992
(Dollars in Thousands)
Federal provision (credit) at
statutory rate $(2,291) $(6,284) $2,925
Adjusted for
State income taxes (credits)
--net of effect on
federal income taxes (350) (980) 48
Non-taxable insurance proceeds -- -- (750)
Other (188) (159) (40)
------- ------- ------
Total provision (credit) for
income taxes $(2,829) $(7,423) $2,183
======= ======= ======
Deferred tax assets and liabilities were comprised of the following
types of temporary differences as of December 31, 1994 and 1993:
1994 1993
(Dollars in Thousands)
Accrued retirement benefits $ 7,967 $ 7,291
Net operating loss carryforward 6,691 530
Minimum tax credit carryforward 2,515 4,069
Vacation accruals 786 777
Other 286 309
------- -------
Total deferred tax assets 18,245 12,976
------- -------
Inventory (1,016) (23)
Installment sale -- (892)
Charitable contributions (1,174) (1,123)
Income from partnerships (5,869) (1,356)
Pineapple marketing costs (755) (1,548)
Deferred condemnation proceeds (5,990) (5,756)
Property net book value (5,288) (4,975)
------- -------
Total deferred tax liabilities (20,092) (15,673)
------- -------
Net deferred tax liabilities $(1,847) $(2,697)
======= =======
At December 31, 1994 the Company had federal income tax net operating
loss carryforwards of approximately $16 million, which expire in 2008 and
2009. The Company also had federal minimum tax credit carryforwards of $2.5
million.
In 1993 the Internal Revenue Service (IRS) began its examination of the
Company's federal income tax returns for 1989 and 1990. In November of 1994
the IRS began its examination of the Company's federal income tax return for
1993. The revenue agent's report on these years has not yet been issued and
the Company cannot predict the outcome of these examinations.
12. RESEARCH AND DEVELOPMENT
Research and development expenses totaled $285,000 in 1994, $416,000 in
1993 and $466,000 in 1992.
13. CONTINGENCIES & COMMITMENTS
There are various claims and legal actions pending against the Company.
In the opinion of management, after consultation with counsel, the resolution
of these matters will not have a material adverse effect on the Company's
financial statements. At December 31, 1994, the Company had commitments under
signed contracts of $3.9 million.
14. CONCENTRATIONS OF CREDIT RISK
A substantial portion of the Company's trade receivables results from
sales of pineapple products, primarily to food distribution customers in the
United States. Credit is extended after evaluating creditworthiness and no
collateral is generally required from customers. Notes receivable result
principally from sales of real estate in Hawaii and are collateralized by the
property sold.
15. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
Notes and Interest Receivable:
The fair value of these assets was estimated based on rates currently
available for similar types of transactions.
Notes Payable, Long-Term Debt and Accrued Interest:
The fair value of these liabilities was estimated based on rates
currently available to the Company for debt with similar terms and remaining
maturities.
The estimated fair values of the Company's financial instruments at
December 31, 1994 and 1993 were as follows:
<TABLE>
1994 1993
(Dollars in Thousands)
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Notes and Interest Receivable $ 731 $ 606 $ 3,281 $ 3,254
Notes Payable, Long-Term Debt
and Accrued Interest $129,909 $122,918 $97,427 $95,519
</TABLE>
<PAGE>
MAUI LAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. BUSINESS SEGMENTS
The Company's principal activities are Pineapple, Resort and Commercial
& Property. Pineapple includes growing pineapple, canning pineapple in tin-
plated steel containers fabricated by the Company, and marketing canned
pineapple products and fresh pineapple. Resort includes the development and
sale of real estate, property management and the operation of recreational and
retail facilities and utility companies at Kapalua on the Island of Maui. It
also includes the Company's investments in Plantation Club Associates and
Kaptel Associates. Commercial & Property includes the Kaahumanu Center and
Napili Plaza shopping centers and other land development, property rentals and
sales. Inter-segment sales were insignificant.
"Operating Profit (Loss)" is total revenues less all expenses except
corporate expenses, interest expense and income taxes. Assets identifiable by
activity are those assets that are used in the operations of each activity.
LAND OWNED BY THE PARENT COMPANY AND ANY GAIN FROM THE SALE OF SUCH LAND IS
ALLOCATED TO THE BUSINESS SEGMENTS.
Neither total export sales nor sales to any single customer exceeded 10%
of consolidated revenues.
NOTES TO FINANCIAL STATEMENTS
<TABLE>
1994 1993 1992
(Dollars in Thousands)
<S> <C> <C> <C>
Revenues
Pineapple $ 81,044 $ 86,033 $ 95,472
Resort 34,109 31,455 26,528
Commercial & Property 10,617 13,635 22,813
Corporate 112 49 2,236
-------- -------- --------
Total Revenues 125,882 131,172 147,049
======== ======== ========
Operating Profit (Loss)
Pineapple (867) (16,223) 491
Resort (1) (2,203) (1,614) (3,199)
Commercial & Property 5,357 9,085 17,304
-------- -------- --------
Total Operating Profit (Loss) 2,287 (8,752) 14,596
-------- -------- --------
Corporate Expenses--Net (2) (3,343) (4,933) (1,962)
Interest Expense (5,682) (4,797) (4,031)
-------- -------- --------
Income (Loss) Before Income Taxes and
Cumulative Effect of
Accounting Changes (6,738) (18,482) 8,603
======== ======== ========
Depreciation
Pineapple 5,561 4,957 4,738
Resort 3,689 3,839 3,510
Commercial & Property 1,309 1,111 1,092
Corporate 292 408 434
-------- -------- --------
Total Depreciation 10,851 10,315 9,774
======== ======== ========
Capital Expenditures
Pineapple 1,148 8,173 10,040
Resort 1,851 2,091 2,609
Commercial & Property 40,427 28,057 2,035
Corporate 75 507 280
-------- -------- --------
Total Capital Expenditure 43,501 38,828 14,964
======== ======== ========
Identifiable Assets
Pineapple 71,343 78,634 79,192
Resort 64,415 66,829 66,590
Commercial & Property 94,475 54,638 27,729
Corporate 5,178 11,487 4,033
-------- -------- --------
Total Assets $235,411 $211,588 $177,544
======== ======== ========
(1) Resort operating profit (loss) includes the Company's equity in the loss
of Plantation Club Associates of $766,000 for 1994, $147,000 for 1993
and $11,000 for 1992. Resort operating profit (loss) also includes the
Company's equity in the loss of Kaptel Associates of $4,119,000 for 1994
and $871,000 for 1993.
(2) Corporate expenses-net includes a $2 million recovery under the
Company's insurance program in 1992.
</TABLE>
<PAGE>
COMMON STOCK
A dividend of $.25 per share was declared for each of the first three
quarters of 1993. In compliance with the terms of a loan agreement the
Company may not declare any dividends in 1995.
At February 3, 1995, there were 415 shareholders of record.
Stock is traded over the counter nationally. The range of common stock
bid prices which follow were supplied by the National Quotation Bureau
Incorporated and do not include retail markups, markdowns or commissions:
First Second Third Fourth
Quarter Quarter Quarter Quarter
1994 High 105 90 71 70
Low 90 65 63 40
1993 High 120 115 106 105
Low 90 80 105 100
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
1994 1993 1992 1991 1990
(Dollars in Thousands Except Share Amounts)
<S> <C> <C> <C> <C> <C>
FOR THE YEAR
Summary of Operations
Revenues $125,882 $131,172 $147,049 $132,560 $112,093
Cost of goods sold 67,623 84,932 81,147 82,001 72,761
Operating expenses 23,551 22,577 20,762 19,149 14,911
Shipping and marketing 16,568 17,673 15,917 14,907 10,687
General and
administrative 14,352 18,657 16,578 14,314 14,909
Equity in losses (earnings)
of joint ventures 4,844 1,018 11 (7,805) (26,591)
Interest expense 5,682 4,797 4,031 4,253 2,415
Income Taxes (Credits) (2,829) (7,423) 2,183 1,922 8,411
Income (loss) before cumulative effect of
accounting changes (3,909) (11,059) 6,420 3,819 14,590
Cumulative effect of
accounting changes -- -- (7,673) -- --
Net Income (Loss) (3,909) (11,059) (1,253) 3,819 14,590
Per Common Share
Income (loss) before cumulative effect of
accounting changes (2.18) (6.15) 3.57 2.13 8.12
Cumulative effect of
accounting changes -- -- (4.27) -- --
Net Income (Loss) (2.18) (6.15) (.70) 2.13 8.12
Pro Forma Amounts Assuming
Inventory Accounting Principle
was Applied Retroactively
Net Income (Loss) -- -- (2,138) 4,088 14,777
Net Income (Loss) Per
Common Share -- -- (1.19) 2.28 8.22
Other Data
Cash dividends
Amount -- 1,348 1,797 1,797 1,797
Per common share -- .75 1.00 1.00 1.00
Depreciation $ 10,851 $ 10,315 $ 9,774 $ 9,215 $ 7,458
Return on beginning
stockholders' equity (6.1%) (14.5%) (1.6%) 5.0% 23.1%
Percent of net income (loss)
to revenues (3.1%) (8.4%) (0.9%) 2.9% 13.0%
AT YEAR END
Current assets less
current liabilities $ (1,097) $ 29,398 $ 26,233 $ 20,158 $ 17,478
Ratio of current assets
to current liabilities .97 2.47 2.33 2.28 1.91
Property, net of
depreciation $180,194 $148,774 $121,045 $117,077 $ 74,699
Total assets 235,411 211,588 177,544 162,434 145,389
Long-term debt and
capital leases 99,180 96,108 60,569 57,971 39,543
Stockholders' equity
Amount 60,429 64,321 76,187 78,729 76,246
Per common share $ 33.63 $ 35.79 $ 42.40 $ 43.81 $ 42.43
Common shares outstanding 1,797,125 1,797,125 1,797,125 1,797,125 1,797,125
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
1994 vs. 1993
CONSOLIDATED
The Company reported a consolidated net loss for the year 1994 of $3.9
million. This compares to a consolidated net loss of $11 million for 1993.
The principal reason for the improved results was a decrease in the loss from
the pineapple operations. These improved results more than offset increased
losses from joint venture investments at the Kapalua resort and a lower amount
of income from land sales. Other income for 1994 includes $3 million from the
sale of land; other income for 1993 included $6.8 million attributable to land
sales.
General and administrative expenses decreased in 1994 by 23% as compared
to the year 1993. Company-wide cost reduction efforts were principally
responsible for this improvement. A large part of the decrease was
attributable to lower personnel costs, including a decrease in post-retirement
medical benefits, a restructuring of the medical plans for current employees
and a decrease in the number of personnel through early retirements and job
consolidations. Also, there was no employee benefit expense associated with
the Company's ESOP in 1994 because all stock had been allocated to
participants' accounts as of December 31, 1993.
Interest expense increased in 1994 by 18% because of higher average
rates and higher borrowings. Borrowings and the amount of interest
capitalized increased in 1994 because of the expansion and renovation of
Kaahumanu Center. Construction at the Center was substantially completed by
the end of November 1994.
PINEAPPLE
Revenue from pineapple operations decreased by 6% in 1994 and the
operating loss from pineapple operations decreased from $16.2 million in 1993
to $867,000 in 1994. The improved results were principally due to cost
reductions.
Revenues decreased due to lower case volume of sales and to slightly
lower sales prices. Revenues from the fresh fruit operations increased in
1994 compared to 1993 due to higher sales volumes.
The number of cases packed in 1994 increased by approximately 2%, but
the per unit production cost decreased substantially. The cost reduction was
accomplished by job consolidations, reduced overtime, layoffs and other
measures to cut costs and to increase efficiency. In 1993 there was a partial
liquidation of LIFO inventories which resulted in lower costs from prior years
being included in cost of sales. Cost of sales for 1993 would have been
higher by $858,000 based on current production costs.
Shipping and selling costs, which includes freight, brokerage and
warehousing costs, decreased by 17% due largely to lower case volume of sales.
Also, inventory levels at the end of 1992 were higher than normal which
resulted in higher warehousing and other holding costs in 1993.
RESORT
Revenues from the Kapalua Resort increased by 8%, from $31.5 million in
1993 to $34.1 million in 1994. The operating loss attributable to the resort
increased from $1.6 million in 1993 to $2.2 million in 1994. The increased
loss was largely due to the Company's share of losses from joint ventures
which are accounted for on the equity method (see Note 3 to Consolidated
Financial Statements). Excluding these losses, resort operations produced
operating profits in 1994 compared to operating losses for 1993.
Resort occupancies increased in 1994 as compared to 1993. The Kapalua
Villas contributed a 17% increase in revenues. Paid rounds of golf decreased
by approximately 3%, but revenues from the golf operations increased by 2% due
to higher average rates. Revenues attributable to merchandise sales increased
by 2%. In 1994 a new resort membership program was initiated which also
contributed to the increase in revenues.
The improved results for the resort's on-going operations were also
attributable to reductions in operating costs and improved retail margins.
COMMERCIAL & PROPERTY
Revenues from Commercial & Property decreased from $13.6 million in 1993
to $10.6 million for 1994 and operating profits decreased by $3.7 million from
$9.1 million to $5.4 million. The decreases were largely due to lower
revenues from land sales and condemnation proceeds which were included in
1993.
Decreased revenues from land sales and condemnations were partially
offset by higher revenues from Kaahumanu Center and Napili Plaza. Increased
revenues from Kaahumanu Center had a more pronounced effect in the third and
fourth quarters of 1994 compared to 1993 as the renovation work neared
completion and the space occupied by tenants increased. Revenues from Napili
Plaza also increased due to higher occupancies of leasable area.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
1993 vs. 1992
CONSOLIDATED
Consolidated net loss for 1993 was $11.1 million. For 1992 the
consolidated profit before cumulative effect of the accounting changes made in
1992 was $6.4 million. The primary reasons for the decline were the operating
loss from pineapple operations and a lower amount of income from condemnations
proceeds and other land sales. Other income for 1993 includes $6.8 million
from the sale of land as compared to $12.6 million in 1992.
General and administrative expenses increased by 13% in 1993. The
increase was largely attributable to charges to bad debt expense and to labor-
related charges, some of which were the result of programs to reduce the
Company's work force in an effort to decrease future costs.
Interest expense increased in 1993 by 19% primarily because of higher
average borrowings. The amount of interest capitalized in 1993 also increased
as compared to 1992 and primarily related to construction at Kaahumanu Center.
PINEAPPLE
Revenue from pineapple operations decreased by 10% in 1993, and cost of
sales and shipping and selling expenses increased as compared to 1992. The
operating loss from pineapple operations for 1993 was $16.2 million. In 1992
pineapple operations produced an operating profit of $491,000.
Lower revenues resulted from a 5% decrease in case sales volume, coupled
with a decrease in the average price per case. These results primarily
reflect increased competition from foreign producers.
Because of high inventory levels and low sales volumes, production
levels in 1993 were considerably reduced from amounts originally planned.
This resulted in increased per unit production costs, which was the primary
reason for the increase in cost of sales for 1993 as compared to 1992. In
1993 there was a partial liquidation of LIFO inventories which resulted in
lower costs from prior years being included in cost of sales. Cost of sales
for 1993 would have been higher by $858,000 based on current production costs.
Shipping and selling costs increased in 1993 by 12% due to higher
warehousing and other holding costs as a result of high inventory levels and
lower sales volume. Additionally, ocean freight rates increased by
approximately 3%.
RESORT
Revenues attributable to the Kapalua Resort increased from $26.5 million
in 1992 to $31.5 million in 1993, and the operating loss from the resort
decreased from $3.2 million in 1992 to $1.6 million in 1993. The increase in
visitor traffic to the resort resulting from the opening of The Ritz-Carlton
Kapalua Hotel in October of 1992 and increased occupancies at The Kapalua
Villas contributed to the improved results.
Paid rounds of golf increased by approximately 18% in 1993 and revenues
from golf operations increased by 13%. Merchandise sales increased by 16% and
revenue from the villa operations increased by 70%.
Partially offsetting these positive changes was a $1 million charge in
1993 representing the Company's share of its losses from joint ventures which
are accounted for on the equity method (see Note 3 to Consolidated Financial
Statements).
COMMERCIAL & PROPERTY
Revenues from the Commercial & Property segment decreased from $22.8
million in 1992 to $13.6 million in 1993, and operating profits declined by
47% to $9.1 million. A large part of the decrease was due to lower revenue
from condemnation proceeds and other land sales.
Operating revenue from Kaahumanu Center was lower in 1993 as compared to
1992, primarily reflecting an 8% decrease in the gross leasable area as well
as lower sales reported by the tenants because of the expansion and renovation
work that was taking place at Kaahumanu Center.
Revenue and operating profits from Napili Plaza increased in 1993 due to
increased tenant occupancies.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1994 the Company's total debt, including capital leases,
was $128.6 million, compared to $98 million at the end of 1993. The increase
was due primarily to debt related to the renovation and expansion of Kaahumanu
Center.
The expansion and renovation of Kaahumanu Center was substantially
complete by the end of November of 1994. Negotiations are continuing to
effect the conversion of the Employees' Retirement System of the State of
Hawaii's $30.6 million loan to an additional 49% interest in the Kaahumanu
Center. Once the conversion has been accomplished, the Company will account
for its investment in Kaahumanu Center Associates (KCA) by the equity method
and the Company's consolidated debt will be reduced by approximately $76
million.
<PAGE>
The Company, on behalf of KCA, has secured a $65 million fixed rate term
loan commitment from a group of banks to refinance the construction loans and
the existing first mortgage. The Company is targeting the end of March of
1995 to close and fund the loan.
In January of 1995 the Company was notified by Kaptel Associates of a
request for additional capital contributions from the partners to fund its
February debt service, but as of March 15, 1995, none of the partners had made
additional capital contributions to the partnership. The partnership made
only partial payment of its February and March debt service, resulting in
notification by the lender that partial payment constituted an event of
default (see Note 3 to Consolidated Financial Statements). At this stage, the
Company is unable to determine how this situation may affect capital resources
or liquidity.
The Company has a $27.8 million revolving credit commitment which
reduces to $23 million on March 31, 1995 and terminates on June 30, 1995. The
Company is presently negotiating an extension of the commitment to June 30,
1997. The ability of the Company to meet the March 31, 1995 paydown
requirement is dependent on the closing of the KCA refinancing. To the extent
that the closing is delayed, the Company believes the lenders will allow an
extension pending the closing.
In 1995 capital expenditures are expected to be approximately $4.6
million. This amount includes approximately $2.2 million originally scheduled
to be incurred in 1994 for a system that will totally replace the existing
method used by the Company's pineapple cannery to dispose of processing waste
water. It also includes approximately $.5 million to complete the upgrading
of the water system at the Kapalua resort. The remaining expenditures are for
equipment considered essential to the Company's current operations, necessary
for the distribution of new products expected to strengthen the Company's
operations, or expenditures required for compliance with governmental
regulations.
In addition to these capital expenditures, the Company expects to
contribute approximately $1.6 million to the County of Maui for its share of
increased capacity in the West Maui sewer system.
The Company as a partner in various partnerships may, under certain
circumstances, be called upon to make additional capital contributions (see
Note 3 to Consolidated Financial Statements).
IMPACT OF INFLATION AND CHANGING PRICES
The Company uses the LIFO method of accounting for its pineapple
inventories. Under this method the cost of products sold approximates current
cost and during periods of rising prices the ending inventory balance is below
current cost. The replacement cost of pineapple inventory was $26 million at
December 31, 1994.
Most of the land owned by the Company was acquired from 1911 to 1932 and
is carried at cost. A small portion of "Real Estate Held for Sale" represents
land cost. Replacements and additions to the pineapple operations occur every
year and some of the assets presently in use were placed in service in 1934.
At Kapalua 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.
<PAGE>
MAUI LAND & PINEAPPLE COMPANY, INC.
Officers
President & Chief Executive Officer
Joseph W. Hartley, Jr.
Executive Vice President/Resort
Gary L. Gifford
Executive Vice President/Finance
& Treasurer
Paul J. Meyer
Vice President/Pineapple
Douglas R. Schenk
Vice President/Property Management
Richard H. Cameron
Secretary
Adele H. Sumida
Controller & Assistant Treasurer
Ted L. Proctor
<PAGE>
Directors
Mary C. Sanford--Chairman
Publisher
Maui Publishing Company, Ltd.
Peter D. Baldwin
President
Baldwin Pacific Corporation
Richard H. Cameron
Vice President/Property Management
Maui Land & Pineapple Company, Inc.
Lansing E. Eberling
Financial Vice President
The Terramics Companies
Randolph G. Moore
Chief Executive Officer
Kaneohe Ranch
Fred E. Trotter III
President
F. E. Trotter, Inc.
Mrs. J. Walter Cameron--Director Emeritus
Director
Maui Publishing Company, Ltd.
Andrew T. F. Ing--Director Emeritus
Chairman of the Board
Denis Wong and Associates<PAGE>
Audit and Compensation Committees
Andrew T. F. Ing--Chairman
Peter D. Baldwin
Lansing E. Eberling
Randolph G. Moore
Mary C. Sanford
Fred E. Trotter III
<PAGE>
PRINCIPAL SUBSIDIARIES
MAUI PINEAPPLE COMPANY, LTD.
Officers
President & Chief Executive Officer
Douglas R. Schenk
Executive Vice President/Finance &
Treasurer
Paul J. Meyer
Vice President/Cannery
Eduardo E. Chenchin
Vice President/Plantations
L. Douglas MacCluer
Vice President/Sales & Marketing
James B. McCann
Secretary
Adele H. Sumida
Controller
Stacey M. Jio
Assistant Treasurer
Ted L. Proctor
<PAGE>
Directors
Mary C. Sanford--Chairman
Peter D. Baldwin
Douglas B. Cameron
Richard H. Cameron
Lansing E. Eberling
Joseph W. Hartley, Jr.
Andrew T. F. Ing
Paul J. Meyer
Randolph G. Moore
Claire C. Sanford
Douglas R. Schenk
Douglas R. Sodetani
Fred E. Trotter III
Mrs. J. Walter Cameron--Director Emeritus
KAPALUA LAND COMPANY, LTD.
Officers
President & Chief Executive Officer
Gary L. Gifford
Executive Vice President/Finance &
Treasurer
Paul J. Meyer
Executive Vice President/Operations
Donald A. Young
Vice President/Administration & Support Operations
Robert P. Derks
Vice President/Resort Operations
Gary M. Planos
Vice President/Marketing & Real Estate
Margaret A. Santos
Vice President/Planning & Construction
Warren A. Suzuki
Secretary
Adele H. Sumida
Controller
Russell E. Johnson
Assistant Treasurer
Ted L. Proctor
Directors
Mary C. Sanford--Chairman
Peter D. Baldwin
Richard H. Cameron
Lansing E. Eberling
Gary L. Gifford
Joseph W. Hartley, Jr.
Andrew T. F. Ing
Paul J. Meyer
Randolph G. Moore
Jared B. H. Sanford
Douglas R. Sodetani
Fred E. Trotter III
Donald A. Young
Mrs. J. Walter Cameron--Director Emeritus
