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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
Commission file number 0-4674
MAUI LAND & PINEAPPLE COMPANY, INC.
(Exact name of registrant as specified in its charter)
HAWAII 99-0107542
(State or other jurisdiction (IRS Employer Identification
of incorporation or organization) Number)
P.O. Box 187
120 Kane Street
KAHULUI, MAUI, HAWAII 96732-0187
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (808)877-3351
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark 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. [ ]
The aggregate market value, as of February 3, 1995, of the voting stock
held by nonaffiliates of the registrant: $53,714,000.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at February 3, 1995
Common Stock,
without Par Value 1,797,125 Shares
Documents incorporated by reference:
Parts I, II and IV -- Portions of the 1994 Annual Report to Stockholders.
Part III -- Portions of the Proxy Statement, dated March 31, 1995.
Exhibit Index--pages 16-17.
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PART I
Item 1. Business
(a) General
Maui Land & Pineapple Company, Inc. is a Hawaii corporation, the
successor to a business organized in 1909. The Company consists of a land-
holding and operating parent company as well as its principal wholly-owned
subsidiaries, Maui Pineapple Company, Ltd., Kapalua Land Company, Ltd.,
Kapalua Investment Corp., Kapalua Waste Treatment Company, Ltd., Kapalua
Water Company, Ltd. and Honolua Plantation Land Company, Inc. Maui
Pineapple Company, Ltd. and Kapalua Land Company, Ltd. are the major
operating subsidiaries. The Company, as used herein, refers to the parent
and all of its subsidiaries.
(b) Financial Information About Industry Segments
The information set forth under Note 16 to Consolidated Financial
Statements on page 18 of the Maui Land & Pineapple Company, Inc. 1994
Annual Report to Stockholders is incorporated herein by reference.
(c) Narrative Description of Business
The Company's principal activities are Pineapple, Resort and
Commercial & Property.
(1) Pineapple
In 1994 pineapple 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.
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.
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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.
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 Thai 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 the Company expects to receive final decisions on injury and
anti-dumping duties.
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. 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.
In 1994 we increased our emphasis on marketing. Our gaol is a
transition from trade-oriented marketing to a trade and consumer-oriented
marketing. 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.
Maui Pineapple Company, Ltd. is the operating subsidiary for
pineapple. It owns and operates fully-integrated facilities for the
production of pineapple products.
Pineapple is cultivated on two company-operated plantations on Maui
which provided approximately 75% of the fruit processed in 1994. The
balance of fruit processed was purchased from independent growers, a
substantial portion of which is from Wailuku Agribusiness Co., Inc. under
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long-term contract. Two pineapple crops are normally harvested from each
new planting. The first, or plant crop, is harvested approximately 18 to
23 months after planting, and the second, or ratoon crop, is harvested 12
to 14 months later.
Harvested pineapple is processed at the Company's cannery in Kahului,
Maui, where a full line of canned pineapple products is produced, including
solid pineapple in various grades and styles, juice, and juice
concentrates. The cannery operates most of the year; however, over 50% of
production volume takes place during June, July and August. The metal
containers used in canning pineapple are produced in the Company-owned can
plant. Warehouses are maintained at the cannery site for inventory
purposes.
The Company sells pineapple products under buyers' labels principally
to large grocery chains, other food processors, wholesale grocers, and to
organizations offering a complete buyers' brand program to affiliated
chains and wholesalers serving both retail and food service outlets. A
substantial volume of its pineapple products is marketed through food
brokers. Maui Pineapple Company, Ltd. is the sole supplier of private
label, 100% Hawaiian canned pineapple products to United States
supermarkets. In 1994, approximately 20 domestic customers accounted for
about 51% of pineapple sales. Export sales, chiefly to Japan, Canada and
Western Europe, amounted to approximately 6.2%, 5.2% and 7.1% of total
pineapple sales in 1994, 1993 and 1992, respectively. Sales to the U.S.
government amounted to approximately 11.8%, 8.5% and 8.7% of total
pineapple sales in 1994, 1993 and 1992, respectively. The Company's
pineapple sales office is in Concord, California.
As a service to its customers, the Company maintains inventories of
its products in public warehouses in the continental United States. The
balance of its products are shipped directly from Hawaii to its customers.
The Company sells its products in competition with both foreign and
U.S. companies. Its principal competitors are two U.S. companies which
produce sizable quantities of pineapple, a significant portion of which is
produced in the Philippines. Producers in other foreign countries
(particularly Thailand) are also a major source of competition. Although
foreign production has the advantage of lower hourly labor costs, the
Company is able to maintain its market position through other production
and shipping cost advantages, and by producing high quality canned
products. Other canned fruits and fruit juices are also a source of
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competition. Generally, the price of the Company's products is influenced
by supply and demand of pineapple and other fruits and juices.
To grow and harvest its crops and operate its cannery, the Company
employed approximately 1,000 year-round employees and hired approximately
550 seasonal workers in 1994.
(2) Resort
Kapalua resort 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 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. See Note
3 to Consolidated Financial Statements in Maui Land & Pineapple Company,
Inc. 1994 Annual Report to shareholders.
Resorts on-going operations posted a profit of $2.8 million for 1994,
an increase of over $3 million from the loss in 1993. Cash flow from
resort operations increased in 1994 to a positive $4.4 million.
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
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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 the resort is 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. 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.
The Kapalua Villas, our short-term rental operations, 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.
The Kapalua resort development is a destination resort community in
West Maui. The resort borders the ocean and includes two hotels, 528
condominium units, three residential subdivisions, three championship golf
courses, two ten-court tennis facilities, a 22,000 square foot commercial
shopping center, restaurants, a water utility and a waste transmission
utility.
Kapalua Land Company, Ltd. is the developer of the Kapalua resort. It
operates the golf and tennis facilities, the commercial shopping center, a
short-term vacation rental program (The Kapalua Villas) and certain retail
outlets in the resort. It is the provider of certain services to the
resort including shuttle, security and the maintenance of common areas.
Kapalua Land Company, Ltd. also receives rental income from the lease of
certain properties to third parties.
Kapalua Realty Company, Ltd. (a wholly-owned subsidiary of Kapalua
Land Company, Ltd.) is a general brokerage real estate company located
within the resort. Kapalua Water Company, Ltd. and Kapalua Waste Treatment
Company, Ltd. (wholly-owned subsidiaries of the Company) are public
utilities providing water and waste transmission services to the Kapalua
resort.
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Kapalua Land Company, Ltd. and Rolfing Partners formed a joint venture
in November of 1988 to finance and develop the third 18-hole golf course
and Plantation Estate Phase I and Phase II, two residential development
projects at Kapalua. Five lots in Plantation Estates Phase I and allocated
planning and offsite costs related to Plantation Estates Phase II, remain
in inventory at December 31, 1994.
Kapalua Investment Corp. (a wholly-owned subsidiary of the Company),
Maui Hotels (a subsidiary of The Ritz-Carlton Hotel Company) and NI Hawaii
Resort, Inc. (a subsidiary of Nissho Iwai Corp.) are the general partners
of Kaptel Associates. The partnership is the owner of The Ritz-Carlton
Kapalua hotel which opened in October of 1992. The partnership is leasing
the 36-acre hotel site from the Company under a long-term lease.
The Kapalua resort faces substantial competition from existing and
planned resort developments throughout Hawaii and the world. Kapalua is
adjacent to the Napili resort area and is approximately five miles from the
Kaanapali resort area.
The Company employed approximately 360 employees in its resort
operations at December 31, 1994.
(3) 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
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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.
Napili Plaza continues to experience a relatively high vacancy level
due to highly competitive leasing conditions for commercial property in
West Maui and the continued relatively low visitor count.
Commercial & Property includes Kaahumanu Center, Napili Plaza and
other non-resort property rentals and sales. Kaahumanu Center is a
regional shopping mall and office building located in Kahului on the island
of Maui. On December 31, 1994, 89% of the available gross leasable area
was occupied by 112 tenants. The Center's primary competitor is the Maui
Mall which is located within one mile of Kaahumanu Center. Napili Plaza is
a 44,000 square foot retail and commercial office center located in West
Maui. The first tenants in Napili Plaza began operation in January of
1992. As of December 31, 1994, 71% of the gross leasable area was occupied
by 15 tenants. Napili Plaza faces competition from several other retail
locations in the Napili area.
In June of 1993 Kaahumanu Center Associates (KCA) was formed to
finance the expansion of and to own and operate the Kaahumanu Center. KCA
is a partnership between the Company as general partner and the Employees'
Retirement System of the State of Hawaii as a limited partner. The
renovation which was completed in November of 1994, expanded the Center
from approximately 315,000 to 525,000 square feet of gross leasable area.
(4) Other Information
The Company engages in continuous research to develop techniques to
reduce costs through crop production innovations. Improved production
systems have resulted in increased productivity by the labor force.
Research and development expenses approximated $285,000 in 1994, $416,000
in 1993 and $466,000 in 1992.
The Company has reviewed its compliance with Federal, State and local
provisions which regulate the discharge of materials into the environment.
It does not expect any material financial impact as a result of compliance
with these laws.
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The Company's method of disposing of pineapple processing waste water
utilizes underground injection wells. In recent years, such methods have
come under the scrutiny of the regulatory agencies. The Company's capital
expenditure budget for 1995 includes $2.2 million for a system which will
totally replace the existing method of disposing of processing waste water.
In total, the Company employed approximately 2,000 people in 1994.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales.
Export sales only arise through the pineapple company. Export sales
of pineapple products are made chiefly to Japan, Western Europe and Canada.
For the last three years these sales did not exceed 10% of total
consolidated revenues.
Item 2. PROPERTIES
The Company owns approximately 28,700 acres of land on the island of
Maui. This land, most of which was acquired from 1911 to 1932, is carried
at cost. The Company believes it has clear and unencumbered marketable
title to all of the preceding property except for the following:
(1) a $13,890,000 mortgage loan on Kaahumanu Center;
*(2) a $35,000,000 second mortgage on Kaahumanu Center, securing the bank
construction loan for the Kaahumanu Center renovation; and a $30,588,000
third mortgage to the Employees' Retirement System of the State of Hawaii.
*(3) a mortgage on the fee and leasehold interest of the 36-acre Ritz-
Carlton Kapalua Hotel site, which secures a loan to Kaptel Associates for
$186,250,000;
(4) a perpetual conservation easement granted to the State of Hawaii on a
13-acre parcel at Kapalua;
(5) certain existing easements and rights-of-way that do not materially
affect the Company's use of such property;
*(6) a mortgage on the land underlying the Kapalua Bay Hotel, The Kapalua
Shops, The Bay Club, approximately 12 acres of undeveloped land at Kapalua
and the Napili Plaza, which secures the $30,588,000 loan from the
Employees' Retirement System of the State of Hawaii.
(7) a mortgage on the three golf courses at Kapalua, which secures the
Company's $27.8 million revolving credit arrangement;
(8) a permanent conservation easement granted to The Nature Conservancy, a
non-profit corporation, covering approximately 8,600 acres; and
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(9) a small percentage of the Company's land in various locations on which
multiple claims exist and for which the Company has initiated quiet title
actions.
*See Note 3 to Consolidated Financial Statements in the Maui Land &
Pineapple Company, Inc. 1994 Annual Report to Shareholders.
Approximately 22,400 acres of the Company's land are located in West
Maui, approximately 6,200 acres are located at its Haliimaile plantation in
central Maui, and approximately 60 acres are located in Kahului, Maui. The
22,800 acres in West Maui comprise a largely contiguous parcel which
extends from the sea to an elevation of approximately 5,700 feet and
includes nine 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 Haliimaile property is situated at
elevations between 1,000 and 3,000 feet above sea level on the slopes of
Haleakala.
Approximately 6,500 acres of Company-owned land are used directly or
indirectly in the pineapple operations and approximately 1,500 acres are
designated for the Kapalua resort. The Kahului acreage includes offices, a
can manufacturing plant and pineapple processing cannery, interconnected
warehouses at the cannery site where finished product is stored and the
Kaahumanu Center. The remaining land is primarily in pasture or forest
reserve.
Approximately 2,800 acres of leased land are used in the Company's
pineapple operations. A major operating lease covers approximately 1,500
acres of land. The balance of the leased property is covered under eight
leases expiring variously through 2006. The aggregate land rental for
these leases was $398,000 in 1994.
Item 3. LEGAL PROCEEDINGS
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
The information set forth under the caption "Common Stock" on page 19
of the Maui Land & Pineapple Company, Inc. 1994 Annual Report to
Stockholders is incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Selected Financial Data"
on page 20 of the Maui Land & Pineapple Company, Inc. 1994 Annual Report to
Stockholders is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" on pages 21 through 23 of the Maui Land & Pineapple
Company, Inc. 1994 Annual Report to Stockholders is incorporated herein by
reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The "Independent Auditors' Report," "Consolidated Financial
Statements," "Notes to Consolidated Financial Statements" on pages 7
through 18 of the Maui Land & Pineapple Company, Inc. 1994 Annual Report to
Stockholders are incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the captions "Compliance with Section
16(a) of the Exchange Act" and "Election of Directors" on pages 6 through 8
of the Maui Land & Pineapple Company, Inc. Proxy Statement, dated March 31,
1995, is incorporated herein by reference.
The Company has the following executive officers:
Principal Occupation
Name During Last 5 Years
Joseph W. Hartley, Jr. President & Chief Executive Officer
(Age 61) since June 1992; Executive Vice
President/Pineapple from 1979 to
1992.
Gary L. Gifford Executive Vice President/Resort
(Age 47)
Paul J. Meyer Executive Vice President/Finance
(Age 47)
Richard H. Cameron (1) Vice President/Property Management
(Age 40) since 1990; Vice President/Planning
& Development of Kapalua Land
Company, Ltd. from 1985 to 1990.
Douglas R. Schenk Vice President/Pineapple since 1993;
(Age 42) Cannery Manager of Maui Pineapple
Company, Ltd. since 1989.
(1) Richard H. Cameron is the grandson of Frances B. Cameron, Director
Emeritus, and the nephew of Mary C. Sanford, Chairman of the Board.
Item 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation"
on pages 9 through 13 of the Maui Land & Pineapple Company, Inc. Proxy
Statement, dated March 31, 1995, is incorporated herein by reference.
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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Security Ownership of
Certain Beneficial Owners and Management" on pages 4 through 6 of the Maui
Land & Pineapple Company, Inc. Proxy Statement, dated March 31, 1995, is
incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Compensation Committee
Interlocks and Insider Participation" on page 13 of the Maui Land &
Pineapple Company, Inc. Proxy Statement, dated March 31, 1995, is
incorporated herein by reference.
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PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following Financial Statements and Supplementary Data of Maui Land
& Pineapple Company, Inc. and subsidiaries and the Independent Auditors'
Report are included in Item 8 of this report:
Consolidated Balance Sheets, December 31, 1994 and 1993
Consolidated Statements of Operations and Retained Earnings for
the Years Ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
(a) 2. Financial Statement Schedules
The Financial Statements of Kaptel Associates for the Years Ended
December 31, 1994, 1993 and 1992 are filed as exhibits.
(a) (3) Exhibits
Exhibits are listed in the "Index to Exhibits" found on pages 16 to 17
of this Form 10-K.
(b) (3) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MAUI LAND & PINEAPPLE COMPANY, INC.
March 29, 1995 By /s/JOSEPH W. HARTLEY, JR.
Joseph W. Hartley, Jr.
President & 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/MARY C. SANFORD Date March 29, 1995
Mary C. Sanford
Chairman of the Board
By /s/PAUL J. MEYER Date March 29, 1995
Paul J. Meyer
Executive Vice President/Finance
By /s/TED PROCTOR Date March 29, 1995
Ted Proctor
Controller & Assistant Treasurer
By /s/PETER D. BALDWIN Date March 29, 1995
Peter D. Baldwin
Director
By /s/RICHARD H. CAMERON Date March 29, 1995
Richard H. Cameron
Director
By /s/LANSING E. EBERLING Date March 29, 1995
Lansing E. Eberling
Director
By /s/RANDOLPH G. MOORE Date March 29, 1995
Randolph G. Moore
Director
By /s/FRED E. TROTTER III Date March 29, 1995
Fred E. Trotter III
Director
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INDEX TO EXHIBITS
The exhibits designated by an asterisk (*) are filed herein. The exhibits not
so designated are incorporated by reference to the indicated filing. All
previous exhibits were filed with the Securities and Exchange Commission in
Washington D. C. under file number 0-4674.
3. Articles of Incorporation and By-laws
3(i) Articles of Incorporation (Amended as of 4/19/79). Exhibit 3 to
Form 10-K for the year ended December 31, 1980.
3(ii) By Laws (Amended as of 2/26/88). Exhibit (3ii) to Form 10-Q for
the quarter ended September 30, 1994.
10. Material Contracts
10.1(i) Revolving and Term Loan Agreement, dated as of December 31, 1992.
Exhibit (10)A to Form 10-K for the year ended December 31, 1992.
(ii) First Loan Modification Agreement, dated and effective as of March
1, 1993. Exhibit (10)A to Form 10-Q for the quarter ended March 31,
1993.
(iii) Second Loan Modification Agreement, dated September 8, 1993.
Exhibit (10)B to Form 10-Q for the quarter ended September 30,
1993.
(iv) Third Loan Modification Agreement, dated September 30, 1994.
Exhibit (10)B to Form 10-K for the year ended December 31, 1993.
(v) Fourth Loan Modification Agreement, dated March 8, 1994. Exhibit
(10)A to Form 10-K for the year ended December 31, 1993.
*(vi) Fifth Loan Modification Agreement, dated as of December 31, 1994.
Attached.
10.2(i) Limited Partnership Agreement of Kaahumanu Center Associates, dated
June 18, 1993. Exhibit (10)A to Form 10-Q for the quarter ended
June 30, 1993.
(ii) Cost Overrun Guaranty Agreement, dated June 28, 1993. Exhibit
(10)B of Form 10-Q for the quarter ended June 30, 1993.
(iii) Environmental Indemnity Agreement, dated June 28, 1993. Exhibit
(10)C to Form 10-Q for the quarter ended June 30, 1993.
(iv) Indemnity Agreement, dated June 28, 1993. Exhibit (10)D to Form
10-Q for the quarter ended June 30, 1993.
(v) Direct Liability Agreement, dated June 28, 1993. Exhibit (10)E to
Form 10-Q for the quarter ended June 30, 1993.
10.3(i) Note Purchase Agreement between John Hancock Mutual Life Insurance
Company and Maui Land & Pineapple Company, Inc., dated September 9,
1993. Exhibit (10)A to Form 10-Q for the quarter ended September
30, 1993.
(ii) First Amendment to Note Purchase Agreement dated as of March 30,
1994. Exhibit (10)A to Form 10-Q for the quarter ended March 31,
1994.
10.4 The following relate to the Ritz-Carlton Kapalua Hotel:
Partnership Agreement; Development Agreement; Operating Agreement;
Hotel Ground Lease; Supplemental Agreement; Construction Loan
Agreement; Promissory Note; Real Property Mortgage; Leasehold
Mortgage. Exhibit (10)A-I to Form 10-Q for the quarter ended
September 30, 1990.
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10.5 Partnership Agreement of Plantation Club Associates, dated November
10, 1988. Exhibit (10)A to Form 10-K for the year ended December
31, 1988.
10.6 $15 million Promissory Note, dated March 31, 1986, for the
acquisition of Kaahumanu Center. Exhibit (10)C to Form 10-K for
the year ended December 31, 1986.
10.7 Compensatory plans or arrangements
(i) Executive Deferred Compensation Plan (revised as of 8/16/91).
Exhibit (10)A to Form 10-Q for the quarter ended September 30,
1994.
(ii) Executive Insurance Plan (Amended). Exhibit (10)A to Form 10-K for
the year ended December 31, 1980.
(iii) Remunerative agreement between Maui Land & Pineapple Company, Inc.
and Paul J. Meyer, Executive Vice President/Finance. Exhibit (10)A
to Form 10-Q for the quarter ended June 30, 1984.
(iv) Supplemental Executive Retirement Plan (effective as of January 1,
1988). Exhibit (10)B to Form 10-K for the year ended December 31,
1988.
10.8 Hotel Ground Lease between Maui Land & Pineapple Company, Inc. and
The KBH Company. Exhibit (10)B to Form 10-Q for the quarter ended
September 30, 1985.
11. Statement re computation of per share earnings: Net Income (Loss)
divided by weighted Average Common Shares Outstanding equals Net
Income (Loss) Per Common Share.
13.* Annual Report to security holders. Maui Land & Pineapple Company,
Inc. 1994 Annual Report.
21. Subsidiaries of registrant:
All of the following were incorporated in the State of Hawaii:
Maui Pineapple Company, Ltd.
Kapalua Land Company, Ltd.
Kapalua Investment Corp.
Kapalua Water Company, Ltd.
Kapalua Waste Treatment Company, Ltd.
Honolua Plantation Land Company, Ltd.
27.* Financial Data Schedule.
99. Additional Exhibits
99.1* Financial Statements of Kaptel Associates for the years ended
December 31, 1994 and 1993.
99.2* Maui Land & Pineapple Company, Inc. Proxy Statement dated March 31,
1995.
FIFTH LOAN MODIFICATION AGREEMENT
FIFTH LOAN MODIFICATION AGREEMENT, dated effective as
of December 31, 1994 (the "Amendment"), by and among MAUI LAND
& PINEAPPLE COMPANY, INC. (the "Borrower") and BANK OF HAWAII,
a Hawaii banking corporation ("BKOH"), FIRST HAWAIIAN BANK, a
Hawaii banking corporation ("FHB"), BANK OF AMERICA, NATIONAL
TRUST AND SAVINGS ASSOCIATION, a national banking association
("BOA"), CENTRAL PACIFIC BANK, a Hawaii banking corporation
("CPB" and, together, with BKOH, FHB, and BOA, the "Lenders")
and BANK OF HAWAII, as Agent for the Lenders (in such capacity,
together with its successors in such capacity, the "Agent"),
W I T N E S S E T H:
WHEREAS, the Borrower, Lenders and Agent are parties
to that certain Revolving and Term Loan Agreement, dated as of
December 31, 1992, as amended by a First Loan Modification
Agreement, dated as of March 1, 1993, and supplemented by
letter agreements dated April 30, 1993 and June 24, 1993, and
further amended by Second Loan Modification Agreement, dated
September 8, 1993, by a Third Loan Modification Agreement,
dated September 30, 1993, and by a Fourth Loan Modification
Agreement, dated March 8, 1994, each among the Borrower and the
Lenders (as so amended and supplemented, the "Loan Agreement"),
pursuant to which the Lenders have made Loans to the Borrower
on the terms and conditions stated therein; and
WHEREAS, the Borrower, Lenders and Agent have agreed
to amend the Loan Agreement and the Notes (as such term is
defined in the Loan Agreement) for the purposes of, among other
things, amending and restating certain covenants of the
Borrower set forth in the Loan Agreement, all as set forth in
this Amendment;
NOW, THEREFORE, in consideration of the premises and
for other good and valuable consideration, the receipt and suf-
ficiency of which are hereby acknowledged, and intending to be
legally bound hereby, each of the Borrower, Lenders and Agent
agree as follows:
SECTION 1. Definitions. Capitalized terms used
herein and not otherwise defined herein shall have the meanings
ascribed to them in the Loan Agreement.
SECTION 2. Amendments to Loan Agreement.
(a) Effective on and after the Effective Date (as
such term is defined in Section 6 of this Amendment), Section
1.04a of the Loan Agreement is amended and restated in its
entirety to read as follows:
"1.04a 'Commitment Reduction Date' means each
of the following dates:
(i) the earlier of (a) March 31, 1995 and (b)
the date that the Aggregate Loan Commitment is reduced to
$23,000,000 or less (the earlier of such dates is herein
referred to as the 'First 1995 Commitment Reduction
Date'); and
(ii) each date on which the Borrower or any
Subsidiary receives any amount in respect of the sale of
any of its real estate assets."
(b) Effective on and after the Effective Date,
Section 1.05 of the Loan Agreement is amended and restated in
its entirety to read as follows:
"1.05 "Consolidated Current Assets" and
"Consolidated Current Liabilities" mean, at any time, all
assets or liabilities, respectively, that, in accordance
with generally accepted accounting principles consistently
applied, should be classified as current assets or current
liabilities, respectively, on a consolidated balance sheet
of the Borrower and its Subsidiaries, except that
"Consolidated Current Assets" shall not include growing
crops and that "Consolidated Current Liabilities" shall
not include the aggregate outstanding principal amount of
the Loans, together with accrued and unpaid interest
thereon, at the time of determination."
(c) Effective on and after the Effective Date,
Section 2.06(A)(1) of the Loan Agreement is amended and re-
stated in its entirety to read as follows:
"A. Mandatory Reduction. On January 1, 1994,
the Aggregate Loan Commitment was reduced to $35,000,000;
and on each Commitment Reduction Date thereafter, the
Aggregate Loan Commitment shall be reduced to the amount
set forth below with respect to such Commitment Reduction
Date:
(1) If not earlier permanently reduced to
$23,000,000 or less, at the close of business on the First
1995 Commitment Reduction Date, the Aggregate Loan Com-
mitment in effect at the opening of business on such date
shall be reduced to Twenty-three Million Dollars
($23,000,000.00); and"
(d) Effective on and after the Effective Date, Section
5.01(F) of the Loan Agreement is amended and restated in its
entirety to read as follows:
"(F) The Borrower will maintain:
(1) At all times on and after January 1,
1994, a Current Ratio not less than 1.90;
(2) A Recourse Debt/Net Worth Ratio not
more than (a) 0.90 at December 31, 1994 and at March 31,
1995, and (b) 0.90 at June 30, 1995 (for the purposes of
this covenant, KCA's debt approved by the Lenders pur-
suant to the last sentence in Section 5.02(I) of this
Agreement, and any KCA debt which is Nonrecourse to the
Borrower, shall be disregarded); and
(3) A minimum Net Worth of at least (a)
$60,000,000 at December 31, 1994 and (b) $57,000,000 at
March 31, 1995 and thereafter."
(e) Effective on and after the Effective Date,
Section 5.02(D) of the Loan Agreement is amended and restated
in its entirety to read as follows:
"(D) Neither the Borrower nor any Subsidiary
will make any Capital Expenditures or any Investments, or
both, in any of the fiscal years listed below in column
(a) which, together with all other Capital Expenditures
and Investments made by the Borrower and its Subsidiaries
in any such fiscal year, will exceed the amount shown
below opposite such fiscal year in column (b):
(a) (b)
1994 $8.5 million
1995 and thereafter $10.0 million
The foregoing to the contrary notwithstanding, (1) Capital
Expenditures incurred in one fiscal year, within the
foregoing limitations, may be disbursed in the next
following fiscal year, in which case such Capital Expen-
ditures shall be deemed to have been made in the fiscal
year in which they were incurred, and (2) Capital Expen-
ditures made by KCA shall be excluded from the determi-
nation of the Borrower's compliance with this Section
5.02(D)."
(f) Effective on and after the Effective Date,
Section 5.02(H) of the Loan Agreement is amended and restated
in its entirety to read as follows:
"(H) Neither the Borrower nor any Subsidiary,
without the prior written consent of all of the Lenders,
will incur, agree to incur, assume, or in any manner
become liable in respect of any Indebtedness for Borrowed
Money (recourse or nonrecourse) other than the indebt-
edness evidenced by the Notes and this Loan Agreement and
additional indebtedness which, together with the in-
debtedness evidenced by the Notes and this Loan Agreement,
shall not cause Total Debt to exceed:
(a) $66,000,000 in the aggregate principal
amount as of December 31, 1993, and
(b) $63,000,000 in the aggregate principal
amount as of March 31, 1994, and
(c) $65,000,000 in the aggregate principal
amount as of June 30, 1994, and
(d) $69,000,000 in the aggregate principal
amount as of September 30, 1994, and
(e) $57,000,000 in the aggregate principal
amount as of December 31, 1994, and
(f) $50,000,000 in the aggregate principal
amount as of March 31, 1995 and thereafter.
For the purposes of this Section 5.02(H), KCA's debt
approved by the Lenders pursuant to the last sentence in
Section 5.02(I) of this Agreement, and any KCA debt which
is Nonrecourse to the Borrower, shall not be deemed to
constitute indebtedness of the Borrower or any Subsi-
diary."
SECTION 3. General Amendments.
All references set forth in the Loan Agreement
(including, without limitation, all exhibits, schedules and
appendices thereto), the Notes, the Mortgage, the Agency
Agreement, the Environmental Indemnity Agreement, the Addi-
tional Security Mortgage and the other documents, instruments
and agreements relating to the Loan Agreement, the Notes, the
Mortgage, the Agency Agreement, the Environmental Indemnity
Agreement, the Additional Security Mortgage or to the loans
made under the Loan Agreement by the Lenders to the Borrower
(collectively, the "Loan Documents") to (i) the Loan Agreement,
is amended to mean and include the Loan Agreement, as
heretofore amended, as amended by this Amendment, and as may be
further amended, modified and supplemented from time to time by
written agreement between the parties hereto, (ii) the Notes,
are amended to mean and include the Notes, as heretofore
amended, as amended by this Amendment, and as may be further
amended from time to time, (iii) the Mortgage, is amended to
mean and include the Mortgage, as amended from time to time,
and (iv) the other Loan Documents, or any of them, are amended
to mean and include such Loan Documents, as amended from time
to time.
SECTION 4. Representations, Warranties and Agree-
ments.
The Borrower hereby:
(a) reaffirms each and all of its representa-
tions and warranties set forth in Section 4.01 of the Loan
Agreement as being true and correct on and as of the date
hereof with the same force and effect as if such representa-
tions and warranties were set forth in full herein (provided
that the representations and warranties set forth in Section
4.01(F) of the Loan Agreement shall for the purposes hereof be
deemed to be made with respect to the Borrower's financial
statements most recently delivered to the Lenders pursuant to
the Loan Agreement);
(b) represents and warrants that no Event of
Default and no event, which with the lapse of time, the giving
of notice or both would constitute an Event of Default, has oc-
curred and is continuing on and as of the date hereof;
(c) represents and warrants that no material
adverse change in the condition (financial or otherwise) of the
Borrower has occurred since the periods covered by the
Borrower's financial statements most recently delivered to the
Lenders pursuant to the Loan Agreement;
(d) represents and warrants that each of this
Amendment, the Loan Agreement, as heretofore amended and as
amended by this Amendment, and each of the Notes, as heretofore
amended and as amended by this Amendment has been duly
authorized, executed and delivered by the Borrower and con-
stitutes the legal, valid and binding obligation of the Bor-
rower and is enforceable in accordance with its terms;
(e) represents and warrants that the execution,
delivery and performance of this Amendment do not and will not
violate articles of incorporation, by-laws, any applicable
laws, rules, regulations, orders, injunctions, writs or decrees
or result in a breach of or constitute a default under any
contract, agreement or instrument to which the Borrower is a
party or by which the Borrower, or its properties are bound, or
result in the creation or imposition of any security interest
in, or lien or encumbrance upon any property or assets of the
Borrower, except in favor of the Lenders; and
(f) represents and warrants that no consent or
withholding of objection, approval or authorization of or
declaration or filing with, or the taking of any other action
by or in respect of any governmental body or regulatory author-
ity or any other Person is required in connection with the
execution, delivery and performance of this Amendment, other
than as may have been obtained or effected prior to the date
hereof, and in respect of which the Borrower shall have no-
tified the Lenders in writing on or prior to the date hereof.
SECTION 5. Effectiveness. Notwithstanding anything
herein to the contrary, the amendments to the Loan Agreement,
Notes and the other Loan Documents set forth in Sections 2, 3
and 4 of this Amendment, shall amend the provisions of the Loan
Agreement, Notes and the other Loan Documents as of De-
cember 31, 1994 (the "Effective Date"), when each and all of
the following conditions precedent shall have been satisfied in
full:
(a) Delivery of this Amendment. Each of the
parties hereto shall have duly executed and delivered to the
Agent this Amendment.
(b) No Default. On and as of the Effective
Date, no Event of Default shall have been declared by the
Lenders under the Loan Agreement.
(c) Payments; Charges; Fees. The Borrower
shall have paid to the Lenders in accordance with the terms of
the Loan Agreement all payments, charges and fees required to
have been paid on or before the Effective Date by the terms of
the Loan Agreement or the other Loan Documents, and in addi-
tion, shall have paid to the Agent for pro rata distribution to
the Lenders an amendment fee in the amount of $20,000.
(d) Consents. There shall have been obtained
all third-party consents, if any, necessary or appropriate to
effect the amendments and consummate the transactions set forth
in this Amendment.
SECTION 6. Limitations. The amendments to the Loan
Agreement, the Notes and the other Loan Documents set forth
hereinabove in Sections 2, 3 and 4 of this Amendment shall be
limited precisely as written and shall not, except as expressly
provided herein, be deemed otherwise to be a consent to any
waiver, amendment or modification of any other terms or condi-
tions of the Loan Agreement, the Notes or any of the other Loan
Documents. The Loan Agreement, the Notes and other Loan
Documents, heretofore amended and as amended hereby, are in all
respects ratified and confirmed and shall remain in full force
and effect.
SECTION 7. Further Assurances. The Borrower shall
take all such further actions and execute and deliver all such
further documents and instruments as the Lenders may from time
to time reasonably request to further evidence or effect the
transactions contemplated by this Amendment.
SECTION 8. Counterparts. This Amendment may be ex-
ecuted in two or more counterparts, each of which shall be an
original hereof, but all of which together shall constitute but
one and the same instrument.
SECTION 9. Headings. The section headings in this
Amendment have been inserted for convenience of reference only
and shall in no manner affect the meaning or interpretation of
the various provisions hereof.
SECTION 10. Governing Law. This Amendment shall be
governed by, and construed in accordance with, the laws of the
State of Hawaii.
SECTION 12. Expenses of the Agent. Without in any
way limiting the obligations of the Borrower under Section 7.04
of the Loan Agreement, the Borrower shall reimburse the Agent
for all of the costs and expenses of the Agent in connection
with the preparation of this Amendment, including, but not
limited to, reasonable attorneys fees and expenses.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed on the date first-above
written.
MAUI LAND & PINEAPPLE COMPANY, INC.
By: /S/ PAUL J. MEYER
Its: EXECUTIVE VICE PRESIDENT/
FINANCE
By: /S/ JOSEPH W. HARTLEY, JR.
Its: PRESIDENT
BANK OF HAWAII, individually
and as Agent
By: /S/ THOMAS A. GRIMES
Its: VICE PRESIDENT
FIRST HAWAIIAN BANK
By: /S/ RAYMOND B. ONO
Its: VICE PRESIDENT &
BRANCH MANAGER
BANK OF AMERICA, NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:/S/ RICHARD E BRYSON
Its: VICE PRESIDENT
CENTRAL PACIFIC BANK
By:/S/ ROBERT D MURAKAMI
Its: VICE PRESIDENT
KAPTEL ASSOCIATES
(a Hawaii General Partnership)
Financial Statements
December 31, 1994 and 1993
With Independent Auditors' Report Thereon
Peat Marwick LLP
303 Peachtree Street, N.E. Suite 2000
Atlanta, GA 30308
Independent Auditors' Report
The Partners
Kaptel Associates:
We have audited the accompanying balance sheets of Kaptel
Associates (a Hawaii General Partnership) as of December 31, 1994
and 1993, and the related statements of loss and partners' capital
(deficit) and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit 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, the financial statements referred to above present
fairly, in all material respects, the financial position of Kaptel
Associates at December 31, 1994 and 1993, and the results of its
operations and its cash flows for the years then in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
that Kaptel Associates will continue as a going concern. As discussed
in note 2 to the financial statements, the Partnership's recurring
losses from operations, net capital deficiency, and the event of
default on its construction loan raise substantial doubt about its
ability to continue as a going concern unless additional debt or
capital infusions are obtained. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
January 25, 1995, except for
the second paragraph of note 2
which is as of February 16, 1995
Member Firm of
Klynveld Peat Marwick Goerdeler
<TABLE>
KAPTEL ASSOCIATES
(a Hawaii General Partnership)
Balance Sheets
December 31, 1994 and 1993
<CAPTION>
ASSETS 1994 1993
<S> <C> <C>
Cash $ 91,956 1,572,458
Cash-restricted (note 7) 45,965 3,840,856
Accounts receivable, net 3,000,344 1,866,004
Inventories 383,575 475,527
Prepaid expenses 30,957 384,190
Loan and interest receivable 5,108,483 5,235,714
(note 5)
Property and equipment, at cost 171,261,448 172,943,983
(notes 4,5,9, and 10)
Less accmulated depreciation 15,276,211 8,195,045
Net property and equipment 155,985,237 164,748,938
Preopening costs 3,924,018 3,924,018
Less accmulated amortization 1,708,230 915,846
Net preopening costs 2,215,788 3,008,172
Deferred loan costs 3,384,378 3,384,378
Less accmulated amortizattion 1,488,213 798,693
Net deferred loan costs 1,896,165 2,585,685
Other assets (note 8) 5,414,543 3,537,377
174,173,013 187,254,921
Liabilities and Partners' Capital (Deficit)
Liabilities:
Construction loan payable 185,119,361 177,477,057
(note 5)
Accrued interest payable 666,903 384,053
Retainage due on construction contract
payable (notes 8 and 10) 2,489,329 4,415,687
Accounts payable 2,046,096 1,373,059
Due to affiliate 538,738 196,274
Advance deposits 1,150,419 2,016,038
Other accrued expenses (note 7) 2,130,305 4,885,206
Total liabilities 194,141,151 190,747,374
Partners' deficit (note 3) (19,968,138) (3,492,453)
Commitments and contingencies
(notes 2,5,6,9, and 10)
$ 174,173,013 187,254,921
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<TABLE>
KAPTEL ASSOCIATES
(a Hawaii General Partnership)
Statements of Loss and Partners' Capital (Deficit)
Years ended December 31, 1994 and 1993
<CAPTION>
1994 1993
<S> <C> <C>
Department revenues:
Room $ 22,023,700 18,848,821
Food and beverage 15,230,082 12,539,115
Other 2,495,928 2,046,382
Total department revenues 39,749,710 33,434,318
Department expenses:
Room 6,879,150 6,671,738
Food and beverage 12,894,696 12,091,783
Other 2,211,221 2,175,150
Total department expenses 21,985,067 20,938,671
Gross operating profit 17,764,643 12,495,647
Unallocated operating expenses:
General and administrative 2,654,169 2,628,706
Advertising and promotion 3,925,808 3,852,850
(note 9)
Management fees (note 9) 1,201,915 1,001,197
Utilities 1,833,801 1,874,904
Repairs and amintenance 2,267,008 2,164,957
Total unallocated operating expenses 11,882,701 11,522,614
Income from hotel operations 5,881,942 973,033
Other expenses:
Depreciation and amortization 8,563,070 8,529,926
Interest and credit support fees,
net of interest income of
$307,056 and $254,823 for 1994
and 1993, respectively (note 9) 10,928,436 8,259,865
Property taxes 839,636 723,000
Insurance 765,609 680,000
Ground rent (note 6) 463,620 211,650
Resort association fees (note 9) 704,291 488,808
Other 92,965 80,865
Total other expenses 22,357,627 18,974,114
Net loss 16,475,685 18,001,081
Partners' capital (deficit), (3,492,453) 14,508,628
beginning of year
Partners; capital (deficit), $ (19,968,138) (3,492,453)
end of year
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<TABLE>
KAPTEL ASSOCIATES
(a Hawaii General Partnership)
Statements of Cash Flows
Years ended December 31, 1994 and 1993
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (16,475,685) (18,001,081)
Adjustments to reconcile net loss
to net cash used in operating
activities: Depreciation and
amortization 8,563,070 8,529,926
Increase in accounts receivable (1,134,340) (794,730)
Decrease (increase) in inventories 91,952 (190,037)
Decrease (increase) in prepaid expenses 353,233 ( 99,966)
Increase in other assets (1,877,166) (3,537,377)
Increase (decrease) in accounts payable 673,037 (613,654)
Increase in accrued interest payable 282,850 42,115
Increase (decrease) in advance deposits (865,619) 233,987
Increase (decrease) in other
accrued expenses (552,075) 3,835,303
Net cash used in
operating activities (10,940,743) (10,595,514)
Cash flows from investing activities:
Additions to property and
equipment (520,291) (1,812,250)
Decrease in construction contract
payable (1,926,358) (7,205,713)
Decrease (increase) in loan and
interest receivable 127,231 (43,174)
Net cash used in
investing activities (2,319,418) (9,061,137)
Cash flows from financing activities:
Proceeds from building loan
payable 7,642,304 22,778,564
Net advances from affiliates 342,464 19,396
Net cash provided by
financing activities 7,984,768 22,797,960
Net (decrease) increase in cash (5,275,393) 3,141,309
Cash at beginning of year 5,413,314 2,272,005
Cash at end of year $ 137,921 5,413,314
Supplemental disclosure of cash flow information-
interest paid during the year $ 10,690,142 8,122,573
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
KAPTEL ASSOCIATES
(a Hawaii General Partnership)
Notes to Financial Statements
December 31, 1994 and 1993
(1) Summary of Significant Accounting Policies
(a) General
Kaptel Associates, a Hawaii General Partnership (Partnership), was formed
on September 26, 1990 by NI Hawaii Resort, Inc. (NIHR), a Hawaii
Corporation, Kapalua Investment Corp. (Kapalua), a Hawaii Corporation and
Maui Hotels, a Georgia Limited Partnership.
The Partnership was formed for the purpose of acquiring, owning, and
developing the 550-room luxury class Ritz-Carlton Hotel and Tennis Center
in Kapalua Bay, Maui, Hawaii.
(b) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is calculated on the straight-line method over the estimated useful
lives of the respective assets.
(c) China, Glass, Silverware, and Linen
The cost basis of initial china, glass, silverware, and linen inventories has
been capitalized. All subsequent replacements are charged to expense.
(d) Preopening Costs
Preopening costs of the hotel are being amortized on the straight-line
method over five years.
(e) Deferred Loan Costs
Costs incurred to obtain the construction loan have been capitalized and are
being amortized on the straight-line method over the term of the
indebtedness.
(f) Income Taxes
Earnings and losses from the Partnership are passed through to the individual
partners. Tax expense (benefit), therefore, is not provided for on the books
of the Partnership.
KAPTEL ASSOCIATES
(a Hawaii General Partnership)
Notes to Financial Statements
(2) Going Concern Considerations
Since the opening of the Hotel on October 29, 1992, the Partnership has
experienced significant net losses from operations which have been financed
through funds specifically identified for that purpose from the construction
loan. At December 31, 1994, the Partnership has $1,130,639 remaining to
be drawn under its construction loan to fund operating deficits and remaining
amounts due under the construction contract. In addition to funding possible
future cash operating deficits, the Partnership is required to make a one-time
mandatory principal repayment under the construction loan at the discretion
of the lender equal to the excess loan balance over 75% of the appraised
value of the Hotel plus any undrawn amounts from two letters of credit
aggregating $35,000,000 (note 5). The letters of credit have been provided
by NIHR as additional security under the construction loan. A $15,000,000
letter of credit is available to fund operating deficits and debt service. The
remaining $20,000,000 letter of credit is available to fund construction costs
under a completion guaranty or can be drawn in the event of a default under
the loan agreement. The amount of the required repayment is not presently
determinable as the appraised value is unknown.
On February 15, 1995, the Partnership defaulted on its construction loan for
nonpayment of interest when due of approximately $864,000. The lender has
declared an event of default and can exercise its rights of remedies against
the Partnership.
These factors raise substantial doubt about the Partnership's ability to
continue as a going concern unless additional capital infusions or a
forbearance agreement on principal and interest payments are obtained. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
(3) Partnership Agreement
The Partner capital contributions made pursuant to the Partnership
Agreement are as follows:
Partnership Capital
interests contributions
NIHR 50 % $ 20,000,000
Kapalua 25 50
Maui Hotels 25 50
100 % $ 20,000,100
The Partnership Agreement required NIHR to make initial capital
contributions of up to $20,000,000. NIHR is entitled to receive a cumulative
preferred return on its capital contribution as follows:
*Prior to the date of the initial funding under the construction loan
agreement (note 5), at the rate of LIBOR plus 150 basis points, simple
interest, computed on the paid-in and unreturned capital contribution. Any
unpaid preferred return will accrue interest at 10% compounded monthly.
KAPTEL ASSOCIATES
(a Hawaii General Partnership)
Notes to Financial Statements
*Commencing on the date of the initial funding of the construction
loan agreement and continuing through date of completion of the hotel, at
the rate in effect under the construction loan agreement, computed on the
paid-in and unreturned capital contribution. Any unpaid preferred return
will accrue interest at 10% compounded monthly.
*Subsequent to the completion of the hotel, at the rate of 8% simple
interest computed on the paid-in and unreturned capital contribution. Any
unpaid preferred return will accrue interest at 10% compounded annually.
*The preferred return accrued during the construction of the hotel
and will be paid monthly from available cash flow (as defined) subsequent
to the hotel opening.
The cumulative unpaid preferred return due NIHR was $7,637,741 and
$5,488,856 at December 31, 1994 and 1993, respectively.
The Partnership Agreement provides for advances and additional capital
contributions (cash calls) to the Partnership by all partners to meet
additional funding requirements, if necessary.
In accordance with the Partnership Agreement:
1. Net profits (as defined below) are to be allocated:
(i) In an amount up to the excess of the sum of all Cash Flow (as
defined) over the sum of the aggregate amount of net profits previously
allocated to the partners shall be allocated in proportion to relative amounts
by which the sum of the partners' respective shares of cash flow exceeds the
aggregate amount of net profits previously allocated to the partners; and
(ii) Then, in proportion to the respective Partnership interests.
2. Net losses (as defined below) are to be allocated in proportion to the
respective Partnership interests. Net losses otherwise allocable to a partner
which exceed such Partners' share of Minimum Gain, as defined in the
Internal Revenue Code, shall be allocated first to the other Partners in
proportion to, and to the extent of, the positive balances, if any, in their
respective Capital Accounts, and then to all of the Partners in proportion
to their respective Partnership interests.
Net profit or net loss is defined as the Partnership's taxable income or
taxable loss as determined under Section 703(a) of the Internal Revenue
Code and Treasury Regulation Section 1.703-1.
Application of Gross Receipts (as defined) and distributions of Cash Flow
are governed by the Partnership Agreement.
KAPTEL ASSOCIATES
(a Hawaii General Partnership)
Notes to Financial Statements
(4) Property and Equipment
The cost basis of property and equipment is summarized as follows:
<TABLE>
1994 1993
<S> <C> <C>
Building and building equipment $ 144,209,996 146,169,759
Furniture, fixtures, and
equipment 23,030,014 21,001,804
China, glass, silverware, and linen 1,422,000 1,422,000
Artwork and antiques 2,322,715 2,322,715
Automobiles 276,723 276,723
$171,261,448 171,193,001
</TABLE>
(5) Construction Loan Payable
The Partnership has entered into a construction loan agreement (Agreement)
with a lender which permits borrowings up to $186,250,000 to finance the
construction of the hotel. The loan principal accrues interest at a prime rate
(as defined) plus .50% or an optional alternate rate (as defined) equal to
LIBOR plus 1.50%. Subsequent to the completion of the hotel and tennis
center, the Partnership has the option of converting the interest rate to a
fixed rate (as defined) for the remaining term of the indebtedness. Interest
is payable monthly in arrears with principal and accrued interest due at the
maturity date of September 25, 1997.
The Agreement is secured by a first fee simple mortgage on the hotel and
tennis center, including personal property and fixtures and a first leasehold
mortgage encumbering the hotel and tennis center site and the Partnership's
interest as lessee under the hotel ground lease (note 6). Further, as additional
security under the Agreement, the Partnership has granted to the lender, a
security interest in the Operating Agreement (note 9) and the Development
Agreement (note 9). The Agreement is secured in part by two letters of
credit aggregating $35,000,000 provided by NIHR on behalf of the
Partnership. A $15,000,000 letter of credit is available to fund operating
deficits and debt service. The remaining $20,000,000 letter of credit is only
available to fund construction costs under a completion guaranty; however,
both letters of credit can be drawn by the lender in the event of default
under the Agreement.
Pursuant to the Agreement, the Partnership is required to make a one-time
mandatory principal payment at the discretion of the lender equal to the
amount by which the outstanding loan principal exceeds 75% of the
appraised value of the secured property plus the undrawn balance of the
letters of credit. This provision is exercisable by the lender at any time
subsequent to the two-year anniversary of the completion of the hotel (as
defined in the Agreement).
KAPTEL ASSOCIATES
(a Hawaii General Partnership)
Notes to Financial Statements
In connection with the project financing, an affiliate of NIHR guaranteed
to the Lender the lien-free completion of the hotel and premises.
Pursuant to the Partnership Agreement, the Partnership was obligated to
pay a fee equal to 3% of certain construction costs in consideration of this
guaranty. Through December 31, 1993, the Partnership had capitalized
$3,327,999 for such fees paid to the NIHR affiliate. In connection with
the financing of the hotel, The Ritz-Carlton Hotel Company (RCHC),
general partner of Maui Hotels, has guaranteed, among other things, to
the NIHR affiliate the construction of the hotel for the approved
budgeted amount (note 10).
The Partnership has entered into a supplemental loan agreement with an
affiliate of Kapalua to provide $4,750,000 from the proceeds of the
Agreement to fund certain off-site improvements. The loan bears interest
at the same rate as the Agreement and is secured by rents payable under
the hotel ground lease described in note 6. The loan is to be repaid by
offsetting rent payable under the lease until the loan principal and interest
is paid in full. Interest accrued during the years ended December 31, 1994
and 1993 amounted to $307,056 and $254,823, respectively. Rent of
$463,620 and $211,650, less excise taxes of $18,546 and $8,436,
respectively, which were separately paid, were offset against the
supplemental loan during 1994 and 1993, respectively.
(6) Hotel (6) Hotel Ground Lease
On September 26, 1990, the Partnership entered into a 99-year hotel ground
lease (Lease) with Maui Land and Pineapple Company, Inc. (Lessor), an
affiliate of Kapalua to lease the hotel and tennis center sites. The significant
terms of the Lease require rental payments as follows:
(1) No Annual Minimum Rent (as defined) is payable until after the hotel
is completed and open to the public;
(2) During the first four Rental Years (as defined), the Partnership is
obligated to pay Annual Minimum Rent equal to the greater of:
( i) Net Cash Flow (as defined) but not to exceed 5% of Gross Revenues
(as defined) - (defined as Contingent Rent); or
(ii) A stipulated percentage of Gross Revenues (Contract Rent) as
follows:
Rental year Percentage
1st 0.5%
2nd 1.0
3rd 1.5
4th 2.0
5th 5.0
(3) During the fifth through tenth Rental Years, no Annual Minimum Rent
is payable to the Lessor. During this period, the Partnership is obligated to
pay Gross Annual Percentage Rent (as defined) to the Lessor equal to 5%
of Gross Revenues.
4) Beginning with the 11th Rental Year and for the remainder of the Lease
term the Partnership will pay the Annual Minimum Rent and Gross Annual
Percentage Rent.
KAPTEL ASSOCIATES
(a Hawaii General Partnership
Notes to Financial Statements
(5) Beginning with the 11th Rental Year and for the remainder of the
Lease term, the Gross Annual Percentage Rent will be the amount by
which 5% of the Gross Revenues of such year exceed the Annual
Minimum Rent.
(6) During the 11th through 20th Rental Year, the Annual Minimum
Rent will be 5% of 75% of the average annual gross revenues of the last
five rental years (6th through l0th Rental Years).
(7) During each successive ten-year period, the Annual Minimum Rent
for each ten-year period will be 5% of 75% of the average annual Gross
Revenues of the ten Rental Years of the immediately preceding ten-year
period, but in no event less than the Annual Minimum Rent for the
immediately preceding ten-year period.
(8) Annual Minimum Rent and Gross Annual Percentage Rent are
payable in monthly installments to the Lessor with provisions for
estimation and periodic adjustments based on actual operating results.
(9) Additional rent is payable to the Lessor in an amount equal to excise
taxes payable on the rents payable to the Lessor.
The Partnership expensed $463,620 and $211,650 in ground lease rents for
the years ended December 31, 1994 and 1993, respectively.
In addition, the Partnership entered into an Operating Agreement with
Kapalua for the adjoining tennis center, whereby the Partnership, as
owners of the tennis center, is responsible for its construction and major
capital repairs and maintenance and the operator, Kapalua, is responsible
for normal day-to-day costs. Beginning January 1, 1993, the owners
received a fee equal to 1.0% of tennis center revenues for 1993, and will
receive fees of 1.5% for 1994, 2.0% for 1995, and 2.5% for the remaining
term (through 2007). This agreement can be renewed for four additional
10-year periods. The Partnership recognized income of $12,241 and
$9,404 relating to the operation of the tennis center for the years ended
December 31, 1994 and 1993, respectively.
(7) Restricted Cash
During 1993, the Partnership received a settlement for $4,689,549 relating to
certain construction deficiencies performed by a subcontractor. The
construction lender has a security interest in the settlement proceeds as
amounts are restricted to the actual construction cost relating to the
deficiencies and repayment of the loan and accrued interest thereon.
Included in other accrued expenses at December 31, 1993 is the unexpended
settlement of $3,840,856. The construction deficiency was cured during 1994,
and the Partnership used $2,238,883 of the settlement proceeds to pay 1994
accrued interest relating to the construction loan.
KAPTEL ASSOCIATES
(a Hawaii General Partnership)
Notes to Financial Statements
(8) Other Assets
The Partnership has filed a claim against the Hotel and Tennis Center's
general contractor, a subcontractor, the general contractor's guarantor,
and the general contractor's surety, arising from settlement of the soil
underlying portions of the hotel. The Partnership is seeking undisclosed
damages in its complaint. The Partnership has capitalized and separately
classified as other assets direct costs of $5,414,543 and $3,537,377
incurred in remediating the foundation and settlement problem at
December 31, 1994 and 1993, respectively. At December 31, 1994, the
identified soil settlement problems have been remediated and no additional
costs relating to these problems are anticipated. The partnership has
entered into an interim agreement with the general contractor, pending
resolution of the claim against the subcontractor, whereby $2,468,227 of
the retainage payable can be offset against the costs to cure the soil
settlement problems.
(9) Other Related Party Transactions
The Partnership has entered into an Operating Agreement with RCHC for
the management and operation of the hotel. The operator's fee is
calculated on a fiscal year basis equal to a base fee equal to 3% of gross
revenues plus an incentive fee equal to 10% of house profit (as defined) -
(not to exceed 5% of gross revenues). Subsequent to the third year of
operations, the base fee increases to 3.5% of gross revenues. The incentive
fee portion of the Operator's Fee is only earned if the House Profit (as
defined) exceeds $20,225,000 and is to be deferred with interest, to the
extent not payable out of net cash flow (as defined). The Operating
Agreement has an initial 25-year term, commencing with the opening of
the hotel, with an option to renew for four additional 10-year periods. In
addition, the Partnership will also pay RCHC a group services fee not to
exceed 1% of gross revenues.
Management fees paid or accrued to RCHC under the operating
agreement totaled $1,201,915 and $1,001,197 for the years ended
December 31, 1994 and 1993, respectively. Group service fees paid or
accrued totaled $400,963 and $333,649 for the years ended December 31,
1994 and 1993, respectively.
The Partnership had a Development Agreement with RCHC to provide
development services (as defined) during the construction period. Through
December 31, 1992, the Partnership had capitalized $8,382,900 in
development fees paid to RCHC or its affiliates pursuant to the
Development Agreement. In addition, the Partnership reimbursed RCHC
or an affiliate thereof and has capitalized $2,117,000 for salaries, travel,
and other reimbursable expenses incurred in developing the hotel through
December 31, 1993.
As additional security for the obligations of the Partnership under the
Agreement described in note 5, NIHR had provided to the Lender on
behalf of the Partnership, two letters of credit aggregating $35,000,000.
The Partnership is obligated to pay NIHR an annual fee equal to 1% of
the drawable amount of the letters of credit for the credit support to be
provided on behalf of the Partnership. The Partnership expensed $350,000
in such fees for each of the years ended December 31, 1994 and 1993.
Amounts drawn, if any, under the letter of credit facilities will be
accounted for as cash calls in accordance with the Partnership Agreement.
KAPTEL ASSOCIATES
(a Hawaii General Partnership)
Notes to Financial Statements
Pursuant to the Hotel Ground Lease, the Partnership must be a member of
the Kapalua Resort Association (KRA) and Kapalua Marketing Association
(KMA), both of which are controlled by Kapalua. The Partnership is to pay
its pro rata share of the annual KRA budget and its pro rata share, up to
1/2% of gross revenues, of the KMA budget. The Partnership paid or
accrued to KRA dues of $505,965 and $488,808 and to KMA dues of
$198,326 and $166,873 for the years ended December 31, 1994 and 1993,
respectively.
(10) Commitment
The Partnership is obligated under construction contracts for the
development of the hotel with an aggregate guaranteed maximum cost of
approximately $112,899,568. At December 31, 1994, payments and accruals
on this contract, including retainage, total approximately $112,421,373. This
commitment is secured in part by a letter of credit in the amount of
$20,000,000 provided by NIHR on behalf of the Partnership.
(11) Disclosures About Fair Value Of Financial Instruments
Cash, Accounts Receivable, Accounts Payable, Construction
Contract Payable, Accrued Expenses, and Due to Affiliate
The carrying amount approximates fair value because of the short-term
maturity of these instruments.
Loan and Interest Receivable and Construction Loan Payable
Given the nonrecourse nature of these loans and the fact the Hotel and
Tennis center have only recently commenced operations, it is not practical
to determine the market value of these loans.
<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
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
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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Maui
Land & Pineapple Company, Inc. Balance Sheet as of December 31, 1994 and the
Statement of Operations for the year then ended, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 2269
<SECURITIES> 0
<RECEIVABLES> 13507
<ALLOWANCES> 0
<INVENTORY> 20537
<CURRENT-ASSETS> 40960
<PP&E> 274490
<DEPRECIATION> 94296
<TOTAL-ASSETS> 235411
<CURRENT-LIABILITIES> 42057
<BONDS> 99180
<COMMON> 12318
0
0
<OTHER-SE> 48111
<TOTAL-LIABILITY-AND-EQUITY> 235411
<SALES> 121918
<TOTAL-REVENUES> 125882
<CGS> 67623
<TOTAL-COSTS> 91174
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5682
<INCOME-PRETAX> (6738)
<INCOME-TAX> (2829)
<INCOME-CONTINUING> (3909)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3909)
<EPS-PRIMARY> (2.18)
<EPS-DILUTED> (2.18)
</TABLE>
<PAGE>
March 31, 1995
To Our Stockholders:
At our annual meeting on May 5, 1995, we plan to consider only two
matters: The election of two directors for a three-year term and the approval
of an auditor.
We know of no other matters likely to be brought up at the meeting.
Your participation is important to the orderly conduct of the Company's
business. We urge you to sign and mail your proxy now. If you later decide
to attend the meeting you can then vote in person, if you wish.
For the Board of Directors,
/s/ MARY C. SANFORD
Mary C. Sanford
Chairman
<PAGE>
MAUI LAND & PINEAPPLE COMPANY, INC.
120 Kane Street, P. O. Box 187
Kahului, Maui, Hawaii 96732-0187
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 5, 1995
TO THE STOCKHOLDERS OF MAUI LAND & PINEAPPLE COMPANY, INC.:
The Annual Meeting of Stockholders of Maui Land & Pineapple Company,
Inc. (the "Company") will be held on Friday, May 5, 1995 at 9:00 a.m. in the
Corporate Office courtyard, 120 Kane Street, Kahului, Hawaii, for the
following purposes:
1. To elect two Class Two Directors to serve for a three-year term or until
their successors are elected and qualified;
2. To elect the firm of Deloitte & Touche LLP as the Auditor of the Company
for fiscal year 1995 and thereafter until its successor is duly elected; and
3. To transact such other business as may properly be brought before the
meeting or any postponement or adjournment thereof.
The close of business on February 25, 1995 is the record date for
determining stockholders entitled to notice of and to vote at the Annual
Meeting or any postponements or adjournments thereof.
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING. IF YOU
ARE UNABLE TO ATTEND IN PERSON, PLEASE SIGN, DATE AND RETURN THE ENCLOSED
PROXY PROMPTLY IN THE ENVELOPE PROVIDED.
Stockholders are cordially invited to attend the meeting in person.
Please indicate on the enclosed proxy card if you plan to attend the meeting
and return the proxy card promptly in the enclosed stamped envelope.
Your attention is directed to the Proxy Statement enclosed.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ ADELE H. SUMIDA
ADELE H. SUMIDA
Secretary
Dated: March 31, 1995
<PAGE>
MAUI LAND & PINEAPPLE COMPANY, INC.
120 Kane Street, P. O. Box 187
Kahului, Maui, Hawaii 96732-0187
March 31, 1995
PROXY STATEMENT
This proxy is solicited on behalf of the Board of Directors of Maui Land
& Pineapple Company, Inc. (the "Company").
The person giving the proxy may revoke it at any time before it is voted
by delivering a written revocation or a signed proxy card bearing a later date
to the Company's Secretary, provided that such revocation or proxy card is
actually received by the Secretary before it is used. Shares of the Company's
common stock represented by properly executed proxies received by the Company
at or prior to the Annual Meeting and not subsequently revoked will be voted
as directed in such proxies. If a proxy is signed and no directions are
given, shares represented thereby will be voted in favor of electing the
Board's nominees for director and in favor of the proposal to elect the
Company's auditor. The proxy confers discretionary authority on the persons
named therein as to all other matters that may come before the meeting.
VOTING SECURITIES AND RIGHT TO VOTE
Holders of record of shares of Common Stock of the Company at the close
of business on February 25, 1995 will be entitled to vote at the Annual
Meeting of Stockholders to be held on May 5, 1995 and at any and all
postponements or adjournments thereof.
The voting securities entitled to vote at the meeting consist of shares
of Common Stock of the Company with each share entitling its owner to one
vote. Shareholders do not have cumulative voting. The number of outstanding
shares at the close of business on February 25, 1995 was 1,797,125.
If a majority of the Company's outstanding shares are represented at the
meeting, either in person or by proxy, a quorum will exist for conducting
business. Election of directors and the auditor will require an affirmative
vote of a majority of shares present. Abstentions, but not broker non-votes,
will be treated as present at the meeting for these purposes. In connection
with the election of directors, a vote to withhold authority will have the
effect of a negative vote.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth information as of February 17, 1995 with
respect to all persons known to the Company to be the beneficial owners of
more than 5% of the Company's Common Stock, other than those listed under
"Security Ownership of Management."
Number Percent
Name and Address of Shares of Class
The J. Walter Cameron Family Group 718,851(1)(3)(4) 40.0%
P. O. Box 187
Kahului, Hawaii 96732
Maui Publishing Company, Ltd. 105,939(4) 5.9%
P. O. Box 550
Wailuku, Hawaii 96793
Ethel S. Baldwin Trust 180,087(1) 10.0%
P. O. Box 187
Kahului, Hawaii 96732
Cameron Family Partnership 99,776(1) 5.6%
P. O. Box 187
Kahului, Hawaii 96732
<PAGE>
Harry Weinberg Family Foundation, Inc. 667,445(2) 37.1%
101 West Mount Royal Avenue
Baltimore, Maryland 21201
Maui Land & Pineapple Company, Inc.
Employee Stock Ownership Trust 150,788(3) 8.4%
c/o Hawaiian Trust Co., Ltd., Trustee
P. O. Box 3170
Honolulu, Hawaii 96802
(1) The J. Walter Cameron Family holdings include 60,297 shares owned
by Mary C. Sanford; 43,051 shares owned by Claire C. Sanford;
43,050 shares owned by Jared B. H. Sanford; 36,160 shares owned by
Richard H. Cameron, his spouse and minor children (includes 1,349
shares allocated as of December 31, 1993 to his account in the
Maui Land & Pineapple Company, Inc. Employee Stock Ownership Plan
["ESOP"]); 35,511 shares owned by Douglas B. Cameron; 4,481 shares
owned by Joseph W. Hartley, Jr. (consisting of shares allocated as
of December 31, 1993 to his account in the Company's ESOP); 39,029
shares owned by the Allan G. Sanford Trust, of which Mary C.
Sanford is the trustee; 51,110 shares owned by the Colin C.
Cameron Trust, of which Richard H. Cameron, Margaret A. C.
Alvidrez, Douglas B. Cameron, Frances E. C. Ort and Hawaiian Trust
Company, Ltd. are co-trustees; 99,776 shares owned by the Cameron
Family Partnership, whose general partners are Mary C. Sanford,
Richard H. Cameron, Claire C. Sanford and Frances E. C. Ort;
180,087 shares owned by the Ethel S. Baldwin Trust, of which
Frances B. Cameron and Hawaiian Trust Company, Ltd. are co-
trustees; 20,360 shares owned by the J. Walter Cameron Trust, of
which Mary C. Sanford, Richard H. Cameron, Margaret A. C.
Alvidrez, Claire C. Sanford and Hawaiian Trust Company, Ltd. are
co-trustees; 105,939 shares owned by Maui Publishing Company,
Ltd., of which Richard H. Cameron is an officer and director,
Frances B. Cameron is a director and Mary C. Sanford is an
officer, director and shareholder (see Note (4) below). Voting
and investment decisions with respect to shares held by the
foregoing trusts with three or more trustees and shares held by
the Cameron Family Partnership generally require approval of a
majority of the trustees or general partners. However, all of the
partnership's general partners must approve dispositions of the
Company's shares. Mrs. Alvidrez has disclaimed sole or shared
voting or dispositive power with respect to shares held by the
trusts of which she is one of the trustees. It is the Company's
understanding that Mrs. Alvidrez and Mrs. Ort (sisters of Richard
H. Cameron and nieces of Mary C. Sanford) are not currently
members of the J. Walter Cameron Family Group. The Company does
not have current information regarding shares owned individually
by Mrs. Alvidrez or Mrs. Ort. Except as indicated above, share
ownership figures for the J. Walter Cameron Family Group exclude
shares owned by the Company's ESOP of which Richard H. Cameron and
Joseph W. Hartley, Jr. are members of the Administrative Committee
(see Note (3) below).
(2) The Harry Weinberg Family Foundation, Inc., a charitable
foundation, owns 667,445 shares. The directors are Darrell D.
Friedman, Zanvyl Krieger, Alfred Coplan, Richard Pearlstone,
Suzanne F. Cohen, Samuel K. Himmelrich Sr., Nathan Weinberg, David
Weinberg, Bernard Siegel, Shale Stiller and Mortimer Caplin. The
Company's records currently show that 300 Corporation (a
corporation formerly owned by Harry Weinberg) owns 50,672 shares;
and Irene Weinberg owns 150 shares. The Company has been advised
by the Harry Weinberg Family Foundation, Inc. that it does not
control, is not controlled by and does not act in concert with the
entity or individual listed.
(3) Joseph W. Hartley, Jr., President of the Company, Gary L. Gifford
and Paul J. Meyer, Executive Vice Presidents of the Company, and
Douglas R. Schenk and Richard H. Cameron, Vice Presidents of the
Company, are members of the Administrative Committee of the
Company's ESOP which was adopted by the Company on December 27,
1978. Except as indicated in Note (1), shares held by the ESOP
are not included in the J. Walter Cameron Family Group holdings
set forth above. The ESOP requires the Trustee to inquire of each
plan participant, on a confidential basis, how to vote the shares
allocated to the plan participant's individual account and to vote
the allocated shares and a corresponding portion of the
unallocated shares accordingly. The trustee is required to vote
shares allocated to participants' accounts for which no
instructions are received and to vote any shares not then
allocated to participants' accounts in the same proportions as the
aggregate shares allocated to participants' accounts are voted
pursuant to participants' instructions.
(4) Maui Publishing Company, Ltd. owns 105,939 shares. Richard H.
Cameron is an officer and director, Frances B. Cameron is a
director and Mary C. Sanford is an officer, director and
shareholder of Maui Publishing Company, Ltd. The shares are
included in the holdings of the J. Walter Cameron Family Group
(see Note (1) above).
<PAGE>
Security Ownership of Management
The following table sets forth information as of February 17, 1995 with
respect to the Company's voting Common Stock beneficially owned by all
directors, nominees and executive officers of the Company as a group (see
"Election of Directors" below).
Number
of Shares
Beneficially Percent
Owned of Class
Mary C. Sanford 325,401(1) 18.1%
Richard H. Cameron 313,345(2) 17.4%
Frances B. Cameron,
non-voting Director Emeritus 286,026(3) 15.9%
Joseph W. Hartley, Jr. 4,481(4) 0.2%
Gary L. Gifford 1,209(4) 0.07%
Paul J. Meyer 2,029(4) 0.1%
Douglas R. Schenk 1,321(4) 0.07%
Peter D. Baldwin 100 0.01%
Lansing E. Eberling 200 0.01%
Randolph G. Moore 500 0.03%
Fred E. Trotter III -- --
Andrew T. F. Ing, non-voting Director Emeritus 200 0.01%
All directors, nominees
and executive officers as a group (12) 724,410(5) 40.3%
(1) Mary C. Sanford, the daughter of Frances B. Cameron and the aunt of
Richard H. Cameron, owns of record 60,297 shares and beneficially
265,104 shares (see Note (1) regarding the J. Walter Cameron Family
Group in the preceding table). She is a Class Three Director (see
"Election of Directors" below).
(2) Richard H. Cameron, the grandson of Frances B. Cameron and the
nephew of Mary C. Sanford, owns of record 33,011 shares and
beneficially 280,334 shares (see Note (1) regarding the J. Walter
Cameron Family Group in the preceding table). Included are 1,349
shares allocated to him as a participant in the Company's ESOP
(see Note (3) regarding the Company's ESOP in the preceding
table). He is a Class Three Director (see "Election of Directors"
below).
(3) Frances B. Cameron, the mother of Mary C. Sanford and the
grandmother of Richard H. Cameron, owns beneficially 286,026
shares (see Note (1) regarding the J. Walter Cameron Family Group
in the preceding table).
(4) Represents shares allocated to these executive officers as participants
in the Company's ESOP (see Note (3) regarding the Company's ESOP in the
preceding table).
(5) Includes 718,851 shares beneficially owned by the J. Walter
Cameron Family Group, but does not include 150,788 shares owned by
the Company's ESOP (see Note (3) regarding the Company's ESOP in
the preceding table).
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act requires the Company's
officers and directors and beneficial owners of more than 10% of the Company's
Common Stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC") and to furnish the Company with
copies of such reports. Based solely upon a review of such reports and
amendments thereto received by the Company during or with respect to its most
recent fiscal year and upon certain written representations, the Company is
required to identify herein any officer, director or 10% beneficial owner who
during the most recent year or any prior year failed to make a filing under
Section 16(a) on a timely basis.
In mid-1994, based on review of Company records, it was concluded that
certain directors, officers and 10% beneficial owners who should have filed
Forms 3 in a prior year had not done so. Therefore, in 1994 Forms 3 were
filed by the following: Maui Publishing Company, Ltd., Ethel S. Baldwin
Trust, J. Walter Cameron Trust, Colin C. Cameron Trust, Cameron Family
Partnership, Jared B. H. Sanford, Claire C. Sanford, Gary L. Gifford, Paul J.
Meyer, Douglas R. Schenk, Richard H. Cameron, Ted L. Proctor, Douglas B.
Cameron, Fred E. Trotter III and Lansing E. Eberling. Form 3 for Randolph G.
Moore was filed two months late in 1994. Form 3 for Adele H. Sumida was filed
seven months late in 1994. It appears that Margaret A. C. Alvidrez and
Frances E. C. Ort should have filed Forms 3 in a prior year, particularly in
view of their membership in the J. Walter Cameron
<PAGE>
Family Group, which owns in excess of 10% of the Company's stock. The Company
has no record of any Section 16(a) filings for these individuals. It is the
Company's understanding that Mrs. Alvidrez and Mrs. Ort are not currently
members of the J. Walter Cameron Family Group. Due to an oversight, Frances
B. Cameron failed to report in prior years two disposition by gift
transactions. These were reported on Form 4 in 1994. Maui Publishing Co.,
Ltd. reported on Form 4 two 1994 purchase transactions six months late.
Richard H. Cameron, Frances B. Cameron, Claire C. Sanford, Jared B. H. Sanford
and Mary C. Sanford, whose reports reflect indirect beneficial ownership of
the shares owned by Maui Publishing Co., Ltd., were also delinquent in
reporting the two purchase transactions.
ELECTION OF DIRECTORS
The By-Laws provide for three classes of directors consisting of two
members in each class with each class holding office for three years. The
first class consists of the two directors elected at the 1994 annual meeting
whose term of office expires in 1997 ("Class One Directors"). The second
class consists of the two directors elected at the 1992 annual meeting whose
term of office expires in 1995 ("Class Two Directors"). The third class
consists of the two directors elected at the 1993 annual meeting whose term of
office expires in 1996 ("Class Three Directors").
The Board recommends the election of the nominees listed below as Class
Two Directors to hold office for three years, until 1998, or until their
successors are elected and qualified. If at the time of the 1995 annual
meeting of stockholders any of such nominees should be unable or decline to
serve, the discretionary authority provided in the proxy will be exercised to
vote for a substitute or substitutes. The Board has no reason to believe that
any substitute nominee or nominees will be required.
The Board's proxy holders will, if so authorized, vote their proxies for
the nominees for Class Two Directors. Shareholders do not have cumulative
voting.
Hawaii law requires that at least one of the directors of the Company be
a resident of the State of Hawaii. All of the Board's nominees for Class Two
Directors and all Class One and Class Three Directors are Hawaii residents.
Under the Company's By-Laws, no person is eligible to be elected as a director
who has attained his or her 70th birthday at the time of election, but the
directors may create exceptions to this requirement by resolution, including
"Director Emeritus."
In 1977 Mrs. J. Walter Cameron was elected a Director Emeritus of the
Company for life in grateful recognition of her many contributions to the
Company. In 1993 Andrew T. F. Ing was elected a Director Emeritus of the
Company in recognition of his long and dedicated service. As Directors
Emeritus, they are eligible to attend all meetings of the Board of Directors
and to have their fees and expenses paid, but they are not eligible to vote
and are not counted as part of the quorum at any meeting.
The following table indicates the principal occupation or employment of
each continuing director and nominee, his or her positions with the Company
and other information, and the year first elected as a director.
Positions and Offices with the Year First
Company and Principal Occupation During Elected
Name Last Five Years and Other Information Director
Class One Directors--Elected in 1994 for a three-year term:
Randolph G. Moore Executive Vice President: H.K.L. Castle 1994
(age 56) Foundation; Chief Executive Officer:
Kaneohe Ranch; Director: Grove Farm
Company, Inc., Maui Land & Pineapple Co.,
Inc., Maui Pineapple Co., Ltd., Kapalua
Land Co., Ltd.
Fred E. Trotter III President: F. E. Trotter, Inc. 1992
(age 64) Trustee: The Estate of James Campbell
(1970-1991); Director: Bancorp Hawaii,
Bank of Hawaii, Bancorp Leasing, Inc.,
Longs Drugs, Maui Land & Pineapple Co.,
Inc., Maui Pineapple Co., Ltd., Kapalua
Land Co., Ltd.
<PAGE>
Positions and Offices with the Year First
Company and Principal Occupation During Elected
Name Last Five Years and Other Information Director
Class Two Directors--Nominees to be elected in 1995 for a three-year term:
Peter D. Baldwin President: Baldwin Pacific Corporation, 1972(1)
(age 57) Baldwin Pacific Properties, Inc., Orchards
Hawaii, Inc., Haleakala Ranch Co.,
Haleakala Properties, Inc.; General
Partner: Baldwin Pacific Farms; Director:
Maui Land & Pineapple Co., Inc., Maui
Pineapple Co., Ltd., Kapalua Land Co.,
Ltd., Bancorp Hawaii, Inc., Bank of
Hawaii, Bishop Insurance Agency of Hawaii,
Inc.
Joseph W. Hartley, Jr. President and Chief Executive Officer: (2)
(age 61) Maui Land & Pineapple Company, Inc.;
President: Maui Pineapple Company, Ltd.
(1969-1992); Director: Maui Pineapple Company,
Ltd., Kapalua Land Company, Ltd.
Class Three Directors--Elected in 1993 for a three-year term:
Mary C. Sanford Chairman: Maui Publishing Co., Ltd., 1972(1)
(age 64) Maui Land & Pineapple Co., Inc.;
Publisher: The Maui News; Director:
Haleakala Ranch Co., Maui Land & Pineapple
Co., Inc., Kapalua Land Co., Ltd.
Maui Pineapple Co., Ltd.
Richard H. Cameron Vice President, Property Management: 1984
(age 40) Maui Land & Pineapple Co., Inc.; Director:
Maui Land & Pineapple Co., Inc., Maui
Pineapple Co., Ltd., Kapalua Land Co., Ltd.
Maui Publishing Co., Ltd.
(1) Mr. Baldwin and Mrs. Sanford were re-elected to the Board in 1980 and
1981, respectively.
(2) Nominated for the first time in 1995.
Certain Transactions
See "Compensation Committee Interlocks and Insider Participation."
Directors' Meetings and Committees
The Board of Directors held five meetings in 1994. It has two standing
committees, the Audit Committee and the Compensation Committee. Each
committee held one meeting in 1994. The Board has no Nominating Committee.
The Audit Committee serves as an independent check on the reliability of
the Company's financial controls and its financial reporting and reviews the
work of the independent auditors. The Compensation Committee reviews and
approves the compensation plans, salary recommendations and other matters
relating to compensation of senior management and directors. The members of
both committees are Andrew T. F. Ing (chairman), Peter D. Baldwin, Lansing E.
Eberling, Randolph G. Moore, Mary C. Sanford and Fred E. Trotter III.
Directors, including Directors Emeritus, receive an attendance fee of
$500 for each Board meeting attended. Since November 1, 1993, no attendance
fees have been paid to directors who are employees of the Company or its
subsidiaries. Directors, including Directors Emeritus, also receive an annual
fee of $10,000. The Chairman of the Board receives an annual fee of $20,000.
Directors who are employees of the Company or its subsidiaries are not
eligible to receive an annual fee. Members of the Audit and Compensation
Committees receive an attendance fee of $500 for each committee meeting
attended.
<PAGE>
EXECUTIVE COMPENSATION
Summary of Cash and Other Compensation
The following table summarizes the cash and non-cash compensation paid
by the Company for services rendered during each of the last three years by
the Company's Chief Executive Officer and four other most highly compensated
executive officers.
Summary Compensation Table
Annual Compensation
All
Name and Other
Principal Position Year Salary Compensation
(2)
Joseph W. Hartley, Jr. 1994 $283,500 $ 64,632
President & Chief 1993 309,750 100,120
Executive Officer 1992 271,238 101,022
Gary L. Gifford 1994 188,194 37,537
Executive Vice 1993 199,276 62,696
President/Resort 1992 192,348 65,351
Paul J. Meyer 1994 175,860 31,304
Executive Vice 1993 190,730 54,568
President/Finance 1992 185,220 58,130
Douglas R. Schenk (1) 1994 145,800 10,630
Vice President/Pineapple 1993 136,300 28,112
Richard H. Cameron 1994 98,711 10,610
Vice President/ 1993 101,848 27,987
Property Management 1992 97,500 30,003
(1) Mr. Schenk became an executive officer in 1993.
(2) Represents imputed income related to excess group life coverage and the
Executive Supplemental Insurance Plan ("ESIP"). It also includes the
value of shares allocated to the executive (participant) in the Employee
Stock Ownership Plan ("ESOP") and the annual increase in value of ESIP
benefits payable after retirement. Directors' meeting attendance fees
are included for 1993 and 1992.
Details of "All Other Compensation" for 1994 are as follows:
Life
Insurance ESOP ESIP Total
(a)
Hartley $5,370 $1,122 $58,140 $64,632
Gifford 1,745 745 35,047 37,537
Meyer 1,196 696 29,412 31,304
Schenk 363 577 9,690 10,630
Cameron 139 391 10,080 10,610
(a) Allocation to an ESOP participant's account is related to
compensation levels. The values shown are the estimated shares to
be allocated to the designated individual's account as of December
31, 1994 valued at $50 per share.
<PAGE>
Executive Supplemental Insurance Plan
The Board adopted an Executive Supplemental Insurance Plan ("ESIP") in
1979 which covers certain management personnel approved by the Board.
Currently 20 individuals are covered, including the officers of the Company.
The Plan provides for benefits which supplement the Group Life Insurance
Program and the Company's Retirement Plan. The program is designed to make
the Company competitive in its efforts to attract, motivate and retain quality
executive talent.
The Company purchased individual life insurance policies on the
participants. Premium payments are in large part offset by borrowing against
the cash values of the policies. The Plan is unfunded and is designed such
that if the assumptions made as to mortality experience, policy dividends and
other factors are realized, the Company's share of the policy proceeds will
cover all its payments.
In 1991 the Plan was amended to include a provision such that benefits
under this plan begin to vest after five years of participation in the
program. The benefit is 100% vested when the participant reaches age 62.
Upon retirement, the participant may elect to continue the life insurance
benefit or to begin receiving the benefit in the form of monthly payments
payable for ten years. If the participant's employment is terminated prior to
retirement, any vested benefit is payable in the form of monthly installments
commencing at age 62.
This Plan is an endorsement program in which the Company endorses part
of the insurance benefit to the beneficiary of the participant. "Life
Insurance" in the "All Other Compensation" table includes the insurance value
of the benefit for each named executive officer in accordance with Internal
Revenue Service Table PS-58.
<PAGE>
Pension Plan
The Company has a non-contributory, defined benefit pension plan that
covers all regular non-bargaining unit employees, including the executive
officers. Participation begins after completion of one year of continuous
service. Retirement benefits are computed based on each participant's years
of service, year of birth, earnings and retirement date and are not subject to
any deduction for social security or other offset amounts. Normal retirement
age for participants is 65, with provisions for retirement as early as 55 and
after age 65. Benefits are payable as a qualified joint and survivor annuity
with options for benefits in other annuity forms. Vesting is 100% after five
years of service.
The Company has a Supplemental Executive Retirement Program (SERP)
covering highly paid employees. The provisions are the same as the defined
benefit pension plan that covers all regular non-bargaining unit employees,
except that benefits are determined as follows: When the benefits of an
employee under the pension plan are reduced because of (1) the maximum annual
benefit limitation ($118,800 in 1994) or (2) the maximum compensation
limitation ($150,000 in 1994), the SERP will provide a benefit to make up the
difference.
The following tables show the estimated benefits in the single life
annuity form at normal retirement age to persons in specified remuneration and
years-of-service classifications.
ESTIMATED CREDITED YEARS OF SERVICE AND COVERED COMPENSATION
on 12/31/94
Covered
Individual Years Compensation
Joseph W. Hartley, Jr. 35.4 $288,500
Gary L. Gifford 6.3 188,194
Paul J. Meyer 9.8 175,860
Douglas R. Schenk 17.3 145,800
Richard H. Cameron 17.1 98,711
ESTIMATED ANNUAL BENEFIT FROM QUALIFIED DEFINED BENEFIT PLAN
AND SUPPLEMENTAL EXECUTIVE RETIREMENT PROGRAM
<TABLE>
<S> <C> <C> <C> <C> <C>
Final
5-Year Years of Service at Age 65
Average
Annual
Salary 15 20 25 30 35
$375,000 $82,309 $109,745 $137,181 $164,617 $182,890
350,000 76,684 102,245 127,806 153,367 170,391
325,000 71,059 94,745 118,431 142,117 157,892
300,000 65,434 87,245 109,056 130,867 145,393
275,000 59,809 79,745 99,681 119,617 132,895
250,000 54,184 72,245 90,306 108,367 120,396
225,000 48,559 64,745 80,931 97,117 107,897
200,000 42,934 57,245 71,556 85,867 95,398
175,000 37,309 49,745 62,181 74,617 82,900
150,000 31,684 42,245 52,806 63,367 70,401
125,000 26,059 34,745 43,431 52,117 57,902
100,000 20,434 27,245 34,056 40,867 45,403
75,000 14,809 19,745 24,681 29,617 32,905
</TABLE>
<PAGE>
Report of Compensation Committee on Executive Compensation
The Compensation Committee of the Board of Directors (the "Committee")
is composed entirely of directors who are not members of the Company's
management. The Board of Directors has charged the Committee with the
responsibility of administering the Company's executive compensation program.
The Committee principally administers executive compensation as part of the
Company's overall salary system which covers all non-bargaining unit
employees. The philosophy of this salary system is to reward good judgment
and to be internally fair and externally competitive. The Committee's
philosophy with regard to executive compensation is to provide a competitive
pay system to attract, retain and motivate executives. The Committee is
assisted from time to time by a national management consulting firm which
advises the Committee on compensation matters.
Executive compensation is primarily comprised of base salary. Salary
mid-points have been provided by Hay Management Consultants with re-
evaluations as conditions warrant. The CEO recommends salary adjustments to
the Committee for executives who report to him based on his qualitative
judgment as to overall job performance, salary mid-points, where the
executive's compensation stands relative to the mid-point and the Company's
overall budget for salaries. The Committee approves a salary adjustment for
the CEO based on its qualitative judgment as to his job performance and within
the same mid-point and budgetary guidelines which are used throughout the
Company.
In 1994 salary mid-points and other factors specified above were not the
primary reasons for the Committee's salary actions. In November of 1993, upon
the recommendation of the CEO, Joseph W. Hartley, Jr., a 10% salary decrease
for himself and the next three highest paid executive officers became
effective. The next 14 highest paid employees of the Company took a 5% salary
decrease and all other non-bargaining unit salaries were frozen. The salary
decreases were part of a company-wide effort to reduce the operating and
administrative costs of the Company.
In March of 1994 the Committee affirmed the salary reduction package
which had been implemented in November of 1993. The Committee's decisions in
that regard, with respect to the CEO and other executive officers, were based
primarily on its view that such reductions were appropriate as a matter of
leadership and fairness in the context of the Company's broader cost reduction
efforts. The amounts of the reductions were not based upon any specific
measures of the Company's performance. Nor did the Committee's decisions
reflect adverse judgments as to performance of the CEO and other executive
officers.
Other aspects of executive compensation are described on pages 9 to 11.
In 1994 there were no new items added to or changes made to such other
compensation.
Compensation Committee:
Andrew T. F. Ing (Chairman) Randolph G. Moore
Peter D. Baldwin Mary C. Sanford
Lansing E. Eberling Fred E. Trotter III
<PAGE>
Shareholder Return Performance Graph
Set forth below is a line graph comparing the cumulative total
shareholder return on Maui Land & Pineapple Company, Inc. common stock against
the cumulative total return of the S&P 500 Index and the S&P 500 Food Group.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
Among Maui Land & Pineapple Company, Inc.,
S&P 500 Index and S&P Food Group
(graph here) -SEE APPENDIX
* $100 invested on December 31, 1989 in common stock of Maui
Land & Pineapple Company, Inc., S&P 500 Index and S&P Food
Group.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee was at any time during the last
complete fiscal year an officer or employee of the Company or any of its
subsidiaries. No member was formerly an officer of the Company or any of its
subsidiaries. However, committee member Mary C. Sanford is the aunt of
Richard H. Cameron.
The Company currently leases approximately 1,600 acres of grazing land
to Haleakala Ranch Company at an annual rent of $14,626. The lease is due to
expire on March 31, 1998. Richard H. Cameron is Vice President of Haleakala
Ranch Company; he and Mary C. Sanford are directors. Committee member Peter
D. Baldwin is President, a major stockholder and a director of Haleakala Ranch
Company.
In 1994 Haleakala Dairy executed a promissory note to the Company for
$95,129 for its prorata share of a shared reservoir and water system. Baldwin
Pacific Corporation is the managing general partner of Haleakala Dairy. Peter
D. Baldwin is President of Baldwin Pacific Corporation.
ELECTION OF AUDITOR
The firm of Deloitte & Touche LLP, independent certified public
accountants, has been the auditor of the Company for many years. The Board of
Directors recommends the election of Deloitte & Touche LLP as the auditor of
the Company for fiscal year 1995 and thereafter until its successor is duly
elected.
A representative of Deloitte & Touche LLP will be present at the annual
meeting of shareholders, will be given an opportunity to make a statement and
will be available to respond to questions raised orally at the meeting or
submitted in writing by shareholders.
<PAGE>
OTHER MATTERS
The Board knows of no other matters that may be brought before the
meeting. However, if any other matters are properly brought before the
meeting, the persons named in the enclosed proxy or their substitutes will
vote in accordance with their best judgment on such matters and discretionary
authority to do so is included in the proxy.
SOLICITATION OF PROXIES
The entire cost of soliciting proxies will be borne by the Company. The
Company may make arrangements with brokerage houses, banks and other
custodians, nominees and fiduciaries to forward proxies and proxy material to
the beneficial owners of the common stock of the Company and to request
authority for the execution of proxies. In such cases, the Company may
reimburse such brokerage houses, banks, custodians, nominees and fiduciaries
for their expenses in connection therewith. Proxies may be solicited in
person or by telephone, telegram or mail by certain directors and officers of
the Company without additional compensation for such services, or by its
Transfer Agent, and the cost will be borne by the Company.
FINAL DATE FOR PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the Company's 1996
annual meeting must be received by the Company at its principal executive
office no later than December 4, 1995.
PROXY INSTRUCTIONS
A form of proxy for the Annual Meeting is enclosed. You are requested
to sign and return your proxy promptly to make certain your shares will be
voted at the meeting. As previously stated, you may revoke your proxy at any
time before it is voted by delivering a written revocation or a signed proxy
card bearing a later date to the Company's Secretary, provided that such
revocation or proxy card is actually received by the Secretary before it is
used. Attendance at the Annual Meeting will not in itself constitute
revocation of a proxy. If you attend the meeting, you may vote your shares in
person if you so decide. For your convenience, a self-addressed envelope is
enclosed; it requires no postage if mailed in the United States.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ ADELE H. SUMIDA
ADELE H. SUMIDA
Secretary
Kahului, Maui, Hawaii
March 31, 1995
<PAGE>
APPENDIX
The graphic image on page 13 of this document has the following graph points:
S&P
ML&P S&P FOOD
---- ---- ----
1989 $100 $100 $100
1990 68 97 143
1991 66 126 139
1992 63 136 125
1993 56 149 123
1994 26 151 129
<PAGE>
