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Maui Land and Pineapple Company Inc Reports Operating Results (10-Q)

August 04, 2009 | About:

Maui Land and Pineapple Company Inc (MLP) filed Quarterly Report for the period ended 2009-06-30.

MAUI LAND & PINEAPPLE CO Inc. is committed to the integration of agriculture natural resource management and eco-effective design principles to create and manage holistic communities. MLP\'s vision of holistic communities is based on the traditional Hawaiian model of ahupua?a a system of self-reliance based on the artful use of land and water resources to sustain island life indefinitely. MLP is a Hawai?i corporation and successor to a business organized in 1909. Its principal operating subsidiaries are Maui Pineapple Company Ltd. a producer and marketer of Maui-grown pineapple and Kapalua Land Company Ltd. operator of Kapalua Resort a master-planned resort community in West Maui. Maui Land and Pineapple Company Inc has a market cap of $59.1 million; its shares were traded at around $7.25 with and P/S ratio of 0.8. Maui Land and Pineapple Company Inc had an annual average earning growth of 23.6% over the past 5 years.

Highlight of Business Operations:

For the six months ended June 30, 2009, we incurred a net loss of $67.4 million and had negative cash flows from operations of $15.1 million. At June 30, 2009, we had amounts outstanding under borrowing agreements of approximately $102 million; and approximately $10.7 million available under existing lines of credit and $1.5 million in cash and cash equivalents. As a result of the continued poor operating results in 2009, we also had negative working capital of $42.7 million and a deficiency in stockholders\' equity (total liabilities exceeded total assets) of $34.9 million. In March 2010, $58.8 million of borrowings under our two lines of credit are scheduled to mature. If we are unable to extend the maturity date of our lines of credit or are unable to meet financial covenants resulting in our borrowings becoming immediately due, we may not have sufficient liquidity to repay such outstanding borrowings. These circumstances raised substantial doubt about our ability to continue as a going concern and there can be no assurance that we will be able to successfully achieve our initiatives in order to continue as a going concern. See Note 1 to condensed consolidated financial statements.

Interest expense was $3.1 million for the second quarter of 2009 compared to $550,000 for the second quarter of 2008. Interest of $58,000 was capitalized to construction projects in the second quarter of 2008; there was no interest capitalized in the second quarter of 2009 as construction projects have been delayed due to the current economic climate and our cash flow constraints. Included in interest expense are credits of $258,000 and $860,000 for the second quarters of 2009 and 2008, respectively, representing the change in fair value of certain interest rate swap agreements. Also included in interest expense for the second quarter of 2009 is a net charge of $736,000 representing accretion on the carrying value of our $40 million convertible notes, less the change in the estimated fair value of the derivative liability that was bifurcated from the notes. In 2009, the increase in interest expense was due to higher average borrowings and higher average interest rates. Our effective interest rate on borrowings was 6.5% in the second quarter of 2009 compared to 5.0% in the second quarter of 2008.

Revenues for the Agriculture segment decreased by 14%, or $749,000, from $5.3 million for the second quarter of 2008 to $4.5 million for the second quarter of 2009, primarily due to a reduction in pineapple juice sales volume and lower average prices for fresh pineapple. Pineapple juice sales represented approximately 5% of the Agriculture segment revenues in the second quarter of 2009 compared to approximately 13% of Agriculture segment revenues in the second quarter of 2008. The Agriculture segment reported an operating loss of $5.0 million for the second quarter of 2009 compared to an operating loss of $4.6 million for the second quarter of 2008. The operating loss for the second quarter of 2009 includes a charge of $1.9 million representing an adjustment to the fair value less selling costs of our property in Kahului that includes our fresh fruit processing plant. The Kahului property is currently held for sale.

Our equity in the income (losses) of Bay Holdings was $(2.0) million (excluding the effect of the $21.3 million impairment charge mentioned above) in the second quarter of 2009 compared to $12.0 million in the second quarter of 2008. Revenues and profit from sale of the whole and fractional residential condominiums were being recognized on the percentage-of-completion method from March 2007 through June 2009 as construction progressed and the pre-sales of the units took place. The construction of the 146 units in six residential buildings were completed in the second quarter of 2009, and the sale of 15 units closed escrow. The lower results in 2009 reflect sales concessions and increased default reserves recorded in 2009.

Consolidated general and administrative expenses decreased by 15%, or $2.7 million to $15.7 million for the first six months of 2009 from $18.4 million for the first six months of 2008.

Interest expense was $4.5 million for the first six months of 2009 compared to $1.9 million for the first six months of 2008. Interest incurred in the first six months of 2009 was $4.6 million of which $18,000 was capitalized. In the first six months of 2008 interest incurred was $2.2 million of which $258,000 was capitalized to construction projects. Interest expense for the first six months of 2009 and 2008 includes a credit of $487,000 and $339,000 representing the change in the estimated fair value of the swap agreements entered into in January 2008 (see Note 15 to condensed consolidated financial statements). Also included in interest expense for the first six months of 2009 is a charge of $119,000 representing interest accretion on our $40 million convertible notes of $1,543,000, less a credit of $1,424,000 representing the change in the estimated fair value of the derivative liability that was bifurcated from the notes. Our effective interest rate on borrowings was 5.6% for the first six months of 2009 compared to 5.2% for the first six months of 2008. The increase in interest expense was due to higher average borrowings and interest rates in the first six months of 2009.

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