Maui Land & Pineapple Co., plagued by mounting losses in its pineapple division, wrapped up its worst year since 1993 with a fourth-quarter loss of $2.2 million. Maui Land & Pineapple
loss worst in 9 yearsPineapples crush its earnings
as the company drops $2.2 million
in the fourth quarter and
$5.7 million in 2002By Dave Segal
dsegal@starbulletin.comThe company, which ended 2002 with a loss of $5.7 million, chose the unusual time of Saturday morning on a three-day holiday weekend to release its results. Chief Financial Officer Paul Meyer said the weekend release was because the audit committee didn't approve the numbers until late Friday afternoon and the company wanted to release the results as soon as possible rather than wait for today, which is a market holiday, or tomorrow.
Maui Land & Pineapple, which had posted annual gains for five years in a row, hadn't lost as much as $5.7 million since 1993 when it dropped $11.1 million.
The company's fourth-quarter loss, which amounted to 31 cents a share, was a turnaround from a gain of $4.6 million, or 63 cents a share, a year earlier. The 2002 loss of $5.7 million, or 79 cents a share, compared with a gain of $7.6 million, or $1.05 a share, in 2001.
Revenues in the quarter fell 2.7 percent to $47,138 from $48,445 a year ago while 2002 revenues dropped 9.9 percent to $155,465 from $172,580 in 2001.
"The results were certainly disappointing," Meyer said. "There were a number of factors that came into play, particularly in the fourth quarter, that resulted in higher levels of expense than the prior year."
Once again, pineapples continued to be a drag on the company's overall business as operating income swung to a $3.3 million loss in the quarter from an operating profit of $724,000 in the year-earlier period. The pineapple segment's operating loss for the year more than tripled to $7.9 million from a loss of $3.2 million in 2001. Meyer said the company had to absorb $840,000 in extra expenses during the quarter related to the dockworker lockout's effect on its canned pineapple business. Higher legal fees, pensions costs and insurance costs also contributed to the loss. The pineapple division has lost money for three consecutive years since posting a $6.1 million operating profit in 1999.
Meyer said the company is taking steps to get the pineapple operations back on track.
"The pineapple business is looked at regularly, at least annually, as a business overall and it's evaluated by the company," Meyer said. "It had very profitable years through most of the '80s, and through most of the '90s has not been profitable. We are in the process of making some pretty dramatic changes to the pineapple business by expanding the volume of higher margin products such as our Hawaiian Gold fresh fruit, fresh-cut pineapples, and single-strength pineapple juice in PET plastic containers. At the same time, the production level and volume of canned products is being reduced. These changes are intended to substantially improve profitability. But these changes do take some time to accomplish."
The company's Kapalua Resort segment also was down sharply for the quarter and year due to the timing of bringing real estate projects to the market. The resort segment had an operating profit of $481,000 in the quarter compared with a profit of $7.1 million in the year-earlier quarter and in 2002 had an operating profit of $2.8 million compared with $19.8 million in 2001.
"We had a substantial volume of real estate sales and profit contributions from two projects in particular, Coconut Grove on Kapalua Bay and Pineapple Hill Estates, that were substantial in 2001 compared with 2002," Meyer said.
Maui Land & Pineapple's commercial property division, which includes the island's largest retail mall, Queen Kaahumanu Center, had an operating gain for the quarter and narrowed its loss from the previous year. The division had a fourth-quarter operating profit of $388,000 compared with a loss of $604,000 a year ago while for the year it narrowed its loss to $91,000 from a loss of $1.4 million in 2001. The company attributed the improved results to a first-quarter sale of a real estate parcel and to the fourth-quarter sales of 13 of 45 lots in an employee housing subdivision in West Maui.
Meanwhile, a real estate consulting firm is now looking into options to recapitalize Queen Kaahumanu Center on behalf of joint partners Maui Land & Pineapple and the Employees' Retirement System of Hawaii. Options include attracting new capital to the partnership, having one partner buy out the other, or having both partners sell to a new owner.
Scott Crockford, general manager of the center and vice president for retail property at Maui Land & Pineapple, declined to comment on the recapitalization efforts.
The center, which lost $2.906 million in 2001, posted a narrower loss in 2002 and a smaller loss in the fourth quarter from the year-earlier period. The company, however, said it won't break out the exact numbers until it issues its annual report.
Rich Humphreys, vice chairman of the ERS board and head of ERS' investment committee, said "it's not far-fetched" that some recapitalization activity will occur this year.
"We haven't made any final decision yet," he said. "We could increase (our stake), lessen it or get out. There's a lot of stuff up in the air."
Queen Kaahumanu Center is owned and operated by Kaahumanu Center Associates, which is the partnership formed in June 1993 on behalf of Maui Land & Pineapple and ERS to finance the expansion and renovation of the center.
ERS contributed $312,000 and made a $30.6 million loan to fund the improvements that were completed in November 1994. Then, in April 1995, ERS converted its $30.6 million loan to an additional 49 percent stake in the partnership to give ERS a 50 percent interest. Maui Land & Pineapple and ERS each lost $1.453 million on the center in 2001. The figures for 2002 are not publicly available yet.
Crockford said he was encouraged by the holiday sales at the money-losing center.
"Last year, sales were down 2 percent for the year although in December they were up almost 16 percent," Crockford said. "So we started to see the center start to recover and show some good progress toward the end of the year. Probably the biggest news we have is Macy's taking over J.C. Penney's business, which we see as a very big positive for the center. What that will do is give Macy's a wider offering of merchandise than ever before and it will really strengthen the shopping center."
Macy's, which already had an existing location in the Wailuku mall, acquired the 86,000-square-foot site that Penney formerly occupied when Penney closed its doors in mid-January. Macy's plans to put its home store, men's department and possibly other departments into the former Penney spot, Crockford said. A salon that was in the Penney building will reopen in a few weeks and remain open while renovations are going on in the building, Crockford said.
