Click for larger imageWAILUKU – Maui Land & Pineapple Co.’s unrelenting losses and deep debts could sink the company, according to auditors.
In a report filed Monday with the Securities and Exchange Commission, ML&P said auditors found the company’s future jeopardized by its financial losses, weak cash reserves, an inability to meet certain financial obligations and an overall balance sheet that shows the company’s liabilities exceeding its assets by more than $60 million.
ML&P is counting on being able to sell some of its real estate in order to meet its financial obligations and raise cash, but in a down real estate market that plan’s success is uncertain, the report says.
"There can be no assurance that the company will be able to sell real estate assets at acceptable prices, or at all, or that it will be able to maintain compliance with financial covenants, which raises substantial doubt about the company’s ability to continue as a going concern," the report says.
Maui Land & Pineapple also hopes to raise up to $25 million in the form of new investment from existing shareholders. In a separate registration statement filed Monday with the SEC, the company announced its intentions to register a secondary equity offering that would allow current shareholders to buy additional shares of common stock.
The offering is pending approval by the SEC.
The report detailing the concerns of auditors Deloitte & Touche served as an update to ML&P’s annual financial report for 2009, which was provided as a reference to its registration statement.
Maui Land & Pineapple Chief Financial Officer John Durkin said Tuesday the company had already made "a lot of progress" toward financial stability by restructuring its operations, and that its proposed new equity offering would provide an infusion of cash.
The report outlines steps the company has already taken this year to find stronger financial footing, including selling the Plantation Golf Course in March to pay off about $45 million in debt and raising an additional $11.5 million by selling two properties in the third quarter of the year.
ML&P also successfully negotiated with lenders in October to postpone the maturity of about $50 million in debt from March 2010 to March 2011 in exchange for higher interest payments.
The company laid off 183 employees in the first nine months of the year to reduce expenses, the report notes.
And in November the board of directors approved plans to shut down the company’s money-losing pineapple operations, cutting an additional 208 jobs by the end of the year.
ML&P also brought in outside companies to take over some of its operations at Kapalua, including Outrigger, which took over management of its Kapalua Villas, Durkin noted.
"We’re working really hard to put the company on a firm foundation for the future, and I think if you look at the actions we’ve taken in the last few months we’re in the process of turning the company around and making it a going concern," he said.
ML&P recorded a $92.9 million net loss for the first nine months of 2009, coming on the heels of a $71.6 million loss last year.
The company reported in October that it had written off all of the money it had originally invested in the Residences at Kapalua, due to higher-than-expected default rates on the units that had been sold, as well as lower revenue forecasts for future sales.
"The company does not expect to recover any amounts from its investment" in the Residences, according to the report.
Additional financial pressures facing the company include a commitment made years ago to purchase the spa, beach club improvements and sundry store for the Residences at Kapalua from its partners in the venture for $35 million. ML&P is now negotiating with its partners to restructure the agreement because it does not have the cash to complete the purchase, according to the report.
And even the shutdown of pineapple will cost the company. Severance, property clean-up and other expenses associated with the closure are expected to cost around $16.8 million, according to the report.
Stock in Maui Land & Pineapple closed at $5.81 Tuesday, down 1.7 percent.
* Ilima Loomis can be reached at iloomis@ mauinews.com.
