MAUI LAND & PINEAPPLE CO INC MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

The following discussion and analysis of our unaudited condensed consolidated
interim financial condition and results of operations should be read in
conjunction with our annual audited consolidated financial statements and
related notes included in our Annual Report on Form 10-K for the year ending
December 31, 2021 and the unaudited condensed consolidated interim financial
statements and related notes included in this Quarterly Report on Form 10-Q. The
following discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those expressed
or implied by the forward-looking statements below. Factors that could cause or
contribute to those differences in our actual results include, but are not
limited to, those discussed below and those discussed elsewhere within this
Quarterly Report, particularly in the section entitled “Cautionary Note
Regarding Forward-Looking Statements.” Depending upon the context, the terms
the “Company,” “we,” “our,” and “us,” refer to either Maui Land & Pineapple
Company, Inc.
alone, or to Maui Land & Pineapple Company, Inc. and its
subsidiaries collectively.



Overview


Maui Land & Pineapple Company, Inc. was a Hawaii corporation at June 30, 2022
and the successor to a business organized in 1909. The Company consists of a
landholding and operating parent company, its principal subsidiary, Kapalua Land
Company, Ltd.
and certain other subsidiaries of the Company.

On June 29, 2022, the Company’s shareholders voted to approve a proposal to
change the state of incorporation of the Company from Hawaii to Delaware. The
principal reasons to reincorporate were: 1) the predictability, flexibility, and
responsiveness of Delaware law, 2) access to specialized courts, and 3) the
enhanced ability to attract and retain qualified candidates for Board of
Directors and management. The reincorporation was effected through a plan of
conversion completed on July 18, 2022. Total authorized capital stock provided
by the Delaware certificate of incorporation include 48,000,000 million shares,
consisting of 43,000,000 shares of common stock, par value $0.0001 per share,
and 5,000,000 shares of preferred stock, par value $0.0001 per share. No change
in ownership resulted as each outstanding share of common stock was
automatically converted into one share of the reincorporated Company. The name
of the Company after reincorporation remains Maui Land & Pineapple Company, Inc.
and shares of common stock continue to be listed on the New York Stock Exchange
under the ticker symbol “MLP.”

We own approximately 22,000 acres of land on the island of Maui, Hawaii and
develop, sell, and manage residential, resort, commercial, agricultural and
industrial real estate through the following business segments:

• Real Estate-Our real estate operations consist of land planning and
entitlement, development and sales activities.

• Leasing-Our leasing operations include residential, resort, commercial,
agricultural and industrial land and property leases, licensing of our
registered trademarks and trade names. This operating segment also includes the
management of ditch, reservoir, and well systems in West and Upcountry Maui and
the stewardship of conservation areas.




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• Resort Amenities-We manage the operations of the Kapalua Club, a private,
non-equity club program providing our members special programs, access and other
privileges at certain amenities at the Kapalua Resort.

We continue to monitor the effects of the COVID-19 pandemic on us, our
customers, and our vendors. While we are not able to accurately predict the
magnitude or scope of such impacts at this time, should the existence of the
COVID-19 pandemic continue for an extended period, our future business
operations, including the results of operations, cash flows and financial
position will be significantly affected. Appropriate remote work arrangements
continue to be established for our employees in order to maintain our financial
reporting systems






Results of Operations



Three and Six Months Ended June 30, 2022 compared to Three and Six Months Ended
June 30, 2021



CONSOLIDATED



                                              Three Months Ended           Six Months Ended
                                                   June 30,                    June 30,
                                                 (unaudited)                  (unaudited)
                                              2022          2021          2022          2021
                                                (in thousands)              (in thousands)

Operating revenues                         $   13,987     $   4,950     $  16,234     $   7,009
Segment operating costs and expenses           (2,034 )      (1,608 )      (3,375 )      (2,959 )
General and administrative                       (759 )        (574 )      (1,516 )      (1,291 )
Share-based compensation                         (276 )        (370 )        (654 )        (719 )
Depreciation                                     (277 )        (302 )        (550 )        (602 )
Operating income                               10,641         2,096        10,139         1,438
Other income                                        -             -             -            13
Pension and other postretirement
expenses                                         (114 )        (116 )        (229 )        (232 )
Interest expense                                   (2 )         (32 )          (3 )         (65 )
Income from Continuing Operations              10,525         1,948         9,907         1,154
Loss from Discontinued Operations                   -           (69 )           -          (209 )
Net income                                 $   10,525     $   1,879     $   9,907     $     945

Income from Continuing Operations per
Common Share                               $     0.54     $    0.10     $    0.51     $    0.06
Loss from Discontinued Operations per
Common Share                               $        -     $       -     $       -     $   (0.01 )
Net income per Common Share                $     0.54     $    0.10     $    0.51     $    0.05






REAL ESTATE



                                 Three Months Ended          Six Months Ended
                                      June 30,                   June 30,
                                     (unaudited)                (unaudited)
                                  2022          2021         2022         2021
                                   (in thousands)             (in thousands)

Operating revenues             $    11,600     $ 2,700     $  11,600     $ 2,700
Operating costs and expenses          (707 )      (454 )        (796 )      (552 )
Operating income               $    10,893     $ 2,246     $  10,804     $ 2,148



In June 2022, we sold for $2.0 million approximately 50 acres in West Maui to
the County of Maui for development of a regional park.

In February 2022, we entered into an agreement to sell the 646-acre parcel of
agricultural land in Upcountry Maui. Terms of the agreement, as amended,
included a purchase price of $9.6 million, a diligence period ending on May 16,
2022
, and other customary closing conditions. On May 20, 2022, net proceeds of
$9.2 million were collected upon closing.




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In June 2021, we entered into an agreement with a local buyer to sell and grant
to a conservation organization a perpetual, non-exclusive conservation easement.
The conservation easement included approximately 791 acres of unimproved land in
Honolua Valley, Maui, Hawaii. We collected proceeds of approximately $0.9
million
upon closing.

In May 2021, we sold the property commonly known as the Steeple House located in
the Kapalua Resort for $1.7 million. The sale included the fee simple interest
of the 1.1 acre parcel as well as buildings and improvements located on the
property.

In December 2021, the Company entered into an agreement to sell the Kapalua
Central Resort
project for $40.0 million. On May 13, 2022, terms of the
agreement were amended to include a closing condition requiring the Maui
Planning Commission
to approve a (5) five-year extension of a Special Management
Area (SMA) permit issued by the County of Maui by April 10, 2023. If the
extension is not approved by April 10, 2023, the purchase agreement will
terminate. The amendment also allows the buyer to spend $290,000 of the initial
$300,000 escrowed deposit on costs related to the extension of the SMA permit.
If the extension is approved, the closing date is expected to be no later than
(30) thirty days after the date of the extension approval.

There were no significant real estate development expenditures during the six
months ended June 30, 2022 and 2021, respectively.

Real estate development and sales are cyclical and depend on a number of
factors. Results for one period are therefore not necessarily indicative of
future performance trends in this business segment. Uncertainties associated
with the COVID-19 pandemic may, among other things, reduce demand for real
estate and impair prospective purchasers’ ability to obtain financing, which
would adversely affect revenues from our real estate operations.



LEASING



                                 Three Months Ended          Six Months Ended
                                      June 30,                   June 30,
                                     (unaudited)                (unaudited)
                                  2022          2021         2022         2021
                                   (in thousands)             (in thousands)

Operating revenues             $    2,198      $ 1,962     $  4,228     $  3,763
Operating costs and expenses         (997 )       (876 )     (1,739 )     (1,716 )
Operating income               $    1,201      $ 1,086     $  2,489     $  2,047



The island of Maui experienced an increase in visitor traffic during the three
and six months ended June 30, 2022 compared to the three and six months ended
June 30, 2021. As a result of increased tourism, income recognized from our
commercial leasing portfolio was higher. Certain of our leasing income is
contingent upon the sales of the tenant exceeding a defined threshold and is
recognized as a percentage of sales after those thresholds are achieved. For the
three and six months ended June 30, 2022, percentage rental income was $0.6
million
and $1.0 million, respectively.




Our leasing operations face substantial competition from other property owners
in Maui and Hawaii.



RESORT AMENITIES AND OTHER



                                 Three Months Ended          Six Months Ended
                                      June 30,                   June 30,
                                     (unaudited)                (unaudited)
                                 2022           2021         2022          2021
                                   (in thousands)             (in thousands)

Operating revenues             $     189       $   288     $     406      $  546
Operating costs and expenses        (330 )        (278 )        (840 )      (691 )
Operating income (loss)        $    (141 )     $    10     $    (434 )    $ (145 )



Our Resort Amenities segment includes the operations of the Kapalua Club, a
private, non-equity club providing its members special programs, access and
other privileges at certain of the amenities at the Kapalua Resort, including a
30,000 square foot full-service spa and a private pool-side dining beach club.
The Kapalua Club does not operate any resort amenities and the dues collected
are primarily used to pay contracted fees for member access to the spa, beach
club, golf courses and other resort amenities.

The decrease in operating revenues for the three and six months ended June 30,
2022
, compared to the three and six months ended June 30, 2021, was due to lower
membership levels of the Kapalua Club.




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The increase in operating costs for the three and six months ended June 30, 2022
compared to the three and six months ended June 30, 2021, was primarily due to
higher golf course fees charged to the Company.

LIQUIDITY AND CAPITAL RESOURCES



Liquidity


We had cash on hand of approximately $16.9 million and $5.6 million (audited) at
June 30, 2022 and December 31, 2021, respectively.

At June 30, 2022, $15.0 million was available under our revolving line of credit
facility with First Hawaiian Bank (“Credit Facility”). The Credit Facility which
matures on December 31, 2025 provides for revolving or term loan borrowing
options. Interest on revolving loan borrowings is calculated using the Bank’s
prime rate minus 1.125 percentage points. Interest on term loan borrowing is
fixed at the Bank’s commercial loan rates with interest rate swap options
available. We have pledged approximately 30,000 square feet of commercial leased
space in the Kapalua Resort as security for the Credit Facility. Net proceeds
from the sale of any collateral are required to be repaid toward outstanding
borrowings and will permanently reduce the Credit Facility’s revolving
commitment amount. There are no commitment fees on the unused portion of the
Credit Facility.

The terms of the Credit Facility include various representations, warranties,
affirmative, negative and financial covenants and events of default customary
for financings of this type. Financial covenants include a minimum liquidity (as
defined) of $2.0 million, a maximum of $45.0 million in total liabilities, and a
limitation on new indebtedness.

We were in compliance with the covenants under the Credit Facility at June 30,
2022
. If economic conditions are negatively impacted in future periods, we may
borrow under our Credit Facility.



Cash Flows


Net cash flow provided by our operating activities was approximately $11.9
million
for the six months ending June 30, 2022.

In June 2022, we sold approximately 50 acres in West Maui to the County of Maui
for $2.0 million.

In May 2022, we collected net proceeds of $9.2 million upon closing of the
646-acre parcel in Upcountry Maui.

The outstanding balance of our Credit Facility remained zero at June 30, 2022.
No interest payments on our Credit Facility were due for the six months ended
June 30, 2022.

No minimum funding contributions are required to be made to our defined benefit
pension plan in 2022.

Future Cash Inflows and Outflows

Our business initiatives include investing in our operating infrastructure,
continued planning and entitlement efforts on our development projects. This may
require borrowing under our Credit Facility or other indebtedness, repayment of
which may be dependent on selling of our real estate assets at acceptable prices
in condensed timeframes. We believe that our cash on-hand and cash received from
operations, together with borrowing capacity under our Credit Facility, will
provide sufficient financial flexibility to meet working capital requirements
and to fund capital expenditures through the next twelve months and the
foreseeable future.

Our indebtedness could have the effect of, among other things, increasing our
exposure to general adverse economic and industry conditions, limiting our
flexibility in planning for, or reacting to, changes in our business and
industry, and limiting our ability to borrow additional funds.

Critical Accounting Policies and Estimates

The preparation of the unaudited condensed consolidated interim financial
statements in conformity with GAAP requires the use of accounting estimates.
Changes in these estimates and assumptions are considered reasonably possible
and may have a material effect on the unaudited condensed consolidated interim
financial statements and thus actual results could differ from the amounts
reported and disclosed herein. For additional information regarding our critical
accounting policies, see the section entitled “Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Critical Accounting
Policies” contained within our Annual Report. There have been no significant
changes in our critical accounting policies.




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