SEC Company Response from MAUI LAND & PINEAPPLE CO INC (MLP) (CIK 0000063330) (MLP) — Sep 10, 2013
MAUI LAND & PINEAPPLE CO INC (MLP) (CIK 0000063330)
Date: Sept. 10, 2013 · CIK: 0000063330 · Accession: 0001104659-13-069067
AI Filing Summary & Sentiment
Referenced dates: August 27, 2013
Letter
Division of Corporation Finance Form 10-K for the Year Ended December 31, 2012 Filed March 1, 2013 File No. 1-06510
Re: Maui Land & Pineapple Company, Inc.
Dear Ms. Marrone,
We respectfully submit our responses to your comments set forth in your letter dated August 27, 2013. To assist in your review, we have included your comments and have numbered our responses to correspond with your comments.
Form 10-K for the Year Ended December 31, 2012
General
1. It appears a significant portion of your business is derived from acquiring real estate and holding it for investment. Accordingly, please include Schedule III, or tell us why you believe such schedule is unnecessary. Refer to Rules 5-04 and 12-28 of Regulation S-X.
Company Response:
1. We are considered a smaller reporting company in 2012 as our public float at June 30, 2012 was less than $75 million. As a smaller reporting company, we considered the guidance in the SEC Financial Reporting Manual, Section 1130.2, which indicates that supplemental schedules are not required for smaller reporting companies. Accordingly, we did not include Schedule III in our Form 10-K for the year ended December 31, 2012.
200 Village Road · Lahaina, Maui, Hawai‘i 96761 · 808-665-5480 Fax 808-665-0641
tesaki@kapalua.com
Real Estate, page 2
2. Your disclosure in this section suggests that there are extensive development activities ongoing. However, your disclosure on page 19 indicates that you do not expect any significant capital expenditures in 2013. Please revise this section to provide greater detail on the current status of development activities and your expectations for changes in status. In future Exchange Act reports, for your material developments, please revise to disclose the anticipated completion dates, the costs incurred to date and the budgeted costs.
Company Response:
2. We are currently in the early entitlement stages of several development projects: Kapalua Resort, Pulelehua (Other West Maui), and Hali`imaile Town (Upcountry). The entitlement process for development of property in Hawaii is complex and time-consuming, involving numerous state and county regulatory approvals which can take many years to complete. Please see our risk factors on page 9 addressing those issues. Our current development activities are limited to planning, permitting and other efforts to secure and/or maintain project entitlements. As a result, we did not anticipate any significant capital expenditures in 2013, and we have not incurred any significant capital expenditures during 2013. Our disclosure on page 19 regarding capital expenditures reflects the capital expenditure needs given the current status of our projects. In future filings we will take your comments into consideration and endeavor to provide project costs incurred to date; and anticipated completion dates and budgeted costs as they are determined. We believe that an amendment to revise the disclosure in our Form 10-K for the year ended December 31, 2012 is not necessary in light of the foregoing.
3. We note that you have recorded deferred development costs of $7.6 million at December 31, 2012. Given that there is substantial doubt about the company’s ability to continue as a going concern and that you have disclosed that you do not anticipate any significant capital expenditures in 2013, please provide us with a detailed analysis to support your conclusion that the deferred costs are recoverable, citing the applicable accounting guidance that supports your view.
Company Response:
3. In determining the recoverability of our $7.6 million of deferred development costs, we considered ASC 970-360-35-3 which provides that the provisions of Subtopic 360-10 for long-lived assets to be held and used shall apply to real estate held for development, including property to be developed in the future as well as that currently under development. ASC 970-360-35-4 refers to paragraph 360-10-35-21 for examples of events or changes in circumstances that indicate that the recoverability of the carrying amount of a long-lived asset shall be assessed. Our impairment analysis performed pursuant to Subtopic 360-10 considered the following factors:
· A significant decrease in the market price of a long-lived asset (asset group)
· A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition
· A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator
· An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group)
· A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group)
· A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent.
Based on our analysis, we did not identify any impairment indicators that indicated that our deferred development costs may not be recoverable. Although there is doubt about our ability to continue as a going concern, our financial statements continue to be prepared on a going concern basis and we intend to continue to be in business for the foreseeable future. Although we do not anticipate significant capital expenditures in 2013, we continue to work on entitlement activities related to these development projects. While these projects will be developed in the future, these projects are forecasted to be profitable and we currently have no intention to abandon them. Further, the land underlying these development projects was acquired in the early 1900s and is carried at nominal amounts on our consolidated balance sheet within deferred development costs. Based on the most recent third-party appraisals performed in 2012, the fair value of these parcels significantly exceeds the carrying value of each parcel and its associated deferred development costs at December 31, 2012 by $56 million for Kapalua Resort, $17 million for Pulelehua, and $24 million for Hali`imaile Town. Based on the above and as disclosed in our critical accounting policies on page 20 of our Form 10-K for the year ended December 31, 2012, we believe that our deferred development costs are fully recoverable and are not impaired at December 31, 2012.
Leasing, page 3
4. We note references throughout the filing, including on page 36, that your leased properties primarily consist of buildings. Please revise this section and/or Item 2 to identify the leased buildings, including those indirectly owned through affiliates, and provide a brief description of the terms of the leases. Please provide updated information as of the date of filing to reflect any property sales or foreclosures. In future Exchange Act reports, to the extent material, please disclose property operating information such as occupancy data and a lease expiration schedule.
Company Response:
4. We have approximately 120,000 square feet of commercially-leasable building space in the Kapalua Resort. Approximately 70,000 square feet of this space consists of buildings related to our former agricultural operations which have been retrofitted and/or are being leased on a temporary basis until the land underlying the buildings is redeveloped. The remainder of our leasable buildings are former warehouse and maintenance facilities related to our former agricultural and golf operations, which are being leased to agricultural and industrial tenants. No one building lease is material to our leasing operations and no lease is dependent upon the continuation of any other lease. The average term of our leases is four years. As a result, we respectfully submit that the requested additional information is not material to an understanding of our Form 10-K for the year ended December 31, 2012 and an amendment to revise the disclosure in our Form 10-K is not necessary.
In future filings, to the extent material, we will identify leased buildings and their related lease terms, as well as occupancy and lease expiration information.
All of our leased buildings are wholly-owned and we do not own any indirectly through affiliates. There were no property sales or foreclosures since the date of our filing.
Risks Related to Indebtedness and Liquidity, page 10
5. Please revise the liquidity risk factors to include the representation on page 34 regarding your inability to meet your December 31, 2013 repayment obligations absent the sale of real estate or a refinancing.
Company Response:
5. In future filings beginning with our Form 10-Q for the quarter ended September 30, 2013, we will include substantially the following representation to our risks related to indebtedness and liquidity: “Absent the sale of some of our real estate holdings or refinancing, we do not expect to be able to pay any significant amount of our debt.” We note that the foregoing representation is also included in our Liquidity and Capital Resources discussion on page 18. Because this language is already included in our discussion of liquidity, we do not believe that the duplication of the representation in our risk factors is material. As a result, we respectfully submit that an amendment to revise the disclosure in our Form 10-K for the year ended December 31, 2012 is not necessary.
If we do not meet the continued listing requirements of the NYSE…, page 12
6. Please revise to provide more detailed disclosure on any milestones set forth in business plan submitted to the NYSE, whether you have achieved and believe you will continue to achieve any such milestones, and any ongoing obligations to report listing qualification developments to the NYSE.
Company Response:
6. On May 20, 2013, we were informed by the NYSE that we are back in compliance with the NYSE’s continued listing standards and subsequently disclosed this development in a Form 8-K filed on May 22, 2013. The NYSE stated that its decision was based on our consistent positive performance with respect to our business plan and the achievement of compliance with the NYSE’s minimum average market capitalization over the past two quarters. We do not have any ongoing obligations to report listing qualification developments to the NYSE. As a result, we believe that additional disclosure regarding our business plan that was submitted to the NYSE is not material.
Item 7. Management’s Discussion and Analysis of Financial Condition…, page 15
7. We note your disclosure regarding the foreclosure proceeding and subsequent auction of Kapalua Bay. Please revise this section to explain how this development will impact your future results.
Company Response:
7. As a result of the 2009 losses incurred by Kapalua Bay Holdings, LLC (“Bay Holdings”), our carrying value of our investment in Bay Holdings was written down to zero in 2009. We do not expect to recover any amounts from our investment in Bay Holdings and we will not recognize any additional equity in the earnings (losses) of Bay Holdings until the income attributable to us exceeds the accumulated losses. Disclosure to that effect is included in Note 8 to our consolidated financial statements included in our Form 10-K for the year ended December 31, 2012. Accordingly, other than resolution of certain commitments, the foreclosure proceedings and auction will not directly impact our future operating results. As a result, we respectfully submit that an amendment to revise the disclosure in our Form 10-K for the year ended December 31, 2012 is not necessary.
In future filings beginning with our Form 10-Q for the quarter ended September 30, 2013, we will include substantially the following disclosure in our MD&A: “Our investment in the Kapalua Bay project was written down to zero in 2009 and we do not expect to recover any amounts from our investment in the Kapalua Bay project. Accordingly, other than resolution of certain commitments, the foreclosure proceeding and auction will not directly impact our future operating results.”
8. In future Exchange Act reports, please revise to discuss in more detail the drivers of any significant period to period changes in reported results for each segment. In this regard, we note your disclosure that, on a consolidated basis, you had a net loss of $4.6 million in 2012 compared to net income of $5.1 million for 2011, but there is no clear discussion of the drivers responsible for the significant difference between the two periods.
Company Response:
8. As discussed on page 16 of our Form 10-K for the year ended December 31, 2012, the significant driver for the difference between the two periods was the gain of $15.1 million recognized in March 2011 from the sale of the Bay Course, which is reported in discontinued operations. Based on your comment, in future filings beginning with our Form 10-Q for the quarter ended September 30, 2013, we will expand in more detail the drivers of any significant period to period changes in reported results for each segment.
General and Administrative, page 17
9. We note that you made a contribution of land valued at $1.5 million to Maui Preparatory Academy in 2011. Please explain the business reason for this contribution and disclose if there are any related party relationships between your Company, officers or directors and Maui Preparatory Academy.
Company Response:
9. The business reason for the contribution of our land to Maui Preparatory Academy was mainly to support the community by enhancing efforts to provide high-quality education in the West Maui area, where the majority of our projects reside. Our ability to obtain entitlements for our development activities in Maui is partly dependent upon our community support. Also, in order to develop our Kapalua Resort in the future, it is imperative that quality educational opportunities exist for potential buyers of real estate and future residents of the area. There were no related party relationships between our Company, officers or directors and Maui Preparatory Academy.
Liquidity and Capital Resources, page 18
10. In future Exchange Act reports, please revise to indicate whether or not you are in compliance with the financial covenants on your indebtedness. To the extent continued compliance with your covenants will significantly restrict your ability to achieve your stated investment objectives, please also disclose your current compliance ratios.
Company Response:
10. We were in compliance with the financial covenants of our indebtedness at December 31, 2012. Maintaining compliance with our covenants did not significantly restrict our ability to achieve our stated investment objectives for the year ended December 31, 2012. We will indicate in future filings beginnin
Show Raw Text
CORRESP 1 filename1.htm September 10, 2013 Ms. Kristi Marrone Division of Corporation Finance U.S. Securities & Exchange Commission 100 F Street, NE Washington, D.C. 20549 Re: Maui Land & Pineapple Company, Inc. Form 10-K for the Year Ended December 31, 2012 Filed March 1, 2013 File No. 1-06510 Dear Ms. Marrone, We respectfully submit our responses to your comments set forth in your letter dated August 27, 2013. To assist in your review, we have included your comments and have numbered our responses to correspond with your comments. Form 10-K for the Year Ended December 31, 2012 General 1. It appears a significant portion of your business is derived from acquiring real estate and holding it for investment. Accordingly, please include Schedule III, or tell us why you believe such schedule is unnecessary. Refer to Rules 5-04 and 12-28 of Regulation S-X. Company Response: 1. We are considered a smaller reporting company in 2012 as our public float at June 30, 2012 was less than $75 million. As a smaller reporting company, we considered the guidance in the SEC Financial Reporting Manual, Section 1130.2, which indicates that supplemental schedules are not required for smaller reporting companies. Accordingly, we did not include Schedule III in our Form 10-K for the year ended December 31, 2012. 200 Village Road · Lahaina, Maui, Hawai‘i 96761 · 808-665-5480 Fax 808-665-0641 tesaki@kapalua.com Real Estate, page 2 2. Your disclosure in this section suggests that there are extensive development activities ongoing. However, your disclosure on page 19 indicates that you do not expect any significant capital expenditures in 2013. Please revise this section to provide greater detail on the current status of development activities and your expectations for changes in status. In future Exchange Act reports, for your material developments, please revise to disclose the anticipated completion dates, the costs incurred to date and the budgeted costs. Company Response: 2. We are currently in the early entitlement stages of several development projects: Kapalua Resort, Pulelehua (Other West Maui), and Hali`imaile Town (Upcountry). The entitlement process for development of property in Hawaii is complex and time-consuming, involving numerous state and county regulatory approvals which can take many years to complete. Please see our risk factors on page 9 addressing those issues. Our current development activities are limited to planning, permitting and other efforts to secure and/or maintain project entitlements. As a result, we did not anticipate any significant capital expenditures in 2013, and we have not incurred any significant capital expenditures during 2013. Our disclosure on page 19 regarding capital expenditures reflects the capital expenditure needs given the current status of our projects. In future filings we will take your comments into consideration and endeavor to provide project costs incurred to date; and anticipated completion dates and budgeted costs as they are determined. We believe that an amendment to revise the disclosure in our Form 10-K for the year ended December 31, 2012 is not necessary in light of the foregoing. 3. We note that you have recorded deferred development costs of $7.6 million at December 31, 2012. Given that there is substantial doubt about the company’s ability to continue as a going concern and that you have disclosed that you do not anticipate any significant capital expenditures in 2013, please provide us with a detailed analysis to support your conclusion that the deferred costs are recoverable, citing the applicable accounting guidance that supports your view. Company Response: 3. In determining the recoverability of our $7.6 million of deferred development costs, we considered ASC 970-360-35-3 which provides that the provisions of Subtopic 360-10 for long-lived assets to be held and used shall apply to real estate held for development, including property to be developed in the future as well as that currently under development. ASC 970-360-35-4 refers to paragraph 360-10-35-21 for examples of events or changes in circumstances that indicate that the recoverability of the carrying amount of a long-lived asset shall be assessed. Our impairment analysis performed pursuant to Subtopic 360-10 considered the following factors: 2 · A significant decrease in the market price of a long-lived asset (asset group) · A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition · A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator · An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group) · A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group) · A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent. Based on our analysis, we did not identify any impairment indicators that indicated that our deferred development costs may not be recoverable. Although there is doubt about our ability to continue as a going concern, our financial statements continue to be prepared on a going concern basis and we intend to continue to be in business for the foreseeable future. Although we do not anticipate significant capital expenditures in 2013, we continue to work on entitlement activities related to these development projects. While these projects will be developed in the future, these projects are forecasted to be profitable and we currently have no intention to abandon them. Further, the land underlying these development projects was acquired in the early 1900s and is carried at nominal amounts on our consolidated balance sheet within deferred development costs. Based on the most recent third-party appraisals performed in 2012, the fair value of these parcels significantly exceeds the carrying value of each parcel and its associated deferred development costs at December 31, 2012 by $56 million for Kapalua Resort, $17 million for Pulelehua, and $24 million for Hali`imaile Town. Based on the above and as disclosed in our critical accounting policies on page 20 of our Form 10-K for the year ended December 31, 2012, we believe that our deferred development costs are fully recoverable and are not impaired at December 31, 2012. Leasing, page 3 4. We note references throughout the filing, including on page 36, that your leased properties primarily consist of buildings. Please revise this section and/or Item 2 to identify the leased buildings, including those indirectly owned through affiliates, and provide a brief description of the terms of the leases. Please provide updated information as of the date of filing to reflect any property sales or foreclosures. In future Exchange Act reports, to the extent material, please disclose property operating information such as occupancy data and a lease expiration schedule. 3 Company Response: 4. We have approximately 120,000 square feet of commercially-leasable building space in the Kapalua Resort. Approximately 70,000 square feet of this space consists of buildings related to our former agricultural operations which have been retrofitted and/or are being leased on a temporary basis until the land underlying the buildings is redeveloped. The remainder of our leasable buildings are former warehouse and maintenance facilities related to our former agricultural and golf operations, which are being leased to agricultural and industrial tenants. No one building lease is material to our leasing operations and no lease is dependent upon the continuation of any other lease. The average term of our leases is four years. As a result, we respectfully submit that the requested additional information is not material to an understanding of our Form 10-K for the year ended December 31, 2012 and an amendment to revise the disclosure in our Form 10-K is not necessary. In future filings, to the extent material, we will identify leased buildings and their related lease terms, as well as occupancy and lease expiration information. All of our leased buildings are wholly-owned and we do not own any indirectly through affiliates. There were no property sales or foreclosures since the date of our filing. Risks Related to Indebtedness and Liquidity, page 10 5. Please revise the liquidity risk factors to include the representation on page 34 regarding your inability to meet your December 31, 2013 repayment obligations absent the sale of real estate or a refinancing. Company Response: 5. In future filings beginning with our Form 10-Q for the quarter ended September 30, 2013, we will include substantially the following representation to our risks related to indebtedness and liquidity: “Absent the sale of some of our real estate holdings or refinancing, we do not expect to be able to pay any significant amount of our debt.” We note that the foregoing representation is also included in our Liquidity and Capital Resources discussion on page 18. Because this language is already included in our discussion of liquidity, we do not believe that the duplication of the representation in our risk factors is material. As a result, we respectfully submit that an amendment to revise the disclosure in our Form 10-K for the year ended December 31, 2012 is not necessary. 4 If we do not meet the continued listing requirements of the NYSE…, page 12 6. Please revise to provide more detailed disclosure on any milestones set forth in business plan submitted to the NYSE, whether you have achieved and believe you will continue to achieve any such milestones, and any ongoing obligations to report listing qualification developments to the NYSE. Company Response: 6. On May 20, 2013, we were informed by the NYSE that we are back in compliance with the NYSE’s continued listing standards and subsequently disclosed this development in a Form 8-K filed on May 22, 2013. The NYSE stated that its decision was based on our consistent positive performance with respect to our business plan and the achievement of compliance with the NYSE’s minimum average market capitalization over the past two quarters. We do not have any ongoing obligations to report listing qualification developments to the NYSE. As a result, we believe that additional disclosure regarding our business plan that was submitted to the NYSE is not material. Item 7. Management’s Discussion and Analysis of Financial Condition…, page 15 7. We note your disclosure regarding the foreclosure proceeding and subsequent auction of Kapalua Bay. Please revise this section to explain how this development will impact your future results. Company Response: 7. As a result of the 2009 losses incurred by Kapalua Bay Holdings, LLC (“Bay Holdings”), our carrying value of our investment in Bay Holdings was written down to zero in 2009. We do not expect to recover any amounts from our investment in Bay Holdings and we will not recognize any additional equity in the earnings (losses) of Bay Holdings until the income attributable to us exceeds the accumulated losses. Disclosure to that effect is included in Note 8 to our consolidated financial statements included in our Form 10-K for the year ended December 31, 2012. Accordingly, other than resolution of certain commitments, the foreclosure proceedings and auction will not directly impact our future operating results. As a result, we respectfully submit that an amendment to revise the disclosure in our Form 10-K for the year ended December 31, 2012 is not necessary. In future filings beginning with our Form 10-Q for the quarter ended September 30, 2013, we will include substantially the following disclosure in our MD&A: “Our investment in the Kapalua Bay project was written down to zero in 2009 and we do not expect to recover any amounts from our investment in the Kapalua Bay project. Accordingly, other than resolution of certain commitments, the foreclosure proceeding and auction will not directly impact our future operating results.” 5 8. In future Exchange Act reports, please revise to discuss in more detail the drivers of any significant period to period changes in reported results for each segment. In this regard, we note your disclosure that, on a consolidated basis, you had a net loss of $4.6 million in 2012 compared to net income of $5.1 million for 2011, but there is no clear discussion of the drivers responsible for the significant difference between the two periods. Company Response: 8. As discussed on page 16 of our Form 10-K for the year ended December 31, 2012, the significant driver for the difference between the two periods was the gain of $15.1 million recognized in March 2011 from the sale of the Bay Course, which is reported in discontinued operations. Based on your comment, in future filings beginning with our Form 10-Q for the quarter ended September 30, 2013, we will expand in more detail the drivers of any significant period to period changes in reported results for each segment. General and Administrative, page 17 9. We note that you made a contribution of land valued at $1.5 million to Maui Preparatory Academy in 2011. Please explain the business reason for this contribution and disclose if there are any related party relationships between your Company, officers or directors and Maui Preparatory Academy. Company Response: 9. The business reason for the contribution of our land to Maui Preparatory Academy was mainly to support the community by enhancing efforts to provide high-quality education in the West Maui area, where the majority of our projects reside. Our ability to obtain entitlements for our development activities in Maui is partly dependent upon our community support. Also, in order to develop our Kapalua Resort in the future, it is imperative that quality educational opportunities exist for potential buyers of real estate and future residents of the area. There were no related party relationships between our Company, officers or directors and Maui Preparatory Academy. Liquidity and Capital Resources, page 18 10. In future Exchange Act reports, please revise to indicate whether or not you are in compliance with the financial covenants on your indebtedness. To the extent continued compliance with your covenants will significantly restrict your ability to achieve your stated investment objectives, please also disclose your current compliance ratios. 6 Company Response: 10. We were in compliance with the financial covenants of our indebtedness at December 31, 2012. Maintaining compliance with our covenants did not significantly restrict our ability to achieve our stated investment objectives for the year ended December 31, 2012. We will indicate in future filings beginnin