**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

**FORM 10-Q**

**(Mark One)**
| x      |   | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|--------|--------|---------------------------------------------------------------------------------------------------------|
|   |   | **For the quarterly period ended June 30, 2005**                                                        |
| **OR** |
| o      |   | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**Commissionfile number*** *1-6510**

**MAUI LAND & PINEAPPLE COMPANY, INC.    **

(Exact name of registrantas specified in its charter)
| **HAWAII**                                                       | **99-0107542**                     |
|------------------------------------------------------------------|------------------------------------|
| (State or other  jurisdiction  of incorporation or organization) | (IRS Employer  Identification No.) |

 

**P. O. BOX 187, KAHULUI, MAUI,HAWAII 96733-6687**(Address of principal executive offices)

**(808) 877-3351***(*Registrant’s telephone number, including area code)

**NONE**

(Former name, formeraddress and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.

Yes  x    No  o

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes  o    No  x

Indicatethe number of shares outstanding of each of the issuer’s classes of commonstock, as of the latest practicable date.
| Class                       | ** ** | **Outstanding at August 1, 2005** |
|-----------------------------|------------|----------------------------------------|
| Common Stock, no  par value |       | 7,378,550 shares                       |

 

 

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**MAUI LAND &PINEAPPLE COMPANY, INC.AND SUBSIDIARIES**

**TABLEOF CONTENTS**
|                                                                                                                                     | ** ** | **Page** |
|-------------------------------------------------------------------------------------------------------------------------------------|------------|----------|
| **PART I.  FINANCIAL INFORMATION**                                                                                             |       |     |
| Item  1. Financial Statements                                                                                                       |       |     |
| Condensed Consolidated Balance Sheets,  June 30, 2005 and December 31, 2004 (Unaudited)                                   |       | 3        |
| Condensed Consolidated Statements of Operations and  Retained Earnings,  Three Months Ended June 30, 2005 and 2004 (Unaudited) |       | 4        |
| Condensed Consolidated Statements of Operations and  Retained Earnings,  Six Months Ended June 30, 2005 and 2004 (Unaudited)   |       | 5        |
| Condensed Consolidated Statements of Comprehensive  Income (Loss),  Three Months Ended June 30, 2005 and 2004 (Unaudited)      |       | 6        |
| Condensed  Consolidated Statements of Comprehensive Income (Loss),  Six Months Ended June 30, 2005 and 2004 (Unaudited)        |       | 6        |
| Condensed Consolidated Statements of Cash Flows,  Six Months Ended June 30, 2005 and 2004 (Unaudited)                          |       | 7        |
| Notes to Condensed Consolidated Financial Statements  (Unaudited)                                                                   |       | 8        |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and  Results of Operations                                |       | 13       |
| Item 3. Quantitative and Qualitative Disclosures About  Market Risk                                                                 |       | 22       |
| Forward-Looking Statements and Risks                                                                                                |       | 22       |
| Item 4. Controls and Procedures                                                                                                     |       | 26       |
| **PART II.  OTHER INFORMATION**                                                                                                |       |     |
| Item  1. Legal Proceedings                                                                                                          |       | 28       |
| Item 4. Submission of Matters to a Vote of Security Holders                                                                         |       | 28       |
| Item 6.  Exhibits                                                                                                                   |       | 28       |
| Signatures                                                                                                                          |       | 29       |

 

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**PART I  FINANCIAL INFORMATION**

**Item 1.**                        FinancialStatements

**MAUI LAND &PINEAPPLE COMPANY, INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED BALANCE SHEETS (Unaudited)**
| ** **                                                                                                                                                                      | ** ** | **6/30/05**                          | ** ** | **12/31/04** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|--------------|------------|
| ** **                                                                                                                                                                      | ** ** | **(Dollars in Thousands)** | ** ** |
| **ASSETS**                                                                                                                                                                      |       |                                 |       |         |       |
| Current Assets                                                                                                                                                                  |       |                                 |       |         |       |
| Cash and cash equivalents                                                                                                                                                       |       | $                                    | 5,136      |         | $          | 11,531 |   |
| Accounts and notes receivable                                                                                                                                                   |       | 12,246                               |       | 12,716       |       |
| Inventories                                                                                                                                                                     |       | 15,142                               |       | 15,100       |       |
| Other current assets                                                                                                                                                            |       | 7,456                                |       | 8,023        |       |
| Total current assets                                                                                                                                                            |       | 39,980                               |       | 47,370       |       |
| Property                                                                                                                                                                        |       | 247,099                              |       | 240,466      |       |
| Accumulated depreciation                                                                                                                                                        |       | (153,407                             | )          | (146,569     | )          |
| Property—net                                                                                                                                                               |       | 93,692                               |       | 93,897       |       |
| Other Assets                                                                                                                                                                    |       | 31,005                               |       | 19,656       |       |
| Total                                                                                                                                                                           |       | 164,677                              |       | 160,923      |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                   |       |                                 |       |         |       |
| Current Liabilities                                                                                                                                                             |       |                                 |       |         |       |
| Current portion of long-term debt and capital lease  obligations                                                                                                                |       | 2,831                                |       | 3,314        |       |
| Trade accounts payable                                                                                                                                                          |       | 11,851                               |       | 12,703       |       |
| Deferred revenue                                                                                                                                                                |       | 3,567                                |       | 13,018       |       |
| Other current liabilities                                                                                                                                                       |       | 10,699                               |       | 7,151        |       |
| Total current liabilities                                                                                                                                                       |       | 28,948                               |       | 36,186       |       |
| Long-Term  Liabilities                                                                                                                                                          |       |                                 |       |         |       |
| Long-term debt and capital lease obligations                                                                                                                                    |       | 12,540                               |       | 13,953       |       |
| Accrued retirement benefits                                                                                                                                                     |       | 34,023                               |       | 33,264       |       |
| Other long-term liabilities                                                                                                                                                     |       | 8,128                                |       | 5,395        |       |
| Total long-term liabilities                                                                                                                                                     |       | 54,691                               |       | 52,612       |       |
| Minority Interest in Subsidiary                                                                                                                                                 |       | 510                                  |       | 504          |       |
| Stockholders’  Equity                                                                                                                                                      |       |                                 |       |         |       |
| Common stock, no par value—8,000,000 shares authorized, 7,230,300  and 7,226,550 issued and outstanding as of June 30, 2005 and  December 31, 2004, respectively |       | 13,462                               |       | 13,335       |       |
| Additional paid-in-capital                                                                                                                                                      |       | 2,497                                |       | 1,456        |       |
| Retained earnings                                                                                                                                                               |       | 68,710                               |       | 60,971       |       |
| Accumulated other comprehensive loss                                                                                                                                            |       | (4,141                               | )          | (4,141       | )          |
| Stockholders’ equity                                                                                                                                                       |       | 80,528                               |       | 71,621       |       |
| Total                                                                                                                                                                           |       | $                                    | 164,677    |         | $          | 160,923 |   |

 

See accompanying Notes to Condensed Consolidated Financial Statements.

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**MAUILAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONSAND RETAINED EARNINGS**

**(UNAUDITED)**
| ** **                                                            | ** ** | **Three Months Ended**                                     | ** ** |
|-----------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                                            | ** ** | **6/30/05**                                                          | ** ** | **6/30/04** | ** ** |
| ** **                                                            | ** ** | **(Dollars in Thousands  Except Share Amounts)** | ** ** |
| Operating Revenues                                                    |       |                                                                 |       |   |   |
| Net sales                                                             |       | $                                                                    | 43,809     |   | $ | 20,994 |   |
| Operating income                                                      |       | 7,262                                                                |       | 8,657 |   |
| Other income                                                          |       | 99                                                                   |       | 91 |   |
| Total Operating  Revenues                                             |       | 51,170                                                               |       | 29,742 |   |
| Operating Costs and  Expenses                                         |       |                                                                 |       |   |   |
| Cost of goods sold                                                    |       | 19,755                                                               |       | 13,981 |   |
| Operating expenses                                                    |       | 8,516                                                                |       | 8,907 |   |
| Shipping and marketing                                                |       | 3,171                                                                |       | 3,562 |   |
| General and administrative                                            |       | 9,207                                                                |       | 6,824 |   |
| Total Operating  Costs and Expenses                                   |       | 40,649                                                               |       | 33,274 |   |
| Net Operating  Income (Loss)                                          |       | 10,521                                                               |       | (3,532 | ) |
| Equity in earnings (losses) of affiliates                             |       | (112                                                                 | )          | 275 |   |
| Interest expense                                                      |       | (95                                                                  | )          | (275 | ) |
| Interest income                                                       |       | 10                                                                   |       | 7 |   |
| Income (Loss)  From Continuing Operations Before Income Taxes         |       | 10,324                                                               |       | (3,525 | ) |
| Income Tax  Expense (Benefit)                                         |       | 3,840                                                                |       | (1,178 | ) |
| Income (Loss)  From Continuing Operations                             |       | 6,484                                                                |       | (2,347 | ) |
| Loss From  Discontinued Operations (net of income tax benefit of $53) |       | —                                                               |       | (26 | ) |
| Net Income (Loss)                                                     |       | 6,484                                                                |       | (2,373 | ) |
| Retained Earnings, Beginning of Period                                |       | 62,226                                                               |       | 62,872 |   |
| Retained Earnings, End of Period                                      |       | 68,710                                                               |       | 60,499 |   |
| Earnings Per Common  Share                                            |       |                                                                 |       |   |   |
| Basic                                                                 |       | .90                                                                  |       | (.33 | ) |
| Diluted                                                               |       | $                                                                    | .89        |   | $ | (.33 | ) |

 

See accompanying Notes to Condensed Consolidated Financial Statements.

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**MAUILAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONSAND RETAINED EARNINGS**

**(UNAUDITED)**
| ** **                                                                 | ** ** | **Six Months Ended**                                       | ** ** |
|----------------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                                                 | ** ** | **6/30/05**                                                          | ** ** | **6/30/04** | ** ** |
| ** **                                                                 | ** ** | **(Dollars in Thousands  Except Share Amounts)** | ** ** |
| Operating  Revenues                                                        |       |                                                                 |       |   |   |
| Net sales                                                                  |       | $                                                                    | 71,279     |   | $ | 51,251 |   |
| Operating income                                                           |       | 17,672                                                               |       | 18,899 |   |
| Other income                                                               |       | 380                                                                  |       | 106 |   |
| Total Operating  Revenues                                                  |       | 89,331                                                               |       | 70,256 |   |
| Operating Costs  and Expenses                                              |       |                                                                 |       |   |   |
| Cost of goods sold                                                         |       | 35,398                                                               |       | 31,276 |   |
| Operating expenses                                                         |       | 17,756                                                               |       | 17,705 |   |
| Shipping and marketing                                                     |       | 6,967                                                                |       | 8,072 |   |
| General and administrative                                                 |       | 16,502                                                               |       | 14,207 |   |
| Total Operating  Costs and Expenses                                        |       | 76,623                                                               |       | 71,260 |   |
| Net Operating  Income (Loss)                                               |       | 12,708                                                               |       | (1,004 | ) |
| Equity in earnings (losses) of affiliates                                  |       | (216                                                                 | )          | 301 |   |
| Interest expense                                                           |       | (237                                                                 | )          | (652 | ) |
| Interest income                                                            |       | 30                                                                   |       | 28 |   |
| Income (Loss)  From Continuing Operations Before Income Taxes              |       | 12,285                                                               |       | (1,327 | ) |
| Income Tax  Expense (Benefit)                                              |       | 4,546                                                                |       | (438 | ) |
| Income (Loss)  From Continuing Operations                                  |       | 7,739                                                                |       | (889 | ) |
| Income From  Discontinued Operations (net of of income tax expense of $20) |       | —                                                               |       | 34 |   |
| Net Income (Loss)                                                          |       | 7,739                                                                |       | (855 | ) |
| Retained Earnings, Beginning of Period                                     |       | 60,971                                                               |       | 61,354 |   |
| Retained  Earnings, End of Period                                          |       | 68,710                                                               |       | 60,499 |   |
| Earnings Per  Common Share                                                 |       |                                                                 |       |   |   |
| Basic                                                                      |       | 1.07                                                                 |       | (.12 | ) |
| Diluted                                                                    |       | $                                                                    | 1.06       |   | $ | (.12 | ) |

 

See accompanying Notes to Condensed Consolidated Financial Statements.

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**MAUILAND & PINEAPPLE COMPANY, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OFCOMPREHENSIVE INCOME (LOSS)**

**(UNAUDITED)**
| ** **                   | ** ** | **Three Months Ended**     | ** ** |
|------------------------------|------------|--------------------------------------|------------|
| ** **                   | ** ** | **6/30/05**                          | ** ** | **6/30/04** | ** ** |
| ** **                   | ** ** | **(Dollars in Thousands)** | ** ** |
| Net Income (Loss)            |       | $                                    | 6,484      |   | $ | (2,373 | ) |
| Other Comprehensive  Income  |       | —                               |       | — |   |
| Comprehensive Income  (Loss) |       | $                                    | 6,484      |   | $ | (2,373 | ) |

 
| ** **                                                               | ** ** | **Six Months Ended**       | ** ** |
|--------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                               | ** ** | **6/30/05**                          | ** ** | **6/30/04** | ** ** |
| ** **                                                               | ** ** | **(Dollars in Thousands)** | ** ** |
| Net Income (Loss)                                                        |       | $                                    | 7,739      |   |   | $ | (855 | ) |   |
| Other  Comprehensive Income—Foreign Currency Translation Adjustment |       | —                               |       |   | 111 |   |   |
| Comprehensive Income (Loss)                                              |       | $                                    | 7,739      |   |   | $ | (744 | ) |   |

 

See accompanying Notes to Condensed Consolidated Financial Statements.

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**MAUI LAND &PINEAPPLE COMPANY, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**
| ** **                                                | ** ** | **Six Months Ended**       | ** ** |
|-----------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                | ** ** | **6/30/05**                          | ** ** | **6/30/04** | ** ** |
| ** **                                                | ** ** | **(Dollars in Thousands)** | ** ** |
| Net Cash Provided  by Operating Activities                |       | $                                    | 516        |   | $ | 13,499 |   |
| Investing Activities                                      |       |                                 |       |   |   |
| Purchases of property                                     |       | (6,850                               | )          | (9,165 | ) |
| Proceeds from disposals of property                       |       | 2,643                                |       | 2,974 |   |
| Non-refundable deposit (hotel purchase)                   |       | —                               |       | (2,000 | ) |
| Other                                                     |       | (808                                 | )          | (1,357 | ) |
| Net Cash Used in  Investing Activities                    |       | (5,015                               | )          | (9,548 | ) |
| Financing  Activities                                     |       |                                 |       |   |   |
| Payments of long-term debt and capital lease  obligations |       | (6,396                               | )          | (11,692 | ) |
| Proceeds from long-term debt                              |       | 4,500                                |       | 4,500 |   |
| Distributions to minority interest                        |       | —                               |       | (1,046 | ) |
| Other                                                     |       | —                               |       | (81 | ) |
| Net Cash Used in  Financing Activities                    |       | (1,896                               | )          | (8,319 | ) |
| Net Decrease in  Cash                                     |       | (6,395                               | )          | (4,368 | ) |
| Cash and Cash Equivalents at Beginning of Period          |       | 11,531                               |       | 7,863 |   |
| Cash and Cash  Equivalents at End of Period               |       | $                                    | 5,136      |   | $ | 3,495 |   |

 

Supplemental Disclosures of Cash Flow Information—Interest(net of amounts capitalized) of $257,000 and $717,000 was paid during the sixmonths ended June 30, 2005 and 2004, respectively. Income taxes of$273,000 and $1,781,000 were paid during the six months ended June 30,2005 and 2004, respectively.

Non-Cash Investing Activities—For 2005, net cash salesproceeds of $10.6 million were available for re-investment on a tax-deferredbasis.

See accompanying Notes to Condensed Consolidated Financial Statements.

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**MAUI LAND & PINEAPPLE COMPANY, INC. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)**

**1.**                 Inthe opinion of management, the accompanying condensed consolidated financialstatements contain all normal and recurring adjustments necessary to fairlypresent the statement of financial position, results of operations and cashflows for the interim periods ended June 30, 2005 and 2004.

**2.**                 TheCompany’s reports for interim periods utilize numerous estimates of productioncost, general and administrative expenses, and other costs for the full year. Futureactual amounts may differ from the estimates. Amounts in the interim reportsare not necessarily indicative of results for the full year.

**3.**                 Theeffective tax rate for 2005 and 2004 differs from the statutory federal rate of34% primarily because of the state tax provision and refundable state taxcredits.

**4.**                 Accountsand notes receivable are reflected net of allowance for doubtful accounts of$642,000 and $825,000 at June 30, 2005 and December 31, 2004,respectively.

**5.**                 Inventoriesas of June 30, 2005 and December 31, 2004 were as follows:
| ** **                           | ** ** | **6/30/05**                          | ** ** | **12/31/04** | ** ** |
|--------------------------------------|------------|--------------------------------------|------------|--------------|------------|
| ** **                           | ** ** | **(Dollars in Thousands)** | ** ** |
| Pineapple products                   |       |                                 |       |         |       |
| Finished goods                       |       | $                                    | 4,243      |         | $          | 3,477 |   |
| Work in progress                     |       | 398                                  |       | 438          |       |
| Raw materials                        |       | 623                                  |       | 751          |       |
| Real estate held  for sale           |       | 2,449                                |       | 2,966        |       |
| Merchandise,  materials and supplies |       | 7,429                                |       | 7,468        |       |
| Total Inventories                    |       | $                                    | 15,142     |         | $          | 15,100 |   |

 

The Company accounts for the costs of growingpineapple in accordance with the “annual accrual method,” which has been usedby Hawaii’s pineapple and sugarcane growers since the 1950s. Under this method,revenues and costs are determined on the accrual basis, and pineappleproduction costs incurred during a year are charged to the costs of cropsharvested during that year. These costs include land preparation and planting,cultivation, irrigation, crop development, harvesting and hauling to thecannery. They also include certain overhead costs that are directly related tothe growing of pineapple. Accordingly, no costs are assigned to the growing(unharvested) crops.  The annual accrualmethod is the most appropriate method of accounting for the costs of growingpineapple because of the pineapple’s crop cycle (18 to 48 months) and theuncertainties about fruit quality and the number of crops to be harvested fromeach planting (one to three crops). AICPA Statement of Position No. 85-3(SOP), “Accounting by Agricultural Producers and Agricultural Cooperatives,”states that all direct and indirect costs of growing crops should beaccumulated and growing crops should be reported at the lower of cost or market.However, the SOP does not apply to growers of pineapple and sugarcane intropical regions because tropical agriculture (of which pineapple and sugarcaneproduction in Hawaii are examples) differs greatly from agriculture intemperate regions of the mainland United States. The Company’s growing(unharvested) crops at June 30, 2005 and December 31, 2005, consistedof approximately 4,200 acres in various stages of growth that will be harvestedprincipally in the years 2005 through 2008, and are expected to yield anaverage of approximately 30 tons per acre. The estimated average yield of tonsper acre reflects the Company’s expectation that it will harvest second ratooncrops (fruit from the third harvest), which yield less tons per acre.

The Company uses thepercentage-of-completion method to recognize revenues and profits from the saleof residential land parcels where the Company is obligated to construct improvements(roads, 

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sidewalks,drainage, and utilities) after the closing of the sale. Under this method,revenues are recognized over the improvement construction period on the basisof costs incurred as a percentage of total costs to be incurred. In the firsthalf of 2005, the Company recognized revenues and profits using the percentageof completion method for the sale of lots that closed escrow in Honolua RidgePhase I residential subdivision at the Kapalua Resort. In the first half of2005, five lots closed escrow bringing the total lots sold to 22. At June 30,2005, construction of the improvements was estimated to be approximately 92%complete. Costs of sales are allocated to each lot based on relative salesvalues. The total estimated costs are approximately $13.2 million, and consistprimarily of executed contracts with contractors. This estimate could beaffected by construction or land conditions that were not anticipated thatcould result in additional change orders to the existing contracts or otherunforeseen variables that may affect the total cost of the improvements to beconstructed. Construction of the project’s 25 residential lots and relatedimprovements are scheduled to be completed by September 2005.

**6.**                 RealEstate Sales

In June 2005, the Company sold approximately 129acres of Upcountry Maui land for $14 million, comprised of $11 million in cashand a promissory note for $3 million. In connection with the sale, the Companyand the buyer executed a Water Development Agreement. Under the agreement, theCompany will drill a new water well and construct a storage tank and atransmission line that would connect to the County of Maui water system. Thewell and storage tank will be constructed on a separate land parcel. After theCounty’s approval of the completed project, the Company will dedicate thefacilities to the County for use as part of the County’s Upcountry water system.In exchange for the dedication, the Company would receive access to a watersource (i.e., specified quantity of water). The cost to construct the watersource is estimated at $6.4 million and, based on the expected water capacity,the buyer will be assigned 51% of the water source allocated to the Company bythe County. Thus, in determining the profit to be recognized, 51% of theestimated total cost was allocated to the three parcels sold. The remainder ofthe cost (49%) will be deferred because the water source will benefit (serve)other Company projects in the Upcountry area. Because the cost to construct thewater source can be reasonably estimated, $7.1 million of the profit on thetransaction was allocated to the sale of the land parcels and $1.9 million wasallocated to subsequent construction of the water source. Both of theseactivities will have the same rate of gross profit. This accounting isconsistent with SFAS No. 66, *Accounting for Sales ofReal Estate*. The $3.0 million note receivable is due on the date thebuyer receives its allocated water source; accordingly, the $1.9 million ofgross profit relating to construction of the water source will be recognized infuture periods based on performance.

In June 2005, the Company also sold approximately25 acres of land and improvements to the Hui No`eau Visual Arts Center for $2.7million in cash and a promissory note of $856,000 that is due by December 31,2005.

Thesesecond quarter 2005 real estate sales transactions resulted in net cash salesproceeds of $13.3 million, which have been or are expected to be re-invested ona tax deferred basis (Internal Revenue Code Section 1031 exchange). Proceedsof $2.7 million were used to purchase property to be used in the Company’soperations and, as of June 30, 2005, $10.6 million was on deposit with aqualified exchange intermediary. The gain on these sales recognized for financialstatement purposes was $10.5 million.

**7.**                 DeferredCosts

Pursuant to an April 30, 2004 letter of intent,the Company and Miraval Holding, LLC (Miraval) were negotiating the formationof a joint venture to create and manage a health and wellness community at theKapalua Resort. In early May 2005, the parties agreed to discontinuenegotiations and to not proceed with the joint venture. In the second quarterof 2005, the Company wrote-off legal, design and other deferred costs of$440,000 that related to the anticipated venture with Miraval. The Companyplans to continue with 

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the development of ahealth and wellness community in another area of the Kapalua Resort. On May 13,2005, the Company’s Chairman, President & CEO, David C. Cole, resignedfrom the Board of Directors of Miraval. The Stephen M. Case Revocable Trust,which as of June 30, 2005 owns 42% of the Company’s issued and outstandingcommon stock, controls an entity that owns 70% of Miraval.

**8.****                 OperatingSegment Information:**
| ** **                                 | ** ** | **Three Months**       | ** ** | **Six Months**         | ** ** |
|--------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                                 | ** ** | **Ended June 30** | ** ** | **Ended June 30** | ** ** |
| ** **                                 | ** ** | **2005**                    | ** ** | **2004**                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                 | ** ** | **(Dollars in Thousands)**  | ** ** |
| Revenues                                   |       |                        |       |                        |       |   |   |   |   |
| Pineapple                                  |       | $                           | 16,256     |                        | $          | 16,871 |   | $ | 32,043 |   | $ | 38,596 |   |
| Resort                                     |       | 8,674                       |       | 9,888                       |       | 22,118 |   | 22,515 |   |
| Community Development                      |       | 26,224                      |       | 2,965                       |       | 35,136 |   | 9,111 |   |
| Other                                      |       | 16                          |       | 18                          |       | 34 |   | 34 |   |
| Total Operating  Revenues                  |       | 51,170                      |       | 29,742                      |       | 89,331 |   | 70,256 |   |
| Operating Profit  (Loss)                   |       |                        |       |                        |       |   |   |   |   |
| Pineapple                                  |       | (2,603                      | )          | (2,761                      | )          | (4,691 | ) | (4,553 | ) |
| Resort                                     |       | (2,252                      | )          | (1,359                      | )          | (1,934 | ) | (1,259 | ) |
| Community Development                      |       | 15,321                      |       | 1,008                       |       | 19,242 |   | 5,347 |   |
| Other                                      |       | (57                         | )          | (145                        | )          | (125 | ) | (238 | ) |
| Total Operating  Profit (Loss)             |       | 10,409                      |       | (3,257                      | )          | 12,492 |   | (703 | ) |
| Interest Expense                           |       | (95                         | )          | (275                        | )          | (237 | ) | (652 | ) |
| Interest Income                            |       | 10                          |       | 7                           |       | 30 |   | 28 |   |
| Income Tax  (Expense) Benefit              |       | (3,840                      | )          | 1,178                       |       | (4,546 | ) | 438 |   |
| Income (Loss)—Continuing Operations   |       | 6,484                       |       | (2,347                      | )          | 7,739 |   | (889 | ) |
| Income (Loss)—Discontinued Operations |       | —                      |       | (26                         | )          | — |   | 34 |   |
| Net Income (Loss)                          |       | $                           | 6,484      |                        | $          | (2,373 | ) | $ | 7,739 |   | $ | (855 | ) |

 

In 2005, responsibility for the real estate leasingactivity that was accounted for in the Resort segment was transferred to theCommunity Development segment (previously called “Development” segment) andprior year amounts were restated for comparability. The Community Developmentsegment as reorganized is comprised of all of the Company’s real estateentitlement, development, construction, sales and leasing activities. TheCommunity Development segment also includes the Company’s 51% equity interestin Kapalua Bay Holdings LLC, the owner and operator of the Kapalua Bay Hotel.Remaining in the Resort segment are the operations of three championship golfcourses, a tennis facility, ten retail outlets, a vacation rental program (The KapaluaVillas), and Public Utilities Commission regulated water and sewagetransmission operations at the Kapalua Resort.

 

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**9.****                 DiscontinuedOperations**

In December 2003, inconnection with the Company’s plan to cease a substantial portion of itsforeign pineapple operations, the Company entered into an agreement to sellsubstantially all of the assets of its 51% owned Costa Rican pineapplesubsidiary, and in 2003, title to all but two parcels of land in Costa Rica wastransferred to the buyer. In the first quarter of 2004, the Company ceased theremainder of its foreign pineapple operations; title to one of the remainingparcels was transferred to the buyer and $2.7 million of the previouslywithheld sales price was paid to the Company’s subsidiary. The results of theseoperations prior to the sales and the gains and other revenues and expensesrealized after the sales are being reported as discontinued operations, withprior period amounts restated for comparability. Revenues and operating lossattributable to this discontinued operation were $35,000 and $(79,000),respectively for the three months ended June 30, 2004. For the first sixmonths of 2004, revenues and operating profit from this discontinued operationwas $1,740,000 and $54,000, respectively.

**10.****          AverageCommon Shares Outstanding Used to Compute Earnings Per Share**
| ** ** | ** ** | **Three Months ** | ** ** | **Six Months **   | ** ** |
|------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** ** | ** ** | **Ended June 30** | ** ** | **Ended June 30** | ** ** |
| ** ** | ** ** | **2005**                    | ** ** | **2004**                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| Basic      |       | 7,228,569                   |       | 7,195,822                   |       | 7,227,576 |   | 7,195,811 |   |
| Diluted    |       | 7,321,733                   |       | 7,195,822                   |       | 7,322,835 |   | 7,195,811 |   |

 

Forthe three months and six months ended June 30, 2004, potentially dilutivecommon shares from stock-based compensation arrangements are not included inthe number of diluted common shares because to do so would have an antidilutiveeffect on the earning per share amounts (i.e. decrease loss per common share). Thepotentially dilutive common shares were 37,254 and 40,072, for the three monthsand six months ended June 30, 2004, respectively.

**11.**          AtJune 30, 2005 and 2004, the Company did not hold any derivativeinstruments and did not enter into hedging transactions.

**12.****          Componentsof Net Periodic Benefit Cost**
| ** **                            | ** ** | **Three Months  Ended**         | ** ** | **Six Months  Ended** | ** ** |
|---------------------------------------|------------|--------------------------------------|------------|----------------------------|------------|
| ** **                            | ** ** | **2005**                             | ** ** | **2004**                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                            | ** ** | **(Dollars in Thousands)** | ** ** |
| **Pension Benefits**                  |       |                                 |       |                       |       |   |   |   |   |
| Service cost                          |       | $                                    | 429        |                       | $          | 501 |   | $ | 858 |   | $ | 1,002 |   |
| Interest cost                         |       | 781                                  |       | 726                        |       | 1,562 |   | 1,452 |   |
| Expected return on plan  assets       |       | (810                                 | )          | (745                       | )          | (1,620 | ) | (1,490 | ) |
| Amortization of prior  service cost   |       | 12                                   |       | 11                         |       | 24 |   | 22 |   |
| Amortization of  transition liability |       | 6                                    |       | 6                          |       | 13 |   | 12 |   |
| Special termination  benefits         |       | —                               |       | —                     |       | — |   | 106 |   |
| Recognized actuarial  loss            |       | 126                                  |       | 98                         |       | 252 |   | 196 |   |
| Net expense                           |       | $                                    | 544        |                       | $          | 597 |   | $ | 1,089 |   | $ | 1,300 |   |
| **Other Benefits**                    |       |                                 |       |                       |       |   |   |   |   |
| Service cost                          |       | $                                    | 91         |                       | $          | 98 |   | $ | 182 |   | $ | 196 |   |
| Interest Cost                         |       | 240                                  |       | 225                        |       | 480 |   | 450 |   |
| Amortization of prior  service cost   |       | (32                                  | )          | (33                        | )          | (64 | ) | (66 | ) |
| Special termination  benefits         |       | —                               |       | —                     |       | — |   | 55 |   |
| Recognized actuarial  (gain)          |       | (68                                  | )          | (75                        | )          | (136 | ) | (150 | ) |
| Net expense                           |       | $                                    | 231        |                       | $          | 215 |   | $ | 462 |   | $ | 485 |   |

 

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TheCompany expects to contribute $1,201,000 to its defined benefit pension plansand $675,000 to its other postretirement benefit plans in 2005. Specialtermination benefits for pension benefits and other benefits relate tomanagement changes in 2004.

**13.****          Contingencies**

Pursuant to a 1999 settlement agreement resulting froma lawsuit filed by the County of Maui, the Company and several chemicalmanufacturers have agreed that until December 1, 2039, they will pay for90% of the capital cost to install filtration systems in any future water wellsif the presence of a nematocide commonly known as DBCP exceeds specifiedlevels, and for the ongoing maintenance and operating cost for filtration systemson existing and future wells. To secure its obligations, the Company and theother defendants in the lawsuit are required to furnish to the County of Mauian irrevocable standby letter of credit throughout the entire term of theagreement. The Company had estimated a range of its share of the cost tooperate and maintain the filtration systems for the existing wells and itsshare of the cost of the letter of credit, and recorded a liability of $250,000in 1999. In 2004, the Company recognized a liability and expense of $167,000for its share of the capital costs to install a filtration system for anexisting well. Adjustments to the liability through June 30, 2005 did nothave a material effect on the Company’s financial statements. The Company ispresently not aware of any plans by the County of Maui to install otherfiltration systems or to drill any water wells in areas affected byagricultural chemicals. The level of DBCP in the existing wells should declineover time as the wells are pumped, which may end the requirement for filtrationbefore 2039. There are procedures in the settlement agreement to minimize theDBCP impact on future wells by relocating the wells to areas unaffected by DBCPor by using less costly methods to remove DBCP from the water. Therefore, whileit is likely that the County of Maui will at sometime in the future drilladditional wells, the possible cost to the Company depends on many factors,including the location of the well, the availability of suitable alternativesites and ultimately, whether or not the contaminant DBCP is found in the water.Accordingly, a reserve for costs relating to any future wells was not recordedbecause the Company was not able to reasonably estimate the amount of liability(if any).

In 2001, in connection with pre-development planningfor a land parcel in Upcountry Maui, pesticide residues in the parcel’s soilwere discovered in levels that are in excess of Federal and Hawaii State limits.Studies by environmental consultants, in consultation with the State Departmentof Health, indicate that remediation probably will be necessary. Based on thepossible land use alternatives and the remediation alternatives proposed by theenvironmental consultants, estimates of the future remediation cost range from -0-to $3.5 million, and a liability for this remediation was not recorded. In thesecond quarter of 2005, the Company sold this land parcel and the buyer will beresponsible for any future soil remediation.

The Company has a 51% membership interest in KapaluaBay Holdings LLC (“Bay Holdings”). Kapalua Bay LLC, which is a wholly ownedsubsidiary of Bay Holdings, secured a $45.0 million loan in connection with itspurchase of the Kapalua Bay Hotel assets. The Company and the other BayHoldings’ members (owners) executed a $5.0 million indemnity and guarantyagreement, pursuant to which each member is responsible for (and guaranteespayment to the lenders of) their pro rata share of costs and losses incurred bythe lenders as a result of the occurrence of specified triggering events duringthe term of the agreement. The maximum future payments the Company could berequired to make is $2.55 million, plus interest. The Company has recognized aliability of $180,000, representing the estimated fair value of its indemnitor’sobligation.

In addition to the matters noted above, there arevarious other claims and legal actions pending against the Company. In theopinion of management, after consultation with legal counsel, the resolution ofthese other matters will not have a material adverse effect on the Company’sfinancial position or results of operations.

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The Company, as an investor in various affiliates(partnerships, LLCs), may under specific circumstances be called upon to makeadditional capital contributions.

At June 30, 2005, theCompany had commitments under signed contracts totaling $8,683,000, whichprimarily relate to real estate development projects.

**Item 2.**                        Management’sDiscussion and Analysis of Financial Condition and Results of Operations

The Company consists of a landholding and operatingparent company and its principal subsidiaries, including Maui PineappleCompany, Ltd. and Kapalua Land Company, Ltd. The Company’s reportable operatingsegments are Pineapple, Resort and Community Development. These segments aredescribed further in the sections that follow.

In January 2005,lines of responsibility among the Company’s operating segments were modified toenhance decision-making, to drive continuous improvement in day-to-dayperformance, and to reach the Company’s objectives for 2005, which are to:

·       Achieveprofitable Pineapple segment operations (operating loss adjusted for certainnon-recurring revenue and expense items);

·       Enhanceoperating margins and management practices in Resort operations;

·       Executethe Community Development planning and entitlement agenda;

·       Drivecost savings by consolidating functions and processes; and

·       Improveemployee productivity through training, communication and professionaldevelopment.

In the second quarter of 2005, some of the Company’ssignificant transactions, events and key initiatives to meet its goals andobjectives included:

In June of 2005, the Company sold approximately25 acres of land and improvements to the Hui No`eau Visual Arts Center. TheCompany also sold approximately 129 acres of Upcountry Maui land. The Companywill re-invest the $13.3 million net cash sales proceeds from thesetransactions ($10.5 million pre-tax gain) to strengthen its Pineapple segmentoperations, reposition the Resort operations and to increase investments in itsCommunity Development segment.

Design work for the new multi-client processingfacility continued in the second quarter as long-lead-time items are beingordered and bid packages for the various aspects of the facility are prepared. TheCompany’s Board of Directors approved the capital expenditure of $17.2 million forthis new facility on a portion of the present pineapple cannery grounds in February 2005.The new facility, which is scheduled to be in operation by July 2006, isexpected to reduce the Company’s overall cost structure by integrating thefresh fruit and canning processes and by upgrading much of the currentequipment.

In June 2005, the newly renovated restaurant atthe Bay Course Clubhouse opened under new management. As of April 1, 2005,the Plantation Course was closed for regrassing of the greens, renovation ofthe fairway bunkers and other course improvements. The Course reopened on July 31,2005.

Several Company initiatives to prepare for the MauiCounty Council Land Use Committee hearings regarding Kapalua Mauka took placein the second quarter of 2005. The Company expects to have a decision from theCounty Council by the end of 2005. Final State of Hawaii Department of Commerce &Consumer Affairs registration approval for Honolua Ridge Phase II was receivedin June 2005, and the Company expects that it will begin sales ofagricultural home sites in the project in September 2005. SpecialManagement Area permit for construction of the first phase of Kapalua Village(commercial project) was approved in the second quarter of 2005 andconstruction of two buildings totaling approximately 12,000 square feet isexpected to begin in September 2005.

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Leadership training andcommunications processes were implemented in the second quarter of 2005 for allmanagement employees and planning began for a new company-wide employeeorientation and re-orientation program. An outside consultant was engaged andhas begun to work with management to develop ethics training sessions for theCompany’s employees.

**RESULTS OF OPERATIONS**

**CONSOLIDATED**

**Overview**

The Company reported net income of $6.5 million ($.90per share) for the second quarter of 2005 compared to a net loss of $2.4million ($.33 per share) for the second quarter of 2004. For the first sixmonths of 2005, the Company’s net income was $7.7 million ($1.07 per share) comparedto a net loss of $855,000 ($.12 per share) for the same period in 2004. Revenuesfor the second quarter of 2005 were $51.2 million compared to $29.7 million forthe second quarter of 2004. For the first six months of 2005, consolidatedrevenues were $89.3 million compared to $70.3 million for the first half of2004. A large part of the improved results for the second quarter and firsthalf of 2005 was attributable to two land sale transactions.

In June 2005, theCompany concluded two land sale transactions of Upcountry Maui properties andrecognized revenues of $14.5 million and a pre-tax gain of $10.5 million (seeNote 6 to Condensed Consolidated Financial Statements). Approximately 88 acresof the land had been planned for development and subsequent bulk sale,potentially in 2007. The remaining property was comprised of sub-standardagricultural lands and property that had been earmarked for disposition as “non-core”to the Company’s strategic plan. The Company has other under-performing fieldsand pasturelands leased to other parties in Upcountry Maui, as well as otherreal estate that has been assessed as “non-core” that may also be disposed ofin 2005 and 2006.

**General and Administrative**

Consolidated general and administrative expensesincreased by 35% to $9.2 million for the second quarter of 2005 from $6.8million for the second quarter of 2004. For the first six months of 2005,general and administrative expenses increased by 16% to $16.5 million comparedto $14.2 million for the first six months of 2004.

The major components of the difference in general andadministrative expenses between the second quarter and first half of 2005compared to the same periods in 2004 were as follows:
| ** **                                    | ** ** | **Second Quarter**             | ** ** |
|-----------------------------------------------|------------|-------------------------------------|------------|
| ** **                                    | ** ** | **2005**                            | ** ** | **2004** | ** ** | **inc (dec)** | ** ** |
| ** **                                    | ** ** | **(Dollars in Millions)** | ** ** |
| Salaries &  wages                         |       | $                                   | 2.1        |   | $ | 1.5 |   |   | $ | 0.6 |   |   |
| Employee  incentives & stock compensation |       | 0.8                                 |       | 0.4 |   |   | 0.4 |   |   |
| Employee  severance expense                   |       | —                              |       | 0.4 |   |   | (0.4 | ) |   |
| Professional  services                        |       | 1.1                                 |       | 0.8 |   |   | 0.3 |   |   |
| Depreciation  expense                         |       | 1.6                                 |       | 0.4 |   |   | 1.2 |   |   |
| Other (net)                                   |       | 3.6                                 |       | 3.3 |   |   | 0.3 |   |   |
| Total                                         |       | $                                   | 9.2        |   | $ | 6.8 |   |   | $ | 2.4 |   |   |

 

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| ** **                                    | ** ** | **Six Months Ended June 30,** | ** ** |
|-----------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                    | ** ** | **2005**                                          | ** ** | **2004** | ** ** | **inc (dec)** | ** ** |
| ** **                                    | ** ** | **(Dollars in Millions)**               | ** ** |
| Salaries &  wages                         |       | $                                                 | 4.0        |   | $ | 3.2 |   |   | $ | 0.8 |   |   |
| Employee  incentives & stock compensation |       | 1.4                                               |       | 0.6 |   |   | 0.8 |   |   |
| Employee  severance expense                   |       | 0.3                                               |       | 1.5 |   |   | (1.2 | ) |   |
| Medical insurance  premiums                   |       | 1.9                                               |       | 2.3 |   |   | (0.4 | ) |   |
| Professional  services                        |       | 2.2                                               |       | 1.5 |   |   | 0.7 |   |   |
| Depreciation  expense                         |       | 2.4                                               |       | 1.0 |   |   | 1.4 |   |   |
| Other (net)                                   |       | 4.3                                               |       | 4.1 |   |   | 0.2 |   |   |
| Total                                         |       | $                                                 | 16.5       |   | $ | 14.2 |   |   | $ | 2.3 |   |   |

 

The increase in salaries and wages is primarily theresult of additional employees in the Community Development segment in thesecond quarter and first half of 2005. Further expansion of the CommunityDevelopment staff is expected in order to accomplish the projects andinitiatives for this segment. The increase in employee incentives and stockcompensation expense was principally the result of accruals forperformance-based incentives, reflecting the Company’s increased emphasis onperformance-based pay plans.

Employee severance expense was lower in the secondquarter and first half of 2005 because of management changes at the corporatelevel in the first half of 2004. In addition, in the first half of 2005,employee severance charges due to reduction in the work force in the Pineapplesegment was approximately $300,000 compared to $680,000 in the first half of2004. The decrease in medical insurance premiums in the first half of 2005largely reflects the reduction in the work force in the Pineapple segment.

The increase in professional services reflects chargesincurred in the first half of 2005 for modifications and adjustments to theCompany’s integrated accounting system and additional training of the Company’semployees on use of the system. The system was fully placed in service in January 2003and reduction in staffing and staff turnover, particularly in the Pineapplesegment, necessitated re-training in 2005. The increase in professionalservices in 2005 also reflects the cost of outside consultants primarily toassist the Company in documenting its internal controls and processes required,in part, by the requirements of the Sarbanes-Oxley Act.

The increase in depreciation charged to general andadministrative expense for both the second quarter and the first half of 2005is due to a change in the estimated useful lives of certain Pineapple segmentassets in 2005 as a result of the decision to construct a new plant to replacethe current cannery, can plant and fresh fruit processing facility. The Companycurrently estimates that assets with a net book value of approximately $6million will be expensed over the 16 month period ending June 30, 2006.

General and administrativeexpenses are incurred at the corporate level and at the operating segment level.All general and administrative expenses incurred at the corporate level areallocated to the operating segments. Such allocations are consistent withmanagement’s evaluation of the operating segments.

**Interest Expense**

Interest expense of $95,000 for thesecond quarter of 2005 and $237,000 for the first half of 2005 was lower by 65%and 64%, respectively, compared to the same periods in 2004. The decrease ininterest expense was due to lower average borrowings and to a higher amount ofcapitalized interest in 2005. Capitalized interest was $197,000 and $337,000for the second quarter and first half of 2005, respectively, primarily as aresult of construction activity at the Kapalua Resort. For the same periods in2004, interest capitalized was approximately $30,000. The Company’s effectiveinterest rate on borrowings was slightly higher in 2005 due to higher borrowingrates from financial institutions.

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**PINEAPPLE**

**Overview**

The Pineapple operating segment includes growing,packing and processing, and marketing of fresh and canned pineapple. The fruitgrown by the Company principally consists of three types of pineapple: HawaiianGoldTM (sold as fresh whole or canned fruit), Champaka(largely used for canning) and organic pineapple (sold as fresh whole fruit).

The Company is expanding its presence in the freshfruit market, while selectively reducing its reliance on the canned fruitmarket. Therefore, over recent years, the Company has decreased the tonnage offruit going to the cannery and, in 2004, began to commensurately reduce thenumber of markets that it serves. The Company’s strategy focuses on using thecanned pineapple operations to complement the fresh operations, therebyallowing the Company to market only the highest quality fresh pineapple. TheCompany directs fruit to either the canned or the fresh pack facility at thetime of harvest based on a variety of factors including: market conditions, fruitsize and fruit quality. The transition of the Company’s pineapple operationscontinues with an emphasis on automating many labor-intensive functions andupgrading the workforce through selective training and performance basedcompensation programs.

The fresh fruit market is a year-round business, whichrequires consistency of supply. Over the past year, significant progress hasbeen made in changing the Company’s agronomic practices and planting schedulesto produce a more consistent and predictable supply of fruit throughout theyear. In addition, significant progress has been made towards improved cropmaintenance and agronomic practices that are beginning to result in improvedplant yields (tons of fruit per acre) and vastly improved fruit quality.

The Pineapple segment produced an operating loss fromcontinuing operations of $2.6 million for the second quarter of 2005 comparedto an operating loss of $2.8 million for the second quarter of 2004. Revenuesfor the second quarter of 2005 of $16.3 million were 4% lower than the secondquarter of 2004. For the first six months of 2005, the Pineapple segmentreported an operating loss of $4.7 million compared to an operating loss of$4.6 million for the first six months of 2004. Revenues of $32.0 million for thefirst six months of 2005 were 17% lower than the first six months of 2004.

Lower revenues for the second quarter and first halfof 2005 largely reflect the Company’s strategy to discontinue certain retailsegments for canned pineapple. Average sales prices for the Company’s cannedand fresh pineapple increased in the second quarter and first half of 2005compared to the same periods in 2004. Operating losses reported by thePineapple segment in 2005 largely reflect increased depreciation chargesrelated to the planned replacement of the current cannery, can plant and freshfruit packing facility, and costs associated with the modification andadjustment of the Company’s integrated accounting system, as mentioned aboveunder “General and Administrative.”  Inaddition, the losses incurred in 2005 and 2004 reflect the Company’s high coststructure, and costs associated with transitioning from predominantly a cannedpineapple supplier to a high-quality fresh fruit supplier.

As mentioned above, theCompany’s new multi-client processing facility is presently being designed andphysical construction work is scheduled to begin in September 2005. Thenew facility is expected to reduce the Company’s overall cost structure byintegrating and streamlining the fresh fruit and canning processes and byupgrading much of the current equipment. The Company is analyzing whichequipment will not be incorporated into the new facility and has acceleratedthe depreciation of equipment with a net book value of approximately $6 million,over the 16 month period ending June 30, 2006, the scheduled date ofcompletion of the new processing plant. This has resulted in additionaldepreciation charges of $1.2 million and $1.4 million, respectively, for thesecond quarter and first half of 2005. In connection with the new processingfacility, and as the Company transitions its business to focus on the premiumfresh fruit business, the Company will continue to restructure its workforce,which may result in additional charges to operating results.

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**Canned and Fresh Operations**

The case volume of canned pineapple sales decreased by18% and 31%, respectively, for the second quarter and first half of 2005 ascompared to the same periods in 2004 primarily reflecting the Company’sstrategy to sharply reduce supply to selected retail market segments. Thismarket refinement has resulted in the average sales prices for the Company’scanned pineapple products to increase by approximately 3% for the secondquarter and 4% for the first half of 2005 compared to the same periods in 2004.The Company implemented price increases for its canned product lines in March 2004,June 2004 and August 2004, and has announced an additional priceincrease effective August 2005.

Canned pineapple sold to the U. S. Government(primarily to the Department of Agriculture) comprised approximately 39% of theCompany’s case volume of canned pineapple sales in the second quarter and firsthalf of 2005 compared to approximately 17% and 23%, respectively, for thesecond quarter and first half of 2004. The Company will continue to participatein government programs that purchase pineapple for school lunches, needyfamilies and other areas.

The case volume of fresh pineapple sales increased by24% and 12%, respectively, for the second quarter and first half of 2005compared to the same periods in 2004. Revenues from fresh pineapple sales wereapproximately 35% and 34%, respectively, of the Pineapple segment net sales forthe second quarter and first half of 2005. In 2004, fresh pineapple sales wereapproximately 27% of net Pineapple segment sales for the second quarter and 24%for the first half year. The Company’s average revenue per box of freshpineapple sales increased by approximately 2% and 5%, respectively, in thesecond quarter and first half of 2005 compared to the same periods in 2004primarily reflecting the improved quality of its products and related marketingefforts.

Pineapple cost of sales was lower by 7% for the secondquarter and 17% for the first six months of 2005 as compared to the sameperiods in 2004, primarily reflecting lower sales volume of canned pineapple. Theaverage per unit cost of sales is higher in 2005 compared to 2004 because in2004, cost of sales was reduced because of the impact of a liquidation of inventorybased on the LIFO (last-in, first-out) method of accounting for inventories.

Pineapple shipping andmarketing cost decreased by $733,000 (25%) in the second quarter of 2005 and by$2.0 million (32%) in the first six months of 2005, compared to the sameperiods in 2004, largely reflecting the lower sales volume of canned pineapple.Reductions in the work force at the Company’s sales and marketing office and anincrease in shipments directly to the Company’s customers (as opposed tointerim storage of inventory in public warehouses), also contributed to lowershipping and marketing cost in 2005. In addition, a lower average shipping costfor fresh pineapple due to an increased use of surface shipment instead of thehigher cost air shipment, was also responsible for the lower cost in 2005. TheCompany’s changes in cultivation practices, harvesting methods, andpost-harvest handling have extended the shelf life of fresh fruit productsthereby enabling a greater reliance on surface transport to reach North Americanmarkets. In the first six months of 2005, the Company shipped approximately 80%of its Hawaiian GoldTM fresh pineapple bysurface, rather than by air, compared to about 65% in the first six months of2004.

**RESORT**

**Overview**

The Resort segment consists of ongoing operations atthe Kapalua Resort. These operations include three championship golf courses, atennis facility, a vacation rental program (The Kapalua Villas), ten retailoutlets and Public Utilities Commission regulated water and sewage transmissionoperations.

The Company began to implement the Kapalua Goldprogram to upgrade and standardize The Kapalua Villas as well as otherinitiatives to enhance and improve the Kapalua resort. The Company 

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expects to have 8 to 10Kapalua Gold Villas renovations completed in the fourth quarter of 2005. TheCompany presently has commitments from owners to proceed with renovation ofabout 50 units.

Hotel and condominium room occupancies at the Resort,and to a somewhat lesser extent for Maui in general, largely drive the increasein resort activity as reflected by increased golf play, merchandise sales andincreased lease revenues. Hotel and condominium room occupancies at KapaluaResort increased by 3% in the second quarter of 2005 and 4% in the first halfof 2005 compared to the same periods in 2004. Occupancies for the island ofMaui increased by 2% and for the State of Hawaii, occupancies increased by 4%in the first six months 2005 compared to the first six months of 2004.

The Resort segment reported an operating loss of $2.3million for the second quarter of 2005 compared to an operating loss of $1.4million for the second quarter of 2004. For the first six months of 2005, theResort produced an operating loss of $1.9 million compared to an operating lossof $1.3 million for the first six months of 2004. Resort revenues of $8.7million for the second quarter of 2005 were 12% lower than the second quarterof 2004; revenues for the first half of 2005 of $22.1 million were 2% lowerthan the same period in 2004.

The closure of the Plantation Golf Course as of April 1,2005 for extended green and fairway bunker renovations was the single largestcontributor to the lower revenues and increased operating losses in 2005. Therenovations were completed on schedule and the course reopened on July 31,2005.

Higher operating expenseat the Resort for electricity, repairs and maintenance costs, increased KapaluaResort Association dues, and increased costs for outside consultants werepartially offset by lower workers’ compensation cost, and reduced payroll costbecause of vacant administrative positions. Marketing expenses were higher inthe second quarter and first half of 2005 compared to the prior year because ofgreater emphasis on marketing the Kapalua Resort.

**Golf, Merchandise and Villas**

Revenues from golf operations decreased by 19% and 4%,respectively, for the second quarter and first half of 2005 compared to thesame periods in 2004. Lost revenues from the closure of the Plantation Coursewere partially offset by increased paid rounds at the Bay Course and theVillage Course. Overall, paid rounds of golf decreased by 24% for the secondquarter and 12% for the first six months of 2005 compared to the same periodsin 2004. Average green and cart fees were higher by 6% and 8%, respectively, inthe second quarter and first half of 2005 compared to the same periods in 2004.

The closure of the Plantation Course during the secondquarter of 2005 also negatively affected the Resort’s merchandise sales, whichdecreased by 16% for the second quarter and 6% for the first half of 2005compared to the same periods in 2004. Increased sales at Kapalua Resort’s otherretail outlets, in part attributed to higher room occupancies, partially offsetthe effect of the Plantation Course closure.

Revenues from the KapaluaVillas decreased by approximately 8% for the second quarter of 2005 compared tothe second quarter of 2004. For the first half of 2005, revenues from theKapalua Villas were about the same as the second half of 2004. These resultsreflect lower room occupancy rates, which were largely attributable to turnover in the Villa’s sales staff. Higher average room rates partially offsetlower 2005 occupancies.

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**COMMUNITY DEVELOPMENT**

**Overview**

The Community Development segment includes the Company’sreal estate entitlement, development, construction, sales and leasingactivities. A large portion of the focus for this segment is on the luxury realestate market on Maui. The segment also includes the operations of KapaluaRealty Company, a general brokerage real estate company located within theResort.

Community Development includes the management ofseveral leases, including the ground lease underlying the Ritz-Carlton, Kapaluaand through August 31, 2004, the ground lease for the Kapalua Bay Hotel. BeginningAugust 31, 2004, the Community Development segment includes the Company’s51% equity interest in Kapalua Bay Holdings LLC, the limited liability companythat owns and operates the Kapalua Bay Hotel, and that has the landlord’srights and interest in the adjacent retail shops, including the retail leases. KapaluaBay Holdings LLC currently plans to demolish the hotel and shops after the landentitlements are secured, which is presently estimated to be in 2006, anddevelop new whole and fractional residential units, an ocean-side spa and abeach club.

The Company has approximately 1,800 acres of land inMaui that are at various stages in the land entitlement process. Land must beappropriately entitled if development or construction is the intended use. Securingproper land entitlement is a process that requires obtaining county, state andfederal approvals, which can take several years to complete and entails a varietyof risks.

The Community Development segment is working on anumber of real estate development and Kapalua Resort revitalization projects. HonoluaRidge Phase II, a residential subdivision at the Kapalua Resort, comprised of25 agricultural-zoned lots ranging in size from 3 to 30 acres, is anticipatedto be ready for sale in September 2005. In the second quarter of 2005, theCompany submitted its final environmental impact statement for Pulelehua, aplanned traditional community in West Maui for working families. Applicationsfor zoning and community plan amendment changes for Pulelehua were alsosubmitted in the first half of 2005. Master planning work began in the firsthalf of 2005 for Kapalua Mauka, a planned 690 unit residential community. Theoutcome of County of Maui Land Use Committee hearings in the third quarter of2005 is a critical phase for this project. A Special Management Area permit,part of the County of Maui entitlement process, was approved in the secondquarter of 2005 for the first phase of Kapalua Village, a planned commercialarea in the Central Resort. Construction of this phase of Kapalua Village,comprised of 12,000 square feet of commercial space, is expected to begin in September 2005,and will house, among other tenants, Kapalua Realty in a new, highly visibleoffice.

The Community Development segment reported anoperating profit of $15.3 million for the second quarter of 2005 compared to$1.0 million for the second quarter of 2004. For the first six months of 2005,Community Development had operating profit of $19.2 million compared to $5.3million for the first six months of 2004. Revenues from this business segmentwere $26.2 million for the second quarter of 2005 compared to $3.0 million forthe second quarter of 2004. For the first six months of 2005, revenues fromthis segment were $35.1 million compared to $9.1 million for the first sixmonths of 2004.

Operating profit for thesecond quarter and first six months of 2005 include $113,000 and $223,000 oflosses from the Company’s equity interest in Kapalua Bay Holdings LLC. In thesecond quarter of 2005, the Company wrote off legal, design and other deferredcosts of $440,000 related to a joint venture to develop a health and wellnesscommunity at Kapalua Resort (see Note 7 to Condensed Consolidated FinancialStatements).

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**Real Estate Sales**

In the second quarter of 2005, the Company concludedthe sale of approximately 25 acres of land and improvements to the Hui No`eauVisual Arts Center. The Company also sold approximately 129 acres of UpcountryMaui land. Revenues of $14.5 million and operating profit of $10.5 million fromthese two real estate sales transactions were recognized by the CommunityDevelopment segment in the second quarter of 2005.

Revenues for the second quarter of 2005 also include$9.9 million from the sale of lots at the Honolua Ridge residential subdivision.For the first six months of 2005, Community Development revenues include $17.2million from the sale of lots at Honolua Ridge. Revenues and profit from HonoluaRidge are being recognized using the percentage-of-completion method as thesubdivision improvements are completed. At the end of the second quarter of2005, these improvements were approximately 92% complete. Three Honolua Ridgelots remained in inventory at June 30, 2005, of which two were undercontract and scheduled to close during the third quarter of 2005.

The Company’s balance sheet at June 30, 2005,includes $3.2 million of deferred revenues (current liability) related toHonolua Ridge and $1.9 million of deferred profit (offset against the relatednote receivable, which is included in non-current other assets) related to thesecond quarter sale of Upcountry Maui properties. See Note 6 to CondensedConsolidated Financial Statements.

Operating profit for thesecond quarter and first half of 2004 includes $506,000 and $4.5 million,respectively, from the sales of real estate. In May 2004, the sale of acustom home at Pineapple Hill Estates that the Company constructed as part of ajoint venture closed escrow resulting in revenues of $810,000 to the Company. InMarch 2004, the sale of a 6.5-acre parcel at Kapalua closed escrowresulting in revenues of $4.3 million.

**Realty and Leasing**

Kapalua Realty’s commission income from the resale ofresidential units in the Kapalua Resort was lower in the second quarter andfirst half of 2005 compared to the same periods in 2004, primarily because offewer transactions, partially offset by higher average resale prices in 2005. Typically,there is less real estate resale activity at Kapalua Resort when the Companyhas new product available for sale.

Revenues from leasingactivities decreased by about 50% for the second quarter and first half of 2005compared to the same periods in 2004. The decrease primarily reflects theabsence of lease revenues from the Kapalua Shops retail leases and from theKapalua Bay Hotel ground lease, effective August 31, 2004.

**LIQUIDITY,CAPITAL RESOURCES AND OTHER**

**Debt Position**

At June 30, 2005, the Company’s total debt,including capital leases, was $15.4 million, a reduction of $1.9 million from December 31,2004. The year 2005 began with no borrowings under the Company’s revolvingcredit lines and $11.5 million in cash and cash equivalents. Such cash and cashequivalents were used to fund cash flows used in operating activities in thefirst six months of 2005 and the scheduled repayments of existing debt. At June 30,2005, the Company had unused long-term credit lines of $30.0 million.

In May 2005, theCompany’s $15 million revolving credit agreement was increased to $30 million,the maturity of the revolving period was extended from December 2005 to April 2008,and the option to convert to a three-year term loan at the end of the revolvingperiod was eliminated. The modifications to this credit agreement were madebecause the availability of funds is expected to be necessary for interimfunding of the Company’s various construction projects.

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**Operating Cash Flows**

In thefirst six months of 2005, cash flows from operating activities was $516,000. Operatingactivities for the first six months of 2004 provided $13.5 million of net cashflows. By operating segment, these cash flows were approximately as follows:
| ** **                                      | ** ** | **Six Months Ended June 30,** | ** ** |
|-------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                      | ** ** | **2005**                                          | ** ** | **2004** | ** ** |
| ** **                                      | ** ** | **(Dollars in Millions)**               | ** ** |
| Pineapple                                       |       |                                              | $          | 0.2 |   |   |   | $ | 11.5 |   |   |
| Resort                                          |       |                                              | 1.8        |   |   |   | 1.3 |   |   |
| Community  Development                          |       |                                              | 3.7        |   |   |   | 6.7 |   |   |
| Corporate  expense, taxes, interest & other |       |                                              | (5.2       | ) |   |   | (6.0 | ) |   |
| Total                                           |       |                                              | $          | 0.5 |   |   |   | $ | 13.5 |   |   |

 

In the first six months of 2004, the large amount ofcash from operating activities in the Pineapple segment was primarily due to ahigher than normal level of sales late in 2003 that were collected in early2004. In addition, higher than normal rainfall in the first half of 2004resulted in a delay in planting and mulching, and therefore, less cash wasexpended in the first six months of 2004 for Pineapple segment labor andmaterials.

The reduction in cashflows from operating activities from the Community Development segment isprincipally due to cash flows of $8.9 million in the first half of 2005 fromthe sale of lots at Honolua Ridge being partially offset by construction costof the infrastructure improvements for the subdivision and the cost ofadministration of the operating segment. Cash flows from the second quarter2005 land sales transactions (see Note 6 to Condensed Consolidated FinancialStatements) are reported as non-cash Investing Activities. In the first sixmonths of 2004, the construction of improvements related to real estate salesactivity occurred in prior periods.

**Real Estate Sales Proceeds**

In the second quarter of2005, the Company closed two real estate sales transactions, which resulted innet cash sales proceeds of $13.3 million that the Company intends to reinveston a tax-deferred basis. Proceeds of $2.7 million were used to purchaseproperty to be used in the Company’s operations and $10.6 million was availableat June 30, 2005 to re-invest on a tax-deferred basis.

**Future Cash Outflows**

Capital expenditures for the Pineapple segment areexpected to be $10.8 million in 2005, including $7.6 million (of a total of$17.2 million) for the planning, design and construction of the newmulti-client processing facility that will replace the present pineapplecannery, can plant and fresh fruit packing facility. The planned capitalexpenditures for 2005 also include $1.1 million for replacement of existingequipment.

Capital expenditures for the Resort segment areexpected to be $5.8 million in 2005. These expenditures include renovation ofthe Plantation Course greens and fairway bunkers, the Bay Course Clubhouserestaurant, and renovation or replacement of other existing facilities andequipment.

Capital expenditures for the Community Developmentsegment in 2005 for the renovation of existing facilities and for new facilitiesare expected to be approximately $13 million. Expenditures in 2005 that will beaccounted for as deferred development costs pending entitlements and finalproject feasibility analyses are expected to be about $5.8 million. Expendituresfor Honolua Ridge Phase II, which the Company expects to begin selling in September 2005,are expected to be approximately $12 million in 2005. Aggregate expendituresfor the Community Development segment in 2005 are estimated to be $31 million.

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In total, expenditures forcapital, real estate inventory, planning, and new projects are expected to beabout $50 million in 2005. In the first half of 2005, sales proceeds fromHonolua Ridge Phase I totaled $8.9 million; and the Company anticipates that salesproceeds from the remaining three lots of approximately $5 million will beavailable in 2005 to fund other projects. The Company anticipates that some ofthe subdivision construction cost for Honolua Ridge Phase II will be funded bypre-sale proceeds and project specific financing will be secured for certaincapital projects. In addition, some of the projects will be funded by proceedsfrom the sale of properties that the Company has identified as “non-core” toits primary businesses and its vision for the future. Based on preliminarydiscussions with lenders, the Company believes that it will be able to securethe additional funds needed to accomplish these projects.

**Item 3.**                        Quantitativeand Qualitative Disclosures about Market Risk

The Company’s primarymarket risk exposure with regard to financial instruments is to changes ininterest rates. The Company attempts to manage this risk by monitoring interestrates and future cash requirements, and evaluating opportunities to refinanceborrowings at various maturities and interest rates. There were no materialchanges to the Company’s market risk exposure during the first six months of2005.

**FORWARD-LOOKINGSTATEMENTS AND RISKS**

This and otherreports published by the Company contain forward-looking statements intended toqualify for the safe harbor from liability established by the PrivateSecurities Litigation Reform Act of 1955. You can identify these statement bythe fact that they do not relate strictly to historical or current facts. Thesestatements contain words such as “may,” “will,” “project,” “might,” “expect,” “believe,”“anticipate,” “intend,” “could,” “would,” “estimate,” “continue” or “pursue,”or the negative or other variations thereof or comparable terminology. Inparticular, they include statements relating to:

·       thetiming and success of the Kapalua Bay Hotel redevelopment;

·       theclosing of lot sales at the Honolua Ridge residential subdivisions;

·       thetiming, cost and efficiency of the planned multi-client processing facility;

·       thetiming and success of sale of “non-core” properties;

·       thetiming and success of the Kapalua Resort initiatives to enhance and improve theresort, including renovations of the Plantation Golf Course, the Bay Club, theBay Course restaurant and the Villas;

·       newprocedures and practices to balance revenue sources and timing of productionvolume to strengthen the pineapple operations;

·       reductionin the number of types of products canned and sold;

·       2005expectations as to cash commitments;

·       2005expectations as to cash flows from operating and investing activities;

·       recoverabilityfrom operations of real estate development deferred costs and the net bookvalue of Pineapple segment assets;

·       shiftingtowards greater levels of fresh fruit production;

·       thefuture cost of compliance with environmental laws;

·       improvementof practices in areas of soil, water and energy conservation;

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·       theeffect of assumption changes on net periodic pension and other benefit costs;and

·       theimpact from the continuation of work force restructuring of the Pineapplesegment.

In addition, from time to time, the Company maypublish forward-looking statements as to those matters or other aspects of theCompany’s anticipated financial performance, business prospects, new products,marketing initiatives or similar matters.

Any forward-looking statements are made pursuant tothe Private Securities Litigation Reform Act of 1995 and, as such, speak onlyas of the date made. The Company undertakes no obligation to publiclyupdate any forward-looking statements, whether as a result of new information,future events or otherwise. The Company has based these forward-lookingstatements on our current expectations and projections about future events.

The Company cautions thereader that forward-looking statements involve risks and uncertainties thatcannot be predicted or quantified and, consequently, actual results may differmaterially from those expressed or implied by such forward-looking statements.Such risks and uncertainties include, but are not limited to, the followingfactors as well as other factors described from time to time in theCompany’s reports filed with the Securities and Exchange Commission:

**Dependencyon certain key personnel.**

The Company is currentlydependent upon the ability and experience of certain key management employees. Therecan be no assurance that the Company will be able to retain their services. TheCompany does not currently carry key man insurance on any of these individuals,and loss of one or more could have a material adverse effect on financialresults.

**RealEstate Investments are subject to numerous risks.**

The Company is subject tothe risks that generally relate to investments in real property because itdevelops and sells real property, primarily for residential use. Also, theCompany has a 51% ownership interest in Kapalua Bay Holdings LLC, which ownsand operates the Kapalua Bay Hotel. When interest rates increase, the cost ofacquiring, developing, expanding or renovating real property increases and realproperty values may decrease as the number of potential buyers decreases. Similarly,as financing becomes less available, it becomes more difficult both to acquireand to sell real property. Under eminent domain laws, governments can take realproperty. Sometimes this taking is for less compensation than the ownerbelieves the property is worth. Any of these factors could have a materialadverse impact on our results of operations or financial condition. Inaddition, equity real estate investments may be difficult to sell quickly andthe Company may not be able to adjust its portfolio of properties quickly inresponse to changes in economic conditions.

**Ifthe Company is unable to complete land development projects within forecastedtiming and budgeting, or at all, financial results may be negatively affected.**

TheCompany intends to develop resort properties, as suitable opportunities arise,taking into consideration the general economic climate. New projectdevelopments have a number of risks, including risks associated with:

·       construction delays or costoverruns that may increase project costs;

·       receiptof zoning, occupancy and other required governmental permits andauthorizations;

·       developmentcosts incurred for projects that are not pursued to completion;

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·       earthquakes,hurricanes, floods, fires or other natural disasters that could adverselyimpact a project;

·       defectsin design or construction that may result in additional costs to remedy orrequire all or a portion of a property to be closed during the period requiredto rectify the situation;

·       abilityto raise capital;

·       governmentalrestrictions on the nature or size of a project or timing of completion; and

·       potentiallack of adequate building/construction capacity for large development projects.

If any development projectis not completed on time or within budget, it may have a material adverseaffect on the Company’s financial results.

**Ifthe Company is unable to obtain required land use entitlements at reasonablecosts, or at all, its operating results would be adversely affected.**

The Company’s financialresults are highly dependent on its real estate development business segment. Thefinancial performance of the Company’s real estate development segment isclosely related to our success in obtaining land use entitlements for proposeddevelopment projects. Obtaining all of the necessary entitlements to develop aparcel of land is often difficult, costly and may take several years, or more,to complete. In some situations, the Company may be unable to obtain thenecessary entitlements to proceed with a real estate development or may berequired to alter its plans for the development.  Delays or failures to obtain theseentitlements may have a material adverse affect on the Company’s financialresults.

**Ifthe planning and construction of infrastructure in Maui is not improved,particularly in the area of transportation, this could result in additionaldifficulty or the inability of the Company to move forward with its planneddevelopment projects, which could negatively impact its financial results.**

The roads and highways inMaui are currently inadequate to accommodate the planned growth of the island. Planningand construction of this infrastructure has not been done with a long-termperspective and in coordination with the needs of the community. This lack ofcomprehensive planning may result in infrastructure stress in Maui and may be amajor impediment to future development. Infrastructure stress can also lead toa deterioration of the visitor experience and the quality of life forresidents, which in turn can impact the Company’s ability to attractdiscriminating customers, employees, vendors and contractors.

**Thehistorical price and market for luxury real estate on Maui has been highlycyclical and if the market demand for luxury real estate were to decrease, theCompany’s operating results could be adversely affected.**

The highs and lows in themarket cycle can prevail for multiple years at a time. During low periods ofdemand, real estate product may remain in inventory for much longer thanexpected or be sold at lower than expected returns, or even at a loss, whichcould impair the Company’s liquidity and ability to proceed with additionalland development projects and negatively affect its operating results.

**Ifthe Company is unable to successfully compete with other developers of luxuryreal estate on Maui, its financial results could be materially affected.**

The Company’s real estateproduct faces competition from other luxury resort real estate properties onMaui, and from other luxury resort residential property in Hawaii and themainland United States. In many cases, the Company’s competitors are largerthan it is and have greater access to capital. If the Company is unable tocompete with these larger competitors, its financial results could bematerially and adversely affected.

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**Ifthe Company cannot attract and retain skilled workers for its resortoperations, its financial results could be negatively impacted. There is apotential lack of adequate skilled workers on Maui for larger developmentprojects.**

The Company’s three golf coursesrequire a large number of course and facility maintenance and operationsworkers, and the hotel and villas require housekeepers, food and beverageservers, front desk, and other operational and hospitality workers. Overall,the Company’s resort operations require a large number of workers to maintainthe quality and level of service that it strives to provide to its customers. TheCompany’s plans for development projects require that there be adequate laborin all of the construction trades. The labor market on Maui is verycompetitive, with the labor premium in West Maui being even greater thanelsewhere on Maui. The cost and insufficient supply of housing and the absenceof adequate public services, such as schools, continue to be an impediment to attractingand retaining labor. If the Company and other Maui businesses are unable towork with the government to allow for the expansion of affordable housing andto implement plans to provide a higher level of public services, includingschools, further development in West Maui could be severely restricted, whichin turn could have a material adverse effect on the Company’s operations.

**TheCompany may be subject to certain environmental regulations under which it mayhave additional liability and experience additional costs for land development.**

Various federal, state,and local environmental laws, ordinances and regulations regulate the Company’sproperties and could make it liable for the costs of removing or cleaning uphazardous or toxic substances on, under, or in property it currently owns oroperates or that it previously owned or operated. These laws could imposeliability without regard to whether the Company knew of, or was responsiblefor, the presence of hazardous or toxic substances. The presence of hazardousor toxic substances, or the failure to properly clean up such substances whenpresent, could jeopardize the Company’s ability to develop, use, sell or rentthe real property or to borrow using the real property as collateral. If theCompany arranges for the disposal or treatment of hazardous or toxic wastes, itcould be liable for the costs of removing or cleaning up wastes at the disposalor treatment facility, even if it never owned or operated that facility. Certainlaws, ordinances and regulations, particularly those governing the managementor preservation of wetlands, coastal zones and threatened or endangeredspecies, could limit the Company’s ability to develop, use, sell or rent itsreal property.

**TheCompany’s pineapple operations face significant competition from companies withgreater financial resources and from foreign competition with lower coststructures.**

The Company sells its products in competition withboth foreign and United States companies. Its principal competitors are threeUnited States companies, Dole Food Company, Inc., Del Monte Food Co., andDel Monte Fresh Produce Company, each of which produces substantial quantitiesof pineapple products, a significant portion of which is produced in CentralAmerica and Southeast Asia. Other producers of pineapple products in CentralAmerica, Thailand and Indonesia also are a major source of competition. Producersof pineapple in foreign countries have substantially lower labor costs than theCompany’s.

The Company’s marketing strategyis to compete based on the premium quality of our fresh pineapple product andbeing the only company that cans all of its pineapple in the United States. Ifthe Company cannot compete effectively with these larger companies and lowercost producers, its financial results could be adversely affected.

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**Ifthe Company is unable to successfully compete with other producers of fresh andcanned pineapple, its financial results could be materially affected.**

The fresh and cannedpineapple markets are highly competitive. A decline in the price of pineappleor increases in the price of fuel or packaging materials could adversely affectoperating results. The growing, planting and harvesting of crops can beaffected by adverse weather conditions, thereby increasing costs and erodingprofit margins. Agricultural chemicals used in the past have resulted incontingent liabilities that could result in future claims against the Company.

**Ifthe multi-client processing facility is not able to sufficiently reduce the Company’scost of processing and packing pineapple, the Company’s financial results couldbe adversely affected.**

The Company is in theplanning and design phase for the construction of a multi-client processingfacility that will replace the present pineapple cannery, can plant and freshfruit packing facility. The Company’s current high cost structure is expectedto be reduced because of the efficiency of the new facility. While the Company’spersonnel and outside consultants have thoroughly evaluated the requirements ofthe new facility, variances from the estimates of the cost, timing ofcompletion or the efficiency of the new processing facility could adverselyaffect the Company’s financial results.

**Onecustomer has provided a substantial portion of the Company’s canned pineapplesales; the loss of this customer may have a material adverse effect onoperating results.**

The United Statesgovernment represented approximately 35% and 20% of the Company’s cannedpineapple sales for 2004 and 2003, respectively; and 39% of the Company’scanned pineapple sales for the first six months of 2005. It is difficult topredict whether the United States government will continue to represent such asignificant portion of the Company’s canned pineapple sales in the future becausethere is no long-term contract to supply pineapple to the government. If theCompany were to lose this customer, operating results would be negativelyaffected.

**Becausethe Company is located in Hawaii and therefore apart from the mainland UnitedStates, it is more sensitive to certain economic factors, which may adverselyaffect operating results.**

The Community Development segment and the Resortsegment are dependent on attracting visitors to Kapalua and to Maui and thestate of Hawaii as a whole. Economic factors that affect the number ofvisitors, their length of stay or expenditure levels will affect our financialperformance. Factors such as the cost of energy, events in the airline industrythat affect passenger capacity or traveling cost, and the threat, or perceivedthreat, of heightened terrorist activity in the United States, could affect apotential visitor’s choice of vacation destination or second home location.

The Company’s pineappleoperations are dependent on ocean, surface and air freight to transport cannedand fresh pineapple to customers on the mainland United States. Increases inthe cost of energy, and other factors that affect the cost and reliability ofocean, surface and air freight will affect the financial results of the Pineapplesegment.

**Item 4.**                        Controlsand Procedures

The Company maintains disclosure controls andprocedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) underthe Securities Exchange Act of 1934, as amended) that are designed to ensurethat information required to be disclosed in the Company’s Exchange Act reportsis recorded, processed, summarized and reported within the time periodsspecified in the SEC’s rules and forms, and that such information isaccumulated and communicated to Company’s management, including its ChiefExecutive Officer and Chief Financial Officer, as appropriate, to allow timelydecisions regarding required disclosure.

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In designing and evaluating the disclosure controlsand procedures, the Company’s management recognizes that any controls andprocedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving the desired control objectives, and theCompany’s management necessarily was required to apply its judgment inevaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) and 15d-15(b) underthe Exchange Act, the Company carried out an evaluation, under the supervisionand with the participation of the Company’s management, including the Company’sChief Executive Officer and Chief Financial Officer, of the effectiveness ofthe design and operation of the Company’s disclosure controls and procedures asof the end of the fiscal quarter covered by this report. Based upon theforegoing, the Company’s Chief Executive Officer and Chief Financial Officerconcluded that the Company’s disclosure controls and procedures were effectivein reaching a level of reasonable assurance in achieving the Company’s desiredcontrol objectives.

There have been no changes in the Company’s internalcontrols over financial reporting during the most recent fiscal quarter thathave materially affected, or are reasonably likely to materially affect, theCompany’s internal controls over financial reporting.

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**PART II  OTHER INFORMATION**

**Item 1.**                        LegalProceedings

There are no knownmaterial pending legal proceedings to which the Company or any of itssubsidiaries is a party or to which any of their property is subject. Certainof the Company’s subsidiaries are involved in ordinary routine litigationincidental to their respective businesses.

**Item 4.**                        Submissionof Matters to a Vote of Security-Holders

On May 2, 2005, the annual meeting of the Company’sshareholders was held. Proxies for the meeting were solicited pursuant toRegulation 14A under the Securities Exchange Act of 1934. The number ofoutstanding shares as of March 10, 2005, the record date of the annualmeeting, was 7,372,550. The results of the voting were as follows:

Electionof Class Three Directors for a three-year term:
| ** **          | ** ** | **Shares Voted For** | ** ** | **Shares Withheld** | ** ** |
|---------------------|------------|--------------------------------|------------|--------------------------|------------|
| John H. Agee        |       |                           | 5,061,696  |                     |       |   | 1,394,862 |   |   |
| Richard H.  Cameron |       |                           | 5,038,458  |                     |       |   | 1,418,100 |   |   |
| Duncan MacNaughton  |       |                           | 5,045,579  |                     |       |   | 1,410,979 |   |   |

 

Ratificationof the firm Deloitte & Touche LLP as independent auditor of theCompany for the fiscal year 2005:
| Shares voted for:      |   | 5,034,096 |   |
|------------------------|--------|-----------|--------|
| Shares voted  against: |   | 1,411,148 |   |
| Shares abstained:      |   | 11,313    |   |

 

There were no broker non-votes on any matter votedupon at the meeting.

The terms of the followingmembers of the Company’s Board of Directors continued after the annualmeeting:  David C. Cole, Walter A. Dods, Jr.,Thomas M. Gottlieb, David A. Heenan, Kent T. Lucien and Fred E. Trotter III.

**Item 6.**                        Exhibits

The followingexhibits are filed herewith:

(4)                InstrumentsDefining the Rights of Security Holders.Amended and Restated Revolving Credit Agreement, dated as of May 17, 2005

(31)         Rule 13a – 14(a) Certifications

(32)         Section 1350Certifications

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**SIGNATURE**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.
|                             |   | MAUI LAND & PINEAPPLE COMPANY, INC.                                           |
|-----------------------------|--------|----------------------------------------------------------------------------------------|
| Date: August 10,  2005 |   | /s/ FRED W. RICKERT                                                                    |
|                        |   | Fred W. Rickert*Vice President/Chief Financial Officer  (Principal Financial Officer)* |

 

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