**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**FORM 10-K**

**(Mark One)**

**x**                              ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**For the fiscal year ended December 31,2006**

**OR**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGEACT OF 1934

**For the transition periodfrom                to              **

**Commissionfile number   1-6510**

**MAUI LAND &PINEAPPLE COMPANY, INC.**(Exact name of registrant as specified in itscharter)

| **HAWAII**                                                  | ** ** | **99-0107542**                |
|-------------------------------------------------------------|------------|-------------------------------|
| (State or other  jurisdiction                               |       | (IRS Employer  Identification |
| of incorporation  or organization)                          |       | number)                       |
| **120 KANE  STREET, P. O. BOX 187,  KAHULUI, MAUI, HAWAII** | ** ** | **96733-6687**                |
| (Address of  principal executive offices)                   |       | (Zip Code)                    |

 

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

**Securities registered pursuant toSection 12(b) of the Act:**

| **Title of Each Class**          | ** ** | **Name of  Each Exchange on Which Registered** |
|----------------------------------|------------|------------------------------------------------|
| Common Stock,  without Par Value |       | American Stock  Exchange                       |

 

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act. Yes o   No x

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Act. Yes o   No x

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes x   No o

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment tothis Form 10-K. o

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeraccelerated filer” in Rule 12b-2 of the Exchange Act.

Largeaccelerated filer  o          Acceleratedfiler  x          Non-acceleratedfiler  o

Indicate by check markwhether the registrant is a shell Company in Rule 12b-2 of the Exchange Act).Yes o    No x

The aggregate market value,as of June 30, 2006, of the voting stock held by non-affiliates of theregistrant was $140,621,000 based upon the closing price on the American StockExchange on such date. This computation assumes that all directors, executiveofficers and persons known to the Company to be the beneficial owners of morethan ten percent of the Company’s common stock are affiliates. Such assumptionshould not be deemed conclusive for any other purpose.

At February 22, 2007,the number of shares outstanding of the registrant’s common stock was7,565,800.

**Documents incorporated byreference:**

Part III—Portions of theproxy statement for the registrant’s annual meeting of stockholders to be heldon May 7, 2007, to be filed no later than 120 days after the close of theregistrant’s fiscal year ended December 31, 2006. Only those portions ofthe proxy statement that are specifically incorporated by reference hereinshall constitute a part of this annual report.

 

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**FORWARD-LOOKINGSTATEMENTS AND RISKS**

This and otherreports filed by Maui Land & Pineapple Company, Inc. (the “Company”)with the Securities and Exchange Commission contain forward-looking statementsintended to qualify for the safe harbor from liability established by thePrivate Securities Litigation Reform Act of 1995. These statements can beidentified by the fact that they do not relate strictly to historical orcurrent facts. They 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, among others and without limitation, statementsrelating to the:

·       timingand success of the Residences at Kapalua Bay project;

·       closingof lot sales at the Honolua Ridge agricultural subdivisions;

·       timingand success of the sale of “non-core” properties;

·       timingand success of the Kapalua Resort initiatives to enhance and improve the resortand the Kapalua Villas;

·       expectationsas to the Company’s cash commitments;

·       expectationsas to the Company’s cash flows from operating and investing activities;

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

·       impactof current and future local, state and national government regulations,including Maui County affordable housing legislation;

·       shiftingtowards greater levels of fresh fruit production;

·       futurecost of compliance with environmental laws;

·       timingof approvals and conditions of future real estate entitlement applications; and

·       effectof changes in assumptions on net periodic pension and other benefit costs.

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 current expectations and projections about future events.

The Company cautions the reader that forward-lookingstatements involve risks and uncertainties that cannot be predicted orquantified and, consequently, actual results may differ materially from thoseexpressed or implied by such forward-looking statements. Such risks anduncertainties include, but are not limited to, the factors discussed in thesections entitled “Business,” “Risk Factors,” and “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” in this annualreport, as well as other factors described from time to time in theCompany’s reports filed with the Securities and Exchange Commission.

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**TABLE OF CONTENTS**

| PART I   |   |                                                                                                               |   |   |   |
|---------------|--------|--------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
| Item 1.       |   | Business                                                                                                           |   | 1      |   |
| Item 1A.      |   | Risk Factors                                                                                                       |   | 9      |   |
| Item 1B.      |   | Unresolved Staff Comments                                                                                          |   | 13     |   |
| Item 2.       |   | Properties                                                                                                         |   | 13     |   |
| Item 3.       |   | Legal Proceedings                                                                                                  |   | 14     |   |
| Item 4.       |   | Submission of Matters to a Vote of Security Holders                                                                |   | 14     |   |
| PART II  |   |                                                                                                               |   |   |   |
| Item 5.       |   | Market for Registrant’s Common Equity, Related  Stockholder Matters and Issuer Purchases of Equity Securities |   | 15     |   |
| Item  6.      |   | Selected  Financial Data                                                                                           |   | 17     |   |
| Item 7.       |   | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                        |   | 18     |   |
| Item 7A.      |   | Quantitative and Qualitative Disclosures About Market  Risk                                                        |   | 32     |   |
| Item 8.       |   | Financial Statements and Supplementary Data                                                                        |   | 34     |   |
| Item 9.       |   | Changes in and Disagreement with Accountants on  Accounting and Financial Disclosure                               |   | 67     |   |
| Item 9A.      |   | Controls and Procedures                                                                                            |   | 67     |   |
| Item  9B.     |   | Other  Information                                                                                                 |   | 68     |   |
| PART III |   |                                                                                                               |   |   |   |
| Item 10.      |   | Directors, Executive Officers and Corporate Governance                                                             |   | 69     |   |
| Item 11.      |   | Executive Compensation                                                                                             |   | 69     |   |
| Item 12.      |   | Security Ownership of Certain Beneficial Owners and  Management and Related Stockholder Matters                    |   | 69     |   |
| Item 13.      |   | Certain Relationships and Related Transactions, and  Director Independence                                         |   | 69     |   |
| Item 14.      |   | Principal Accountant Fees and Services                                                                             |   | 69     |   |
| PART IV  |   |                                                                                                               |   |   |   |
| Item 15.      |   | Exhibits and Financial Statement Schedules                                                                         |   | 70     |   |
| SIGNATURES    |   | 75                                                                                                                 |

 

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**PART I**

**Item 1. BUSINESS**

**Overview**

Maui Land & Pineapple Company, Inc. (the“Company”) is a Hawaii corporation, the successor to a business organized in1909. The Company consists of a landholding and operating parent company andits principal subsidiaries, including Maui Pineapple Company, Ltd. and KapaluaLand Company, Ltd. Depending upon the context, the terms the “Company,” “we,” “our,”and “us,” refer to either the Company alone, or the Company and itssubsidiaries collectively.

The Company hasthree operating segments as follows:

·       *Agriculture. *The Agriculture segment primarilyincludes growing, packing, processing, and marketing of processed and freshpineapple. The fruit grown by the Company principally consists of three typesof pineapple, *Maui Gold**®* and HawaiianGoldTM (usually sold as fresh, whole fruit), Champaka(largely used for canning) and fresh organic pineapple.

·       *Resort*.* *TheResort segment includes our ongoing operations at the Kapalua Resort. Theseoperations include three championship golf courses, a tennis facility, avacation rental program (The Kapalua Villas), and several retail outlets. In2006, responsibility for our Public Utilities Commission regulated water andsewage transmission operations that were accounted for in the Resort segmentwas transferred to the Community Development segment and prior year amountswere restated for comparability.

·       *Community Development. *The Community Developmentsegment includes our real estate entitlement, development, construction, salesand leasing activities. This segment also includes the operations of KapaluaRealty Company, a general brokerage real estate company located within KapaluaResort and Public Utilities Commission regulated water and sewage transmissionoperations. The Community Development segment includes our 51% equity interestin Kapalua Bay Holdings, LLC (Note 3 to the Consolidated Financial Statements).

For additional financialinformation about these segments, see Operating Segments, Note 17 to theCompany’s Consolidated Financial Statements.

**2006 BusinessDevelopment**

This is a summary of material business developments in2006. For more information about business developments in 2006, seeItem 7, “Management’s Discussion and Analysis of Financial Condition andResults of Operations,” in this annual report.

*KapaluaMauka—*In February, we received final zoning approvalfrom the Maui County Council to change Kapalua Mauka’s zoning from “agricultural”to “West Maui Project District 2,” which allows a mix of up to 690 homes andcondominiums, five acres of commercial space, and up to 27 holes of golf.

*VillageCourse—**In***March,we concluded that we would close the Village Course in early 2007 and weentered into an agreement to design a new Kapalua Mauka golf course with T. J.F. Golf, Inc.

*BoardAppointment and Annual Meeting of Shareholders—*InMarch, the Board of Directors appointed Warren H. Haruki to fill the positionas Class III Director that was left vacant by the resignation of RichardH. Cameron in May 2005. At our Annual Meeting of Shareholders in May, (i) DavidC. Cole, Walter A. Dods Jr. and Fred E. Trotter III were re-elected as Class IDirectors; (ii) the number of authorized shares of common stock wasincreased by 1,000,000 shares in order to issue equity incentive awards underthe Maui Land & Pineapple Company, Inc. 2006 Equity and IncentiveAward Plan (the 

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“2006 Plan”); and (iii) the2006 Plan was approved with a maximum aggregate of 1,000,000 shares of commonstock that may be issued or transferred pursuant to awards granted thereunder.

*Salesof Non-Core Property—*In March, we sold approximately1,860 acres and in December we sold approximately 320 acres of UpcountryMaui land as we continued towards our goal of re-deploying assets to strengthenour Agriculture segment operations, repositioning our Resort operations andincreasing investments in our Community Development segment. These propertiesprimarily consist of land that was deemed unsuitable for precision cultivationof pineapple and were also not suitable for creating new holistic communities.

*KapaluaBay—*In early April, the Kapalua Bay Hotel held itsfinal guest night and closed its doors. In conjunction with our joint venturepartners in Kapalua Bay Holdings, LLC, we began the recycling and upcycling ofall salvable materials with the intent of reusing over 90% of the material fromthe existing hotel. Demolition of the property commenced in July. In June, webegan to finalize binding sales contracts for the whole-ownership units and in July webegan sales of the fractional ownership units. Construction loan financing forthis project was concluded in July.

*Accountingand Corporate Services—*In May, our Resort andCommunity Development segments implemented a new accounting system and, inJuly, our Agriculture segment and corporate services implementation of theaccounting system was completed. In August, we began implementation of ourplans to centralize and reorganize our accounting and other corporate servicefunctions.

*Pulelehua—*InJune, the Pulelehua project was approved by the State Land Use Commission andthe County Planning Commission recommended approval of the project to the MauiCounty Council. We are currently in the process of securing a date for hearingof the project by the Maui County Council Land Use Committee.

*HawaiiBioEnergy—*In July, we announced the formation ofHawaii BioEnergy LLC, an international consortium including our Company. TheLLC will research the viability of renewable energy crops, products andservices in the State of Hawaii.

*PineappleOperations—*In June, our new fresh fruit packing lineat Kahului commenced operations. In September and early October, weterminated, through voluntary resignation and layoffs approximately 6% our workforce as the improved technology of our new fresh fruit packing facilityautomated certain tasks.

*HonoluaVillage Center—**In***October,we held a grand opening for the first phase of Honolua Village Center, a 12,000square foot commercial space in the central area of the Kapalua Resort.

*Debt Commitments—*In2006, we secured additional debt commitments by increasing an existing line ofcredit by $10 million, concluding a term loan of $10 million secured by theCompany’s Kahului cannery land and other real estate, and concluding equipmentloans for the fresh fruit packing plant totaling $7.5 million.

**Description ofBusiness**

***Agriculture***

Maui Pineapple Company, Ltd. is the operatingsubsidiary for our Agriculture segment. We own and operate fully integrated facilities for the production offresh and processed pineapple. Our current strategy is to expand ourpresence in the premium fresh pineapple market, while selectively reducing ourreliance on the processed pineapple market. Therefore, over recent years, wehave decreased the tonnage of fruit going to the cannery and, in the last fewyears, we began to commensurately reduce the number of markets for processedpineapple that we serve.

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Our strategy focuses onmarketing only the highest quality fresh pineapple by using the processedpineapple operations to complement the fresh operations. We direct fruit toeither the processed or the fresh packing facility at the time of harvest basedon a variety of factors, including market conditions, fruit size and fruitquality. In 2006, sales of fresh pineapple represented approximately 45% of netpineapple sales compared to 34% in 2005 and 24% in 2004. The transition of ourAgriculture operations continues with an emphasis on automating manylabor-intensive functions and upgrading the workforce through selectivetraining and performance based compensation programs.

*Planting,Harvesting and Seasonality*

The fresh fruit market is a year-round business, whichrequires consistency of supply. Over the past two years, we have madesignificant progress in changing our agronomic practices and planting schedulesto produce a more consistent and predictable supply of fruit throughout theyear. In addition, we have made significant progress in implementing improvedcrop maintenance and agronomic practices that are beginning to improve plantyields (tons of fruit per acre) and fruit quality. Planting and harvesting takeplace throughout the year. Two pineapple crops are normally harvested from eachnew planting. The first, or plant crop, is harvested approximately 18 to 23months after planting; the second, or ratoon crop, is harvested 12 to 14 monthslater. A third crop, the second ratoon, may be harvested 9 to 14 months laterdepending on a number of conditions.

Our processed pineapple operations have historicallyhad a seasonal operating cycle. The seasonality of the processing operation isnot only due to the pineapple’s natural tendency to ripen during the summermonths, but also because the timing of initial planting and initiation offlowering can promote ripening during the summer. During the summer months,student labor for the harvesting and processing operations is also more readilyavailable. As we shift our operations towards the fresh fruit market andaccordingly, adjust our agronomic practices, the seasonality of the business isbecoming less pronounced. In 2007, we expect to continue the transition of ourpineapple operations with an increased emphasis on the fresh fruit market. Theseasonality of the processing operation does not specifically affect sales orearnings because sales are driven by consumer consumption and resupply ordersby customers.

Theavailability of water for irrigation is critical to the cultivation of pineapple.The Upcountry Maui area, in which we have historically grown pineapple, issusceptible to drought conditions, which can adversely affect pineappleoperations by resulting in poor yields (tons per acre) and lower recoveries(the amount of saleable product per ton of fruit processed). A large portion ofthe fields in our Upcountry Maui plantation are equipped with drip irrigationsystems. We are also shifting more of our plantings to our West Mauiagricultural lands, which we have farmed for many years. Our West Mauiagricultural lands are less susceptible to drought conditions and additionalirrigation storage capacity is also being installed.

*Packing and CanneryFacilities*

Harvested pineapple ispacked for fresh shipment at our new packing facility located in Kahului,adjacent to our cannery. The new facility, which was placed into service in June 2006,is expected to reduce our overall cost structure by integrating and automatingmuch of the fresh and processed fruit grading and packing operations. Pineapplethat will be canned is processed at our cannery. The cannery is located in aforeign trade zone and operates most of the year. The metal containers used incanning pineapple are produced in a Company-owned can plant at the cannery site.The metal is imported from manufacturers in Japan. A warehouse is maintained atthe cannery site for inventory purposes.

*Products andDistribution*

We sell fresh whole pineapple from Hawaii to retailand wholesale channels in Hawaii and the continental United States. Beginningin November 2005, our fresh premium pineapple has been sold under 

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the *Maui Gold**® *(in addition to the Hawaiian GoldTM )**brand name. Wesell processed pineapple products primarily as private label pineapple with100% HAWAIIAN U.S.A. stamped on the can lid. Our products are sold principallyto large grocery chains, other food processors, wholesale grocers, the UnitedStates government and to organizations offering a complete buyers’ brandprogram to affiliated chains and wholesalers serving both retail and foodservice outlets. A substantial volume of our pineapple products is marketedthrough food brokers, which is administered through our sales office inConcord, California.

We sell pineapple juice in plastic bottles in varioussizes to large grocery chains in the continental United States. The pineapplejuice ingredients are shipped in bulk from our cannery on Maui to co-packers onthe mainland that bottle the juice to our specifications.

As a service to our customers, we maintain inventoriesof our products in seven public warehouses in the continental United States. Thebalance of our products is shipped directly from Hawaii to our customers. Ourprocessed pineapple products are shipped from Hawaii by ocean transportationand are then transported by truck or rail to customers or to public warehouses.Fresh whole pineapple is shipped by air or by ocean transportation.

In 2006, approximately 20United States customers accounted for approximately 49% of our processed andfresh pineapple sales. Sales of Hawaii grown pineapple to customers located inforeign countries, primarily to Japan and Canada, amounted to approximately 4%of our processed pineapple sales in 2006, and 2% in 2005 and 2004. Sales to theUnited States government, mainly the Department of Agriculture, amounted toapproximately 25%, 29% and 35% of processed pineapple sales in 2006, 2005 and2004, respectively.

*Competition*

We sell our products in competition with both foreignand United States companies. Our principal competitors are Dole Food Company, Inc.,Del Monte Food Co., and Del Monte Fresh Produce Company, each of which producessubstantial quantities of fresh and/or processed pineapple products, asignificant portion of which is produced in Central America and Southeast Asia.Other major sources of competition in the processed pineapple sector areThailand and Indonesia. Foreign production has the advantage of lower land,water, labor, and regulatory costs. Our principal marketing advantages are thepremium quality of our fresh and processed pineapple, the relative proximity tothe United States West Coast fresh fruit market, and being the only processorof pineapple in the United States. The price of our products is influenced bysupply and demand of pineapple products and other fruits and juices.

In November 2006, DelMonte Fresh Produce (Hawaii) Inc. announced the immediate closure of its Hawaiifresh pineapple operations. This immediate removal of a substantial volume ofpineapple provides opportunity for us to increase our fresh pineapple marketshare in Hawaii and to leverage the regional branding attributes of Hawaiiangrown pineapple to mainland United States customers.

***Resort***

Kapalua Land Company, Ltd. is the operating subsidiaryof our Resort segment, which operates the Kapalua Resort, a master-planned,golf resort community on Maui’s northwest coast. The Kapalua Resort is part ofapproximately 22,500 acres of our land-holdings in West Maui, most of whichremain as conservation or open space.

Presently, the Kapalua Resort development includes1,650 acres bordering the ocean with three white sand beaches and includes twochampionship golf courses (The Bay Course and The Plantation Course), TheRitz-Carlton, Kapalua hotel, eight residential subdivisions, a ten-court tennisfacility, the first phase of commercial space in the central area of theResort, several restaurants, and over 700 single family residential lots,condominiums and homes. We operate Kapalua Resort’s golf courses, the tennisfacility, 

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retail shops, a vacationrental program (The Kapalua Villas), and certain services to the Resort. We had260 units in our Kapalua Villas short-term rental program at December 31,2006. We also manage The Kapalua Club, a membership program that providescertain benefits and privileges within the Kapalua Resort for its members. TheKapalua Golf Academy, located on 23 acres of land in the Central Resort area isa state-of-the-art teaching and practice facility that was developed inconjunction with PGA Touring Professional Hale Irwin. Prior to March 2007, the Resortincluded a third golf course, The Village Course, which was closed as ofFebruary 28, 2007.

In 2006, we continued working on several major newinitiatives to improve and revitalize the Kapalua Resort. The Honolua VillageCenter, a 12,000 square foot commercial space in the central area of KapaluaResort opened in October 2006 and includes 1,900 square feet of retailarea for our new Kapalua Collections retail outlet. Some of our current Resortprojects include plans for additional amenities, renovation of certainfacilities and a trail system that will run along the ocean, through themountains and encompass the entire resort. In 2005, the Resort segment began toimplement the Kapalua Gold program to upgrade and standardize The KapaluaVillas in our rental program, as well as other initiatives to enhance andimprove the Kapalua Resort. Currently, we have completed the renovation ofapproximately 50 Kapalua Gold Villas.

We also utilize nationally televised professional golftournaments as a major marketing tool for the Kapalua Resort. Since January 1999,Kapalua has hosted the Mercedes-Benz Championship, the season opening event forthe PGA TOUR. Through the non-profit organization, Kapalua Maui Charities, Inc.,we have agreements with Mercedes-Benz and the PGA TOUR to host and manage thisevent at the Kapalua Resort through January 2010.

Other signatureevents of the Kapalua Resort include:

·       WhaleQuestat Kapalua, an annual event that commenced in February 2006 to celebratethe annual migration of North Pacific Humpback Whales to Hawaiian waters, andincludes lectures, tours and educational workshops;

·       Celebrationof the Arts, an annual event held in April that pays tribute to thepeople, arts and culture of Hawaii through demonstrations in hula and chant,workshops in Hawaiian art, and one-on-one interaction with local artists;

·       KapaluaWine & Food Festival, an annual event held in July that attractsworld-famous winemakers, chefs and visitors to Kapalua for a series of winetasting, festive gatherings and gourmet meals.

The Kapalua Resort facessubstantial competition from alternative visitor destinations and resortcommunities in Hawaii and throughout the world. The Kapalua Resort’s primaryresort competitors on Maui are located in Kaanapali, which is approximatelyfive miles from Kapalua, and Wailea on Maui’s south coast.

***Community Development***

The Community Development segment is responsible forall of our real estate entitlement, development, construction, sales andleasing activities. Our projects are focused primarily on the luxury realestate market within the central area of Kapalua Resort and affordable andmoderately priced residential and mixed use projects in West Maui and UpcountryMaui. This segment also includes the operations of Kapalua Realty Company, ageneral brokerage real estate company located within the Kapalua Resort; andour Public Utilities Commission regulated water and sewage transmissionoperations that service the Kapalua Resort.

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We are the ground lessor under a long-term lease forThe Ritz-Carlton, Kapalua Hotel. We also receive rental income from certainother commercial and residential properties. In August 2004, wecontributed the fee interests in the land underlying the Kapalua Bay Hotel andour interests in The Kapalua Shops to Kapalua Bay LLC, a wholly-ownedsubsidiary of Kapalua Bay Holdings, LLC (“Bay Holdings”) a limited liabilitycompany formed as a joint venture between the Company, Marriott InternationalInc. and Exclusive Resorts LLC. We have a 51% interest in and are the managingmember of Bay Holdings. In April 2006, the Kapalua Bay Hotel was closedand demolition of the property began in July in connection with theconstruction of The Residences at Kapalua Bay project. See Other Assets—KapaluaBay Holdings, LLC, Note 3 to the Consolidated Financial Statements.

Appropriate entitlements must be obtained for landthat is intended for development. Securing proper land entitlement is a processthat requires obtaining county, state and federal approvals, which can takemany years to complete and entails a variety of risks. The entitlement processrequires that we satisfy all conditions and restrictions imposed in connectionwith such governmental approvals, including among other things, construction ofinfrastructure improvements, payment of impact fees (for things such as parksand traffic mitigation), restrictions on permitted uses of the land, andprovision of affordable housing. We actively work with the community,regulatory agencies, and legislative bodies at all levels of government in aneffort to obtain necessary entitlements consistent with the needs of thecommunity.

We have approximately1,500 acres of land in Maui that are at various stages in the land entitlementprocess as follows:

| ** **                         | ** ** | **Number** | ** ** | **Zoned for** | ** ** |
|------------------------------------|------------|------------|------------|--------------------|------------|
| **Location **                 | ** ** | ** ** | ** ** | **of Acres**  | ** ** | **Planned Use** | ** ** |
| Kapalua Resort                     |       |       | 675        |               |       |   | Yes |   |   |
| Other Kapalua Resort and West Maui |       |       | 528        |               |       |   | No |   |   |
| Upcountry                          |       |       | 305        |               |       |   | No |   |   |
|                                    |            |            |            |                    |            |  |  |  |  |  |  |

 

Honolua Ridge Phase I andII are comprised of a total 50 agricultural lots ranging from three to30 acres, with list sales prices ranging from $895,000 to $6.5 million. Webegan selling Phase I in 2004 and Phase II in 2005. As of December 31,2006, all Phase I lots had been sold and there were nine unsold lots remainingin Honolua Ridge Phase II.

In 2006, we sold 2,200 acres of “non-core” propertiesin three transactions that resulted in net cash sales proceeds of $27.6 million.See Real Estate Sales, Note 7 to the Consolidated Financial Statements.

Some of theprojects that the Community Development segment has in the planning stagesinclude:

·       *Kapalua Mauka*: As presently planned,this project is comprised of 690 single and multi-family residential units andcommercial components, five acres of commercial space and up to 27 holes ofgolf.

·       *The Village at Kapalua: *This is thecommercial component of the central area of the Kapalua Resort. It is plannedto be built in two phases and will add approximately 50,000 square feet of newretail space to the Kapalua Resort. The Village will also include apartments,condominiums and other resort related facilities. The grand opening of thefirst phase was held in October 2006.

·       *Pulelehua:** *This project is designed to be a newtraditional community for working families in West Maui. It encompasses 312acres and is currently planned to include 13 acres for an elementary school,882 dwelling units, 91 acres of usable open space, and a traditional villagecenter with a mix of residential and neighborhood-serving commercial uses. Weare currently in the process of securing a date for hearing of the project bythe Maui County Council Land Use Committee.

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·       *The Residences at Kapalua Bay*:* *This project includes the construction ofapproximately 146 units that will be sold as whole ownership and fractionalownership residences, a clubhouse, pool, spa and other amenities on the site ofthe former Kapalua Bay Hotel. Demolition of the hotel and construction began inJuly of 2006. Together with our joint venture partners we began therecycling and upcycling of all salvable materials with the intent of reusingover 90% of the material from the existing hotel after closure of the hotel inearly April. In June, we began to finalize binding sales contracts for thewhole-ownership units and in July we began sales of the fractionalownership units. Construction loan financing for this project was concluded inJuly.

·       *Hali`imaile Town:** *Thisnew town in Upcountry Maui will be a holistic traditional community whereagriculture, education, and sustainability are core design elements. A seriesof community design workshops were held in March 2006 to involve the Mauicommunity in determining the vision for this expansion of the community. Thepublic approval process for any plan to develop this area is expected to takeseveral years and will be subject to urban growth boundary determination by theCounty of Maui when it updates the County General Plan over the next three years.

The price and market forluxury real estate on Maui has in the past been highly cyclical based uponinterest rates, the popularity of Hawaii as a vacation destination, the generalcondition of the economy in the United States and Asia, and the relationship ofthe dollar to foreign currencies. The Community Development segment facessubstantial competition from other land developers on the island of Maui aswell as in other parts of Hawaii and the mainland United States.

**Employees**

In 2006, we employedapproximately 1,195 people. Agricultural operations employed approximately 370full-time and approximately 309 seasonal or intermittent employees. Approximately64% of the Agricultural operations employees were covered by collective bargainingagreements. Resort operations employed approximately 430 employees, of whichapproximately 7% were part-time employees and approximately 28% were covered bycollective bargaining agreements. The Community Development segment employedapproximately 25 employees, and corporate and support services employedapproximately 61 employees in 2006.

**Other Information**

Our Agriculture segmentengages in continuous research to develop techniques to reduce costs throughcrop production and processing innovations and to develop and perfect newproducts. Research and development expenses approximated $1,078,000 in 2006,$530,000 in 2005 and $695,000 in 2004.

We have reviewed ourcompliance with federal, state and local provisions that regulate the dischargeof materials into the environment or otherwise related to the protection of theenvironment. We do not expect any material future financial impact as a resultof compliance with these laws.

Pursuant to a settlementagreement with the County of Maui in 1999, we have a commitment untilDecember 1, 2039 to share with several chemical manufacturers in thecapital costs to install filtration systems in any future water wells if thepresence of a nematocide, commonly known as DBCP, exceeds specified levels, andfor the ongoing maintenance and operating costs for filtrations systems onexisting and future wells. We are not presently aware of any plans by theCounty of Maui to install other filtration systems or to drill any water wellsin areas affected by agricultural chemicals. For additional information, seeCommitments and Contingencies, Note 18 to the Consolidated FinancialStatements.

**Financial Information about Geographic Areas**

Revenues and long-livedassets attributable to foreign countries were not material for the last threeyears. See Discontinued Operations, Note 4 to the Consolidated FinancialStatements.

7

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**AvailableInformation**

Our Internet address is *www.mauiland.com.*Information about the Company is alsoavailable on www.kapalua.com. Reference in this annual report to our websiteaddress does not constitute incorporation by reference of the information containedon the websites. We make available free of charge on or through our website itsannual reports on Form 10-K, quarterly reports on Form 10-Q,current reports on Form 8-K, and amendments to those reports filedor furnished pursuant to Section 13(a) or 15(d) of theSecurities Exchange Act of 1934, as amended, or the Exchange Act, as soon asreasonably practicable after we electronically file such material with, orfurnishes it to, the Securities and Exchange Commission, or SEC. We also makeavailable through our website all filings of our executive officers anddirectors on Forms 3, 4 and 5 under Section 16 of the Exchange Act. Thesefilings are also available on the SEC’s website at *www.sec.gov.*

**Executive Officersof the Company**

The Company’s executive officers as of March 1,2007, are listed below. The current terms of the executive officers expire in May 2007,or at such time as their successors are elected.
| David C. Cole (54)    |   | Mr. Cole has served as Chairman of the Company  since March 2004, and President and Chief Executive Officer of the  Company since October 2003. Mr. Cole also served as Manager of  Sunnyside Farms, LLC, a  specialty consumer products retailer and supplier of premium organic meats  and produce in Washington, Virginia from 1997 to 2006; and President  of Aquaterra, Inc. an investment management firm that serves as managing  general partner for Pan Pacific Ventures LP, Catalyst II LLC and Aquaterra  Partners LLC, partnerships with interests in software, real estate,  agriculture, retailing, renewable energy and consumer products since 1997.  Mr. Cole served as Chairman of Twin Farms Collections, LLC a luxury  resort in Barnard Vermont from 2001 to 2004.     |
|-----------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Robert I. Webber (48) |   | Mr. Webber has  served as Chief Financial Officer and Senior Vice President of Business  Development since April 2006. He served as President of  Dyntek, Inc., a provider of technology services based in Irvine,  California, from June 2005 to March 2006; and as Chief Financial  Officer and Director from July 2004 to March 2006. He was the  General Manager of Spectrus, Inc., (formerly known as FOR1031) a  privately held commercial real estate development and services company in  Irvine, California from October 2003 to June 2004. Mr. Webber  served as President and Chief Executive Officer of MindArrow  Systems, Inc., a communications and technology company in Aliso Viejo,  California from June 2000 to September 2003. |
| Brian C. Nishida (50) |   | Mr. Nishida has  served as Executive Vice President/Agriculture of the Company since  June 2004; President and Chief Executive Officer, Maui Pineapple  Company, Ltd. since January 2004. He served as Vice President and  General Manager, Del Monte Fresh Produce (Hawaii) Inc., a vertically  integrated producer, marketer and distributor of fresh and fresh-cut prepared  fruit and vegetables, juices, beverages, snacks and desserts from 1985 to  2003.                                                                                                                                                                                                                                                                                                                                           |

8

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| Robert M. McNatt (59) |   | Mr. McNatt has  served as Executive Vice President/Community Development since  February 2005; Senior Vice President/Land Planning &  Development 2004 to 2005; Vice President/Land Planning & Development  2001 to 2004; Vice President/Development of Kapalua Land Company, Ltd., the  land development and resort operating subsidiary of the Company since 1996.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|-----------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Fred W. Rickert (63)  |   | Mr. Rickert has  served as Vice President/Treasurer of the Company since May 2006. He  served as Vice President/Chief Financial Officer from September 2004 to  May 2006 and Acting Chief Financial Officer July 2004 to  September 2004; Vice President/Finance of Maui Pineapple Company, Ltd.,  the operating subsidiary of the Company’s Agriculture segment from  April 2004 to July 2004. Mr. Rickert served as Chief Financial  Officer of the Port of Oakland, a municipal corporation with operations in the  Oakland International Airport, maritime operations, and commercial real  estate development 1996 to 2004 and Vice President Accounting of PLM  International, Inc., an AMEX listed company syndicating partnerships for  transportation equipment operating leases, from 1990 to 1996. |

 

**Item 1A.**                RISKFACTORS

**Our success dependsin large part upon the continued services of a number of significant employees,the loss of which could adversely affect our business, financial condition andresults of operation.**

We are currently dependentupon the ability and experience of certain key management employees. There canbe no assurance that we will be able to retain their services. We do notcurrently carry key man insurance on any of these individuals, and loss of oneor more could have a material adverse effect on financial results.

**Real estateinvestments are subject to numerous risks.**

We are subject to therisks that generally relate to investments in real property because we developand sell real property, primarily for residential use. Also, we have a 51%ownership interest in Kapalua Bay Holdings, LLC, the owner and developer of TheResidences at Kapalua Bay  When interestrates increase, the cost of acquiring, developing, expanding or renovating realproperty increases and real property values may decrease as the number ofpotential buyers decrease. Similarly, as financing becomes less available, itbecomes more difficult both to acquire and to sell real property. Under eminentdomain laws, governments can take real property. Sometimes this taking is forless compensation than the owner believes the property is worth. Any of thesefactors could have a material adverse effect on our results of operations orfinancial condition. In addition, equity real estate investments may bedifficult to sell quickly and we may not be able to adjust our portfolio ofproperties quickly in response to economic or other conditions.

**If we are unable tocomplete land development projects within forecasted timing and budgeting, orat all, financial results may be negatively affected.**

We intend to develop resort and other properties, assuitable opportunities arise, taking into consideration the general economicclimate. New project developments have a number of risks, including risksassociated with:

·       constructiondelays or cost overruns that may increase project costs;

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

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

·       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, this could have a materially adverseaffect on our financial results.

**If we are unable toobtain required land use entitlements at reasonable costs, or at all, ouroperating results would be adversely affected.**

Our financial results arehighly dependant on our Community Development operating segment. The financialperformance of our Community Development segment is closely related to oursuccess in obtaining land use entitlements for proposed development projects. Obtainingall of the necessary entitlements to develop a parcel of land is oftendifficult, costly and may take several years, or more, to complete. In somesituations, we may be unable to obtain the necessary entitlements to proceedwith a real estate development or may be required to alter our plans for thedevelopment. Delays or failures to obtain these entitlements may have amaterially adverse affect on our financial results.

**Recent legislationadopted by the County of Maui may increase land use entitlement costs,negatively impact land values, defer planned development projects, andmaterially impact operating results.**

On November 3, 2006, the Maui County Councilvoted unanimously to adopt a Residential Workforce Housing Policy (the “Policy”).This measure requires developers to sell or rent 40% to 50% of the total numberof units in developments of five or more units at below market rates, or paysignificant fees or contribute property with equivalent value to Maui Countyfor low income housing. Prior to the adoption of the Policy, the affordablehousing component of a development typically represented 15% to 25% of totalunits. We believe that the new Policy could significantly impact our cost ofobtaining entitlements, increase our financing costs, potentially reduce thevalue of our land, and delay the development of units across all marketsegments.

The Policy also sets forthcertain requirements for offering affordable units, including a lottery formatfor selecting potential residents. We believe that this feature will openaffordable projects to any party based solely on economic qualifications andchance. Ironically, the lottery requirement may serve as an additionaldisincentive to build affordable housing projects for local employees,teachers, public safety personnel, health care professionals and other workersthat provide critical services for our community. These factors will result ina re-assessment of planned projects with significant affordable housingcomponents designated for local residents, such as our previously-announcedPulelehua project.

**The historicalprice and market for luxury real estate on Maui has been highly cyclical and ifthe market demand for luxury real estate were to decrease, our operatingresults could be adversely affected.**

The highs and lows in thereal estate market cycle can prevail for multiple years at a time. During lowperiods of demand, real estate product may remain in inventory for much longerthan expected or be sold at lower than expected returns, or even at a loss,which could impair our liquidity and ability to proceed with additional landdevelopment projects and negatively affect our operating results.

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**If we are unable tosuccessfully compete with other developers of luxury real estate on Maui, ourfinancial results could be materially affected.**

Our real estate productfaces competition from other luxury resort real estate properties on Maui, andfrom other luxury resort residential property in Hawaii and the mainland UnitedStates. In many cases, our competitors are larger than us and have greateraccess to capital. If we are unable to compete with these larger competitors,our financial results could be materially and adversely affected.

**We have enteredinto limited guarantees under which we may be required to guarantee completionof the Kapalua Bay project or certain limited recourse obligations of KapaluaBay, LLC.**

Kapalua Bay, LLC, a whollyowned subsidiary of Kapalua Bay Holdings, LLC, in which we own a 51% ownershipinterest, entered into a construction loan agreement with Lehman BrothersHoldings Inc. (“Lehman”) on July 14, 2006, pursuant to which Lehman mayloan Kapalua Bay up to $370 million. Kapalua Bay intends to construct a newproject consisting of residential development on land that it owns at the siteof the former Kapalua Bay Hotel, and a spa on an adjacent parcel of land thatis owned by us and leased to Kapalua Bay. In connection with entering into theconstruction loan agreement by Kapalua Bay, we, and other members of KapaluaBay Holdings entered into a completion guaranty and a recourse guaranty. Underthe completion guaranty, members of Kapalua Bay Holdings agreed to guaranteesubstantial completion of the project and to reimburse Lehman for expensesincurred by Lehman toward completion of the project. Under the recourseguaranty, members of Kapalua Bay Holdings agreed to reimburse Lehman for lossesincurred by Lehman due to specified actions of Kapalua Bay Holdings, including,without limitation, fraud or intentional misrepresentation, gross negligence,physical waste of project assets, and breach of certain environmentalprovisions of the construction loan agreement. Our guarantees do not includepayment in full of the loan. If Kapalua Bay fails to complete the project ortakes any of the specified actions that result in expenses to Lehman and whichare covered by the guarantees that we entered into, we could incurunanticipated expenses that could materially and adversely affect our resultsof operations and financial condition.

**If ancient humanremains continue to be uncovered at the construction site of the Residences at KapaluaBay project, our expected financial returns from the project could benegatively impacted.**

In mid-December 2006,in the process of excavation work at The Residences at Kapalua Bay project, twosets of ancient human remains were found. Construction was halted at the twolocations where the remains were found and we have been working with the StateHistoric Preservation Division and the Maui/Lanai Island Burial Council todetermine the best plan of action for the remains. At a minimum, we will needto remove and re-intern the remains. The discovery of additional remains, aconcentration of remains in an area or pervasive findings of remains couldresult in the need to redesign portions of the project. The discovery ofancient remains at job sites in Hawaii are relatively common , but can resultin substantial additional cost and fewer units available for sale.

**If we cannotattract and retain skilled workers for our resort operations, our financialresults could be negatively impacted. There is a potential lack of adequateskilled workers on Maui for larger development projects.**

Our golf courses require alarge number of course and facility maintenance and operations workers and thehotel and villas require housekeepers, food and beverage servers, front desk,and other operational and hospitality workers. Overall, our resort operationsrequire a large number of workers to maintain the quality and level of servicethat we strive to provide to our guests. Our plans for development projectsrequire that there be adequate labor in all of the construction trades. Thelabor market on Maui is very competitive, with the labor premium in West Mauibeing even greater than elsewhere on Maui. The cost and insufficient supply ofhousing and the absence of adequate public services, such as schools, continueto 

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be animpediment to attracting and retaining labor. If we and other Maui businessesare unable to gain approvals from the government to allow for the expansion ofaffordable housing and to implement plans to provide a higher level of publicservices, including schools, further development in West Maui could be severelyrestricted, which in turn could have a materially adverse effect on ouroperations. While we proposes to pay our fair share for the provision ofaffordable housing and the construction of infrastructure, there are politicalfactions in the County government who do not want any further development.

**We may be subjectto certain environmental regulations under which we may have additionalliability and experience additional costs for land development.**

Various federal, state,and local environmental laws, ordinances and regulations regulate ourproperties and could make us liable for the costs of removing or cleaning uphazardous or toxic substances on, under, or in property we currently owns oroperates or that we previously owned or operated. These laws could imposeliability without regard to whether we knew of, or were responsible for, thepresence of hazardous or toxic substances. The presence of hazardous or toxicsubstances, or the failure to properly clean up such substances when present,could jeopardize our ability to develop, use, sell or rent the real property orto borrow using the real property as collateral. If we arrange for the disposalor treatment of hazardous or toxic wastes, we could be liable for the costs ofremoving or cleaning up wastes at the disposal or treatment facility, even ifwe never owned or operated that facility. Certain laws, ordinances andregulations, particularly those governing the management or preservation ofwetlands, coastal zones and threatened or endangered species, could limit ourability to develop, use, sell or rent its real property.

**Our agricultureoperations face significant competition from companies with greater financialresources and from foreign competition with lower cost structures.**

We sell our products in competition with both foreignand United States companies. Our principal competitors are three companies,Dole Food Company, Inc., Del Monte Food Co., and Del Monte Fresh ProduceCompany, each of which produce substantial quantities of pineapple products, asignificant portion of which is produced in Central America and Southeast Asia.Other producers of pineapple products in Thailand and Indonesia also are amajor source of competition. Producers of pineapple in foreign countries havesubstantially lower land, water, labor, and regulatory costs than we do.

Our marketing strategy isto 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. Ifwe cannot compete effectively with these larger companies and lower costproducers, our financial results could be adversely affected.

**Changes in weatherconditions or natural disasters can have an adverse impact on crop productionand materially affect our results of operations.**

Changes in weatherconditions and natural disasters, such as earthquakes, droughts, extreme coldor pestilence, may affect the planting, growing and delivery of crops, reducesales stock, interrupt distribution, and have a material adverse impact on ourbusiness, financial condition and results of operations. Our competitors may beaffected differently by such weather conditions and natural disasters dependingon the location of their supplies or operations. We have diversified growingregions in Central and West Maui to mitigate some of these weather-relatedrisks.

**If we are unable tosuccessfully compete with other producers of fresh and processed pineapple, ourfinancial results could be materially affected.**

The fresh and processedpineapple markets are highly competitive. A decline in the price of pineappleor increases in the price of fuel or packaging materials could adversely affectoperating results. 

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Agriculturalchemicals used in the past have resulted in contingent liabilities that couldresult in future claims against us.

**One customer hasprovided a substantial portion of our processed pineapple sales; the loss ofthis customer may have a material adverse effect on operating results.**

The United Statesgovernment represented approximately 25%, 29% and 35% of our processedpineapple sales for 2006, 2005 and 2004, respectively. It is difficult topredict whether the United States government will continue to represent such asignificant portion of our processed pineapple sales in the future because wedo not have a long-term contract to supply pineapple to the government. If wewere to lose the United States government as a customer, our operating resultswould be negatively affected.

**Our ability tocompetitively serve our customers depends on the availability of reliable andlow-cost transportation, and any increases in transportation-related costscould have material adverse impact on our results of operations.**

We use multiple forms oftransportation to bring our products to market, including by airplanes, ships,railcars and trucks. Disruption to the timely supply of these services orincreases in the cost of these services for any reason, including availabilityor cost of fuel, regulations affecting the industry, or labor shortages in thetransportation industry, could have an adverse effect on our ability to serveour customers, and could have a material adverse effect on our financialperformance.

**We rely uponco-packers to provide our supply of some products, and any failure byco-packers to fulfill their obligations could adversely affect our financialperformance.**

We sell pineapple juiceand pineapple juice in plastic bottles of various sizes to large grocery chainsin the continental United States. The pineapple juice ingredients are shippedin bulk from our cannery on Maui to co-packers on the mainland that bottle thejuice to our specifications under certain co-pack agreements. The failure forany reason of any such co-packer to fulfill its obligations under theapplicable agreements with us could result in disruptions to our supply offinished goods and have an adverse effect on our financial performance. Wecannot provide assurance that a new arrangement would be available on terms asfavorable to us as the existing co-pack arrangement, if at all.

**Because we arelocated in Hawaii and therefore apart from the mainland United States, we aremore sensitive to certain economic factors, which may adversely affectoperating results.**

Our Community Developmentsegment and the Resort segment are dependent on attracting visitors to Kapalua,to Maui, and the state of Hawaii as a whole. Economic factors that affect thenumber of visitors, their length of stay or expenditure levels will affect ourfinancial performance. Factors such as the cost of energy, events in theairline industry that affect passenger capacity or traveling cost, and thethreat, or perceived threat, of heightened terrorist activity in the UnitedStates, could affect a potential visitor’s choice of vacation destination orsecond home location.

**Item 1B.**               UNRESOLVEDSTAFF COMMENTS

Not applicable.

**Item 2.**                        PROPERTIES

TheCompany owns approximately 25,400 acres of land on Maui. Approximately 24% ofthe acreage is used directly or indirectly in the Company’s operations and theremaining land is primarily in pasture or forest reserve. This land, most ofwhich was acquired from 1911 to 1932, is carried on the Company’s 

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balance sheet at cost. The Company believes it hasclear and unencumbered marketable title to all such property, except for thefollowing:

·       aperpetual conservation easement granted to the State of Hawaii on a 13-acreparcel at Kapalua;

·       certaineasements and rights-of-way that do not materially affect the Company’s use ofits property;

·       amortgage on approximately 3,100 acres used in Agriculture operations, whichsecures the Company’s $25 million revolving loan agreement;

·       amortgage on the three golf courses at Kapalua, which secures the Company’s $30million revolving credit facility;

·       amortgage on approximately 20 acres comprising the Kahului cannery property,which secures the Company’s $10 million term loan agreement;

·       apermanent conservation easement granted to The Nature Conservancy of Hawaii, anon-profit corporation, covering approximately 8,600 acres of forest reserveland;

·       asmall percentage of the Company’s land in various locations on which multipleclaims exist, for some of which the Company is securing clean title; and

·       amortgage on 249 acres of Company land that secures a $4.2 million loan to MauiPreparatory Academy, or MPA, a new private middle school in West Maui. TheCompany has an agreement to sell 15 acres of the parcel to MPA for $100, and isin the process of subdividing the parcel.

Approximately 21,890 acresof the Company’s land are located in West Maui, approximately 3,500 acres arelocated in Upcountry Maui and approximately 28 acres are located in Kahului,Maui.

The 21,890 acres in WestMaui comprise a largely contiguous parcel that extends from the sea to anelevation of approximately 5,700 feet and includes 10.6 miles of ocean frontagewith approximately 3,300 lineal feet along sandy beaches, as well asagricultural and grazing lands, gulches and heavily forested areas. The WestMaui acreage includes approximately 2,800 acres comprising the Company’s WestMaui pineapple plantation and approximately 1,645 acres designated for theKapalua Resort.

The Upcountry Mauiproperty is situated at elevations between 1,000 and 3,000 feet above sea levelon the slopes of Haleakala. Approximately 1,700 acres are used for the Company’sAgriculture operations in the Company’s Upcountry pineapple plantation andfresh fruit packing facility.

The Kahului acreageincludes the Company’s administrative offices, a fresh fruit packing facility,a can manufacturing plant, and a pineapple cannery with interconnectedwarehouses at the cannery site where finished product is stored.

Approximately 3,000 acresof leased land are used in the Company’s Agriculture operations under tenleases expiring at various dates through 2018. The Company paid $545,000 in2006 for the aggregate land rental for all leased land in agriculturalproduction.

**Item3.**                        LEGALPROCEEDINGS

The Company is a party tovarious claims, complaints and other legal actions that have arisen in thenormal course of business from time to time. The Company believes the outcomeof these pending legal proceedings, in the aggregate, is not likely to have amaterial adverse effect on the operations or financial position of the Company.

**Item 4.**                        SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company’sstockholders during the fourth quarter of fiscal year 2006.

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**PART II**

**Item5.**                     MARKET FORREGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIES

The Company’s common stockis traded on the American Stock Exchange under the symbol “MLP.”  The Company did not declare any dividends in2006 and 2005. The declaration and payment of cash dividends are restricted bythe terms of borrowing arrangements to 30% of prior year’s net income. As of February 16,2007, there were 399 shareholders of record.

Thefollowing chart reflects high and low sales prices during each of the quartersin 2006 and 2005:

| ** ** | ** ** | ** ** | ** ** | **First**   | ** ** | **Second**  | ** ** | **Third**   | ** ** | **Fourth**  | ** ** |
|------------|------------|------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|
| ** ** | ** ** | ** ** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** |
| 2006       |       | High       |       |        | $          | 39.40       |       |        |       | $           | 39.10      |   |   |   | $ | 37.60 |   |   |   | $ | 33.99 |   |   |
|       |       | Low        |       |        | 33.80      |        |       |        | 34.87      |        |       |   | 29.52 |   |   |   | 29.27 |   |   |
| 2005       |       | High       |       |        | $          | 47.20       |       |        |       | $           | 44.35      |   |   |   | $ | 39.30 |   |   |   | $ | 35.75 |   |   |
|       |       | Low        |       |        | 36.26      |        |       |        | 36.34      |        |       |   | 29.60 |   |   |   | 26.75 |   |   |

 

The Company did notrepurchase any shares of common stock during the fiscal year ended December 31,2006. 

**Shareholder Return Performance Graph**

Set forth below is a graphcomparing the cumulative total Shareholder return on Company’s Common Stockagainst the cumulative total return of the S&P Small Cap 600 Index and theS&P 600 Food Products. The historical stock price performance of theCompany’s Common Stock show in the performance graph below is not necessarilyindicative of future stock price performance.

**COMPARISONOF FIVE YEAR CUMULATIVE TOTAL RETURN**

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*                    $100 investedon December 31, 2001 in common stock of Maui Land & PineappleCompany, Inc., S&P Small Cap 600 Index and S&P 600 Food Products.

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*The material in the above performance graph does notconstitute soliciting material and should not be deemed filed or incorporatedby reference into any other Company filing, whether under the Securities Act of1933, as amended, or the Securities Exchange Act of 1934, as amended, whethermade on, before or after the date of this Annual Report on Form 10-Kand irrespective of any general incorporation language in such filing, exceptto the extent the Company specifically incorporates this performance graph byreference therein.*

**SecuritiesAuthorized For Issuance Under Equity Compensation Plans**

Thefollowing table provides summary information as of December 31, 2006, forour equity compensation plans:

| ** **                                                  | ** ** | ** **                         | ** ** | ** **                        | ** ** | **Number of securities**      | ** ** |
|-------------------------------------------------------------|------------|------------------------------------|------------|-----------------------------------|------------|-----------------------------------------|------------|
| ** **                                                  | ** ** | **Number of securities** | ** ** | ** **                        | ** ** | **remaining available for**   | ** ** |
| ** **                                                  | ** ** | **to be issued**         | ** ** | **Weighted-average**              | ** ** | **future issuance under**     | ** ** |
| ** **                                                  | ** ** | **upon exercise of**     | ** ** | **exercise price of**   | ** ** | **equity compensation plans** | ** ** |
| ** **                                                  | ** ** | **outstanding options,**      | ** ** | **outstanding options,**     | ** ** | **(excluding securities**          | ** ** |
| **Plan Category**                                      | ** ** | ** **                         | ** ** | **warrants and rights** | ** ** | **warrants and rights**       | ** ** | **reflected in column (a))** | ** ** |
| ** **                                                  | ** ** | **(a)**                            | ** ** | **(b)**                           | ** ** | **(c)**                                 | ** ** |
| Equity  compensation plans approved by security holders     |       |                               | 663,500    |                              |       |                                    | $          | 35.24 |   |   |   | 502,500 |   |   |
| Equity  compensation plans not approved by security holders |       |                               | 66,667     | (1)                               |       |                                    | $          | 19.70 |   |   |   | 0 |   |   |
|                                                        |       |                               | 133,333    | (1)                               |       |                                    | 27.60      |   |   |   | 0 |   |   |
|                                                             |            |                                    |            |                                   |            |                                         |            |  |  |  |  |  |  |  |  |  |

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(1)          Options to purchase200,000 shares of Company common stock were granted in 2003 to David C. Cole underan Option Agreement, effective as of his employment start date of October 15,2003. The exercise price for the options was $19.70 per share, the fair marketvalue of the Company’s Common Stock on August 11, 2003, the date on whichthe stock compensation was agreed to in connection with Mr. Cole’semployment with the Company. Section 409A of the Internal Revenue Codeimposed significant additional taxes on stock options granted with an exerciseprice lower than the fair market value on the date of grant that vest after December 31,2004. In order to eliminate those adverse tax consequences, on August 7,2006, the Company and Mr. Cole entered into an amendment to Mr. Cole’sStock Option Agreement dated October 6, 2003. The amendment changed theexercise price for 133,333 shares of our common stock underlying the optionfrom $19.70 to $27.60, the fair market value of our common stock as of theeffective date of the option grant. All of the options were exercisable as of October 2006and the options terminate in October 2013.

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**Item6. SELECTED FINANCIAL DATA**

Theselected financial data set forth below for the five years ended December 31,2006, should be read in conjunction with the Consolidated Financial Statementsand accompanying notes thereto.

| ** **                                          | ** ** | **2006**                                                    | ** ** | **2005**  | ** ** | **2004**  | ** ** | **2003**  | ** ** | **2002**  | ** ** |
|-----------------------------------------------------|------------|-------------------------------------------------------------|------------|-----------|------------|-----------|------------|-----------|------------|-----------|------------|
| ** **                                          | ** ** | **(in thousands except share amounts)** | ** ** |
| *FOR THE  YEAR*                                     |       |                                                        |       |      |       |      |       |      |       |      |       |
| Summary of  Operations                              |       |                                                        |       |      |       |      |       |      |       |      |       |
| Operating revenues                                  |       | $                                                           | 178,897    |      | $          | 186,680   |       | $         | 153,249    |      | $          | 151,333 |   | $ | 147,627 |   |
| Cost of sales                                       |       | 65,488                                                      |       | 73,537    |       | 71,226    |       | 74,832    |       | 79,582    |       |
| Operating expenses                                  |       | 39,253                                                      |       | 36,418    |       | 36,177    |       | 33,188    |       | 32,888    |       |
| Shipping and marketing                              |       | 16,528                                                      |       | 14,446    |       | 15,621    |       | 19,379    |       | 18,746    |       |
| General and administrative                          |       | 41,939                                                      |       | 38,425    |       | 29,347    |       | 30,537    |       | 22,679    |       |
| Equity in earnings (losses) of affiliates           |       | (5,340                                                      | )          | (484      | )          | (727      | )          | 12,678    |       | (1,178    | )          |
| Interest expense                                    |       | (775                                                        | )          | (521      | )          | (1,159    | )          | (2,526    | )          | (2,389    | )          |
| Interest income                                     |       | 1,367                                                       |       | 443       |       | 23        |       | 167       |       | 114       |       |
| Income tax (expense) benefit                        |       | (3,716                                                      | )          | (8,723    | )          | 528       |       | (1,500    | )          | 3,697     |       |
| Income (loss) from continuing operations            |       | 7,225                                                       |       | 14,569    |       | (457      | )          | 2,216     |       | (6,024    | )          |
| Discontinued operations, net of income taxes(1)     |       | —                                                      |       | —    |       | 74        |       | 3,781     |       | 315       |       |
| Net income (loss)                                   |       | 7,225                                                       |       | 14,569    |       | (383      | )          | 5,997     |       | (5,709    | )          |
| Earnings Per Common Share—Basic                |       |                                                        |       |      |       |      |       |      |       |      |       |
| Income (loss) from continuing operations            |       | 1.00                                                        |       | 2.02      |       | (.06      | )          | .31       |       | (.83      | )          |
| Discontinued operations, net of income taxes        |       | —                                                      |       | —    |       | .01       |       | .52       |       | .04       |       |
| Net income (loss)                                   |       | 1.00                                                        |       | 2.02      |       | (.05      | )          | .83       |       | (.79      | )          |
| Other Data                                          |       |                                                        |       |      |       |      |       |      |       |      |       |
| Depreciation and amortization                       |       | $                                                           | 12,374     |      | $          | 14,263    |       | $         | 10,040     |      | $          | 12,184 |   | $ | 11,072 |   |
| Return on beginning stockholders’ equity       |       | 7.9                                                         | %          | 20.3      | %          | (0.5      | )%         | 9.6       | %          | (7.8      | )%         |
| Percent of net income (loss) to revenues            |       | 4.0                                                         | %          | 7.8       | %          | (0.2      | )%         | 4.0       | %          | (3.9      | )%         |
| *AT YEAR END*                                       |       |                                                        |       |      |       |      |       |      |       |      |       |
| Current assets  less current liabilities(2)         |       | $                                                           | 19,003     |      | $          | 8,900     |       | $         | 11,184     |      | $          | 23,567 |   | $ | 25,502 |   |
| Ratio of current  assets to current  liabilities(2) |       | 1.7                                                         |       | 1.2       |       | 1.3       |       | 1.9       |       | 1.9       |       |
| Property, net of  accumulated  depreciation         |       | $                                                           | 129,849    |      | $          | 96,935    |       | $         | 93,897     |      | $          | 95,048 |   | $ | 112,198 |   |
| Total assets                                        |       | 220,199                                                     |       | 185,999   |       | 160,923   |       | 161,680   |       | 184,195   |       |
| Long-term debt and  capital leases                  |       | 49,716                                                      |       | 10,284    |       | 13,953    |       | 22,996    |       | 43,252    |       |
| Stockholders’  equity                          |       |                                                        |       |      |       |      |       |      |       |      |       |
| Amount                                              |       | 100,369                                                     |       | 91,180    |       | 71,621    |       | 71,544    |       | 62,739    |       |
| Per common share                                    |       | $                                                           | 13.77      |      | $          | 12.57     |       | $         | 9.91       |      | $          | 9.94 |   | $ | 8.72 |   |
| Common shares outstanding                           |       | 7,287,779                                                   |       | 7,254,779 |       | 7,226,550 |       | 7,195,800 |       | 7,195,800 |       |

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(1)           In 2003, the Company sold the Napili Plazaand substantially all of its Costa Rican pineapple assets. The operatingresults of these operations and the gains from the sales of these assets arereported as discontinued operations. Prior period amounts have been restatedfor comparability.

(2)           Current assets less current liabilities and the ratioof current assets to current liabilities for 2005 and 2004 are relatively lowprimarily because of an increase in deferred revenues related to the HonoluaRidge lot sales. See Deferred Revenues, Note 6 to the Consolidated FinancialStatements.

17

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**Item 7.**                        MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussionand analysis should be read in conjunction with our consolidated financialstatements and the related notes to those statements contained elsewhere inthis annual report.

***Overview of the Company***

The Company consists of alandholding and operating parent company and its principal subsidiaries,including Maui Pineapple Company, Ltd. and Kapalua Land Company, Ltd. Ourreportable operating segments are Agriculture, Resort and CommunityDevelopment.

*Agriculture*

The Agriculture segmentprimarily includes growing, packing, processing, and marketing of processed andfresh pineapple. The fruit grown by the Company principally consists of threetypes of pineapple *Maui Gold**® *and Hawaiian GoldTM (usually sold as fresh, whole fruit), Champaka(largely used for canning), and fresh organic pineapple.

*Resort*

The Resort segmentincludes our ongoing operations at the Kapalua Resort. These operations includethree championship golf courses (two golf courses after February 2007), atennis facility, a vacation rental program, and several retail outlets.

*CommunityDevelopment*

The Community Developmentsegment includes our real estate entitlement, development, construction, salesand leasing activities. This segment also includes the operations of KapaluaRealty Company, a general brokerage real estate company, and Public UtilitiesCommission regulated water and sewage transmission operations located withinKapalua Resort. Beginning August 31, 2004, the Community Developmentsegment includes the Company’s investment in Kapalua Bay Holdings, LLC. SeeOther Assets—Kapalua Bay Holdings, LLC, Note 3 to the Consolidated FinancialStatements.

***Current Developments***

*Kapalua Mauka*—In February, wereceived final zoning approval from the Maui County Council to change KapaluaMauka’s zoning from “agricultural” to “West Maui Project District 2,” whichallows a mix of up to 690 homes and condominiums, five acres of commercialspace, and up to 27 holes of golf.

*Village Course*—In March, weconcluded that we would close the Village Course in early 2007 and we enteredinto an agreement to design a new Kapalua Mauka golf course with T. J. F. Golf, Inc.

*Board Appointment and Annual Meeting ofShareholders*—In March, the Board of Directors appointedWarren H. Haruki to fill the position as Class III Director that was leftvacant by the resignation of Richard H. Cameron in May 2005. At our AnnualMeeting of Shareholders in May, (i) David C. Cole, Walter A. Dods Jr. andFred E. Trotter III were re-elected as Class I Directors; (ii) thenumber of authorized shares of common stock was increased by 1,000,000 sharesin order to issue equity incentive awards under the Maui Land &Pineapple Company, Inc. 2006 Equity and Incentive Award Plan (the “2006Plan”); and (iii) the 2006 Plan was approved with a maximum aggregate of1,000,000 shares of common stock that may be issued or transferred pursuant toawards granted thereunder.

*Sales of Non-Core Property*—InMarch, we sold approximately 1,860 acres and in December we soldapproximately 320 acres of Upcountry Maui land as we continued towards our goalof re-deploying assets 

18

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to strengthen our Agriculture segment operations,repositioning our Resort operations and increasing investments in our CommunityDevelopment segment. These properties primarily consist of land that was deemedunsuitable for precision cultivation of pineapple and were also not suitablefor creating new holistic communities.

*Kapalua Bay*—In early April, theKapalua Bay Hotel held its final guest night and closed its doors. Inconjunction with our joint venture partners in Kapalua Bay Holdings, LLC, webegan the recycling and upcycling of all salvable materials with the intent ofreusing over 90% of the material from the existing hotel. Demolition of theproperty commenced in July. In June, we began to finalize binding salescontracts for the whole-ownership units and in July we began sales of thefractional ownership units. Construction loan financing for this project wasconcluded in July.

*Accounting and Corporate Services*—InMay, our Resort and Community Development segments implemented a new accountingsystem and, in July, our Agriculture segment and corporate servicesimplementation of the accounting system was completed. In August, we beganimplementation of our plans to centralize and reorganize our accounting andother corporate service functions.

*Pulelehua*—In June, the Pulelehuaproject was approved by the State Land Use Commission and the County PlanningCommission recommended approval of the project to the Maui County Council. Weare currently in the process of securing a date for hearing of the project bythe Maui County Council Land Use Committee.

*Hawaii BioEnergy*—In July, weannounced the formation of Hawaii BioEnergy LLC, an international consortiumincluding our Company. The LLC will research the viability of renewable energycrops, products and services in the State of Hawaii.

*Pineapple Operations*—In June, ournew fresh fruit packing line at Kahului commenced operations. In September andearly October, we terminated, through voluntary resignation and layoffsapproximately 6% our work force as the improved technology of our new freshfruit packing facility automated certain tasks.

*Honolua Village Center*—InOctober, we held a grand opening for the first phase of Honolua Village Center,a 12,000 square foot commercial space in the central area of the KapaluaResort.

*DebtCommitments*—In 2006, we secured additional debt commitmentsby increasing an existing line of credit by $10 million, concluding a term loanof $10 million secured by our Kahului cannery land and other real estate, andconcluding equipment loans for the fresh fruit packing plant totaling $7.5million.

RESULTS OF OPERATIONS

Comparison of Years Ended December 31,2006 and 2005

CONSOLIDATED

| ** **                  | ** ** | **Years Ended December 31,**                                      | ** ** | ** **                                                                       | ** ** |
|-----------------------------|------------|----------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                  | ** ** | **      2006      ** | ** ** | **      2005      ** | ** ** | **difference** | ** ** |
| ** **                  | ** ** | **(in millions, except per share amounts)**             | ** ** |
| *Consolidated  Revenues*    |       |                                                                             | $          | 178.9                                                                            |       |   |   | $ | 186.7 |   |   |   | $ | (7.8 | ) |   |
| *Net  Income*               |       |                                                                             | $          | 7.2                                                                              |       |   |   | $ | 14.6 |   |   |   | $ | (7.4 | ) |   |
| *Earnings Per Common Share* |       |                                                                             | $          | 1.00                                                                             |       |   |   | $ | 2.02 |   |   |   | $ | (1.02 | ) |   |

 

We reported net income of$7.2 million ($1.00 per share) for 2006 compared to net income of $14.6 million($2.02 per share) for 2005. Consolidated revenues were $178.9 million for 2006,a decrease of 4% from $186.7 million for 2005. In 2006 and 2005, we soldapproximately 2,200 and 640 acres, respectively, of land and other real estatein Upcountry Maui and recognized profit of $31.6 million and $26.9 million(pre-tax), respectively. Income for 2006 and 2005 also includes approximately$8.8 million and $7.4 million (pre-

19

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tax),respectively, of asset write offs, accelerated depreciation, severance andother charges related to restructuring our operations and processes. Resultsfor 2006 also include our equity in the losses of Kapalua Bay Holdings, LLC of$5.3 million, which primarily represents sales and marketing costs. Thereduction in revenues in 2006 was due to a $9.3 million decrease from theAgriculture segment, $3.7 million from the Community Development segment,partially offset by a $5.3 million increase from the Resort segment.

*General andAdministrative*

In 2006, general and administrative expenses increasedby 9.1% to $41.9 million compared to $38.4 million for 2005.

Themajor components of the difference in general and administrative expenses wereas follows:

| ** **                                  | ** ** | **Years ended December 31,**                                      | ** ** | ** **                                                                       | ** ** |
|---------------------------------------------|------------|----------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                                  | ** ** | **      2006      ** | ** ** | **      2005      ** | ** ** | **difference** | ** ** |
| ** **                                  | ** ** | **(in millions)**                                                           | ** ** |
| Salaries and  wages                         |       |                                                                             | $          | 12.0                                                                             |       |   |   | $ | 9.0 |   |   |   | $ | 3.0 |   |   |
| Employee  severance expense                 |       |                                                                             | 2.7        |                                                                             |       |   | 0.9 |   |   |   | 1.8 |   |   |
| Professional and  other outside services    |       |                                                                             | 6.8        |                                                                             |       |   | 7.1 |   |   |   | (0.3 | ) |   |
| Depreciation and  asset write offs          |       |                                                                             | 6.4        |                                                                             |       |   | 7.3 |   |   |   | (0.9 | ) |   |
| Medical insurance  premiums                 |       |                                                                             | 3.5        |                                                                             |       |   | 3.7 |   |   |   | (0.2 | ) |   |
| Employee  incentives and stock compensation |       |                                                                             | 2.8        |                                                                             |       |   | 2.7 |   |   |   | 0.1 |   |   |
| Other (net)                                 |       |                                                                             | 7.7        |                                                                             |       |   | 7.7 |   |   |   | — |   |   |
| Total                                       |       |                                                                             | $          | 41.9                                                                             |       |   |   | $ | 38.4 |   |   |   | $ | 3.5 |   |   |

 

Approximately $0.5 million of the increase in salariesand wages in 2006 was due to salaries and wages for our Agriculture segmentpersonnel who were taken out of operations to be trained for other work. Theseemployees were removed from the pineapple operations in connection with thetransition to a less labor-intensive operation that is more focused on freshfruit. The remaining increase in salaries and wages were the result ofincreases in personnel and wage adjustments. The increase in employee severancecost reflects the reduction in the Agriculture segment work force in September andOctober of 2006, the planned closure of the Village Course as of February 28,2007 and management changes in 2006. See Subsequent Events—Note 20 toConsolidated Financial Statements.

The decrease in professional and other outsideservices primarily reflects costs incurred in 2005 to maintain and adjust theaccounting system that was being used by our Agriculture segment. A decisionwas made in the fourth quarter of 2005 to replace accounting informationtechnology systems and standardize our primary accounting systems and processesused by all of our businesses. In addition, the decrease in professional andother outside services costs in 2006 is due to higher cost incurred in 2005 toprepare the Company for compliance with Section 404, Sarbanes-Oxley Act of2002.

In 2005, after planning the construction of a freshfruit packing facility adjacent to our Kahului cannery, we changed theestimated useful life of the affected assets and began the acceleration ofdepreciation of those assets. Plans regarding the construction of a new canneryand can plant were revised in January 2006, and accordingly, weprospectively revised depreciation charges on the cannery and plant. In 2005,we began the execution of our plans to replace all of our accounting systemsand we began the acceleration of depreciation for those assets. Theseaccounting system assets were fully depreciated in the first half 2006, as thenew accounting system was placed in service as of the beginning of the thirdquarter of 2006. In 2006 and 2005, we recorded charges of $2.0 million and $1.8million, respectively, for the write-off of inventory, machinery, equipment,and deferred costs primarily because of changes in our businesses.

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The reduction in medical insurance premium expense in2006 primarily reflects the reduction in the Agriculture segment work force.

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 with ourmanagement’s evaluation of the services provided to the operating segments.

*Interest Expense*

Interest expense was$775,000 for 2006 compared to $521,000 for 2005. Interest incurred in 2006 was$2,473,000, of which $1,698,000 was capitalized to construction projects. Ourmajor capital projects under construction in 2006 included Honolua Ridge PhaseII, Honolua Village at Kapalua Resort, the fresh fruit packing facility andoffices, and replacement of our accounting systems. In 2005, interest incurredwas $1,263,000 of which $742,000 was capitalized. Our effective interest rateon borrowings was 7.4% in 2006 compared to 6.7% in 2005.

AGRICULTURE

| ** **                   | ** ** | **Years Ended December 31,**                                      | ** ** | ** **                                                                       | ** ** |
|------------------------------|------------|----------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                   | ** ** | **      2006      ** | ** ** | **      2005      ** | ** ** | **difference** | ** ** |
| ** **                   | ** ** | **(in millions)**                                                           | ** ** |
| *Revenues*                   |       |                                                                             | $          | 65.2                                                                             | * *   |   |   | $ | 74.5 | * * |   |   | $ | (9.3 | ) |   |
| *% of consolidated revenues* | * *   | * *                                                                         | *36*       | *%*                                                                              | * *   | * * | *40* | *%* |   |   |   |   |   |
| *Operating  Loss*            |       |                                                                             | $          | (18.6                                                                            | *)*        |   |   | $ | (11.4 | *)* |   |   | $ | (7.2 | ) |   |

 

The Agriculture segment reported an operating loss of$18.6 million for 2006 compared to an operating loss of $11.4 million for 2005.Revenues for 2006 were $65.2 million or 13% lower than 2005 primarily due to alower case volume of processed pineapple sales that were only partially offsetby higher case volume of fresh pineapple sales.

Operating losses reported bythe Agriculture segment for 2006 and 2005 include $4.0 million and $4.5million, respectively, for asset write offs and accelerated depreciationcharges related to assets where the estimated useful lives were reduced becauseof changes in our pineapple operations. The Agriculture segment also recorded$1.8 million for employee severance cost in 2006 primarily as a result ofproduction efficiencies gained by the operation of the new fresh fruit packingplant and charges of $944,000 related to materials and supplies inventoriesthat were considered obsolete with the change to the new packing facility thatwent into operation at the end of June 2006. In addition, the Agriculturesegment recorded $1.8 million of charges related to re-training employees in2006 compared to $1.1 million of re-training charges in 2005.

*Processed and FreshOperations*

The case volume of fresh pineapple sales increased by17% and the average revenue per case of fresh pineapple sold increased by lessthan 1% in 2006 compared to 2005. Revenues from fresh pineapple sales wereapproximately 45% of the Agriculture segment net sales for 2006, compared toapproximately 34% for 2005.

The case volume of processed pineapple sales decreasedby 29% in 2006 as compared to 2005 primarily reflecting our strategy to reducesupply to selected retail market segments. This market refinement has resultedin the average sales prices for our processed pineapple products increasing byapproximately 5% for 2006 compared to 2005. We implemented price increases forour processed product lines in January, March, and August of 2006, and in May andAugust of 2005.

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Processed pineapple soldto the U.S. Government (primarily to the Department of Agriculture) comprisedapproximately 36% of our case volume of canned pineapple sales in 2006 comparedto 40% in 2005. The decrease in the percentage of processed pineapple sales tothe U.S. Government is a result of unanticipated sales in 2005 that did notrecur in 2006.

The Agriculture segmentcost of sales was lower by 4% in 2006 compared to 2005, primarily reflectingthe reduced sales volume of processed pineapple partially offset by theincreased sales volume of fresh pineapple. The average per unit cost of salesfor processed pineapple was higher in 2006 compared to 2005 because of thereduced tonnage of fruit being processed, while the average per unit cost ofsales for fresh pineapple was lower primarily reflecting efficiencies that theoperation is beginning to realize with the operation of the new fresh packingfacility. In 2006 and 2005, there were partial liquidations of LIFO (last-in,first-out) inventories for our processed pineapple products, resulting in lowercosts from prior years being charged to cost of sales. Based on current costs,the operating loss for the Agriculture segment for 2006 and 2005 would haveincreased by approximately $2.3 million and $2.9 million, respectively.

Agriculture segmentshipping and marketing cost decreased by about 1% in 2006 compared to 2005principally reflecting a lower volume of processed pineapple, partially offsetby higher average cost for shipping and higher volume of fresh fruit shipments.The average shipping and selling cost for our fresh pineapple was lower in 2006compared to 2005 primarily because in 2006 we shipped approximately 84% of ourfresh product to the mainland United States by ocean transportation (as comparedto air freight, which is more costly) compared to 75% in 2005. Changes in ourcultivation practices, harvesting methods, and post-harvest handling haveextended the shelf life of fresh fruit products enabling us to increase ourreliance on surface transport to reach North American markets.

RESORT

| ** **                   | ** ** | **Years Ended December 31,**                                      | ** ** | ** **                                                                       | ** ** |
|------------------------------|------------|----------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                   | ** ** | **      2006      ** | ** ** | **      2005      ** | ** ** | **difference** | ** ** |
| ** **                   | ** ** | **(in millions)**                                                           | ** ** |
| *Revenues*                   |       |                                                                             | $          | 46.1                                                                             | * *   |   |   | $ | 40.8 | * * |   |   | $ | 5.3 |   |   |
| *% of consolidated revenues* | * *   | * *                                                                         | *26*       | *%*                                                                              | * *   | * * | *22* | *%* |   |   |   |   |   |
| *Operating  Loss*            |       |                                                                             | $          | (6.4                                                                             | *)*        |   |   | $ | (5.8 | *)* |   |   | $ | (0.6 | ) |   |

 

The Resort segmentreported an operating loss of $6.4 million for 2006 compared to $5.8 millionfor 2005. Resort segment revenues were $46.1 million for 2006 compared to $40.8million for 2005, an increase of 13%, as a result of higher revenues from theKapalua Villas and from our golf operations primarily due to rate increases.The operating loss for 2006 includes $946,000 of employee severance expense,primarily reflecting the planned February 28, 2007 closure of the VillageCourse and management changes. The operating loss for 2006 also includes higherexpenses in particular for advertising and promotions, utilities and allowancefor doubtful accounts.

The Plantation Course wasclosed from April through July of 2005 for renovation of the greensand bunkers. The closure of that golf course for four months in 2005 negativelyimpacted the operating results from Resort operations in 2005 compared to 2006.

Hotel and condominium roomoccupancies at the Kapalua Resort, and to a somewhat lesser extent for Maui ingeneral, largely drive resort activity as reflected by increased golf play andmerchandise sales. In early April 2006, the Kapalua Bay Hotel held itsfinal guest night and the hotel was permanently closed. This closure resulted inapproximately 20% fewer available rooms at Kapalua Resort and as expected,negatively affected the number of paid rounds of golf and retail sales in 2006.

*Golf, Retail and Villas*

Revenues from golf operations increased by 8% for 2006compared to 2005. Overall, paid rounds of golf decreased by 6%, and averagegreen and cart fees increased by 19% in 2006 compared to 2005.

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Resort retail sales for 2006 were about 5% lower thansales in 2005. Lower retail sales reflect the closure of the Kapalua Bay Hoteland the closure of our Logo Shop, Kids Shop and Home Store in May 2006,and our Kapalua Collection Store in March 2006. These shops were adjacentto the hotel and represented approximately 6,600 square feet of retail area. Inmid-October 2006, our new 1,900 square foot Kapalua Collections storefeaturing upscale resort wear opened at The Honolua Village Center in ourcentral resort area.

Revenues from The KapaluaVillas increased in 2006 compared to 2005, primarily reflecting an 18% increasein the average room rates, partially offset by a lower number of occupied rooms.The increase in average room rates were due to a greater number of directbookings and a more aggressive pricing strategy across all channels and productcategories.

**COMMUNITYDEVELOPMENT**

| ** **                   | ** ** | **Years Ended December 31,**                                      | ** ** | ** **                                                                       | ** ** |
|------------------------------|------------|----------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                   | ** ** | **      2006      ** | ** ** | **      2005      ** | ** ** | **difference** | ** ** |
| ** **                   | ** ** | **(in millions)**                                                           | ** ** |
| *Revenues*                   |       |                                                                             | $          | 67.3                                                                             | * *   |   |   | $ | 71.1 | * * |   |   | $ | (3.8 | ) |   |
| *% of consolidated revenues* | * *   | * *                                                                         | *38*       | *%*                                                                              | * *   | * * | *38* | *%* |   |   |   |   |   |
| *Operating  Profit*          |       |                                                                             | $          | 36.2                                                                             | * *   |   |   | $ | 40.8 | * * |   |   | $ | (4.6 | ) |   |

 

The Community Development segment reported anoperating profit of $36.2 million for 2006 compared to $40.8 million for 2005. Revenuesfrom this operating segment were $67.3 million for 2006 compared to $71.1million for 2005.

In 2006, we recognized revenues of $33.5 million and apre-tax gain of $31.6 million from the sale of approximately 2,200 acres ofnon-core Upcountry Maui land. The land sold was comprised of agricultural landsthat had been earmarked for disposition as “non-core” to our strategic plans. In2005, we recognized revenues of $32.2 million and operating profit of $26.9million from seven real estate sales transactions. In June 2005, weconcluded the sale of approximately 25 acres of land and improvements to theHui No`eau Visual Arts Center. We also sold approximately 600 acres ofUpcountry Maui land in 2005.

Our equity in the losses of Kapalua Bay Holdings, LLCwas $5.3 million in 2006 compared to $454,000 in 2005. The increased loss isthe result of closure of the Kapalua Bay Hotel in April 2006 and the preparationfor and commencement of sales and marketing efforts for the whole andfractional condominium units that will comprise The Residences at Kapalua Bayproject.

*Real Estate Sales*

Honolua Ridge Phase II residential subdivisionconsists of 25 agricultural lots, which began selling in August 2005. Throughthe end of 2006, 16 lots had closed escrow, with nine lot sales closing in 2006.Revenues and profit from this project are being recognized on thepercentage-of-completion method, under which we recognized revenues of $26.2million in 2006. Honolua Ridge Phase II was substantially complete as of December 31,2006.

In 2005, we recognized revenues of $30.8 million fromHonolua Ridge Phase I and Phase II lot sales. At December 31, 2005, theinfrastructure improvements for Honolua Ridge Phase I were substantiallycomplete, and Honolua Ridge Phase II was approximately 35% complete. Ourbalance sheet at December 31, 2005 included deferred revenues for HonoluaRidge lots sales recognized on the percentage-of-completion method of $1.9million.

Real estate development and sales are cyclical anddepend on a number of factors. Results for one period are therefore notnecessarily indicative of future performance trends for this segment.

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Comparison of Years Ended December 31,2005 and 2004

**CONSOLIDATED**

| ** **                   | ** ** | **Years Ended December 31,**                                      | ** ** | ** **                                                                       | ** ** |
|------------------------------|------------|----------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                   | ** ** | **      2005      ** | ** ** | **      2004      ** | ** ** | **difference** | ** ** |
| ** **                   | ** ** | **(in millions, except per share amounts)**             | ** ** |
| *Consolidated  Revenues*     |       |                                                                             | $          | 186.7                                                                            |       |   |   | $ | 153.2 |   |   |   | $ | 33.5 |   |   |
| *Net Income (Loss)*          |       |                                                                             | $          | 14.6                                                                             |       |   |   | $ | (0.4 | ) |   |   | $ | 15.0 |   |   |
| *Earnings  Per Common Share* |       |                                                                             | $          | 2.02                                                                             |       |   |   | $ | (0.05 | ) |   |   | $ | 2.07 |   |   |

 

We reported net income of $14.6 million ($2.02 pershare) for 2005 compared to a net loss of $383,000 ($.05 per share) for 2004. Consolidatedrevenues were $186.7 million for 2005, an increase of 22% from $153.2 millionfor 2004. The improved results in 2005 were primarily attributable to revenuesand operating profit from the Community Development segment as a result ofsales of real estate inventories and the sale of other real estate, as furtherdescribed below. Results for 2005 included charges of approximately $7.4million (pre-tax) related to the restructuring of our business processes andoperations.

*General andAdministrative*

In 2005, general and administrative expenses increasedby 31% to $38.4 million compared to $29.3 million for 2004.

Themajor components of the difference in general and administrative expenses wereas follows:

| ** **                                  | ** ** | **Years ended December 31,**                                      | ** ** | ** **                                                                       | ** ** |
|---------------------------------------------|------------|----------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                                  | ** ** | **      2005      ** | ** ** | **      2004      ** | ** ** | **difference** | ** ** |
| ** **                                  | ** ** | **(in millions)**                                                           | ** ** |
| Salaries and  wages                         |       |                                                                             | $          | 9.0                                                                              |       |   |   | $ | 6.2 |   |   |   | $ | 2.8 |   |   |
| Depreciation and  asset write offs          |       |                                                                             | 7.3        |                                                                             |       |   | 3.4 |   |   |   | 3.9 |   |   |
| Professional and  other outside services    |       |                                                                             | 7.1        |                                                                             |       |   | 3.8 |   |   |   | 3.3 |   |   |
| Medical insurance  premiums                 |       |                                                                             | 3.7        |                                                                             |       |   | 4.4 |   |   |   | (0.7 | ) |   |
| Employee  incentives and stock compensation |       |                                                                             | 2.7        |                                                                             |       |   | 2.1 |   |   |   | 0.6 |   |   |
| Employee  severance expense                 |       |                                                                             | 0.9        |                                                                             |       |   | 2.1 |   |   |   | (1.2 | ) |   |
| Other (net)                                 |       |                                                                             | 7.7        |                                                                             |       |   | 7.3 |   |   |   | 0.4 |   |   |
| Total                                       |       |                                                                             | $          | 38.4                                                                             |       |   |   | $ | 29.3 |   |   |   | $ | 9.1 |   |   |

 

The increase in salaries and wages is primarily theresult of additional employees in the Community Development segment in 2005. Expansionof the Community Development staff was necessary in order to accomplish theprojects and initiatives for this segment. The increase in employee incentivesand stock compensation expense was principally the result of accruals forperformance-based incentives, reflecting our increased emphasis onperformance-based pay plans.

The decrease in medical insurance premiums in 2005largely reflects the reduction in the work force in the Agriculture segmentthat occurred in 2004 and in 2005. Employee severance expense was lower in 2005because of management changes at the corporate level in 2004. In addition,employee severance charges arising from reduction in the work force in theAgriculture segment were approximately $1.3 million in 2004 compared to$520,000 in 2005.

The increase in depreciation and asset write offscharged to general and administrative expenses primarily relate to: (1) accelerationof depreciation charges on certain assets from the current cannery, can plantand fresh fruit processing facility; (2) acceleration of depreciationcharges on our integrated 

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accounting system; (3) writeoff of assets related to our payroll and human resource accounting system; and (4) thewrite off of other assets that we have ceased to use.

In 2005, we began planning the construction of aprocessing facility to replace our fresh fruit packing plant, and amulti-commodity/multi-client processing facility to replace our cannery and canplant. In 2005, we began to evaluate the Agriculture segment assets and recorddepreciation charges related to the change in estimated useful life of theseassets. We estimated that Agriculture segment assets with a net book value ofapproximately $5.4 million will be expensed over the 34-month periodending December 31, 2007. This resulted in additional depreciation chargesof $2.7 million in 2005.

In 2005, as we evaluated our businesses, operationsand processes it became evident that the accounting systems currently in usewere not able to meet our expanding needs. Our payroll and human resourceaccounting functions were outsourced to a third party provider at the end of2005 and the net book value of the related in-house systems was written off. Inthe fourth quarter of 2005, we concluded plans to replace the other primaryaccounting systems that were being used and began to accelerate thedepreciation of the existing accounting systems. Evaluation of our fixed assetsin 2005 also resulted in the identification of assets that we will no longer usebecause of changes in plans and operations. In 2005, we expensed $4.0 millionfor these asset write offs and acceleration of depreciation for accountingsystems.

The increase in professional and other outsideservices in 2005 reflects the cost of outside consultants primarily to assistus in documenting our internal controls and processes required, in part, by therequirements of Section 404 of the Sarbanes-Oxley Act. The increase inprofessional and other outside services also reflects charges incurred in 2005for modifications and adjustments to our accounting system and additionaltraining of our employees on use of the system. Reduction in staffing and staffturnover, particularly in the Agriculture segment, necessitated re-training ofthe staff.

General and administrative expenses are incurred atthe corporate level and at the operating segment level. All general andadministrative expenses incurred at the corporate level are allocated to theoperating segments. Such allocations are consistent with management’sevaluation of the operating segments.

*Interest Expense*

Interest expense of$521,000 for 2005 was lower by 55% compared to 2004. The decrease in interestexpense was due to lower average borrowings and to a higher amount ofcapitalized interest in 2005. Capitalized interest was $742,000 for 2005compared to $199,000 for 2004, primarily as a result of construction activitiesat the Kapalua Resort. The Company’s average interest rate on borrowings was6.7% in 2005 compared to 5.5% in 2004, due to higher borrowing rates fromfinancial institutions.

**AGRICULTURE**

| ** **                   | ** ** | **Years Ended December 31,**                                      | ** ** | ** **                                                                       | ** ** |
|------------------------------|------------|----------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                   | ** ** | **      2005      ** | ** ** | **      2004      ** | ** ** | **difference** | ** ** |
| ** **                   | ** ** | **(in millions)**                                                           | ** ** |
| *Revenues*                   |       |                                                                             | $          | 74.5                                                                             | * *   |   |   | $ | 80.0 | * * |   |   | $ | (5.5 | ) |   |
| *% of consolidated revenues* | * *   | * *                                                                         | *40*       | *%*                                                                              | * *   | * * | *52* | *%* |   |   |   |   |   |
| *Operating  Loss*            |       |                                                                             | $          | (11.4                                                                            | *)*        |   |   | $ | (10.8 | *)* |   |   | $ | (0.6 | ) |   |

 

The Agriculture segment reported an operating lossfrom continuing operations of $11.4 million for 2005 compared to an operatingloss of $10.8 million for 2004. Revenues in 2005 of $74.5 million were 7% lowerthan revenues in 2004.

Lower Agriculture segment revenues in 2005 was due toa reduced sales volume of processed pineapple, which was partially offset byincreased fresh pineapple sales volume and higher average prices for bothprocessed and fresh pineapple in 2005.

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*Non-Recurring Items*

·       Theoperating loss for 2005 includes $4.5 million for asset write offs andadditional depreciation charges for assets where the estimated useful liveswere reduced because of changes in the operations of the Agriculture segment,as mentioned in *General and Administrative*above. The operating loss for 2004 included $1.3 million of asset write offsrelated to the restructuring of the Agriculture segment operations.

·       Revenuesfor 2005 include $3.1 million received from the U.S. Customs Service comparedto $1.7 million received from this program in 2004. These cash distributionswere made pursuant to the Continued Dumping and Subsidy Offset Act of 2000, orthe CDSOA, which allows for distribution of antidumping duties to injureddomestic producers. The distributions are recorded as “Other Income” in theConsolidated Statements of Operations.

Anti-dumping duties have been in effect on processedpineapple fruit imported from Thailand since 1995. In late 2004, theanti-dumping duty order on several Thailand exporters of processed pineapple,which together accounted for more than 50% of the Thailand exports to theUnited States, was revoked. As a result, these Thailand exporters no longerhave anti-dumping duties assessed on their exports to the United States. Theserevocations have had, and will continue to have, an effect on the amount offunds collected and distributed to us under the CDSOA.

*Fresh and Processed Operations*

The case volume of fresh pineapple sales increased by25% in 2005 compared to 2004. Revenues from fresh pineapple sales wereapproximately 34% and 24% of the Agriculture segment net sales for 2005 and2004, respectively. Our average revenue per box of fresh pineapple salesincreased by approximately 6% in 2005 compared to 2004 primarily reflecting theimproved quality of its products and related marketing efforts.

The case volume of processed pineapple sales decreasedby 27% for 2005 compared to 2004, primarily reflecting our strategy to sharplyreduce supply to selected retail market segments. This market refinement hasresulted in the average sales prices for our processed pineapple products toincrease by approximately 7% for 2005 compared to 2004. We implemented priceincreases for our processed product lines in March, June and August of2004, and in August 2005.

Processed pineapple sold to the U. S. Government,primarily to the Department of Agriculture, comprised approximately 40% of ourcase volume of processed pineapple sales in 2005 compared to approximately 35%in 2004. The increase in the percentage of processed pineapple sales to the U.S. Government is a result of lower overall processed pineapple sales and anincrease in our participation in government programs that purchase pineapplefor school lunches, needy families and other government programs.

The Agriculture segment cost of sales was lower by 12%for 2005 as compared to 2004, primarily reflecting lower sales volume ofprocessed pineapple. The average per unit cost of sales was higher in 2005compared to 2004 because the impact of a liquidation of inventory based on theLIFO (last-in, first-out) method of accounting for inventories was higher in2004 than in 2005. Cost of sales in 2005 and 2004 would have been higher by$2.9 million and $6.8 million, respectively, based on current costs.

Agriculture shipping andmarketing cost decreased by $1.1 million, or 9%, in 2005 as compared to 2004,largely reflecting the lower sales volume of processed pineapple, partiallyoffset by increased ocean and airfreight shipping costs per unit. Increased useof surface shipment, instead of the higher cost air shipment, was alsoresponsible for the lower cost in 2005. In 2005, we shipped approximately 87%of our *Maui Gold**®* fresh pineapple by surface, rather than byair, compared to about 72% in 2004. Reductions in the work force at our salesand marketing office and an increase in shipments directly to our customers (as

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opposedto interim storage of inventory in public warehouses), also contributed tolower shipping and marketing costs in 2005.

**RESORT**

| ** **                   | ** ** | **Years Ended December 31,** | ** ** | ** ** | ** ** |
|------------------------------|------------|---------------------------------------------|------------|------------|------------|
| ** **                   | ** ** | **2005**                                    | ** ** | **2004**   | ** ** | **difference** | ** ** |
| ** **                   | ** ** | **(in millions)**                      | ** ** |
| *Revenues*                   |       |                                        | $          | 40.8       | * *   |   |   | $ | 39.6 | * * |   |   | $ | 1.2 |   |   |
| *% of consolidated revenues* | * *   | * *                                    | *22*       | *%*        | * *   | * * | *26* | *%* |   |   |   |   |   |
| *Operating  Loss*            |       |                                        | $          | (5.8       | *)*        |   |   | $ | (5.2 | *)* |   |   | $ | (0.6 | ) |   |

 

The Resort segment reported an operating loss of $5.8million for 2005 compared to an operating loss of $5.2 million for 2004. Resortrevenues of $40.8 million in 2005 were 3% higher than in 2004.

Hotel and condominium room occupancies at the KapaluaResort, and to a somewhat lesser extent for Maui in general, largely drive theincrease in resort activity as reflected by increased golf play, merchandisesales and lease revenues. Hotel and condominium room occupancies at KapaluaResort increased by 10% in 2005 compared to 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 increased operating losses in 2005. The renovations werecompleted on schedule and the course reopened on July 31, 2005.

Higher operating expensesat the Kapalua Resort were attributable to increases in staffing at the KapaluaVillas, and higher fuel and utility costs, repairs and maintenance costs,Kapalua Resort Association dues, and increased costs for outside consultants. Marketingexpenses were higher in 2005 compared to the prior year because of increasedstaffing and events reflecting greater emphasis on marketing the KapaluaResort.

*Golf, Merchandise and Villas*

Revenues from golf operations increased by 2% in 2005compared to 2004. Lost revenues from the closure of the Plantation Course wereoffset by higher average green fees. Overall, paid rounds of golf decreased by9% for 2005 compared to 2004. Average green and cart fees increased by 11% in2005 compared to 2004.

The closure of the Plantation Course from April 1,2005 through July 30, 2005 also negatively affected the Kapalua Resort’smerchandise sales, which decreased by approximately 2% for 2005 compared to2004. Increased sales at Kapalua Resort’s other retail outlets, in partattributed to higher room occupancies, partially offset the effect of thePlantation Course closure.

Gross revenues from theKapalua Villas increased by approximately 8% for 2005 compared to 2004,reflecting both higher average room rates and occupancies.

**COMMUNITYDEVELOPMENT**

| ** **                   | ** ** | **Years Ended December 31,** | ** ** | ** ** | ** ** |
|------------------------------|------------|---------------------------------------------|------------|------------|------------|
| ** **                   | ** ** | **2005**                                    | ** ** | **2004**   | ** ** | **difference** | ** ** |
| ** **                   | ** ** | **(in millions)**                      | ** ** |
| *Revenues*                   |       |                                        | $          | 71.1       | * *   |   |   | $ | 33.4 | * * |   |   | $ | 37.7 |   |   |
| *% of consolidated revenues* | * *   | * *                                    | *38*       | *%*        | * *   | * * | *22* | *%* |   |   |   |   |   |
| *Operating  Profit*          |       |                                        | $          | 40.8       | * *   |   |   | $ | 16.4 | * * |   |   | $ | 24.4 |   |   |

 

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The Community Development segment reported anoperating profit of $40.8 million for 2005 compared to $16.4 million for 2004. Revenuesfrom this operating segment were $71.1 million for 2005 compared to $33.4million for 2004.

Operating profit for 2005includes $454,000 of losses from our equity interest in Kapalua Bay Holdings,LLC, compared to losses of $779,000 for 2004.

*Real Estate Sales*

Revenues for 2005 include $32.2 million from the saleof approximately 640 acres of land in Upcountry Maui, which resulted inoperating profit of $26.9 million. Of these 640 acres, approximately 88 acresof the land had been previously been planned for development and subsequentbulk sale, potentially in 2007. The remaining property was comprised of agriculturallands and property that had been earmarked for disposition as “non-core” to ourstrategic plan.

Revenues for 2005 also include $30.8 million from thesale of agricultural lots at the Honolua Ridge Phase I and II residentialsubdivisions. Revenues and profit from these projects are being recognizedusing the percentage-of-completion method as the subdivision improvements arecompleted. At December 31, 2005, Honolua Ridge Phase I was substantiallycomplete and Honolua Ridge Phase II, which began construction in August 2005,was approximately 35% complete. Our balance sheet at December 31, 2005,includes $10.1 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 a June 2005sale of Upcountry Maui properties.

Honolua Ridge Phase Ibegan sales in July of 2004 and 17 lots were sold in 2004. Revenues of$17.8 million were recognized in 2004 using the percentage of completion method.Revenues for 2004 also include $4.3 million from the March 2004 sale of a6.5-acre parcel at Kapalua and $603,000 from the May 2004 sale of acustom home at Pineapple Hill Estates that we constructed as part of a joint venture.

**LIQUIDITY AND CAPITAL RESOURCES**

*Debt Position*

At December 31, 2006, the Company’s total debt,including capital leases, was $51.1 million, an increase of $40 million from December 31,2005. Additional debt in 2006 was needed to fund capital expenditures andinvestments, and operating cash flows.

In September through November of 2006, weconcluded $17.5 million in additional long-term debt secured by our new freshfruit packing equipment and approximately 20 acres of land and other realestate comprising our Kahului cannery property. This includes $7.5 million ofsuch long-term debt in the form of equipment loans that are fully amortizedover a 7-year term. The remainder of the long-term debt is in the form ofa $10 million real estate term loan, which requires monthly principal andinterest payments and is fully amortized over a 20-year term.

In December 2006, weamended one of our lines of credit increasing the total availability from $15million to $25 million and extending the draw period and maturity date from June 2009to June 2011.

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*Operating Cash Flows*

Netcash used in operating activities for 2006 was $20.2 million. In 2005 and 2004,net cash flows provided by operating activities were $9.9 million and $27.6million, respectively. By business segment, these cash flows were approximatelyas follows:

| ** **                 | ** ** | **Years ended December 31,** | ** ** |
|----------------------------|------------|---------------------------------------------|------------|
| ** **                 | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                 | ** ** | **(in millions)**                      | ** ** |
| Agriculture                |       |                                        | $          | (5.5 | ) |   | $ | (1.9 | ) | $ | 7.7 |   |
| Resort                     |       |                                        | (0.6       | ) |   | (2.0 | ) | (3.0 | ) |
| Community  Development     |       |                                        | (6.6       | ) |   | 14.5 |   | 26.5 |   |
| Interest, taxes  and other |       |                                        | (7.5       | ) |   | (0.7 | ) | (3.6 | ) |
| Total                      |       |                                        | $          | (20.2 | ) |   | $ | 9.9 |   | $ | 27.6 |   |

 

Agriculture segment cash flows used in operatingactivities for 2006 is largely a result of the operating loss. Cash flows for2004 include $9.6 million from the reduction in trade receivables as a resultof sales late in 2003 that were collected in early 2004.

The Community Development segment cash flows fromoperating activities generally vary with the amount of new real estate productavailable for sale. In 2004, the Company began sales and construction ofinfrastructure of Honolua Ridge Phase I, a 25 agricultural lot residentialsubdivision and 17 lot sales closed escrow in 2004. The remaining 8 lots closedescrow in 2005. In 2005, the Company began the sales and construction of infrastructurefor Phase II of the Honolua Ridge agricultural lots, and 7 lot sales closedescrow in 2005. In 2006, nine Honolua Ridge Phase II lots closed escrow,resulting in cash proceeds of approximately $14 million. Cash outflows forthese projects were approximately $11 million in 2006, $12 million in 2005 and$8 million in 2004.

Taxes and interest paid in2006 was $7.5 million compared to $747,000 in 2005 and $3.6 million in 2004.

*Investing Cash Flows*

Cash provided byinvesting activities in 2006 included the following transactions:

·       Thereturn from the exchange intermediary of $13.9 million of proceeds fromprevious sales of properties in 2005.

·       Thesale of approximately 2,200 acres of Upcountry Maui land that was considerednon-core to our businesses, which resulted in cash proceeds of $27.6 million,and a promissory note of $4.5 million that was collected in January 2007.

Cashused in investing activities in 2006 included the following transactions:

·       Cashoutflows for major capital projects include the Honolua Village approximately$9.0 million; fresh pineapple packing facility $15.8 million; new corporateoffices $5.4 million; and replacement of accounting systems $3.4 million. Intotal, cash flows used in investing activities included approximately$43.7million for additions to fixed assets.

·       Cashflows used for deferred development costs of approximately $11 million.

·       Cashcontributions of $11.7 million to Kapalua Bay Holdings, LLC. See Other Assets,Kapalua Bay Holdings, LLC, Note 3 to the Consolidated Financial Statements.

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In 2005, proceeds from the disposal of property of$14.3 million represent partial proceeds from the sale of Upcountry Mauiacreage. At the end of 2005, the remaining cash from these sales of $13.9million were held by an exchange intermediary pending reinvestment in otherlong lived assets.

In 2005, cash flows used in investing activitiesincluded $16.9 million for additions to fixed assets and $5.0 million fordeferred development costs.

Cash used ininvesting activities for 2004 included the following transactions:

·       $3.9million for the purchase of ten acres in West Maui, was paid in January 2004;

·       $1.9million was expended in June 2004 for the purchase of three industriallots on Oahu, which were exchanged with the State of Hawaii for 223 acres atKapalua located adjacent to the Company’s Kapalua Mauka project;

·       $500,000cash contribution for a 51% membership interest in Kapalua Bay Holdings, LLC. ;

·       $500,000was invested in Series A preferred convertible stock of the HawaiiSuperferry in May 2004; and

·       Cash distributions totaling$5.7 million were paid to the minority shareholders of our Costa Ricansubsidiary.

*Future Cash Outflows*

Contributions to our defined benefit pension plans areexpected to be approximately $1 million to $1.8 million in 2007.

Capital expenditures for 2007 are expected to include$4 million for completion of construction of a new office area for ourcorporate headquarters and support services—accounting, information technologyand human resources. This office area is being constructed within an existingwarehouse at the Kahului cannery and will utilize recycled materials from theKapalua Bay Hotel, which was demolished in 2006. The new office area isexpected to be completed by April 2007.

We expect the Agriculture segment to have capitalexpenditures of approximately $5.6 million in 2007 of which about $1.8 millionis for the replacement of existing equipment and facilities.

The Resort segment capital expenditures for 2007 areexpected to be approximately $3.1 million of which approximately $2.3 millionis for the renovation, refurbishment, or replacement of existing facilities andequipment.

Expenditures in 2007 for Community Development segmentcapital projects, deferred development costs and investments are expected to beapproximately $40 million. In addition, we expect that we may contributeadditional cash to Kapalua Bay Holdings, LLC if cash needs for constructionexceed the funds to be released by the construction lender (see Note 3 to the ConsolidatedFinancial Statements). In connection with the planning for the variousprojects, we will analyze the feasibility of proceeding with each project andwill seek project specific non-recourse financing for some of the capitalprojects.

At December 31, 2006, the Company had unusedlong-term credit lines of $21.6 million. The Company believes that cash flowsfrom operations will be sufficient to meet future debt service for existinglong-term debt. The Company believes that additional financing will benecessary to fund capital expenditures and other construction projects in 2007and is in the process of seeking specific financing for some of its investmentsand construction projects. The Company also believes that (although noassurances can be given) because of the significant debt reduction that itachieved in 2004 and 2005, it will be able to obtain the necessary financingfor any new capital projects.

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**Contractual Obligations**

Thefollowing summarizes the Company’s contractual obligations as of December 31,2006 (in thousands):

| ** **                                      | ** ** | ** ** | ** ** | **Payment due by period (years)** | ** ** |
|-------------------------------------------------|------------|------------|------------|-------------------------------------------------------|------------|
| ** **                                      | ** ** | ** ** | ** ** | **Less**                                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Contractual Obligations**                | ** ** | ** ** | ** ** | **Total**                                             | ** ** | **Than 1** | ** ** | **1-3** | ** ** | **4-5** | ** ** | **After 5** | ** ** |
| Long-term debt                                  |       | $          | 51,053     |                                                  | $          | 1,396 |   | $ | 20,421 |   | $ | 2,830 |   | $ | 26,406 |   |
| Capital lease  obligations (including interest) |       | 85         |       | 19                                                    |       | 38 |   | 28 |   | — |   |
| Interest on long  term debt(1)                  |       | 37,100     |       | 3,894                                                 |       | 5,117 |   | 4,267 |   | 23,822 |   |
| Operating  leases(2)                            |       | 2,866      |       | 585                                                   |       | 891 |   | 526 |   | 864 |   |
| Purchase  commitments(2)                        |       | 10,239     |       | 6,662                                                 |       | 2,754 |   | 823 |   | — |   |
| Other long-term  liabilities(3)                 |       | 4,543      |       | 586                                                   |       | 1,194 |   | 1,088 |   | 1,675 |   |
| Total                                           |       | $          | 105,886    |                                                  | $          | 13,142 |   | $ | 30,415 |   | $ | 9,562 |   | $ | 52,767 |   |
|                                                 |            |            |            |                                                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)          Future interest paymentson long term debt were calculated assuming that future interest rates equal therates at December 31, 2006.

(2)          These operating leasesand purchase commitments are not reflected on the consolidated balance sheetsunder accounting principles generally accepted in the United States of America.

(3)          Amountsconsist primarily of payments due under the Company’s deferred compensationplan, unfunded pension payments and severance plans. Where pension paymentswere for lifetime, payments were estimated for five additional years.

**CRITICAL ACCOUNTING POLICIES ANDESTIMATES**

The Company’saccounting policies are described in Summary of Significant Accounting Policies,Note 1 to the Consolidated Financial Statements (included in Item 8). Thepreparation of financial statements in conformity with generally acceptedaccounting principles require the use of accounting estimates. Some of theseestimates and assumptions involve a high level of subjectivity and judgment andtherefore the impact of a change in these estimates and assumptions couldmaterially affect the amounts reported in the Company’s financial statements. Theaccounting policies and estimates that the Company has identified as criticalto the consolidated financial statements were as follows:

·       Thepercentage of completion method is used to recognize revenues (and profits)from the sale of residential land parcels where the Company is obligated toconstruct improvements (roads, sidewalks, drainage, and utilities) after theclosing of the sale. Under this method, revenues are recognized over theimprovement period on the basis of costs incurred as a percentage of totalcosts to be incurred. Changes in the total estimated cost expected to beincurred could be affected by conditions not anticipated that could result inhigher or lower cost to complete the improvements. In 2006, 2005 and 2004, theCompany recognized revenues (and profits) using the percentage-of-completionmethod for the sales of lots in the Honolua Ridge Phase I and II residentialsubdivisions. At December 31, 2006 both Phase I and II were substantiallycomplete.

·       Inconnection with one of the 2005 sales transactions of Upcountry Maui land, theCompany and the buyer executed a Water Development Agreement. Based on theestimated cost to drill the new water well and construct a storage tank and theestimated water flow from the future well, costs were allocated to the salestransaction. The profit from the sale has been allocated between the landparcels sold and the agreement to provide the water source, and the portionrelated to the water source ($1.9 million) has been deferred pendingperformance of the Company’s obligations under the agreement. The estimates ofthe costs of the water source could differ from actual costs because 

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final contracts with theCounty of Maui and with the outside contractors for completion of the watersource have not yet been consummated.

·       Deferreddevelopment costs, principally predevelopment costs and offsite developmentcosts related to various projects in the planning stages by the Company’sCommunity Development segment, totaled $23.6 million at year-end 2006. Suchamounts are carried on the balance sheet at the lower of cost or estimated fairvalue. Based on the Company’s future development plans for Kapalua Resort andother properties, and the estimated value of these future projects, managementhas concluded that these deferred costs will be recoverable from futuredevelopment projects. The volatility of this assumption arises because of thelong-term nature of the Company’s development plans and the uncertainty of whenor if certain parcels will be developed. Approximately $3.4 million of theResort deferred development costs relate to a fee paid by the Company to theCounty of Maui for future sewerage capacity. Management estimates that thecapacity in the sewerage system will be available for future developmentprojects.

·       Pensionexpense for the Company’s two defined benefit pension plans utilize actuarialestimates of employees’ expected service period, age at retirement, andcompensation levels, as well as estimates as to employee turnover, the longterm rate of return on investments and other factors. Other post retirementbenefits for life insurance and health care utilize actuarial estimates as tothe retirees’ life span, the cost of future health insurance premiums andutilization of health benefits by the employees. In addition, both pension andother post retirement expenses are sensitive to the discount rate utilized. Thisrate should be commensurate to the interest rate yield of a high qualitycorporate fixed income investment portfolio. These assumptions are subject tothe risk of change as they require significant judgment and have inherentuncertainties that management or its consulting actuaries may not control oranticipate.

·       Theallowance for doubtful accounts is calculated based on assumptions determinedby management as to its portfolio of accounts receivable. It is based onknowledge that management has about specific accounts and on historical levelsof uncollectible accounts. These assumptions are subject to the risk of changebecause of the amount of judgment required as well as the inherent risk ofusing the past to forecast the future.

·       Stockbased compensation expense is calculated based on assumptions as to expectedlife of the options, price volatility, risk-free interest rate and expectedforfeitures. While management believes that the assumptions made areappropriate, compensation expense recorded currently and future compensationexpense would vary based on the assumptions used.

·       The Company is self insuredup to certain limits for workers compensation claims and general business liabilities.At December 31, 2006, there were approximately $1.2 million ofself-insurance accruals reflected on the Company’s balance sheet. Themeasurement of these costs requires consideration of historical experience andjudgment and assumptions regarding the claims, and could vary significantlybased on different assumptions and analyses.

**Item 7A.**                QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s primary market risk exposure with regardto financial instruments is due to changes in interest rates. The Companymanages this risk by monitoring interest rates and future cash requirements andevaluating opportunities to refinance borrowings at various maturities andinterest rates. At December 31, 2006, 66% of the Company’s borrowings carriedinterest rates that were periodically adjustable to the prime rate, or to aLIBOR rate, and 34% carried interest at fixed rates. The average interest rateon the Company’s debt outstanding at December 31, 2006 was 7.4% and thefair value of the Company’s debt was $50.9 million. Based on debt outstandingat the end of 2006, a hypothetical increase in interest rates of 100 basispoints would increase the Company’s interest expense by approximately $335,000 

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and a hypotheticaldecrease in interest rates of 100 basis points would increase the fair value ofthe Company’s long-term debt by approximately $921,000. At December 31,2006, the fair value of the Company’s long-term debt was approximately equal toits fair value.

The Company does notbelieve that the market risk exposure due to foreign exchange transactionswould have a material impact on the Company’s consolidated financialstatements.

**IMPACT OF INFLATION AND CHANGINGPRICES**

The Company uses the LIFO method of accounting for itspineapple inventories. Under this method, the cost of products soldapproximates current cost and, during periods of rising prices, the endinginventory is reflected at an amount below current cost. See Inventories, Note 2to the Consolidated Financial Statements for a discussion of the effects of thecurrent year’s LIFO liquidation. The replacement cost of pineapple inventorywas $8.3 million at December 31, 2006, which is $6.1 million more than theamount reflected in the consolidated financial statements.

Most of the land owned by the Company was acquiredfrom 1911 to 1932 and is carried at cost. A small portion of “Real Estate Heldfor Sale” represents land cost. Replacements and additions to Pineappleoperations occur every year and some of the assets presently in use were placedin service in 1934. At Kapalua, some of the fixed assets were constructed andplaced in service in the mid-to-late 1970s. Depreciation expense would beconsiderably higher if fixed assets were stated at current cost.

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**Item 8.**                        FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM**

To the Board of Directorsand Stockholders of**Maui Land & Pineapple Company, Inc.Kahului, Hawaii

We have audited the accompanying consolidated balancesheets of Maui Land & Pineapple Company, Inc. and subsidiaries(the “Company”) as of December 31, 2006 and 2005, and the relatedconsolidated statements of operations, comprehensive income (loss),stockholders’ equity, and cash flows for each of the three years in the periodended December 31, 2006. Our audits also included the financial statementschedule listed in the Index at Item 15. We also have audited management’sassessment, included in the accompanying Management’s Report on InternalControl over Financial Reporting, that the Company maintained effectiveinternal control over financial reporting as of December 31, 2006, basedon the criteria established in *Internal Control—IntegratedFramework* issued by the Committee of Sponsoring Organizations of theTreadway Commission. The Company’s management is responsible for thesefinancial statements and financial statement schedule, for maintainingeffective internal control over financial reporting, and for its assessment ofthe effectiveness of internal control over financial reporting. Ourresponsibility is to express an opinion on these financial statements andfinancial statement schedule, an opinion on management’s assessment, and anopinion on the effectiveness of the Company’s internal control over financialreporting based on our audits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement and whether effective internal control over financial reportingwas maintained in all material respects. Our audit of financial statementsincluded examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accounting principlesused and significant estimates made by management, and evaluating the overallfinancial statement presentation. Our audit of internal control over financialreporting included obtaining an understanding of internal control overfinancial reporting, evaluating management’s assessment, testing and evaluatingthe design and operating effectiveness of internal control, and performing suchother procedures as we considered necessary in the circumstances. We believethat our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reportingis a process designed by, or under the supervision of, the company’s principalexecutive and principal financial officers, or persons performing similarfunctions, and effected by the company’s board of directors, management, andother personnel to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles.A company’s internal control over financial reporting includes thosepolicies and procedures that (1) pertain to the maintenance of recordsthat, in reasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internalcontrol over financial reporting, including the possibility of collusion orimproper management override of controls, material misstatements due to error 

34

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or fraud may not beprevented or detected on a timely basis. Also, projections of any evaluation ofthe effectiveness of the internal control over financial reporting to futureperiods are subject to the risk that the controls may become inadequate becauseof changes in conditions, or that the degree of compliance with the policies orprocedures may deteriorate.

In our opinion, the consolidated financial statementsreferred to above present fairly, in all material respects, the financialposition of Maui Land & Pineapple Company, Inc. and subsidiariesas of December 31, 2006 and 2005, and the results of their operations andtheir cash flows for each of the three years in the period ended December 31,2006, in conformity with accounting principles generally accepted in the UnitedStates of America. Also, in our opinion, such financial statement schedule,when considered in relation to the basic consolidated financial statementstaken as a whole, presents fairly, in all material respects, the informationset forth therein. Also, in our opinion, management’s assessment that theCompany maintained effective internal control over financial reporting as of December 31,2006, is fairly stated, in all material respects, based on the criteriaestablished in *Internal Control—Integrated Framework*issued by the Committee of Sponsoring Organizations of the Treadway Commission.Furthermore, in our opinion, the Company maintained, in all material respects,effective internal control over financial reporting as of December 31,2006, based on the criteria established in *Internal Control—IntegratedFramework* issued by the Committee of Sponsoring Organizations of theTreadway Commission.

As discussed in Note 1 tothe consolidated financial statements, the Company adopted Statement ofFinancial Accounting Standards (“SFAS”) No. 123(R), *Share-Based Payment*, on January 1,2006 and SFAS No. 158, *Employers’ Accounting forDefined Benefit Pension and Other Postretirement Plans—an amendment of FASBStatements No. 87, 88, 106, and 132(R)*, as of December 31,2006.

/s/ DELOITTE & TOUCHE LLP

Honolulu, HawaiiMarch 7, 2007

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

**CONSOLIDATED STATEMENTS OFOPERATIONS**

| ** **                                                              | ** ** | **Years Ended December 31,** | ** ** |
|-------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                              | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                              | ** ** | **(in thousands except**          | ** ** |
| ** **                                                              | ** ** | **share amounts)**                     | ** ** |
| OPERATING REVENUES                                                      |       |                                        |       |   |   |   |   |
| Net Sales                                                               |       | $                                           | 137,741    |   | $ | 149,204 |   | $ | 115,715 |   |
| Operating Income                                                        |       | 39,413                                      |       | 33,679 |   | 35,182 |   |
| Other Income                                                            |       | 1,743                                       |       | 3,797 |   | 2,352 |   |
| Total Operating  Revenues                                               |       | 178,897                                     |       | 186,680 |   | 153,249 |   |
| OPERATING COSTS AND  EXPENSES                                           |       |                                        |       |   |   |   |   |
| Cost of sales                                                           |       | 65,488                                      |       | 73,537 |   | 71,226 |   |
| Operating  expenses                                                     |       | 39,253                                      |       | 36,418 |   | 36,177 |   |
| Shipping and  marketing                                                 |       | 16,528                                      |       | 14,446 |   | 15,621 |   |
| General and  administrative                                             |       | 41,939                                      |       | 38,425 |   | 29,347 |   |
| Total Operating  Costs and Expenses                                     |       | 163,208                                     |       | 162,826 |   | 152,371 |   |
| Operating Income                                                        |       | 15,689                                      |       | 23,854 |   | 878 |   |
| Equity in losses  of affiliates                                         |       | (5,340                                      | )          | (484 | ) | (727 | ) |
| Interest expense                                                        |       | (775                                        | )          | (521 | ) | (1,159 | ) |
| Interest income                                                         |       | 1,367                                       |       | 443 |   | 23 |   |
| Income (Loss) From  Continuing Operations                               |       |                                        |       |   |   |   |   |
| Before Income Taxes                                                     |       | 10,941                                      |       | 23,292 |   | (985 | ) |
| Income Tax  Expense (Benefit)                                           |       | 3,716                                       |       | 8,723 |   | (528 | ) |
| Income (Loss) From  Continuing Operations                               |       | 7,225                                       |       | 14,569 |   | (457 | ) |
| Income From  Discontinued Operations (net of income tax expense of $46) |       | —                                      |       | — |   | 74 |   |
| NET INCOME (LOSS)                                                       |       | $                                           | 7,225      |   | $ | 14,569 |   | $ | (383 | ) |
| BASIC EARNINGS PER  COMMON SHARE                                        |       |                                        |       |   |   |   |   |
| Continuing Operations                                                   |       | $                                           | 1.00       |   | $ | 2.02 |   | $ | (0.06 | ) |
| Discontinued Operations                                                 |       | —                                      |       | — |   | 0.01 |   |
| Net Income (Loss)                                                       |       | $                                           | 1.00       |   | $ | 2.02 |   | $ | (0.05 | ) |
| DILUTED EARNINGS PER  COMMON SHARE                                      |       |                                        |       |   |   |   |   |
| Continuing Operations                                                   |       | $                                           | 0.98       |   | $ | 1.99 |   | $ | (0.06 | ) |
| Discontinued Operations                                                 |       | —                                      |       | — |   | 0.01 |   |
| Net Income (Loss)                                                       |       | $                                           | 0.98       |   | $ | 1.99 |   | $ | (0.05 | ) |
| Average Common Shares  Outstanding                                      |       |                                        |       |   |   |   |   |
| Basic                                                                   |       | 7,259,534                                   |       | 7,229,457 |   | 7,197,808 |   |
| Diluted                                                                 |       | 7,347,694                                   |       | 7,309,043 |   | 7,197,808 |   |

 

See Notes to Consolidated Financial Statements

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

**CONSOLIDATEDSTATEMENTS OF COMPREHENSIVE INCOME (LOSS)**

| ** **                                                                | ** ** | **Years Ended December 31,** | ** ** |
|---------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                                | ** ** | **(in thousands)**                     | ** ** |
| Net Income (Loss)                                                         |       | $                                           | 7,225      |   | $ | 14,569 |   | $ | (383 | ) |
| Minimum pension  liability, net of taxes of $(1,335), $1,499 and $(1,007) |       | (2,373                                      | )          | 2,665 |   | (1,792 | ) |
| Foreign currency  translations                                            |       | —                                      |       | — |   | 111 |   |
| Comprehensive Income  (Loss)                                              |       | $                                           | 4,852      |   | $ | 17,234 |   | $ | (2,064 | ) |

 

See Notes to Consolidated Financial Statements

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

**CONSOLIDATEDBALANCE SHEETS**

| ** **                                                                                                                        | ** ** | **December 31,**   | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                                                                                        | ** ** | **2006**                | ** ** | **2005** | ** ** |
| ** **                                                                                                                        | ** ** | **(in thousands)** | ** ** |
| ASSETS                                                                                                                            |       |                    |       |   |   |
| CURRENT ASSETS                                                                                                                    |       |                    |       |   |   |
| Cash and cash equivalents                                                                                                         |       | $                       | 1,143      |   | $ | 7,216 |   |
| Accounts receivable, less allowance of $555 and $265  for doubtful accounts                                                       |       | 25,440                  |       | 19,605 |   |
| Inventories                                                                                                                       |       |                    |       |   |   |
| Pineapple products                                                                                                                |       | 2,207                   |       | 3,653 |   |
| Real estate held for sale                                                                                                         |       | 8,449                   |       | 5,651 |   |
| Merchandise, materials, and supplies                                                                                              |       | 7,368                   |       | 8,001 |   |
| Prepaid expenses and other assets                                                                                                 |       | 837                     |       | 1,310 |   |
| Deferred income taxes                                                                                                             |       | 976                     |       | 3,961 |   |
| Total Current Assets                                                                                                              |       | 46,420                  |       | 49,397 |   |
| PROPERTY                                                                                                                          |       |                    |       |   |   |
| Land                                                                                                                              |       | 10,315                  |       | 10,332 |   |
| Land improvements                                                                                                                 |       | 56,738                  |       | 55,715 |   |
| Buildings                                                                                                                         |       | 63,280                  |       | 48,452 |   |
| Machinery and equipment                                                                                                           |       | 117,661                 |       | 110,525 |   |
| Construction in progress                                                                                                          |       | 12,843                  |       | 11,226 |   |
| Total Property                                                                                                                    |       | 260,837                 |       | 236,250 |   |
| Less accumulated depreciation                                                                                                     |       | 130,988                 |       | 139,315 |   |
| Net Property                                                                                                                      |       | 129,849                 |       | 96,935 |   |
| OTHER ASSETS                                                                                                                      |       | 43,930                  |       | 39,667 |   |
| TOTAL                                                                                                                             |       | $                       | 220,199    |   | $ | 185,999 |   |
| LIABILITIES &  STOCKHOLDERS’ EQUITY                                                                                 |       |                    |       |   |   |
| CURRENT LIABILITIES                                                                                                               |       |                    |       |   |   |
| Current portion of long-term debt                                                                                                 |       | $                       | 1,396      |   | $ | 534 |   |
| Current portion of capital lease obligations                                                                                      |       | 14                      |       | 303 |   |
| Trade accounts payable                                                                                                            |       | 16,145                  |       | 18,418 |   |
| Payroll and employee benefits                                                                                                     |       | 6,079                   |       | 4,676 |   |
| Income taxes payable                                                                                                              |       | 346                     |       | 2,518 |   |
| Deferred revenue                                                                                                                  |       | 1,205                   |       | 11,380 |   |
| Other accrued liabilities                                                                                                         |       | 2,232                   |       | 2,668 |   |
| Total Current Liabilities                                                                                                         |       | 27,417                  |       | 40,497 |   |
| LONG-TERM LIABILITIES                                                                                                             |       |                    |       |   |   |
| Long-term debt                                                                                                                    |       | 49,657                  |       | 10,284 |   |
| Capital lease obligations                                                                                                         |       | 59                      |       | — |   |
| Accrued retirement benefits                                                                                                       |       | 29,272                  |       | 29,792 |   |
| Deferred income taxes                                                                                                             |       | 4,566                   |       | 8,924 |   |
| Other noncurrent liabilities                                                                                                      |       | 8,321                   |       | 4,805 |   |
| Total Long-Term Liabilities                                                                                                       |       | 91,875                  |       | 53,805 |   |
| MINORITY INTEREST  IN SUBSIDIARY                                                                                                  |       | 538                     |       | 517 |   |
| COMMITMENTS AND  CONTINGENCIES (Note 18)                                                                                          |       |                    |       |   |   |
| STOCKHOLDERS’ EQUITY                                                                                                         |       |                    |       |   |   |
| Common stock—no par value, 9,000,000 and 8,000,000  shares authorized, 7,287,779 and 7,254,779 shares issued and outstanding |       | 15,168                  |       | 14,186 |   |
| Additional paid in capital                                                                                                        |       | 4,743                   |       | 2,930 |   |
| Retained earnings                                                                                                                 |       | 82,765                  |       | 75,540 |   |
| Accumulated other comprehensive loss                                                                                              |       | (2,307                  | )          | (1,476 | ) |
| Stockholders’ Equity                                                                                                         |       | 100,369                 |       | 91,180 |   |
| TOTAL                                                                                                                             |       | $                       | 220,199    |   | $ | 185,999 |   |

 

See Notes to Consolidated Financial Statements

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**MAUILAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYFor the Three Years Ended December 31, 2006(in thousand)**

| ** **                                                             | ** ** | ** **            | ** ** | ** **       | ** ** | ** **     | ** ** | ** **        | ** ** | **Accumulated**        | ** ** |
|------------------------------------------------------------------------|------------|-----------------------|------------|------------------|------------|----------------|------------|-------------------|------------|------------------------|------------|
| ** **                                                             | ** ** | ** **            | ** ** | ** **       | ** ** | **Additional** | ** ** | ** **        | ** ** | **Other**              | ** ** |
| ** **                                                             | ** ** | **Common Stock** | ** ** | **Paid in** | ** ** | **Retained**   | ** ** | **Comprehensive** | ** ** |
| ** **                                                             | ** ** | **Shares**            | ** ** | **Amount**       | ** ** | **Capital**    | ** ** | **Earnings**      | ** ** | **Income (Loss)** | ** ** |
| Balance,  December 31, 2003                                       |       |                  | 7,196      |             |       | $              | 12,455     |              |       | $                      | 195        |   |   | $ | 61,354 |   |   | $ | (2,460 | ) |   |
| Stock  compensation expense                                            |       |                  |       |             |       |           |       |              | 2,141      |                   |       |   |   |   |   |   |   |
| Vested restricted  stock issued                                        |       |                  | 31         |             |       | 880            |       |              | (880       | )                      |       |   |   |   |   |   |   |
| Minimum pension  liability                                             |       |                  |       |             |       |           |       |              |       |                   |       |   |   |   | (1,792 | ) |   |
| Foreign currency  translations                                         |       |                  |       |             |       |           |       |              |       |                   |       |   |   |   | 111 |   |   |
| Net Loss                                                               |       |                  |       |             |       |           |       |              |       |                   |       | (383 | ) |   |   |   |   |
| Balance, December 31, 2004                                        |       |                  | 7,227      |             |       | 13,335         |       |              | 1,456      |                   |       | 60,971 |   |   | (4,141 | ) |   |
| Stock  compensation expense                                            |       |                  |       |             |       |           |       |              | 2,292      |                   |       |   |   |   |   |   |   |
| Vested restricted  stock issued                                        |       |                  | 28         |             |       | 851            |       |              | (851       | )                      |       |   |   |   |   |   |   |
| Minimum pension  liability                                             |       |                  |       |             |       |           |       |              |       |                   |       |   |   |   | 2,665 |   |   |
| Tax benefit from  stock compensation                                   |       |                  |       |             |       |           |       |              | 33         |                   |       |   |   |   |   |   |   |
| Net income                                                             |       |                  |       |             |       |           |       |              |       |                   |       | 14,569 |   |   |   |   |   |
| Balance, December 31, 2005                                        |       |                  | 7,255      |             |       | 14,186         |       |              | 2,930      |                   |       | 75,540 |   |   | (1,476 | ) |   |
| Adjustment to initially apply FASB Statement  No. 158, net of tax |       |                  |       |             |       |           |       |              |       |                   |       |   |   |   | 1,542 |   |   |
| Minimum pension  liability                                             |       |                  |       |             |       |           |       |              |       |                   |       |   |   |   | (2,373 | ) |   |
| Stock option  exercises                                                |       |                  | 25         |             |       | 694            |       |              |       |                   |       |   |   |   |   |   |   |
| Stock  compensation expense                                            |       |                  |       |             |       |           |       |              | 2,063      |                   |       |   |   |   |   |   |   |
| Vested restricted  stock issued                                        |       |                  | 8          |             |       | 288            |       |              | (288       | )                      |       |   |   |   |   |   |   |
| Tax benefit from  stock compensation                                   |       |                  |       |             |       |           |       |              | 38         |                   |       |   |   |   |   |   |   |
| Net income                                                             |       |                  |       |             |       |           |       |              |       |                   |       | 7,225 |   |   |   |   |   |
| Balance,  December 31, 2006                                       |       |                  | 7,288      |             |       | $              | 15,168     |              |       | $                      | 4,743      |   |   | $ | 82,765 |   |   | $ | (2,307 | ) |   |

 

See Notes to Consolidated Financial Statements

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**MAUILAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIES** CONSOLIDATED STATEMENTS OF CASH FLOWS

| ** **                                                                               | ** ** | **Years Ended December 31,** | ** ** |
|------------------------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                               | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                                               | ** ** | **(in thousands)**                     | ** ** |
| OPERATING ACTIVITIES                                                                     |       |                                        |       |   |   |   |   |
| Net Income (loss)                                                                        |       | $                                           | 7,225      |   | $ | 14,569 |   | $ | (383 | ) |
| Adjustments to reconcile net income (loss) to net  cash provided by operating activities |       |                                        |       |   |   |   |   |
| Depreciation                                                                             |       | 12,374                                      |       | 14,263 |   | 10,040 |   |
| Stock based compensation                                                                 |       | 2,063                                       |       | 2,292 |   | 2,141 |   |
| Equity in losses of affiliates                                                           |       | 5,336                                       |       | 642 |   | 1,000 |   |
| (Gain) loss on property disposals                                                        |       | (30,465                                     | )          | (25,361 | ) | 87 |   |
| Deferred income taxes                                                                    |       | (906                                        | )          | 6,151 |   | (1,317 | ) |
| Changes  in operating assets and liabilities:                                            |       |                                        |       |   |   |   |   |
| Accounts receivable                                                                      |       | (629                                        | )          | (6,621 | ) | 11,349 |   |
| Inventories                                                                              |       | (719                                        | )          | (2,205 | ) | (699 | ) |
| Trade payable                                                                            |       | (3,693                                      | )          | 2,685 |   | 141 |   |
| Income taxes payable                                                                     |       | (2,083                                      | )          | 2,293 |   | (1,679 | ) |
| Deferred revenues                                                                        |       | (8,941                                      | )          | (1,638 | ) | 11,830 |   |
| Other operating assets and liabilities                                                   |       | 206                                         |       | 2,797 |   | (4,890 | ) |
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                      |       | (20,232                                     | )          | 9,867 |   | 27,620 |   |
| INVESTING ACTIVITIES                                                                     |       |                                        |       |   |   |   |   |
| Purchases of property                                                                    |       | (45,874                                     | )          | (16,887 | ) | (11,360 | ) |
| Proceeds from disposals of property                                                      |       | 44,071                                      |       | 14,300 |   | 1,657 |   |
| Distribution from affiliates                                                             |       | —                                      |       | 75 |   | 433 |   |
| Contributions to affiliates                                                              |       | (11,735                                     | )          | (213 | ) | (1,090 | ) |
| Payments for other assets                                                                |       | (12,954                                     | )          | (5,277 | ) | (2,840 | ) |
| NET CASH USED IN INVESTING ACTIVITIES                                                    |       | (26,492                                     | )          | (8,002 | ) | (13,200 | ) |
| FINANCING  ACTIVITIES                                                                    |       |                                        |       |   |   |   |   |
| Proceeds from long-term debt                                                             |       | 112,600                                     |       | 21,900 |   | 11,500 |   |
| Payments of long-term debt                                                               |       | (72,365                                     | )          | (27,678 | ) | (20,780 | ) |
| Payments on capital lease obligations                                                    |       | (310                                        | )          | (402 | ) | (299 | ) |
| Stock compensation exercises                                                             |       | 694                                         |       | — |   | — |   |
| Other                                                                                    |       | 32                                          |       | — |   | (1,173 | ) |
| NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                      |       | 40,651                                      |       | (6,180 | ) | (10,752 | ) |
| NET INCREASE (DECREASE) IN CASH & CASH  EQUIVALENTS                             |       | (6,073                                      | )          | (4,315 | ) | 3,668 |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                           |       | 7,216                                       |       | 11,531 |   | 7,863 |   |
| CASH AND CASH EQUIVALENTS AT END OF YEAR                                                 |       | $                                           | 1,143      |   | $ | 7,216 |   | $ | 11,531 |   |
| SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION (in thousands):                       |       |                                        |       |   |   |   |   |
| Cash paid during the  year—                                                         |       |                                        |       |   |   |   |   |
| Interest (net of amount capitalized)                                                     |       | $                                           | 793        |   | $ | 468 |   | $ | 1,184 |   |
| Income taxes                                                                             |       | 6,672                                       |       | 279 |   | 2,450 |   |

 

**SUPPLEMENTALNON-CASH INVESTING AND FINANCING ACTIVITIES:**

·        Amounts included in accounts payable foradditions to property and other investments totaled $2,359,000, $1,701,000 and$790,000 at December 31, 2006, 2005 and 2004, respectively.

·        In 2004, the Company contributed propertywith a net book value of $1.7 million to Kapalua Bay Holdings, LLC. See OtherAssets—Kapalua Bay Holdings, LLC, Note 3 to the Consolidated FinancialStatements.

·        In 2005, additions to property includeland valued at $350,000 that was received in connection with the sale of one ofthe land parcels in Upcountry Maui. See Real Estate Sales, Note 7 to theConsolidated Financial Statements.

·        At December 31, 2005, $13.9 millionof net cash proceeds were being held by an exchange intermediary pendinginvestment on a tax-deferred basis.

See Notes to Consolidated Financial Statements

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**MAUILAND & PINEAPPLE COMPANY, INC. & SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**1.**              SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES

**CONSOLIDATION**

The consolidated financialstatements include the accounts of Maui Land & Pineapple Company, Inc.and its subsidiaries, primarily Maui Pineapple Company, Ltd. and Kapalua LandCompany, Ltd. The Company’s principal operations include production and sale ofpineapple products, resort operations, and real estate development and sales. Significantintercompany balances and transactions have been eliminated.

**COMPREHENSIVE INCOME**

Comprehensive income(loss) includes all changes in Stockholders’ Equity, except those resultingfrom capital stock transactions. Comprehensive income (loss) includes theminimum pension liability (see Employee Benefit Plans, Note 9) and foreigncurrency translation adjustments.

**CASH AND CASH EQUIVALENTS**

Cash and cash equivalentsinclude cash on hand, deposits in banks and commercial paper with originalmaturities of three months or less.

**INVENTORIES**

Inventories of tinplate, cans, ends and processedpineapple products are stated at cost, not in excess of market value, using thedollar value last-in, first-out (“LIFO”) method.

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 andAgricultural Cooperatives*, states that all direct and indirect costsof growing crops should be accumulated and growing crops should be reported atthe lower of cost or market. However, the SOP does not apply to growers ofpineapple and sugarcane in tropical regions because tropical agriculture (ofwhich pineapple and sugarcane production in Hawaii are examples) differsgreatly from agriculture in temperate regions of the mainland United States. TheCompany’s growing (unharvested) crops at December 31, 2006, consisted ofapproximately 3,575 acres in various stages of growth that will be harvestedprincipally in the years 2007 through 2008, and are expected to yield anaverage of approximately 33 tons per acre. At December 31, 2005, growingcrops consisted of approximately 5,500 acres that will be harvested in theyears 2006 through 2008, and are expected to yield an average of approximately33 tons per acre.

Real estate held for sale is stated at the lower ofcost or fair value less cost to sell. These costs generally include directon-site construction costs, offsite improvement cost, planning and permittingcosts for the project, and the cost of the land.

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Merchandise, materials andsupplies are stated at cost, not in excess of market value, using the retailand average cost methods. Merchandise inventories are retail inventories heldfor sale at the Kapalua Resort. Materials and supply inventories includeamounts for both the Agriculture and the Resort segments.

**OTHER ASSETS**

Deferred costs are primarily real estate developmentcosts related to various projects at the Kapalua Resort that will be allocatedto future income-producing development projects.

Cash surrender value of life insurance policies isreflected net of loans against the policies.

Investments in affiliates,partnerships, and limited liability companies, over which the Company does notexercise control, are generally accounted for using the equity method.

**PROPERTY AND DEPRECIATION**

Property is stated at cost.Major replacements, renewals and betterments are capitalized while maintenance andrepairs that do not improve or extend the life of an asset are charged toexpense as incurred. When property is retired or otherwise disposed of, thecost of the property and the related accumulated depreciation are written offand the resulting gains or losses are included in income. Depreciation isprovided over estimated useful lives of the respective assets using thestraight-line method.

**LONG-LIVED ASSETS**

Long-lived assets andcertain intangibles held and used by the Company are reviewed for impairmentwhenever events or changes in circumstances indicate that the carrying amountof an asset may not be recoverable. When such events or changes occur, anestimate of the future cash flows expected to result from the use of the assetsand their eventual disposition is made. If the sum of such expected future cashflows (undiscounted and without interest charges) is less than the carryingamount of the asset, an impairment loss is recognized in an amount by which theassets’ net book values exceed their fair value.

**EMPLOYEE BENEFIT PLANS**

The Company’s policy is to fund pension cost at alevel at least equal to the minimum amount required under federal law, but notmore than the maximum amount deductible for federal income tax purposes.

As of December 31, 2006, the Company adopted FASBStatement of Financial Accounting Standards No. 158 (SFAS No. 158), “*Employers’ Accounting for Defined Benefits Pension and OtherPostretirement Plans.*”  TheStandard amends FASB Statements No. 87, 88, 106 and 132(R) and requiresan employer to recognize the over-funded or under-funded status of a definedbenefit postretirement plan (other than a multiemployer plan) as an asset orliability in its statement of financial position and to recognize changes inthat funded status in the year in which the changes occur though comprehensiveincome. The pension asset or liability is the difference between the planassets at fair value and the projected benefit obligation as of year end.

Deferred compensation plans for certain management employeesprovide for specified payments after retirement. The present value of estimatedpayments to be made is accrued over the period of active employment. In 1998,future benefits under these plans were terminated (see Employee Benefit Plans,Note 9).

The estimated cost ofproviding postretirement health care and life insurance benefits is accruedover the period employees render the necessary services.

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**REVENUE RECOGNITION**

Net sales primarily include the sales of pineapple,retail merchandise at the Kapalua Resort and real estate inventories. Operatingincome primarily includes income from the golf course operations, income fromthe Kapalua Villas rental program, lease revenues, real estate commissionincome and gains from the sale of non-core land parcels (land not used in theCompany’s core operations).

Revenues from the sale of pineapple products arerecognized when title to the product is transferred to the customer. The timingof transfer of title varies according to the shipping and delivery terms of thesale.

Sales of real estate are recognized as revenues in theperiod in which sufficient cash has been received, collection of the balance isreasonably assured and risks of ownership have passed to the buyer. The Company uses the percentage-of-completionmethod to recognize revenues and profits from the sale of residential landparcels where the Company is obligated to construct improvements (roads,sidewalks, drainage, and utilities) after the closing of the sale. Under thismethod, revenues are recognized over the construction improvement period on thebasis of costs incurred as a percentage of expected total costs to be incurred.

Rental income is recognized on a straight-line basisover the terms of the leases.

Revenues from otheractivities are recognized when delivery has occurred or services have beenrendered, the sales price is fixed or determinable, and collectibility isreasonably assured.

**INTEREST CAPITALIZATION**

Interest costs arecapitalized during the construction period of major capital projects.

**ADVERTISING AND RESEARCH ANDDEVELOPMENT**

The costs of advertisingand research and development activities are expensed as incurred.

**LEASES**

Leases that transfersubstantially all of the benefits and risks of ownership of the property areaccounted for as capital leases. Amortization of property under capital leasesis included in depreciation expense. Other leases are accounted for asoperating leases. Rentals under operating leases are recognized on astraight-line basis.

**INCOME TAXES**

The Company’s provision for income taxes is calculatedusing the liability method. Deferred income taxes are provided for alltemporary differences between the financial statement and income tax bases ofassets and liabilities using tax rates enacted by law or regulation. Avaluation allowance is established for deferred income tax assets if managementbelieves that it is more likely than not that some portion or all of the assetwill not be realized through future taxable income.

The Company’s Federal,State, and foreign income tax filings are subject to examination by the taxauthorities. Although the Company believes that its tax positions are fullysupportable, the Company has recorded an estimated liability for certain taxcontingencies because, in the event of tax examinations, certain positions arelikely to be challenged and the Company’s positions may not be fully sustained.The estimated tax liability is periodically reviewed and adjusted for changesin facts and circumstances (e.g., progress of audits, new or revised case law,expiration of statute of limitations). If events occur and the payment of theseamounts proves to be unnecessary, the reversal of the liabilities would resultin tax benefits being recognized in the period when the Company determines thatthe liabilities are no longer 

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necessary.If the Company’s estimate of tax liabilities proves to be less than theultimate result, a further charge to expense would occur.

**STOCK COMPENSATION PLANS**

Effective January 1,2006, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123(R),*Share-Based Payment*, using themodified prospective application transition method. The Company had previouslyaccounted for its stock-based compensation arrangements under SFAS No. 123,*Accounting for Stock-Based Compensation.*SFASNo. 123(R) requires all share-based payments, including grants ofemployee stock options, to be recognized as compensation expense over theservice period (generally the vesting period) in the consolidated financialstatements based on their fair values. Under the modified prospective method,awards that were granted, modified, or settled on or after January 1, 2006are measured and accounted for in accordance with SFAS No. 123(R). Theimpact of forfeitures that may occur prior to vesting is also estimated andconsidered in the amount recognized. In addition, prior to adoption of SFAS No. 123(R),benefits of tax deductions in excess of recognized compensation costs werereported as operating cash flows. SFAS No. 123(R) requires excess taxbenefits be reported as a financing cash inflow rather than as a reduction oftaxes paid.

**FOREIGN CURRENCY TRANSLATION**

The assets and liabilitiesof the Company’s majority owned subsidiary in Costa Rica are translated intoUnited States dollars at exchange rates in effect at the balance sheet date,and revenues and expenses are translated at weighted average exchange rates ineffect during the period. Translation adjustments are reported as othercomprehensive income (loss) and accumulated in Stockholders’ Equity, whichtotaled $-0- for 2006 and 2005, and $111,000 for 2004. Transactiongains and losses that arise from exchange rate changes on transactionsdenominated in a currency other than the functional currency are included inincome as incurred. During 2006, 2005 and 2004 such transaction gains andlosses were not material.

**USE OF ESTIMATES**

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the consolidatedfinancial statements and the reported amounts of revenues and expenses duringthe reporting periods. Future actual amounts could differ from these estimates.

**NEW ACCOUNTING PRONOUNCEMENTS**

On July 13, 2006, the Financial AccountingStandards Board (FASB) issued FASB Interpretation No. 48, “*Accounting for Uncertainty in Income Taxes-an interpretation of FASBStatement No. 109*” (FIN 48). This interpretation prescribes arecognition threshold and measurement attribute for the financial statementrecognition and measurement of a tax position taken or expected to be taken ina tax return. This interpretation also provides guidance on derecognition,classification, interest and penalties, accounting in interim periods,disclosure, and transition. The new interpretation will be effective for fiscalyears beginning after December 15, 2006. The Company will be required toadopt this interpretation in the first quarter of 2007, and is currently in theprocess of determining the effect on its financial statements of the adoption.

On September 15,2006, the FASB issued Statement of Financial Accounting Standards No. 157(SFAS No. 157), “*Fair Value Measurements*,”which defines fair value, establishes guidelines for measuring fair value, andexpands disclosures regarding fair value measurements. SFAS No. 157 doesnot require any new fair value measurements but rather eliminatesinconsistencies in guidance found in various prior 

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accountingpronouncements. SFAS No. 157 is effective for fiscal years beginning afterNovember 15, 2007. The Company is currently evaluating the impact of SFAS No. 157,but does not expect that the adoption of SFAS No. 157 will have a materialimpact on the Company’s consolidated financial position, results of operations,or cash flows.

**EARNINGS PER COMMON SHARE**

Basic earnings per share is computed by dividing netincome by the weighted-average number of common shares outstanding. Dilutedearnings per share is computed similar to basic earnings per share except thatthe denominator is increased to include the number of additional common sharesthat would have been outstanding if the dilutive potential common shares fromstock-based compensation arrangements had been issued.

Diluted earnings per common share is computed on theassumption that the shares of nonvested restricted stock are issued for anamount based on the grant date market price of the shares and that theoutstanding stock options are exercised. The treasury stock method is appliedto determine the number of potentially dilutive shares.

Potentially dilutivecommon shares from stock-based compensation arrangements are not included inthe number of diluted common shares for 2004, because to do so would have anantidilutive effect on the net loss per share. The potentially dilutive commonshares were 106,817 for 2004. In 2006 and 2005, the potentially dilutive commonshares were included in the dilutive earnings per share computation.

**2.**              INVENTORIES

Agricultureproduct inventories were comprised of the following components at December 31,2006 and 2005:

| ** **       | ** ** | **2006**                | ** ** | **2005** | ** ** |
|------------------|------------|-------------------------|------------|----------|------------|
| ** **       | ** ** | **(in thousands)** | ** ** |
| Finished Goods   |       | $                       | 1,416      |     | $          | 2,425 |   |
| Work In Progress |       | 299                     |       | 367      |       |
| Raw Materials    |       | 492                     |       | 861      |       |
| Total            |       | $                       | 2,207      |     | $          | 3,653 |   |

 

The replacement cost ofAgriculture product inventories at year-end approximated $8 million in 2006 and$10 million in 2005. In 2005 and 2004, there were partial liquidations of LIFOinventories; thus, cost of sales included prior years’ inventory costs, whichwere lower than current costs. Had current costs been charged to cost of sales,income from continuing operations before income taxes for 2006 and 2005 wouldhave decreased by $2.3 million and $2.9 million, respectively; and the lossfrom the continuing operations before income taxes for 2004 would haveincreased by $6.8 million.

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**3.**              OTHER ASSETS

OtherAssets at December 31, 2006 and 2005 consisted of the following:

| ** **                                             | ** ** | **2006**                | ** ** | **2005** | ** ** |
|--------------------------------------------------------|------------|-------------------------|------------|----------|------------|
| ** **                                             | ** ** | **(in thousands)** | ** ** |
| Deferred costs                                         |       | $                       | 24,360     |     | $          | 12,831 |   |
| Cash surrender  value of life insurance policies (net) |       | 1,646                   |       | 1,518    |       |
| Pension asset                                          |       | —                  |       | 1,866    |       |
| Investment in  Kapalua Bay Holdings, LLC               |       | 10,041                  |       | 2,518    |       |
| Cash held by  exchange intermediary (Note 7)           |       | —                  |       | 13,854   |       |
| Notes receivable  from real estate sales (Note 7)      |       | 1,009                   |       | 3,411    |       |
| Other                                                  |       | 6,874                   |       | 3,669    |       |
| Total                                                  |       | $                       | 43,930     |     | $          | 39,667 |   |

 

Cash surrender value oflife insurance policies is stated net of policy loans, totaling $619,000 at December 31,2006 and 2005. The policy loans bear interest at 5.75% to 8% and are payableupon the death of the insured or cancellation of the policies. The Company owns the insurance policies andthe related cash surrender values, and has directly borrowed against such cashsurrender values for general operating purposes. The loans were not provided byor on behalf of the Company to our officers and/or directors. The Company hasno intention of repaying such loans during the next year and has the right tooffset the loans against the proceeds received on maturity or cancellation ofthe policies; accordingly, the loans are presented as a reduction of therespective cash surrender values included in other noncurrent assets on theCompany’s balance sheet.

**KAPALUA BAY HOLDINGS, LLC**

On August 31, 2004, the Company, MarriottInternational Inc. (“Marriott”) and Exclusive Resorts LLC (“ER”), throughwholly owned affiliates, entered into an agreement to form Kapalua BayHoldings, LLC (“Bay Holdings”). A 46% shareholder of the Company throughrelated companies is the majority owner of ER. Bay Holdings also formed awholly-owned, single member limited liability company, Kapalua Bay LLC (“KapaluaBay”).

On August 31, 2004, Kapalua Bay completed thepurchase of the leasehold interest in the land (“ground lease”) and hotelimprovements of the Kapalua Bay Hotel (“KBH”) from YCP Kapalua L.P. and YCPKapalua Operator, Inc. for $48.3 million. The Company was the lessor underthe ground lease with YCP. The purpose for the acquisition was to redevelop thesite and construct whole and fractional residential units for sale to thepublic. The plan was to operate the hotel and adjacent retail shops, demolishthese improvements, and then begin construction of the residential units. Thehotel was closed in early April 2006, and demolition of the improvementsbegan in July 2006. During the period prior to the demolition, BayHoldings prepared the development plans, obtained the required governmentalapprovals, and prepared marketing and sales plans. Sales of the whole unitsbegan in June 2006 and sales of the fractional residential units began in July 2006.

In mid-December 2006, in the process ofexcavation work at the project site, two sets of ancient human remains werefound. Construction was halted at the two locations where the remains werefound and the Company is currently working with the State Historic PreservationDivision and the Maui/Lanai Island Burial Council to determine the best plan ofaction for the remains. Construction is continuing on the areas of the projectthat are unaffected.

In connection with the formation of Bay Holdings andKapalua Bay, the Company contributed $500,000 of cash to Bay Holdings andcontributed to Kapalua Bay: (1) its lessor’s interest under the ground lease;(2) its fee interest in the 21-acre land parcel underlying the KBH(ground lease concurrently 

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cancelled); (3) itsrights and interests as landlord of the adjacent retail shops (“Shops”),including the retail leases; and (4) the payment, on behalf of KapaluaBay, of $574,000 of costs relating to the acquisition of KBH. The Shops’improvements will also be demolished, and Bay Holdings will construct anocean-side spa and beach club on the site. The Company will purchase the spaand beach club at Bay Holdings’ actual construction costs. The members (owners)valued these non-monetary contributions at $25 million through arms-lengthnegotiations. In exchange for its $25.5 million contribution to Bay Holdingsand Kapalua Bay, the Company received 51% of the outstanding membershipinterests of Bay Holdings. Marriott contributed $17.0 million of cash to BayHoldings for 34% of the outstanding membership interests in Bay Holdings, andER contributed $7.5 million of cash to Bay Holdings for 15% of the outstandingmembership interests in Bay Holdings.

The Company recorded its non-monetary capitalcontributions to Bay Holdings at the carrying values (carryover historical costbasis) of the assets contributed because the contributions are not theculmination of an earnings process. The historical cost basis of the land isnominal because it was acquired in the early 1900s. The net book value of theShops was $1.7 million at the date of contribution, and the costs paid onbehalf of Kapalua Bay of $574,000 are also included in the Company’s investmentaccount. In 2006 and 2005, the Company capitalized $358,000 and $499,000,respectively, of costs paid on behalf of Kapalua Bay and additional Shopsassets to the Company’s investment account. The unrecognized (and unrealized)appreciation relating to the contributed land parcel is estimated atapproximately $24.6 million (based on arms-length negotiations between the BayHoldings members), and will be recognized as income as Bay Holdings sells theresidential units. The Company believes that the recognition of income at thetime of sale satisfies the realization criteria because the earnings process iscomplete and the amount of income is determinable and collectible. The costs ofthe other components in the Company’s investment account (Shop improvements andcosts paid on behalf of Bay Holdings) will be charged to expense in asystematic manner as Bay Holdings sells the residential units. The Company willinclude the income and expenses relating to these non-monetary contributions aspart of its equity in the income of Bay Holdings.

In connection with the transaction, Kapalua Baysecured a $45 million credit agreement with two lenders. The credit agreementhad an initial term of two years and was secured by a mortgage on the KBH. In July 2006,Kapalua Bay entered into a Construction Loan Agreement (the “Loan Agreement”)with Lehman Brothers Holdings Inc., a Delaware corporation (“Lehman”), for thelesser of $370 million or 61.6% of the total projected cost of the project (the“Loan”). Upon closing of the Loan, the lender disbursed an initial advance of$40.1 million (including the repayment of advances under the $45 million creditagreement) to Kapalua Bay. Kapalua Bay paid Lehman a loan fee of $3.7 millionout of the proceeds of the initial advance under the Loan Agreement, whichpayment represents one percent (1.0%) of the maximum Loan amount and isnon-refundable regardless of when the loan is repaid or whether any furtheradvances of the Loan are made. Disbursements under the Loan Agreement arecontingent upon, among other things, no event of default or material adversechange occurring with respect to Kapalua Bay or the project. The loan is notrevolving in nature and amounts repaid may not be subsequently advanced. AllLoan proceeds disbursed shall be used only for specified budgeted items forwhich such proceeds were advanced. The lender was not obligated to make furtheradvances until certain building permits for the project have been issued, andsuch building permits were issued in the fourth quarter of 2006. After issuanceof the building permits, Kapalua Bay may borrow up to an additional $44.9million for certain purposes, for a total advance of $85 million. Subsequentborrowings by Kapalua Bay are contingent upon sales of residential units equalto or exceeding $285.0 million. As of February 2007, Kapalua Bay hasreceived approximately $218 million in binding sales commitments.

Interest accrues on the Loan at a floating rate equalto the one (1) month LIBOR rate plus two hundred twenty (220) basispoints, or 2.2% (the “Adjusted LIBOR Rate”). Subject to certain limitations,during the term of the Loan, Kapalua Bay may elect to have the then-currentAdjusted LIBOR Rate apply to some or all of the outstanding Loan amount. All principaland interest amounts due under the Loan 

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shall be due and payablein full on August 1, 2009 unless Kapalua Bay elects to extend the maturitydate for up to two additional terms of twelve (12) months, which elections aresubject to the satisfaction of certain conditions. Kapalua Bay may not prepaythe Loan at any time prior to the second anniversary of the Effective Date, butmay prepay the Loan thereafter, provided that it pays certain costs and fees asset forth in the Loan Agreement.

The Loan is collateralized by the project assets,including the fee simple interest in the land owned by Kapalua Bay, theadjacent spa parcel owned by the Company, and all of the sales contracts.

The Company and the other members of the joint venturehave guaranteed to the lender completion of the project and each member’s prorata share of costs and losses incurred by the lender as a result of theoccurrence of specified triggering events during the term of the Loan Agreement.The members’ guarantee to the lender does not include payment in full of theLoan. The Company has recognized a liability of $968,000, representing theestimated fair value of its obligation under this Loan Agreement. During the2006, the Company made cash contributions of $11.7 million to the jointventure.

The Company has been designated as the managing memberof Bay Holdings and as such will manage the affairs of the entity. Profits andlosses of Bay Holdings will be allocated in proportion to the members’ownership interest, which approximate the estimated cash distributions to themembers.

The Company has an agreement with Bay Holdings toprovide entitlement services relating to the receipt of governmental permitsand authorizations required for the development projects. The fee to theCompany for these services is $450,000, which in lieu of cash payment, wasdeemed to be contributed to the Company’s capital account in Bay Holdings intwo equal installments on September 1, 2005 and September 1, 2006. In2006 and 2005, the Company recorded 49% (amount attributable to the othermembers) of the fee earned.

Bay Holdings is not a variable interest entity, asdefined in FASB Interpretation No. 46, *Consolidation of VariableInterest Entities*. The Company accounts for its investment in BayHoldings using the equity method of accounting because, although it has theability to exercise significant influence over operating and financialpolicies, it does not control Bay Holdings through a majority voting interest.Under the LLC agreement, major decisions require the approval of either 75% or100% of the membership interests.

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TheCompany’s 2006, 2005 and 2004 equity in the losses of Bay Holdings was $5.3million, $454,000, and $779,000 (pre-tax), respectively. Summarized balancesheet information for Bay Holdings as of December 31, 2006 and 2005 andoperating information for 2006 and 2005 and for the period from August 31,2004 (date of formation) to December 31, 2004 follows:

| ** **                | ** ** | **2006**                | ** ** | **2005**   | ** ** | ** ** | ** ** |
|---------------------------|------------|-------------------------|------------|------------|------------|------------|------------|
| ** **                | ** ** | **(in thousands)** | ** ** | ** ** | ** ** |
| Restricted cash           |       |                    | $          | 22,398     |       |       | $          | — |   |   |   |
| Project  development cost |       |                    | 87,211     |       |       | 55,336     |       |   |   |
| Other assets, net         |       |                    | 25,193     |       |       | 29,152     |       |   |   |
| Total Assets              |       |                    | $          | 134,802    |       |       | $          | 84,488 |   |   |   |
| Construction loan payable |       |                    | $          | 41,589     |       |       | $          | 28,980 |   |   |   |
| Deposits                  |       |                    | 21,161     |       |       | —     |       |   |   |
| Other liabilities         |       |                    | 11,295     |       |       | 7,601      |       |   |   |
| Total Liabilities         |       |                    | $          | 74,045     |       |       | $          | 36,581 |   |   |   |
| Members’ Capital     |       |                    | $          | 60,757     |       |       | $          | 47,907 |   |   |   |
| ** **                | ** ** | ** **              | **2006**   | ** ** | ** ** | **2005**   | ** ** | **2004** | ** ** |
| Revenues                  |       |                    | $          | 6,865      |       |       | $          | 24,490 |   | $ | 5,939 |   |
| Costs and  Expenses       |       |                    | 17,349     |       |       | 25,380     |       | 7,467 |   |
| Net Loss                  |       |                    | $          | (10,484    | )          |       | $          | (890 | ) | $ | (1,528 | ) |

 

**4.**                DISCONTINUEDOPERATIONS

In the fourth quarter of2003, in connection with the Company’s plan to cease a substantial portion ofits foreign pineapple operations, the Company entered into an agreement to sellsubstantially all of the assets of its 51% owned Costa Rican pineapplesubsidiary for $15.3 million. In 2003, title to all of the assets, except fortwo land parcels was transferred to the buyers. In 2003, the gain from theasset sales and most of the components of the Costa Rican pineapple operationswere reported as discontinued operations. The portion of the operations thatthe Company planned to continue was classified in continuing operations. In2004, the Company recorded pre-tax gains of $839,000 (after reduction for 49%minority interest), after title to the remaining two land parcels transferredto the buyers. In the first quarter of 2004, the Company ceased the remainderof its foreign pineapple operations. Revenues and income before income taxesrelating to this operation for 2004 were $2,036,000 and $118,000, respectively.

**5.**                FINANCINGARRANGEMENTS

During 2006, 2005 and 2004, the Company had averageborrowings outstanding of $29.5 million, $16.3 million, and $20.4 million,respectively, at average interest rates of 7.4%, 6.7% and 5.5%, respectively.

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Long-termdebt at December 31, 2006 and 2005 consisted of the following (interestrates represent the rates at December 31):

| ** **                                         | ** ** | **2006**                             | ** ** | **2005** | ** ** |
|----------------------------------------------------|------------|--------------------------------------|------------|----------|------------|
| ** **                                         | ** ** | **(Dollars in Thousands)** | ** ** |
| Revolving loans, 6.75% to 8.25% and 5.5% to 7.25%  |       |                                 | $          | 33,400   |       |   |   | $ | 10,000 |   |   |
| Term Loan, 6.93%                                   |       |                                 | 9,988      |     |       |   | — |   |   |
| Equipment loans,  6.06% to 6.93% and 5.3% to 6.84% |       |                                 | 7,665      |     |       |   | 818 |   |   |
| Total                                              |       |                                 | 51,053     |     |       |   | 10,818 |   |   |
| Less current  portion                              |       |                                 | 1,396      |     |       |   | 534 |   |   |
| Long-term debt                                     |       |                                 | $          | 49,657   |       |   |   | $ | 10,284 |   |   |

 

The Company has a $25.0 million revolving loan that issecured by certain parcels of the Company’s real property on Maui. In December 2006,the loan was amended to increase the line of credit from $15.0 million to $25.0million and to extend the draw period and maturity date from June 2009 to June 2011.The draw period and maturity date will automatically extend to June 2026provided there is no default or event of default (as defined) on June 1,2011. Commitment fees of .25% to .40% are payable on the unused portion of therevolving facility. At the Company’s option, interest rates on advances areadjustable to the prime rate or based on one-month to one-year Libor rates. Theagreement includes certain financial covenants, including the maintenance of aminimum net worth and interest coverage ratio, maximum funded debt tocapitalization ratio, and limits on capital expenditures and the payment ofdividends.

The Company has a revolving credit agreement withparticipating banks under which it may borrow up to $30 million in revolvingloans through April 2008, and amounts outstanding at that time are due andpayable. At the Company’s option, interest on advances is at the prime rate orbased on one- to six-month Libor rates. The loan is collateralized by theCompany’s three golf courses at the Kapalua Resort. The agreement containscertain financial covenants, including the maintenance of consolidated networth at certain levels, minimum interest coverage ratio, limits on theincurrence of other indebtedness, and the sale of assets. Declaration andpayment of cash dividends is restricted to 30% of prior year’s net income.

In October 2006, the Company entered into a $10.0million term loan agreement, secured by approximately 20 acres of land andother real estate comprising the Company’s cannery property. Interest accrueson the loan at a fixed rate of 6.93% and the loan is fully amortized over a 20-yearterm with monthly interest and principal payments of $77,169. The Company may prepay the outstandingprincipal of the loan at anytime subject to a prepayment penalty of 2% in thefirst year and 1% in the second year of the loan.

The Company has agreements that provide for term loansthat were used to purchase equipment for the Company’s Agriculture and Resortoperations. At December 31, 2006, these loans were principally at fixedinterest rates and mature through November 2026. Some of the agreementsinclude financial covenants that are similar to those in the Company’srevolving credit agreement.

Maturities of long-termdebt during the next five years, from 2007 through 2011, are as follows:$1,396,000, $19,142,000, $1,278,000, $1,367,000 and $1,463,000.

**6.**               DEFERRED REVENUES

In 2006 and 2005, theCompany recognized revenues and profits using the percentage of completionmethod for lot sales that closed escrow in the Honolua Ridge Phase I and PhaseII subdivisions at the Kapalua Resort. Construction of the improvements forPhase II was substantially complete in November 2006 and Phase I wassubstantially complete in November 2005; Phase II was approximately 35%complete as of December 31, 2005. Costs are allocated to each lot soldbased on relative sales values. 

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At December 31,2006 and 2005 deferred revenues for Honolua Ridge of $1.2 million and $9.9million, respectively, were included in liabilities in the accompanyingconsolidated balance sheets.

**7.**                REAL ESTATE SALES

In 2006, the Company sold approximately 2,200 acres ofUpcountry Maui land in three land sales transactions, and realized salesproceeds of $27.6 million. At December 31, 2006, the Company held notesreceivable of $5.9 million related to one of the sales. In January 2007,one note totaling $4.5 million was collected. The note receivable for $1.4million is recorded net of deferred revenue of equal amount on the Company’sbalance sheet pending the final determination of the additional cost to thebuyer as a result of a Maui County affordable housing policy that was adoptedin November 2006. If the cost to the buyer as a result of this policy isless than $1.4 million, the difference will be paid to the Company. If the costis equal to or greater than $1.4 million, the Company will forgive the buyer’sdebt under the note receivable.

In 2005, the Company sold approximately 640 acres ofUpcountry Maui properties in seven transactions that resulted in net cash salesproceeds of $28.2 million. Proceeds of $2.6 million were used to purchaseproperty to be used in the Company’s operations and, as of December 31,2005, $13.9 million was on deposit with a qualified exchange intermediary. TheCompany held notes receivable for $2.5 million related to two of the sales,which were collected in January 2006. Part of the consideration forone of the sales transactions was a one-acre parcel of land in West Maui valuedat $350,000. The gain on these sales recognized for financial statementpurposes was $26.9 million.

One of the 2005 land sales involved three parcels ofapproximately 129 acres of Upcountry Maui land for $14 million, comprised of$11 million in cash and a promissory note for $3 million. In connection withthe sale, the Company and the buyer executed a Water Development Agreement. Underthe agreement, the Company will drill a new water well and construct a storagetank and a transmission line that would connect to the County of Maui watersystem. The well and storage tank will be constructed on a separate land parcelof Company-owned land. After the County’s approval of the completed project,the Company will dedicate the facilities to the County for use as part of theCounty’s Upcountry water system. In exchange for the dedication, the Companyexpects to receive access to a specified quantity of water. Based on estimatesof the cost to construct the water source and on the potential water flow fromthe well, the estimated water source cost was allocated between the threeparcels sold and other Company projects in the Upcountry area. Profit of $7.0million on the transaction was allocated to the sale of the land parcels and$1.9 million was allocated to subsequent construction of the water source. Bothof these activities will have the same rate of gross profit pursuant to theprovisions of 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.

The Company has twobinding contracts for the sales of approximately 338 acres of Upcountry Mauiland that are estimated to close in February and April of 2007. TheCompany expects to realize cash proceeds and report a net gain of approximately$6 million. See Note 19, Related Party Transactions.

**8.**                LEASINGARRANGEMENTS

LESSEE

The Company has capital leases, primarily on equipmentused in Agriculture operations, which expire at various dates through 2011. At December 31,2006 and 2005, property included capital leases of $1,706,000 and $1,715,000(before accumulated depreciation of $1,305,000 and $1,168,000, respectively). Futureminimum rental payments under capital leases aggregate $86,000 (including$12,000 representing interest) and are payable as follows:  $19,000 per year through 2010 and $10,000 in2011.

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The Company has variousoperating leases, primarily for land used in Agriculture operations, whichexpire at various dates through 2018. Total rental expense under operatingleases was $878,000 in 2006, $880,000 in 2005 and $829,000 in 2004. Futureminimum rental payments under operating leases aggregate $2,866,000 and arepayable during the next five years (2007 to 2011) as follows: $585,000,$571,000, $320,000, $299,000, $227,000, respectively, and $864,000 thereafter.

LESSOR

TheCompany leases land and land improvements, primarily to hotels at Kapalua, andspace in buildings, primarily to retail tenants. These operating leasesgenerally provide for minimum rents and, in most cases, percentage rentalsbased on tenant revenues. In addition, the leases generally provide forreimbursement of common area maintenance and other expenses. Total rentalincome under these operating leases was as follows:

| ** **          | ** ** | **2006**                | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------|------------|-------------------------|------------|----------|------------|----------|------------|
| ** **          | ** ** | **(in thousands)** | ** ** |
| Minimum rentals     |       | $                       | 665        |     | $          | 433      |       | $ | 968 |   |
| Percentage  rentals |       | 1,925                   |       | 1,674    |       | 2,292    |       |
| Total               |       | $                       | 2,590      |     | $          | 2,107    |       | $ | 3,260 |   |

 

As discussed in Other Assets, Note 3, in connectionwith the formation of Bay Holdings on August 31, 2004, the Companycontributed to Kapalua Bay its fee interest in the land underlying the hotel(hotel ground lease concurrently cancelled) and its landlord’s interests in TheKapalua Shops (including retail leases). Rental income from these leases was$1,098,000 in 2004.

Property at December 31, 2006 and 2005 includesleased property of $14,298,000 and $9,609,000, respectively (before accumulateddepreciation of $4,373,000 and $4,430,000, respectively).

Future minimum rentalincome aggregates $2,580,000 and is receivable during the next five years (2007to 2011) as follows:  $394,000, $405,000,$405,000, $405,000, $232,000, respectively, and $739,000 thereafter.

**9.**                EMPLOYEE BENEFITPLANS

The Company has defined benefit pension plans coveringsubstantially all full-time, part-time and intermittent employees. Pensionbenefits are based primarily on years of service and compensation levels. TheCompany has defined benefit postretirement health and life insurance plans thatcover primarily non-bargaining salaried employees and certain bargaining unitemployees. Postretirement health and life insurance benefits are principallybased on the employee’s job classification at the time of retirement and onyears of service.

As of December 31,2006, the Company adopted FASB Statement of Financial Accounting Standards No. 158(SFAS No. 158), “*Employers’ Accounting forDefined Benefits Pension and Other Postretirement Plans.*”  The Standard amends FASB Statements No. 87,88, 106 and 132(R) and requires an employer to recognize the over-fundedor under-funded status of a defined benefit postretirement plan (other than amultiemployer plan) as an asset or liability in its statement of financialposition and to recognize changes in that funded status in the year in whichthe changes occur though comprehensive income. The pension asset or liabilityis the difference between the plan assets at fair value and the projectedbenefit obligation as of year end. For other postretirement benefit plans, theasset or liability is the difference between the plan 

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assetsat fair value and the accumulated postretirement benefit obligation as of yearend. The incremental effect from application of SFAS No. 158 on individualline items in the Consolidated Balance Sheet as of December 31, 2006 is asfollows (in thousands):

| ** **                                              | ** ** | **Before Application of  SFAS No. 158** | ** ** | **Increase  (Decrease)** | ** ** | **After Application of  SFAS No. 158** | ** ** |
|---------------------------------------------------------|------------|-------------------------------------------------------------|------------|--------------------------|------------|------------------------------------------------------------|------------|
| Other Assets                                            |       |                                                        | $          | 44,314                   |       |                                                       |       | $ | (384 | ) |   |   | $ | 43,930 |   |   |
| Total Assets                                            |       |                                                        | 220,583    |                     |       |                                                       | (384       | ) |   |   | 220,199 |   |   |
| Payroll and  employee benefits                          |       |                                                        | 5,127      |                     |       |                                                       | 952        |   |   |   | 6,079 |   |   |
| Total current  liabilities                              |       |                                                        | 26,465     |                     |       |                                                       | 952        |   |   |   | 27,417 |   |   |
| Accrued  retirement benefits                            |       |                                                        | 33,018     |                     |       |                                                       | (3,746     | ) |   |   | 29,272 |   |   |
| Deferred Income  Taxes                                  |       |                                                        | 3,698      |                     |       |                                                       | 868        |   |   |   | 4,566 |   |   |
| Total Long Term  Liabilities                            |       |                                                        | 94,753     |                     |       |                                                       | (2,878     | ) |   |   | 91,875 |   |   |
| Accumulated Other  Comprehensive Loss                   |       |                                                        | 3,849      |                     |       |                                                       | (1,542     | ) |   |   | 2,307 |   |   |
| Stockholders’  Equity                              |       |                                                        | 98,827     |                     |       |                                                       | 1,542      |   |   |   | 100,369 |   |   |
| Total  Liabilities & Stockholders’ Equity |       |                                                        | 220,583    |                     |       |                                                       | (384       | ) |   |   | 220,199 |   |   |

 

Themeasurement date for the Company’s benefit plan disclosures is December 31st of each year. The changes in benefitobligations and plan assets for 2006 and 2005, and the funded status of theplans, and assumptions used to determine benefit information at December 31,2006 and 2005 were as follows:

| ** **                                                                              | ** ** | **Pension Benefits** | ** ** | **Other Benefits** | ** ** |
|-----------------------------------------------------------------------------------------|------------|---------------------------|------------|-------------------------|------------|
| ** **                                                                              | ** ** | **2006**                  | ** ** | **2005**                | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                                                              | ** ** | **(in thousands)**   | ** ** |
| Change in benefit  obligations:                                                         |       |                      |       |                    |       |   |   |   |   |
| Benefit obligations at beginning of year                                                |       | $                         | 51,282     |                    | $          | 53,170 |   | $ | 17,383 |   | $ | 16,234 |   |
| Service cost                                                                            |       | 1,830                     |       | 1,605                   |       | 328 |   | 390 |   |
| Interest cost                                                                           |       | 3,278                     |       | 3,024                   |       | 770 |   | 950 |   |
| Actuarial (gain) loss                                                                   |       | 5,024                     |       | (3,531                  | )          | (4,579 | ) | 460 |   |
| Special termination benefits                                                            |       | —                    |       | 185                     |       | 69 |   | — |   |
| Curtailments                                                                            |       | 64                        |       |                    |       | (27 | ) |   |   |
| Benefits paid                                                                           |       | (3,369                    | )          | (3,171                  | )          | (687 | ) | (651 | ) |
| Benefit obligations at end of year                                                      |       | 58,109                    |       | 51,282                  |       | 13,257 |   | 17,383 |   |
| Change in plan  assets:                                                                 |       |                      |       |                    |       |   |   |   |   |
| Fair value of plan assets at beginning of year                                          |       | 42,973                    |       | 41,456                  |       | — |   | — |   |
| Actual return on plan assets                                                            |       | 3,996                     |       | 3,486                   |       | — |   | — |   |
| Employer contributions                                                                  |       | 2,199                     |       | 1,202                   |       | 687 |   | 651 |   |
| Benefits paid                                                                           |       | (3,369                    | )          | (3,171                  | )          | (687 | ) | (651 | ) |
| Fair value of plan assets at end of year                                                |       | 45,799                    |       | 42,973                  |       | — |   | — |   |
| Funded status                                                                           |       | $                         | (12,310    | )                       | $          | (8,309 | ) | $ | (13,257 | ) | $ | (17,383 | ) |
| Weighted average  assumption used to determine benefit obligations at December 31: |       |                      |       |                    |       |   |   |   |   |
| Discount rate                                                                           |       | 6.00                      | %          | 5.88                    | %          | 6.00 | % | 5.88 | % |
| Rate of compensation  increase                                                          |       | 3.50                      | %          | 3.50                    | %          | 3.50 | % | 3.50 | % |

 

Special termination benefits in 2005 relate toenhanced pension benefits as a result of management changes. The curtailment in2006 relates to the termination of Agriculture segment employees in 2006.

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The projected benefit obligation, accumulated benefitobligation and fair value of plan assets for pension plans with accumulatedbenefits in excess of plan assets were $58,109,000, $53,559,000, and$45,799,000, respectively, as of December 31, 2006 and $33,737,000,$30,407,000 and $25,750,000, respectively as of December 31, 2005.

The accumulated postretirement benefit obligation forhealth care as of December 31, 2006 was determined using a health carecost trend rate of 6.5% in 2006 and decreasing by .5% each year through 2010,and 5% thereafter. The effect of a 1% annual increase in these assumed costtrend rates would increase the accrued postretirement benefit obligation byapproximately $1,616,000 as of December 31, 2006, and the aggregate of theservice and interest cost for 2006 by approximately $160,000. A 1% annualdecrease would reduce the accrued postretirement benefit obligation byapproximately $1,310,000 as of December 31, 2006, and the aggregate of theservice and interest cost for 2006 by approximately $127,000.

Theamounts recognized on the Company’s consolidated Balance sheets as of December 31,2006 and 2005 were as follows:

| ** **                                                  | ** ** | **Pension Benefits** | ** ** | **Other Benefits** | ** ** |
|-------------------------------------------------------------|------------|---------------------------|------------|-------------------------|------------|
| ** **                                                  | ** ** | **2006**                  | ** ** | **2005**                | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                                  | ** ** | **(in thousands)**   | ** ** |
| Funded status                                               |       | $                         | (12,310    | )                       | $          | (8,309 | ) | $ | (13,257 | ) | $ | (17,383 | ) |
| Unrecognized  actuarial (gain) loss                         |       | —                    |       | 6,829                   |       | — |   | (3,209 | ) |
| Unrecognized net  transition obligation                     |       | —                    |       | 180                     |       | — |   | — |   |
| Unrecognized  prior service cost                            |       | —                    |       | 285                     |       | — |   | (161 | ) |
| Net amounts  recognized                                     |       | $                         | (12,310    | )                       | $          | (1,015 | ) | $ | (13,257 | ) | $ | (20,753 | ) |
| Amounts  recognized in balance sheets consist of:           |       |                      |       |                    |       |   |   |   |   |
| Current Liability                                           |       | $                         | (254       | )                       | $          | — |   | $ | (699 | ) | $ | — |   |
| Noncurrent Liability                                        |       | (12,056                   | )          | (2,095                  | )          | (12,558 | ) | (20,753 | ) |
| Pension asset before minimum liability adjustment           |       | —                    |       | 1,080                   |       | — |   | — |   |
| Intangible asset                                            |       | —                    |       | 256                     |       | — |   | — |   |
| Minimum liability adjustment                                |       | —                    |       | (2,562                  | )          | — |   | — |   |
| Accumulated other comprehensive loss (before income  taxes) |       | —                    |       | 2,306                   |       | — |   | — |   |
| Net amounts  recognized                                     |       | $                         | (12,310    | )                       | $          | (1,015 | ) | $ | (13,257 | ) | $ | (20,753 | ) |

 

Amountsrecognized in Accumulated Other Comprehensive (Income) Loss (before income taxeffect) at December 31, 2006 are as follows:

| ** **                                     | ** ** | **Pension  Benefits**   | ** ** | **Other  Benefits** | ** ** |
|------------------------------------------------|------------|-------------------------|------------|---------------------|------------|
| ** **                                     | ** ** | **(in thousands)** | ** ** |
| Unrecognized net transition obligation (asset) |       | $                       | 147        |                | $          | — |   |
| Unrecognized net  loss (gain)                  |       | 10,565                  |       | (7,313              | )          |
| Unrecognized  prior service cost               |       | 237                     |       | (31                 | )          |
|                                           |       | $                       | 10,949     |                | $          | (7,344 | ) |

 

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Amountsin Accumulated Other Comprehensive (Income) Loss at December 31, 2006 thatare expected to be recognized as components of net periodic benefit cost in2007 are as follows:

| ** **                 | ** ** | **Pension  Benefits**   | ** ** | **Other  Benefits** | ** ** |
|----------------------------|------------|-------------------------|------------|---------------------|------------|
| ** **                 | ** ** | **(in thousands)** | ** ** |
| Net transition  obligation |       |                    | $          | 23                  |       |   |   | $ | — |   |   |
| Net loss (gain)            |       |                    | 460        |                |       |   | (499 | ) |   |
| Prior service  cost        |       |                    | 47         |                |       |   | (32 | ) |   |
|                       |       |                    | $          | 530                 |       |   |   | $ | (531 | ) |   |

 

Net periodic benefit costs for 2006, 2005 and 2004 included thefollowing components:

| ** **                                | ** ** | **2006**                | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------------|------------|-------------------------|------------|----------|------------|----------|------------|
| ** **                                | ** ** | **(in thousands)** | ** ** |
| Pension benefits:                         |       |                    |       |     |       |     |       |
| Service cost                              |       | $                       | 1,830      |     | $          | 1,605    |       | $ | 1,679 |   |
| Interest cost                             |       | 3,278                   |       | 3,024    |       | 2,932    |       |
| Expected return on plan assets            |       | (3,366                  | )          | (3,232   | )          | (2,991   | )          |
| Recognized net actuarial loss             |       | 658                     |       | 389      |       | 436      |       |
| Amortization of net transition obligation |       | 24                      |       | 25       |       | 25       |       |
| Amortization of prior service cost        |       | 47                      |       | 47       |       | 45       |       |
| Special termination benefits              |       | —                  |       | 185      |       | 106      |       |
| Recognition of loss due to curtailment    |       | 74                      |       | —   |       | —   |       |
| Net expense                               |       | $                       | 2,545      |     | $          | 2,043    |       | $ | 2,232 |   |
| Other benefits:                           |       |                    |       |     |       |     |       |
| Service cost                              |       | $                       | 328        |     | $          | 389      |       | $ | 326 |   |
| Interest cost                             |       | 770                     |       | 950      |       | 860      |       |
| Amortization of prior service cost        |       | (126                    | )          | (128     | )          | (128     | )          |
| Recognized net actuarial gain             |       | (500                    | )          | (202     | )          | (279     | )          |
| Special termination benefits              |       | —                  |       | —   |       | 55       |       |
| Gain due to curtailment                   |       | (7                      | )          | —   |       | —   |       |
| Net expense                               |       | $                       | 465        |     | $          | 1,009    |       | $ | 834 |   |

 

| ** **                                                                 | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|----------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Weighted average  assumptions used to determine net periodic benefit cost: |       |     |       |     |       |     |       |
| Pension benefits:                                                          |       |     |       |     |       |     |       |
| Discount rate                                                              |       | 5.9      | %          | 6        | %          | 6.25     | %          |
| Expected long-term return on plan assets                                   |       | 8.0      | %          | 8        | %          | 8        | %          |
| Rate of compensation increase                                              |       | 3% - 4   | %          | 3% - 4.5 | %          | 3% - 4.5 | %          |
| Other benefits:                                                            |       |     |       |     |       |     |       |
| Discount rate                                                              |       | 5.9      | %          | 6        | %          | 6.25     | %          |
| Rate of  compensation increase                                             |       | 3% - 4   | %          | 3.5      | %          | 3.5      | %          |

 

The expected long-term rate of return on plan assetswas based on historical total returns of broad equity and bond indices for tento fifteen year periods, weighted against the Company’s targeted pension assetallocation ranges. These rates were also compared to historical rates of returnon hypothetical blended funds with 60% equity securities and 40% bondsecurities.

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TheCompany’s pension plan weighted-average asset allocations at December 31,2006 and 2005, by asset category, was as follows:

| **Asset Category** | ** ** | ** ** | ** ** | **2006** | ** ** | **2005** | ** ** |
|-------------------------|------------|------------|------------|----------|------------|----------|------------|
| Equity securities       |       |       | 67         | %        |       |     | 67         | % |   |
| Debt securities         |       |       | 31         | %        |       |     | 32         | % |   |
| Real estate             |       |       | —     |     |       |     | —     |   |   |
| Other                   |       |       | 2          | %        |       |     | 1          | % |   |

 

A pension committee consisting of certain seniormanagement employees administers the Company’s defined benefit pension plans. Thepension plan assets are allocated among approved asset types based on assetallocation guidelines and investment and risk-management guidelines set by thepension committee, and subject to liquidity requirements of the plans. Thepension committee has set the following asset mix guidelines: equities 40% to80%; fixed income securities 20% to 60%; international securities 0% to 10%;and cash or equivalents 0% to 10%.

TheCompany expects to contribute $1.4 million to its defined benefit pension plansand $719,000 to its other postretirement benefit plans in 2006. Estimatedfuture benefit payments, which include expected future service, are as follows:

| ** **  | ** ** | **Pension  Benefits**   | ** ** | **Other  Benefits** | ** ** |
|-------------|------------|-------------------------|------------|---------------------|------------|
| ** **  | ** ** | **(in thousands)** | ** ** |
| 2007        |       | $                       | 3,189      |                |       | $ | 719 |   |   |
| 2008        |       | 3,170                   |       |                | 733        |   |   |
| 2009        |       | 3,193                   |       |                | 750        |   |   |
| 2010        |       | 3,231                   |       |                | 755        |   |   |
| 2011        |       | 3,263                   |       |                | 754        |   |   |
| 2012 - 2016 |       | 18,085                  |       |                | 3,975      |   |   |
|             |            |                         |            |                     |            |  |  |  |  |

 

The Company has investment and savings plans thatallow eligible employees on a voluntary basis to make pre-tax contributions oftheir cash compensation. Substantially all employees are eligible toparticipate in one or more plans. No Company contributions were made to theseplans in 2006, 2005 or 2004.

On October 1, 1998,deferred compensation plans that provided for specified payments afterretirement for certain management employees were amended to eliminate futurebenefits. At the termination date, these employees were given credit forexisting years of service and future vesting of additional benefits wasdiscontinued. The present value of the benefits to be paid is being accruedover the period of active employment. As of December 31, 2006 and 2005,deferred compensation plan liabilities totaled $1,679,000 and $1,848,000,respectively.

**10.**          STOCKCOMPENSATION PLANS

Effective January 1, 2006, the Company adoptedStatement of Financial Accounting Standards (“SFAS”) No. 123(R), *Share-Based Payment*, using the modifiedprospective application transition method. The Company had previously accountedfor its stock-based compensation arrangements under SFAS No. 123, *Accounting for Stock-Based Compensation.*Becausethe fair value recognition provisions of SFAS No. 123 and SFAS No. 123(R) werematerially consistent under the Company’s equity plans, the adoption of SFAS No. 123(R) didnot have a significant impact on the Company’s financial position or results ofoperations. SFAS No. 123(R) requires all share-based payments,including grants of employee stock options, to be recognized as compensationexpense over the service period (generally the vesting period) in 

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the consolidated financialstatements based on their fair values. Under the modified prospective method,awards that were granted, modified, or settled on or after January 1, 2006are measured and accounted for in accordance with SFAS No. 123(R). Theimpact of forfeitures that may occur prior to vesting is also estimated andconsidered in the amount recognized. In addition, prior to adoption of SFAS No. 123(R),benefits of tax deductions in excess of recognized compensation costs werereported as operating cash flows. SFAS No. 123(R) requires excess taxbenefits be reported as a financing cash inflow rather than as a reduction oftaxes paid.

The total compensationexpense recognized for stock-based compensation was $2,063,000, $2,292,000 and$2,141,000 for 2006, 2005, and 2004, respectively. The total tax benefitrelated thereto was $743,000, $825,000 and $771,000 for 2006, 2005 and 2004,respectively.

*Stock Options*

In May 2006, the Company’s shareholders approvedthe 2006 Equity and Incentive Award Plan (the “2006 Plan”) and an increase inthe number of shares of common stock authorized under the Articles ofAssociation by 1,000,000 shares, all of which have been reserved for issuanceunder the 2006 Plan. The 2006 Plan provides that the administrator can grantstock options and other equity instruments. The terms of certain grants typesfollow general guidelines, but the term and conditions of each award can varyat the discretion of the administrator. With respect to awards granted tonon-employee directors, the administrator of the 2006 Plan is the Board ofDirectors. The Compensation Committee of the Board is the administrator of the2006 Plan for all other persons, unless the Board assumes authority foradministration. Upon approval of the 2006 Plan, the Company’s Stock andIncentive Compensation Plan of 2003 (the “2003 Plan”) was terminated and nofurther grants will be made under that plan.

The 2003 Plan was approved by the Company’sshareholders in December 2003 and included 500,000 shares of common stockauthorized for issuance. The Company also has stock compensation agreementswith its President and Chief Executive Officer under which non-qualified stockoptions (200,000 shares) and restricted stock (100,000 shares) were granted in2003.

Asummary of stock option award activity as of and for the year ended December 31,2006 is presented below:

| ** **                             | ** ** | **Shares** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Weighted  Average  Grant-Date  Fair Value** | ** ** | **Weighted  Average  Remaining  Contractual  Term (years)** | ** ** | **Aggregate  Intrinsic  Value  $(000)(1)** | ** ** |
|----------------------------------------|------------|------------|------------|----------------------------------------|------------|----------------------------------------------------|------------|------------------------------------------------------------------|------------|--------------------------------------------|------------|
| Outstanding at  December 31, 2005 |       | 613,500    |       |                                   | $          | 28.99                                              |       |                                                             |       |                                       |       |   |   |   |   |   |   |   |   |   |
| Granted                                |       | 352,500    |       |                                   | $          | 37.26                                              |       |                                                             |       | $                                          | 15.76      |   |   |   |   |   |   |   |   |   |   |
| Exercised                              |       | (25,000    | )          |                                   | $          | 27.74                                              |       |                                                             |       |                                       |       |   |   |   |   |   |   |   |   |   |
| Forfeited or  Cancelled                |       | (77,500    | )          |                                   | $          | 37.49                                              |       |                                                             |       | $                                          | 13.78      |   |   |   |   |   |   |   |   |   |   |
| Outstanding at  December 31, 2006 |       | 863,500    |       |                                   | $          | 31.64                                              |       |                                                             |       | $                                          | 13.39      |   |   |   | 8.1 |   |   |   | $ | 4,002 |   |   |
| Exercisable at  December 31, 2006 |       | 305,900    |       |                                   | $          | 24.40                                              |       |                                                             |       | $                                          | 11.56      |   |   |   | 6.8 |   |   |   | $ | 3,229 |   |   |

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(1)          For in the money options

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Additionalstock option information the years ended December 31:

| ** **                                          | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Weighted Average  Grant-Date Fair Value             |       |     |       |     |       |     |       |
| For Options Granted During the Year                 |       | $        | 15.76      |     | $          | 12.98    |       | $ | 9.91 |   |
| Intrinsic Value  of Options Exercised $(000)        |       | $        | 80         |     | —     |     | —     |   |
| Cash Received  From Option Exercises $(000)         |       | $        | 694        |     | —     |     | —     |   |
| Fair Value of Shares  Vested During the Year $(000) |       | $        | 1,270      |     | $          | 1,092    |       | $ | 921 |   |

 

Forthe years ended December 31, 2006, 2005, and 2004 the fair value of theCompany’s stock-based awards to employees was estimated using the Black-Scholesoption pricing model and the following weighted average assumptions:

| ** **                         | ** ** | **Stock Options** | ** ** |
|------------------------------------|------------|------------------------|------------|
| ** **                         | ** ** | **2006**               | ** ** | **2005** | ** ** | **2004** | ** ** |
| Expected life of  options in years |       | 6.2                    |       | 5 |   | 3.9 |   |
| Expected  volatility               |       | 32.4                   | %          | 33.4 | % | 38.1 | % |
| Risk-free  interest rate           |       | 5.0                    | %          | 4.1 | % | 2.8 | % |
| Expected dividend yield            |       | —                 |       | — |   | — |   |

 

·       Theexpected life of the options represents expectations of future employeeexercise and post-vesting termination behavior and was calculated using the “simplified”method for all of its plain vanilla options as allowed for in the SEC StaffAccounting Bulletin (“SAB”) 107, “*Share-Based Payment*”.

·       Expectedvolatility was based on the historical volatility of the Company’s common stockfor a period equal to the option’s estimated life.

·       Therisk-free interest rate was based on U.S. Government treasury yields forperiods equal to the expected term of the option on the grant date.

·       Theexpected dividend yield is based on the Company’s current and historicaldividend policy.

SFAS No. 123(R) requires the recognition ofstock-based compensation for the number of awards that are ultimately expectedto vest. As a result, recognized stock compensation was reduced for estimatedforfeitures prior to vesting primarily based on historical annual forfeiturerates of approximately 5.1%. Estimated forfeitures will be reassessed insubsequent periods and may change based on new facts and circumstances.

As of December 31,2006, there was $7,053,000 of total unrecognized compensation for awardsgranted under the stock options plans that is expected to be recognized over aweighted average period of 2.2 years.

*Restricted Stock*

In 2006, 149,750 shares of restricted stock weregranted pursuant to the 2006 and 2003 Plans, including 100,000 shares to theCompany’s President and Chief Executive Officer, 8,250 shares to new and re-electeddirectors, and the remainder to certain officers of the Company. The restrictedshares vest as service is provided or vest subject to the achievement ofcertain performance measures. In 2006, 8,000 shares of restricted stock vestedas the directors’ service requirements were met. The weighted average grant-date fair valueof restricted stock granted during 2006, 2005 and 2004 was $34.94, $39.00 and$27.06 per share, respectively.

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Asummary of the activity for nonvested restricted stock awards as of and for theyear ended December 31, 2006 is presented below:

| ** **                                   | ** ** | **Shares** | ** ** | **Weighted  Average  Grant-Date  Fair Value** | ** ** |
|----------------------------------------------|------------|------------|------------|----------------------------------------------------|------------|
| Nonvested balance at December 31, 2005  |       | 123,771    |       |                                               | $          | 27.90 |   |   |
| Granted                                      |       | 149,750    |       |                                               | $          | 35.94 |   |   |
| Vested                                       |       | (8,000     | )          |                                               | $          | 36.01 |   |   |
| Forfeited or Cancelled                       |       | (6,250     | )          |                                               | $          | 34.62 |   |   |
| Nonvested balance  at December 31, 2006 |       | 259,271    |       |                                               | $          | 33.24 |   |   |

 

**11.**          MINORITYINTEREST IN SUBSIDIARY

In February 1999,Royal Coast Tropical Fruit Company, Inc. (a wholly owned subsidiary ofMaui Pineapple Company, Ltd.) obtained a 51% ownership interest in a new CostaRican subsidiary. The subsidiary’s purpose was to produce fresh pineapple forsale to customers in the east coast of the United States and in Western Europe.As mentioned in Discontinued Operations, Note 4, in December 2003, theCompany sold substantially all of the assets of the Costa Rican pineapplesubsidiary, and the related operations were classified as discontinuedoperations. The minority stockholders’ share of the 2004 pre-tax income was$751,000.

**12.**          INCOMETAXES

Thecomponents of the income tax provision (benefit) were as follows:

| ** **                                           | ** ** | **2006**                | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------------------------------------|------------|-------------------------|------------|----------|------------|----------|------------|
| ** **                                           | ** ** | **(in thousands)** | ** ** |
| Current                                              |       |                    |       |     |       |     |       |
| Federal                                              |       | $                       | 4,535      |     | $          | 2,562    |       | $ | 603 |   |
| State                                                |       | 87                      |       | 10       |       | 232      |       |
| Total                                                |       | 4,622                   |       | 2,572    |       | 835      |       |
| Deferred                                             |       |                    |       |     |       |     |       |
| Federal                                              |       | (654                    | )          | 5,267    |       | (713     | )          |
| State                                                |       | (252                    | )          | 884      |       | (604     | )          |
| Total                                                |       | (906                    | )          | 6,151    |       | (1,317   | )          |
| Total provision (benefit)                            |       | 3,716                   |       | 8,723    |       | (482     | )          |
| Less total  provision for discontinued operations    |       | —                  |       | —   |       | 46       |       |
| Total provision  (benefit) for continuing operations |       | $                       | 3,716      |     | $          | 8,723    |       | $ | (528 | ) |

 

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Reconciliationbetween the total provision and the amount computed using the statutory federalrate of 35% in 2006 and 34% in 2005 and 2004 follows:

| ** **                                                 | ** ** | **2006**                | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------------------------------------------|------------|-------------------------|------------|----------|------------|----------|------------|
| ** **                                                 | ** ** | **(in thousands)** | ** ** |
| Federal provision (benefit) at statutory rate              |       | $                  | 3,829      |     | $     | 7,919    |       | $  | (294 | ) |
| Adjusted for                                               |       |                    |       |     |       |     |       |
| State income taxes, net of effect on federal income  taxes |       | (67                     | )          | 605      |       | (223     | )          |
| Federal research credits                                   |       | (98                     | )          | —   |       | (25      | )          |
| Other                                                      |       | 52                      |       | 199      |       | 60       |       |
| Total provision  (benefit)                                 |       | $                       | 3,716      |     | $          | 8,723    |       | $ | (482 | ) |

 

Deferredtax assets and liabilities were comprised of the following temporarydifferences as of December 31, 2006 and 2005:

| ** **                                                                                                                                                                                                                    | ** ** | **2006**                | ** ** | **2005** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|----------|------------|
| ** **                                                                                                                                                                                                                    | ** ** | **(in thousands)** | ** ** |
| Accrued retirement benefits                                                                                                                                                                                                   |       | $                       | 10,990     |     | $          | 10,227 |   |
| Minimum tax  credit carryforwards                                                                                                                                                                                             |       | —                  |       | 447      |       |
| Accrued liabilities                                                                                                                                                                                                           |       | 1,417                   |       | 1,643    |       |
| Deferred revenue                                                                                                                                                                                                              |       | —                  |       | 2,459    |       |
| Inventory                                                                                                                                                                                                                     |       | 405                     |       | 165      |       |
| Allowance for  doubtful accounts                                                                                                                                                                                              |       | 228                     |       | 128      |       |
| Stock  compensation                                                                                                                                                                                                           |       | 1,670                   |       | 1,102    |       |
| Net operating  loss and tax credit carryforwards                                                                                                                                                                              |       | 318                     |       | 380      |       |
| Total deferred tax assets                                                                                                                                                                                                     |       | 15,028                  |       | 16,551   |       |
| Deferred condemnation proceeds                                                                                                                                                                                                |       | (6,292                  | )          | (6,460   | )          |
| Tax deferred land  sales                                                                                                                                                                                                      |       | (1,543                  | )          | (6,136   | )          |
| Property net book  value                                                                                                                                                                                                      |       | (4,054                  | )          | (3,533   | )          |
| Income from  investments                                                                                                                                                                                                      |       | (718                    | )          | (356     | )          |
| Agriculture  marketing costs                                                                                                                                                                                                  |       | (130                    | )          | (165     | )          |
| Other                                     |       | (5,881                  | )          | (4,864   | )          |
| Total deferred tax liabilities                                                                                                                                                                                                |       | (18,618                 | )          | (21,514  | )          |
| Net deferred tax  liabilities                                                                                                                                                                                                 |       | $                       | (3,590     | )        | $          | (4,963 | ) |

 

A valuation allowance against deferred tax assets asof December 31, 2006 and 2005 is not considered necessary, as the Companybelieves it is more likely than not the deferred tax assets will be fullyrealized through future taxable income.

Net operating loss and tax credit carryforwards forState income tax purposes amounted to $8.6 million at December 31, 2006and expire in 2012 through 2016. The Company’s State of Hawaii income taxreturns for 2000, 2001 and 2002 are under examination by the Department ofTaxation. The tax auditor’s reports on these examinations have not been issuedand the Company presently cannot predict the outcome of these examinations. TheCompany’s federal income tax returns have been reviewed through 2002.

Income before income taxesfrom foreign sources totaled $118,000 in 2004.

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**13.**          INTERESTCAPITALIZATION

Interest cost incurred(continuing and discontinued operations) in 2006, 2005 and 2004 was $2,473,000,$1,263,000 and $1,358,000, respectively, of which $1,698,000, $742,000 and$199,000, respectively, were capitalized.

**14.**          ADVERTISINGAND RESEARCH AND DEVELOPMENT

Advertising expensetotaled $6,314,000 in 2006, $4,328,000 in 2005 and $3,444,000 in 2004. Researchand development expenses totaled $1,078,000 in 2006, $530,000 in 2005 and$695,000 in 2004.

**15.**          CONCENTRATIONSOF CREDIT RISK

A substantial portion ofthe Company’s trade receivables results from sales of pineapple products,primarily to food distribution customers in the United States and the UnitedStates government. Credit is extended after evaluating creditworthiness and nocollateral generally is required from customers.

**16.**          DISCLOSUREABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Except as indicated below,the carrying amount of the Company’s financial instruments approximates fairvalue.

Non-Current Notes Receivable:

The fair value of theseassets was estimated based on rates that would be currently available forsimilar transactions. The carrying amount of these assets at December 31,2006 and 2005 was $15,713,000 and $5,335,000, respectively, and the fair valuewas $15,635,000 and $5,300,000, respectively.

Long-Term Debt:

The fair value oflong-term debt was estimated based on rates currently available to the Companyfor debt with similar terms and remaining maturities. The carrying amount oflong-term debt at December 31, 2006 and 2005 was $51,053,000 and$10,818,000, respectively, and the fair value was $50,936,000 and $10,811,000,respectively.

**17.**          OPERATINGSEGMENTS

The Company’s reportable operating segments areAgriculture, Resort, Community Development and Commercial & Property. Eachsegment is a line of business requiring different technical and marketingstrategies.

Agriculture primarily includes growing, packing andprocessing and marketing processed and fresh pineapple products.

Resort includes the ongoing operations at the KapaluaResort on Maui. These operations include three championship golf courses, atennis facility, a vacation rental program, ten retail outlets. In 2006, theCompany’s Public Utilities Commission regulated water and sewage transmissionoperations were transferred from the Resort segment to the CommunityDevelopment segment and prior year amounts were restated for comparability.

Community Development includes the Company’s realestate entitlement, development, construction, sales and leasing activities. Thissegment also includes the operations of Kapalua Realty Company, a generalbrokerage real estate company, located within Kapalua Resort, the Company’sPublic Utilities Commission regulated water and sewage transmission operations,and as of August 31, 2004, the Company’s investment in Kapalua BayHoldings, LLC (see Other Assets, Note 3).

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The accounting policies of the segments are the sameas those described in Summary of Significant Accounting Policies, Note 1.

Thefinancial information for each of the Company’s reportable operating segmentsfor 2006, 2005, and 2004 follows:

| ** **                                            | ** ** | ** **              | ** ** | ** ** | ** ** | **Community**   | ** ** | ** ** | ** ** | ** **       | ** ** |
|-------------------------------------------------------|------------|-------------------------|------------|------------|------------|-----------------|------------|------------|------------|------------------|------------|
| ** **                                            | ** ** | **Agriculture**         | ** ** | **Resort** | ** ** | **Development** | ** ** | **Other**  | ** ** | **Consolidated** | ** ** |
| ** **                                            | ** ** | **(in thousands)** | ** ** |
| ***2006***                                            | ** ** |                    | ** ** | ** ** |       | ** **      | ** ** |       | ** ** | ** **       |       | ** ** | ** ** |   | ** ** | ** ** |   |
| Operating  revenues(1)                                |       |                    | $          | 65,194     |       |            | $          | 46,098     |       |             | $          | 67,326 |   |   | $ | 279 |   |   | $ | 178,897 |   |   |
| Operating profit  (loss)(2)(3)                        |       |                    | (18,580    | )          |       | (6,426          | )          |       | 36,236     |             |       | (881 | ) |   | $ | 10,349 |   |   |
| Interest expense                                      |       |                    |       |       |       |            |       |       |       |             |       |   |   |   | (775 | ) |   |
| Interest income                                       |       |                    |       |       |       |            |       |       |       |             |       |   |   |   | 1,367 |   |   |
| Income before  income taxes                           |       |                    |       |       |       |            |       |       |       |             |       |   |   |   | $ | 10,941 |   |   |
| Depreciation and  amortization                        |       |                    | 7,919      |       |       | 3,249           |       |       | 781        |             |       | 425 |   |   | 12,374 |   |   |
| Equity in losses of  affiliates                       |       |                    |       |       |       |            |       |       | (5,340     | )                |       |   |   |   | (5,340 | ) |   |
| Investment in  affiliates                             |       |                    |       |       |       |            |       |       | 10,052     |             |       |   |   |   | 10,052 |   |   |
| Segment Assets(4)                                     |       |                    | 58,607     |       |       | 49,301          |       |       | 80,867     |             |       | 31,424 |   |   | 220,199 |   |   |
| Expenditures for  segment assets                      |       |                    | 21,320     |       |       | 4,147           |       |       | 24,767     |             |       | 8,905 |   |   | 59,139 |   |   |
| ***2005***                                            | ** ** |                    | ** ** | ** ** |       | ** **      | ** ** |       | ** ** | ** **       |       | ** ** | ** ** |   | ** ** | ** ** |   |
| Operating  revenues(1)                                |       |                    | $          | 74,501     |       |            | $          | 40,786     |       |             | $          | 71,074 |   |   | $ | 319 |   |   | $ | 186,680 |   |   |
| Operating profit  (loss)(2)(3)                        |       |                    | (11,408    | )          |       | (5,838          | )          |       | 41,250     |             |       | (150 | ) |   | $ | 23,854 |   |   |
| Interest expense                                      |       |                    |       |       |       |            |       |       |       |             |       |   |   |   | (521 | ) |   |
| Interest income                                       |       |                    |       |       |       |            |       |       |       |             |       |   |   |   | 443 |   |   |
| Income before  income taxes                           |       |                    |       |       |       |            |       |       |       |             |       |   |   |   | $ | 23,776 |   |   |
| Depreciation                                          |       |                    | 9,615      |       |       | 4,070           |       |       | 445        |             |       | 133 |   |   | 14,263 |   |   |
| Equity in  earnings (losses) of affiliates            |       |                    | 25         |       |       | —          |       |       | (484       | )                |       | (25 | ) |   | (484 | ) |   |
| Investment in  affiliates                             |       |                    | —     |       |       | —          |       |       | 2,332      |             |       | — |   |   | 2,332 |   |   |
| Segment Assets(4)                                     |       |                    | 52,511     |       |       | 52,412          |       |       | 41,681     |             |       | 39,395 |   |   | 185,999 |   |   |
| Expenditures for  segment assets                      |       |                    | 7,327      |       |       | 3,894           |       |       | 8,794      |             |       | 4,101 |   |   | 24,116 |   |   |
| ***2004***                                            | ** ** |                    | ** ** | ** ** |       | ** **      | ** ** |       | ** ** | ** **       |       | ** ** | ** ** |   | ** ** | ** ** |   |
| Operating  revenues(1)                                |       |                    | $          | 80,003     |       |            | $          | 39,640     |       |             | $          | 33,410 |   |   | $ | 196 |   |   | $ | 153,249 |   |   |
| Operating profit  (loss)(2)(3)                        |       |                    | (10,702    | )          |       | (5,178          | )          |       | 17,159     |             |       | (401 | ) |   | $ | 878 |   |   |
| Interest expense                                      |       |                    |       |       |       |            |       |       |       |             |       |   |   |   | (1,159 | ) |   |
| Interest income                                       |       |                    |       |       |       |            |       |       |       |             |       |   |   |   | 23 |   |   |
| Loss before  income taxes and discontinued operations |       |                    |       |       |       |            |       |       |       |             |       |   |   |   | $  | (258 | ) |   |
| Depreciation                                          |       |                    | 5,752      |       |       | 3,807           |       |       | 471        |             |       | 10 |   |   | 10,040 |   |   |
| Equity in  earnings (losses) of affiliates            |       |                    | (64        | )          |       | —          |       |       | (809       | )                |       | 146 |   |   | (727 | ) |   |
| Investment in  affiliates                             |       |                    | 87         |       |       | —          |       |       | 1,930      |             |       | 146 |   |   | 2,163 |   |   |
| Segment Assets(4)                                     |       |                    | 58,692     |       |       | 52,437          |       |       | 20,640     |             |       | 29,154 |   |   | 160,923 |   |   |
| Expenditures for segment  assets                      |       |                    | 3,547      |       |       | 2,797           |       |       | 3,439      |             |       | 7,573 |   |   | 17,356 |   |   |

----

(1)          Amounts are principallyrevenues from external customers and exclude equity in earnings of affiliatesand interest income. Intersegment revenues were insignificant. Sales to asingle customer in the Agriculture segment accounted for 9.1%, 11.2% and 13.8%,respectively, of consolidated operating revenues for 2006, 2005 and 2004. Salesof Hawaii grown pineapple to customers located in foreign countries wereapproximately $2.8 million in 2006, and $1.1 million in 2005 and 2004.

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(2)          “Operating profit (loss)”is total operating revenues, less operating costs and expenses, plus equity inearnings and losses of affiliates (excludes interest income, interest expenseand income taxes).

(3)          In 2004, the Companybegan to allocate all corporate general and administrative expenses to itsoperating segments and prior year amounts were restated for comparability. Suchallocations are consistent with management’s evaluation of the operatingsegments.

(4)          “Segmentassets” are located in the United States. “Other” assets are corporate andnon-segment assets.

**18.**          COMMITMENTSAND CONTINGENCIES

Pursuant to a 1999 settlement agreement with theCounty of Maui, the Company and several chemical manufacturers have agreed thatuntil December 1, 2039, they will pay for 90% of the capital cost toinstall filtration systems in any future water wells if the presence of anematocide commonly known as DBCP exceeds specified levels, and for the ongoingmaintenance and operating cost for filtration systems on existing and futurewells. The Company estimated its share of the cost to operate and maintain thefiltration systems for the existing wells and its share of the cost of a letterof credit used to secure its obligations, and recorded a liability of $250,000in 1999. The Company recognized an additional liability and expense of $3,000,$48,000 and $176,000 in 2006, 2005 and 2004, respectively, and paid $238,000 in2005 for its share of the capital costs to install a filtration system for anexisting well. The Company is presently not aware of any plans by the County ofMaui to install other filtration systems or to drill any water wells in areasaffected by agricultural chemicals. Accordingly, a reserve for costs relatingto any future wells has not been recorded because the Company is not able toreasonably estimate the amount of liability (if any).

The Company has a 51% membership interest in KapaluaBay Holdings, LLC (“Bay Holdings”). In July 2006, Kapalua Bay LLC, whichis a wholly owned subsidiary of Bay Holdings, entered into a Construction LoanAgreement (the “Loan Agreement”), for the lesser of $370 million or 61.6% ofthe total projected cost of the project (the “Loan”). The Company and the othermembers of Bay Holdings have guaranteed to the lender completion of the projectand each member’s pro rata share of costs and losses incurred by the lender asa result of the occurrence of specified triggering events during the term ofthe Loan Agreement. The members’ guarantee to the lender does not includepayment in full of the Loan. The Company has recognized a liability of$968,000, representing the estimated fair value of its obligation under thisLoan Agreement.

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 is not expected to have a material adverse effect on theCompany’s financial position or results of operations.

The Company, as an investor in various affiliates(partnerships, limited liability companies), may under specific circumstancesbe called upon to make additional capital contributions.

At December 31, 2006,the Company had commitments under signed contracts totaling $10,239,000 whichprimarily relate to real estate development projects.

**19.**          RELATEDPARTY TRANSACTIONS

In 2005, the Company purchased a residential propertyin Upcountry Maui that includes a house and cottage on approximately 4 acres ofland for $2.6 million. The purchase was made to provide housing for one of itsexecutive officers, and the Company entered into a one-year rental agreement at$4,000 per month with the officer. The officer’s employment with the Companywas terminated in 2006, and the 

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Company expects to leaseto property to another executive officer when the premises is vacated in June 2007.

In March 2006, the Company entered into anagreement to sell 190 acres of Upcountry Maui land and improvements thereon toDavid C. Cole, the Company’s Chairman, President and Chief Executive Officer,for $4.9 million. As provided for in the purchase and sale agreement, in August 2006,the boundaries of the subject property were adjusted to accommodate naturaltopographic features based on completion of a survey map; and accordingly, anamendment to the agreement revises the sales price to $4.1 million for 157acres. Prior to the closing of the sale, the Company will lease a 3,500 squarefoot residence that is located on the property to Mr. Cole for $1,500 permonth, which amount represents fair market value based on an estimate by athird party realtor. See Note 20, Subsequent Events.

In April 2006, the Company entered into anagreement to sell approximately 181 acres of Upcountry Maui land to a VicePresident/Community Development of the Company for $2.8 million. The Companyestimates that this sale will close in the second quarter of 2007.

These land sale agreementswere structured in compliance with the Company’s policy for related party realestate sales. Such policy requires an independent appraisal of the propertyvalue, allows for a 3% discount to the sales price in lieu of broker’scommissions, and requires review and approval of the sales price by the AuditCommittee of the Board of Directors (the “Committee”). The Committee reviewedthe appraisals and the terms of the agreements with the other independentDirectors, and the sales were approved by all of the independent Directors. Thesales agreements require a deposit of $50,000 upon execution and the balance ofthe sales price is payable in cash upon closing of the sale. Subdivision of theland parcels is a condition precedent to the closing of the sales. The subjectproperties had been previously designated for sale in 2004 as part of the realestate that is considered non-core to the Company’s operations.

**20.**          SUBSEQUENTEVENTS

On February 26, 2007, the sale of land to DavidC. Cole closed escrow (see Note 19, Related Party Transactions), and theCompany expects to report a gain from this sale of approximately $3.8 millionin the first quarter of 2007.

On February 28, 2007, the Company’s Village(golf) Course closed. The Company intends to construct a new Mauka Course inplace of the Village Course.

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**QUARTERLYEARNINGS(unaudited)**

| ** **                          | ** ** | **First**                                                            | ** ** | **Second**  | ** ** | **Third**   | ** ** | **Fourth**  | ** ** |
|-------------------------------------|------------|----------------------------------------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|
| ** **                          | ** ** | **Quarter**                                                          | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** |
| ** **                          | ** ** | **(in thousands except per share amounts)** | ** ** |
| ***2006***                          |       |                                                                 |       |        |       |        |       |        |       |
| Net sales                           |       | $                                                                    | 48,961     |        | $          | 22,861      |       | $           | 29,768     |   | $ | 36,151 |   |
| Gross profit                        |       | 33,130                                                               |       | 9,612       |       | 12,923      |       | 16,588      |       |
| Net income (loss)                   |       | 13,775                                                               |       | (2,600      | )          | (2,493      | )          | (1,457      | )          |
| Net income (loss)  per common share |       | $                                                                    | 1.90       |        | $          | (.36        | )          | $           | (.34       | ) | $ | (.20 | ) |
| ***2005***                          |       |                                                                 |       |        |       |        |       |        |       |
| Net sales                           |       | $                                                                    | 27,470     |        | $          | 43,809      |       | $           | 35,510     |   | $ | 42,415 |   |
| Gross profit                        |       | 11,827                                                               |       | 24,054      |       | 16,940      |       | 22,846      |       |
| Net income                          |       | 1,255                                                                |       | 6,484       |       | 2,004       |       | 4,826       |       |
| Net income per common  share        |       | $                                                                    | .17        |        | $          | .90         |       | $           | .28        |   | $ | .67 |   |

 

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**SCHEDULE II**

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

**VALUATIONAND QUALIFYING ACCOUNTSFOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004**

| ** **                                     | ** ** | ** **              | ** ** | ** **         | ** ** | **ADDITIONS**         | ** ** | ** **     | ** ** | ** **      | ** ** |
|------------------------------------------------|------------|-------------------------|------------|--------------------|------------|-----------------------|------------|----------------|------------|-----------------|------------|
| ** **                                     | ** ** | ** **              | ** ** | **ADDITIONS**      | ** ** | **(DEDUCTIONS)**      | ** ** | ** **     | ** ** | ** **      | ** ** |
| ** **                                     | ** ** | **BALANCE AT**     | ** ** | **(DEDUCTIONS)**   | ** ** | **TO OTHER**     | ** ** | ** **     | ** ** | **BALANCE**     | ** ** |
| ** **                                     | ** ** | **BEGINNING**           | ** ** | **TO COSTS**  | ** ** | **ACCOUNTS**          | ** ** | **DEDUCTIONS** | ** ** | **AT END** | ** ** |
| **DESCRIPTION**                                | ** ** | ** **              | ** ** | **OF PERIOD** | ** ** | **AND EXPENSES** | ** ** | **(describe)** | ** ** | **(describe)**  | ** ** | **OF PERIOD** | ** ** |
| ** **                                     | ** ** | **(in thousands)** | ** ** |
| Allowance for Doubtful  Accounts     |       |                    |       |               |       |                  |       |           |       |            |       |   |   |   |   |   |   |   |   |   |   |
| 2006                                           |       |                    | $          | 265                |       |                  |       | $              | 563        |            |       |   | $ | — |   |   |   | $ | (273 | )(b) |   |   | $ | 555 |   |   |
| 2005                                           |       |                    | 825        |               |       |                  | (98        | )              |       |            | —     |   |   |   | (462 | )(b) |   |   | 265 |   |   |
| 2004                                           |       |                    | 994        |               |       |                  | 620        |           |       |            | 15         | (a) |   |   | (804 | )(b) |   |   | 825 |   |   |
| Reserve for Environmental  Liability |       |                    |       |               |       |                  |       |           |       |            |       |   |   |   |   |   |   |   |   |   |   |
| 2006                                           |       |                    | $          | 230                |       |                  |       | $              | 3          |            |       |   | $ | — |   |   |   | $ | — |   |   |   | $ | 233 |   |   |
| 2005                                           |       |                    | 420        |               |       |                  | 48         | (d)            |       |            | —     |   |   |   | (238 | )(c) |   |   | 230 |   |   |
| 2004                                           |       |                    | 250        |               |       |                  | 176        | (d)            |       |            | —     |   |   |   | (6 | )(c) |   |   | 420 |   |   |
|                                                |            |                         |            |                    |            |                       |            |                |            |                 |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(a)           Recoveries.

(b)          Write off ofuncollectible accounts.

(c)           Payments.

(d)          Primarily accrued forinstallation of filtration equipment.

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**Item 9.**                        CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

**Item 9A.**                CONTROLSAND PROCEDURES

*EVALUATION OFDISCLOSURE CONTROLS AND PROCEDURES*

The Company’s management, with the participation ofthe Company’s Chief Executive Officer and Chief Financial Officer, hasevaluated the effectiveness of the Company’s disclosure controls and procedures(as such term is defined in Rules 13a-15(e) and 15d-15(e) underthe Securities Exchange Act of 1934, as amended) as of the end of the periodcovered by this report.

Based upon the foregoing, the Company’s ChiefExecutive Officer and Chief Financial Officer concluded that, as of such date,the Company’s disclosure controls and procedures were effective to ensure thatinformation required to be disclosed by the Company in its Exchange Act reportsis recorded, processed, summarized and reported within the time periodsspecified in applicable SEC rules and forms.

The report of the Company’s management on the Company’sinternal control over financial reporting follows this Item 9A.

There have been no changesin the Company’s internal controls over financial reporting (as such term isdefined in Rules 13a-15(f) under the Exchange Act) during the fiscalfourth quarter that has materially affected, or is reasonably likely tomaterially affect, the Company’s internal controls over financial reporting.

*MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVERFINANCIAL REPORTING*

The Management of Maui Land & Pineapple Company, Inc.has the responsibility for establishing and maintaining adequate internalcontrol over financial reporting. Internal control over financial reporting isdefined in Rule 13a- 15(f) and 15d- 15(f) under the SecuritiesExchange Act of 1934, as amended, as a process designed by, or under thesupervision of, the Company’s principal executive and principal financialofficers and effected by the Company’s board of directors, management and otherpersonnel to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for externalpurposes in accordance with accounting principles generally accepted in theUnited States of America and includes those policies and procedures that:

·       Pertain to the maintenanceof records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of assets of the Company;

·       Provide reasonable assurancethat transactions are recorded as necessary to permit preparation of financialstatements in accordance with accounting principles generally accepted in theUnited States of America, and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directorsof the Company; and

·       Provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use ordisposition of the Company’s assets that could have a material effect on theconsolidated financial statements.

Because ofits inherent limitations, internal control over financial reporting onlyprovides reasonable assurance with respect to financial statement presentationand preparation. Projections of any evaluation of effectiveness to futureperiods are subject to the risks that controls may become inadequate because ofchanges in conditions, or that the degree of compliance with the policies orprocedures may deteriorate.

67

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Management assessed the effectiveness of the Company’sinternal control over financial reporting as of December 31, 2006. Inmaking this assessment, Management used the criteria set forth by the Committeeof Sponsoring Organizations of the Treadway Commission (COSO) in *Internal Control—Integrated Framework.*Based on itsassessments, Management believes that, as of December 31, 2006, theCompany’s internal control over financial reporting is effective. The Company’sindependent registered public accounting firm, Deloitte & Touche LLP,has issued an audit report on Management’s assessment of the Company’s internalcontrol over financial reporting. That report appears on page 34 of this Form 10-K.

*MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING*

Managementis also responsible for preparing the accompanying consolidated financialstatements and related notes accurately and objectively. The statements havebeen prepared in accordance with accounting principles generally accepted inthe United States of America, consistently applied, and necessarily includeamounts based on judgments and estimates made by Management. Management alsoprepared the other information in this Form 10-K and is responsiblefor its accuracy and consistency with the consolidated financial statements.

The Company’sconsolidated financial statements have been audited by Deloitte &Touche LLP and its report appears on page 34 of this Form 10-K.Management has made available to Deloitte & Touche LLP all of theCompany’s financial records and related data. Furthermore, Management believesthat all representations made to Deloitte & Touche LLP during itsaudit were valid and appropriate.

The Board of Directors, through its Audit Committee(composed solely of independent directors), oversees Management’sresponsibilities in the preparation of the consolidated financial statements. TheAudit Committee appoints the independent auditors, subject to shareholderratification. The Audit Committee meets regularly with the external andinternal auditors to evaluate the effectiveness of their work in dischargingtheir respective responsibilities and to assure their independent and freeaccess to the Committee.
| /s/ DAVID C. COLE                                           |   | /s/ ROBERT I. WEBBER                                                             |   |
|-------------------------------------------------------------|--------|----------------------------------------------------------------------------------|--------|
| Chairman, President & Chief Executive Officer |   | Chief  Financial Officer & Senior Vice President/  Business Development |
| March 7, 2007                                          |   | March 7,  2007                                                              |

**Item 9B.**               OTHERINFORMATION

None.

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**PART III**

**Item 10.**                 DIRECTORS,EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information set forth under “—Section 16(a) Beneficial OwnershipReporting Compliance” and “Election of Directors” in the Maui Land &Pineapple Company, Inc. Proxy Statement, to be filed no later than 120days after the close of the registrant’s fiscal year ended December 31,2006, is incorporated herein by reference.

The Company’s Board ofDirectors approved the Amended Code of Ethics in November 2005 that coversthe Principal Executive Officer, Principal Financial Officer, PrincipalAccounting Officer and all other employees of the Company. A copy of the Codeof Ethics will be furnished, free of charge, upon written request to:  Corporate Secretary, Maui Land & PineappleCompany, Inc., P. O. Box 187, Kahului, Hawaii 96733-6687; or email:communications@mlpmaui.com.

**Item 11.**                 EXECUTIVECOMPENSATION

The information set forth under “ExecutiveCompensation,” and “—Director Compensation” in the Maui Land &Pineapple Company, Inc. Proxy Statement, to be filed no later than 120days after the close of the registrant’s fiscal year ended December 31,2006, is incorporated herein by reference.

The material incorporatedherein by reference to the material under the caption “—Compensation CommitteeReport” in the Proxy Statement shall be deemed furnished, and not filed, inthis Report on Form 10-K and shall not be deemed incorporated byreference into any filing under the Securities Act of 1933, as amended, or theSecurities Exchange Act of 1934, as amended, as a result of this furnishing,except to the extent that the Registrant specifically incorporates it byreference.

**Item 12.**                 SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS

The information set forthunder “Security Ownership of Certain Beneficial Owners” in the Maui Land &Pineapple Company, Inc. Proxy Statement, to be filed no later than 120days after the close of the registrant’s fiscal year ended December 31,2006, is incorporated herein by reference, with the exception of theinformation regarding securities authorized for issuance under our equitycompensation plans, which is set forth in Item 5 of this Annual Report on Form 10-Kunder the heading “Securities Authorized For Issuance under Equity CompensationPlans” and is incorporated herein by reference.

**Item 13.**                 CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information set forthunder “Certain Relationship and Related Transactions,” and “—Director Independence” in the Maui Land &Pineapple Company, Inc. Proxy Statement, to be filed no later than120 days after the close of the registrant’s fiscal year ended December 31,2006, is incorporated herein by reference.

**Item 14.**                 PRINCIPALACCOUNTANT FEES AND SERVICES

Information set forth under “Independent RegisteredPublic Accounting Firm” in the Maui Land & Pineapple Company, Inc.Proxy Statement, to be filed no later than 120 days after the close of theregistrant’s fiscal year ended December 31, 2006, is incorporated hereinby reference.

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**PART IV**

**Item 15.**              EXHIBITSAND FINANCIAL STATEMENT SCHEDULE

**1.**              FinancialStatements

The following FinancialStatements of Maui Land & Pineapple Company, Inc. andsubsidiaries and Report of Independent Registered Public Accounting Firm areincluded in Item 8 of this report:

ConsolidatedStatements of Operations for the Years Ended December 31, 2006, 2005 and 2004

ConsolidatedBalance Sheets, December 31, 2006 and 2005

ConsolidatedStatements of Comprehensive Income (Loss) for the Years Ended December 31, 2006, 2005 and 2004

ConsolidatedStatements of Stockholders’ Equity for the Years Ended December 31, 2006, 2005 and 2004

ConsolidatedStatements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004

Notes to ConsolidatedFinancial Statements

**2.**              FinancialStatement Schedules

The followingFinancial Statement Schedule of Maui Land & Pineapple Company, Inc.and subsidiaries is filed herewith:

II.             Valuationand Qualifying Accounts for the Years Ended December 31, 2006, 2005 and2004.

**3.**              Exhibits

| 3.1 |   | Restated Articles of  Association, as of February 24, 2000 (Filed as Exhibit 3(i) to  Form 10-K for the year ended December 31, 1999 and  incorporated herein by reference).                                                                                                                                                                    |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2 |   | Articles of Amendment to  Restated Articles of Association. (Filed as Exhibit 3.1(i) to  Amendment No. 1 to Registration Statement on Form 8-A/A, File  No. 001-06510, filed January 5, 2004, and incorporated herein  by reference.).                                                                                                     |
| 3.3 |   | Bylaws (Amended as of  December 11, 2003) (Filed as Exhibit 3.1(ii) to Amendment  No. 1 to Registration Statement on Form 8-A/A, File  No. 001-06510, filed January 5, 2004, and incorporated herein  by reference).                                                                                                                  |
| 4.1 |   | Amended and Fourth  Restated Revolving Credit Agreement between Bank of Hawaii, First Hawaiian  Bank, Central Pacific Bank, American AgCredit, PCA, and Bank of Hawaii, as  Agent for the Lenders., dated as of May 17, 2005 (Filed as  Exhibit 4 to Form 10-Q for the quarter ended June 30,  2005 and incorporated herein by reference).           |
| 4.2 |   | Bridge Loan Agreement  between Pacific Coast Farm Credit Services, ACA and Maui Land &  Pineapple Company, Inc., dated December 30, 1998. (Filed as  Exhibit 4.2(i) to Form 10-K for the year ended  December 31, 1998 and incorporated herein by reference).                                                                     |
| 4.3 |   | Revolving line of Credit  Loan Agreement between American AgCredit, FLCA, successor in interest to  Pacific Coast Farm Credit Services, ACA and Maui Land & Pineapple  Company, Inc., dated as of September 1, 2005 (Filed as  Exhibit 4 to Form 10-Q for the quarter ended  September 30, 2005 and incorporated herein by reference). |

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| 4.4        |   | First Amendment to  Revolving Line of Credit Loan Agreement between American AgCredit, FLCA,  successor in interest to Pacific Coast Farm Credit Services, ACA and Maui  Land & Pineapple Company, Inc., dated December 4, 2006  (Filed as Exhibit 10.1 to Form 8-K filed December 19,  2006 and incorporated herein by reference).                                                    |
|------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1       |   | Second Amended and  Restated Hotel Ground Lease (The Ritz-Carlton, Kapalua) between Maui  Land & Pineapple Company, Inc. (Lessor) and RCK Hawaii, LLC dba  RCK Hawaii-Maui (Lessee), effective as of January 31, 2001 (Filed as  Exhibit 10.2(i) to Form 10-K for the year ended  December 31, 2000 and incorporated herein by reference).                                        |
| 10.2† |   | Executive Deferred  Compensation Plan (revised as of 8/16/91) (Filed as Exhibit (10)A to  Form 10-Q for the quarter ended September 30, 1994 and  incorporated herein by reference).                                                                                                                                                                                                                      |
| 10.3† |   | Supplemental Executive  Retirement Plan (effective as of January 1, 1988) (Filed as  Exhibit (10)B to Form 10-K for the year ended  December 31, 1988 and incorporated herein by reference).                                                                                                                                                                                                         |
| 10.4† |   | Restated and Amended  Change-In-Control Severance Agreement (Warren A. Suzuki, Vice President/Land  Management), dated as of March 16, 1999 (Filed as Exhibit 10.3  (viii) to Form 10-K for the year ended December 31, 1998  and incorporated herein by reference).                                                                                                                            |
| 10.5† |   | Executive Severance  Plan, as amended through November 6, 1998 (Filed as Exhibit 10.3  (x) to Form 10-K for the year ended December 31, 1998  and incorporated herein by reference).                                                                                                                                                                                                            |
| 10.6† |   | Employment Agreement  effective as of October 6, 2003 by and between Maui Land &  Pineapple Company, Inc. and David C. Cole (Filed as  Exhibit 10.3(viii) to Form 10-K for the year ended  December 31, 2003 and incorporated herein by reference).                                                                                                                               |
| 10.7† |   | Maui Land &  Pineapple Company, Inc. Stock Option Agreement for David Cole, dated  October 6, 2003 (Filed as Exhibit 10.3 (ix) to Form 10-K  for the year ended December 31, 2003 and incorporated herein by  reference).                                                                                                                                                         |
| 10.8† |   | Maui Land &  Pineapple Company, Inc. Restricted Share Agreement for David Cole, dated  October 6, 2003 (Filed as Exhibit 10.3(x) to Form 10-K  for the year ended December 31, 2003 and incorporated herein by  reference).                                                                                                                                                       |
| 10.9† |   | Maui Land &  Pineapple Company, Inc. 2006 Equity and Incentive Award Plan (Incorporated  by reference to Appendix B of the Definitive Proxy Statement on Schedule 14A  filed on March 27, 2006).                                                                                                                                                                                                      |
| 10.10      |   | Kapalua Bay  Hotel & Villas, Purchase and Sale Agreement and Escrow Instructions,  Between YCP Kapalua L.P. and YCP Kapalua Operator, Inc., collectively,  as seller, and Maui Land & Pineapple Company, Inc. as  Purchaser, as of April 30, 2004 (Filed as Exhibit 10(A) to  Form 10-Q for the quarter ended June 30, 2004 and  incorporated herein by reference). |
| 10.11      |   | Limited Liability  Company Agreement of Kapalua Bay Holdings, LLC, dated August 31, 2004  (Filed as Exhibit 10(A) to Form 10-Q for the quarter  ended September 30, 2004 and incorporated herein by reference).                                                                                                                                                                                 |

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| 10.12       |   | First Amendment to  Purchase and Sale Agreement and Joint Escrow Instructions, entered into as of  August 6, 2004, by and among YCP Kapalua L.P., and YCP Kapalua  Operator, Inc., and Maui Land & Pineapple Company, Inc.  (Filed as Exhibit 10(B) to Form 10-Q for the quarter  ended September 30, 2004 and incorporated herein by reference). |
|-------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.13       |   | Termination of Hotel  Ground Lease, effective as of August 31, 2004 (Filed as  Exhibit 10(C) to Form 10-Q for the quarter ended  September 30, 2004 and incorporated herein by reference).                                                                                                                                                                           |
| 10.14       |   | Settlement Agreement and  Release of All Claims (Board of Water Supply of the County of Maui vs. Shell  Oil Company, et al.) (Filed as Exhibit 10.5(i) to Form 10-K  for the year ended December 31, 1999 and incorporated herein by  reference).                                                                                                                         |
| 10.15       |   | Summary of Terms of  Consulting Agreement Between Maui Land & Pineapple Company, Inc.  and Director Thomas M. Gottlieb, effective as of June 15, 2004 (Filed as  Exhibit 10(B) to Form 10-Q for the quarter ended  June 30, 2004 and incorporated herein by reference).                                                                                |
| 10.16       |   | Cancellation of  Consulting Agreement between the Maui Land & Pineapple  Company, Inc. and Thomas M. Gottlieb, entered into on October 29,  2004, and effective as of September 15, 2004 (Filed as Exhibit 99  to Form 8-K dated November 1, 2004 and incorporated herein by  reference).                                                              |
| 10.17       |   | Purchase and Sale  Agreement effective as of March 14, 2006, by and between Maui  Land & Pineapple Company, Inc. and David C. Cole and Margaret  Cole (Filed as Exhibit 10 to Form 10-Q for the quarter ended  March 31, 2006 and incorporated herein by reference).                                                                                        |
| 10.18       |   | Construction Loan Agreement  between Kapalua Bay Holdings, LLC, and Lehman Brothers Holdings, Inc.  (Filed as Exhibit 10.1 to Form 8-K filed July 20, 2006  and incorporated herein by reference).                                                                                                                                                                        |
| 10.19       |   | Fee and Leasehold  Mortgage, Security Agreement and Fixture Filing made by Kapalua Bay, LLC in  favor of Lehman Brothers Holdings, Inc. (Filed as Exhibit 10.2 to  Form 8-K filed July 20, 2006 and incorporated herein by  reference).                                                                                                                                   |
| 10.20       |   | Promissory Note issued  by Kapalua Bay, LLC to Lehman Brothers Holdings, Inc. (Filed as  Exhibit 10.3 to Form 8-K filed July 20, 2006 and  incorporated herein by reference).                                                                                                                                                                                             |
| 10.21       |   | Completion Guaranty made  by Maui Land & Pineapple Company, Inc., The Ritz-Carlton  Development Company, Inc. and Exclusive Resorts Development Company, LLC  in favor of Lehman Brothers Holdings, Inc. (Filed as Exhibit 10.4  to Form 8-K filed July 20, 2006 and incorporated herein by  reference).                                               |
| 10.22       |   | Recourse Guaranty made  by Maui Land & Pineapple Company, Inc., The Ritz-Carlton  Development Company, Inc. and Exclusive Resorts Development Company, LLC  in favor of Lehman Brothers Holdings, Inc. (Filed as Exhibit 10.5  to Form 8-K filed July 20, 2006 and incorporated herein by  reference).                                                 |
| 10.23† |   | Amendment to Stock  Option Agreement dated August 7, 2006, by and between Maui  Land & Pineapple Company, Inc. and David C. Cole (Filed as  Exhibit 10.1 to Form 10-Q for the quarter ended June 30,  2006 and incorporated herein by reference).                                                                                                           |

72

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| 10.24† |   | Restricted Stock Award  Agreement and Award Grant Notice, dated as of August 4, 2006, by and  between Maui Land & Pineapple Company, Inc. and David C. Cole  (Filed as Exhibit 10.2 to Form 10-Q for the quarter ended  June 30, 2006 and incorporated herein by reference).                   |
|-------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.25† |   | Stock Option Agreement  and Stock Option Grant Notice, dated as of August 4, 2006, by and  between Maui Land & Pineapple Company, Inc. and David C. Cole  (Filed as Exhibit 10.3 to Form 10-Q for the quarter ended  June 30, 2006 and incorporated herein by reference).                      |
| 10.26† |   | Amendment to Stock  Option Agreement, dated as of August 7, 2006, by and between Maui  Land & Pineapple Company, Inc. and Brian C. Nishida (Filed as  Exhibit 10.4 to Form 10-Q for the quarter ended June 30,  2006 and incorporated herein by reference).                                    |
| 10.27† |   | Employment Agreement,  dated August 4, 2006, by and between Maui Land & Pineapple  Company, Inc. and Robert I. Webber (Filed as Exhibit 10.5 to  Form 10-Q for the quarter ended June 30, 2006 and  incorporated herein by reference).                                                         |
| 10.28† |   | Restricted Stock Award  Agreement and Award Grant Notice, dated as of August 7, 2006, by and  between Maui Land & Pineapple Company, Inc. and Brian C.  Nishida (Filed as Exhibit 10.6 to Form 10-Q for the quarter  ended June 30, 2006 and incorporated herein by reference).                |
| 10.29† |   | Restricted Stock Award  Agreement and Award Grant Notice, dated as of August 4, 2006, by and  between Maui Land & Pineapple Company, Inc. and Robert I.  Webber (Filed as Exhibit 10.7 to Form 10-Q for the quarter  ended June 30, 2006 and incorporated herein by reference).                |
| 10.30† |   | Restricted Stock Award  Agreement and Award Grant Notice, dated as of August 4, 2006, by and  between Maui Land & Pineapple Company, Inc. and Fred W. Rickert  (Filed as Exhibit 10.8 to Form 10-Q for the quarter ended  June 30, 2006 and incorporated herein by reference).                 |
| 10.31† |   | Form of Award Grant  Notice and Stock Option Agreement, pursuant to the Maui Land &  Pineapple Company, Inc. 2006 Equity and Incentive Award Plan (Filed as  Exhibit 10.9 to Form 10-Q for the quarter ended June 30,  2006 and incorporated herein by reference).                             |
| 10.32† |   | Form of Restricted  Stock Award Grant Notice and Restricted Stock Award Agreement, pursuant to  the Maui Land & Pineapple Company, Inc. 2006 Equity and  Incentive Award Plan (Filed as Exhibit 10.10 to Form 10-Q for  the quarter ended June 30, 2006 and incorporated herein by reference). |
| 10.33       |   | First Amendment to  Purchase and Sale Agreement, dated as of August 7, 2006, by and between  Maui Land & Pineapple Company, Inc. and David C. Cole (Filed as  Exhibit 10.11 to Form 10-Q for the quarter ended  June 30, 2006 and incorporated herein by reference).                           |
| 10.34       |   | Purchase and Sale  Agreement, dated August 7, 2006, by and between Maui Land &  Pineapple Company, Inc. and Duncan MacNaughton (Filed as  Exhibit 10.12 to Form 10-Q for the quarter ended  June 30, 2006 and incorporated herein by reference).                                               |
| 10.35       |   | Termination of Purchase  and Sale Agreement dated August 7, 2006 between Duncan MacNaughton and  Maui Land & Pineapple Company, Inc. (Filed as Exhibit 10.1  to Form 10-Q for the quarter ended September 30, 2006 and  incorporated herein by reference).                                     |

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| 10.36† |   | Separation of Employment  Agreement between Thomas Juliano and Kapalua Land Company, Ltd., dated  October 24, 2006 and effective as of November 3, 2006 (Filed as  Exhibit 10.2 to Form 10-Q for the quarter ended  September 30, 2006 and incorporated herein by reference).               |
|-------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.37       |   | Promissory Note issued  by Maui Land & Pineapple Company, Inc. in favor of GE Capital  Public Finance, Inc., dated September 29, 2006 (Filed as  Exhibit 10.1 to Form 8-K filed October 5, 2006 and  incorporated herein by reference).                                       |
| 10.38       |   | Guaranty Agreement made  by Maui Land & Pineapple Company, Inc. in favor of GE Capital  Public Finance, Inc., dated September 29, 2006 (Filed as  Exhibit 10.2 to Form 8-K filed October 5, 2006 and  incorporated herein by reference).                                      |
| 10.39       |   | Loan Agreement (Real  Estate) between Bank of Hawaii and Maui Land & Pineapple  Company, Inc., dated October 1, 2006 (Filed as Exhibit 10.1 to  Form 8-K filed November 2, 2006 and incorporated herein by  reference).                                                            |
| 10.40       |   | Mortgage, Security  Agreement, Assignment of Leases and Rents and Fixture Filing made by Maui  Land & Pineapple Company, Inc. in favor of Bank of Hawaii,  dated October 1, 2006 (Filed as Exhibit 10.2 to Form 8-K  filed November 2, 2006 and incorporated herein by reference). |
| 11.         |   | Statement re computation  of per share earnings. See Earnings Per Common Share under Note 1 to the  Consolidated Financial Statements.                                                                                                                                                                               |
| 21.*        |   | Subsidiaries of Maui  Land & Pineapple Company, Inc.                                                                                                                                                                                                                                                   |
| 23.*        |   | Consent of  Deloitte & Touche LLP, Independent Registered Public Accounting  Firm, dated March 7, 2007.                                                                                                                                                                                                |
| 31.1*       |   | Certification of Chief  Executive Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of  the Securities Exchange Act of 1934.                                                                                                                                                                             |
| 31.2*       |   | Certification of Chief  Financial Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of  the Securities Exchange Act of 1934.                                                                                                                                                                             |
| 32.1**      |   | Certification of Chief  Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.                                                                                                                          |
| 99.*        |   | Financial Statements for  Kapalua Bay Holdings, LLC for the years ended December 31, 2006 and  December 31, 2005 and the period from August 31, 2004 (date of  inception) through December 31, 2004.                                                                                             |

----

*                    Filedherewith.

**             Furnished herewithand not “filed” for purposes of Section 18 of the Securities Exchange Actof 1934, as amended

†                     Managementcontract or compensatory plan or arrangement required to be filed as an exhibitto this Form pursuant to Item 15(c) of Form 10-K.

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the Registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized, on March 7, 2007.

|        | MAUI LAND &  PINEAPPLE COMPANY, INC. |
|--------|-----------------------------------------------|
|   | By                                            | /s/  DAVID C. COLE |
|   |                                          | David C. Cole |
|   |                                          | *President &  Chief Executive Officer* |

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, this report has been signed below by the followingpersons on behalf of the Registrant and in the capacities and on the datesindicated.
| By     |   | /s/ DAVID C. COLE                                                                                                               |   | Date   |   | March 7,  2007 |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|---------------------|
|   |   | David C. Cole, Chairman of the Board, President &  Chief Executive Officer  (Principal Executive Officer)                   |   |   |   |                |
| By     |   | /s/ JOHN H. AGEE                                                                                                                |   | Date   |   | March 7,  2007 |
|   |   | John H. Agee, Director                                                                                                          |   |   |   |                |
| By     |   | /s/ WALTER A. DODS, JR.                                                                                                         |   | Date   |   | March 7,  2007 |
|   |   | Walter A. Dods, Jr., Director                                                                                              |   |   |   |                |
| By     |   | /s/ THOMAS M. GOTTLIEB                                                                                                          |   | Date   |   | March 7,  2007 |
|   |   | Thomas M. Gottlieb, Director                                                                                                    |   |   |   |                |
| By     |   | /s/ WARREN H. HARUKI                                                                                                            |   | Date   |   | March 7,  2007 |
|   |   | Warren H. Haruki                                                                                                                |   |   |   |                |
| By     |   | /s/ DAVID A. HEENAN                                                                                                             |   | Date   |   | March 7,  2007 |
|   |   | David A. Heenan, Director                                                                                                       |   |   |   |                |
| By     |   | /s/ KENT T. LUCIEN                                                                                                              |   | Date   |   | March 7,  2007 |
|   |   | Kent T. Lucien, Director                                                                                                        |   |   |   |                |
| By     |   | /s/ DUNCAN MACNAUGHTON                                                                                                          |   | Date   |   | March 7,  2007 |
|   |   | Duncan MacNaughton, Director                                                                                                    |   |   |   |                |
| By     |   | /s/ FRED E. TROTTER III                                                                                                         |   | Date   |   | March 7,  2007 |
|   |   | Fred E. Trotter III, Director                                                                                                   |   |   |   |                |
| By     |   | /s/ ROBERT I. WEBBER                                                                                                            |   | Date   |   | March 7,  2007 |
|   |   | Robert I. Webber, Chief Financial Officer &  Senior Vice President/Business Development  (Principal Financial Officer) |   |   |   |                |
| By     |   | /s/ ADELE H. SUMIDA                                                                                                             |   | Date   |   | March 7,  2007 |
|   |   | Adele H. Sumida, Controller & Secretary  (Principal Accounting Officer)                                                |   |   |   |                |

 

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