Kapalua Coconut
Grove LLC
Financial Statements for the Years
Ended December 31, 2001, 2000 and 1999
and Independent Accountants' Report
INDEPENDENT ACCOUNTANTS' REPORT
To the Owners of Kapalua Coconut Grove LLC:
We have audited the accompanying statement of financial
position of Kapalua Coconut Grove LLC as of December 31, 2001,
and the related statements of operations, changes in members'
equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial position of Kapalua
Coconut Grove LLC at December 31, 2001, and the results of its
operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the
United States of America.
The accompanying statement of financial position of Kapalua
Coconut Grove LLC as of December 31, 2000, and the related
statements of operations, changes in members' equity, and cash
flows for each of the two years in the period ended December
31, 2000 were not audited by us and, accordingly, we do not
express an opinion on them.
/S/DELOITTE & TOUCHE LLP
Honolulu, Hawaii
February 12, 2002
KAPALUA COCONUT GROVE LLC
STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 2001 AND 2000
ASSETS 2001 2000
(Unaudited)
CASH AND CASH
EQUIVALENTS $1,559,250 $ 24,691
ACCOUNTS RECEIVABLE 237,141
WORK IN PROGRESS 35,405,234
TOTAL $1,559,250 $35,667,066
LIABILITIES AND
MEMBERS' EQUITY 2001 2000
(Unaudited)
LIABILITIES:
Customer deposits $14,617,028
Notes payable 3,313,865
Accounts payable and
accrued liabilities $ 787,113 5,320,618
Contractors' retention
payable 753,243 1,682,981
Total liabilities 1,540,356 24,934,492
MEMBERS' EQUITY 18,894 10,732,574
TOTAL $1,559,250 $35,667,066
See notes to financial statements.
KAPALUA COCONUT GROVE LLC
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999
(Unaudited) (Unaudited)
REVENUES:
Real estate sales $70,250,191
Other 15,222 $ 237,236 $ 4,532
Total revenues 70,265,413 237,236 4,532
COSTS AND EXPENSES:
Cost of real estate sales 54,419,251
Selling and marketing 1,756,750
General and administrative 103,092 361,622 349,992
Total costs and expenses 56,279,093 361,622 349,992
NET INCOME (LOSS) $13,986,320 $(124,386) $(345,460)
See notes to financial statements.
KAPALUA COCONUT GROVE LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
Kapalua YCP Site
Land Co. 29, Inc. Total
BALANCE, JANUARY 1, 1999
(Unaudited) $ 5,026,210 $ 5,026,21 $10,052,420
Net loss (172,730) (172,730) (345,460)
Cash contributions 575,000 575,000 1,150,000
BALANCE, DECEMBER 31, 1999
(Unaudited) 5,428,480 5,428,480 10,856,960
Net loss (62,193) (62,193) (124,386)
BALANCE, DECEMBER 31, 2000
(Unaudited) 5,366,287 5,366,287 10,732,574
Net income 6,993,160 6,993,160 13,986,320
Cash distributions (12,350,000) (12,350,000) (24,700,000)
BALANCE, DECEMBER 31, 2001 $ 9,447 $ 9,447 $ 18,894
See notes to financial statements.
KAPALUA COCONUT GROVE LLC
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999
(Unaudited) (Unaudited)
OPERATING ACTIVITIES:
Net income (loss) $13,986,320 $(124,386) $(345,460)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Changes in assets and liabilities:
Accounts receivable 237,141 (237,141)
Work in progress 35,405,234 (23,135,748) (2,439,303)
Customer deposits (14,617,028) 14,617,028
Accounts payable, accrued
liabilities and
retentions payable (5,463,243) 6,133,831 830,644
Net cash provided by
(used in) operating
activities 29,548,424 (2,746,416) (1,954,119)
FINANCING ACTIVITIES:
Repayments on notes payable (33,889,817)
Borrowings on notes payable 30,575,952 2,747,711 566,155
Contributions from owners 1,150,000
Distributions to owners (24,700,000)
Net cash provided by
(used in) financing
activities (28,013,865) 2,747,711 1,716,155
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,534,559 1,295 (237,964)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 24,691 23,396 261,360
CASH AND CASH EQUIVALENTS,
END OF YEAR $1,559,250 $ 24,691 $ 23,396
See notes to financial statements.
KAPALUA COCONUT GROVE LLC
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 (UNAUDITED) AND 1999
(UNAUDITED)
1. ORGANIZATION
Kapalua Coconut Grove LLC ("KCG") is a Hawaii limited
liability company whose members are Kapalua Land Company,
Ltd., a subsidiary of Maui Land & Pineapple Company, Inc., and
YCP Site 29, Inc. KCG was formed in June 1997 to own,
develop, and sell luxury condominiums on the 12-acre parcel of
beachfront property adjacent to the Kapalua Bay Hotel. Each
member has a 50% interest in KCG. Kapalua Land Company, Ltd.
previously owned the land and sold 50% of the parcel at fair
market value to YCP Site 29, Inc. Each member contributed to
the company its 50% interest in the land parcel for a total of
$9.0 million and $1.1 million in cash.
Neither member is personally liable for any debt, obligation
or liability of KCG. The KCG operating agreement expires on
December 31, 2095, unless sooner dissolved as allowed for in
the agreement.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents - KCG considers all highly liquid
investments with maturities of three months or less at the
date of purchase to be cash equivalents.
Work in Progress - Work in progress is stated at the lower of
cost or fair value, and includes all direct and indirect
development costs and interest charges.
Income Taxes - The net income of KCG for federal and state
income tax purposes is reported by the members in their
separate tax returns; accordingly, the KCG financial
statements do not include any provision for income taxes.
Use of Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in
the United States of America requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
periods. Actual amounts could differ from those estimates.
3. WORK IN PROGRESS
Work in progress as of December 31, 2000 consisted of:
Site construction $22,086,000
Land 9,000,000
Project management and administration 1,997,000
Design, engineering, and planning 1,440,000
Financing 464,000
Marketing 418,000
Total $35,405,000
4. NOTES PAYABLE
The $33,000,000 revolving construction loan was collateralized
by the land and improvements, and interest was at the bank's
base rate. At December 31, 2000, the balance outstanding was
$3,314,000, and the notes were paid in full during 2001.
5. REAL ESTATE SALES
Presales of the 36 luxury, residential condominiums
constructed on the parcel began in 1999 and construction of
all units were completed during the year ended December 31,
2001. As of December 31, 2001, sales of all units have been
closed, title has been delivered to the buyers, and proceeds
have been received by KCG.
6. COST OF REAL ESTATE SALES
Cost of real estate sales for the year ended December 31, 2001
includes all costs related to the project as follows:
Site construction $39,447,000
Land 9,000,000
Project management and administration 2,692,000
Design, engineering, and planning 1,496,000
Financing 1,103,000
Marketing 681,000
Total $54,419,000
7. RELATED PARTY TRANSACTIONS
Kapalua Land Company, Ltd. was the managing member of KCG and
provided services at $10,000 per month from July 1997 through
June 2001, which was capitalized to the project.
Kapalua Realty Company, Ltd., an affiliate of Kapalua Land
Company, Ltd., provided real estate services and was paid
$1,334,000 in sales commissions for the year ended December
31, 2001. Such amounts have been included in selling and
marketing expenses in the statements of operations.
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