MAUI LAND & PINEAPPLE CO INC - Quarter Report: 2021 March (Form 10-Q)

 

 

Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

☒         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2021

 

OR

 

☐         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number 001-06510

 

MAUI LAND & PINEAPPLE COMPANY, INC.

(Exact name of registrant as specified in its charter)

 

HAWAII		99-0107542
(State or other jurisdiction		(IRS Employer
of incorporation or organization)		Identification No.)

 

200 Village Road, Lahaina, Maui, Hawaii 96761

(Address of principal executive offices)

 

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

 

None

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

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, no par value		MLP		NYSE

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒ Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class		Outstanding at April 21, 2021
Common Stock, no par value		19,432,398 shares

 

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MAUI LAND & PINEAPPLE COMPANY, INC.

AND SUBSIDIARIES

 

 

TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION	3
Item 1. Financial Statements (unaudited)	3
Condensed Consolidated Balance Sheets, March 31, 2021 and December 31, 2020	3
Condensed Consolidated Statements of Operations and Comprehensive Loss, Three Months Ended March 31, 2021 and 2020	4
Condensed Consolidated Statements of Changes in Stockholders’ Equity, Three Months Ended March 31, 2021 and 2020	5
Condensed Consolidated Statements of Cash Flows, Three Months Ended March 31, 2021 and 2020	6
Notes to Condensed Consolidated Interim Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Cautionary Note Regarding Forward-Looking Statements	17
Item 3. Quantitative and Qualitative Disclosures About Market Risk	18
Item 4. Controls and Procedures	18
PART II. OTHER INFORMATION	19
Item 1. Legal Proceedings	19
Item 1A. Risk Factors	19
Item 6. Exhibits	19
Signature	20
EXHIBIT INDEX	21
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Exhibit 101

 

 

		March 31,				December 31,
		2021				2020
		(unaudited)				(audited)
		(in thousands except share data)
CURRENT ASSETS
Cash		$	458			$	869
Accounts receivable, net			1,493				1,362
Prepaid expenses and other assets			138				80
Assets held for sale			7,336				7,440
Total current assets			9,425				9,751
PROPERTY			51,988				51,956
Accumulated depreciation			(33,745	)			(33,445	)
Property, net			18,243				18,511
OTHER ASSETS
Deferred development costs			8,943				8,901
Other noncurrent assets			1,287				1,307
Total other assets			10,230				10,208
TOTAL ASSETS		$	37,898			$	38,470
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable		$	985			$	899
Payroll and employee benefits			451				970
Long-term debt, current portion			800				200
Accrued retirement benefits, currernt portion			165				165
Deferred revenue, current portion			472				260
Other current liabilities			508				453
Total current liabilities			3,381				2,947
LONG-TERM LIABILITIES
Accrued retirement benefits			10,232				10,926
Deferred revenue			1,733				1,767
Deposits			2,636				2,680
Other noncurrent liabilities			75				83
Total long-term liabilities			14,676				15,456
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock--no par value, 43,000,000 shares authorized, 19,351,489 and 19,311,528 shares issued and outstanding			81,972				81,485
Additional paid-in-capital			9,184				9,184
Accumulated deficit			(49,838	)			(48,904	)
Accumulated other comprehensive loss			(21,477	)			(21,698	)
Total stockholders' equity			19,841				20,067
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY		$	37,898			$	38,470

 

		Three Months Ended March 31,
		2021				2020
		(in thousands except
		per share amounts)
OPERATING REVENUES
Real estate		$	-			$	69
Leasing			1,801				1,736
Resort amenities and other			258				230
Total operating revenues			2,059				2,035
OPERATING COSTS AND EXPENSES
Real estate			97				175
Leasing			840				776
Resort amenities and other			412				570
General and administrative			719				760
Share-based compensation			349				425
Depreciation			300				323
Total operating costs and expenses			2,717				3,029
OPERATING LOSS			(658	)			(994	)
Other income			13				-
Pension and other post-retirement expenses			(116	)			(117	)
Interest expense			(33	)			(46	)
LOSS FROM CONTINUING OPERATIONS		$	(794	)		$	(1,157	)
Income (Loss) from discontinued operations, net			(140	)			83
NET LOSS		$	(934	)		$	(1,074	)
Pension, net			221				206
TOTAL COMPREHENSIVE LOSS		$	(713	)		$	(868	)
EARNINGS (LOSS) PER COMMON SHARE-BASIC AND DILUTED
Loss from Continuing Operations		$	(0.04	)		$	(0.06	)
Income (Loss) from Discontinued Operations		$	(0.01	)		$	-
Net Loss		$	(0.05	)		$	(0.06	)

 

																		Accumulated
										Additional								Other
		Common Stock								Paid in				Accumulated				Comprehensive
		Shares				Amount				Capital				Deficit				Loss				Total
Balance, January 1, 2021			19,312			$	81,485			$	9,184			$	(48,904	)		$	(21,698	)		$	20,067
Share-based compensation			60				748				163												911
Vested restricted stock issued			14				163				(163	)											-
Shares canceled to pay tax liability			(34	)			(424	)															(424	)
Other comprehensive income - pension																			221				221
Net loss															(934	)							(934	)
Balance, March 31, 2021			19,352			$	81,972			$	9,184			$	(49,838	)		$	(21,477	)		$	19,841
Balance, January 1, 2020			19,238			$	80,606			$	9,184			$	(46,300	)		$	(20,798	)		$	22,692
Share-based compensation			68				865				186												1,051
Vested restricted stock issued			17				186				(186	)											-
Shares canceled to pay tax liability			(42	)			(522	)															(522	)
Other comprehensive income - pension																			206				206
Net loss															(1,074	)							(1,074	)
Balance, March 31, 2020			19,281			$	81,135			$	9,184			$	(47,374	)		$	(20,592	)		$	22,353

 

		Three Months Ended March 31,
		2021				2020
		(in thousands)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES		$	(513	)		$	1,453
CASH USED IN INVESTING ACTIVITIES
Payments for property and deferred development costs			(74	)			(48	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt			600				700
Payments on long-term debt			-				(1,500	)
Debt and common stock issuance costs and other			(424	)			(522	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES			176				(1,322	)
NET (DECREASE) INCREASE IN CASH			(411	)			83
CASH AT BEGINNING OF PERIOD			869				683
CASH AT END OF PERIOD		$	458			$	766
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest:		$	5			$	14

 

SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:

 

●

Common stock issued to certain members of the Company’s management totaled $748,000 and $865,000 for the three months ended March 31, 2021 and 2020, respectively.

 

See Notes to Condensed Consolidated Interim Financial Statements.

 

1.	BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated interim financial statements have been prepared by Maui Land & Pineapple Company, Inc. (together with its subsidiaries, collectively, the “Company”) in conformity with generally accepted accounting principles in the United States (“GAAP”) for interim financial information that are consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and pursuant to the instructions to Form 10-Q and Article  8 promulgated by Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes to the annual audited consolidated financial statements required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated interim financial statements contain all normal and recurring adjustments necessary to fairly present the Company’s financial position, results of operations and cash flows for the interim periods ended March 31, 2021 and 2020. The unaudited condensed consolidated interim financial statements and notes should be read in conjunction with the annual audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2020.

 

2.	USE OF ESTIMATES AND RECLASSIFICATIONS

 

The Company’s reports for interim periods utilize numerous estimates of general and administrative expenses and other costs for the full year. Future actual amounts may differ from these estimates. Amounts reflected in interim statements are not necessarily indicative of results for a full year.

 

3.	SHARES – BASIC AND DILUTED

 

Basic and diluted weighted-average shares outstanding for the three months ended March 31, 2021 and 2020 were 19,327,739 and 19,254,783, respectively.

 

Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding. Diluted net loss per common share is computed similar to basic net loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares from share-based compensation arrangements had been issued.

 

4.

PROPERTY

 

Property at March 31, 2021 and December 31, 2020 consisted of the following:

 

 

 

Land

 

Most of the Company’s 22,800 acres of land were acquired between 1911 and 1932 and is carried in its consolidated balance sheets at cost. Approximately 20,700 acres of land are located in West Maui and comprise a largely contiguous parcel that extends from the sea to an elevation of approximately 5,700 feet. This parcel includes approximately 900 acres within the Kapalua Resort, a master-planned, destination resort and residential community located in West Maui encompassing approximately 3,000 acres. The Company’s remaining 2,100 acres of land are located in Upcountry Maui in an area commonly known as Hali’imaile and are mainly comprised of leased agricultural fields, including related processing and maintenance facilities.

 

Land Improvements

 

Land improvements are comprised primarily of roads, utilities, and landscaping infrastructure improvements at the Kapalua Resort. Also included is the Company’s potable and non-potable water systems in West Maui. The majority of the Company’s land improvements were constructed and placed in service in the mid-to-late 1970’s or conveyed in 2017. Depreciation expense would be considerably higher if these assets were stated at current replacement cost.

 

Buildings

 

Buildings are comprised of restaurant, retail and light industrial spaces located at the Kapalua Resort and Hali’imaile which are used in the Company’s leasing operations. The majority of the buildings were constructed and placed in service in the mid-to-late 1970’s. Depreciation expense would be considerably higher if these assets were stated at current replacement cost.

 

Machinery and Equipment

 

Machinery and equipment are mainly comprised of zipline course equipment installed in 2008 at the Kapalua Resort and used in the Company’s leasing operations.

 

5.	ASSETS HELD FOR SALE

 

Assets held for sale at March 31, 2021 and December 31, 2020 consisted of the following:

 

 

In February 2020, the Company entered into an agreement to sell the Kapalua Central Resort project for $43.9 million. The closing of the transaction is contingent upon, among other things, the satisfaction of certain customary closing conditions, including a due diligence period ending on July 15, 2021. The closing date of the sale is expected to be 30 days after the last day of the due diligence period.

 

The Company entered into an Asset Purchase Agreement in December 2019 to sell the PUC-regulated assets of Kapalua Water Company, Ltd. and Kapalua Waste Treatment Company, Ltd. located in the Kapalua Resort. In March 2021, the sale was approved by the State of Hawaii PUC subject to certain closing conditions of its Decision and Order. The sale, with net proceeds of $4.2 million, was completed on May 1, 2021.  The results of discontinued operations related to the sale of the Kapalua Water Company and Kapalua Waste Treatment Company assets are reflected in Note 13.

 

The above assets held for sale have not been pledged as collateral under the Company’s credit facility.

 

6.	LONG-TERM DEBT

 

Long-term debt is comprised of amounts outstanding under the Company’s $15.0 million revolving line of credit facility with First Hawaiian Bank (“Credit Facility”). The Credit Facility matures on December 31, 2021. Interest on borrowings is at LIBOR plus 3.50%, or 3.62% and 3.65%, at March 31, 2021 and December 31, 2020, respectively. The Company has pledged its 800-acre Kapalua Mauka project and approximately 30,000 square feet of commercial leased space in the Kapalua Resort as security for the Credit Facility. Net proceeds from the sale of any collateral are required to be repaid toward outstanding borrowings and will permanently reduce the Credit Facility’s revolving commitment amount. There are no commitment fees on the unused portion of the Credit Facility.

 

 

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

 

The Company was in compliance with the covenants under the Credit Facility as of March 31, 2021.

 

7.	SHARE-BASED COMPENSATION

 

The Company’s directors, officers and certain members of management receive a portion of their compensation in shares of the Company’s common stock granted under the Company’s 2017 Equity and Incentive Award Plan (“Equity Plan”). Share-based compensation is valued based on the average of the high and low share price on the date of grant. Shares are issued upon execution of agreements reflecting the grantee’s acceptance of the respective shares subject to the terms and conditions of the Equity Plan. Restricted shares issued under the Equity Plan vest quarterly and have voting and regular dividend rights but cannot be disposed of until such time as they are vested. All unvested restricted shares are forfeited upon the grantee’s termination of directorship or employment from the Company.

 

Share-based compensation is determined and awarded annually to the Company’s officers and certain members of management based on their achievement of certain predefined performance goals and objectives under the Equity Plan. Such share-based compensation is comprised of an annual incentive paid in shares of common stock and a long-term incentive paid in restricted shares vesting quarterly over a period of three years.

 

Share-based compensation totaled $349,000 and $425,000 for the three months ended March 31, 2021 and 2020, respectively. Included in these amounts were $163,000 and $186,000 of restricted shares of common stock which vested during the first three months of 2021 and 2020, respectively.

 

8.	ACCRUED RETIREMENT BENEFITS

 

Accrued retirement benefits at March 31, 2021 and December 31, 2020 consisted of the following:

 

 

 

The Company has a defined benefit pension plan which covers substantially all of its former bargaining and non-bargaining full-time, part-time and intermittent employees. In 2011, pension benefits under the plan were frozen. The Company also has unfunded non-qualified retirement plans covering nine of its former executives. The non-qualified retirement plans were frozen in 2009 and future vesting of additional benefits was discontinued.

 

 

The net periodic benefit costs for pension and postretirement benefits for the three months ended March 31, 2021 and 2020 were as follows:

 

 

 

9.	CONTRACT ASSETS AND LIABILITIES

 

Receivables from contracts with customers were $876,000, $806,000, and $673,000 at March 31, 2021, December 31, 2020 and December 31, 2019, respectively.

 

Deferred club membership revenue

 

The Company manages the operations of the Kapalua Club, a private, non-equity club program providing members special programs, access and other privileges at certain of the amenities within the Kapalua Resort. Deferred revenues from dues received from the private club membership program are recognized on a straight-line basis over one year.

 

Deferred license fee revenue

 

The Company entered into a trademark license agreement with the owner of the Kapalua Plantation and Bay golf courses, effective April 1, 2020. Under the terms and conditions set forth in the agreement, the licensee is granted a perpetual, terminable on default, transferable, non-exclusive license to use the Company’s trademarks and service marks to promote its golf courses and to sell its licensed products. The Company received a single payment royalty of $2.0 million in March 2020. Revenue recognized on a straight-line basis over its estimated economic useful life of 15 years was $33,000 for the three months ended March 31, 2021.

 

10.	INCOME TAXES

 

The Company uses a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company’s provision for income taxes is calculated using the liability method. Deferred income taxes are provided for all temporary differences between the financial statement and income tax basis of assets and liabilities using tax rates enacted by law or regulation. A full valuation allowance continues to be established for deferred income tax assets as of March 31, 2021 and December 31, 2020, respectively.

 

11.	REPORTABLE OPERATING SEGMENTS

 

The Company’s reportable operating segments are comprised of the discrete business units whose operating results are regularly reviewed by the Company’s Chief Executive Officer – its chief decision maker – in assessing performance and determining the allocation of resources. Reportable operating segments are as follows:

 

•

Real Estate includes the planning, entitlement, development and sale of real estate inventory. The segment also included the operations of Kapalua Realty Company, Ltd., a general brokerage real estate company located in the Kapalua Resort, through June 30, 2020.

 

•

Leasing includes revenues and expenses from real property leasing activities, license fees and royalties for the use of certain of the Company’s trademarks and brand names by third parties, and the cost of maintaining the Company’s real estate assets, including conservation activities. The operating segment also includes the management of ditch, reservoir and well systems that provide non-potable irrigation water to West and Upcountry Maui areas.

 

•

Resort Amenities include a membership program that provides certain benefits and privileges within the Kapalua Resort for its members.

 

The Company’s reportable operating segment results are measured based on operating income (loss), exclusive of interest, depreciation, general and administrative, share-based compensation, pension and other postretirement expenses.

 

 

Reportable operating segment revenues and income for the three months ended March 31, 2021 and 2020 were as follows:

 

 

 

12.	LEASING ARRANGEMENTS

 

The Company leases land primarily to agriculture operators and space in commercial buildings, primarily to restaurant and retail tenants through 2048. These operating leases generally provide for minimum rents and, in some cases, licensing fees, percentage rentals based on tenant revenues, and reimbursement of common area maintenance and other expenses. Certain leases allow the lessee an option to extend or terminate the agreement. There are no leases allowing a lessee an option to purchase the underlying asset. Total leasing income for the three months ended March 31, 2021 and 2020 were as follows:

 

 

 

13.	DISCONTINUED OPERATIONS

 

The results of discontinued operations related to the sale of the Kapalua Water Company and Kapalua Waste Treatment Company assets for the three months ended March 31, 2021 and 2020 were as follows:

 

 

 

14.	COMMITMENTS AND CONTINGENCIES

 

On December 31, 2018, the State of Hawaii Department of Health (“DOH”) issued a Notice and Finding of Violation and Order (“Order”) for alleged wastewater effluent violations related to the Company’s Upcountry Maui wastewater treatment facility. The facility was built in the 1960’s to serve approximately 200 single-family homes developed for workers in the Company’s former agricultural operations. The facility is made up of two 1.5-acre wastewater stabilization ponds and surrounding disposal leach fields. The Order includes, among other requirements, payment of a $230,000 administrative penalty and development of a new wastewater treatment plant, which become final and binding – unless a hearing is requested to contest the alleged violations and penalties.

 

The DOH agreed to defer the Order without a hearing date while the Company continues working on a previously approved corrective action plan to resolve and remediate the facility’s wastewater effluent issues. The construction of additional leach fields was completed in December 2020. The installation of a surface aerator, sludge removal system, and natural pond cover, using water plants, were also completed during the three months ended March 31, 2021. The DOH is currently reviewing the test results of these corrective action plan items.  With these actions, the test results have been in compliance with applicable standards. No hearing date has been set since discussions with the DOH are ongoing.

 

The Company is presently unable to estimate the amount, or range of amounts, of any probable liability, if any, related to the Order and no provision has been made in the accompanying unaudited condensed consolidated interim financial statements.

 

There are various other claims and legal actions pending against the Company. The resolution of these other matters is not expected to have a material adverse effect on the Company’s consolidated financial position or results of operations after consultation with legal counsel.

 

Quarantine, travel restrictions and other public health measures to reduce the spread of COVID-19 has caused and is likely to continue to have an adverse impact on economic activity, including business closures, increased unemployment, financial market instability, and reduced tourism. Notwithstanding the administration of vaccines to residents and visitors to Maui, the duration of the disruption on global, national, and local economies cannot be reasonably estimated at this time. The Company’s future business operations, including the results of operations, cash flows and financial position will be significantly affected should the existence of the COVID-19 pandemic continue for an extended period.

 

15.	FAIR VALUE MEASUREMENTS

 

GAAP establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements to enable the reader of the unaudited condensed consolidated interim financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. GAAP requires that financial assets and liabilities be classified and disclosed in one of the following three categories:

 

Level 1: Quoted market prices in active markets for identical assets or liabilities.

 

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

 

Level 3: Unobservable inputs that are not corroborated by market data.

 

The Company considers all cash on hand to be unrestricted cash for the purposes of the interim unaudited condensed consolidated balance sheets and interim unaudited condensed consolidated statements of cash flows. The fair value of receivables and payables approximate their carrying value due to the short-term nature of the instruments. The fair value of income tax receivables approximate their carrying value due to the certainty of collection or short-term nature of the instruments. The valuation is based on settlements of similar financial instruments all of which are short-term in nature and are generally settled at or near cost. The fair value of debt was estimated based on borrowing rates currently available to the Company for debt with similar terms and maturities. The carrying amount of debt, which approximated fair value, was $800,000 and $200,000 (audited) at March 31, 2021 and December 31, 2020, respectively. The fair value of debt was measured using the level 2 inputs, noted above.

 

16.	RECENT ACCOUNTING PRONOUNCEMENTS

 

In June 2016, the FASB issued ASU 2016-13 to update the methodology used to measure current expected credit losses (“CECL”). This ASU apples to financial assets measured at amortized cost, including loans, held-to-maturity debt securities, net investments in leases, and trade accounts receivable as well as certain off-balance sheet exposures, such as loan commitments. This ASU requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. The guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings/(accumulated deficit) in the period of adoption. ASU 2019-10 was subsequently issued delaying the effective date to the first quarter of 2023. The Company is in the process of assessing the impact of the ASU on its consolidated financial statements.

 

In December 2019, the FASB issued ASU 2019-12 to simplify the accounting in ASC Topic 740, Income Taxes. This guidance removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. The guidance also clarifies and simplifies other areas of ASC Topic 740. This ASU was effective beginning in the first quarter of 2021 with early adoption permitted. Certain adjustments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(accumulated deficit) in the period of adoption. The ASU did not have a significant impact on the Company’s consolidated financial statements and related disclosures.

 

In March 2020, the FASB issued ASU 2020-04 as an update to provide optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform (ASC Topic 848) on financial reporting. The amendments in the ASU are elective and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The ASU is effective through December 31, 2022. Management is evaluating its impact on the Company’s consolidated financial statements and related disclosures, if elected.