<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 1-9145
MAUNA LOA MACADAMIA PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 99-0248088
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
827 FORT STREET, HONOLULU, HAWAII 96813
(Address Of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's Telephone Number, Including Area Code: 808-544-6112
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 twelve 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 X No
----- -----
As of October 31, 1995, Registrant had 7,500,000 Class A Units issued and
outstanding.
<PAGE> 2
MAUNA LOA MACADAMIA PARTNERS, L.P.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3-8
Item 2. Management's Discussion and Analysis of Financial
Financial Condition and Results of Operations 9-12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
2
<PAGE> 3
MAUNA LOA MACADAMIA PARTNERS, L.P.
Balance Sheets (Unaudited)
(In Thousands)
<TABLE>
<CAPTION> September 30,
--------------------- December 31,
ASSETS 1995 1994 1994
------- ------- -------
<S> <C> <C> <C>
Current assets:
Cash and short term investments $ 11 19 37
Receivables from related party:
Accounts receivable 3,860 1,995 5,995
Other - - -
Annualized cost adjustment 354 1,335 -
Prepaid expenses and other assets 55 43 24
------- ------- -------
Total current assets 4,280 3,392 6,056
------- ------- -------
Land, orchards and equipment 73,191 73,191 73,191
Less accumulated depreciation
and amortization (12,916) (11,353) (11,715)
------- ------- -------
Land, orchards and equipment (net) 60,275 61,838 61,476
------- ------- -------
Deferred charges (net) 11 14 12
------- ------- -------
Total assets $64,566 65,244 67,544
======= ======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Line of credit payable $ 825 1,205 1,407
Mortgage note payable (current portion) 62 63 60
Accounts payable to related parties 2,081 1,755 3,784
Distributions payable 379 379 379
Other current and accrued liabilities 227 204 207
------- ------- -------
Total current liabilities 3,574 3,606 5,837
------- ------- -------
Mortgage note payable (noncurrent portion) 218 275 264
Deferred income tax expense 14,982 14,982 14,982
Partners' capital:
General partners 459 464 465
Class A limited partners 45,333 45,917 45,996
------- ------- -------
Total partners' capital 45,792 46,381 46,461
------- ------- -------
Total liabilities and partners' capital $64,566 65,244 67,544
======= ======= =======
</TABLE>
See notes to financial statements.
3
<PAGE> 4
MAUNA LOA MACADAMIA PARTNERS, L.P.
Income Statements (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three months Nine months
ended September 30, ended September 30,
------------------- -------------------
1995 1994 1995 1994
------ ------ ----- -----
<S> <C> <C> <C> <C>
Macadamia nut sales to related party $3,860 1,995 6,495 4,112
Cost of goods sold:
Costs expensed under farming
contracts with related parties 2,619 1,474 4,263 3,003
Depreciation and amortization 623 333 918 585
Other 95 47 145 89
------ ----- ----- -----
3,337 1,854 5,326 3,677
------ ----- ----- -----
Gross profit margin 523 141 1,169 435
General and administrative expenses:
Costs expensed under management
contract with related party 99 107 336 369
Amortization 3 2 9 10
Other 61 49 335 318
------ ----- ----- -----
163 158 680 697
------ ----- ----- -----
Operating income (loss) 360 (17) 489 (262)
Interest income (expense) (11) (26) (22) (40)
------ ----- ----- -----
Income (loss) before taxes 349 (43) 467 (302)
Deferred income tax credit (expense) - - - 329
------ ----- ----- -----
Net income (loss) $ 349 (43) 467 27
====== ===== ===== =====
Net cash flow (as defined in the
Partnership Agreement) $ 959 276 1,347 1,746
====== ===== ===== =====
Net income (loss) per Class A Unit $ 0.05 (0.01) 0.06 0.00
====== ===== ===== =====
Net cash flow per Class A Unit $ 0.13 0.04 0.18 0.23
====== ===== ===== =====
Cash distributions per Class A Unit $ 0.10 0.10 0.10 0.20
====== ===== ===== =====
Class A Units outstanding 7,500 7,500 7,500 7,500
====== ===== ===== =====
</TABLE>
See notes to financial statements.
4
<PAGE> 5
MAUNA LOA MACADAMIA PARTNERS, L.P.
Statements of Partners' Capital (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three months Nine months
ended September 30, ended September 30,
-------------------- -------------------
1995 1994 1995 1994
------- ------ ------ ------
<S> <C> <C> <C> <C>
Partners' capital at beginning of period: $
General partners 458 468 465 483
Class A Limited Partners 45,363 46,335 45,996 47,765
------- ------ ------ ------
45,821 46,803 46,461 48,248
------- ------ ------ ------
Allocation of net income (loss):
General partners 4 - 5 -
Class A Limited Partners 345 (43) 462 27
------- ------ ------ ------
349 (43) 467 27
------- ------ ------ ------
Cash distributions:
General partners 3 4 11 19
Class A Limited Partners 375 375 1,125 1,875
------- ------ ------ ------
378 379 1,136 1,894
------- ------ ------ ------
Partners' capital at end of period:
General partners 459 464 459 464
Class A Limited Partners 45,333 45,917 45,333 45,917
------- ------ ------ ------
$45,792 46,381 45,792 46,381
======= ====== ====== ======
</TABLE>
See notes to financial statements.
5
<PAGE> 6
MAUNA LOA MACADAMIA PARTNERS, L.P.
Statements of Cash Flows (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three months Nine months
ended September 30, ended September 30,
------------------- -------------------
1995 1994 1995 1994
------- ------ ------ ------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Cash received from nut sales $ 61 690 8,630 8,112
Cash paid under farming
and management contracts (1,077) (970) (6,344) (6,221)
Cash paid to other suppliers (108) (98) (520) (481)
Interest received (paid) (11) (32) (22) (50)
------- ------ ------ ------
Net cash provided by
(used in) operating activities (1,135) (410) 1,744 1,360
------- ------ ------ ------
Cash flows from investing activities:
Stabilization payments received - - - 20
Cash flow warranty payments received - 654 - 1,589
------- ------ ------ ------
Net cash provided by investing activities - 654 - 1,609
------- ------ ------ ------
Cash flows from financing activities:
Line of credit drawings (repayments) 825 (2,570) (582) (632)
Principal payments of mortgage note (14) (16) (44) (48)
Distributions paid (378) (757) (1,136) (2,272)
Other - - (8) (9)
------- ------ ------ ------
Net cash provided by
(used in) financing activities 433 (3,343) (1,770) (2,961)
------- ------ ------ ------
Net increase (decrease) in cash (702) (3,099) (26) 8
Cash at beginning of period 713 3,118 37 11
------- ------ ------ ------
Cash at end of period $ 11 19 11 19
======= ====== ====== ======
</TABLE>
See notes to financial statements.
6
<PAGE> 7
MAUNA LOA MACADAMIA PARTNERS, L.P.
Statements of Cash Flows (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three months Nine months
ended September 30, ended September 30,
------------------ -------------------
1995 1994 1995 1994
------- ------ ------ ------
<S> <C> <C> <C> <C>
Reconciliation of net income to net cash
provided (used) by operating activities:
Net income (loss) $ 349 (43) 467 27
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation and amortization 626 335 927 595
Deferred income tax credit - - - (329)
(Increase) decrease in accounts
receivable from related party (3,799) (1,305) 2,135 3,947
(Increase) decrease in prepaid
expenses and other assets 9 - (31) (21)
Increase (decrease) in accounts
payable to related party 1,004 704 (1,703) (2,056)
Increase (decrease) in current
and other accrued liabilities - 2 20 18
(Increase) decrease in annualized
cost adjustment [other than from
depreciation and amortization] 676 (103) (71) (743)
Net cost of developing orchard - - - (79)
Other - - - 1
------- ------ ------ ------
Total adjustments (1,484) (367) 1,277 1,333
------- ------ ------ ------
Net cash provided by (used
in) operating activities $(1,135) (410) 1,744 1,360
======= ====== ====== ======
</TABLE>
See notes to financial statements.
7
<PAGE> 8
MAUNA LOA MACADAMIA PARTNERS, L.P.
Notes to Financial Statements
(1) In the opinion of management, the accompanying unaudited Balance Sheets
as of September 30, 1995, September 30, 1994 and December 31, 1994 and
the related unaudited Statements of Income, Partners' Capital and Cash
Flows for the periods ended September 30, 1995 and 1994 contain all
adjustments, consisting only of normally recurring accruals, necessary
to present fairly the financial position as of September 30, 1995,
September 30, 1994 and December 31, 1994 and the results of operations,
changes in partners' capital and cash flows for the periods ended
September 30, 1995 and 1994.
(2) These interim financial statements should be read in conjunction with
the Financial Statements and the Notes to Financial Statements filed
with the Commission in the Partnership's 1994 Annual Report on Form
10-K.
(3) All production costs are annualized for interim reporting purposes,
with the difference between costs incurred to date and costs expensed
to date being reported on the balance sheet as an annualized cost
adjustment.
(4) All capital allocations reflect the general partners' 1% equity
interest and the limited partners' 99% percent equity interest.
(5) Because the Partnership is not presently a taxable entity, no current
income taxes have been accrued. The Omnibus Budget Reconciliation Act
of 1987 includes a provision that some publicly traded limited
partnerships, including the Partnership, are to be taxed as
corporations beginning in 1998.
The Partnership adopted Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes ("FAS No. 109") in 1993 and applied
the provisions of FAS No. 109 retroactively to January 1, 1988. Prior
year financial statements were restated to give effect to this
standard. The Partnership is required to accrue a deferred income tax
expense, or credit, for any changes in the deferred income tax
liability balance. This charge, or credit, does not have a
relationship to income, or loss, before taxes.
(6) On August 18, 1995, the third quarter cash distribution was declared in
the amount of five cents (5 cents) per Class A Unit, payable on November
15, 1995 to unitholders of record as of the close of business on
September 29, 1995.
(7) On September 30, 1995, there were 7,500,000 Class A Units issued and
outstanding and 1,500,000 Class B Units issued and outstanding. No
value has been assigned to the Class B Units.
8
<PAGE> 9
MAUNA LOA MACADAMIA PARTNERS, L.P.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
OPERATING RESULTS -- FOR THE PERIODS ENDED SEPTEMBER 30, 1995 AND 1994
For the first three months and first nine months of 1995 and 1994, nut
production, price and revenues are summarized below:
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
-------------------------
1995 1994 Change
------ ------ ------
<S> <C> <C> <C>
Nuts harvested (000's Lbs. WIS) 6,656 3,313 + 101%
Nut price ($/Lb.) .5799 .6021 - 4%
----- -----
Net nut revenues ($000's) 3,860 1,995 + 93%
===== =====
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
-------------------------
1995 1994 Change
------ ------ ------
<S> <C> <C> <C>
Nuts harvested (000's Lbs. WIS) 11,251 6,917 + 63%
Nut price ($/Lb.) .5773 .6021 - 4%
------ -----
Gross nut revenues ($000's) 6,495 4,165 + 56%
Less portion reported on
the balance sheet ($000's) - (53)
------ -----
Net nut revenues ($000's) 6,495 4,112 + 58%
====== =====
</TABLE>
Production changes year-over-year result primarily from variations in weather
(especially rainfall levels and patterns) and tree maturation. Because the
Ka'u orchards are located in a drier part of the Island of Hawaii while the
Keaau and Mauna Kea orchards are located in a wetter part of the Island of
Hawaii, periods of very dry weather on the island tend to penalize the Ka'u
orchards (from insufficient moisture) while periods of very wet weather on the
island tend to penalize the Keaau and Mauna Kea orchards (from excessive
moisture). Nearly one-third of the Partnership's acreage has not yet reached
full maturity.
The increase in nut production for the third quarter and for the first nine
months of 1995 reflected a combination of weather and tree maturation. Because
of the continuation of unusually dry weather in the Ka'u area, however, fourth
quarter production is expected to be lower than normal this year.
The Partnership's nut price is determined by a formula which is weighted 50% on
a two-year trailing average of USDA reported macadamia nut prices and 50% on
the current year processing and marketing results of Mauna Loa Macadamia Nut
Corporation ("MLMNC"), a separate privately owned company which purchases all
of the Partnership's nuts under long-term contracts.
9
<PAGE> 10
The final price to be paid for the entire year's production is not known until
early in the following year when MLMNC's books have been closed and audited.
For interim payment and reporting purposes, therefore, the Partnership and
MLMNC estimate this nut price based on MLMNC's current processing and marketing
plan. When MLMNC updates its plan, the Partnership revises its current year
nut price estimate accordingly and records an adjustment in that quarter to
apply the revised price estimate to all nuts sold earlier in that year as well.
Production costs (reported as "cost of goods sold") are based on annualized
standard unit costs. As with estimated interim nut prices, these standards are
updated when new information becomes available. With a standard costing
system, any difference between costs incurred during an interim period and
costs charged to expense during that period is recorded on the balance sheet as
an annualized cost adjustment.
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
--------------------------
1995 1994 Change
------ ------ ------
<S> <C> <C> <C>
Production costs incurred ($000's) 2,438 2,026 + 20%
Portion charged to balance sheet ($000's) (899) 172 NM
------ ------
Portion charged to expense ($000's) 3,337 1,854 + 80%
Nuts harvested (000's Lbs WIS) 6,656 3,313 + 101%
------ ------
Average unit cost (per Lb.) 50.1 cents 56.0 cents - 11%
====== ======
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
--------------------------
1995 1994 Change
------ ------ ------
<S> <C> <C> <C>
Production costs incurred ($000's) 5,680 5,144 + 10%
Portion charged to balance sheet ($000's) 354 1,467 - 76%
------ ------
Portion charged to expense ($000's) 5,326 3,677 + 45%
Nuts harvested (000's Lbs WIS) 11,251 6,917 + 63%
------ ------
Average unit cost (per Lb.) 47.3 cents 53.2 cents - 11%
====== ======
</TABLE>
The increases in total production costs resulted from substantially higher
production, which raises both harvesting and husking costs. The decreases in
average unit costs primarily results from differences in the mix of orchards
harvested in the respective periods, as a separate standardized unit cost is
used for each orchard (based on that orchard's expected full year production
and farming costs).
General and administrative expenses are roughly comparable year over
year. The reduction in interest expense reflects reduced borrowing needs as a
result of good production volume and therefore nut sales revenue in the fourth
quarter of 1994 and the first quarter of 1995.
10
<PAGE> 11
SEASONALITY, CAPITAL RESOURCES AND LIQUIDITY
Macadamia nut farming is seasonal, with production peaking late in the fall.
However, farming operations continue year round. As a result, additional
working capital is required for much of the year.
The Partnership has a $4.0 million revolving line of credit in place to fund
working capital needs arising from the normal seasonality of macadamia nut
farming. Line of credit drawings decreased from $1.2 million at September 30,
1994 to $0.8 million at September 30, 1995 due primarily to cash flow from
operations having exceeded payments of cash distributions during that period.
There were no drawings from February 1995 through June 1995 and none are
expected for November or December of 1995.
Cash flow from the Ka'u and Mauna Kea orchards acquired in October 1989 was
supplemented through 1994 by cash flow warranty payments from the sellers of
those orchards.
It is the opinion of management that the Partnership has adequate borrowing
capacity available to meet anticipated working capital needs. Except for
opportunistic orchard acquisitions, the Partnership has made no major capital
expenditures since inception and has none currently planned.
INFLATION AND TAXES
In general, prices paid to macadamia nut farmers fluctuate independently of
inflation. Those prices are influenced strongly by worldwide macadamia nut
production and by prices for finished macadamia products which, in turn, depend
on competition and consumer acceptance.
The large majority of the world's macadamia nuts are grown in Hawaii and in
Australia, with a handful of other countries accounting for the remainder.
Although Hawaii has led the world in production for many years, it appears that
Australian macadamia nut production has grown significantly in recent years and
that Australia may overtake Hawaii in production as early as this year.
Inasmuch as only an estimated 40% of Australian macadamia nut trees are now at
full maturity, it is likely that Australian macadamia nut production will
continue to grow significantly over the next several years.
As a result, it is likely that macadamia nut supplies will be abundant for the
next several years and that macadamia nut prices will experience pressure if
that expected increased supply of macadamia nuts is not matched by commensurate
increases in worldwide demand for macadamia nuts.
Farming costs, particularly materials and labor, do generally reflect
inflationary trends as do general and administrative costs.
The Omnibus Budget Reconciliation Act of 1987 ("OBRA") provides that some
publicly traded limited partnerships, including the Partnership, are to be
taxed as corporations beginning in 1998. If this provision is not modified and
if the Partnership does not modify its operating structure prior to 1998, the
amount of cash available for distribution will be reduced materially.
11
<PAGE> 12
As a result of this OBRA provision, the Partnership implemented Financial
Accounting Standards No. 109, Accounting for Income Taxes ("FAS No. 109") in
1993 and applied the provisions of FAS No. 109 retroactively to January 1,
1988. Prior year financial statements were restated to give effect to this
standard. The Partnership is required to accrue a deferred income tax expense,
or credit, for changes in the deferred income tax liability balance. This
charge, or credit, does not have a relationship to income, or loss, before
taxes.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following documents are filed as part of this report:
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
------- ----------- ------
<S> <C> <C>
(11.1) Statement re Computation of Net Income 14
per Class A Unit
</TABLE>
(b) Reports on Form 8-K:
None.
12
<PAGE> 13
MAUNA LOA MACADAMIA PARTNERS, L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAUNA LOA MACADAMIA PARTNERS, L.P.
(Registrant)
By MAUNA LOA RESOURCES INC.
Managing General Partner
By /s/ D. S. Dymond
---------------------------------
D. S. DYMOND
Senior Vice President, Operations
and Principal Financial Officer
Date: November 13, 1995
13
<PAGE> 1
EXHIBIT 11.1
MAUNA LOA MACADAMIA PARTNERS, L.P.
Computation of Net Income per Class A Unit
(Unaudited)
(In Thousands, Except Per Unit Data)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1995 1994 1995 1994
------ ------- ------ ------
<S> <C> <C> <C> <C>
Net income (loss) $ 349 (43) 467 27
Class A Unitholders
(ownership percentage) x 99% x 99% x 99% x 99%
------ ----- ----- -----
Net income (loss) allocable
to Class A Unitholders $ 345 (43) 462 27
====== ===== ===== =====
Class A Units outstanding 7,500 7,500 7,500 7,500
====== ===== ===== =====
Net income (loss)
per Class A Unit $ 0.05 (0.01) 0.06 0.00
====== ===== ===== =====
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 11
<SECURITIES> 0
<RECEIVABLES> 3,860
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,280
<PP&E> 73,191
<DEPRECIATION> 12,916
<TOTAL-ASSETS> 64,566
<CURRENT-LIABILITIES> 3,574
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 45,792
<TOTAL-LIABILITY-AND-EQUITY> 64,566
<SALES> 6,495
<TOTAL-REVENUES> 6,495
<CGS> 5,326
<TOTAL-COSTS> 5,326
<OTHER-EXPENSES> 680
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22
<INCOME-PRETAX> 467
<INCOME-TAX> 0
<INCOME-CONTINUING> 467
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 467
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
