<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 June 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)
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)
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 July 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>
June 30,
--------------------- December 31,
ASSETS 1995 1994 1994
-------- ------- ------------
<S> <C> <C> <C>
Current assets:
Cash and short term investments $ 713 3,118 37
Receivables from related party:
Accounts receivable 61 690 5,995
Other - 654 -
Annualized cost adjustment 1,253 1,163 -
Prepaid expenses and other assets 64 43 24
-------- ------- --------
Total current assets 2,091 5,668 6,056
-------- ------- --------
Land, orchards and equipment 73,191 73,191 73,191
Less accumulated depreciation
and amortization (12,516) (10,951) (11,715)
-------- ------- --------
Land, orchards and equipment (net) 60,675 62,240 61,476
-------- ------- --------
Deferred charges (net) 14 16 12
-------- ------- --------
Total assets $ 62,780 67,924 67,544
======== ======= ========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Line of credit payable $ - 3,775 1,407
Mortgage note payable (current portion) 60 65 60
Accounts payable to related parties 1,077 1,051 3,784
Distributions payable 379 757 379
Other current and accrued liabilities 227 202 207
-------- ------- --------
Total current liabilities 1,743 5,850 5,837
-------- ------- --------
Mortgage note payable (noncurrent portion) 234 289 264
Deferred income tax expense 14,982 14,982 14,982
Partners' capital:
General partners 459 468 465
Class A limited partners 45,362 46,335 45,996
-------- ------- --------
Total partners' capital 45,821 46,803 46,461
-------- ------- --------
Total liabilities and partners' capital $ 62,780 67,924 67,544
======== ======= ========
</TABLE>
See notes to financial statements.
3
<PAGE> 4
MAUNA LOA MACADAMIA PARTNERS, L.P.
Income Statements (Unaudited)
(In Thousands, Except Per Unit Data)
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
---------------- ----------------
1995 1994 1995 1994
------ ----- ----- -----
<S> <C> <C> <C> <C>
Macadamia nut sales to related parties $ 61 690 2,635 2,117
Cost of goods sold:
Costs expensed under farming
contracts with related parties 20 485 1,644 1,529
Depreciation and amortization 16 66 295 252
Other 3 8 50 42
------ ----- ----- -----
39 559 1,989 1,823
------ ----- ----- -----
Gross profit margin 22 131 646 294
General and administrative expenses:
Costs expensed under management
contract with related party 101 123 237 262
Amortization 3 4 6 8
Other 68 79 274 269
------ ----- ----- -----
172 206 517 539
------ ----- ----- -----
Operating income (loss) (150) (75) 129 (245)
Interest income (expense) 2 (3) (11) (14)
------ ----- ----- -----
Income (loss) before taxes (148) (78) 118 (259)
Deferred income tax credit (expense) - 614 - 329
------ ----- ----- -----
Net income (loss) $ (148) 536 118 70
====== ===== ===== =====
Net cash flow (as defined in the
Partnership Agreement) $ (145) 565 388 1,470
====== ===== ===== =====
Net income (loss) per Class A Unit $(0.02) 0.07 0.02 0.01
====== ===== ===== =====
Net cash flow per Class A Unit $(0.02) 0.07 0.05 0.19
====== ===== ===== =====
Cash distributions per Class A Unit $ 0.05 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 Six months
ended June 30, ended June 30,
-------------------- ------------------
1995 1994 1995 1994
------- ------ ------ ------
<S> <C> <C> <C> <C>
Partners' capital at beginning of period:
General partners $ 464 470 465 483
Class A Limited Partners 45,884 46,554 45,996 47,765
------- ------ ------ ------
46,348 47,024 46,461 48,248
------- ------ ------ ------
Allocation of net income (loss):
General partners (2) 6 1 -
Class A Limited Partners (146) 530 117 70
------- ------ ------ ------
(148) 536 118 70
------- ------ ------ ------
Cash distributions:
General partners 4 8 8 15
Class A Limited Partners 375 749 750 1,500
------- ------ ------ ------
379 757 758 1,515
------- ------ ------ ------
Partners' capital at end of period:
General partners 458 468 458 468
Class A Limited Partners 45,363 46,335 45,363 46,335
------- ------ ------ ------
$45,821 46,803 45,821 46,803
======= ====== ====== ======
</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 Six months
ended June 30, ended June 30,
----------------- ----------------
1995 1994 1995 1994
------- ------ ------ ------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Cash received from macadamia nut sales $ 3,128 4,514 8,569 7,422
Cash paid under farming
and management contracts (2,128) (1,986) (5,267) (5,251)
Cash paid to other suppliers (96) (107) (412) (383)
Interest received (paid) 2 26 (11) (18)
------- ------ ------ ------
Net cash provided
(used) by operating activities 906 2,447 2,879 1,770
------- ------ ------ ------
Cash flows from investing activities:
Stabilization payments received - 20 - 20
Cash flow warranty payments received - 915 - 935
------- ------ ------ ------
Net cash provided by investing activities - 935 - 955
------- ------ ------ ------
Cash flows from financing activities:
Line of credit drawings (repayments) - 510 (1,407) 1,938
Principal payments of mortgage note (15) (16) (30) (32)
Distributions paid (379) (758) (758) (1,515)
Other (8) (9) (8) (9)
------- ------ ------ ------
Net cash provided
(used) in financing activities (402) (273) (2,203) 382
------- ------ ------ ------
Net increase (decrease) in cash 504 3,109 676 3,107
Cash at beginning of period 209 9 37 11
------- ------ ------ ------
Cash at end of period $ 713 3,118 713 3,118
======= ====== ====== ======
</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 Six months
ended June ended June 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) $ (148) 536 118 70
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation and amortization 19 70 301 260
Deferred income tax credit - (614) - (329)
Decrease in accounts
receivable from related party 3,067 3,824 5,934 5,252
Decrease (increase) in prepaid
expenses and other assets (14) 32 (40) (21)
Decrease in accounts payable
to related party (1,218) (980) (2,707) (2,760)
Increase in current and
other accrued liabilities 47 27 20 16
(Increase) decrease in annualized
cost adjustment [other than from
depreciation and amortization] (847) (391) (747) (640)
Net cost of developing orchard - (57) - (79)
Other - - - 1
------- ------ ------ ------
Total adjustments 1,054 1,911 2,761 1,700
------- ------ ------ ------
Net cash provided (used)
by operating activities $ 906 2,447 2,879 1,770
======= ====== ====== ======
</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 June 30, 1995, June 30, 1994 and December 31, 1994 and
the related unaudited Statements of Income, Partners' Capital and
Cash Flows for the periods ended June 30, 1995 and 1994 contain
all adjustments, consisting only of normally recurring accruals,
necessary to present fairly the financial position as of June 30,
1995, June 30, 1994 and December 31, 1994 and the results of
operations, changes in partners' capital and cash flows for the
periods ended June 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 May 19, 1995, the second quarter cash distribution was declared
in the amount of five cents (5 cents.) per Class A Unit, payable on
August 15, 1995 to unitholders of record as of the close of
business on June 30, 1995.
(7) On June 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 JUNE 30, 1995 AND 1994
For the first three months and first six months of 1995, nut production, price
and revenues are summarized below:
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
--------------------
1995 1994 Change
----- ----- ------
<S> <C> <C> <C>
Nuts harvested (000's Lbs. WIS) 575 1,146 - 50%
Nut price ($/Lb.) .5733 .6021 - 5%
----- -----
Gross nut revenues ($000's) 330 690 - 52%
Less adjustment for revised nut
price estimate on first quarter
production (see discussion below) (269) -
Less portion reported on the
balance sheet ($000's) - -
----- -----
Net nut revenues ($000's) 61 690 - 91%
===== =====
</TABLE>
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
--------------------
1995 1994 Change
----- ----- ------
<S> <C> <C> <C>
Nuts harvested (000's Lbs. WIS) 4,595 3,604 + 27%
Nut price ($/Lb.) .5733 .6021 - 5%
----- -----
Gross nut revenues ($000's) 2,635 2,170 + 21%
Less portion reported on
the balance sheet ($000's) - (53)
----- -----
Net nut revenues ($000's) 2,635 2,117 +24%
===== =====
</TABLE>
For the full 1994-95 crop year (July 1 through June 30), nut production
increased by 6% to 19.9 million pounds. Comparative crop year production
figures are summarized below (in thousands of wet-in-shell pounds at 25%
equivalent moisture):
9
<PAGE> 10
<TABLE>
<CAPTION>
For the Crop Year
Ended June 30, 1995 1994
------------------------------- over over
1995 1994 1993 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Keaau orchards 7,038 7,846 6,157 - 10% + 27%
Ka'u orchards 12,319 10,204 9,980 + 21% + 2%
Mauna Kea orchard 577 729 470 - 21% + 55%
------ ------ -----
Total production 19,934 18,779 16,607 + 6% + 13%
====== ====== ======
</TABLE>
Production changes year-over-year resulted 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 first half of 1995 reflected a
combination of weather and tree maturation. Because of harvest timing,
however, second quarter nut production was lower than the same quarter of the
prior 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.
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.
Normally, MLMNC updates its plan late in the third quarter and this adjustment
is reflected in the Partnership's third quarter results. Because MLMNC changed
its fiscal year this year, however, their new plan was available in time to
incorporate their updated nut price estimate into the Partnership's second
quarter report this year.
Weather at the Partnership's Keaau and Mauna Kea orchards has been good
recently. However, weather at the Partnership's Ka'u orchards has been drier
than normal in the first half of 1995. Although rainfall levels have improved
in the last few weeks at Ka'u, it is likely that production from the Ka'u
orchards will be lower than normal during the 1995-96 crop year.
Production costs (reported as "cost of goods sold") are based on annualized
standard unit costs. As with estimated interim nut prices, these annualized
standard unit costs are updated when new information becomes available. In
prior years, those affiliates of MLMNC which perform farming services for the
Partnership under long-term contracts updated their plans late in the third
10
<PAGE> 11
quarter and the effect of those adjustments on its standard unit costs was
reflected in the Partnership's third quarter results. Because these
affiliates also changed fiscal years this year, however, their new plans were
available in time for the Partnership to update its standard costs as of the
second quarter this year.
Total production costs were 9% higher in the first half of 1995 than for the
same period in 1994 as a result of higher production. On a per pound basis,
production costs were 16% lower in the first half of 1995 than in the
corresponding period last year due primarily due to differences in orchard mix
(with proportionately more pounds harvested from the Partnership's lower cost
orchards in the first half of 1995).
Excluding management fees payable to the managing general partner, general and
administrative expenses are roughly comparable year over year. No management
fee is currently expected to be paid with respect to 1995. The Partnership
generated more interest income from its cash on hand than it incurred under its
mortgage note payable, resulting in net interest income for the second quarter
of 1995.
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. Line of credit drawings decreased from $3.8 million at
June 30, 1994 to zero at June 30, 1995 due primarily to payment timing. No
borrowings were made from the line of credit during the second quarter. The
Partnership will make borrowings from the line during the last five months of
the year to fund working capital needs arising from the normal seasonality of
macadamia nut farming.
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
11
<PAGE> 12
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
also 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 could be reduced materially.
As a result of the 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: August 11, 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 Six Months
Ended June 30, Ended June 30,
------------------- ------------------
1995 1994 1995 1994
------ ------- ------ ------
<S> <C> <C> <C> <C>
Net income (loss) $(148) 536 118 70
Class A Unitholders
(ownership percentage) x 99% x 99% x 99% x 99%
----- ----- ----- -----
Net income (loss) allocable
to Class A Unitholders $(146) 531 117 70
===== ===== ===== =====
Class A Units outstanding 7,500 7,500 7,500 7,500
===== ===== ===== =====
Net income (loss)
per Class A Unit $(0.02) 0.07 0.02 0.01
====== ==== ===== =====
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 713
<SECURITIES> 0
<RECEIVABLES> 61
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,091
<PP&E> 73,191
<DEPRECIATION> 12,516
<TOTAL-ASSETS> 62,780
<CURRENT-LIABILITIES> 1,743
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 45,821
<TOTAL-LIABILITY-AND-EQUITY> 62,780
<SALES> 2,635
<TOTAL-REVENUES> 2,635
<CGS> 1,989
<TOTAL-COSTS> 1,989
<OTHER-EXPENSES> 517
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> 118
<INCOME-TAX> 0
<INCOME-CONTINUING> 118
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 118
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
