<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, 1996
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 October 31, 1996, Registrant had 7,500,000 Class A Units issued and
outstanding.
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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 Condition and Results of Operations 9-11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
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MAUNA LOA MACADAMIA PARTNERS, L.P.
Balance Sheets (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
September 30, December 31
1996 1995 1995
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and short term investments $ 9 11 421
Accounts receivable from related party 4,255 3,860 4,095
Annualized cost adjustment 1,089 354 -
Prepaid expenses and other assets 61 55 54
Total current assets 5,414 4,280 4,570
Land, orchards and equipment 73,214 73,191 73,191
Less accumulated depreciation
and amortization (14,517) (12,916) (13,316)
Land, orchards and equipment (net) 58,697 60,275 59,875
Deferred charges (net) 6 11 10
Total assets $ 64,117 64,566 64,455
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Line of credit payable $ 430 825 -
Mortgage note payable (current portion) - 62 265
Accounts payable to related parties 2,684 2,081 2,455
Distributions payable 379 379 383
Other current and accrued liabilities 287 227 232
Total current liabilities 3,780 3,574 3,335
Mortgage note payable (noncurrent portion) - 218 -
Deferred income tax expense 14,982 14,982 14,982
Partners' capital:
General partners 454 459 462
Class A limited partners 44,901 45,333 45,676
Total partners' capital 45,355 45,792 46,138
Total liabilities and partners' capital $ 64,117 64,566 64,455
</TABLE>
See notes to financial statements.
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MAUNA LOA MACADAMIA PARTNERS, L.P.
Income Statements (Unaudited)
(In Thousands, Except Per Unit Data)
<TABLE>
<CAPTION>
Three months Nine months
ended September 30, ended September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Macadamia nut sales to related party $ 4,255 3,860 6,316 6,495
Cost of goods sold:
Costs expensed under farming
contracts with related parties 2,888 2,619 4,286 4,263
Depreciation and amortization 557 623 843 918
Other 97 95 167 145
3,542 3,337 5,296 5,326
Gross profit margin 713 523 1,020 1,169
General and administrative expenses:
Costs expensed under management
contract with related party 115 99 345 336
Other 66 64 323 344
181 163 668 680
Operating income (loss) 532 360 352 489
Interest income (expense) (5) (11) 1 (22)
Net income (loss) $ 527 349 353 467
Net cash flow (as defined in the
Partnership Agreement) $ 1,080 974 1,194 1,385
Net income (loss) per Class A Unit $ 0.07 0.05 0.05 0.06
Net cash flow per Class A Unit $ 0.14 0.13 0.16 0.18
Cash distributions per Class A Unit $ 0.05 0.05 0.15 0.15
Class A Units outstanding 7,500 7,500 7,500 7,500
</TABLE>
See notes to financial statements.
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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,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Partners' capital at beginning of period:
General partners $ 452 458 462 465
Class A Limited Partners 44,754 45,363 45,676 45,996
45,206 45,821 46,138 46,461
Allocation of net income (loss):
General partners 5 4 3 5
Class A Limited Partners 522 345 350 462
527 349 353 467
Cash distributions:
General partners 3 3 11 11
Class A Limited Partners 375 375 1,125 1,125
378 378 1,136 1,136
Partners' capital at end of period:
General partners 454 459 454 459
Class A Limited Partners 44,901 45,333 44,901 45,333
$ 45,355 45,792 45,355 45,792
</TABLE>
See notes to financial statements.
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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,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Cash received from macadamia nut sales $ 519 61 6,156 8,630
Cash paid under farming
and management contracts (1,178) (1,077) (5,091) (6,344)
Cash paid to other suppliers (96) (108) (478) (520)
Interest received (paid) (6) (11) 2 (22)
Net cash provided
by operating activities (761) (1,135) 589 1,744
Cash flows from financing activities:
Line of credit repayments 430 825 430 (582)
Principal payments of mortgage note - (14) (265) (44)
Distributions paid (378) (378) (1,140) (1,136)
Other - - (8) (8)
Net cash provided
(used) in financing activities 52 433 (983) (1,770)
Net increase (decrease) in cash (709) (702) (394) (26)
Cash at beginning of period 736 713 421 37
Cash at end of period $ 27 11 27 11
</TABLE>
See notes to financial statements.
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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,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Reconciliation of net income to net cash
provided (used) by operating activities:
Net income (loss) $ 527 349 353 467
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation and amortization 553 626 849 927
Decrease (increase) in accounts
receivable from related party (3,736) (3,799) (160) 2,135
Decrease (increase) in prepaid
expenses and other assets 4 9 (7) (31)
Increase (decrease) in accounts
payable to related party 1,441 1,004 229 (1,703)
Increase (decrease) in current and
other accrued liabilities 22 - 55 20
Decrease (increase) in annualized
cost adjustment [other than from
depreciation and amortization] 428 676 (730) (71)
Total adjustments (1,288) (1,484) 236 1,277
Net cash provided
by operating activities $ (761) (1,135) 589 1,744
</TABLE>
See notes to financial statements.
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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, 1996, September 30, 1995 and December 31,
1995 and the related unaudited Statements of Income, Partners' Capital
and Cash Flows for the periods ended September 30, 1996 and 1995
contain all adjustments, consisting only of normally recurring
accruals, necessary to present fairly the financial position as of
September 30, 1996, September 30, 1995 and December 31, 1995 and the
results of operations, changes in partners' capital and cash flows for
the periods ended September 30, 1996 and 1995.
(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 1995 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.
(6) On August 16, 1996, the third quarter cash distribution was declared
in the amount of five cents (5c.) per Class A Unit, payable on
November 15, 1996 to unitholders of record as of the close of business
on September 30, 1996.
(7) On September 30, 1996, 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.
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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, 1996 AND 1995
For the first three months and first nine months of 1996, nut production, price
and revenues are summarized below:
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
1996 1995 Change
<S> <C> <C> <C>
Nuts harvested (000's Lbs. WIS) 7,649 6,656 + 15%
Nut price ($/Lb.) .5564 .5799 - 4%
Net nut revenues ($000's) 4,255 3,860 + 10%
For the Nine Months
Ended September 30,
1996 1995 Change
Nuts harvested (000's Lbs. WIS) 11,356 11,251 + 1%
Nut price ($/Lb.) .5562 .5773 - 4%
Net nut revenues ($000's) 6,316 6,495 - 3%
</TABLE>
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 (unless the effect would be minimal) and records
an adjustment in that quarter to apply the revised price estimate to all nuts
sold earlier in that year as well.
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
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Keaau and Mauna Kea orchards (from excessive moisture). Nearly one-third of
the Partnership's acreage has not yet reached full maturity.
The increases in nut production in 1996 primarily resulted from wetter weather
this year, along with the effects of harvest timing in both 1996 and 1995.
Weather so far during the fourth quarter of 1996 has been fairly wet, with
periods of heavy rainfall. Nut "washout" (i.e. the effect of heavy rainfall
washing away some nuts already on the ground) during the fourth quarter has
been above normal levels; total washout for the quarter has been estimated to
be around 450,000 pounds of wet-in-shell nuts (which would equate to roughly 2%
of our annual crop).
Production costs (reported as "cost of goods sold") are based on annualized
standard unit costs. Total production costs were 6% higher in the third
quarter of 1996 primarily due to higher production and orchard mix, but -1/2%
lower in the first nine months of 1996 than for the same periods in 1995
primarily due to orchard mix. On a per pound basis, production costs were
7-1/2% lower in the third quarter of 1996 and 1-1/2% lower in the first nine
months of 1996 than in the corresponding periods last year due mainly to
differences in orchard mix (with proportionately more pounds harvested from the
Partnership's lower cost orchards in 1996).
Excluding management fees payable to the managing general partner, general and
administrative expenses for the third quarter of 1996 were the same as for the
third quarter of 1995. No management fee was paid with respect to 1995 but
such a fee is expected to be paid with respect to 1996. The Partnership
incurred lower interest expense for the third quarter of 1996 and for the first
nine months of 1996 as a result of having paid off its remaining debt in early
1996.
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 were $0.43 million at September
30, 1996 and $0.83 million at September 30, 1995. The line of credit was paid
off on October 30, 1996 and no further borrowings are expected until the summer
of 1997. Those future borrowings are anticipated for the purpose of funding
working capital needs arising from the normal seasonality of macadamia nut
farming.
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 Part-nership 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
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production for many years, it appears that Australian macadamia nut production
has grown significantly in recent years and that Australia will likely overtake
Hawaii in production in the near future.
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.
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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.
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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 and
Principal Financial Officer
Date: November 14, 1996
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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,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net income (loss) $ 527 349 353 467
Class A Unitholders
(ownership percentage) x 99% x 99% x 99% x 99%
Net income (loss) allocable
to Class A Unitholders $ 522 346 349 462
Class A Units outstanding 7,500 7,500 7,500 7,500
Net income (loss)
per Class A Unit $ 0.07 0.05 0.05 0.06
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 9
<SECURITIES> 0
<RECEIVABLES> 4,255
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,414
<PP&E> 73,214
<DEPRECIATION> 14,517
<TOTAL-ASSETS> 64,117
<CURRENT-LIABILITIES> 3,780
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 45,355
<TOTAL-LIABILITY-AND-EQUITY> 64,117
<SALES> 6,316
<TOTAL-REVENUES> 6,317
<CGS> 5,296
<TOTAL-COSTS> 5,296
<OTHER-EXPENSES> 668
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 353
<INCOME-TAX> 0
<INCOME-CONTINUING> 353
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 353
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
