<PAGE>
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, 1997
-------------
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, 1997, Registrant had 7,500,000 Class A Units issued and
outstanding.
1
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MAUNA LOA MACADAMIA PARTNERS, L.P.
INDEX
PAGE
----
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 13
SIGNATURES 14
2
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MAUNA LOA MACADAMIA PARTNERS, L.P.
Balance Sheets (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
------------------------
ASSETS 1997 1996 1996
- ------ ---------- ---------- ------------
<S> <C> <C> <C>
Current assets:
Cash and short term investments $ 4,070 736 676
Accounts receivable from related party 476 519 6,899
Annualized cost adjustment 1,592 1,673 -
Prepaid expenses and other assets 131 65 82
---------- ---------- ----------
Total current assets 6,269 2,993 7,657
---------- ---------- ----------
Land, orchards and equipment 73,214 73,191 73,214
Less accumulated depreciation
and amortization (15,720) (14,117) (14,918)
---------- ---------- ----------
Land, orchards and equipment (net) 57,494 59,074 58,296
---------- ---------- ----------
Deferred charges (net) - 8 -
---------- ---------- ----------
Total assets $ 63,763 62,075 65,953
========== ========== ==========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Current liabilities:
Accounts payable to related parties $ 1,133 1,243 2,623
Distributions payable 568 379 379
Other current and accrued liabilities 291 265 313
---------- ---------- ----------
Total current liabilities 1,992 1,887 3,315
---------- ---------- ----------
Deferred income tax expense 14,982 14,982 14,982
Partners' capital:
General partners 468 452 476
Class A limited partners 46,321 44,754 47,180
---------- ---------- ----------
Total partners' capital 46,789 45,206 47,656
---------- ---------- ----------
Total liabilities and partners' capital $ 63,763 62,075 65,953
========== ========== ==========
========================================================================================
</TABLE>
See notes to financial statements.
3
<PAGE>
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,
-------------------- ----------------------
1997 1996 1997 1996
------- ------- ------- --------
<S> <C> <C> <C> <C>
Macadamia nut sales to related party $ 476 519 2,239 2,061
Cost of goods sold:
Costs expensed under farming
contracts with related parties 264 320 1,277 1,398
Depreciation and amortization 44 59 224 286
Other 13 22 62 70
--------- --------- --------- -------
321 401 1,563 1,754
--------- --------- --------- -------
Gross profit margin 155 118 676 307
General and administrative expenses:
Costs expensed under management
contract with related party 109 116 239 230
Other 56 65 255 257
--------- --------- --------- -------
165 181 494 487
--------- --------- --------- -------
Operating income (loss) (10) (63) 182 (180)
Interest income 53 7 87 6
--------- --------- --------- -------
Net income (loss) $ 43 (56) 269 (174)
========= ========= ========= =======
==========================================================================================
Net cash flow (as defined in the
Partnership Agreement) $ 87 3 493 112
========= ========= ========= =======
Net income (loss) per Class A Unit $ 0.01 (0.01) 0.04 (0.02)
========= ========= ========= =======
Net cash flow per Class A Unit $ 0.01 - 0.07 0.01
========= ========= ========= =======
Cash distributions per Class A Unit $ 0.075 0.05 0.15 0.10
========= ========= ========= =======
Class A Units outstanding 7,500 7,500 7,500 7,500
========= ========= ========= =======
==========================================================================================
</TABLE>
See notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
MAUNA LOA MACADAMIA PARTNERS, L.P.
Statements of Partners' Capital (Unaudited)
(In Thousands)
Three months Six months
ended June 30, ended June 30,
----------------------- -----------------------
1997 1996 1997 1996
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Partners' capital at
beginning of period:
General partners $ 473 457 476 462
Class A Limited Partners 46,841 45,184 47,180 45,676
--------- --------- --------- ----------
47,314 45,641 47,656 46,138
--------- --------- --------- ----------
Allocation of net income (loss):
General partners 1 (1) 3 (2)
Class A Limited Partners 42 (55) 266 (172)
--------- ---------- --------- ----------
43 (56) 269 (174)
--------- ---------- --------- ----------
Cash distributions:
General partners 6 4 11 8
Class A Limited Partners 562 375 1,125 750
--------- --------- --------- ----------
568 379 1,136 758
--------- --------- --------- ----------
Partners' capital at end
of period:
General partners 468 452 468 452
Class A Limited Partners 46,321 44,754 46,321 44,754
--------- --------- --------- ----------
$ 46,789 45,206 46,789 45,206
========= ========= ========= ==========
==========================================================================================
</TABLE>
See notes to financial statements.
5
<PAGE>
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,
-------------------------- --------------------------
1997 1996 1997 1996
---------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Cash received from macadamia nut sales $ 1,758 1,542 8,662 5,637
Cash paid under farming
and management contracts (843) (1,327) (3,915) (3,913)
Cash paid to other suppliers (146) (134) (494) (382)
Interest received 53 7 88 8
--------- --------- ---------- ----------
Net cash provided by operating activities 822 88 4,341 1,350
--------- --------- ---------- ----------
Cash flows from financing activities:
Principal payments of mortgage note - - - (265)
Distributions paid (568) (379) (947) (762)
Other - (8) - (8)
--------- --------- ---------- ----------
Net cash used in financing activities (568) (387) (947) (1,035)
--------- --------- ---------- ----------
Net increase (decrease) in cash 254 (299) 3,394 315
Cash at beginning of period 3,816 1,035 676 421
--------- --------- ---------- ----------
Cash at end of period $ 4,070 736 4,070 736
========= ========= ========== ==========
===============================================================================================================
</TABLE>
See notes to financial statements.
6
<PAGE>
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
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net income (loss) $ 43 (56) 269 (174)
Adjustments to reconcile net income
(loss) to net cash provided
by operating activities:
Depreciation and amortization 44 60 225 296
Decrease in accounts
receivable from related party 1,282 1,023 6,424 3,576
Increase in prepaid
expenses and other assets (22) (10) (50) (11)
Increase (decrease) in accounts
payable to related party 251 (119) (1,448) (1,212)
Increase (decrease) in current and
other accrued liabilities 18 14 (36) 33
Increase in annualized cost adjustment
(other than from depreciation and
amortization (794) (824) (1,043) (1,158)
-------- -------- -------- --------
Total adjustments 779 144 4,072 1,524
-------- -------- -------- --------
Net cash provided
by operating activities $ 822 88 4,341 1,350
======== ======== ======== ========
=======================================================================================================
</TABLE>
See notes to financial statements.
7
<PAGE>
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, 1997, June 30, 1996 and December 31, 1996 and the related
unaudited Statements of Income, Partners' Capital and Cash Flows for the
periods ended June 30, 1997 and 1996 contain all adjustments, consisting
only of normally recurring accruals, necessary to present fairly the
financial position as of June 30, 1997, June 30, 1996 and December 31, 1996
and the results of operations, changes in partners' capital and cash flows
for the periods ended June 30, 1997 and 1996.
(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 1996 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 June 3,1997, the second quarter cash distribution was declared in the
amount of seven and one-half cents (7.5c) per Class A Unit, payable on
August 15, 1997 to unitholders of record as of the close of business on June
30, 1997.
On June 30, 1997, 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
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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 JUNE 30, 1997 AND 1996
For the first three months and first six months of 1997, nut production, nut
price and revenues are summarized below:
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
--------------------
1997 1996 Change
---- ---- ------
<S> <C> <C> <C>
Nuts harvested (000's Lbs. WIS) 778 934 - 17%
Nut price ($/Lb.) .6115 .5558 + 10%
----- -----
Net nut revenues ($000's) 476 519 - 8%
===== =====
<CAPTION>
For the Six Months
Ended June 30,
-------------------
1997 1996 Change
---- ---- ------
<S> <C> <C> <C>
Nuts harvested (000's Lbs. WIS) 3,661 3,707 - 1%
Nut price ($/Lb.) .6115 .5558 + 10%
----- -----
Net nut revenues ($000's) 2,239 2,061 + 9%
===== =====
</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.
9
<PAGE>
For the full 1996-97 crop year (July 1 through June 30), nut production
increased by 23% to 22.1 million pounds. Comparative crop year production
figures are summarized below (in thousands of wet-in-shell pounds at 25%
equivalent moisture):
<TABLE>
<CAPTION>
For the Crop Year 1997 1996
Ended June 30, over over
-------------------
1997 1996 1995 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Keaau orchards 7,744 7,106 7,038 + 9% + 1%
Ka'u orchards 13,023 9,578 12,319 + 36% - 22%
Mauna Kea orchard 1,312 1,248 577 + 5% + 116%
------ ------ ------
Total production 22,079 17,932 19,934 + 23% 10%
====== ====== ======
</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 reduce production in the Ka'u orchards
(from insufficient moisture) while periods of very wet weather on the island
tend to reduce production in 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 1996-97 crop year is due to adequate
rainfall in the Ka'u orchards, which suffered from very low rainfall the year
before.
Production costs (reported as "cost of goods sold") are based on annualized
standard unit costs. Total production costs were 11% lower in the first half of
1997 than for the same period in 1996.
On a per pound basis, production costs were 10% lower in the first half of 1997
than in the corresponding period last year. These results are due to the large
percent of production coming from the Ka'u orchards (95% in the first half of
1997 compared to 61% in the first half of 1996) which have a lower production
cost per pound than the Keeau and Mauna Kea orchards.
General and administrative expenses are roughly comparable year over year. The
Partnership generated more interest income in 1997 as a result of having cash on
hand.
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 zero at both June 30, 1996
and June 30, 1997. No borrowings were made from the line of credit during the
first half of 1997.
It is the opinion of management that the Partnership has adequate borrowing
capacity available to meet anticipated working capital needs.
10
<PAGE>
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.
Hawaii's macadamia nut crop for the 1996-97 crop year is estimated at a record
56.5 million pounds net, wet-in-shell, 5.5 million pounds above the last crop
year, according to the Hawaii Agricultural Statistics Service. Average prices
increased by 2.4 cents to 71.3 cents per pound on a 25% moisture equivalent
basis.
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") provided that some
publicly traded limited partnerships, including the Partnership, were to be
taxed as corporations beginning on January 1, 1998. However, this provision has
been modified by the Taxpayer Relief Act of 1997 (1997 Act). The 1997 Act
provides that some publicly traded partnerships, such as Mauna Loa Macadamia
Partners, may elect to continue to be taxed as partnerships rather than be taxed
as corporations. In such event the partnership will be subject to a 3.5% tax on
gross income. This new tax on gross income will have a slight negative impact
upon the Partnership's profit and cash flow compared to current and past years,
but will have a positive impact compared to being taxed as a corporation. The
effect of not being taxed as a corporation in future years may have an impact on
some of the Partnership's accounting methods, specifically the deferred income
tax liability currently shown on the balance sheet. These changes to the
Partnership are currently being examined by management.
NEW ACCOUNTING STANDARDS
EARNINGS PER SHARE
In February 1997, The Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) NO. 128, Earnings per Share,
the provisions of which are effective for fiscal periods ending after December
15, 1997. This Statement establishes standards for computing and presenting
earnings per share. The future adoption of this pronouncement is not expected
to have a material effect on the Partnership's presentation of earnings per unit
amounts.
REPORTING COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income, the
provisions of which are effective for fiscal periods beginning after December
15, 1997. The Statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed
11
<PAGE>
with the same prominence as other financial statements. The future adoption of
this pronouncement is not expected to have a material effect on the
Partnership's presentation of its results of operations.
SEGMENT INFORMATION
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information,, the provisions of which are effective for
fiscal years beginning after December 15, 1997. This Statement establishes
standards for reporting information about operating segments in annual financial
statements and requires selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The Partnership has not determined the impact that the adoption of
this new accounting standard will have on its financial statement disclosures.
================================================================================
12
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) The following documents are filed as part of this report:
Exhibit Page
Number Description Number
------- ----------- ------
(11.1) Statement re Computation of Net Income 15
per Class A Unit
(27) Financial Data Schedule
(b) Reports on Form 8-K:
None.
13
<PAGE>
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/ Gregory A. Sprecher
--------------------------
GREGORY A. SPRECHER
Senior Vice President and
Principal Financial Officer
Date: August 11, 1997
----------------
14
<PAGE>
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,
-------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ 43 (56) 269 (174)
Class A Unitholders
(ownership percentage) x 99% x 99% x 99% x 99%
------ ------ ------ ------
Net income (loss) allocable
to Class A Unitholders $ 42 (55) 266 (172)
===== ====== ====== ======
Class A Units outstanding 7,500 7,500 7,500 7,500
===== ====== ====== ======
Net income (loss)
per Class A Unit $ 0.01 (0.01) .04 (0.02)
==== ====== === ======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,070
<SECURITIES> 0
<RECEIVABLES> 476
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,269
<PP&E> 73,214
<DEPRECIATION> 15,720
<TOTAL-ASSETS> 63,763
<CURRENT-LIABILITIES> 1,992
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 46,789
<TOTAL-LIABILITY-AND-EQUITY> 63,763
<SALES> 476
<TOTAL-REVENUES> 529
<CGS> 321
<TOTAL-COSTS> 321
<OTHER-EXPENSES> 165
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 43
<INCOME-TAX> 0
<INCOME-CONTINUING> 43
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
