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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 March 31, 1997
-------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-9145
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MAUNA LOA MACADAMIA PARTNERS, L.P.
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(Exact name of registrant as specified in its charter)
DELAWARE 99-0248088
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
827 FORT STREET, HONOLULU, HAWAII 96813
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(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 808-544-6112
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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
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As of April 30, 1997, 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
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<S> <C>
Part I - Financial Information
Item 1. Financial Statements 3-7
Item 2. Management's Discussion and Analysis of Financial
Financial Condition and Results of Operations 8-9
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
2
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MAUNA LOA MACADAMIA PARTNERS, L.P.
Balance Sheets (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
March 31
------------------- December 31,
1997 1996 1996
-------- -------- ------------
<S> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 3,816 1,035 676
Accounts receivable from related parties 1,758 1,542 6,899
Annualized cost adjustment 442 507 --
Prepaid expenses and other current assets 109 55 82
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Total current assets 6,125 3,139 7,657
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Land, orchards and equipment 73,214 73,191 73,214
Less accumulated depreciation 15,319 13,716 14,918
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Land, orchards and equipment (net) 57,895 59,475 58,296
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Deferred charges (net) -- 1 --
------- ------- -------
Total assets $64,020 62,615 65,953
======= ======= =======
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Current liabilities:
Line of credit payable $ -- -- --
Accounts payable to related parties 883 1,362 2,623
Distributions payable 568 379 379
Other current and accrued liabilities 273 251 313
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Total current liabilities 1,724 1,992 3,315
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Deferred income tax expense 14,982 14,982 14,982
Commitments
Partners' capital:
General partners 473 457 477
Class A limited partners 46,841 45,184 47,179
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Total partners' capital 47,314 45,641 47,656
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Total liabilities and partners' capital $64,020 62,615 65,953
======= ======= =======
</TABLE>
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See notes to financial statements.
3
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MAUNA LOA MACADAMIA PARTNERS, L.P.
Income Statements (Unaudited)
(In Thousands, Except Per Unit Data)
<TABLE>
<CAPTION>
For the Quarter Ended
March 31,
---------------------
1997 1996
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<S> <C> <C>
Macadamia nut sales to related party $1,763 1,542
Cost of goods sold:
Costs expensed under farming
contracts with related parties 1,013 1,078
Depreciation and amortization 180 227
Other expenses 49 48
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Total cost of goods sold 1,242 1,353
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Gross profit 521 189
General and administrative expenses:
Costs expensed under management
contract with related party 129 114
Other expenses 201 192
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Total general and administrative expenses 330 306
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Operating income (loss) 191 (117)
Interest income (expense) 35 (1)
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Net income (loss) $ 226 (118)
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Net cash flow (as defined in the Partnership Agreement) $ 406 109
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Net income (loss) per Class A Unit $ 0.03 (0.02)
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Net cash flow per Class A Unit $ 0.05 0.01
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Cash distributions per Class A Unit $0.075 0.05
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Class A Units outstanding (average) 7,500 7,500
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</TABLE>
See notes to financial statements
4
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MAUNA LOA MACADAMIA PARTNERS, L.P.
Statements of Partners' Capital (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For the Quarter Ended
March 31,
---------------------
1997 1996
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<S> <C> <C>
Partners' capital at beginning of period:
General partners $ 477 462
Class A limited partners 47,179 45,676
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47,656 46,138
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Allocation of net income (loss):
General partners 2 (1)
Class A limited partners 224 (117)
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226 (118)
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Cash distributions:
General partners 6 4
Class A limited partners 562 375
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568 379
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Partners' capital at end of period:
General partners 473 457
Class A limited partners 46,841 45,184
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$47,314 45,641
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</TABLE>
See notes to financial statements.
5
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MAUNA LOA MACADAMIA PARTNERS, L.P.
Statements of Cash Flows (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For the Quarter Ended
March 31,
---------------------
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Cash received from macadamia nut sales $ 6,904 4,095
Cash paid under farming and management contracts (3,072) (2,586)
Cash paid to other suppliers (348) (248)
Net interest received 35 1
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Net cash provided by operating activities 3,519 1,262
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Cash flows from financing activities:
Line of credit repayments -- --
Principal payments of mortgage note payable -- (265)
Distributions paid (379) (383)
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Net cash used in financing activities (379) (648)
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Net increase in cash and cash equivalents 3,140 614
Cash and cash equivalents at beginning of period 676 421
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Cash and cash equivalents at end of period $ 3,816 1,035
======= =======
=========================================================================================
Reconciliation of net income (loss) to net
cash provided by operating activities:
Net income (loss) $ 226 (118)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 180 236
Decrease in accounts receivable from related party 5,141 2,553
Increase in prepaid expenses and other assets (27) (1)
Decrease in accounts payable to related parties (1,740) (1,093)
Increase (decrease) in other current and accrued liabilities (40) 19
Increase in annualized cost adjustment
(other than from depreciation) (221) (334)
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Total adjustments 3,293 1,380
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Net cash provided by operating activities $ 3,519 1,262
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</TABLE>
See notes to financial statements.
6
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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 March 31, 1997, March 31, 1996 and December 31, 1996 and the related
unaudited Statements of Income, Partners' Capital and Cash Flows for the
quarters ended March 31, 1997 and 1996 contain all adjustments, consisting
only of normally recurring accruals, necessary to present fairly the
financial position as of March 31, 1997, March 31, 1996 and December 31,
1996 and the results of operations, changes in partners' capital and cash
flows for the quarters ended March 31, 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 March 14, 1997, the first quarter cash distribution was declared in the
amount of seven and one-half cents (7 1/2 cents) per Class A Unit, payable
on May 15, 1997 to unitholders of record as of March 31, 1997.
(7) On March 31, 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.
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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 Quarters Ended March 31, 1997 and 1996
First quarter 1997 nut sales revenues increased by 14% versus the same quarter
in 1996 as a result both of higher production and a higher nut price estimate:
<TABLE>
<CAPTION>
For the Quarter
Ended March 31,
---------------
1997 1996 Change
----- ----- ------
<S> <C> <C> <C>
Nuts Harvested (000's Lbs. WIS) 2,883 2,773 + 4%
Nut Price ($/Lb) .6115 .5559 +10%
----- -----
Net Nut Sales ($000's) 1,763 1,542 +14%
===== =====
</TABLE>
The increase in first quarter 1997 nut production primarily reflects harvest
timing differences. Because of an early nut drop, the Fall 1996 crop was heavy
and early while Spring 1997 crop will be light. Over the past six years, first
quarter production has averaged 2.7 million pounds.
Weather at the Partnership's orchards was ideal in 1996 but has been less so
thus far in 1997. We expect the Fall 1997 crop to come in lower than last year
due to the aftereffects of a windstorm which occurred in February 1997. That
windstorm resulted in the loss of about 1.4% of the Partnership's trees and will
necessitate approximately $250,000 in cleanup and replanting costs in the first
half of 1997. This windstorm also destroyed a portion of the emerging Spring
1997 crop.
The nut price for the first quarter of 1997 was 10% higher than for the first
quarter of 1996 but was about 2% higher than the final 1996 nut price. Nut
prices used for interim reporting reflect the estimated full year processing and
marketing performance of Mauna Loa Macadamia Nut Corporation ("Mauna Loa"),
which purchases all of the Partnership's nut production. Since most nut
purchases and nut sales occurs in the second half of the year, nut prices are
subject to subsequent adjustment based on Mauna Loa's actual full year
performance.
Production expenses were 8% lower in the first quarter of 1997 than for the same
quarter in 1996 despite slightly higher production. Unit production costs
improved from 48.8c per pound to 43.1c per pound during the same periods. Most
of that improvement reflected orchard mix, as 98% of the pounds harvested in the
first quarter of 1997 came from the Partnership's Ka'u orchards (which have
lower unit costs on average than the Partnership's Keaau and Mauna Kea orchard
locations). For the first quarter of 1996, only 49% of the nuts harvested came
from the Ka'u orchards.
General and administrative expenses were 8% higher in the first quarter of 1997
than for the same quarter of 1996 primarily as a result of a higher bonus
payment and management fee and higher excise taxes arising from the increase in
revenues for the quarter. Absent those
8
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performance-related increases, the increase in general and administrative costs
would have been only 1%.
The significant increase in net interest income in the first quarter of 1997
reflects the substantially increased level of cash and cash equivalents.
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 March 31, 1997 and
at March 31, 1996. The line of credit is renewable annually on June 1st.
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 only one minor
capital expenditures to date. No other capital expenditure is currently planned.
Inflation and Taxes
In general, prices paid to macadamia nut farmers fluctuate independently of
inflation. Those prices are influenced strongly by prices for finished macadamia
products which, in turn, depend on competition and consumer acceptance. 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.
Earnings per Share
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Standards No. 128, Earnings per Share, the provisions of which are
effective for fiscal periods ending after December 15, 1997. The future adoption
of this pronouncement is not expected to have a material effect on the
Partnership's presentation of earnings per unit amounts.
9
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Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
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(a) The following documents are filed as part of
this report:
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
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<S> <C> <C>
(11.1) Statement re Computation of Net Income 12
per Class A Unit
(27.1) Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K:
None.
10
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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: May 2, 1997
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11
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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>
For the quarter
ended March 31,
-----------------
1997 1996
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<S> <C> <C>
Net income (loss) $ 226 $ (118)
Class A Unitholders
(ownership percentage) x 99% x 99%
------ ------
Net income (loss) allocable to Class A Unitholders $ 224 $ (117)
====== ======
Class A Units outstanding 7,500 7,500
====== ======
Net income (loss) per Class A Unit $ 0.03 $(0.02)
====== ======
</TABLE>
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,816
<SECURITIES> 0
<RECEIVABLES> 1,758
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,125
<PP&E> 73,214
<DEPRECIATION> 15,319
<TOTAL-ASSETS> 64,020
<CURRENT-LIABILITIES> 1,732
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 47,306
<TOTAL-LIABILITY-AND-EQUITY> 64,020
<SALES> 1,763
<TOTAL-REVENUES> 1,798
<CGS> 1,242
<TOTAL-COSTS> 1,242
<OTHER-EXPENSES> 330
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 226
<INCOME-TAX> 0
<INCOME-CONTINUING> 226
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 226
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
