<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 March 31, 1998
---------------
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.
------------------------------------------------------
(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.)
828 FORT STREET, HONOLULU, HAWAII 96813
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(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 808-532-4130
------------
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 March 31, 1998, Registrant had 7,500,000 Class A Units issued and
outstanding.
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MAUNA LOA MACADAMIA PARTNERS, L.P.
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
2
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MAUNA LOA MACADAMIA PARTNERS, L.P.
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
MARCH 31,
----------------------- DECEMBER 31,
1998 1997 1997
----------------------- ------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 5,086 $ 3,816 $ 2,914
Account receivable from Mauna Loa 3,455 1,758 6,809
Annualized cost adjustment 116 442 -
Other current assets 185 109 20
-------- -------- --------
Total current assets 8,842 6,125 9,743
Land, orchards and equipment, net 56,292 57,895 56,692
Capitalized acquisition costs 678 - 292
-------- -------- --------
Total assets $ 65,812 $ 64,020 $ 66,727
-------- -------- --------
-------- -------- --------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable to related parties $ 2,613 $ 883 $ 3,681
Cash distributions payable 568 568 568
Other current liabilities 333 273 281
-------- -------- --------
Total current liabilities 3,514 1,724 4,530
Deferred income tax expense 1,232 14,982 1,232
-------- -------- --------
Total liabilities 4,746 16,706 5,762
-------- -------- --------
Commitments and contingencies
Partners' capital
General partners 611 474 610
Class A limited partners, no par or assigned
value, 7,500 units issued and outstanding 60,455 46,840 60,355
-------- -------- --------
Total partners' capital 61,066 47,314 60,965
-------- -------- --------
Total liabilities and partners' capital $ 65,812 $ 64,020 $ 66,727
-------- -------- --------
-------- -------- --------
</TABLE>
SEE ACCOMPANYING 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 QUARTERS ENDED
MARCH 31,
------------------------
1998 1997
------- -------
<S> <C> <C>
Macadamia nut sales to related party $ 3,455 $ 1,763
Cost of goods sold
Costs expensed under farming contracts with related parties 2,072 1,013
Depreciation and amortization 330 180
Other 95 49
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Total cost of goods sold 2,497 1,242
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Gross income 958 521
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General and administrative expenses
Costs expensed under management contract with related party 124 129
Other 191 201
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Total general and administrative expenses 315 330
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Operating income 643 191
Interest income 60 35
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Income before gross income tax 703 226
Gross income tax 34 -
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Net income $ 669 $ 226
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------- -------
- -------------------------------------------------------------------------------------------------
Net cash flow (as defined in the Partnership Agreement) $ 999 $ 406
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------- -------
- -------------------------------------------------------------------------------------------------
Net income per Class A Unit $ 0.09 $ 0.03
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------- -------
Net cash flow per Class A Unit 0.13 0.05
------- -------
------- -------
Cash distributions per Class A Unit 0.075 0.075
------- -------
------- -------
Class A Units outstanding 7,500 7,500
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------- -------
- -------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING 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 QUARTERS ENDED
MARCH 31,
----------------------
1998 1997
-------- --------
<S> <C> <C>
Partners' capital at beginning of period:
General partners $ 610 $ 477
Class A limited partners 60,355 47,179
-------- --------
60,965 47,656
-------- --------
Allocation of net income:
General partners 6 2
Class A limited partners 663 224
-------- --------
669 226
-------- --------
Cash distributions:
General partners 5 5
Class A limited partners 563 563
-------- --------
568 568
-------- --------
Partners' capital at end of period:
General partners 611 474
Class A limited partners 60,455 46,840
-------- --------
$ 61,066 $ 47,314
-------- --------
-------- --------
- -------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING 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 QUARTERS ENDED
MARCH 31,
----------------------
1998 1997
------- -------
<S> <C> <C>
Cash flows from operating activities:
Cash received from macadamia nut sales $ 6,809 $ 6,904
Cash paid under farming and management contracts (3,000) (3,072)
Cash paid to other suppliers (729) (348)
Interest received 46 35
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Net cash provided by operating activities 3,126 3,519
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Cash flows from investing activities:
Capitalized acquisition costs (386) -
------- -------
Net cash used in investing activities (386) -
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Cash flows from financing activities:
Cash distributions paid (568) (379)
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Net cash used in financing activities (568) (379)
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Net increase in cash 2,172 3,140
Cash at beginning of period 2,914 676
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Cash at end of period $ 5,086 $ 3,816
------- -------
------- -------
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 669 $ 218
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 330 180
Decrease in account receivable from Mauna Loa 3,354 5,141
Increase in other current assets (165) (27)
Increase in annualized cost adjustment
(other than from depreciation) (46) (221)
Decrease in accounts payable (1,068) (1,740)
Increase (decrease) in other current liabilities 52 (32)
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Total adjustments 2,457 3,301
------- -------
Net cash provided by operating activities $ 3,126 $ 3,519
------- -------
------- -------
- -------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING 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 financial
statements of Mauna Loa Macadamia Partners, L.P. ("the Partnership")
include all adjustments, consisting only of normally recurring
adjustments, necessary to present fairly its financial position as of
March 31, 1998, March 31, 1997 and December 31, 1997 and the results of
operations, changes in partners' capital and cash flows for the quarters
ended March 31, 1998 and 1997. The results of operations for the
quarter ended March 31, 1998 are not necessarily indicative of the
results to be expected for the full year or for any future period.
(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 1997 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. Net income per
Class A Unit is calculated by dividing 99% of Partnership net income by
the average number of Class A Units outstanding for the period.
(5) On March 20, 1998, the first quarter cash distribution was declared in
the amount of seven and one-half cents (7.5 CENTS) per Class A Unit,
payable on May 15, 1998 to unitholders of record as of the close of
business on March 31, 1998.
(6) In December 1997 the Partnership entered into a merger agreement with C.
Brewer Homes, Inc. ("Homes"). The joint Proxy Statement/Prospectus
became effective on May 14, 1998. Under the terms of the agreement,
shareholders of Homes would receive 0.667 Class A limited partner units
of Mauna Loa Macadamia Partners, L.P. for each share of Homes. The
merger is expected to result in the issuance of approximately 5.56
million Class A limited partner units. The merger agreement is subject
to approval by the unitholders of the Partnership and the shareholders
of Homes. The merger agreement contemplates that the combined company
will be renamed "Hawaii Land and Farming Company" and will continue as a
Delaware limited partnership, trading on the New York Stock Exchange.
All costs related to the merger are currently being capitalized. Through
March 31, 1998 such costs were approximately $678,000. These costs will
be added to the acquisition price and allocated to the purchased assets
and liabilities of Homes if the merger is approved, or they will be
expensed if the merger is not consummated.
(7) In December 1997, the Partnership elected to continue to be taxed as a
partnership rather than to be taxed as a corporation, as allowed by the
Taxpayer Relief Act of 1997. This election was subject to the
Partnership paying a 3.5% tax on gross income beginning January 1, 1998.
7
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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, 1998 AND 1997 First
quarter 1998 macadamia nut production was 5.6 million pounds (wet-in-shell at
a 25% moisture equivalent), a 96 percent increase over the first quarter 1997
harvest of 2.9 million pounds.
This is the largest first quarter harvest in the history of Mauna Loa
Macadamia Partners, L.P. ("the Partnership"). Since first quarter production
can sometimes reflect harvest timing differences, this large increase over
the first quarter 1997 should be viewed in the context of the natural crop
year (beginning July 1 and ending June 30). The 1997/98 crop year (as of the
end of April) totaled 22.3 million pounds compared to the total 1996/97 crop
year production of 22.1 million pounds - a difference of less than one
percent. The 1997/98 and 1996/97 crop year harvests are, therefore, quite
similar in size, with 1997/98 having more of its production in the first
quarter and 1996/97 having more of its production in the fourth quarter. In
comparison to prior years, both crop years are higher than average due to two
years of optimum rainfall through the end of 1997.
The estimated average nut price received in the first quarter 1998 for
macadamia nut production was $0.6119 compared to the estimated average nut
price of $0.6115 used in the first quarter 1997. For the full year 1997, the
actual nut price received was $0.5970. The price that the Partnership
receives for its nuts is based 50% on the current year processing and
marketing results of Mauna Loa Macadamia Nut Corporation ("Mauna Loa"), its
exclusive purchaser, and 50% on USDA-reported macadamia nut prices for the
two preceding years. The USDA portion for the current year is higher by 5.4%
while the Mauna Loa portion is estimated to be lower by 1.0%.
Cost of goods sold for the first quarter 1998 are higher by 101% over the
first quarter 1997 because of the higher production and increased irrigation
costs due to the El Nino induced drought.
General administrative expenses are lower by $15,000 for the 1998 first
quarter, interest income is higher by $25,000, and gross income tax expense
of $34,000 is recorded for the first time following our election to permanent
partnership status.
EL NINO
The weather pattern known as El Nino has caused a severe drought in the Ka'u
region of the island of Hawaii, where nearly half of the Partnership's
orchards are located.
Ka'u received only 1.13 inches of rain for the first four months of 1998,
compared to its historical average of 18 inches for this period. While
approximately one third of the acres in Ka'u have
8
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irrigation, normal production on the remaining acres cannot be sustained, and
the drought will have a negative impact on production for the remainder of
1998 and most likely into 1999.
The orchards located in Keaau and Mauna Kea received 15.4 inches of rain
since the beginning of the year compared to their average of 46 inches.
Production will only be slightly affected in Keaau and Mauna Kea because
these two areas usually receive too much rain.
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 meets its
working capital needs with cash on hand, and when necessary, through
short-term borrowings under a $4.0 million revolving line of credit. The line
was extended for one year on June 1, 1996, again on June 1, 1997, and may be
extended for additional one-year intervals upon the payment of extension
fees. If the Partnership should merge with another company, this facility
will expire and all outstanding principal and interest shall be due and
payable at the time of the merger.
The Partnership had a cash balance of $5.1 million at March 31, 1998, and
there were no line of credit drawings outstanding. It is the opinion of
management that the Partnership has adequate cash on hand and borrowing
capacity available to meet anticipated working capital needs for operations
as presently conducted.
NEW ACCOUNTING STANDARDS
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
the first fiscal year 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.
9
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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:
Exhibit Page
Number Description Number
------- ----------- ------
11.1 Statement re Computation of Net Income
per Class A Unit 12
27 Financial Data Schedule (filed only
electronically with the SEC) --
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the first quarter of 1998.
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
Date: May 15, 1998 By /s/ Gregory A. Sprecher
--------------------------
GREGORY A. SPRECHER
Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
EXHIBIT INDEX
Number Description of Exhibits Page No.
------ ----------------------- --------
11.1 Statement re Computation of Net Income 12
per Class A Unit
27 Financial Data Schedule (filed only
electronically with the SEC) --
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 quarters ended
March 31,
----------------------
1998 1997
------ ------
<S> <C> <C>
Net income $ 669 $ 226
Class A Unitholders (ownership percentage) x 99% x 99%
------ ------
Net income allocable to Class A Unitholders $ 662 $ 224
------ ------
------ ------
Class A Units outstanding 7,500 7,500
------ ------
------ ------
Net income per Class A Unit $ 0.09 $ 0.03
------ ------
------ ------
</TABLE>
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 5,086
<SECURITIES> 0
<RECEIVABLES> 3,455
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,842
<PP&E> 73,214
<DEPRECIATION> 16,923
<TOTAL-ASSETS> 65,812
<CURRENT-LIABILITIES> 3,514
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 60,455
<TOTAL-LIABILITY-AND-EQUITY> 65,812
<SALES> 3,455
<TOTAL-REVENUES> 3,515
<CGS> 2,497
<TOTAL-COSTS> 2,497
<OTHER-EXPENSES> 315
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 703
<INCOME-TAX> 34
<INCOME-CONTINUING> 669
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 669
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
