<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, 1998
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.)
828 FORT STREET, HONOLULU, HAWAII 96813
---------------------------------------- ----------
(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 June 30, 1998, Registrant had 7,500,000 Class A Units issued and
outstanding.
1
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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 8-10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
</TABLE>
2
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MAUNA LOA MACADAMIA PARTNERS, L.P.
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
JUNE 30,
---------------------- DECEMBER 31,
1998 1997 1997
------- ------- -------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 5,280 $ 4,070 $ 2,914
Account receivable from Mauna Loa 93 476 6,809
Annualized cost adjustment 1,163 1,592 -
Other current assets 128 131 20
------- ------- -------
Total current assets 6,664 6,269 9,743
Land, orchards and equipment, net 55,891 57,494 56,692
Capitalized acquisition costs - - 292
------- ------- -------
Total assets $62,555 $63,763 $66,727
------- ------- -------
------- ------- -------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable to related
parties $ 838 $1,133 $ 3,681
Cash distributions payable 568 568 568
Other current liabilities 646 291 281
------- ------- -------
Total current liabilities 2,052 1,992 4,530
Deferred income tax expense 1,232 14,982 1,232
------- ------- -------
Total liabilities 3,284 16,974 5,762
------- ------- -------
Commitments and contingencies
Partners' capital
General partners 593 468 610
Class A limited partners, no par
or assigned value,
7,500 units issued and
outstanding 58,678 46,321 60,355
------- ------- -------
Total partners' capital 59,271 46,789 60,965
------- ------- -------
Total liabilities and partners'
capital $62,555 $63,763 $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>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------- ---------------------
1998 1997 1998 1997
------- ------ ------- ------
<S> <C> <C> <C> <C>
Macadamia nut sales to related party $ 93 $ 476 $ 3,548 $2,239
Cost of goods sold
Costs expensed under farming contracts
with related parties 82 264 2,154 1,277
Depreciation and amortization 32 44 362 224
Other 11 13 106 62
------- ------ ------- ------
Total cost of goods sold 125 321 2,622 1,563
------- ------ ------- ------
Gross income (loss) (32) 155 926 676
------- ------ ------- ------
General and administrative expenses
Costs expensed under management contract
contract with related party 102 109 227 239
Other 51 56 242 255
------- ------ ------- ------
Total general and administrative expenses 153 165 469 494
------- ------ ------- ------
Operating income (loss) (185) (10) 457 182
Merger transaction costs (1,119) - (1,119) -
Interest income 76 53 136 87
------- ------ ------- ------
Income (loss) before gross income tax (1,228) 43 (526) 269
Gross income tax (benefit) (1) - 32 -
------- ------ ------- ------
Net income (loss) $(1,227) $ 43 $ (558) $ 269
------- ------ ------- ------
------- ------ ------- ------
- --------------------------------------------------------------------------------------------------------
Net cash flow (deficit)
(as defined in the Partnership Agreement and
reduced by the merger transaction costs) $(1,195) $87 $ (196) $ 493
------- ------ ------- ------
------- ------ ------- ------
- --------------------------------------------------------------------------------------------------------
Net income (loss) per Class A Unit $ (0.16) $ 0.01 $ (0.07) $ 0.04
------- ------ ------- ------
------- ------ ------- ------
Net cash flow (deficit) per Class A Unit $ (0.16) $ 0.01 $ (0.03) $ 0.07
------- ------ ------- ------
------- ------ ------- ------
Cash distributions per Class A Unit $ 0.075 $0.075 $ 0.15 $ 0.15
------- ------ ------- ------
------- ------ ------- ------
Class A Units outstanding 7,500 7,500 7,500 7,500
------- ------ ------- ------
------- ------ ------- ------
</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>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------- ---------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Partners' capital at beginning of period:
General partners $ 611 $ 473 $ 610 $ 476
Class A limited partners 60,455 46,841 60,355 47,180
------- ------- ------- -------
61,066 47,314 60,965 47,656
------- ------- ------- -------
Allocation of net income (loss):
General partners (12) 1 (6) 3
Class A limited partners (1,215) 42 (552) 266
------- ------- ------- -------
(1,227) 43 (558) 269
------- ------- ------- -------
Cash distributions:
General partners 6 6 11 11
Class A limited partners 562 562 1,125 1,125
------- ------- ------- -------
568 568 1,136 1,136
------- ------- ------- -------
Partners' capital at end of period:
General partners 593 468 593 468
Class A limited partners 58,678 46,321 58,678 46,321
------- ------- ------- -------
$59,271 $46,789 $59,271 $46,789
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
- ------------------------------------------------------------------------------
SEE ACCOMPANYING 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,
---------------------- ----------------------
1998 1997 1998 1997
------- ------ ------- -------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Cash received from macadamia nut sales $ 3,455 $1,758 $10,264 $ 8,662
Cash paid under farming and
management contracts (2,554) (843) (5,554) (3,915)
Cash paid to other suppliers (230) (146) (1,345) (494)
Interest received 91 53 137 88
------- ------ ------- -------
Net cash provided by operating activities 762 822 3,502 4,341
------- ------ ------- -------
Cash flows from financing activities:
Cash distributions paid (568) (568) (1,136) (947)
------- ------ ------- -------
Net cash used in financing activities (568) (568) (1,136) (947)
------- ------ ------- -------
Net increase in cash 194 254 2,366 3,394
Cash at beginning of period 5,086 3,816 2,914 676
------- ------ ------- -------
Cash at end of period $ 5,280 $4,070 $ 5,280 $ 4,070
------- ------ ------- -------
------- ------ ------- -------
Reconciliation of net income (loss) to net cash
provided by operating activities:
Net income (loss) $(1,227) $ 43 $ (558) $ 269
Adjustments to reconcile net income (loss)
to cash provided by operating activities:
Depreciation and amortization 32 44 362 224
Decrease in account receivable from Mauna Loa 3,362 1,282 6,716 6,425
Decrease (increase) in other current assets 57 (22) (108) (50)
Increase in annualized cost adjustment
(other than from depreciation) (678) (794) (723) (1,043)
Decrease in prepaid merger costs 678 - 292 -
Decrease in accounts payable (1,775) 251 (2,843) (1,448)
Increase (decrease) in other current liabilities 313 18 364 (36)
------- ------ ------- -------
Total adjustments 1,989 779 4,060 4,072
------- ------ ------- -------
Net cash provided by operating activities $ 762 $ 822 $ 3,502 $ 4,341
------- ------ ------- -------
------- ------ ------- -------
</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
June 30, 1998, June 30, 1997 and December 31, 1997 and the results of
operations, changes in partners' capital and cash flows for the periods
ended June 30, 1998 and 1997. The results of operations for the period
ended June 30, 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
Securities and Exchange 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 June 26, 1998, the second quarter cash distribution was declared in
the amount of seven and one-half cents (7.5CENTS) per Class A Unit,
payable on August 14, 1998 to unitholders of record as of the close of
business on July 10, 1998.
(6) On June 26, 1998, a special meeting of the Partnership's unitholders was
held for the purpose of voting on three separate matters, the results of
which are as follows:
1. Approval of the Merger Proposal by and between the Partnership and C.
Brewer Homes, Inc.:
<TABLE>
<CAPTION>
Vote No. of Units
---- ------------
<S> <C>
For. . . . . . . . . . . . . . . . . . . . 2,267,148
Against. . . . . . . . . . . . . . . . . . 2,800,019
Abstain. . . . . . . . . . . . . . . . . . 91,179
2. Approval of Amendment Proposals
For. . . . . . . . . . . . . . . . . . . . 2,301,535
Against. . . . . . . . . . . . . . . . . . 2,739,866
Abstain. . . . . . . . . . . . . . . . . . 117,035
3. Approval of Option Plan Proposal
For. . . . . . . . . . . . . . . . . . . . 2,457,553
Against. . . . . . . . . . . . . . . . . . 2,555,281
Abstain. . . . . . . . . . . . . . . . . . 145,612
</TABLE>
7
<PAGE>
Since the Merger Proposal was not approved, all costs related to the
merger were expensed in the quarter ending June 30, 1998.
(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.
MAUNA LOA MACADAMIA PARTNERS, L.P.
Management's Discussion and Analysis of
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS -- FOR THE QUARTERS ENDED JUNE 30, 1998 AND 1997
For the first three months and first six months of 1998, nut production,
nut price and revenues are summarized below:
<TABLE>
<CAPTION>
For the Three Months
Ended June 30, Change
------------------- ----------
1998 1997
------- -------
<S> <C> <C> <C>
Nut harvested (000's pounds WIS) 152 778 + -80%
Nut price (per pound) $0.6119 $0.6115 -
------- -------
Net nut sales ($000's) 93 476 + -80%
------- -------
------- -------
</TABLE>
<TABLE>
<CAPTION>
For the Six Months
Ended June 30, Change
------------------- ----------
1998 1997
------- -------
<S> <C> <C> <C>
Nut harvested (000's pounds WIS) 5,801 3,661 + 58%
Nut price (per pound) $0.6119 $0.6115 -
------- -------
Net nut sales ($000's) 3,548 2,239 + 58%
------- -------
------- -------
</TABLE>
Nut production in the second quarter normally accounts for less than 5%
of annual production. The second quarter 1998 was further reduced due to the
El Nino caused drought. The production for the first six months of 1998
surpassed the previous year by 58% due to the very large first quarter
harvest, which is a result of harvest timing differences in the fall/winter
crop.
Production costs are based on annualized standard unit costs. Total
production costs were 61% lower for the second quarter 1998 and 68% higher
for the first six months of 1998 compared to the respective periods in the
prior year. These results are due to the differences in nut production for
these periods.
8
<PAGE>
General and administrative costs are slightly lower, by 7% and 5%, for
the three-month and six-month periods in 1998, and the partnership generated
more interest income in 1998 as a result of having more cash on hand.
The Partnership incurred special charges of $1.1 million in the second
quarter 1998 resulting from the write off of costs related to the cancelled
merger of the Partnership with C. Brewer Homes, Inc. A majority vote of the
limited partners, which was necessary to approve the merger, was not received
at a Special Meeting of the Limited Partners on June 26, 1998, and the merger
plans were voided.
For the 1997-98 crop year (July 1 to June 30), total macadamia nut
production increased by 2% over the 1996-97 crop year. These past two crop
years were the best in the Partnership's twelve-year history and were the
result of favorable weather during the two-year period. Comparative crop
year results by orchard area are shown below (in thousands of pounds):
<TABLE>
<CAPTION>
For the Crop Year
Ended June 30, 1998 1997
---------------------------------------- over over
1998 1997 1996 1997 1996
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Keaau
7,427 7,744 7,106 - 4% + 9%
Ka'u 13,951 13,023 9,578 + 7% + 36%
Mauna Kea
1,077 1,312 1,248 - 18% + 5%
------ ------ ------ ------ -----
Total Production 22,455 22,079 17,932 + 2% + 23%
------ ------ ------ ------ -----
------ ------ ------ ------ -----
</TABLE>
EL NINO
The drought caused by the weather pattern known as El Nino is still
affecting the Ka'u region on the island of Hawaii where 48% of the
Partnership's orchards are located. Ka'u has received only 3 inches of
rainfall for the period from January to June 1998 compared to last year's
rainfall of 20 inches for the same period. While approximately one-third of
the acres in Ka'u have 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 on the island of Hawaii have
been receiving moderate rainfall since the beginning of April, and the
drought should only slightly affect the 1998/99 crop year production from
these orchards.
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. The Partnership had a cash balance of $5.3
million at June 30,
9
<PAGE>
1998, and there were no line of credit drawings outstanding. It is the
opinion of management that the Partnership has adequate cash on hand to meet
anticipated working capital needs.
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.
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
per Class A Unit 12
27 Financial Data Schedule (filed only
electronically with the SEC) --
</TABLE>
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the second quarter of 1998.
10
<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
Date: August 10, 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
<TABLE>
<CAPTION>
Number Description of Exhibits Page No.
------ ----------------------- --------
<S> <C> <C>
11.1 Statement re Computation of Net Income 12
per Class A Unit
27 Financial Data Schedule (filed only
electronically with the SEC) --
</TABLE>
11
<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,
---------------------- ---------------------
1998 1997 1998 1997
------- ------ ------ ------
<S> <C> <C> <C> <C>
Net income (loss) $(1,227) $ 43 $ (558) $ 269
Class A Unitholders
(ownership percentage) x 99% x 99% x 99% x 99%
------- ------ ------ ------
Net income (loss) allocable
to Class A Unitholders $(1,215) $ 42 $ (552) $ 266
------- ------ ------ ------
------- ------ ------ ------
Class A Units outstanding 7,500 7,500 7,500 7,500
------- ------ ------ ------
------- ------ ------ ------
Net income (loss)
per Class A Unit $ (0.16) $ 0.01 $(0.07) $ 0.04
------- ------ ------ ------
------- ------ ------ ------
</TABLE>
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 5,280
<SECURITIES> 0
<RECEIVABLES> 93
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,664
<PP&E> 73,214
<DEPRECIATION> 17,324
<TOTAL-ASSETS> 62,555
<CURRENT-LIABILITIES> 2,052
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 59,271
<TOTAL-LIABILITY-AND-EQUITY> 62,555
<SALES> 93
<TOTAL-REVENUES> 93
<CGS> 125
<TOTAL-COSTS> 125
<OTHER-EXPENSES> 153
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,228)
<INCOME-TAX> (1)
<INCOME-CONTINUING> (1,227)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,227)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
