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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 June 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 19145
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, 1996, Registrant had 7,500,000 Class A Units issued and
outstanding.
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MAUNA LOA MACADAMIA PARTNERS, L.P.
INDEX
PAGE
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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
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MAUNA LOA MACADAMIA PARTNERS, L.P.
Balance Sheets (Unaudited)
(In Thousands)
June 30 December 31,
-------------------
ASSETS 1996 1995 1995
------- ------- -----------
Current assets:
Cash and short term investments $ 736 713 421
Accounts receivable from related party 519 61 4,095
Annualized cost adjustment 1,673 1,253 -
Prepaid expenses and other assets 65 64 54
------- ------- -------
Total current assets 2,993 2,091 4,570
------- ------- -------
Land, orchards and equipment 73,191 73,191 73,191
Less accumulated depreciation
and amortization (14,117) (12,516) (13,316)
------- ------- -------
Land, orchards and equipment (net) 59,074 60,675 59,875
------- ------- -------
Deferred charges (net) 8 14 10
------- ------- -------
Total assets $62,075 62,780 64,455
======= ======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Line of credit payable - - -
Mortgage note payable (current portion) - 60 265
Accounts payable to related parties 1,243 1,077 2,455
Distributions payable 379 379 383
Other current and accrued liabilities 265 227 232
------- ------- -------
Total current liabilities 1,887 1,743 3,335
------- ------- -------
Mortgage note payable (noncurrent portion) - 234 -
Deferred income tax expense 14,982 14,982 14,982
Partners' capital:
General partners 453 459 462
Class A limited partners 44,753 45,362 45,676
------- ------- -------
Total partners' capital 45,206 45,821 46,138
------- ------- -------
Total liabilities and partners' cap $62,075 62,780 64,455
======= ======= =======
================================================================================
See notes to financial statements.
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MAUNA LOA MACADAMIA PARTNERS, L.P.
Income Statements (Unaudited)
(In Thousands, Except Per Unit Data)
Three months Six months
ended June 30, ended June 30,
----------------- ------------------
1996 1995 1996 1995
------ ------ ------ -----
Macadamia nut sales to related party $ 519 61 2,061 2,635
Cost of goods sold:
Costs expensed under farming
contracts with related parties 320 20 1,398 1,644
Depreciation and amortization 59 16 286 295
Other 22 3 70 50
------ ----- ----- -----
401 39 1,754 1,989
------ ----- ----- -----
Gross profit margin 118 22 307 646
General and administrative expenses:
Costs expensed under management
contract with related party 116 101 230 237
Other 65 71 257 280
------ ----- ----- -----
181 172 487 517
------ ----- ----- -----
Operating income (loss) (63) (150) (180) 129
Interest income (expense) 7 2 6 (11)
------ ----- ----- -----
Net income (loss) $ (56) (148) (174) 118
====== ===== ===== =====
=============================================================================================
Net cash flow (as defined in the
Partnership Agreement) $ (4) (145) 114 388
====== ===== ===== =====
Net income (loss) per Class A Unit $(0.01) (0.02) (0.02) 0.02
====== ===== ===== =====
Net cash flow per Class A Unit $ - (0.02) 0.02 0.05
====== ===== ===== =====
Cash distributions per Class A Unit $ 0.05 0.05 0.10 0.10
====== ===== ===== =====
Class A Units outstanding 7,500 7,500 7,500 7,500
====== ===== ===== =====
==================================================================
See notes to financial statements.
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MAUNA LOA MACADAMIA PARTNERS, L.P.
Statements of Partners' Capital (Unaudited)
(In Thousands)
Three months Six months
ended June 30, ended June 30,
------------------- -------------------
1996 1995 1996 1995
------- ------ ------ ------
Partners' capital at beginning of period:
General partners $ 457 464 462 465
Class A Limited Partners 45,184 45,884 45,676 45,996
------- ------ ------ ------
45,641 46,348 46,138 46,461
------- ------ ------ ------
Allocation of net income (loss):
General partners (1) (1) (2) 2
Class A Limited Partners (55) (147) (172) 116
------- ------ ------ ------
(56) (148) (174) 118
------- ------ ------ ------
Cash distributions:
General partners 4 4 8 8
Class A Limited Partners 375 375 750 750
------- ------ ------ ------
379 379 758 758
------- ------ ------ ------
Partners' capital at end of period:
General partners 452 459 452 459
Class A Limited Partners 44,754 45,362 44,754 45,362
------- ------ ------ ------
$45,206 45,821 45,206 45,821
======= ====== ====== ======
=========================================================================
See notes to financial statements.
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MAUNA LOA MACADAMIA PARTNERS, L.P.
Statements of Cash Flows (Unaudited)
(In Thousands)
Three months Six months
ended June 30, ended June 30,
-------------------- -----------------
1996 1995 1996 1995
------- ------ ------ ------
Cash flows from operating activities:
Cash received from macadamia nut sales $ 1,542 3,128 5,637 8,569
Cash paid under farming
and management contracts (1,327) (2,128) (3,913) (5,267)
Cash paid to other suppliers (134) (96) (382) (412)
Interest received (paid) 7 2 8 (11)
------- ------ ------ ------
Net cash provided
by operating activities 88 906 1,350 2,879
------- ------ ------ ------
Cash flows from financing activities:
Line of credit repayments - - - (1,407)
Principal payments of mortgage note - (15) (265) (30)
Distributions paid (379) (379) (762) (758)
Other (8) (8) (8) (8)
------- ------ ------ ------
Net cash provided
(used) in financing activities (387) (402) (1,035) (2,203)
------- ------ ------ ------
Net increase (decrease) in cash (299) 504 315 676
Cash at beginning of period 1,035 209 421 37
------- ------ ------ ------
Cash at end of period $ 736 713 736 713
======= ====== ====== ======
======================================================================
See notes to financial statements.
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MAUNA LOA MACADAMIA PARTNERS, L.P.
Statements of Cash Flows (Unaudited)
(In Thousands)
Three months Six month
ended June 30 ended June 30
------------------ ------------------
1996 1995 1996 1995
------ ------ -------- -------
Reconciliation of net income to net cash
provided (used) by operating activities:
Net income (loss) $ (56) (148) (174) 118
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation and amortization 60 19 296 301
Decrease in accounts
receivable from related party 1,023 3,067 3,576 5,934
Decrease (increase) in prepaid
expenses and other assets (10) (14) (11) (40)
Increase (decrease) in accounts
payable to related party (119) (1,218) (1,212) (2,707)
Increase in current and
other accrued liabilities 14 47 33 20
Decrease (increase) in annualized
cost adjustment [other than from
depreciation and amortization] (824) (847) (1,158) (747)
------ ------ ------ ------
Total adjustments 144 1,054 1,524 2,761
------ ------ ------ ------
Net cash provided
by operating activities $ 88 906 1,350 2,879
====== ====== ====== ======
===========================================================================
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 June 30, 1996, June 30, 1995 and December 31, 1995 and the related
unaudited Statements of Income, Partners' Capital and Cash Flows for the
periods ended June 30, 1996 and 1995 contain all adjustments, consisting
only of normally recurring accruals, necessary to present fairly the
financial position as of June 30, 1996, June 30, 1995 and December 31,
1995 and the results of operations, changes in partners' capital and cash
flows for the periods ended June 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 May 14, 1996, the second quarter cash distribution was declared in the
amount of five cents (5 cents) per Class A Unit, payable on August 15,
1996 to unitholders of record as of the close of business on June 28,
1996.
(7) On June 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 JUNE 30, 1996 AND 1995
For the first three months and first six months of 1996, nut production, price
and revenues are summarized below:
For the Three Months
Ended June 30,
------------------------
1996 1995 Change
------ ------ ------
Nuts harvested (000's Lbs. WIS) 934 575 + 62%
Nut price ($/Lb.) .5558 .5733 - 3%
----- -----
Gross nut revenues ($000's) 519 330 + 57%
Less adjustment for revised nut
price estimate on first quarter
production (see discussion below) - (269)
----- -----
Net nut revenues ($000's) 519 61 +751%
===== =====
For the Six Months
Ended June 30,
------------------------
1996 1995 Change
------- ------ ------
Nuts harvested (000's Lbs. WIS) 3,707 4,595 - 19%
Nut price ($/Lb.) .5558 .5733 - 3%
----- -----
Net nut revenues ($000's) 2,061 2,635 - 22%
===== =====
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. Second quarter revenues for 1995 reflect
such an updating of price estimate.
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For the full 1995-96 crop year (July 1 through June 30), nut production
decreased by 10% to 17.9 million pounds. Comparative crop year production
figures are summarized below (in thousands of wet-in-shell pounds at 25%
equivalent moisture):
For the Crop Year
Ended June 30, 1996 1995
------------------------------ over over
1996 1995 1994 1995 1994
----- ----- ----- ------ ------
Keaau orchards 7,106 7,038 7,846 + 1% - 10%
Ka'u orchards 9,578 12,319 10,204 - 22% + 21%
Mauna Kea orchard 1,248 577 729 + 116% - 21%
------ ------ ------
Total production 17,932 19,934 18,779 - 10% + 6%
====== ====== ======
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 Keaau and Mauna Kea orchards (from excessive
moisture). Nearly one-third of the Partnership's acreage has not yet reached
full maturity.
The decrease in nut production for the first half of 1996 reflected a
combination of dry weather during the preceding year at Ka'u and harvest
timing. The increase in second quarter nut production primarily reflected
harvest timing.
Production costs (reported as "cost of goods sold") are based on annualized
standard unit costs. Total production costs were 12% lower in the first half
of 1996 than for the same period in 1995 as a result of lower production. On a
per pound basis, production costs were 9% higher in the first half of 1996 than
in the corresponding period last year due both to differences in orchard mix
(with proportionately more pounds harvested from the Partnership's lower cost
orchards in the first half of 1995) and to somewhat higher cultivation costs in
1996 due to the wetter weather. Second quarter of 1995 cost of goods sold also
reflects a standard cost adjustment to reflect the updated annual operating
forecast of the Partnership's farming management companies.
Excluding management fees payable to the managing general partner, general and
administrative expenses are roughly comparable year over year. No management
fee was paid with respect to 1995 but such a fee is expected to be paid with
respect to 1996. The Partnership generated more interest income in 1996 as a
result of having cash on hand which generated interest income and of its having
paid off its remaining debt in the first quarter of 1996.
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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, 1995
and June 30, 1996. No borrowings were made from the line of credit during the
second quarter. The Partnership will make borrowings from the line during the
last five months of the year to fund 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 Partnership 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 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:
Exhibit Page
Number Description Number
------- ----------- ------
(11.1) Statement re Computation of Net Income 14
per Class A Unit
(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: August 13, 1996
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