Mac nut firm posts loss
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ML Macadamia Orchards LP said yesterday it lost $436,000 in the third quarter due to transaction costs related to its pending acquisition of Mac Farms of Hawaii LLC as well as a smaller harvest and lower nut prices.
The state's largest macadamia nut grower said it's still targeting Dec. 31 to close the deal with the state's second-largest nut processor, but that it could slip into the first quarter of 2008 due to regulatory hurdles.
A year earlier, ML Macadamia had net income of $85,000, or 1 cent per Class A unit.ML Macadamia's revenue plunged 49.4 percent to $2.8 million from $5.5 million.
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ML Macadamia Orchards LP, the state's largest macadamia nut grower, swung to a loss of $436,000 in the third quarter due to a smaller harvest, lower nut prices and transaction costs related to its pending acquisition of Mac Farms of Hawaii LLC.
The Kona-based partnership signed a definitive agreement in May to acquire Big Island-based Mac Farms, the second-largest nut processor in the state, but said yesterday it's possible that the deal may not close until after its Dec. 31 target date.
"Either party could walk if it didn't close by Dec. 31, but both want to do the transaction," said Dennis Simonis, president and chief executive of ML Macadamia. "It's a matter of clearing all the regulatory hurdles. If it was a private company to private company, it would be very simple. But we're a public company and it's more complicated, so it takes time."
Simonis said that ML Macadamia is hoping to get out a proxy to its unitholders "in the next couple of weeks."
"If the date gets too close to the holidays, it could slide into next year," he said.
ML Macadamia, which had net income of $85,000 a year ago, is seeking to buy Mac Farms so it can diversify into processing and marketing.
Upon completion of the transaction, ML Macadamia will pay Mac Farms 650,000 ML Macadamia Class A units -- valued at $2.8 million as of yesterday's market close, plus net working capital, as defined in the purchase agreement, that is estimated at $10.6 million.
In return, Mac Farms will lease the land on which its processing plant is located to ML Macadamia for 20 years and Kapua Orchard Estates LLC, a Mac Farms affiliate, will lease to ML Macadamia 3,998 acres of land, together with the improvements and macadamia nut orchards on the land, for five years.
Last quarter, ML Macadamia's general and administrative expenses soared nearly 90 percent to $874,000 from $461,000 a year ago primarily due to professional fees and other costs related to the potential acquisition of Mac Farms.
"That's really the difference between last year and this year -- using the money to do the acquisition that's important to our future," Simonis said. "If we do the acquisition, those expenses will be reversed and capitalized, which basically restores it to net income and reverses the expenses."
The partnership had a loss per Class A unit of 6 cents last quarter compared with net of 1 cent per Class A unit a year ago.
ML Macadamia's revenue plunged 49.4 percent to $2.8 million from $5.5 million as its nut harvest produced 4.1 million pounds, 28.5 percent lower than the 5.8 million pounds in the year-earlier quarter. Due to contract prices, the partnership also received less for its nuts, getting 58 cents a pound in the third quarter compared with 74 cents a pound a year earlier.
"It's the start of the harvest," Chief Financial Officer Wayne Roumagoux said about the slow quarter. "Our biggest quarter is the fourth quarter every year."
Nut revenue sank 53.9 percent to $2 million from $4.3 million while contract farming revenue declined 33.5 percent to $797,000 from $1.2 million.