SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Non-Tech : ML Macadamia Orchards, L.P.
NUT 0.010000.0%Sep 25 4:00 PM EDT

 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10PreviousNext  
To: long-gone who wrote (12)11/13/2002 3:19:49 PM
From: long-gone   of 13
 
10-Q: ML MACADAMIA ORCHARDS L P

(EDGAR Online via COMTEX) -- Management's Discussion and Analysis of Financial Condition and Results of Operations
Significant Accounting Policies and Estimates

The Partnership prepares its Financial Statements in conformity with accounting principles generally accepted in the United States of America. Certain of our accounting policies, including the estimated lives assigned to our assets, determination of bad debt, estimated nut price, annualized production costs, asset impairment and self-insurance reserves and the calculation of our income tax liabilities, require that we apply significant judgment in defining the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. Our judgments are based on our historical experience, terms of existing contracts, our observance of trends in the industry and crop, information provided by our customers and information available from outside sources, as appropriate. There can be no assurance that the actual results will not differ from our estimates. To provide an understanding of the methodology we apply, our significant accounting policies are discussed where appropriate in this discussion and analysis and in the Notes to Financial Statements.

Results of Operations

ML Macadamia Orchards' net income for the third quarter of 2002 was $43,000, as compared to the $485,000 recorded in same period in 2001, which included a legal fee recovery of $200,000. Net income per Class A Unit was $0.01 compared to last year's net income of $0.06. Net cash flow per Class A Unit decreased to $0.09 from $0.15.

Total revenues for the third quarter 2002 were $5.1 million, of which $4.0 million was nut revenue and $1.1 million farming revenue. This compared to last year's third quarter revenues of $4.8 million, of which $3.6 million was nut revenue and $1.1 million was farming revenue.

Net loss for the nine months ended September 30, 2002 was $344,000, compared to net income of $771,000 recorded in the first nine months of 2001. Net income for the first three quarters of the both years is based on an estimated nut price from Mauna Loa, which will be actualized in the fourth quarter results. Net loss per Class A Unit was $0.05 compared to net income of $0.10 last year and net cash flow per Class A Unit was $0.04 compared to $0.20.

Revenues for the first nine months of 2002 were $8.4 million, 16% lower than the $9.9 million recorded in the first nine months of 2001. The prior year includes approximately $1 million in revenue from the favorable outcome of litigation.

Owned-orchard Segment

For the three months and the nine months ending September 30, 2002 and 2001, nut production, nut prices and revenues are summarized below:

For the Three Months
Ended September 30,
------------------------
2002 2001 Change
----------- --------- ------
Nut harvested (000's pounds WIS) 8,438 7,389 + 14 %
Nut price (per pound) $ 0.4685 $ 0.4915 — 5 %
----------- --------- - ------
Total nut sales ($000's) $ 3,953 $ 3,632 + 9 %
----------- --------- - ------

For the Nine Months
Ended September 30,
-----------------------
2002 2001 Change
----------- -------- ------
Nut harvested (000's pounds WIS) 12,090 11,998 + 1 %
Nut price (per pound) $ 0.4694 $ 0.4942 — 5 %
----------- -------- - ------
Net nut sales ($000's) 5,675 5,930 — 4 %
Litigation Revenues ($000's) — 908
----------- -------- - ------
Total nut sales ($000's) $ 5,675 $ 6,838
----------- -------- - ------

Production for the three-month period ending September 30, 2002 was 14% higher than the three-month period ending September 30, 2001. The nine-month period ending September 30, 2002 was 1% higher than the same period in 2001. The production for the third quarter 2002 was 37% above the historical average for this period. The production for the nine month period ending September 30, 2002 was 15% higher the historical average for this period.
The average nut price received for the third quarter 2002 was $0.4685, a 5% decline from the third quarter 2001. This price is based on Mauna Loa's latest estimate and may be different from the price that is ultimately paid. For the nine-month period, nut prices declined by 5% compared to the same period in 2001. The Partnership's nut price is determined by a formula which is weighted 50% on the two-year trailing average of USDA reported prices and 50% on the current year processing and marketing results of Mauna Loa Macadamia Nut Corporation ("Mauna Loa"), our exclusive purchaser. The USDA portion of the current year's nut price will be 4% lower than the previous year, and the Mauna Loa portion of the current year's nut price is estimated to be flat (to the prior full year actual). However, the final nut price for the year is not known until the completion of the year, when Mauna Loa's books have been closed and audited and that portion of the nut price is determined. For the full year 2001, the actual average nut price received by the Partnership was $0.4830.

Production costs are based on annualized standard unit costs for interim reporting periods. Total production costs for the owned-orchards for the three-months ended September 30, 2002 were equal to the same period in 2001, despite higher production. For the nine-month period, farming costs for the current year were lower as 2002 did not have the flood repairs as occurred in 2001.

Farming Segment

Revenue generated from the farming of macadamia orchards that are owned by other growers was $1,136,000 for the third quarter 2002, or equivalent to the three months ended September 30, 2001. Farming expenses for the quarter ended September 30, 2002 were $1,040,000, which included $87,000 of depreciation expense. Farming revenues for the first nine months of 2002 were $2,685,000 compared to the nine months in 2001 of $3,108,000.

Other Income and Expenses

The Partnership recorded interest expense of $66,000 for the third quarter 2002, which was $49,000 less than the same period in 2001. For the nine months ended September 30, 2002 and 2001, interest expense was $241,000 and $325,000, respectively. The interest results from borrowings required to acquire the farming operations and provide working capital for off-season farming operations. The decrease is the result of lower balances on the line of credit, paid down with the proceeds from collection of receivables.

Interest income decreased by $14,000 for the quarter and decreased $23,000 for the first nine months of 2002 compared to 2001.

Other income of $96,000 was recorded in the third quarter of 2002 as a result of the early termination of certain lease rights held by the Partnership. Other income is $96,000 and $207,000 for the nine months ended September 30, 2002 and 2001, respectively.

Liquidity and Capital Resources

For the nine months ended September 30, 2002, cash provided by operations of $658,000 was derived principally from an decrease in accounts receivable, an increase in the annualized cost adjustment and a decrease in liabilities. Cash provided by operations was used to pay distributions to Unit holders of $1.1 million. During the nine-month period the Partnership has borrowed $700,000 net on its revolving line of credit, approximately $700,000 less than net borrowings in the first nine months of the prior year.

At September 30, 2002, the Partnership had $3.4 million in outstanding long-term debt representing a $3.2 million ten-year note under a Credit Agreement and $210,000 of capital leases. The Credit Agreement contains certain restrictions, which are discussed in Part II—Item 2 below.

Macadamia nut farming is seasonal, with production peaking in the fall and winter. 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 $5.0 million revolving line of credit. The Partnership had a cash balance of $54,000 at September 30, 2002 and there was $1,900,000 drawn on the line of credit. The Partnership has repaid the line of credit as of October 31, 2002 and anticipates borrowing from the revolving line of credit during the last two months of the year to fund working capital needs arising from the normal seasonal requirements of macadamia nut farming.

It is the opinion of management that the Partnership has adequate borrowing capacity available to meet anticipated working capital needs.

Other Developments

The Partnership has reached agreement to purchase approximately 1,774 acres of land currently under long-term leases with C. Brewer and Company, Limited for $1.1 million. The transaction will be financed under a new credit facility and is expected to close prior to December 31, 2002.

The Ka'u region, which had suffered from drought conditions in the prior three years, has received 56 inches of rain in the first nine months of 2002. This exceeds the 10-year average of 38 inches and the nine month period of 2001 which was 19 inches of rain.

On October 30, 2002, the Partnership received a partial payment of $2.8 million from Mauna Loa, on a total receivable of $3.9 million for nuts delivered and services provided in the 3rd quarter of 2002. Mauna Loa has indicated that it expects to pay the remaining balance in November.
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10PreviousNext