<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, 2000
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
ML MACADAMIA ORCHARDS, 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, 2000, Registrant had 7,500,000 Class A Units issued and
outstanding.
1
<PAGE>
ML MACADAMIA ORCHARDS, L.P.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II - OTHER INFORMATION
Item 2. Changes in Securities 13
Item 6. Exhibits and Reports on Form 8-K 14
Signature 14
</TABLE>
2
<PAGE>
ML MACADAMIA ORCHARDS, L.P.
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------------------------------
2000 1999 1999
-------------------------------- -----------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,549 $ 3,063 $ 5,325
Accounts receivable 1,319 4,153 7,687
Inventory of farming supplies 131 - -
Annualized cost adjustment 2,101 748 -
Other current assets 296 23 3
-------------- ------------- -----------------
Total current assets 5,396 7,987 13,015
Land, orchards and equipment, net 61,908 54,289 53,488
Intangible assets, net 30 - -
-------------- ------------- -----------------
Total assets $ 67,334 $ 62,276 $ 66,503
============== ============= =================
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Current portion of long-term debt $ 431 $ - $ -
Accounts payable 740 1,193 2,819
Cash distributions payable 947 758 758
Other current liabilities 696 408 407
-------------- ------------- -----------------
Total current liabilities 2,814 2,359 3,984
Long-term debt 3,768 - -
Deferred income tax liability 1,249 1,220 1,249
-------------- ------------- -----------------
Total liabilities 7,831 3,579 5,233
-------------- ------------- -----------------
Commitments and contingencies
Partners' capital
General partners 595 587 613
Class A limited partners, no par or assigned value,
7,500 units issued and outstanding 58,908 58,110 60,657
-------------- ------------- -----------------
Total partners' capital 59,503 58,697 61,270
-------------- ------------- -----------------
Total liabilities and partners' capital $ 67,334 $ 62,276 $ 66,503
============== ============= =================
</TABLE>
--------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
3
<PAGE>
ML MACADAMIA ORCHARDS, L.P.
INCOME STATEMENTS (UNAUDITED)
(in thousands, except per unit data)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Macadamia nut sales to related party $ 751 $ 614 $ 2,243 $ 4,060
Contract farming revenue 427 - 427 -
Administrative services revenue 56 - 56 -
------------ ------------ ----------- -----------
Total revenues 1,234 614 2,726 4,060
------------ ------------ ----------- -----------
Cost of goods and services
Costs expensed for farming and services 773 376 1,772 2,417
Depreciation and amortization 230 77 411 512
Other 32 21 80 124
------------ ------------ ----------- -----------
Total cost of goods sold 1,035 474 2,263 3,053
------------ ------------ ----------- -----------
Gross income 199 140 463 1,007
------------ ------------ ----------- -----------
General and administrative expenses
Costs expensed under management contract
with related party 77 136 219 299
Other 157 66 353 260
------------ ------------ ----------- -----------
Total general and administrative expenses 234 202 572 559
------------ ------------ ----------- -----------
Operating income (loss) (35) (62) (109) 448
Interest expense (77) - (77) -
Interest income 78 83 226 144
Other income 104 - 104 -
------------ ------------ ----------- -----------
Income before tax 70 21 144 592
Income tax expense 8 5 17 35
------------ ------------ ----------- -----------
Net income $ 62 $ 16 $ 127 $ 557
============ ============ =========== ===========
--------------------------------------------------------------------------------------------------------------------
Net cash flow
(as defined in the Partnership Agreement) $ 292 $ 93 $ 538 $ 1,069
============ ============ =========== ===========
--------------------------------------------------------------------------------------------------------------------
Net income per Class A Unit $ 0.01 $ - $ 0.02 $ 0.07
============ ============ =========== ===========
Net cash flow per Class A Unit $ 0.04 $ 0.01 $ 0.07 $ 0.14
============ ============ =========== ===========
Cash distributions per Class A Unit $ 0.125 $ 0.10 $ 0.25 $ 0.20
============ ============ =========== ===========
Class A Units outstanding 7,500 7,500 7,500 7,500
============ ============ =========== ===========
</TABLE>
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
ML MACADAMIA ORCHARDS, L.P.
STATEMENTS OF PARTNERS' CAPITAL (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------------- --------------------------------
2000 1999 2000 1999
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Partners' capital at beginning of period:
General partners $ 604 $ 594 $ 613 $ 597
Class A limited partners 59,784 58,844 60,657 59,058
------------- ------------ ------------- -------------
60,388 59,438 61,270 59,655
------------- ------------ ------------- -------------
Allocation of net income
General partners 1 - 1 5
Class A limited partners 61 16 126 552
------------- ------------ ------------- -------------
62 16 127 557
------------- ------------ ------------- -------------
Cash distributions:
General partners 10 7 19 15
Class A limited partners 937 750 1,875 1,500
------------- ------------ ------------- -------------
947 757 1,894 1,515
------------- ------------ ------------- -------------
Partners' capital at end of period:
General partners 595 587 595 587
Class A limited partners 58,908 58,110 58,908 58,110
------------- ------------ ------------- -------------
$ 59,503 $ 58,697 $ 59,503 $ 58,697
============= ============ ============= =============
</TABLE>
--------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
ML MACADAMIA ORCHARDS, L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------------------- ---------------------------
2000 1999 2000 1999
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Cash received from goods and services $ 9,235 $ - $ 9,235 $ 5,384
Cash paid to suppliers and employees (3,462) (2,122) (6,596) (5,423)
Interest received 189 46 226 111
------------ ----------- ------------ ------------
Net cash provided by (used in) operating activities 5,962 (2,076) 2,865 72
------------ ----------- ------------ ------------
Cash flows from investing activities:
Acquisition of orchards and farming business (8,928) - (8,928) -
------------ ----------- ------------ ------------
Net cash used in investing activities (8,928) - (8,928) -
------------ ----------- ------------ ------------
Cash flows from financing activities:
Proceeds from borrowings 4,000 - 4,000 -
Capital lease payments (8) - (8) -
Cash distributions paid (947) (758) (1,705) (1,326)
------------ ----------- ------------ ------------
Net cash provided by (used in) financing activities 3,045 (758) 2,287 (1,326)
------------ ----------- ------------ ------------
Net increase (decrease) in cash 79 (2,834) (3,776) (1,254)
Cash at beginning of period 1,470 5,897 5,325 4,317
------------ ----------- ------------ ------------
Cash at end of period $ 1,549 $ 3,063 $ 1,549 $ 3,063
============ =========== ============ ============
Reconciliation of net income to net cash
provided by (used in) operating activities:
Net income $ 62 $ 16 $ 127 $ 557
Adjustments to reconcile net income to
cash provided by (used in) operating activities:
Depreciation and amortization 230 77 411 512
Decrease (increase) in accounts receivable 7,974 (650) 6,368 1,282
Decrease in inventories 48 - 48 -
Increase in annualized cost adjustment (832) (425) (1,549) (459)
Decrease (increase) in other current assets (391) 32 (471) (23)
Decrease in accounts payable (1,081) (953) (2,079) (1,828)
Decrease in annualized cost adjustment liability - (96) - -
Increase (decrease) in other current liabilities (48) (77) 10 31
------------ ----------- ------------ ------------
Total adjustments 5,900 (2,092) 2,738 (485)
------------ ----------- ------------ ------------
Net cash provided by (used in) operating activities $ 5,962 $ (2,076) $ 2,865 $ 72
============ =========== ============ ============
</TABLE>
--------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
ML MACADAMIA ORCHARDS, L.P.
NOTES TO FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited financial statements of
ML Macadamia Orchards, L.P. ("the Partnership") include all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly its
financial position as of June 30, 2000, June 30, 1999 and December 31, 1999 and
the results of operations, changes in partners' capital and cash flows for the
periods ended June 30, 2000 and 1999. The results of operations for the period
ended June 30, 2000 are not necessarily indicative of the results to be expected
for the full year or for any future period.
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 1999 Annual Report on
Form 10-K.
(2) ACQUISITION
On May 1, 2000, the Partnership purchased 142 acres of mature macadamia trees
and substantially all of the assets used in the macadamia farming business from
Ka'u Agribusiness Company, Inc., Ka'u Sugar, Inc., Mauna Kea Macadamia Orchards,
Inc., and Mauna Kea Agribusiness Company, Inc., all related entities. The
farming assets consist of the farming equipment, vehicles, a husking plant,
irrigation well, leasehold improvements, office furniture and equipment and
inventories related to macadamia farming. The purchase price was $8.9 million
dollars and was paid using $4.9 million in cash and a loan from Pacific Coast
Farm Credit of $4 million.
The initial purchase price has been allocated on a preliminary basis, pending a
final determination, to assets acquired based on estimated fair value. The
initial allocated fair value of assets acquired is summarized as follows:
<TABLE>
<S> <C>
Inventory $ 127,000
Nursery 52,000
Property, plant and equipment 9,176,000
Current liabilities (427,000)
-------------------
Total $ 8,928,000
===================
</TABLE>
Pro forma results of operations for the Partnership, assuming the acquisition of
the assets had occurred at the beginning of the periods indicated below, are as
follows:
<TABLE>
<CAPTION>
Six months ended June 30,
2000 1999
----------------- -----------------
(in thousands, except per Unit data)
<S> <C> <C>
Revenue $ 6,273 $ 8,624
Net income $ 492 $ 1,280
Net income per Class A Unit $ 0.06 $ 0.17
</TABLE>
7
<PAGE>
The unaudited pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of the results of operations which actually
would have resulted had the acquisition been in effect at the beginning of each
period presented, or of future results of operations of the entities.
(3) SEGMENT INFORMATION
The Partnership has two reportable segments, the owned-orchard segment and the
farming segment, which are organized on the basis of revenues and assets. The
owned-orchard segment derives its revenues from the sale of macadamia nuts grown
in orchards owned or leased by the Partnership. The farming segment derives its
revenues from the farming of macadamia orchards owned by other growers. It also
farms those orchards owned by the Partnership.
Management evaluates the performance of each segment on the basis of operating
income. The Partnership accounts for intersegment sales and transfers at cost.
Such intersegment sales and transfers are eliminated in consolidation.
The Partnership's reportable segments are distinct business enterprises that
offer different products or services. Revenues from the owned-orchard segment
are subject to long-term nut purchase contracts and tend to vary from year to
year due to changes in the calculated nut price per pound. The farming segment's
revenues are based on long-term farming contracts which generate a farming
profit based on a percentage of farming cost or based on a fixed fee per acre
and tend to be less variable than revenues from the owned-orchard segment.
The following is a summary of each reportable segment's operating income and the
segment's assets as of and for the periods ended June 30, 2000. The contract
farming segment results of operations include the period May 1, 2000 (date of
acquisition) through June 30, 2000.
Segment Reporting for the Three Months ended June 30, 2000
(in thousands)
<TABLE>
<CAPTION>
Owned Contract Intersegment
Orchards Farming elimination Total
-------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C>
Revenues $ 751 $ 1,414 $ (931) $ 1,234
Composition of
intersegment revenues - 931 - 931
Operating income (loss) (20) (15) - (35)
Depreciation expense 125 105 - 230
Segment assets 57,733 9,601 - 67,334
Expenditures for property
and equipment 2,533 6,395 - 8,928
</TABLE>
8
<PAGE>
Segment Reporting for the Six Months ended June 30, 2000
(in thousands)
<TABLE>
<CAPTION>
Owned Contract Intersegment
Orchards Farming elimination Total
-------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C>
Revenues $ 2,243 $ 1,414 $ (931) $ 2,726
Composition of
intersegment revenues - 931 - 931
Operating income (loss) (94) (15) - (109)
Depreciation expense 306 105 - 411
Segment assets 57,733 9,601 - 67,334
Expenditures for property
and equipment 2,533 6,395 - 8,928
</TABLE>
All revenues are from sources within the United States.
(4) INTERIM REPORTING
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.
(5) LONG-TERM CREDIT
As of June 30, 2000, the Partnership had a $4 million promissory note
outstanding, which was issued on May 2, 2000 in conjunction with the acquisition
discussed above. The note is scheduled to mature in 2010 and bears interest at
rates from 8.53 percent to 9.16 percent.
(6) PARTNERS' CAPITAL
All capital allocations reflect the general partner's 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.
(7) CASH DISTRIBUTIONS
On May 12, 2000, a second quarter cash distribution was declared in the amount
of twelve and one-half cents ($0.125) per Class A Unit, payable on August 15,
2000 to unitholders of record as of the close of business on June 30, 2000.
9
<PAGE>
ML MACADAMIA ORCHARDS, L.P.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
On May 1, 2000, the Partnership completed the purchase of the macadamia farming
operations from four subsidiaries of C. Brewer and Company, Ltd. The acquired
assets consist of 142 acres of macadamia orchards, farming contracts, farming
equipment, vehicles, a husking plant, irrigation well, office buildings, garages
and warehouses, office furniture and equipment and material inventories related
to macadamia farming. All the assets and operations are located on the island of
Hawaii. Effective with the acquisition, the Partnership now performs all the
farming operations for its own 4,169 acres and for approximately 3,000
additional acres owned by other growers.
RESULTS OF OPERATIONS
ML Macadamia Orchards' net income for the second quarter of 2000 was $62,000, a
three-fold increase over the $16,000 recorded in same period in 1999. Net income
per Class A Unit was $0.01 compared to last year's net income of less than
$0.01. Net cash flow per Class A Unit increased to $0.04 from $0.01.
Revenues rose to $1.2 million, 100% more than last year's second quarter. The
second quarter normally accounts for less than 4% of the total year's harvest
and revenues. It marks the end of the crop year that began the previous July,
and harvesting is usually at a minimum.
Net income for the six months ended June 30, 2000 was $127,000, down from
$557,000 recorded in the first half of 1999. Net income per Class A Unit was
$0.02 compared to $0.07 last year and net cash flow per Class A Unit was $0.07
compared to $0.14.
Revenues for the first six months of 2000 were $2.7 million, 33% lower than the
$4.1 million recorded in the first half of 1999. The first half of 1999 was
larger than normal because the fall-winter harvest continued to come in very
heavy after the beginning of the calendar year.
OWNED-ORCHARD SEGMENT
For the three months and the six months ending June 30, 2000 and 1999, nut
production, nut prices and revenues are summarized below:
<TABLE>
<CAPTION>
For the Three Months
Ended June 30, Change
------------------------------ -------------
2000 1999
-------------- -------------
<S> <C> <C> <C>
Nut harvested (000's pounds WIS) 1,289 965 + 34%
Nut price (per pound) $ 0.5826 $ 0.6357 - 7%
-------------- -------------
Net nut sales ($000's) 751 614 + 22%
============== =============
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
For the Six Months
Ended June 30, Change
------------------------------ -------------
2000 1999
-------------- -------------
<S> <C> <C> <C>
Nut harvested (000's pounds WIS) 3,847 6,369 - 40%
Nut price (per pound) $ 0.5831 $ 0.6375 - 8%
-------------- -------------
Net nut sales ($000's) 2,243 4,060 - 45%
============== =============
</TABLE>
Production for the three-month period ending June 30, 2000 was approximately 50%
higher than the historical average for this quarter and 34% higher than the
three-month period ending June 30, 1999. The six-month period ending June 30,
2000 was 40% lower than the same period in 1999. The production for the second
quarter 2000 was near the historical average for this period. The production for
the six-month period ending June 30, 1999 was the highest in the Partnership's
history for this period due to the winter crop falling heavier in the first
quarter than normal.
The average nut price received for the second quarter 2000 was $0.5912, a 7%
decline from the second quarter 1999. For the six-month period, nut prices
declined by 8% compared to the same period in 1999. 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 7%
lower than the previous year, and the Mauna Loa portion of the current year's
nut price is estimated to be lower by 4%. 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 1999, the actual average nut price received by the Partnership was
$0.6238.
Prior to the acquisition of the macadamia farming operations on May 1, 2000, all
production activities were performed under long-term farming contracts.
Production costs both before and after the acquisition are based on annualized
standard unit costs for interim reporting periods. Total production costs for
the owned-orchards were higher for the three-month period in 2000 compared to
the same period in 1999 due to the larger harvests. For the six-month period,
farming costs for the current year were lower due to less production.
CROP YEAR PRODUCTION RESULTS
Macadamia nut production for the 1999-2000 crop year (July 1 to June 30) totaled
23.0 million pounds, 15% more than the 1998-99 crop year, and marks the largest
crop-year harvest in the Partnership's fourteen-year history. The Keaau and
Mauna Kea regions benefited from dryer weather early in the growing season and
recorded harvests well above their historical averages. The Ka'u region has been
suffering from drought conditions since December of 1997. The region received
enough rainfall at the beginning of 1999 to generate a slightly less than
average harvest for the 1999-2000 crop year. The 1998-99 crop year in Ka'u was
30% below its average due to the drought. Comparative crop year results by
orchard area are shown below (in thousands of pounds):
11
<PAGE>
<TABLE>
<CAPTION>
For the Crop Year 2000 1999
Ended June 30, Over Over
------------------------------------------
2000 1999 1998 1999 1998
------------ ------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Keaau 10,260 10,884 7,427 - 6% + 47%
Ka'u 10,720 7,807 13,951 + 37% - 44%
Mauna Kea 2,069 1,340 1,077 + 54% + 24%
------------ ------------- ------------
Total Production 23,049 20,031 22,455 + 15% - 11%
============ ============= ============
</TABLE>
FARMING SEGMENT
This is the first quarter that the Partnership has been involved in the farming
activity, which resulted from the May 1, 2000 acquisition. Revenue generated
from the farming of macadamia orchards owned by other growers was $427,000 for
the second quarter 2000. Farming expenses for the same period were $442,000,
which included $105,000 of depreciation expense.
Administrative service revenue of $56,000 was earned by the farming operation's
accounting office as a result of accounting and data processing services being
provided to the previous owner during a period of transition.
OTHER INCOME AND EXPENSES
The Partnership recorded interest expense of $77,000 for the second quarter
2000. This was due to a new long-term loan used to acquire the farming
operations and to the assumption of several equipment leases. There was no
interest expense for the three and six month periods in 1999.
Interest income increased by $82,000 for the first half of 2000 compared to 1999
as a result of higher cash balances generated by cash from operations.
Other income of $104,000 was recorded in the second quarter of 2000 due to a
claim filed on a crop insurance policy for the 1999-2000. Production in some
fields in the Ka'u region were lower than their ten-year average by more than a
25% deductible due to the drought in that region.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 2000, cash provided from operations of $2.9
million was derived principally from a decrease in accounts receivable less an
increase in the annualized cost adjustment and a decrease in accounts payable.
Cash provided by operations was used to pay distributions to Unitholders of $1.7
million. During the period the Partnership borrowed $4.0 million under its new
Credit Agreement which was used to finance acquisitions of $8.9 million.
At June 30, 2000, the Partnership had $4.2 million in outstanding long-term debt
representing a $4.0 million ten-year note under a new Credit Agreement and
$200,000 of assumed 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.
12
<PAGE>
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 $1.5 million at June 30, 2000, and
there were no line of credit drawings outstanding. The Partnership anticipates
borrowing from the revolving line of credit during the last five 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
For the third consecutive year, the Ka'u region is suffering from drought
conditions, receiving nine inches of rainfall for the first six months of the
year. One-third of the acres in Ka'u have irrigation, but normal production on
the remaining acres cannot be sustained, and a continuing drought will have a
negative impact on the region's production for the forthcoming 2000-2001 crop
year.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership is exposed to market risks resulting from changes in interest
rates. The Partnership has market risk exposure on its Credit Agreement due
to its variable rate pricing that is based on rates based on LIBOR, the Farm
Credit Discount Note Rate and the Farm Credit Medium Term Note Rate. As of
June 30, 2000, a one percent increase or decrease in the applicable rate
under the Credit agreement will result in an interest expense fluctuation of
approximately $40,000.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
In connection with the Credit Agreement with Pacific Coast Farm Credit Services,
certain restrictions are placed on the Partnership in regard to indebtedness,
sales of assets and maintenance of certain financial minimums. The Partnership's
cash distributions will be restricted unless all requirements of these covenants
are met and the effects of any cash distributions do not breach any of the
financial covenants. The restrictive covenants consist of the following:
1. Minimum working capital of $2.5 million.
2. Minimum current ratio of 1.5 to 1.
3. Cumulative cash distributions beginning January 1, 2000 cannot exceed
the total of cumulative net cash flow beginning January 1, 2000 plus a
base amount of $3 million.
4. Minimum tangible net worth of $57.5 million (reduced by the amount of
allowed cash distributions over net income).
5. Maximum ratio of funded debt to capitalization of 20%.
6. Minimum debt coverage ratio of 2.5 to 1.
13
<PAGE>
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 16
27 Financial Data Schedule (filed only
electronically with the SEC) --
</TABLE>
(b) Reports on Form 8-K:
On May 8, 2000, the Partnership filed a report on Form 8-K announcing that the
partnership completed the purchase of 142 acres of macadamia orchards and
substantially all of the assets used in the macadamia farming business from Ka'u
Agribusiness, Inc., Ka'u Sugar, Inc., Mauna Kea Macadamia Orchards, Inc. and
Mauna Kea Agribusiness Company, Inc.
SIGNATURE
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.
ML MACADAMIA ORCHARDS, L.P.
(Registrant)
By ML RESOURCES, INC.
Managing General Partner
Date: July 31, 2000 By /s/ Gregory A. Sprecher
--------------------------
GREGORY A. SPRECHER
Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description of Exhibits Page No.
------ ----------------------- --------
<S> <C> <C>
11.1 Statement re Computation of Net Income 16
per Class A Unit
27 Financial Data Schedule (filed only
electronically with the SEC) --
</TABLE>
15
