CONCENTRATION RISKS

12 Months Ended

Dec. 31, 2013

CONCENTRATION RISKS

CONCENTRATION RISKS

(13) CONCENTRATION RISKS

Market and customers.   In 2014, one customer will purchase a significant portion of the Partnership’s production.  If the Partnership’s customer is unable to perform, the Partnership would be required to find alternative purchasers for its nuts.

Nut Purchase Agreements.  In 2013, the Partnership had two nut purchase contracts, two lease agreements and one license agreement with Mauna Loa. The nut purchase contracts are fixed price contracts effective January 1, 2012 with contract terms of two and three years, respectively, and are in accordance with Hershey’s standard payment terms.  The two lease agreements and license agreement acquired in August 2010 contain market determined prices. The two lease agreements have a ninety-nine year term with sixty-six and sixty-eight years remaining.  The license agreement has a term of fifty years with seventeen years remaining. The payment terms of the lease and license agreements are 30 days after the end of month delivery. The Partnership relies upon the financial ability of the buyer of the Partnership’s nuts to abide by the payment terms of the nut purchase agreements.  If the buyer was unable to pay for the macadamia nuts delivered by the Partnership, or if the buyer is late in payment, it could result in the Partnership’s available cash resources being depleted.  If the buyer refuses to purchase the nuts, the Partnership would need to negotiate a nut purchase agreement with another buyer which might not be at the same terms or price.  It is also possible that the Partnership might not be able to find a buyer for the nuts.

The nut purchase contracts provide for a fixed nut price.  Fixed price contracts can be disadvantageous because the Partnership may not be able to pass on unexpected cost increases.

Employees.  As of December 31, 2013, the Partnership employed 279 people, of which 199 were seasonal employees.  Of the total, 22 are in farming supervision and management, 243 in production, maintenance and agricultural operations, and 14 in accounting and administration.

On June 20, 2013 the Partnership and the ILWU Local 142 agreed to two bargaining unit contracts, which are effective June 1, 2013 through May 31, 2016.  These agreements cover all production, maintenance and agricultural employees of the Ka’u, Keaau and the Mauna Kea Orchards. Although, the Partnership believes that relations with its employees and the ILWU are good, there is uncertainty with respect to the ultimate outcome of the bargaining unit negotiations when the current agreement expires.