10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-9145

ROYAL HAWAIIAN ORCHARDS, L.P.

(Exact name of registrant as specified in its charter)

DELAWARE	99-0248088
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

688 Kinoole Street, Suite 121, Hilo, Hawaii	96720
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (808) 747-8471

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 12 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 14, 2016, the registrant had 11,100,000 Class A Units issued and outstanding.

ROYAL HAWAIIAN ORCHARDS, L.P.

INDEX

PART I – FINANCIAL INFORMATION			2
	Item 1. Financial Statements		2
		Condensed Consolidated Balance Sheets	2
		Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)	3
		Condensed Consolidated Statements of Partners’ Capital (unaudited)	4
		Condensed Consolidated Statements of Cash Flows (unaudited)	5
		Notes to Condensed Consolidated Financial Statements (unaudited)	6
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
	Item 3. Quantitative and Qualitative Disclosures About Market Risk		31
	Item 4. Controls and Procedures		31
PART II – OTHER INFORMATION			32
	Item 1. Legal Proceedings		32
	Item 6. Exhibits		32
SIGNATURES			33

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PART II – Financial Information

Item 1.     Financial Statements

Royal Hawaiian Orchards, L.P.

Condensed Consolidated Balance Sheets

(in thousands)

	September 30,			December 31,
	2016			2015
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	759		$	404
Accounts receivable, net		1,908			2,306
Inventories, net		7,751			10,569
Deferred farming costs		3,175			-
Other current assets		875			371
Total current assets		14,468			13,650
Land, orchards and equipment, net		49,218			51,253
Other non-current assets		341			451
Total assets	$	64,027		$	65,354
Liabilities and partners’ capital
Current liabilities
Current portion of long-term debt, net	$	12,008		$	2,166
Accounts payable		981			1,554
Accrued payroll and benefits		970			823
Other current liabilities		92			427
Total current liabilities		14,051			4,970
Non-current benefits		703			703
Long-term debt, net		10,479			19,942
Deferred income tax liability		987			1,018
Total liabilities		26,220			26,633
Commitments and contingencies
Partners’ capital
General and limited partners		38,123			39,042
Accumulated other comprehensive loss		(316	)		(321	)
Total partners’ capital		37,807			38,721
Total liabilities and partners’ capital	$	64,027		$	65,354

See accompanying notes to condensed consolidated financial statements.

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Royal Hawaiian Orchards, L. P.

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)

(in thousands, except per unit data)

	Three months						Nine months
	ended September 30,						ended September 30,
	2016			2015			2016			2015
Revenues
Orchards revenue	$	727		$	1,129		$	3,398		$	4,829
Branded product sales, net		6,839			3,557			16,022			8,419
Total revenues		7,566			4,686			19,420			13,248
Cost of revenues
Cost of orchards revenue		774			955			2,655			3,484
Cost of branded product sales		5,000			2,330			12,108			5,983
Total cost of revenues		5,774			3,285			14,763			9,467
Gross profit		1,792			1,401			4,657			3,781
General and administrative expenses		720			901			2,084			2,232
Selling expenses		947			515			3,069			1,487
Operating income (loss)		125			(15	)		(496	)		62
Net loss on sale of property and equipment		-			-			(4	)		(1	)
Other income (expense)		189			92			374			(188	)
Interest expense		(313	)		(270	)		(898	)		(568	)
Income (loss) before income taxes		1			(193	)		(1,024	)		(695	)
Income tax expense		18			23			119			108
Net loss		(17	)		(216	)		(1,143	)		(803	)
Other comprehensive loss, net of tax
Pension costs		1			2			5			5
Other comprehensive income, net of tax		1			2			5			5
Comprehensive loss	$	(16	)	$	(214	)	$	(1,138	)	$	(798	)
Net loss per Class A Unit	$	(0.00	)	$	(0.02	)	$	(0.10	)	$	(0.07	)
Cash distributions per Class A Unit	$	-		$	-		$	-		$	-
Weighted average Class A Units outstanding		11,100			11,100			11,100			11,100

See accompanying notes to condensed consolidated financial statements.

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Royal Hawaiian Orchards, L.P.

Condensed Consolidated Statements of Partners’ Capital (unaudited)

(in thousands)

	Three months ended						Nine months ended
	September 30,						September 30,
	2016			2015			2016			2015
Partners’ capital at beginning of period:
General and limited partners	$	38,140		$	40,647		$	39,042		$	41,234
Accumulated other comprehensive loss		(317	)		(183	)		(321	)		(186	)
		37,823			40,464			38,721			41,048
Proceeds from sale of general partner interest		-			-			224			-
		-			-			224			-
Allocation of net loss:
General and limited partners		(17	)		(216	)		(1,143	)		(803	)
		(17	)		(216	)		(1,143	)		(803	)
Accumulated other comprehensive income
Change in pension and severance obligations		1			2			5			5
		1			2			5			5
Partners' capital at end of period:
General and limited partners		38,123			40,431			38,123			40,431
Accumulated other comprehensive loss		(316	)		(181	)		(316	)		(181	)
Total partners' capital	$	37,807		$	40,250		$	37,807		$	40,250

See accompanying notes to condensed consolidated financial statements.

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Royal Hawaiian Orchards, L.P.

Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)

	Nine Months Ended
	September 30,
	2016			2015
Cash flows from operating activities:
Net loss	$	(1,143	)	$	(803	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,307			2,022
Amortization of debt issance costs		31			39
Net loss on sale of property and equipment		4			1
Pension expense		6			5
Decrease in accounts receivable		398			139
Decrease (increase) in inventory		2,818			(1,577	)
Increase in deferred farm cost		(3,175	)		(2,239	)
(Increase) decrease in other current assets		(535	)		155
(Decrease) Increase in accounts payable		(573	)		339
Increase (decrease) in accrued payroll and benefits		147			(82	)
(Decrease) Increase in accrued expenses & other current liabilities		(335	)		402
Total adjustments		1,093			(796	)
Net cash used in operating activities		(50	)		(1,599	)
Cash flows from investing activities:
Capital expenditures		(167	)		(11,130	)
Net cash used in investing activities		(167	)		(11,130	)
Cash flows from financing activities:
Debt issuance costs		-			(296	)
Proceeds from sale of general partner interest		224
Proceeds from line of credit		4,000			2,810
Repayment of line of credit		(2,000	)		(1,810	)
Proceeds from long-term debt		-			13,378
Repayment of long-term debt		(1,652	)		(1,069	)
Net cash provided by financing activities		572			13,013
Net increase in cash		355			284
Cash and cash equivalents at beginning of period		404			786
Cash and cash equivalents at end of period	$	759		$	1,070

See accompanying notes to condensed consolidated financial statements.

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ROYAL HAWAIIAN ORCHARDS, L.P.

Notes to Condensed Consolidated Financial Statements (unaudited)

(1)     BASIS OF PRESENTATION

Royal Hawaiian Orchards, L.P. (the “Partnership”) is a master limited partnership, organized under the laws of the State of Delaware in 1986. The accompanying unaudited condensed consolidated financial statements of the Partnership and its subsidiaries Royal Hawaiian Resources, Inc. (“RHR”) (through June 30, 2016), Royal Hawaiian Services, LLC (“RHS”) and Royal Hawaiian Macadamia Nut, Inc. (“Royal”), include all adjustments (consisting only of those of a normal recurring nature) that, in the opinion of management, are necessary to present fairly their financial position as of September 30, 2016, and December 31, 2015, and the results of operations, changes in partners’ capital and cash flows for the three and nine months ended September 30, 2016 and 2015. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results expected for the full year or for any future period.

The December 31, 2015 condensed consolidated balance sheet data in this report was derived from audited consolidated financial statements contained in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Annual Report”), but does not include all disclosures required by accounting principles generally accepted in the United States of America. The interim consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements filed with the Securities and Exchange Commission (“SEC”) in the 2015 Annual Report.

The Partnership’s business has historically been highly seasonal, reflecting the general pattern of peak harvest and sales of macadamia nuts during the fourth quarter. Commencing in January 2015, the Partnership began inventorying more than 70% of its harvest for use in its branded products segment. The inventoried nuts are sold throughout the year which has reduced seasonality of revenues but increased the inventory balances and costs associated with maintaining such balances.

Management is closely monitoring the Partnership’s cash on hand, cash flow provided by operating activities and borrowings under the Partnership’s revolving credit facility and the Partnership’s ability to fund the Partnership’s operating expenses, fund the sales growth of the branded products’ segment and make required debt service payments for the next 12 months, including payment of the 2015 Bridge Loan (as defined below in Note 9 – Debt) in 2017. To the extent that additional cash is needed, management may pursue sale of bulk kernel inventory and explore additional credit facilities, amendments to existing credit facilities, or equity offerings. There can be no assurance that the Partnership will be successful in generating cash from operations or obtaining debt or equity on terms that are acceptable to the Partnership.

(2)     CONSOLIDATION

The consolidated financial statements include the accounts of the Partnership and its subsidiaries. All significant intercompany balances and transactions have been eliminated. On June 30, 2016, the Partnership sold all of the shares of RHR, its general partner, in a related party transaction. See Note 15 – Sale of RHR below for details of the sale.

(3)     NEW ACCOUNTING STANDARDS

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases.” The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Partnership is currently assessing the provisions of the guidance and the impact of the adoption on its consolidated financial statements.

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In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” ASU No. 2015-17 requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet. ASU 2015-17 is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. The Partnership believes that adoption will not have a material impact on its consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory, which changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. ASU 2015-11 defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for annual and interim periods beginning after December 15, 2016. The Partnership is currently assessing the provisions of the guidance and the impact of the adoption on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” ASU 2015-03 amends current presentation guidance by requiring the debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Prior to the issuance of ASU 2015-03, debt issuance costs were required to be presented as an asset in the balance sheet. The standard requires retrospective application and represents a change in accounting principle. The Partnership adopted the provisions of ASU 2015-03 in the first quarter of 2016, and prior period amounts have been reclassified to conform to the current period presentation. Net debt issuance costs of $220,000 and $199,000 were reclassified in the Consolidated Balance Sheet and segment disclosures from other non-current assets to long-term debt for the prior periods ending September 30, 2015 and December 31, 2015, respectively.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements-Going Concern.” This guidance requires management to evaluate whether there are conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern. If such conditions or events exist, disclosures are required that enable users of the financial statements to understand the nature of the conditions or events, management’s evaluation of the circumstances and management’s plans to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. ASU No. 2014-15 is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. The Partnership is currently assessing the provisions of the guidance and the impact of the adoption on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The new guidance provides new criteria for recognizing revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the Partnership expects to be entitled in exchange for those goods or services. The new guidance requires expanded disclosures to provide greater insight into both revenue that has been recognized and revenue that is expected to be recognized in the future from existing contracts. Quantitative and qualitative information will be provided about the significant judgments and changes in those judgments that management made to determine the revenue which is recorded. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.” This update deferred the effective date for implementation of this standard by one year. ASU 2014-09 is now effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted only for annual reporting periods beginning after December 15, 2016, including interim periods within that period. The Partnership is currently assessing the provisions of the guidance and the impact of the adoption on its consolidated financial statements.

(4)     SEGMENT INFORMATION

The Partnership’s two reportable segments, orchards and branded products, are distinct business enterprises that have different products and services, customers, employees and regulatory environments. Both segments are organized on the basis of revenues and assets. The orchards segment derives its revenues from the sale of Wet-In-Shell macadamia nuts, sale of Dry-In-Shell macadamia nuts, sale of macadamia nut kernel to Royal, revenues from contract farming, and orchard lease income. The branded products segment derives its revenues from the sale of branded macadamia nut products and bulk macadamia nut kernel by Royal.

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Management evaluates the performance of each segment on the basis of operating income and revenue growth. The Partnership accounts for intersegment sales and transfers at a predetermined, fixed price based on cost plus a mark-up, and such transactions are eliminated in consolidation. The following tables summarize each reportable segment’s revenues, operating income or loss, assets and other information as of and for the three and nine months ended September 30, 2016 and 2015. Due to the seasonality of crop patterns and the timing of nut purchase contract fulfillment, interim results are not necessarily indicative of annual performance.

	Three Months Ended September 30, 2016
	(in thousands)
	Orchards			Branded Products			Eliminations/ Reconciliation			Total
Revenues(1)
External customers	$	727		$	6,839	(2)	$	-		$	7,566
Intersegment revenue		389			-			(389	)		-
Total revenue	$	1,116		$	6,839		$	(389	)	$	7,566
Operating income (loss)	$	(518	)	$	(150	)	$	793		$	125
Depreciation and amortization	$	745		$	23		$	-		$	768
Capital expenditures	$	31		$	-		$	-		$	31
Segment assets	$	73,439		$	8,257		$	(17,669	)	$	64,027

	Three Months Ended September 30, 2015
	(in thousands)
	Orchards			Branded Products			Eliminations/ Reconciliation			Total
Revenues(1)
External customers	$	1,129		$	3,557	(2)	$	-		$	4,686
Intersegment revenue		2,252			-			(2,252	)		-
Total revenue	$	3,381		$	3,557		$	(2,252	)	$	4,686
Operating income (loss)	$	(2	)	$	8		$	(21	)	$	(15	)
Depreciation and amortization	$	725		$	9		$	-		$	734
Capital expenditures	$	1,422		$	21		$	-		$	1,443
Segment assets	$	69,471		$	4,642		$	(10,575	)	$	63,538

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	Nine Months Ended September 30, 2016
	(in thousands)
	Orchards		Branded Products			Eliminations/ Reconciliation			Total
Revenues(1)
External customers	$	3,398	$	16,022	(2)	$	-		$	19,420
Intersegment revenue		10,658		-			(10,658	)		-
Total revenue	$	14,056	$	16,022		$	(10,658	)	$	19,420
Operating income (loss)	$	1,541	$	(1,558	)	$	(479	)	$	(496	)
Depreciation and amortization	$	2,239	$	68		$	-		$	2,307
Capital expenditures	$	108	$	59		$	-		$	167
Segment assets	$	73,439	$	8,257		$	(17,669	)	$	64,027

	Nine Months Ended September 30, 2015
	(in thousands)
	Orchards		Branded Products			Eliminations/ Reconciliation			Total
Revenues(1)
External customers	$	4,829	$	8,419	(2)	$	-		$	13,248
Intersegment revenue		8,428		-			(8,428	)		-
Total revenue	$	13,257	$	8,419		$	(8,428	)	$	13,248
Operating income (loss)	$	1,492	$	(705	)	$	(725	)	$	62
Depreciation and amortization	$	1,975	$	47		$	-		$	2,022
Capital expenditures	$	11,053	$	77		$	-		$	11,130
Segment assets	$	69,471	$	4,642		$	(10,575	)	$	63,538

(1) All revenues are from sources within the United States of America, Canada and Asia.

(2) Branded products revenue is reported net of slotting fees, trade discounts and promotional allowances.

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(5)     INVENTORIES

Inventories consisted of the following (in thousands):

	September 30, 2016								December 31, 2015
	Orchard		Branded Product			Total			Orchard		Branded Product			Total
Nut-in-shell	$	483	$	-		$	483		$	139	$	-		$	139
Dry-in-shell		1,743		-			1,743			3,685		-			3,685
Macadamia nut kernel		113		2,592			2,705			-		5,360			5,360
Finished goods		-		1,878			1,878			-		771			771
Farming supplies		286		-			286			287		-			287
Packaging, supplies and ingredients		-		673			673			-		394			394
Allowance for shrink and obsolescence		-		(17	)		(17	)		-		(67	)		(67	)
	$	2,625	$	5,126		$	7,751		$	4,111	$	6,458		$	10,569

(6)     LAND, ORCHARDS AND EQUIPMENT

Land, orchards and equipment, stated at cost, consisted of the following (in thousands):

	September 30,			December 31,
	2016			2015
Land	$	10,745		$	10,745
Improvements		2,016			2,016
Machinery and equipment		11,802			8,663
Irrigation well and equipment		2,592			2,592
Producing orchards		76,073			76,073
Construction work-in-progress		40			3,326
Land, orchards and equipment (gross)		103,268			103,415
Less accumulated depreciation and amortization		(54,050	)		(52,162	)
Land, orchards and equipment (net)	$	49,218		$	51,253

(7)     DEFERRED FARMING COSTS

Orchard costs (e.g., irrigation, fertilizer, pruning and depreciation) related to nuts sold under nut purchase contracts and services provided under farming contracts were expensed to cost of revenues based on management’s estimate of the costs expected to be incurred to produce macadamia nuts sold during the interim reporting period, with the difference between costs incurred-to-date and costs expensed-to-date reported on the consolidated balance sheet as deferred farming costs. Deferred farming costs historically accumulate during the first and second quarter of the year and are expensed or added to inventory over the remainder of the year. For the first nine months of 2016, the Partnership recorded a deferred farming cost of $3,175,000. At December 31, 2015, all farming costs not expensed to cost of goods sold were included in inventory.

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(8)     INCOME TAXES

The Partnership is subject to a gross income tax as a result of its election to continue to be taxed as a partnership rather than as a corporation, as allowed by the Taxpayer Relief Act of 1997. This tax is calculated at 3.5% on partnership gross profit.

Royal is subject to taxation as a C corporation at the current federal tax rate of 34% and a blended state tax rate of 6.9% on the corporation’s taxable income (loss). As a result of the cumulative tax losses of Royal, the balance of the Partnership’s deferred tax asset at September 30, 2016 was approximately $3.8 million, against which the Partnership has recorded a valuation allowance equal to 100% of the deferred tax asset due to the uncertainty regarding future realization of Royal’s net operating loss carry-forwards.

(9)     DEBT

As of the indicated dates, the Partnership had the following long-term debt outstanding (in thousands):

	September 30,			December 31,
	2016			2015
Long-Term Debt
Revolving Credit Facility (due 2017)	$	7,000		$	5,000
2015 Bridge Loan (due 2017) (1)		2,835			2,835
2010 Term Loan (due 2020)		3,938			4,725
2015 6-Year Term Loan (due 2021)		3,937			4,594
2015 20-Year Term Loan (due 2035)		4,936			5,133
Other		9			20
Total principal amount of long-term debt		22,655			22,307
Less: unamortized debt issuance costs		(168	)		(199	)
Total long-term debt, net of unamortized loan fees		22,487			22,108
Less: current portion of long-term debt, net		(12,008	)		(2,166	)
Long-Term Debt, net of associated unamortized loan fees	$	10,479		$	19,942

___________________

(1) Maturity date for the 2015 Bridge Loan may be earlier than 2017. See description of the 2015 Bridge Loan below.

The following table summarizes the Partnership’s principal maturities of its debt (in thousands):

	Payments Due by Period
	Total			2016(1)		2017		2018		2019		2020	Remaining
Debt	$	22,655	$	324	$	12,029	$	2,188	$	2,188	$	1,751	$	4,175

_________________________

(1)   For remainder of 2016.

Credit Agreement with AgCredit PCA

Pursuant to the Fourth Amended and Restated Credit Agreement, dated July 15, 2010 (as amended, the “Prior PCA Credit Agreement”), by and between the Partnership and the Partnership’s wholly owned subsidiary Royal, as the borrowers, and American AgCredit, PCA, as lender (“AgCredit PCA”), the Partnership had a revolving credit facility for $5 million (the “Revolving Credit Facility”) and an existing term loan of $10.5 million (the “2010 Term Loan”). The Prior PCA Credit Agreement was amended on various dates in 2011 through February 27, 2015, to extend the maturity date of the Revolving Credit Facility.

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On March 27, 2015, the Partnership and each of its wholly owned subsidiaries RHR, Royal and RHS, as the borrowers (the “Borrowers”), and AgCredit PCA, as lender and as agent for such other persons who may be added as lenders from time to time, entered into an Amended and Restated Credit Agreement that amended and restated the terms of the Partnership’s outstanding borrowings with AgCredit PCA (as amended by the First PCA Credit Agreement Amendment, the Second PCA Credit Agreement Amendment, the Third PCA Credit Agreement Amendment, the Fourth PCA Credit Agreement Amendment, and the Fifth PCA Credit Agreement Amendment (each defined below), the “Amended PCA Credit Agreement”). The Amended PCA Credit Agreement (i) increased the amount of the Revolving Credit Facility from $5 million to $9 million and extended its maturity from March 31, 2015, to March 27, 2017; (ii) reduced the interest rate of the 2010 Term Loan; and (iii) added a new term loan of $5.25 million that matures on March 27, 2021 (the “2015 6-Year Term Loan”).

Pursuant to the Amended PCA Credit Agreement, the Revolving Credit Facility, the 2010 Term Loan, the 2015 6-Year Term Loan and the 2015 Bridge Loan (as defined below) are collateralized by all of the personal and real property assets of the Borrowers other than RHR. The Amended PCA Credit Agreement contains certain restrictions associated with partner distributions, further indebtedness, sales of assets, and maintenance of certain financial covenants.

In connection with the June 2015 acquisition by the Partnership of 736 acres of land, including improvements, 641 acres of macadamia nut trees, and windbreak trees, (the “Becker Property Acquisition”), the Borrowers entered into the First Amendment to Amended and Restated Credit Agreement with AgCredit PCA, effective as of June 15, 2015 (the “First PCA Credit Agreement Amendment”). On June 29, 2015, the Borrowers entered into a Second Amendment to Amended and Restated Credit Agreement with AgCredit PCA (the “Second PCA Credit Agreement Amendment”) to delete a financial covenant for the quarter ended June 30, 2015. On September 22, 2015, the Borrowers entered into a Third Amendment to Amended and Restated Credit Agreement with AgCredit PCA (the “Third PCA Credit Agreement Amendment”) to delete a financial covenant for the quarter ended September 30, 2015.

On March 11, 2016, the Borrowers executed the Fourth Amendment to Amended and Restated Credit Agreement and Waiver (the “Fourth PCA Credit Agreement Amendment”) with AgCredit PCA to (i) extend the maturity date of the 2015 Bridge Loan from March 15, 2016 to January 15, 2017; (ii) increase the interest rate on the 2015 Bridge Loan as of September 1, 2016 from the Base Rate (as defined below under 2015 Bride Loan) plus 0.75% to the Base Rate plus 1.00%; (iii) reduce the minimum Consolidated EBITDA (as defined in the Amended PCA Credit Agreement) (A) for the quarter ending March 31, 2016 from $3,500,000 to $1,000,000, (B) for the quarter ending June 30, 2016 from $4,000,000 to $1,250,000, (C) for the quarter ending September 30, 2016 from $5,000,000 to $2,000,000, and (D) for the quarter ending December 31, 2016 from $5,000,000 to $4,000,000, and (iv) waive the Partnership’s non-compliance with the Consolidated EBITDA covenant for the quarter ended December 31, 2015. For the quarter ending March 31, 2017, and all future quarters, the minimum Consolidated EBITDA requirement remains at $5,000,000.

In connection with the sale of RHR, on June 30, 2016, the Borrowers executed the Fifth Amendment to Amended and Restated Credit Agreement and Consent (the “Fifth PCA Credit Agreement Amendment”) with American AgCredit, PCA, to remove RHR as a party to the Loan Documents (as defined in the Amended PCA Credit Agreement) and release RHR from liability under the Loan Documents, other than from such liability as it may have as general partner of the Partnership.

On November 9, 2016, the Borrowers (no longer including RHR) executed a Waiver Agreement with American AgCredit, PCA, pursuant to which American AgCredit, PCA, waived the Partnership’s noncompliance with the Consolidated EBITDA covenant for the quarter ended September 30, 2016.

Revolving Credit Facility. The Amended PCA Credit Agreement increased the Revolving Credit Facility from $5 million to $9 million and extended the maturity from June 30, 2015, to March 27, 2017. Advances under the Revolving Credit Facility bear interest based on an election made by the Partnership at the time of the advance at either LIBOR rates or at the base rate of the higher of (a) one-half of one percent (0.50%) per annum in excess of the latest Federal Funds Rate (as defined in the Amended PCA Credit Agreement); and (b) the prime rate of interest in effect for such day as published from time to time in The Wall Street Journal. The Partnership is required to pay a fee of 0.375% per annum on the daily unused portion of the Revolving Credit Facility. The interest rate on the Revolving Credit Facility at September 30, 2016, was 4.75% per annum.

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As of September 30, 2016 and December 31, 2015, the outstanding balance on the Revolving Credit Facility was $7 million and $5 million, respectively.

2010 Term Loan. The Prior PCA Credit Agreement provided for the 2010 Term Loan of $10.5 million, which matures on July 1, 2020. The Amended PCA Credit Agreement left the 2010 Term Loan in place but reduced the fixed interest rate under the 2010 Term Loan from 6.5% per annum to 6.0% per annum. As of September 30, 2016 and December 31, 2015, the outstanding balance on the 2010 Term Loan was $3.938 million and $4.725 million, respectively.

2015 6-Year Term Loan. The Amended PCA Credit Agreement provided for the 2015 6-Year Term Loan of $5.25 million, which matures on March 27, 2021. The 2015 6-Year Term Loan bears interest at a fixed rate of 4.01% per annum. The Partnership used the proceeds of the 2015 6-Year Term Loan to replace working capital used to construct Phase 1 of the Partnership’s drying plant and to finance the construction of Phase 2 of its drying plant. As of September 30, 2016 and December 31, 2015, the outstanding balance on the 2015 6-Year Term Loan was $3.937 million and $4.594 million, respectively.

2015 Bridge Loan. The First PCA Credit Agreement Amendment provided for a bridge loan of $2.835 million (the “2015 Bridge Loan”), which was to mature on the earlier of (a) March 15, 2016, or (b) the date that the Partnership or any of its wholly subsidiaries receives net proceeds from any issuance of equity, subject to certain exceptions. Pursuant to the Fourth PCA Credit Agreement, on March 11, 2016, the fixed maturity date trigger for the 2015 Bridge Loan was extended from March 15, 2016, to January 15, 2017. The 2015 Bridge Loan bears interest at the base rate plus three quarters of one percent (0.75%) where the base rate (“Base Rate”) is the higher of (i) one half of one percent (0.5%) per annum in excess of the latest Federal Funds Rate, and (ii) the prime rate of interest in effect for such day as published from time to time in The Wall Street Journal. As of September 1, 2016, the interest rate on the 2015 Bridge Loan increased to the Base Rate plus 1.00%. The 2015 Bridge Loan is collateralized by all personal and real property assets of the Borrowers other than RHR, including a second priority interest in the properties acquired in the Becker Property Acquisition. The proceeds of the 2015 Bridge Loan were used by the Partnership on June 16, 2015, for the Becker Property Acquisition. As of both September 30, 2016 and December 31, 2015, the outstanding balance on the 2015 Bridge Loan was $2.835 million.

2015 20-Year Term Loan. Also in connection with the Becker Property Acquisition, the Partnership entered into a Credit Agreement, effective June 15, 2015 (the “FLCA Credit Agreement”), with American AgCredit, FLCA (“AgCredit FLCA”), providing for a $5.265 million, 20-year term loan (“2015 20-Year Term Loan”). The 2015 20-Year Term Loan bears interest at a fixed rate of 5.29% per annum and requires quarterly payments, with fixed principal reductions, over the term. The 2015 20-Year Term Loan matures on July 1, 2035. On March 11, 2016, the Partnership executed the First Amendment to Credit Agreement and Waiver (the “First FLCA Credit Agreement Amendment”) with AgCredit FLCA. As a result, the maximum allowable Total Indebtedness to Consolidated EBITDA Ratio (as defined in the FLCA Credit Agreement) was increased for the quarter ending December 31, 2016 from (i) 4.0 to 1.0 to (ii) 5.5 to 1.0. In addition, a one-time waiver was granted in connection with the cross-default covenant of the FLCA Credit Agreement relating to the non-compliance with the Consolidated EBITDA covenant in the Amended PCA Credit Agreement described above. The Partnership used the proceeds of the 2015 20-Year Term Loan for the Becker Property Acquisition. The 2015 20-Year Term Loan is secured by a mortgage on the properties acquired in the Becker Property Acquisition. As of September 30, 2016 and December 31, 2015, the outstanding balance on the 2015 20-Year Term Loan was $4.936 million and $5.133, respectively.

(10)     FAIR VALUE MEASUREMENTS

The fair value of the Revolving Credit Facility is approximately the carrying value due to the variability of the interest rate and frequency that the interest rate resets on the line of credit.

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The estimated fair value of the Partnership’s bridge loan and term loans was determined using a discounted cash flow model with similar terms and remaining maturities to that of the current financial instruments. The Partnership has not considered lender fees in determining the estimated fair value.

The estimated fair values of the Partnership’s financial instruments are as follows (in thousands):

	September 30,				December 31,
	2016				2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt	$	15,655	$	15,960	$	17,307	$	18,023
Revolving credit facility		7,000		7,000		5,000		5,000
	$	22,655	$	22,960	$	22,307	$	23,023

The inputs used in determining the fair value of the bridge and term loans and Revolving Credit Facility are classified as Level 3 within the fair value measurement hierarchy.

(11)     PARTNERS’ CAPITAL

Net losses are allocated 1% to the general partner and 99% to the holders of the Class A Units in proportion to the number of Class A Units held.

On June 30, 2016, the partnership sold all of the issued and outstanding shares of capital stock of RHR for $224,000 See Note 15 – Sale of RHR. As a result, partners’ capital increased by $224,000. Partners’ capital includes the general partner interest plus the Class A limited partners’ interest.

(12)     PENSION PLAN

The Partnership sponsors a defined benefit pension plan covering employees who are members of a union bargaining unit. The Partnership’s funding policy is to contribute an amount to the plan sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974.

The components of net periodic pension cost consisted of the following (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Service cost	$	16		$	17		$	49		$	51
Interest cost		17			15			50			46
Expected return on plan assets		(16	)		(17	)		(49	)		(51	)
Amortization of net actuarial loss and prior service cost		1			2			5			5
Net periodic pension cost	$	18		$	17		$	55		$	51

(13)     INTERMITTENT SEVERANCE PLAN

The Partnership sponsors a defined intermittent severance benefit plan covering employees who are members of a union bargaining unit and not covered by the defined benefit pension plan. Payment of the severance benefit is made when covered employees cease employment with the Partnership under certain terms and conditions as defined in the union bargaining agreement.

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The components of net periodic intermittent severance cost consisted of the following (in thousands):

	Intermittent Severance Plan Cost
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Service cost	$	4	$	5	$	12	$	15
Interest Cost		4		3		10		9
Net periodic intermittent severance cost	$	8	$	8	$	22	$	24

(14) COMMITMENTS AND CONTINGENCIES

The Partnership is involved in various commercial claims, litigation and other legal proceedings that arise in the ordinary course of its business. The Partnership assesses these claims in an effort to determine the degree of probability and loss for potential accrual in its financial statements. In accordance with ASC 450, “Contingencies,” an accrual is recorded for a loss contingency when its occurrence is probable and damages are reasonably estimable based on the anticipated most likely outcome or the minimum amount within a range of possible outcomes. Because legal proceedings are inherently unpredictable, and unfavorable resolutions can occur, assessing contingencies is highly subjective and requires judgments about uncertain future events. When evaluating contingencies, the Partnership may be unable to provide a meaningful estimate of loss or recovery due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, the ongoing discovery and/or development of information important to the matter. The Partnership’s material litigation loss contingency is discussed below. The Partnership is unable to estimate reasonably possible losses (in excess of recorded accruals, if any) for this contingency for the reasons set forth below.

Edmund C. Olson, as Trustee of The Edmund C. Olson Trust No. 2 vs. Royal Hawaiian Orchards, L.P. On January 22, 2015, Edmund C. Olson, as trustee of The Edmund C. Olson Trust No. 2 (the “Olson Trust”), filed a complaint seeking a declaratory judgment that the Partnership has breached the terms of the leases for the Green Shoe I Orchard and the Green Shoe II Orchard, on which 609 tree acres of macadamia nut orchards are situated. The Olson Trust claims that the Partnership failed to exercise “good husbandry” and permitted waste of the orchards through its horticultural practices, and, therefore, the Olson Trust is entitled to terminate the leases and reenter and expel the Partnership from the orchards. Pursuant to the lease agreements, the lease terms of the Green Shoe I Lease and Green Shoe II Lease expire in 2019 and 2034, respectively. In addition, the Olson Trust seeks termination damages in an amount to be proven at trial. On or about February 17, 2015, the Partnership filed an answer and a cross-complaint against the Olson Trust, denying the claims of the Olson Trust and asserting claims of the Partnership for breach of contract, unfair and deceptive competition, and injunctive relief, among others. The Partnership believes the claims of the Olson Trust are without merit. The Olson Trust has denied the claims asserted in the Partnership’s cross-claim. On September 17, 2015, the parties signed a Joint Stipulation to Engage in Binding Mediation of Proceedings and to Stay Court Litigation Pending Binding Mediation (the “Joint Stipulation”) to stay the court proceedings pending the issuance of a written report by a panel of three farming experts determining whether the Partnership has been practicing “good husbandry” or “strip or waste” at each orchard. The panel’s report is to include recommendations of any practices or operational changes that should be implemented to bring the leases into compliance with “good husbandry” and to prevent “strip or waste.” The parties have agreed to timely perform all recommendations in the panel’s report. The parties have further agreed that the report shall be enforceable in the state courts of Hawaii to the same extent as an arbitration award. In January 2016, the parties completed their selection of the panel of experts. The panel’s report was due in October 2016. However, on October 4, 2016, the parties filed a Joint Stipulation to Stay Binding Mediation Proceedings with the court mutually agreeing to stay the binding mediation proceedings for forty-five days, or such additional period as agreed upon by the parties in writing, in order to work on a settlement. Either party may terminate the stay upon ten days’ written notice after October 24, 2016, the date on which the parties completed their exchange of initial settlement offers. If the parties are unable to conclude a definitive settlement agreement, the panel of experts will resume preparing its report.

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No amounts have been accrued in the accompanying financial statements due to the uncertainty of (i) the ability of parties to reach a settlement and the terms of any such settlement, and (ii) the conclusions to be reached by the panel in the final report and the costs involved to implement the panel’s recommendations.

(15)     SALE OF RHR

On June 30, 2016, the Partnership entered into a definitive Stock Purchase Agreement (the “Agreement”) with Crescent River Agriculture LLC, a Wyoming limited liability company (“Crescent River”) and a related party, pursuant to which the Partnership sold all of the issued and outstanding shares of capital stock of RHR to Crescent River for $224,000.

The only asset of RHR consists of a one percent general partnership interest in the Partnership. The general partnership interest is unregistered and non-transferrable. Pursuant to the terms of the Amended and Restated Agreement of Limited Partnership, dated as of October 1, 2012, as amended November 1, 2013 (the “Partnership Agreement”), RHR is also entitled to an annual management fee equal to two percent of Operating Cash Flow (as defined by the Partnership Agreement) and an incentive fee if net cash flow of the partnership exceeds certain levels defined in the Partnership Agreement. The management fee has been waived by RHR since it became a wholly-owned subsidiary of the Partnership in 2005. The incentive fee has not been earned by RHR for at least 15 years. As part of the transaction, RHR agreed to waive both the management fee and the incentive fee for fiscal 2016, 2017, and 2018. After 2018, RHR will be eligible to earn the management fee and the incentive fee. Pursuant to the Partnership Agreement, the Partnership will still be required to reimburse RHR for expenses incurred in managing the Partnership.

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition, results of operations, and liquidity and capital resources should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the notes thereto and the financial statements and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2015 (“2015 Annual Report”). This discussion includes forward-looking statements that are subject to risks, uncertainties and other factors that could cause our actual results for this fiscal year and periods that follow to differ materially from those contemplated by these forward-looking statements. Factors that could cause or contribute to such differences include those identified below under the heading “Disclosure Regarding Forward-Looking Statements” and those described in Part I, Item 1A – Risk Factors in our 2015 Annual Report on Form 10-K.

Overview

Royal Hawaiian Orchards, L.P. (the “Partnership”) is a producer, marketer and distributor of high-quality macadamia nut-based products. We are the largest macadamia nut farmer in Hawaii, farming approximately 5,379 tree acres of orchards that we own or lease in two locations on the island of Hawaii, including 641 tree acres that we own and lease to another party. We also farm approximately 433 tree acres of macadamia orchards in Hawaii for other orchard owners.

The Partnership was formed in 1986 as a master limited partnership owning macadamia nut orchards on owned and leased land. In 2000, we acquired farming operations from subsidiaries of C. Brewer and Company, Ltd. In 2012, we established a branded products company to manufacture and sell a line of macadamia snacks under the brand name ROYAL HAWAIIAN ORCHARDS® through our wholly owned subsidiary Royal Hawaiian Macadamia Nut, Inc. (“Royal”). In 2014, we began drying our nuts in Hawaii, which affords us more control over the processing of our nuts as well as reduces our processing costs.

Our macadamia snacks contain no artificial ingredients, contain no genetically modified organisms, are gluten-free, and have no sulfites. We sell our products to national, regional and independent grocery and drug store chains, as well as mass merchandisers, club stores and other retail channels that target consumers with healthy eating habits and disposable income necessary to afford premium products. In 2016, we launched several new products, including macadamia nut milk and macadamia nut butter.

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Recent Developments

On June 30, 2016, the Partnership entered into a definitive Stock Purchase Agreement (the “Agreement”) with Crescent River Agriculture LLC, a Wyoming limited liability company (“Crescent River”) and related party, pursuant to which the Partnership sold all of the issued and outstanding shares of capital stock of Royal Hawaiian Resources, Inc., a Hawaii corporation and the general partner of the Partnership (“RHR” or the “General Partner”) to Crescent River for $224,000.

The only asset of the General Partner consists of a one percent general partnership interest in the Partnership. The general partnership interest is unregistered and non-transferrable. Pursuant to the terms of the Amended and Restated Agreement of Limited Partnership, dated as of October 1, 2012, as amended November 1, 2013 (the “Partnership Agreement”), the General Partner is also entitled to an annual management fee equal to two percent of Operating Cash Flow (as defined by the Partnership Agreement) and an incentive fee if net cash flow of the partnership exceeds certain levels defined in the Partnership Agreement. The management fee has been waived by the General Partner since it became a wholly subsidiary of the Partnership in 2005. The incentive fee has not been earned by the General Partner for at least 15 years. As part of the transaction, the General Partner agreed to waive both the management fee and the incentive fee for fiscal 2016, 2017, and 2018. After 2018, the General Partner will be eligible to earn the management fee and the incentive fee. Pursuant to the Partnership Agreement, the Partnership will still be required to reimburse the General Partner for expenses incurred in managing the Partnership.

There will be no immediate impact on the Partnership as a result of the change of ownership of the General Partner. RHR will continue to own its one percent general partnership interest in the Partnership and serve as general partner of the Partnership. The board of directors and officers of the General Partner will remain unchanged. Prior to the sale of RHR, the board of directors of the General Partner self-determined annually on behalf of the Partnership whether any changes should be made to the board of directors. Following the sale, the board of directors of the General Partner will be elected annually by its new shareholder, Crescent River. The sale of RHR returns the management structure of the Partnership to the original structure that was established when the Partnership was formed, which continued in effect until the purchase of the General Partner by the Partnership in 2005. Therefore, no changes to the Partnership Agreement are necessary as a result of the sale.

Our Operations

We have two business segments: orchards and branded products. The orchards segment includes our orchard, farming and processing operations. The branded products segment includes the development, manufacture and sale of branded products and the sale of processed kernel.

Our orchards segment derives its revenues from the sale of Wet-In-Shell (“WIS”) macadamia nuts grown in orchards we own or lease, the sale of Dry-In Shell (“DIS”) macadamia nuts, the sale of macadamia nut kernel to Royal, revenues from the farming of macadamia orchards owned by other growers and lease income. Our financial results are principally driven by nut production, which is seasonal and highly contingent upon Hawaii’s climatic conditions, as well as nut prices. The macadamia crop year in Hawaii runs from July 1 through June 30, with nuts generally being harvested from August through April. Nut production is generally highest during the third and fourth quarters of the calendar year, with very low production in the first quarter and little or no production in the second quarter. Nut production in the first half of the year is the result of pollination and nut-set that occurs during April through July or August of the previous year. Factors such as cool temperatures to promote flower development, sunlight, adequate moisture and its distribution determine the length of the flower/pollination/nut-set season.

Our branded products segment derives its revenues from the sale of branded macadamia nut products and bulk macadamia nut kernel. Substantial advertising and promotional expenditures are required to introduce a new product or maintain or improve a brand’s market position. Promotional allowances, such as slotting fees, are netted against our revenues; therefore, an increase in promotional allowances without a resulting increase in sales may decrease our revenues. Accordingly, our future success depends, in large part, on our ability to effectively maximize the return on these expenditures to implement our growth strategy of expanding distribution, improving placement of our products and attracting new customers to our brand.

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How We Evaluate Our Business

In operating our business and monitoring its performance, we pay attention to trends in the global and local macadamia nut industries and food manufacturing industry. Management evaluates the performance of each segment on the basis of operating income and revenue growth. In addition, we manage our orchards segment based on increased nut-in-shell productivity, farming costs, kernel recovery, cost stabilization and cash flow generation to support investment in our branded products segment and fund other Partnership priorities. We manage our branded products segment based on sales, gross margins and selling expenses. The Partnership accounts for intersegment sales and transfers at a predetermined, fixed price based on cost plus a mark-up, and such transactions are eliminated in consolidation.

Factors that May Affect Our Results of Operations

Our businesses are seasonal. While sales of our branded products are anticipated to be only slightly seasonal, with the fourth quarter of the calendar year being somewhat higher, macadamia nut production is very seasonal, with the largest quantities typically being produced and added to inventory from September through November, resulting in large inventories that will be converted into finished product and sold throughout the following year.

A substantial portion of our WIS revenues occur from September through February. In addition, weather conditions may affect yields and delay harvesting, which may result in lower than normal production and revenues within a particular fiscal quarter or fiscal year. In the first nine months of 2015, our crop was larger than average with lower production in the subsequent fourth quarter. While our crop in the first half of 2016 was larger than average, a late start to the 2016-2017 crop year has resulted in the crop through the first nine months of 2016 being lower than the same period in 2015. Due in part to the late start of the 2016-2017 crop year, we are anticipating that the crop in the fourth quarter may be smaller than average with harvest delayed into the first quarter of the next year. Due to the seasonality of our business, a significant amount of working capital is required for much of the harvesting season.

We have three long-term nut purchase agreements with Mauna Loa Macadamia Nut Corporation (“Mauna Loa”), expiring in 2029, 2078 and 2080. Under these agreements, all macadamia nuts produced from the orchards acquired from International Air Service Co., Ltd. (“IASCO”), which represented approximately 19% of our production in 2015, must be sold to and purchased by Mauna Loa at a predetermined price as described below.

Under the IASCO agreements, we are paid based on WIS pounds at a price that is derived annually from a formula that factors in the Mauna Loa wholesale price of the highest year-to-date volume fancy and choice products sold in Hawaii and the U.S. Department of Agriculture National Agricultural Statistics Service (“NASS”) reported price of WIS Hawaii macadamia nuts for the period of delivery. If the Final NASS Report for the year contains a price or moisture that varies from that used in the formula price calculations for nuts delivered during the year, then an adjustment is made between the parties. The NASS nut price for the crop year ended June 30, 2016 was $0.97 per WIS pound compared to $0.87 per WIS pound in 2015.

Prior to 2015, we sold most of our harvested macadamia nuts as WIS. We now retain most of our harvested macadamia nuts in inventory for our branded products. The cost of the nuts plus costs of husking, drying and shelling are included in cost of goods sold when our branded products are sold. As a result, the recognition of revenues and expensing of the associated farming costs now occur over a longer period.

Critical Accounting Estimates

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Certain of our accounting policies, including estimates of deferred farming costs, accrual for workers’ compensation claims, assumptions used to determine employee benefit obligations, valuation of long-lived and intangible assets, carrying value of inventories, revenue recognition and accounts receivable, the calculation of our income tax liabilities, and allocation of general and administrative costs to subsidiaries, require management to make significant judgments in defining the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to a degree of uncertainty. Management’s judgments are based on historical experience, terms of existing contracts, observance of trends in the industry, crop information provided by customers and information available from outside sources, as appropriate. Actual results may differ from these estimates. To provide an understanding of the methodology applied, significant accounting policies are discussed where appropriate in this discussion and analysis and in the notes to consolidated financial statements in our 2015 Annual Report.

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Results of Operations

Consolidated Revenues, Cost of Revenues and Gross Profit

For the three months ended September 30, 2016, net revenue increased $2.9 million or 61% compared to the same period in 2015. The increase in the three month period was due to a $3.3 million increase in revenues from the branded products and bulk kernel sales offset by a $402,000 decrease in orchard revenue due to the late start of the fall harvest resulting from a late flowering.

For the nine months ended September 30, 2016, net revenue increased $6.2 million or 47% compared to the same period in 2015. The increase in the nine month period was due to a $7.6 million increase in revenues from branded products and bulk kernel sales offset by a $1.4 million decrease in orchard revenues. During the nine months ended September 30, 2016, revenues from our branded products segment increased as a result of the expansion of our branded products into more stores, the introduction of additional products and increased sales of bulk kernel, and revenues from the orchards segment decreased due to lower WIS pounds sold due to lower production from our IASCO orchards, no sales of DIS and a late start to the fall 2016 harvest as compared to the same period in 2015.

For the three months ended September 30, 2016, cost of revenues increased $2.5 million or 76%, compared to the same period in 2015 due to an increase in branded product sales, and we generated a gross profit of $1.8 million and a gross margin of 24%, compared to gross profit of $1.4 million and gross margin of 30% for the same period in 2015. While our branded product sales increased as a percentage of total net sales, our gross margin decreased due to discounts and promotional incentives as well as an increase in bulk kernel sales that have lower gross margin than branded products. Cost of orchard revenue for the three months ended September 30, 2016 was 19% lower than the same period in 2015 and was higher than orchard revenue primarily due to an adjustment in the standard cost for 2016, which resulted from a reduction of forecasted nuts due to timing of the start of the fall 2016 harvest.

For the nine months ended September 30, 2016, cost of revenues increased $5.3 million or 56%, compared to the same period in 2015 due to an increase in bulk kernel and branded product sales offset by lower orchard cost. For the nine months ended September 30, 2016, we generated a gross profit of $4.7 million and a gross margin of 24%, compared to gross profit of $3.8 million and gross margin of 29% for the same period on 2015. The lower gross margin in the first nine months of 2016 was due to the fact that no DIS sales were made in 2016, which DIS sales contributed to the higher gross profit for the nine months ended September 30, 2015, and a late start to the fall 2016 harvest, which resulted in a change to standard cost which was absorbed in the third quarter.

Orchards Segment

The orchards segment derives its revenues from the sale of WIS macadamia nuts, sale of DIS macadamia nuts, sale of macadamia nut kernel to Royal for our branded products under an intercompany supply agreement, revenues from contract farming, and orchard lease income.

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The tables below show revenues, costs of revenues and gross profit and other financial information for our orchards segment for the three and nine months ended September 30, 2016 and 2015. See Note 4 – Segment Information to the accompanying financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a reconciliation of orchards segment results to our consolidated results.

	Three Months Ended
	(in thousands)
	September 30,
	2016			2015			Change			% Change
Revenues
External customers	$	727		$	1,129		$	(402	)		(36%	)
Intersegment revenue (Royal)		389			2,252			(1,863	)		(83%	)
Total revenue	$	1,116		$	3,381		$	(2,265	)		(67%	)
Cost of orchards revenue	$	1,082		$	2,711		$	(1,629	)		(60%	)
Operating income	$	(518	)	$	(2	)	$	(516	)		100	%
Depreciation and amortization	$	744		$	725		$	19			3	%
Capital expenditures	$	31		$	1,422		$	(1,391	)		(98%	)
Segment assets	$	73,439		$	69,471		$	3,968			6	%

	Nine Months Ended
	(in thousands)
	September 30,
	2016		2015		Change			% Change
Revenues
External customers	$	3,398	$	4,829	$	(1,431	)		(30%	)
Intersegment revenue (Royal)		10,658		8,428		2,230			26	%
Total revenue	$	14,056	$	13,257	$	799			6	%
Cost of orchards revenue	$	11,150	$	10,224	$	926			9	%
Operating income	$	1,541	$	1,492	$	49			3	%
Depreciation and amortization	$	2,239	$	1,975	$	264			13	%
Capital expenditures	$	108	$	11,053	$	(10,945	)		(99%	)
Segment assets	$	73,439	$	69,471	$	3,968			6	%

Revenues from external customers decreased $402,000 to $727,000 for the three months ended September 30, 2016, as compared to $1.1 million for the same period in 2015. The decrease was primarily due to a late start to the fall harvest. Revenues from external customers for the nine months ended September 30, 2016, were $1.4 million lower than the same period in 2015, because there were no DIS sales in 2016, the spring 2016 crop was lower than in 2015, and the fall 2016 harvest started late, offset by an approximately $279,000 increase in lease rental income from the Becker orchard which was acquired in June 2015. The orchard segment normally sells all non-IASCO nuts as kernel to Royal. However, in 2015, the orchard segment took advantage of strong pricing in DIS to sell approximately $1.2 million of DIS. For the three and nine months ended September 30, 2016, intersegment revenue (sales to Royal) decreased $1.9 million and increased $2.2 million, respectively. Segment revenue for sales to Royal is recognized after the nuts have been husked, dried and shelled. Intersegment revenue increased for the nine months ended September 30, 2016, due to more kernel being retained and sold to Royal. Phase 1 of our drying facility was not operational until the end of 2014, so more WIS was sold in 2014, resulting in less kernel available for intersegment sale in the first half of 2015 compared to the first half of 2016 when we processed all non-IASCO nuts. Intersegment revenue decreased for the three months ended September 30, 2016, due to a larger crop in spring 2015, which resulted in more sales of kernel to Royal in the third quarter of 2015 as compared to the third quarter of 2016.

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For the three and nine months ended September 30, 2016, cost of orchards revenue decreased $1.6 million and increased $926,000, respectively. The decrease in cost of orchards revenue for the three months ended September 30, 2016 compared to the same period in 2015 was due to lower revenue. The increase in costs of orchards revenue for the nine months ended September 30, 2016 as compared to the same period in 2015 was due to increased orchard segment revenue due to increased sales. Cost of orchards revenue was 79% of revenue for the first nine months of 2016 compared with 77% of revenue for the same period in 2015.

For the three and nine months ended September 30, 2016, our operating loss increased $516,000 and operating income decreased $49,000, respectively, to ($518,000) and $1.5 million, respectively. The increase in operating loss was due to higher costs in the third quarter due to a revision of the standard cost. Operating income for the nine-month period was similar to the same period in 2015. Higher revenue in 2016 was offset by higher cost of revenue. 

For the three months ended September 30, 2016 and 2015, WIS nut production was 2.6 million pounds and 4.7 million pounds, respectively. For the nine months ended September 30, 2016 and 2015, WIS nut production was 7.6 million pounds and 11.1 million pounds, respectively. The decrease in production in 2016 as compared to the same periods in 2015 relates to the timing of the nut drop and the length of the associated flowering season. For the three months ended September 30, 2016, the production was lower than the same period in 2015 due to a late start to the 2016 fall harvest due to later than average flowering in all of our orchards. In 2015, in the Ka’u region some production carry-over from fall 2014 occurred as a result of delayed nut drop from the fourth quarter of 2014 to the first half of 2015. However, carryover for the same period in 2016 was lower. That lower carryover, combined with the late start to the 2016 fall harvest, resulted in lower production for the nine month period ended September 30, 2016.

Farming costs are recognized when our products are sold to external customers. Farming costs related to WIS nuts are capitalized as deferred farming costs until sold to external customers. A change in the standard cost due to lower production in 2016 resulted in a reduction of deferred farming costs for the third quarter and a corresponding increase to cost of orchard revenue and inventory. Farming costs related to our branded products are initially capitalized as deferred farming costs and subsequently added to our branded products inventory until sold to external customers.

Branded Products Segment

Our branded products segment derives its revenues from the sale of bulk macadamia nuts and branded macadamia nut products sold under the ROYAL HAWAIIAN ORCHARDS® brand name and reported under Royal.

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Financial information for our branded products segment for the three and nine months ended September 30, 2016 and 2015, are set forth in the following table.

	For the Three Months Ended
	(in thousands, except percentages)
	September 30, 2016					September 30, 2015				Change			% Change
Total gross revenues	$	7,395				$	3,857			$	3,538			92	%
Deductions to gross revenues		556					300				256			85	%
Net revenues		6,839		100	%		3,557	100	%		3,282			92	%
Total cost of revenues		5,756		84	%(1)		2,804	79	%(1)		2,952			105	%
Total gross profit		1,083		16	%(1)		753	21	%(1)		330			(44%	)
General and administrative expenses		286		4	%(1)		229	6	%(1)		57			(25%	)
Selling expenses		947		14	%(1)		515	14	%(1)		432			84	%
Operating (loss) income	$	(150	)	(2%	)(1)	$	9	(0%	)(1)	$	(159	)		(106%	)

	For the Nine Months Ended
	(in thousands, except percentages)
	September 30, 2016					September 30, 2015					Change			% Change
Total gross revenues	$	17,988				$	9,368				$	8,620			92	%
Deductions to gross revenues		1,966					949					1,017			107	%
Net revenues		16,022		100	%		8,419		100	%		7,603			90	%
Total cost of revenues		13,674		85	%(1)		6,946		83	%(1)		6,728			97	%
Total gross profit		2,348		15	%(1)		1,473		17	%(1)		875			59	%
General and administrative expenses		837		5	%(1)		722		9	%(1)		115			16	%
Selling expenses		3,069		19	%(1)		1,457		17	%(1)		1,612			111	%
Operating loss	$	(1,558	)	(10%	)(1)	$	(706	)	(8%	)(1)	$	(852	)		(121%	)

(1) As a percentage of net revenues.

Gross segment revenue for the three and nine months ended September 30, 2016 increased $3.5 million and $8.6 million, respectively, compared to the same periods in 2015. Net branded products revenue and bulk kernel sales were $4.7 million and $11.3 million, respectively for the nine months ended September 30, 2016, compared to $2.2 million and $6.2 million, respectively, for the same period in 2015. Branded products segment revenues grew over the same period in 2015 due to continued gains in distribution of our branded products and continued strength in the bulk market. For the three month period ended September 30, 2016, net branded products revenue and bulk sales were $1.3 million and $5.5 million, respectively, compared to $1.1 million and $2.5 million, respectively, for the same period in 2015.

Deductions to gross revenue include slotting fees, trade and sales discounts, promotional incentives and reclamation charges. Deductions to gross revenue increased by approximately $256,000 and $1 million for the three and nine months ended September 30, 2016, respectively, compared with the same period in 2015. The increased deductions were due to introductory sales discounts and promotions related to the increase in overall revenue. We offer a variety of sales and promotion incentives to our customers, such as price discounts, slotting allowances, advertising allowances, in-store displays and consumer coupons. Slotting allowances are one-time costs paid to gain distribution primarily in the grocery channel and totaled $469,000 and $202,000 for the nine months ended September 30, 2016 and 2015, respectively.

Cost of revenues (excluding inter-segment eliminations) for the three and nine months ended September 30, 2016, increased by $3 million (105%) and $6.7 million (97%), respectively, compared to the same period in 2015. The cost of revenues increased at a higher rate than the increase in revenue due to lower gross margins from bulk kernel sales as compared to 2015. Our prices for intersegment sales of kernel from the orchards to branded products are set pursuant to an intercompany agreement at a predetermined, fixed price based on cost plus a mark-up.

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Operating loss for the branded products segment for the three months and nine months ended September 30, 2016, increased $159,000 and $852,000, respectively, over the same periods in 2015 mainly due to higher selling expenses. Selling expenses increased due to higher revenue and due to increased marketing and distribution costs related to new product launches.

General and Administrative Expenses

General and administrative expenses on a consolidated basis were $720,000 and $2.1 million for the three and nine months ended September 30, 2016, respectively, and were $901,000 and $2.2 million for the three and nine months ended September 30, 2015. The decrease in general and administrative expenses in the three months ended September 30, 2016, compared to the same period in 2015 was attributable to the timing of general administrative expenses. General administrative expenses were consistent for the nine-month periods ending September 30, 2016 and 2015.

Selling Expenses

Selling expenses on a consolidated basis were $947,000 and $3.1 million for the three and nine months ended September 30, 2016, respectively, compared to $515,000 and $1.5 million for the three and nine months ended September 30, 2015. The increase in selling expenses in 2016 was attributable to higher storage and handling costs and higher commissions paid to brokers related to the higher volume of branded product sales. Increased advertising costs, product development costs, sales personnel and other selling and marketing expenses also contributed to the increase in selling expenses.

Interest Expense

Interest expense for the three and nine months ended September 30, 2016, was $313,000 and $898,000, respectively, compared to $270,000 and $568,000 for the same periods in 2015. The increase in 2016 was attributable to the additional debt incurred in 2015 for our June 2015 acquisition of approximately 736 acres of land located in Keaau, Hawaii, 641 acres of macadamia nut trees, and windbreak trees (the “Becker Property Acquisition”), and Phases 1 and 2 of our drying plant, as well as a higher outstanding balance on our line of credit.

Other Income and Expenses (net)

Other income, net of other expense, was $189,000 and $374,000 for the three and nine months ended September 30, 2016, respectively. The other income for the three months ended September 30, 2016, was primarily attributable to proceeds from crop insurance. The other income for the nine months ended September 30, 2016, was primarily attributable to a patronage dividend from AgCredit of $113,000 and to proceeds from crop insurance of $156,000. Other expense of $188,000 for the nine months ended September 30, 2015, was attributable to $280,000 for costs incurred for the repair of damages sustained by a wind storm and other expenses in the amount of $53,000, partially offset by other income of $57,000 from a patronage dividend received from AgCredit.

Net Loss on Sale of Property

Losses from the disposition of property for the nine months ended September 30, 2016 and 2015, were $4,000 and $1,000, respectively.

Net Loss /Income

For the three months and nine months ended September 30, 2016, we recorded net loss of $17,000 and $1.1 million, respectively, compared to a net loss of $216,000 and $803,000 for the same periods in 2015. The net loss in the three-and nine-month periods was primarily attributable to increased selling expense in the branded products business, partially offset by increased income from the orchard segment.

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Income Taxes

The Partnership is subject to a gross income tax as a result of our election to continue to be taxed as a partnership rather than as a corporation, as allowed by the Taxpayer Relief Act of 1997. This tax is calculated at 3.5% on partnership gross income (revenues less cost of revenues). For the three and nine months ended September 30, 2016, gross income tax expense was $18,000 and $119,000, respectively, compared to a $23,000 and $108,000 gross income tax expense for the same periods in 2015.

Our wholly owned subsidiary Royal is subject to taxation as a C corporation at the current federal tax rate of 34% and a blended state tax rate of approximately 6.9% on the corporation’s taxable income (loss). As a result of the cumulative tax losses of Royal, the balance of our deferred tax asset at September 30, 2016, was $3.8 million, against which we have recorded a valuation allowance equal to 100% of the deferred tax asset due to the uncertainty regarding future realization of Royal’s net operating loss carry-forwards.

Liquidity and Capital Resources

Our businesses are seasonal. Production from our orchard segment normally peaks in the fall and winter; however, farming operations continue year round. In addition, we are increasing our inventory of nuts to support the growth of our branded products. The working capital required for the increases in inventory and accounts receivable from the branded products sales has been funded by cash flow generated from operations, proceeds from the 2014 rights offering and our line of credit.

(in thousands)	September 30, 2016		December 31, 2015
Cash and cash equivalents	$	759	$	404
Accounts receivable		1,908		2,306
Inventories		7,751		10,569
Accounts payable		981		1,554
Accrued payroll and benefits		970		823
Net working capital (1)		417		8,680

(1) Working capital consists of total current assets less total current liabilities.

At September 30, 2016, our working capital was $417,000 and our current ratio (current assets/current liabilities) was 1.03-to-1, compared to working capital of $8.7 million and a current ratio of 2.75-to-1 at December 31, 2015. The decrease in working capital as of September 30, 2016, was mainly due to the 2015 Bridge Loan (as defined below) and the Revolving Credit Facility (as defined below) becoming current and the balance on the Revolving Credit Facility increasing. In 2015, we increased our borrowings under our credit facilities, including the 2015 Bridge Loan of $2.835 million that was used to finance the acquisition of orchards. The 2015 Bridge Loan matures January 15, 2017 or, if earlier, the date that we receive proceeds from any issuance of equity. Management is closely monitoring our cash on hand, cash flow provided by operating activities and borrowings under our Revolving Credit Facility and our ability to fund our operating expenses, fund the sales growth of the branded products’ segment and make required debt service payments for the next 12 months, including payment of the 2015 Bridge Loan in 2017. To the extent that additional cash is needed, management may pursue sale of bulk kernel inventory and explore additional credit facilities, amendments to existing credit facilities, or equity offerings. Reductions in inventory balances could impact our ability to grow our branded products business. There can be no assurance that we will be successful in generating cash from operations or obtaining debt or equity on terms that are acceptable to us or at all.

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Debt

As of the indicated dates, we had the following long-term debt outstanding (in thousands):

	September 30,			December 31,
	2016			2015
Long-Term Debt
Revolving Credit Facility (due 2017)	$	7,000		$	5,000
2015 Bridge Loan (due 2017) (1)		2,835			2,835
2010 Term Loan (due 2020)		3,938			4,725
2015 6-Year Term Loan (due 2021)		3,937			4,594
2015 20-Year Term Loan (due 2035)		4,936			5,133
Other		9			20
Total principal amount of long-term debt		22,655			22,307
Less: unamortized debt issuance costs		(168	)		(199	)
Total long-term debt, net of unamortized loan fees		22,487			22,108
Less: current portion of long-term debt, net		(12,008	)		(2,166	)
Long-Term Debt, net of associated unamortized loan fees	$	10,479		$	19,942

_________________________

(1)   Maturity date for the 2015 Bridge Loan may be earlier than 2017. See description of the 2015 Bridge Loan below.

The following table summarizes the Partnership’s principal maturities of its debt (in thousands):

	Payments Due by Period
	Total			2016(1)		2017		2018		2019		2020	Remaining
Debt	$	22,655	$	324	$	12,029	$	2,188	$	2,188	$	1,751	$	4,175

_________________________

(1)   For remainder of 2016.

Credit Agreement with AgCredit PCA. Pursuant to the Fourth Amended and Restated Credit Agreement, dated July 15, 2010 (as amended, the “Prior PCA Credit Agreement”), by and between us and our wholly owned subsidiary Royal, as the borrowers, and American AgCredit, PCA, as lender (“AgCredit PCA”), the Partnership had a revolving credit facility for $5 million (the “Revolving Credit Facility”) and an existing term loan of $10.5 million (the “2010 Term Loan”). The Prior PCA Credit Agreement was amended on various dates in 2011 through February 27, 2015, to extend the maturity date of the Revolving Credit Facility.

On March 27, 2015, we and each of our wholly owned subsidiaries RHR, Royal and RHS, as the borrowers (the “Borrowers”), and AgCredit PCA, as lender and as agent, entered into an Amended and Restated Credit Agreement that amended and restated the terms of our outstanding borrowings with AgCredit PCA (as amended by the First PCA Credit Agreement Amendment, the Second PCA Credit Agreement Amendment, the Third PCA Credit Agreement Amendment, the Fourth PCA Credit Agreement Amendment, and the Fifth PCA Credit Agreement Amendment (each defined below), the “Amended PCA Credit Agreement”). The Amended PCA Credit Agreement (i) increased the amount of the Revolving Credit Facility from $5 million to $9 million and extended its maturity from March 31, 2015, to March 27, 2017; (ii) reduced the interest rate of the 2010 Term Loan; and (iii) added a new term loan of $5.25 million that matures on March 27, 2021 (the “2015 6-Year Term Loan”).

Pursuant to the Amended PCA Credit Agreement, the Revolving Credit Facility, the 2010 Term Loan, the 2015 6-Year Term Loan and the 2015 Bridge Loan (as defined below) are collateralized by all of the personal and real property assets of the Borrowers other than RHR.

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The Amended PCA Credit Agreement contains certain restrictions associated with partner distributions, further indebtedness, sales of assets, and maintenance of certain financial covenants. The financial covenants under the Amended PCA Credit Agreement include a requirement that we achieve minimum Consolidated EBITDA for the four-quarter period ending on the last day of each fiscal quarter (the “Consolidated EBITDA Covenant”) as follows:

Fiscal Quarter Ended/Ending	Minimum Consolidated EBITDA (1)
September 30, 2016	$	2,000,000
December 31, 2016	$	4,000,000
March 31, 2017 and each fiscal quarter thereafter	$	5,000,000

___________________

(1) Consolidated EBITDA is a non-GAAP financial measure based on the definition of Consolidated EBITDA in the Amended PCA Credit Agreement, which is defined as the sum (without duplication) of (a) consolidated net income determined in accordance with GAAP; plus (b) the sum of (i) Federal, state, local and foreign income taxes, (ii) interest expense (including the interest portion of any capitalized lease obligations), (iii) depletion, depreciation, and amortization, and (iv) extraordinary losses; minus (c) the sum of (i) gains on asset sales and (ii) extraordinary gains.

Management believes that the Consolidated EBITDA Covenant is a material term of the Amended PCA Credit Agreement and that information about the Consolidated EBITDA Covenant is material to an investor's understanding of our performance and ability to comply with our loan covenants. Reconciliation of Consolidated Net Income to Consolidated EBITDA is as follows:

	Four Quarters ended September 30, 2016
	(in thousands)
Consolidated Net Loss	$	(2,532	)
Total interest expense		1,155
Income taxes		139
Depreciation and amortization		2,904
Consolidated EBITDA	$	1,666

In connection with the Becker Property Acquisition, we entered into the First Amendment to Amended and Restated Credit Agreement with AgCredit PCA, effective as of June 15, 2015 (the “First PCA Credit Agreement Amendment”). The First PCA Credit Agreement Amendment amended the Amended PCA Credit Agreement to add the 2015 Bridge Loan. On June 29, 2015, we entered into a Second Amendment to Amended and Restated Credit Agreement with AgCredit PCA (the “Second PCA Credit Agreement Amendment”) to delete the Consolidated EBITDA Covenant for the quarter ended June 30, 2015. On September 22, 2015, we entered into a Third Amendment to Amended and Restated Credit Agreement with AgCredit PCA (the “Third PCA Credit Agreement Amendment”) to delete the Consolidated EBITDA covenant for the quarter ended September 30, 2015.

On March 11, 2016, the Borrowers executed the Fourth Amendment to Amended and Restated Credit Agreement and Waiver (the “Fourth PCA Credit Agreement Amendment”) with AgCredit PCA to (i) extend the maturity date of the 2015 Bridge Loan from March 15, 2016 to January 15, 2017; (ii) increase the interest rate on the 2015 Bridge Loan as of September 1, 2016 from the Base Rate plus 0.75% to the Base Rate plus 1.00%; (iii) reduce the minimum Consolidated EBITDA (as defined in the Amended PCA Credit Agreement) (A) for the quarter ending March 31, 2016 from $3,500,000 to $1,000,000, (B) for the quarter ending June 30, 2016 from $4,000,000 to $1,250,000, (C) for the quarter ending September 30, 2016 from $5,000,000 to $2,000,000, and (D) for the quarter ending December 31, 2016 from $5,000,000 to $4,000,000; and (iv) waive our non-compliance with the Consolidated EBITDA covenant for the quarter ended December 31, 2015. For quarters ending March 31, 2017, and all future quarters, the minimum Consolidated EBITDA requirement remains at $5,000,000.

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In connection with the sale of RHR, on June 30, 2016, the Borrowers executed the Fifth Amendment to Amended and Restated Credit Agreement and Consent (the “Fifth PCA Credit Agreement Amendment”) with American AgCredit, PCA, to remove RHR as a party to the Loan Documents (as defined in the Amended PCA Credit Agreement) and release RHR from liability under the Loan Documents, other than from such liability as it may have as general partner of the Partnership.

As noted above, the Consolidated EBITDA requirement for the four-quarter period ended September 30, 2016, was $2,000,000. Our actual Consolidated EBITDA for the four-quarter period ended September 30, 2016, was $1,666,000. On November 9, 2016, the Borrowers (no longer including RHR) executed a Waiver Agreement with American AgCredit, PCA, pursuant to which American AgCredit, PCA, waived the Partnership’s noncompliance with the Consolidated EBITDA covenant for the quarter ended September 30, 2016.

Revolving Credit Facility. The Amended PCA Credit Agreement increased the Revolving Credit Facility from $5 million to $9 million and extended the maturity from June 30, 2015, to March 27, 2017. Advances under the Revolving Credit Facility bear interest based on an election made by us at the time of the advance at either LIBOR rates or at the base rate of the higher of (a) one-half of one percent (0.50%) per annum in excess of the latest Federal Funds Rate (as defined in the Amended PCA Credit Agreement); and (b) the prime rate of interest in effect for such day as published from time to time in The Wall Street Journal. We are required to pay a fee of 0.375% per annum on the daily unused portion of the Revolving Credit Facility. The interest rate on the Revolving Credit Facility at September 30, 2016, was 4.75% per annum.

As of September 30, 2016, the outstanding balance on the Revolving Credit Facility was $7 million, compared with a $5.0 million balance outstanding as of December 31, 2015.

2010 Term Loan. The Prior PCA Credit Agreement provided for the 2010 Term Loan of $10.5 million, which matures on July 1, 2020. The Amended PCA Credit Agreement left the 2010 Term Loan in place but reduced the fixed interest rate under the 2010 Term Loan from 6.5% per annum to 6.0% per annum. As of September 30, 2016 and December 31, 2015, the outstanding balance on the 2010 Term Loan was $3.938 million and $4.725 million, respectively.

2015 6-Year Term Loan. The Amended PCA Credit Agreement provided for the 2015 6-Year Term Loan of $5.25 million, which matures on March 27, 2021. The 2015 6-Year Term Loan bears interest at a fixed rate of 4.01% per annum. We used the proceeds of the 2015 6-Year Term Loan to replace working capital used to construct Phase 1 of our drying plant and to finance the construction of Phase 2 of our drying plant. As of September 30, 2016 and December 31, 2015, the outstanding balance on the 2015 6-Year Term Loan was $3.937 and $4.594 million, respectively.

2015 Bridge Loan. The First PCA Credit Agreement Amendment provided for a bridge loan of $2.835 million (the “2015 Bridge Loan”), which was to mature on the earlier of (a) March 15, 2016, or (b) the date that we receive net proceeds from any issuance of equity, subject to certain exceptions. Pursuant to the Fourth PCA Credit Agreement Amendment, the fixed maturity date trigger for the 2015 Bridge Loan was extended from March 15, 2016, to January 15, 2017. The 2015 Bridge Loan bears interest at the base rate plus three quarters of one percent (0.75%) where the base rate (“Base Rate”) is the higher of (i) one half of one percent (0.5%) per annum in excess of the latest Federal Funds Rate, and (ii) the prime rate of interest in effect for such day as published from time to time in The Wall Street Journal. As of September 1, 2016, the interest rate on the 2015 Bridge Loan increased to the Base Rate plus 1.00%. The 2015 Bridge Loan is collateralized by all personal and real property assets of the Borrowers other than RHR, including a second priority interest in the properties acquired in the Becker Property Acquisition. We used the proceeds of the 2015 Bridge Loan on June 16, 2015, for the Becker Property Acquisition. As of both September 30, 2016 and December 31, 2015, the outstanding balance on the 2015 Bridge Loan was $2.835 million.

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2015 20-Year Term Loan. Also in connection with the Becker Property Acquisition, we entered into a Credit Agreement, effective June 15, 2015 (as amended by the First FLCA Credit Agreement Amendment (defined below), the “FLCA Credit Agreement”), with American AgCredit, FLCA (“AgCredit FLCA”), providing for a $5.265 million, 20-year term loan (“2015 20-Year Term Loan”). The 2015 20-Year Term Loan bears interest at a fixed rate of 5.29% per annum and requires quarterly payments, with fixed principal reductions, over the term. The 2015 20-Year Term Loan matures on July 1, 2035. On March 11, 2016, we executed the First Amendment to Credit Agreement and Waiver (the “First FLCA Credit Agreement Amendment”) with AgCredit FLCA. As a result, the maximum allowable Total Indebtedness to Consolidated EBITDA Ratio (as defined in the FLCA Credit Agreement) was increased for the quarter ending December 31, 2016 from (i) 4.0 to 1.0 to (ii) 5.5 to 1.0. In addition, a one-time waiver was granted in connection with the cross-default covenant of the FLCA Credit Agreement relating to the non-compliance with the Consolidated EBITDA covenant in the Amended PCA Credit Agreement described above. We used the proceeds of the 2015 20-Year Term Loan for the Becker Property Acquisition. The 2015 20-Year Term Loan is secured by a mortgage on the properties acquired in the Becker Property Acquisition. As of September 30, 2016 and December 31, 2015, the outstanding balance on the 2015 20-Year Term Loan was $4.936 million and $5.133, respectively.

Cash Flows

The following table sets forth, for the periods indicated, our beginning balance of cash, net cash flows provided by or used in operating, investing and financing activities and ending cash balance:

	Nine Months Ended
	September 30,
(in thousands)	2016			2015
Cash and cash equivalents at beginning of period	$	404		$	786
Net cash used in operating activities		(50	)		(1,599	)
Net cash used in investing activities		(167	)		(11,130	)
Net cash provided by financing activities		572			13,013
Cash and cash equivalents at end of period		759			1,070

Operating Cash Flow. Net cash used in operating activities for the nine months ended September 30, 2016 and 2015, was $50,000 and $1.6 million, respectively, a decrease of $1.6 million. The increased net loss of $340,000 for the first nine months of 2016 was offset by an increase in depreciation and amortization expense of $285,000 and positive changes in asset and liability balances, including a $4.4 million reduction in inventory compared to 2015, so that cash used in operating activities was $1.5 million less than the same period in 2015. Inventory decreased in the first nine months of 2016 due to a larger overall inventory balance at the beginning of the year and increased branded product sales. The accounts receivable decrease was due to the lower orchard revenue in the three months ended September 30, 2016, as compared to the same period in 2015. The increase in deferred farming costs was due to an unusually large crop in the first quarter of 2015 which resulted in less costs being deferred in the first half of 2015 as well as a late start to the fall 2016 harvest. The orchard segment is seasonal with the highest levels of production in the first and fourth quarter of the year. As discussed in Note 7 – Deferred Farming Cost to the accompanying financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q, costs related to maintaining the orchards and preparing for harvest are deferred. As we have become more vertically integrated, the timing of operating cash flows has changed as our nuts are being inventoried and sold throughout the year.

Investing Cash Flow. Cash used in investing activities of $167,000 in the nine months ended September 30, 2016, was used for small equipment purchases, and of the $11.1 million of cash used in investing activities in the nine months ended September 30, 2015, $3 million was used to purchase equipment for Phase 2 of our drying plant and $8.1 million was used for the purchase of orchards.

Financing Cash Flow. Financing activities for the nine months ended September 30, 2016, consisted of proceeds of $4.0 million under our Revolving Credit Facility and $224,000 received from the sale of the General Partner. We made payments on our long term debt in the amount of $3.7 million, which includes $2 million on our Revolving Credit Facility, during the nine months ended September 30, 2016.

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Financing activities for the nine months ended September 30, 2015, consisted of proceeds from long term borrowings of $13.4 million and borrowings of $2.8 million under our revolving credit facility. The long term borrowings were used for construction of drying tanks and for the purchase of orchards. Payments on long-term borrowings in the amount of $1.1 million and repayments of $1.8 million on our revolving credit facility were made during the nine months ended September 30, 2015. Debt issuance fees of $296,000 were incurred in the nine months ended September 30, 2015.

Disclosure Regarding Forward-Looking Statements

Statements that are not historical facts contained or incorporated by reference into this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements involve risks and uncertainties that could cause actual results to differ from projected results. The words “anticipate,” “goal,” “seek,” “project,” “strategy,” “future,” “likely,” “may,” “should,” “will,” “believe,” “estimate,” “expect,” “plan,” “intend” and similar expressions and references to future periods, as they relate to us, are intended to identify forward-looking statements. Forward-looking statements include statements we make regarding:

● projections of revenues, expenses, income or loss;

● quarterly results not being indicative of annual performance;

● trends in our business, including seasonality of nut production and sales of branded products;

● estimates of deferred farming costs and the timing of the recognition of such costs;

● our plans, objectives and expectations, including those relating to regulatory actions, business plans, products or services;

● amount of kernel produced in our orchards segment that will be inventoried and used in our branded products;

● estimated production;

● delays of the harvesting season into future fiscal years;

● increase or decreases in expenditures on slotting fees and other promotional activities and their impact on revenues;

● future economic performance;

● industry trends;

● legal proceedings;

● our ability to fund operating expenses, fund the sales growth of the branded products segment and make required debt service payments from cash on hand, cash flow provided by operating activities and borrowings under our revolving credit facility;

● our plans to raise additional capital from sales of bulk kernel inventory, additional or amended credit facilities, or equity offerings;

● expected impact of new accounting standards on our financial statements; and

● the effectiveness of our disclosure controls and procedures and internal controls over financial reporting.

Forward-looking statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Our actual results could differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in such forward-looking statements include, without limitation, the risk factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015, as well as risks associated with the following:

● changing interpretations of GAAP;

● changes in macadamia nut prices;

● world market conditions relating to macadamia nuts;

● the weather and local conditions in Hawaii affecting macadamia nut production;

● legislation or regulatory environments, requirements or changes adversely affecting our businesses;

● general economic conditions;

● geopolitical events and regulatory changes;

● our ability to retain and attract skilled employees;

● our success in finding purchasers for our macadamia nut production at acceptable prices;

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● increasing competition in the snack food market;

● the availability of and our ability to negotiate acceptable agreements with third parties that are necessary for our business, including those with nut processors, co-packers, distributors and transportation companies;

● market acceptance of our products in the branded segment;

● the availability and cost of raw materials;

● changes in fuel and labor costs;

● our ability to raise capital from the sale of inventory, additional or amended credit facilities, or equity offerings;

● our success at managing the risks involved in the foregoing items; and

● other factors discussed from time to time in our press releases, public statements and documents filed or furnished with the SEC

Forward-looking statements speak only as of the date on which such statements are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. All forward-looking statements are expressly qualified by these cautionary statements.

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Item 3.     Quantitative and Qualitative Disclosures About Market Risk

In the ordinary course of business, we are exposed to various market risks, including those resulting from changes in the market price of macadamia kernel and changes in interest rates. There have been no significant changes in our market risk exposures since December 31, 2015. See “Part II, Item 7A – Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2015, for further discussion on quantitative and qualitative disclosures about market risk.

Item 4.     Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”), we carried out an evaluation, under the supervision and with the participation of management, including the Principal Executive Officer/Principal Financial Officer of the managing general partner of the Partnership, of the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, the Principal Executive Officer/Principal Financial Officer has concluded that, as of the Evaluation Date, the Partnership’s disclosure controls and procedures were effective. The Partnership’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Partnership in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s applicable rules and forms, and (ii) accumulated and communicated to the Partnership’s management, including the Principal Executive Officer/Principal Financial Officer, to allow timely decisions regarding required disclosure. A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Control Over Financial Reporting

No changes were made to internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – Other Information

Item 1.     Legal Proceedings

Edmund C. Olson, as Trustee of The Edmund C. Olson Trust No. 2 vs. Royal Hawaiian Orchards, L.P. On January 22, 2015, Edmund C. Olson, as trustee of The Edmund C. Olson Trust No. 2 (the “Olson Trust”), filed a complaint in the Circuit Court of the Third Circuit State of Hawaii seeking a declaratory judgment that the Partnership has breached the terms of the leases for the Green Shoe I Orchard and the Green Shoe II Orchard, on which 609 tree acres of macadamia nut orchards are situated. The Olson Trust claims that by failing to exercise “good husbandry” and permitting waste of the orchards through its horticultural practices, the Olson Trust is entitled to terminate the leases and reenter and expel the Partnership from the orchards. Pursuant to the lease agreements, the lease terms of the Green Shoe I Lease and Green Shoe II Lease expire in 2019 and 2034, respectively. In addition, the Olson Trust seeks termination damages in an amount to be proven at trial. On or about February 17, 2015, we filed an answer and a cross-complaint against the Olson Trust, denying the claims of the Olson Trust and asserting claims of our own for breach of contract, unfair and deceptive competition, and injunctive relief, among others. We believe the claims of the Olson Trust are without merit. The Olson Trust has denied the claims asserted in our cross-claim. On September 17, 2015, the parties signed a Joint Stipulation to Engage in Binding Mediation of Proceedings and to Stay Court Litigation Pending Binding Mediation (the “Joint Stipulation”) to stay the court proceedings pending the issuance of a written report by a panel of three farming experts determining whether the Partnership has been practicing “good husbandry” or “strip or waste” at each orchard. The panel’s report is to include recommendations of any practices or operational changes that should be implemented to bring the leases into compliance with “good husbandry” and to prevent “strip or waste.” The parties have agreed to timely perform all recommendations in the panel’s report. The parties have further agreed that the report shall be enforceable in the state courts of Hawaii to the same extent as an arbitration award. In January 2016, the parties completed their selection of the panel of experts. The panel’s report was due in October 2016. On October 4, 2016, the parties filed a Joint Stipulation to Stay Binding Mediation Proceedings with the court mutually agreeing to stay the binding mediation proceedings for forty-five days, or such additional period as agreed upon by the parties in writing, in order to work on a settlement. Either party may terminate the stay upon ten days’ written notice after October 24, 2016, the date on which the parties completed their exchange of initial settlement offers. The parties are currently working on a settlement, but no definitive agreement has been concluded, and there is no assurance that a settlement will be concluded, in which case the panel of experts will resume preparing its report.

Item 6.     Exhibits

The following documents are filed or furnished as required by Item 601 of Regulation S-K:

Exhibit Number	Description
3.1	Certificate of Limited Partnership of the Partnership, as amended, as filed with the Delaware Secretary of State (incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-1 filed on November 6, 2013)
3.2	Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of October 1, 2012 (incorporated by reference to Exhibit 3.4 to the Current Report on Form 8-K filed on October 4, 2012), as amended by Amendment to the Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of November 1, 2013 (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q filed on November 4, 2013)
10.1	Waiver Agreement among Royal Hawaiian Orchards, L.P., Royal Hawaiian Services, LLC, and Royal Hawaiian Macadamia Nut, Inc., as Borrowers, and American AgCredit, PCA, as Agent, dated as of November 9, 2016
11.1+	Statement re Computation of Net Income (Loss) per Class A Unit
31.1+	Form of Rule 13a-14(a) [Section 302] Certification — Principal Executive and Financial Officer
32.1++	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 — Principal Executive and Financial Officer
101+	Financial statements from the Quarterly Report on Form 10-Q of Royal Hawaiian Orchards, L.P. for the three months ended September 30, 2016, filed on November 14, 2016, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) Condensed Consolidated Statements of Partners’ Capital, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements

+ Filed herewith.

++ Furnished herewith.

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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.

	ROYAL HAWAIIAN ORCHARDS, L.P.
		(Registrant)
	By:	Royal Hawaiian Resources, Inc.
		Managing General Partner
Date: November 14, 2016
	By:	/s/ Bradford Nelson
		Bradford Nelson
		President
		(Principal Executive and Financial Officer)

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EX-10.1

Exhibit 10.1

WAIVER AGREEMENT

This Waiver Agreement dated as of November 9, 2016 (this “Agreement”), is made by and among American AgCredit, PCA, in its capacity as agent under the Credit Agreement referred to below (in such capacity, “Agent”), the “Lenders” under and as defined in such Credit Agreement, Royal Hawaiian Orchards, L.P., a Delaware limited partnership (“RHO”), Royal Hawaiian Services, LLC, a Hawaii limited liability company (“RHS”), and Royal Hawaiian Macadamia Nut, Inc., a Hawaii corporation (“RHMN” and, together with RHO and RHS, collectively “Borrowers” and each, a “Borrower” and, together with any other “Credit Party” under and as defined in the Credit Agreement, the “Credit Parties”), and RHO, as Borrower Representative, with reference to the following:

RECITALS

A.     Agent, Lenders, and the Credit Parties are parties to that certain Amended and Restated Credit Agreement, dated as of March 27, 2015, as amended by a First Amendment to Amended and Restated Credit Agreement dated as of June 15, 2015, a Second Amendment to Amended and Restated Credit Agreement dated as of June 29, 2015, a Third Amendment to Amended and Restated Credit Agreement dated as of September 22, 2015, a Fourth Amendment to Amended and Restated Credit Agreement and Waiver dated as of March 11, 2016, and a Fifth Amendment to Amended and Restated Credit Agreement and Consent dated as of June 30, 2016 (as it may be further amended, restated, modified or supplemented from time to time, the “Credit Agreement”).

B.     The Credit Parties have requested that Agent and Lenders waive the occurrence of an Event of Default. Agent and Lenders are willing to do so on the terms and conditions set forth in this Agreement.

In consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

ARTICLE I
ACKNOWLEDGMENTS and AGREEMENTS

Section 1.1     Affirmation of Recitals; Defined Terms. Each Credit Party acknowledges and confirms that each of the recitals set forth above is true and correct. Capitalized terms used in this Agreement without being defined shall have the meaning given to those terms in the Credit Agreement.

Section 1.2     Outstanding Indebtedness. Each Credit Party acknowledges and confirms that all amounts owed by the Credit Parties to Agent and Lenders under the Loan Documents are duly and validly owing and that such amounts are not subject to any defense, counterclaim, recoupment or offset of any kind.

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Section 1.3     Waiver Fee. Agent and Lenders have determined not to charge Borrowers a fee in connection with this Agreement. Agent and Lenders reserve the right to charge a fee in connection with any future amendment, waiver, consent, or other accommodation provided to Borrowers.

ARTICLE II
WAIVER

Section 2.1     Waiver of Events of Default. Section 8.15(a) of the Credit Agreement provides that Borrower shall not permit Consolidated EBITDA for the four-quarter period ending on the last day of each Fiscal Quarter to be less than the amount set forth in Section 8.15(a). Borrower failed to comply with the applicable requirement as of September 30, 2016. Pursuant to Section 9.01(c) of the Credit Agreement, such failure constitutes an Event of Default (such default being the “Specified Event of Default”). Agent and Lenders hereby agree to waive the Specified Event of Default. This is a one-time waiver only. Should any Events of Default exist in the future that are similar in kind or character to the Specified Event of Default, such Events of Default are not waived by Agent or Lenders and Agent and Lenders reserve all their rights and remedies with respect to such future Events of Default.

ARTICLE III
CONDITIONS TO EFFECTIVENESS

Section 3.1     Conditions Precedent. The effectiveness of this Agreement is subject to the satisfaction of the following conditions:

(a)     receipt by Agent of duly executed counterparts of this Agreement from each Credit Party and all Lenders and countersignature by Agent;

(b)     satisfaction of all conditions precedent set forth in any closing checklist delivered by Agent to Borrowers; and

(c)     if required by Agent, Borrowers shall have paid all reasonable and documented out-of-pocket costs and expenses of Agent and Lenders in connection with this Agreement, the Loan Documents and the transactions contemplated hereby including an estimate of such costs anticipated in connection with closing (it being understood that if Agent elects not to require payment prior to closing, Borrowers shall promptly pay such amounts upon being billed therefor by Agent).

ARTICLE IV
MISCELLANEOUS

Section 4.1     Representations and Warranties. Each Credit Party hereby represents and warrants to Agent and Lenders that, as of the date hereof, (a) each Credit Party has the legal power and authority to execute and deliver this Agreement; (b) the officers of each Credit Party executing this Agreement have been duly authorized to execute and deliver the same and bind each Credit Party with respect to the provisions hereof; (c) the execution and delivery hereof by each Credit Party and the performance and observance by each Credit Party of the provisions hereof do not violate or conflict with any organizational document of any Person party hereto or any law applicable to any Credit Party or result in a breach of any provision of or constitute a default under any other agreement, instrument or document binding upon or enforceable against any Credit Party; (d)  no Default or Event of Default exists under the Credit Agreement other than any Events of Default being waived by this Agreement, nor will any occur immediately after the execution and delivery of this Agreement or by the performance or observance of any provision hereof; (e) no Credit Party is aware of any claim or offset against, or defense or counterclaim to, any of their obligations or liabilities under the Credit Agreement or any other Loan Document; (f) this Agreement and each document executed by any Credit Party in connection herewith constitute the valid and binding obligations of the applicable Credit Party, enforceable against such Credit Party in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability; and (g) each of the representations and warranties made by such Credit Party in the Credit Agreement and in the other Loan Documents is true and correct in all material respects on and as of such date to the same extent as though made on and as of such date, except to the extent that any thereof expressly relate to an earlier date, in which case, such representations and warranties were true and correct in all material respects on and as of such earlier date.

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Section 4.2     Release. Each Credit Party hereby releases, remises, acquits and forever discharges Agent and each of Lenders and their respective employees, agents, representatives, consultants, attorneys, fiduciaries, officers, directors, partners, predecessors, successors and assigns, subsidiary corporations, parent corporations, and related corporate divisions (collectively, the “Released Parties”), from any and all actions and causes of action, judgments, executions, suits, debts, claims, demands, liabilities, obligations, damages and expenses of any and every character, known or unknown, direct and/or indirect, at law or in equity, of whatsoever kind or nature, for or because of any matter or things done, omitted or suffered to be done by any of the Released Parties prior to and including the effectiveness of this Agreement, and in any way directly or indirectly arising out of or in any way connected to the Credit Agreement or the Loan Documents (collectively, the “Released Matters”). Each Credit Party acknowledges that the agreements in this paragraph are intended to be in full satisfaction of all or any alleged injuries or damages arising in connection with the Released Matters.

Each Credit Party hereby waives the provisions of any statute or doctrine to the effect that a general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. Without limiting the generality of the foregoing, each Credit Party hereby waives the provisions of any statute that prevents a general release from extending to claims unknown by the releasing party, including Section 1542 of the California Civil Code which provides:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

Each Credit Party acknowledges and understands the rights and benefits conferred by such a statute or doctrine and the risks associated with waiver thereof, and after receiving advice of counsel, hereby consciously and voluntarily waives, relinquishes and releases any and all rights and benefits available thereunder, insofar as they apply, or may be construed to apply, to each release set forth herein or contemplated hereby. In so doing, each Credit Party expressly acknowledges and understands that it may hereafter discover facts in addition to or different from those that it now believes to be true with respect to the subject matter of the disputes, claims and other matters released herein, but expressly agrees that it has taken these facts and possibilities into account in electing to make and to enter into this release, and that the releases given herein shall be and remain in effect as full and complete releases notwithstanding the discovery or existence of any such additional or different facts or possibilities.

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This release may be pleaded as a full and complete defense and/or as a cross-complaint or counterclaim against any action, suit, or other proceeding that may be instituted, prosecuted or attempted in breach of this release. Each Credit Party acknowledges that the release contained herein constitutes a material inducement to Agent and each of the Lenders to enter into this Agreement and that Agent and those Lenders would not have done so but for Agent’s and each Lender’s expectation that such release is valid and enforceable in all events.

Section 4.3     Covenant Not to Sue. Each Credit Party, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Released Party that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Released Party on the basis of any Released Matter. If any Credit Party or any of its successors, assigns or other legal representatives violates the foregoing covenant, such Credit Party, for itself and its successors, assigns and legal representatives, agrees to pay, in addition to such other damages as any Released Party may sustain as a result of such violation, all attorneys’ fees and costs incurred by any Released Party as a result of such violation.

Section 4.4     Loan Documents Unaffected. Except as otherwise specifically provided herein, all provisions of the Credit Agreement and the other Loan Documents shall remain in full force and effect and be unaffected hereby. The parties hereto acknowledge and agree that this Agreement constitutes a “Loan Document” under the terms of the Credit Agreement.

Section 4.5     Guarantor Acknowledgement. Any Guarantor, by signing this Agreement:

(a)     consents and agrees to and acknowledges the terms of this Agreement;

(b)     acknowledges and agrees that all of the Loan Documents to which Guarantor is a party or otherwise bound shall continue in full force and effect and that all of Guarantor’s obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Agreement;

(c)     represents and warrants to Agent and Lenders that all representations and warranties made by Guarantor and contained in this Agreement or any other Loan Document to which it is a party are true and correct in all material respects on and as of the date of this Agreement to the same extent as though made on and as of such date, except to the extent that any thereof expressly relate to an earlier date; and

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(d)     acknowledges and agrees that (i) notwithstanding the conditions to effectiveness set forth in this Agreement, Guarantor’s consent to this Agreement is not required under the terms of the Credit Agreement or any other Loan Document or as a matter of law, and (ii) nothing in the Credit Agreement, this Agreement or any other Loan Document shall be deemed to require the consent of Guarantor to any future amendments to, modifications of, consents under, or forbearances or waivers with regard to, the Credit Agreement.

Section 4.6     Costs, Expenses and Taxes.     Borrowers agree to pay on demand all reasonable and documented out-of-pocket costs and expenses of Agent in connection with the preparation, execution, delivery, administration, modification and amendment of this Agreement and the other instruments and documents to be delivered hereunder, including the reasonable and documented fees and out-of-pocket expenses of counsel for Agent with respect thereto and with respect to advising Agent as to its rights and responsibilities hereunder and thereunder. Borrowers further agree to pay on demand all reasonable and documented out-of-pocket costs and expenses, if any (including reasonable and documented counsel fees and expenses), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement and any other instruments and documents to be delivered hereunder, including reasonable and documented counsel fees and expenses in connection with the enforcement of rights under this section. In addition, Borrowers shall pay any and all stamp and other taxes payable or determined to be payable in connection with the execution and delivery of this Agreement and any other instruments and documents to be delivered hereunder, and agrees to save Agent harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such taxes. The foregoing agreements shall be in addition to and not in lieu of any similar obligations under the Loan Documents.

Section 4.7     No Other Promises or Inducements. There are no promises or inducements that have been made to any party hereto to cause such party to enter into this Agreement other than those that are set forth in this Agreement. This Agreement has been entered into by each Credit Party freely, voluntarily, with full knowledge, and without duress, and, in executing this Agreement, no Credit Party is relying on any other representations, either written or oral, express or implied, made to any Credit Party by Agent or any Lender. Each Credit Party agrees that the consideration received by each Credit Party under this Agreement has been actual and adequate.

Section 4.8     No Course of Dealing. Each Credit Party acknowledges and agrees that, (a) this Agreement is not intended to, nor shall it, establish any course of dealing between the Credit Parties, Agent and Lenders that is inconsistent with the express terms of the Credit Agreement or any other Loan Document, (b) notwithstanding any course of dealing between the Credit Parties, Agent and Lenders prior to the date hereof, except as set forth herein, Lenders shall not be obligated to make any Loan, except in accordance with the terms and conditions of this Agreement and the Credit Agreement, and (c) neither Agent nor Lenders shall be under any obligation to forbear from exercising any of their respective rights or remedies upon the occurrence of any Default or Event of Default other than those that have been waived under this Agreement. Nothing herein modifies the agreements among Agent and Lenders with respect to the exercise of their respective rights and remedies under the terms of the Credit Agreement.

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Section 4.9      No Waiver. Each Credit Party acknowledges and agrees that (a) except as expressly provided herein, this Agreement shall not operate as a waiver of any right, power or remedy of Agent or Lenders under the Credit Agreement or any other Loan Document, nor shall it constitute a continuing waiver at any time, and (b) nothing herein shall in any way prejudice the rights and remedies of Agent or Lenders under the Credit Agreement, any Loan Document or applicable law. In addition, Agent and Lenders shall have the right to waive any condition or conditions set forth in this Agreement, the Credit Agreement or any other Loan Document, in their sole discretion, and any such waiver shall not prejudice, waive or reduce any other right or remedy that Agent or Lenders may have against any Credit Party.

Section 4.10     Reaffirmation. Each Credit Party (other than RHR), as debtor, grantor, pledgor, guarantor, assignor, or in any other similar capacity in which such Credit Party grants liens or security interests in its property or otherwise acts as accommodation party or guarantor, as the case may be, hereby (a) ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise, under each of the Loan Documents to which it is a party (after giving effect hereto) and (b) to the extent such Person granted liens on or security interests in any of its property pursuant to any such Loan Document as security for the Obligations under or with respect to the Loan Documents, ratifies and reaffirms such grant of security interests and liens and confirms and agrees that such security interests and liens hereafter secure all of the Obligations. Each Credit Party hereby acknowledges that each of the Loan Documents remains in full force and effect and is hereby ratified and reaffirmed. The execution of this Agreement shall not operate as a waiver of any right, power or remedy of Agent or any Lender, constitute a waiver of any provision of any of the Loan Documents or serve to effect a novation of the Obligations. Each Credit Party acknowledges that all references in the Credit Agreement to the “Agreement” or the “Credit Agreement” shall mean the Credit Agreement, and all references in the Loan Documents to the “Credit Agreement” shall mean the Credit Agreement.

Section 4.11     Modification; Waiver. This Agreement may not be modified orally, but only by an agreement in writing signed by the parties hereto. Any provision of this Agreement can be waived, amended, supplemented or modified by written agreement of the parties hereto.

Section 4.12     Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS.

Section 4.13     Entire Agreement. This Agreement sets forth the entire agreement and understanding among the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements, and undertakings of every kind and nature among them with respect to the subject matter hereof.

Section 4.14     Counterparts; Facsimile or Electronic Transmission of Signature. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. The manual signature of any party hereto that is transmitted to any other party or its counsel by facsimile or electronic transmission shall be deemed for all purposes to be an original signature.

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Section 4.15     Severability of Provisions; Captions; Attachments; Interpretation. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. The captions to Sections and subsections herein are inserted for convenience only and shall be ignored in interpreting the provisions of this Agreement. Each schedule or exhibit attached to this Agreement shall be incorporated herein and shall be deemed to be a part hereof. Words in the singular include the plural and words in the plural include the singular. Use of the term “includes” or “including,” shall mean “including, but not limited to.”

Section 4.16     JURY TRIAL WAIVER. EACH OF THE UNDERSIGNED, HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM HEREIN.

[Remainder of page intentionally left blank; signatures begin on following page.]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

BORROWERS:
ROYAL HAWAIIAN ORCHARDS, L.P., a Delaware limited partnership
By:	Royal Hawaiian Resources, Inc., a Hawaii corporation, its managing general partner
	By:	/s/ Bradford Nelson
	Name:	Bradford Nelson
	Title:	President
ROYAL HAWAIIAN SERVICES, LLC, a Hawaii limited liability company
By:	Royal Hawaiian Orchards, L.P., a Delaware limited liability company, its member
	By:	Royal Hawaiian Resources, Inc., a Hawaii corporation, its managing general partner
		By:	/s/ Bradford Nelson
		Name:	Bradford Nelson
		Title:	President
ROYAL HAWAIIAN MACADAMIA NUT, INC., a Hawaii corporation
By:	/s/ Scott C. Wallace
Name:	Scott C. Wallace
Title:	President

Signature Page 1 

BORROWER REPRESENTATIVE:
ROYAL HAWAIIAN ORCHARDS, L.P., a Delaware limited partnership
By:	Royal Hawaiian Resources, Inc., a Hawaii corporation, its managing general partner
	By:	/s/ Bradford Nelson
	Name:	Bradford Nelson
	Title:	President

[Signature Pages Continue]

Signature Page 2 

AMERICAN AGCREDIT, PCA,
as Agent and Lender
By:	/s/ Janice T. Thede
Name:	Janice T. Thede
Title:	Vice President

Signature Page 3

EX-11.1

Exhibit 11.1

Royal Hawaiian Orchards, L.P.

Computation of Net Income (Loss) per Class A Unit (unaudited)

(in thousands, except per unit data)

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2016			2015			2016			2015
Net loss	$	(17	)	$	(216	)	$	(1,143	)	$	(803	)
Class A Unit Holders (ownership percentage)	x	99	%	x	100	%	x	100	%	x	100	%
Net loss allocable to Class A Unit Holders	$	(17	)	$	(216	)	$	(1,143	)	$	(803	)
Weighted average Class A Units outstanding		11,100			11,100			11,100			11,100
Net loss per Class A Unit	$	(0.00	)	$	(0.02	)	$	(0.10	)	$	(0.07	)

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Bradford Nelson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Royal Hawaiian Orchards, L.P.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2016

/s/ Bradford Nelson

Bradford Nelson

President (Principal Executive and Financial Officer) of Royal Hawaiian Resources, Inc., Managing General Partner of Royal Hawaiian Orchards, L.P.

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Royal Hawaiian Orchards, L.P. (the “Partnership”) for the period ended September 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, the undersigned management of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that,

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

/s/ Bradford Nelson

Bradford Nelson

President (Principal Executive and Financial Officer) of Royal Hawaiian Resources, Inc., Managing General Partner of Royal Hawaiian Orchards, L.P.

November 14, 2016

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Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Nov. 14, 2016
Document Information [Line Items]
Entity Registrant Name	ROYAL HAWAIIAN ORCHARDS, L.P.
Entity Central Index Key	0000792161
Trading Symbol	nnutu
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		11,100,000
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Amendment Flag	false

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Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Assets
Cash and cash equivalents	$ 759,000	$ 404,000
Accounts receivable, net	1,908,000	2,306,000
Inventories, net	7,751,000	10,569,000
Deferred farming costs	3,175,000
Other current assets	875,000	371,000
Total current assets	14,468,000	13,650,000
Land, orchards and equipment, net	49,218,000	51,253,000
Other non-current assets	341,000	451,000
Total assets	64,027,000	65,354,000
Liabilities and partners’ capital
Current portion of long-term debt, net	12,008,000	2,166,000
Accounts payable	981,000	1,554,000
Accrued payroll and benefits	970,000	823,000
Other current liabilities	92,000	427,000
Total current liabilities	14,051,000	4,970,000
Non-current benefits	703,000	703,000
Long-term debt, net	10,479,000	19,942,000
Deferred income tax liability	987,000	1,018,000
Total liabilities	26,220,000	26,633,000
Partners’ capital
General and limited partners	38,123,000	39,042,000
Accumulated other comprehensive loss	(316,000)	(321,000)
Total partners’ capital	37,807,000	38,721,000
Total liabilities and partners’ capital	$ 64,027,000	$ 65,354,000

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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) $ in Thousands, shares in Millions		3 Months Ended			9 Months Ended
		Sep. 30, 2016		Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Orchards [Member]
Revenues		$ 727	[1]	$ 1,129	$ 3,398	$ 4,829
Operating income (loss)		(518)		(2)	1,541	1,492
Branded Products [Member]
Revenues	[2]	6,839		3,557	16,022	8,419
Operating income (loss)		(150)		8	(1,558)	(705)
Revenues		7,566	[1]	4,686	19,420	13,248
Cost of orchards revenue		774		955	2,655	3,484
Cost of branded product sales		5,000		2,330	12,108	5,983
Total cost of revenues		5,774		3,285	14,763	9,467
Gross profit		1,792		1,401	4,657	3,781
General and administrative expenses		720		901	2,084	2,232
Selling expenses		947		515	3,069	1,487
Operating income (loss)		125		(15)	(496)	62
Net loss on sale of property and equipment					(4)	(1)
Other income (expense)		189		92	374	(188)
Interest expense		(313)		(270)	(898)	(568)
Income (loss) before income taxes		1		(193)	(1,024)	(695)
Income tax expense		18		23	119	108
Net loss		(17)		(216)	(1,143)	(803)
Other comprehensive loss, net of tax
Pension costs		1		2	5	5
Other comprehensive income, net of tax		1		2	5	5
Comprehensive loss		$ (16)		$ (214)	$ (1,138)	$ (798)
Net loss per Class A Unit (in dollars per share)		$ 0		$ (0.02)	$ (0.10)	$ (0.07)
Cash distributions per Class A Unit (in dollars per share)
Weighted average Class A Units outstanding (in shares)		11.1		11.1	11.1	11.1

[1] All revenues are from sources within the United States of America, Canada and Asia.

[2] Branded products revenue is reported net of slotting fees, trade discounts and promotional allowances.

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Condensed Consolidated Statements of Partners' Capital (Unaudited) - USD ($) $ in Thousands	General and Limited Partners [Member]	General Partner [Member]	AOCI Attributable to Parent [Member]	General and Limited Partners [Member]	Total
Partners' capital at Dec. 31, 2014	$ 41,234		$ (186)		$ 41,048
Partners’ capital at beginning of period:
Proceeds from sale of general partner interest
General and limited partners	(803)				(803)
Change in pension and severance obligations			5		5
Partners' capital at Sep. 30, 2015			(181)	$ 40,431	40,250
Partners' capital at Jun. 30, 2015	40,647		(183)		40,464
Partners’ capital at beginning of period:
Proceeds from sale of general partner interest
General and limited partners	(216)				(216)
Change in pension and severance obligations			2		2
Partners' capital at Sep. 30, 2015			(181)	40,431	40,250
Partners' capital at Dec. 31, 2015	39,042		(321)		38,721
Partners’ capital at beginning of period:
Proceeds from sale of general partner interest		224			224
General and limited partners	(1,143)				(1,143)
Change in pension and severance obligations			5		5
Partners' capital at Sep. 30, 2016			(316)	38,123	37,807
Partners' capital at Jun. 30, 2016	38,140		(317)		37,823
Partners’ capital at beginning of period:
Proceeds from sale of general partner interest
General and limited partners	$ (17)				(17)
Change in pension and severance obligations			1		1
Partners' capital at Sep. 30, 2016			$ (316)	$ 38,123	$ 37,807

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash flows from operating activities:
Net loss	$ (1,143)	$ (803)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,307	2,022
Amortization of debt issance costs	31	39
Net loss on sale of property and equipment	4	1
Pension expense	6	5
Decrease in accounts receivable	398	139
Decrease (increase) in inventory	2,818	(1,577)
Increase in deferred farm cost	(3,175)	(2,239)
(Increase) decrease in other current assets	(535)	155
(Decrease) Increase in accounts payable	(573)	339
Increase (decrease) in accrued payroll and benefits	147	(82)
(Decrease) Increase in accrued expenses & other current liabilities	(335)	402
Total adjustments	1,093	(796)
Net cash used in operating activities	(50)	(1,599)
Cash flows from investing activities:
Capital expenditures	(167)	(11,130)
Net cash used in investing activities	(167)	(11,130)
Cash flows from financing activities:
Debt issuance costs		(296)
Proceeds from sale of general partner interest	224
Proceeds from line of credit	4,000	2,810
Repayment of line of credit	(2,000)	(1,810)
Proceeds from long-term debt		13,378
Repayment of long-term debt	(1,652)	(1,069)
Net cash provided by financing activities	572	13,013
Net increase in cash	355	284
Cash and cash equivalents at beginning of period	404	786
Cash and cash equivalents at end of period	$ 759	$ 1,070

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Note 1 - Basis of Presentation

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Basis of Accounting [Text Block]

(1)

     

BASIS OF PRESENTATION

Royal Hawaiian Orchards, L.P. (the “Partnership”) is a master limited partnership, organized under the laws of the State of Delaware in 1986. The accompanying unaudited condensed consolidated financial statements of the Partnership and its subsidiaries Royal Hawaiian Resources, Inc. (“RHR”) (through June 30, 2016), Royal Hawaiian Services, LLC (“RHS”) and Royal Hawaiian Macadamia Nut, Inc. (“Royal”), include all adjustments (consisting only of those of a normal recurring nature) that, in the opinion of management, are necessary to present fairly their financial position as of September 30, 2016, and December 31, 2015, and the results of operations, changes in partners’ capital and cash flows for the three and nine months ended September 30, 2016 and 2015. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results expected for the full year or for any future period.

The December 31, 2015 condensed consolidated balance sheet data in this report was derived from audited consolidated financial statements contained in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Annual Report”), but does not include all disclosures required by accounting principles generally accepted in the United States of America. The interim consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements filed with the Securities and Exchange Commission (“SEC”) in the 2015 Annual Report.

The Partnership’s business has historically been highly seasonal, reflecting the general pattern of peak harvest and sales of macadamia nuts during the fourth quarter. Commencing in January 2015, the Partnership began inventorying more than 70% of its harvest for use in its branded products segment. The inventoried nuts are sold throughout the year which has reduced seasonality of revenues but increased the inventory balances and costs associated with maintaining such balances.

Management is closely monitoring the Partnership’s cash on hand, cash flow provided by operating activities and borrowings under the Partnership’s revolving credit facility and the Partnership’s ability to fund the Partnership’s operating expenses, fund the sales growth of the branded products’ segment and make required debt service payments for the next 12 months, including payment of the 2015 Bridge Loan (as defined below in

Note 9 – Debt

) in 2017. To the extent that additional cash is needed, management may pursue sale of bulk kernel inventory and explore additional credit facilities, amendments to existing credit facilities, or equity offerings. There can be no assurance that the Partnership will be successful in generating cash from operations or obtaining debt or equity on terms that are acceptable to the Partnership.

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Note 2 - Consolidation

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

(2)

     

CONSOLIDATION

The consolidated financial statements include the accounts of the Partnership and its subsidiaries. All significant intercompany balances and transactions have been eliminated. On June 30, 2016, the Partnership sold all of the shares of RHR, its general partner, in a related party transaction.

See Note 15 – Sale of RHR

below for details of the sale.

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Note 3 - New Accounting Standards

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Description of New Accounting Pronouncements Not yet Adopted [Text Block]

(3)

     

NEW ACCOUNTING STANDARDS

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases.” The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.

The Partnership is currently assessing the provisions of the guidance and the impact of the adoption on its consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” ASU No. 2015-17 requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet. ASU 2015-17 is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. The Partnership believes that adoption will not have a material impact on its consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory, which changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. ASU 2015-11 defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for annual and interim periods beginning after December 15, 2016. The Partnership is currently assessing the provisions of the guidance and the impact of the adoption on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” ASU 2015-03 amends current presentation guidance by requiring the debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Prior to the issuance of ASU 2015-03, debt issuance costs were required to be presented as an asset in the balance sheet. The standard requires retrospective application and represents a change in accounting principle. The Partnership adopted the provisions of ASU 2015-03 in the first quarter of 2016, and prior period amounts have been reclassified to conform to the current period presentation. Net debt issuance costs of $220,000 and $199,000 were reclassified in the Consolidated Balance Sheet and segment disclosures from other non-current assets to long-term debt for the prior periods ending September 30, 2015 and December 31, 2015, respectively.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements-Going Concern.” This guidance requires management to evaluate whether there are conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern. If such conditions or events exist, disclosures are required that enable users of the financial statements to understand the nature of the conditions or events, management’s evaluation of the circumstances and management’s plans to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. ASU No. 2014-15 is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. The Partnership is currently assessing the provisions of the guidance and the impact of the adoption on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The new guidance provides new criteria for recognizing revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the Partnership expects to be entitled in exchange for those goods or services. The new guidance requires expanded disclosures to provide greater insight into both revenue that has been recognized and revenue that is expected to be recognized in the future from existing contracts. Quantitative and qualitative information will be provided about the significant judgments and changes in those judgments that management made to determine the revenue which is recorded. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.” This update deferred the effective date for implementation of this standard by one year. ASU 2014-09 is now effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted only for annual reporting periods beginning after December 15, 2016, including interim periods within that period. The Partnership is currently assessing the provisions of the guidance and the impact of the adoption on its consolidated financial statements.

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Note 4 - Segment Information

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

(4)

     

SEGMENT INFORMATION

The Partnership’s two reportable segments, orchards and branded products, are distinct business enterprises that have different products and services, customers, employees and regulatory environments. Both segments are organized on the basis of revenues and assets. The orchards segment derives its revenues from the sale of Wet-In-Shell macadamia nuts, sale of Dry-In-Shell macadamia nuts, sale of macadamia nut kernel to Royal, revenues from contract farming, and orchard lease income. The branded products segment derives its revenues from the sale of branded macadamia nut products and bulk macadamia nut kernel by Royal.

Management evaluates the performance of each segment on the basis of operating income and revenue growth. The Partnership accounts for intersegment sales and transfers at a predetermined, fixed price based on cost plus a mark-up, and such transactions are eliminated in consolidation. The following tables summarize each reportable segment’s revenues, operating income or loss, assets and other information as of and for the three and nine months ended September 30, 2016 and 2015. Due to the seasonality of crop patterns and the timing of nut purchase contract fulfillment, interim results are not necessarily indicative of annual performance.

	Three Months Ended September 30, 2016
	(in thousands)
	Orchards			Branded Products			Eliminations/ Reconciliation			Total
Revenues (1)
External customers	$	727		$	6,839	(2)	$	-		$	7,566
Intersegment revenue		389			-			(389	)		-
Total revenue	$	1,116		$	6,839		$	(389	)	$	7,566
Operating income (loss)	$	(518	)	$	(150	)	$	793		$	125
Depreciation and amortization	$	745		$	23		$	-		$	768
Capital expenditures	$	31		$	-		$	-		$	31
Segment assets	$	73,439		$	8,257		$	(17,669	)	$	64,027

	Three Months Ended September 30, 2015
	(in thousands)
	Orchards			Branded Products			Eliminations/ Reconciliation			Total
Revenues (1)
External customers	$	1,129		$	3,557	(2)	$	-		$	4,686
Intersegment revenue		2,252			-			(2,252	)		-
Total revenue	$	3,381		$	3,557		$	(2,252	)	$	4,686
Operating income (loss)	$	(2	)	$	8		$	(21	)	$	(15	)
Depreciation and amortization	$	725		$	9		$	-		$	734
Capital expenditures	$	1,422		$	21		$	-		$	1,443
Segment assets	$	69,471		$	4,642		$	(10,575	)	$	63,538

	Nine Months Ended September 30, 2016
	(in thousands)
	Orchards		Branded Products			Eliminations/ Reconciliation			Total
Revenues (1)
External customers	$	3,398	$	16,022	(2)	$	-		$	19,420
Intersegment revenue		10,658		-			(10,658	)		-
Total revenue	$	14,056	$	16,022		$	(10,658	)	$	19,420
Operating income (loss)	$	1,541	$	(1,558	)	$	(479	)	$	(496	)
Depreciation and amortization	$	2,239	$	68		$	-		$	2,307
Capital expenditures	$	108	$	59		$	-		$	167
Segment assets	$	73,439	$	8,257		$	(17,669	)	$	64,027

	Nine Months Ended September 30, 2015
	(in thousands)
	Orchards		Branded Products			Eliminations/ Reconciliation			Total
Revenues (1)
External customers	$	4,829	$	8,419	(2)	$	-		$	13,248
Intersegment revenue		8,428		-			(8,428	)		-
Total revenue	$	13,257	$	8,419		$	(8,428	)	$	13,248
Operating income (loss)	$	1,492	$	(705	)	$	(725	)	$	62
Depreciation and amortization	$	1,975	$	47		$	-		$	2,022
Capital expenditures	$	11,053	$	77		$	-		$	11,130
Segment assets	$	69,471	$	4,642		$	(10,575	)	$	63,538

(1) All revenues are from sources within the United States of America, Canada and Asia.

(2) Branded products revenue is reported net of slotting fees, trade discounts and promotional allowances.

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Note 5 - Inventories

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Inventory Disclosure [Text Block]

(5)     INVENTORIES

Inventories consisted of the following (in thousands):

	September 30, 2016								December 31, 2015
	Orchard		Branded Product			Total			Orchard		Branded Product			Total
Nut-in-shell	$	483	$	-		$	483		$	139	$	-		$	139
Dry-in-shell		1,743		-			1,743			3,685		-			3,685
Macadamia nut kernel		113		2,592			2,705			-		5,360			5,360
Finished goods		-		1,878			1,878			-		771			771
Farming supplies		286		-			286			287		-			287
Packaging, supplies and ingredients		-		673			673			-		394			394
Allowance for shrink and obsolescence		-		(17	)		(17	)		-		(67	)		(67	)
	$	2,625	$	5,126		$	7,751		$	4,111	$	6,458		$	10,569

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Note 6 - Land, Orchards, and Equipment

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

(6)     LAND, ORCHARDS AND EQUIPMENT

Land, orchards and equipment, stated at cost, consisted of the following (in thousands):

	September 30,			December 31,
	2016			2015
Land	$	10,745		$	10,745
Improvements		2,016			2,016
Machinery and equipment		11,802			8,663
Irrigation well and equipment		2,592			2,592
Producing orchards		76,073			76,073
Construction work-in-progress		40			3,326
Land, orchards and equipment (gross)		103,268			103,415
Less accumulated depreciation and amortization		(54,050	)		(52,162	)
Land, orchards and equipment (net)	$	49,218		$	51,253

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Note 7 - Deferred Farming Costs

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Deferred Costs Capitalized And Inventory Disclosure [Text Block]

(7)     DEFERRED FARMING COSTS

Orchard costs (e.g., irrigation, fertilizer, pruning and depreciation) related to nuts sold under nut purchase contracts and services provided under farming contracts were expensed to cost of revenues based on management’s estimate of the costs expected to be incurred to produce macadamia nuts sold during the interim reporting period, with the difference between costs incurred-to-date and costs expensed-to-date reported on the consolidated balance sheet as deferred farming costs. Deferred farming costs historically accumulate during the first and second quarter of the year and are expensed or added to inventory over the remainder of the year. For the first nine months of 2016, the Partnership recorded a deferred farming cost of $3,175,000. At December 31, 2015, all farming costs not expensed to cost of goods sold were included in inventory.

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Note 8 - Income Taxes

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(8)     INCOME TAXES

The Partnership is subject to a gross income tax as a result of its election to continue to be taxed as a partnership rather than as a corporation, as allowed by the Taxpayer Relief Act of 1997. This tax is calculated at 3.5% on partnership gross profit.

Royal is subject to taxation as a C corporation at the current federal tax rate of 34% and a blended state tax rate of 6.9% on the corporation’s taxable income (loss). As a result of the cumulative tax losses of Royal, the balance of the Partnership’s deferred tax asset at September 30, 2016 was approximately $3.8 million, against which the Partnership has recorded a valuation allowance equal to 100% of the deferred tax asset due to the uncertainty regarding future realization of Royal’s net operating loss carry-forwards.

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Note 9 - Debt

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Debt Disclosure [Text Block]

(9)     DEBT

As of the indicated dates, the Partnership had the following long-term debt outstanding (in thousands):

	September 30,			December 31,
	2016			2015
Long-Term Debt
Revolving Credit Facility (due 2017)	$	7,000		$	5,000
2015 Bridge Loan (due 2017) (1)		2,835			2,835
2010 Term Loan (due 2020)		3,938			4,725
2015 6-Year Term Loan (due 2021)		3,937			4,594
2015 20-Year Term Loan (due 2035)		4,936			5,133
Other		9			20
Total principal amount of long-term debt		22,655			22,307
Less: unamortized debt issuance costs		(168	)		(199	)
Total long-term debt, net of unamortized loan fees		22,487			22,108
Less: current portion of long-term debt, net		(12,008	)		(2,166	)
Long-Term Debt, net of associated unamortized loan fees	$	10,479		$	19,942

___________________

(1) Maturity date for the 2015 Bridge Loan may be earlier than 2017. See description of the 2015 Bridge Loan below.

The following table summarizes the Partnership’s principal maturities of its debt (in thousands):

	Payments Due by Period
	Total			2016 (1)		2017		2018		2019		2020	Remaining
Debt	$	22,655	$	324	$	12,029	$	2,188	$	2,188	$	1,751	$	4,175

_________________________

(1)   For remainder of 2016.

Credit Agreement with AgCredit PCA

Pursuant to the Fourth Amended and Restated Credit Agreement, dated July 15, 2010 (as amended, the “Prior PCA Credit Agreement”), by and between the Partnership and the Partnership’s wholly owned subsidiary Royal, as the borrowers, and American AgCredit, PCA, as lender (“AgCredit PCA”), the Partnership had a revolving credit facility for $5 million (the “Revolving Credit Facility”) and an existing term loan of $10.5 million (the “2010 Term Loan”). The Prior PCA Credit Agreement was amended on various dates in 2011 through February 27, 2015, to extend the maturity date of the Revolving Credit Facility.

On March 27, 2015, the Partnership and each of its wholly owned subsidiaries RHR, Royal and RHS, as the borrowers (the “Borrowers”), and AgCredit PCA, as lender and as agent for such other persons who may be added as lenders from time to time, entered into an Amended and Restated Credit Agreement that amended and restated the terms of the Partnership’s outstanding borrowings with AgCredit PCA (as amended by the First PCA Credit Agreement Amendment, the Second PCA Credit Agreement Amendment, the Third PCA Credit Agreement Amendment, the Fourth PCA Credit Agreement Amendment, and the Fifth PCA Credit Agreement Amendment (each defined below), the “Amended PCA Credit Agreement”). The Amended PCA Credit Agreement (i) increased the amount of the Revolving Credit Facility from $5 million to $9 million and extended its maturity from March 31, 2015, to March 27, 2017; (ii) reduced the interest rate of the 2010 Term Loan; and (iii) added a new term loan of $5.25 million that matures on March 27, 2021 (the “2015 6-Year Term Loan”).

Pursuant to the Amended PCA Credit Agreement, the Revolving Credit Facility, the 2010 Term Loan, the 2015 6-Year Term Loan and the 2015 Bridge Loan (as defined below) are collateralized by all of the personal and real property assets of the Borrowers other than RHR. The Amended PCA Credit Agreement contains certain restrictions associated with partner distributions, further indebtedness, sales of assets, and maintenance of certain financial covenants.

In connection with the June 2015 acquisition by the Partnership of 736 acres of land, including improvements, 641 acres of macadamia nut trees, and windbreak trees, (the “Becker Property Acquisition”), the Borrowers entered into the First Amendment to Amended and Restated Credit Agreement with AgCredit PCA, effective as of June 15, 2015 (the “First PCA Credit Agreement Amendment”). On June 29, 2015, the Borrowers entered into a Second Amendment to Amended and Restated Credit Agreement with AgCredit PCA (the “Second PCA Credit Agreement Amendment”) to delete a financial covenant for the quarter ended June 30, 2015. On September 22, 2015, the Borrowers entered into a Third Amendment to Amended and Restated Credit Agreement with AgCredit PCA (the “Third PCA Credit Agreement Amendment”) to delete a financial covenant for the quarter ended September 30, 2015.

On March 11, 2016, the Borrowers executed the Fourth Amendment to Amended and Restated Credit Agreement and Waiver (the “Fourth PCA Credit Agreement Amendment”) with AgCredit PCA to (i) extend the maturity date of the 2015 Bridge Loan from March 15, 2016 to January 15, 2017; (ii) increase the interest rate on the 2015 Bridge Loan as of September 1, 2016 from the Base Rate (as defined below under 2015 Bride Loan) plus 0.75% to the Base Rate plus 1.00%; (iii) reduce the minimum Consolidated EBITDA (as defined in the Amended PCA Credit Agreement) (A) for the quarter ending March 31, 2016 from $3,500,000 to $1,000,000, (B) for the quarter ending June 30, 2016 from $4,000,000 to $1,250,000, (C) for the quarter ending September 30, 2016 from $5,000,000 to $2,000,000, and (D) for the quarter ending December 31, 2016 from $5,000,000 to $4,000,000, and (iv) waive the Partnership’s non-compliance with the Consolidated EBITDA covenant for the quarter ended December 31, 2015. For the quarter ending March 31, 2017, and all future quarters, the minimum Consolidated EBITDA requirement remains at $5,000,000.

In connection with the sale of RHR, on June 30, 2016, the Borrowers executed the Fifth Amendment to Amended and Restated Credit Agreement and Consent (the “Fifth PCA Credit Agreement Amendment”) with American AgCredit, PCA, to remove RHR as a party to the Loan Documents (as defined in the Amended PCA Credit Agreement) and release RHR from liability under the Loan Documents, other than from such liability as it may have as general partner of the Partnership.

On November 9, 2016, the Borrowers (no longer including RHR) executed a Waiver Agreement with American AgCredit, PCA, pursuant to which American AgCredit, PCA, waived the Partnership’s noncompliance with the Consolidated EBITDA covenant for the quarter ended September 30, 2016.

Revolving Credit Facility.

The Amended PCA Credit Agreement increased the Revolving Credit Facility from $5 million to $9 million and extended the maturity from June 30, 2015, to March 27, 2017. Advances under the Revolving Credit Facility bear interest based on an election made by the Partnership at the time of the advance at either LIBOR rates or at the base rate of the higher of (a) one-half of one percent (0.50%) per annum in excess of the latest Federal Funds Rate (as defined in the Amended PCA Credit Agreement); and (b) the prime rate of interest in effect for such day as published from time to time in

The Wall Street Journal

. The Partnership is required to pay a fee of 0.375% per annum on the daily unused portion of the Revolving Credit Facility. The interest rate on the Revolving Credit Facility at September 30, 2016, was 4.75% per annum.

As of September 30, 2016 and December 31, 2015, the outstanding balance on the Revolving Credit Facility was $7 million and $5 million, respectively.

2010 Term Loan.

The Prior PCA Credit Agreement provided for the 2010 Term Loan of $10.5 million, which matures on July 1, 2020. The Amended PCA Credit Agreement left the 2010 Term Loan in place but reduced the fixed interest rate under the 2010 Term Loan from 6.5% per annum to 6.0% per annum. As of September 30, 2016 and December 31, 2015, the outstanding balance on the 2010 Term Loan was $3.938 million and $4.725 million, respectively.

2015 6-Year Term Loan.

The Amended PCA Credit Agreement provided for the 2015 6-Year Term Loan of $5.25 million, which matures on March 27, 2021. The 2015 6-Year Term Loan bears interest at a fixed rate of 4.01% per annum. The Partnership used the proceeds of the 2015 6-Year Term Loan to replace working capital used to construct Phase 1 of the Partnership’s drying plant and to finance the construction of Phase 2 of its drying plant. As of September 30, 2016 and December 31, 2015, the outstanding balance on the 2015 6-Year Term Loan was $3.937 million and $4.594 million, respectively.

2015 Bridge Loan.

The First PCA Credit Agreement Amendment provided for a bridge loan of $2.835 million (the “2015 Bridge Loan”), which was to mature on the earlier of (a) March 15, 2016, or (b) the date that the Partnership or any of its wholly subsidiaries receives net proceeds from any issuance of equity, subject to certain exceptions. Pursuant to the Fourth PCA Credit Agreement, on March 11, 2016, the fixed maturity date trigger for the 2015 Bridge Loan was extended from March 15, 2016, to January 15, 2017. The 2015 Bridge Loan bears interest at the base rate plus three quarters of one percent (0.75%) where the base rate (“Base Rate”) is the higher of (i) one half of one percent (0.5%) per annum in excess of the latest Federal Funds Rate, and (ii) the prime rate of interest in effect for such day as published from time to time in

The Wall Street Journal

. As of September 1, 2016, the interest rate on the 2015 Bridge Loan increased to the Base Rate plus 1.00%. The 2015 Bridge Loan is collateralized by all personal and real property assets of the Borrowers other than RHR

,

including a second priority interest in the properties acquired in the Becker Property Acquisition. The proceeds of the 2015 Bridge Loan were used by the Partnership on June 16, 2015, for the Becker Property Acquisition. As of both September 30, 2016 and December 31, 2015, the outstanding balance on the 2015 Bridge Loan was $2.835 million.

2015 20-Year Term Loan.

Also in connection with the Becker Property Acquisition, the Partnership entered into a Credit Agreement, effective June 15, 2015 (the “FLCA Credit Agreement”), with American AgCredit, FLCA (“AgCredit FLCA”), providing for a $5.265 million, 20-year term loan (“2015 20-Year Term Loan”). The 2015 20-Year Term Loan bears interest at a fixed rate of 5.29% per annum and requires quarterly payments, with fixed principal reductions, over the term. The 2015 20-Year Term Loan matures on July 1, 2035. On March 11, 2016, the Partnership executed the First Amendment to Credit Agreement and Waiver (the “First FLCA Credit Agreement Amendment”) with AgCredit FLCA. As a result, the maximum allowable Total Indebtedness to Consolidated EBITDA Ratio (as defined in the FLCA Credit Agreement) was increased for the quarter ending December 31, 2016 from (i) 4.0 to 1.0 to (ii) 5.5 to 1.0. In addition, a one-time waiver was granted in connection with the cross-default covenant of the FLCA Credit Agreement relating to the non-compliance with the Consolidated EBITDA covenant in the Amended PCA Credit Agreement described above. The Partnership used the proceeds of the 2015 20-Year Term Loan for the Becker Property Acquisition. The 2015 20-Year Term Loan is secured by a mortgage on the properties acquired in the Becker Property Acquisition. As of September 30, 2016 and December 31, 2015, the outstanding balance on the 2015 20-Year Term Loan was $4.936 million and $5.133, respectively.

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Note 10 - Fair Value Measurements

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Fair Value Disclosures [Text Block]

(10)     FAIR VALUE MEASUREMENTS

The fair value of the Revolving Credit Facility is approximately the carrying value due to the variability of the interest rate and frequency that the interest rate resets on the line of credit.

The estimated fair value of the Partnership’s bridge loan and term loans was determined using a discounted cash flow model with similar terms and remaining maturities to that of the current financial instruments. The Partnership has not considered lender fees in determining the estimated fair value.

The estimated fair values of the Partnership’s financial instruments are as follows (in thousands):

	September 30,				December 31,
	2016				2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt	$	15,655	$	15,960	$	17,307	$	18,023
Revolving credit facility		7,000		7,000		5,000		5,000
	$	22,655	$	22,960	$	22,307	$	23,023

The inputs used in determining the fair value of the bridge and term loans and Revolving Credit Facility are classified as Level 3 within the fair value measurement hierarchy.

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Note 11 - Partners' Capital

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Partners' Capital Notes Disclosure [Text Block]

(11)     PARTNERS’ CAPITAL

Net losses are allocated 1% to the general partner and 99% to the holders of the Class A Units in proportion to the number of Class A Units held.

On June 30, 2016, the partnership sold all of the issued and outstanding shares of capital stock of RHR for $224,000

See Note 15 – Sale of RHR.

As a result, partners’ capital increased by $224,000. Partners’ capital includes the general partner interest plus the Class A limited partners’ interest.

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Note 12 - Pension Plan

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

(12)     PENSION PLAN

The Partnership sponsors a defined benefit pension plan covering employees who are members of a union bargaining unit. The Partnership’s funding policy is to contribute an amount to the plan sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974.

The components of net periodic pension cost consisted of the following (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Service cost	$	16		$	17		$	49		$	51
Interest cost		17			15			50			46
Expected return on plan assets		(16	)		(17	)		(49	)		(51	)
Amortization of net actuarial loss and prior service cost		1			2			5			5
Net periodic pension cost	$	18		$	17		$	55		$	51

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Note 13 - Intermittent Severance Plan

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Postemployment Benefits Disclosure [Text Block]

(13)     INTERMITTENT SEVERANCE PLAN

The Partnership sponsors a defined intermittent severance benefit plan covering employees who are members of a union bargaining unit and not covered by the defined benefit pension plan. Payment of the severance benefit is made when covered employees cease employment with the Partnership under certain terms and conditions as defined in the union bargaining agreement.

The components of net periodic intermittent severance cost consisted of the following (in thousands):

	Intermittent Severance Plan Cost
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Service cost	$	4	$	5	$	12	$	15
Interest Cost		4		3		10		9
Net periodic intermittent severance cost	$	8	$	8	$	22	$	24

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Note 14 - Commitments and Contingencies

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

(14) COMMITMENTS AND CONTINGENCIES

The Partnership is involved in various commercial claims, litigation and other legal proceedings that arise in the ordinary course of its business. The Partnership assesses these claims in an effort to determine the degree of probability and loss for potential accrual in its financial statements. In accordance with ASC 450, “Contingencies,” an accrual is recorded for a loss contingency when its occurrence is probable and damages are reasonably estimable based on the anticipated most likely outcome or the minimum amount within a range of possible outcomes. Because legal proceedings are inherently unpredictable, and unfavorable resolutions can occur, assessing contingencies is highly subjective and requires judgments about uncertain future events. When evaluating contingencies, the Partnership may be unable to provide a meaningful estimate of loss or recovery due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, the ongoing discovery and/or development of information important to the matter. The Partnership’s material litigation loss contingency is discussed below. The Partnership is unable to estimate reasonably possible losses (in excess of recorded accruals, if any) for this contingency for the reasons set forth below.

Edmund C. Olson, as Trustee of The Edmund C. Olson Trust No. 2 vs. Royal Hawaiian Orchards, L.P.

On January 22, 2015, Edmund C. Olson, as trustee of The Edmund C. Olson Trust No. 2 (the “Olson Trust”), filed a complaint seeking a declaratory judgment that the Partnership has breached the terms of the leases for the Green Shoe I Orchard and the Green Shoe II Orchard, on which 609 tree acres of macadamia nut orchards are situated. The Olson Trust claims that the Partnership failed to exercise “good husbandry” and permitted waste of the orchards through its horticultural practices, and, therefore, the Olson Trust is entitled to terminate the leases and reenter and expel the Partnership from the orchards. Pursuant to the lease agreements, the lease terms of the Green Shoe I Lease and Green Shoe II Lease expire in 2019 and 2034, respectively. In addition, the Olson Trust seeks termination damages in an amount to be proven at trial. On or about February 17, 2015, the Partnership filed an answer and a cross-complaint against the Olson Trust, denying the claims of the Olson Trust and asserting claims of the Partnership for breach of contract, unfair and deceptive competition, and injunctive relief, among others. The Partnership believes the claims of the Olson Trust are without merit. The Olson Trust has denied the claims asserted in the Partnership’s cross-claim. On September 17, 2015, the parties signed a Joint Stipulation to Engage in Binding Mediation of Proceedings and to Stay Court Litigation Pending Binding Mediation (the “Joint Stipulation”) to stay the court proceedings pending the issuance of a written report by a panel of three farming experts determining whether the Partnership has been practicing “good husbandry” or “strip or waste” at each orchard. The panel’s report is to include recommendations of any practices or operational changes that should be implemented to bring the leases into compliance with “good husbandry” and to prevent “strip or waste.” The parties have agreed to timely perform all recommendations in the panel’s report. The parties have further agreed that the report shall be enforceable in the state courts of Hawaii to the same extent as an arbitration award. In January 2016, the parties completed their selection of the panel of experts. The panel’s report was due in October 2016. However, on October 4, 2016, the parties filed a Joint Stipulation to Stay Binding Mediation Proceedings with the court mutually agreeing to stay the binding mediation proceedings for forty-five days, or such additional period as agreed upon by the parties in writing, in order to work on a settlement. Either party may terminate the stay upon ten days’ written notice after October 24, 2016, the date on which the parties completed their exchange of initial settlement offers. If the parties are unable to conclude a definitive settlement agreement, the panel of experts will resume preparing its report.

No amounts have been accrued in the accompanying financial statements due to the uncertainty of (i) the ability of parties to reach a settlement and the terms of any such settlement, and (ii) the conclusions to be reached by the panel in the final report and the costs involved to implement the panel’s recommendations.

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Note 15 - Sale of RHR

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

(1

5

)     

SALE OF RHR

On June 30, 2016, the Partnership entered into a definitive Stock Purchase Agreement (the “Agreement”) with Crescent River Agriculture LLC, a Wyoming limited liability company (“Crescent River”) and a related party, pursuant to which the Partnership sold all of the issued and outstanding shares of capital stock of RHR to Crescent River for $224,000.

The only asset of RHR consists of a one percent general partnership interest in the Partnership. The general partnership interest is unregistered and non-transferrable. Pursuant to the terms of the Amended and Restated Agreement of Limited Partnership, dated as of October 1, 2012, as amended November 1, 2013 (the “Partnership Agreement”), RHR is also entitled to an annual management fee equal to two percent of Operating Cash Flow (as defined by the Partnership Agreement) and an incentive fee if net cash flow of the partnership exceeds certain levels defined in the Partnership Agreement. The management fee has been waived by RHR since it became a wholly-owned subsidiary of the Partnership in 2005. The incentive fee has not been earned by RHR for at least 15 years. As part of the transaction, RHR agreed to waive both the management fee and the incentive fee for fiscal 2016, 2017, and 2018. After 2018, RHR will be eligible to earn the management fee and the incentive fee. Pursuant to the Partnership Agreement, the Partnership will still be required to reimburse RHR for expenses incurred in managing the Partnership.

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

(3)

     

NEW ACCOUNTING STANDARDS

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases.” The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.

The Partnership is currently assessing the provisions of the guidance and the impact of the adoption on its consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” ASU No. 2015-17 requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet. ASU 2015-17 is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. The Partnership believes that adoption will not have a material impact on its consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory, which changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. ASU 2015-11 defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for annual and interim periods beginning after December 15, 2016. The Partnership is currently assessing the provisions of the guidance and the impact of the adoption on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” ASU 2015-03 amends current presentation guidance by requiring the debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Prior to the issuance of ASU 2015-03, debt issuance costs were required to be presented as an asset in the balance sheet. The standard requires retrospective application and represents a change in accounting principle. The Partnership adopted the provisions of ASU 2015-03 in the first quarter of 2016, and prior period amounts have been reclassified to conform to the current period presentation. Net debt issuance costs of $220,000 and $199,000 were reclassified in the Consolidated Balance Sheet and segment disclosures from other non-current assets to long-term debt for the prior periods ending September 30, 2015 and December 31, 2015, respectively.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements-Going Concern.” This guidance requires management to evaluate whether there are conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern. If such conditions or events exist, disclosures are required that enable users of the financial statements to understand the nature of the conditions or events, management’s evaluation of the circumstances and management’s plans to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. ASU No. 2014-15 is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. The Partnership is currently assessing the provisions of the guidance and the impact of the adoption on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The new guidance provides new criteria for recognizing revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the Partnership expects to be entitled in exchange for those goods or services. The new guidance requires expanded disclosures to provide greater insight into both revenue that has been recognized and revenue that is expected to be recognized in the future from existing contracts. Quantitative and qualitative information will be provided about the significant judgments and changes in those judgments that management made to determine the revenue which is recorded. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.” This update deferred the effective date for implementation of this standard by one year. ASU 2014-09 is now effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted only for annual reporting periods beginning after December 15, 2016, including interim periods within that period. The Partnership is currently assessing the provisions of the guidance and the impact of the adoption on its consolidated financial statements.

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Note 4 - Segment Information (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three Months Ended September 30, 2016
	(in thousands)
	Orchards			Branded Products			Eliminations/ Reconciliation			Total
Revenues (1)
External customers	$	727		$	6,839	(2)	$	-		$	7,566
Intersegment revenue		389			-			(389	)		-
Total revenue	$	1,116		$	6,839		$	(389	)	$	7,566
Operating income (loss)	$	(518	)	$	(150	)	$	793		$	125
Depreciation and amortization	$	745		$	23		$	-		$	768
Capital expenditures	$	31		$	-		$	-		$	31
Segment assets	$	73,439		$	8,257		$	(17,669	)	$	64,027

	Three Months Ended September 30, 2015
	(in thousands)
	Orchards			Branded Products			Eliminations/ Reconciliation			Total
Revenues (1)
External customers	$	1,129		$	3,557	(2)	$	-		$	4,686
Intersegment revenue		2,252			-			(2,252	)		-
Total revenue	$	3,381		$	3,557		$	(2,252	)	$	4,686
Operating income (loss)	$	(2	)	$	8		$	(21	)	$	(15	)
Depreciation and amortization	$	725		$	9		$	-		$	734
Capital expenditures	$	1,422		$	21		$	-		$	1,443
Segment assets	$	69,471		$	4,642		$	(10,575	)	$	63,538

	Nine Months Ended September 30, 2016
	(in thousands)
	Orchards		Branded Products			Eliminations/ Reconciliation			Total
Revenues (1)
External customers	$	3,398	$	16,022	(2)	$	-		$	19,420
Intersegment revenue		10,658		-			(10,658	)		-
Total revenue	$	14,056	$	16,022		$	(10,658	)	$	19,420
Operating income (loss)	$	1,541	$	(1,558	)	$	(479	)	$	(496	)
Depreciation and amortization	$	2,239	$	68		$	-		$	2,307
Capital expenditures	$	108	$	59		$	-		$	167
Segment assets	$	73,439	$	8,257		$	(17,669	)	$	64,027

	Nine Months Ended September 30, 2015
	(in thousands)
	Orchards		Branded Products			Eliminations/ Reconciliation			Total
Revenues (1)
External customers	$	4,829	$	8,419	(2)	$	-		$	13,248
Intersegment revenue		8,428		-			(8,428	)		-
Total revenue	$	13,257	$	8,419		$	(8,428	)	$	13,248
Operating income (loss)	$	1,492	$	(705	)	$	(725	)	$	62
Depreciation and amortization	$	1,975	$	47		$	-		$	2,022
Capital expenditures	$	11,053	$	77		$	-		$	11,130
Segment assets	$	69,471	$	4,642		$	(10,575	)	$	63,538

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Note 5 - Inventories (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	September 30, 2016								December 31, 2015
	Orchard		Branded Product			Total			Orchard		Branded Product			Total
Nut-in-shell	$	483	$	-		$	483		$	139	$	-		$	139
Dry-in-shell		1,743		-			1,743			3,685		-			3,685
Macadamia nut kernel		113		2,592			2,705			-		5,360			5,360
Finished goods		-		1,878			1,878			-		771			771
Farming supplies		286		-			286			287		-			287
Packaging, supplies and ingredients		-		673			673			-		394			394
Allowance for shrink and obsolescence		-		(17	)		(17	)		-		(67	)		(67	)
	$	2,625	$	5,126		$	7,751		$	4,111	$	6,458		$	10,569

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Note 6 - Land, Orchards, and Equipment (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Property, Plant and Equipment [Table Text Block]

	September 30,			December 31,
	2016			2015
Land	$	10,745		$	10,745
Improvements		2,016			2,016
Machinery and equipment		11,802			8,663
Irrigation well and equipment		2,592			2,592
Producing orchards		76,073			76,073
Construction work-in-progress		40			3,326
Land, orchards and equipment (gross)		103,268			103,415
Less accumulated depreciation and amortization		(54,050	)		(52,162	)
Land, orchards and equipment (net)	$	49,218		$	51,253

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Note 9 - Debt (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Schedule of Debt [Table Text Block]

	September 30,			December 31,
	2016			2015
Long-Term Debt
Revolving Credit Facility (due 2017)	$	7,000		$	5,000
2015 Bridge Loan (due 2017) (1)		2,835			2,835
2010 Term Loan (due 2020)		3,938			4,725
2015 6-Year Term Loan (due 2021)		3,937			4,594
2015 20-Year Term Loan (due 2035)		4,936			5,133
Other		9			20
Total principal amount of long-term debt		22,655			22,307
Less: unamortized debt issuance costs		(168	)		(199	)
Total long-term debt, net of unamortized loan fees		22,487			22,108
Less: current portion of long-term debt, net		(12,008	)		(2,166	)
Long-Term Debt, net of associated unamortized loan fees	$	10,479		$	19,942

Schedule of Maturities of Long-term Debt [Table Text Block]

	Payments Due by Period
	Total			2016 (1)		2017		2018		2019		2020	Remaining
Debt	$	22,655	$	324	$	12,029	$	2,188	$	2,188	$	1,751	$	4,175

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Note 10 - Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Schedule of Carrying Values and Estimated Fair Values of Debt Instruments [Table Text Block]

	September 30,				December 31,
	2016				2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt	$	15,655	$	15,960	$	17,307	$	18,023
Revolving credit facility		7,000		7,000		5,000		5,000
	$	22,655	$	22,960	$	22,307	$	23,023

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Note 12 - Pension Plan (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Schedule of Net Benefit Costs [Table Text Block]

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Service cost	$	16		$	17		$	49		$	51
Interest cost		17			15			50			46
Expected return on plan assets		(16	)		(17	)		(49	)		(51	)
Amortization of net actuarial loss and prior service cost		1			2			5			5
Net periodic pension cost	$	18		$	17		$	55		$	51

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Note 13 - Intermittent Severance Plan (Tables)

9 Months Ended

Sep. 30, 2016

Intermittent Severance Plan [Member]

Notes Tables

Schedule of Net Benefit Costs [Table Text Block]

	Intermittent Severance Plan Cost
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Service cost	$	4	$	5	$	12	$	15
Interest Cost		4		3		10		9
Net periodic intermittent severance cost	$	8	$	8	$	22	$	24

Schedule of Net Benefit Costs [Table Text Block]

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Service cost	$	16		$	17		$	49		$	51
Interest cost		17			15			50			46
Expected return on plan assets		(16	)		(17	)		(49	)		(51	)
Amortization of net actuarial loss and prior service cost		1			2			5			5
Net periodic pension cost	$	18		$	17		$	55		$	51

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Note 3 - New Accounting Standards (Details Textual) - Reclassification From Other Non-current Assets to Non-current Portion of Long-term Debt [Member] - December 31, 2015 [Member]	9 Months Ended
	Sep. 30, 2016 USD ($)
Prior Period Reclassification Adjustment	$ 220,000
Current Period Reclassification Adjustment	$ 199,000

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Note 4 - Segment Information (Details Textual)	6 Months Ended
	Jun. 30, 2016
Number of Reportable Segments	2

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Note 4 - Segment Information - Reportable Segments (Details) - USD ($) $ in Thousands		3 Months Ended			9 Months Ended
		Sep. 30, 2016		Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Orchards [Member] | Intersegment Eliminations [Member]
Revenues(1)
Revenues		$ 389		$ 2,252	$ 10,658	$ 8,428
Orchards [Member] | Operating Segments [Member]
Revenues(1)
Revenues		1,116		3,381	14,056	13,257
Orchards [Member]
Revenues(1)
Revenues		727	[1]	1,129	3,398	4,829
Operating income (loss)		(518)		(2)	1,541	1,492
Depreciation and amortization		745		725	2,239	1,975
Capital expenditures		31		1,422	108	11,053
Segment assets		73,439		69,471	73,439	69,471
Branded Products [Member] | Intersegment Eliminations [Member]
Revenues(1)
Revenues
Branded Products [Member] | Operating Segments [Member]
Revenues(1)
Revenues		6,839		3,557	16,022	8,419
Branded Products [Member]
Revenues(1)
Revenues	[2]	6,839		3,557	16,022	8,419
Operating income (loss)		(150)		8	(1,558)	(705)
Depreciation and amortization		23		9	68	47
Capital expenditures				21	59	77
Segment assets		8,257		4,642	8,257	4,642
Consolidation Reconciliation [Member] | Intersegment Eliminations [Member]
Revenues(1)
Revenues		(389)		(2,252)	(10,658)	(8,428)
Consolidation Reconciliation [Member] | Operating Segments [Member]
Revenues(1)
Revenues		(389)		(2,252)	(10,658)	(8,428)
Consolidation Reconciliation [Member]
Revenues(1)
Revenues			[1]
Operating income (loss)		793		(21)	(479)	(725)
Depreciation and amortization
Capital expenditures
Segment assets		(17,669)		(10,575)	(17,669)	(10,575)
Intersegment Eliminations [Member]
Revenues(1)
Revenues
Operating Segments [Member]
Revenues(1)
Revenues		7,566		4,686	19,420	13,248
Revenues		7,566	[1]	4,686	19,420	13,248
Operating income (loss)		125		(15)	(496)	62
Depreciation and amortization		768		734	2,307	2,022
Capital expenditures		31		1,443	167	11,130
Segment assets		$ 64,027		$ 63,538	$ 64,027	$ 63,538	$ 65,354

[1] All revenues are from sources within the United States of America, Canada and Asia.

[2] Branded products revenue is reported net of slotting fees, trade discounts and promotional allowances.

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Note 5 - Inventories - Summary of Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Nut In Shell [Member] | Orchards [Member]
Nut-in-shell	$ 483	$ 139
Nut In Shell [Member] | Branded Products [Member]
Nut-in-shell
Nut In Shell [Member]
Nut-in-shell	483	139
Dry In Shell [Member] | Orchards [Member]
Nut-in-shell	1,743	3,685
Dry In Shell [Member] | Branded Products [Member]
Nut-in-shell
Dry In Shell [Member]
Nut-in-shell	1,743	3,685
Orchards [Member]
Macadamia nut kernel	113
Finished goods
Farming supplies	286	287
Packaging, supplies and ingredients
Allowance for shrink and obsolescence
	2,625	4,111
Branded Products [Member]
Macadamia nut kernel	2,592	5,360
Finished goods	1,878	771
Farming supplies
Packaging, supplies and ingredients	673	394
Allowance for shrink and obsolescence	(17)	(67)
	5,126	6,458
Macadamia nut kernel	2,705	5,360
Finished goods	1,878	771
Farming supplies	286	287
Packaging, supplies and ingredients	673	394
Allowance for shrink and obsolescence	(17)	(67)
	$ 7,751	$ 10,569

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Note 6 - Land, Orchards, and Equipment - Land, Orchards, and Equipment, Stated at Cost (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Land [Member]
Land, orchards and equipment, gross	$ 10,745	$ 10,745
Land Improvements [Member]
Land, orchards and equipment, gross	2,016	2,016
Machinery and Equipment [Member]
Land, orchards and equipment, gross	11,802	8,663
Irrigation Well And Equipment [Member]
Land, orchards and equipment, gross	2,592	2,592
Producing Orchards [Member]
Land, orchards and equipment, gross	76,073	76,073
Construction in Progress [Member]
Land, orchards and equipment, gross	40	3,326
Land, orchards and equipment, gross	103,268	103,415
Less accumulated depreciation and amortization	(54,050)	(52,162)
Land, orchards and equipment (net)	$ 49,218	$ 51,253

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Note 7 - Deferred Farming Costs (Details Textual) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Deferred Costs, Current	$ 3,175,000

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Note 8 - Income Taxes (Details Textual) $ in Millions	9 Months Ended
	Sep. 30, 2016 USD ($)
Royal Hawaiian Macadamia Nut Inc [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	34.00%
Effective Income Tax Rate Reconciliation, State and Local Income Taxes, Percent	6.90%
Deferred Tax Assets, Gross	$ 3.8
Valuation Allowance As Percentage Of Deferred Tax Asset	100.00%
Gross Income Tax Rate For Partnership	3.50%

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Note 9 - Debt (Details Textual)					8 Months Ended	9 Months Ended
		Sep. 01, 2016	Mar. 11, 2016 USD ($)	Jun. 15, 2015 USD ($) a	Aug. 31, 2016	Sep. 30, 2016 USD ($)	Mar. 31, 2016	Dec. 31, 2015 USD ($)	Jun. 29, 2015	Mar. 31, 2015	Mar. 27, 2015 USD ($)	Jul. 15, 2010 USD ($)
AgCredit [Member] | Bridge Loan [Member] | Base Rate [Member]
Debt Instrument, Basis Spread on Variable Rate				0.75%
Percentage In Excess Of Federal Funds Rate				0.50%
Debt Instrument, Interest Rate, Increase (Decrease)		1.00%
AgCredit [Member] | Bridge Loan [Member]
Long-term Debt, Gross				$ 2,835,000		$ 2,835,000		$ 2,835,000
American Ag Credit [Member] | The 2010 Term Loan [Member]
Long-term Debt, Gross												$ 10,500,000
American Ag Credit [Member] | The 2015 6-year Term Loan [Member] | Second Term Loan [Member]
Long-term Debt, Gross											$ 5,250,000
Debt Instrument, Interest Rate, Stated Percentage							4.01%
Long-term Debt						$ 3,937,000		4,594,000
American Ag Credit [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity												5,000,000
Percentage In Excess Of Federal Funds Rate						0.50%
Debt Instrument, Interest Rate, Stated Percentage									6.00%	6.50%
American AgCredit, FLCA [Member] | The 2015 20-Year Term Loan [Member]
Long-term Debt, Gross											$ 9,000,000	$ 5,000,000
Debt Instrument, Interest Rate, Stated Percentage				5.29%
Long-term Debt				$ 5,265,000
American AgCredit, FLCA [Member] | For the Quarter Ending December 31, 2016 [Member]
Minimum Consolidated EBITDA Ratio Required by Credit Agreement			5.5			4
American AgCredit, PCA [Member] | 2015 Bridge Loan [Member] | Base Rate [Member]
Debt Instrument, Basis Spread on Variable Rate		1.00%			0.75%
American AgCredit, PCA [Member] | For the Quarter Ending March 31, 2016 [Member]
Minimum Consolidated EBITDA Required by Credit Agreement			$ 1,000,000			$ 3,500,000
American AgCredit, PCA [Member] | For the Quarter Ending June 30, 2016 [Member]
Minimum Consolidated EBITDA Required by Credit Agreement			1,250,000			4,000,000
American AgCredit, PCA [Member] | For the Quarter Ending September 30, 2016 [Member]
Minimum Consolidated EBITDA Required by Credit Agreement			2,000,000			5,000,000
American AgCredit, PCA [Member] | For the Quarter Ending December 31, 2016 [Member]
Minimum Consolidated EBITDA Required by Credit Agreement			4,000,000			5,000,000
American AgCredit, PCA [Member] | For the Quarter Ending March 31, 2017, and All Future Quarters [Member]
Minimum Consolidated EBITDA Required by Credit Agreement			$ 5,000,000
Bridge Loan [Member]
Long-term Debt, Gross	[1]					2,835,000		2,835,000
The 2010 Term Loan [Member]
Long-term Debt, Gross						3,938,000		4,725,000
Long-term Debt						3,938,000		4,725,000
The 2015 20-Year Term Loan [Member]
Long-term Debt, Gross						4,936,000		5,133,000
The 2015 6-year Term Loan [Member]
Long-term Debt, Gross						$ 3,937,000		4,594,000
Revolving Credit Facility [Member] | Maximum [Member]
Line of Credit Facility, Commitment Fee Percentage						0.375%
Revolving Credit Facility [Member]
Line of Credit Facility, Interest Rate at Period End						4.75%
Long-term Line of Credit						$ 7,000,000		5,000,000
Geyser Asset Management Inc [Member] | Keaau Hawaii [Member]
Area of Land | a				736
Keaau Hawaii [Member] | Land With Macadamia Nut Trees and Windbreak Trees [Member]
Area of Land | a				641
Long-term Debt, Gross						22,655,000		22,307,000
Long-term Debt						$ 22,655,000		$ 22,307,000

[1] Maturity date for the 2015 Bridge Loan may be earlier than 2017. See description of the 2015 Bridge Loan below.

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Note 9 - Debt - Long-Term Debt Oustanding (Details) - USD ($)		Sep. 30, 2016	Dec. 31, 2015
Line of Credit [Member]
Long-Term Debt		$ 7,000,000	$ 5,000,000
Bridge Loan [Member]
Long-Term Debt	[1]	2,835,000	2,835,000
The 2010 Term Loan [Member]
Long-Term Debt		3,938,000	4,725,000
The 2015 6-year Term Loan [Member]
Long-Term Debt		3,937,000	4,594,000
The 2015 20-Year Term Loan [Member]
Long-Term Debt		4,936,000	5,133,000
BOH [Member]
Long-Term Debt		9,000	20,000
Long-Term Debt		22,655,000	22,307,000
Less: unamortized debt issuance costs		(168,000)	(199,000)
Total long-term debt, net of unamortized loan fees		22,487,000	22,108,000
Current portion of long-term debt		(12,008,000)	(2,166,000)
Long-term debt, net		$ 10,479,000	$ 19,942,000

[1] Maturity date for the 2015 Bridge Loan may be earlier than 2017. See description of the 2015 Bridge Loan below.

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Note 9 - Debt - Maturities of Long-term Debt (Details) $ in Thousands	Sep. 30, 2016 USD ($)
Total	$ 22,655
2016	324	[1]
2017	12,029
2018	2,188
2019	2,188
2020	1,751
Remaining	$ 4,175

[1] For remainder of 2016.

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Note 10 - Fair Value Measurements - Estimated Fair Values of Financial Instrument (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Long-term Debt Excluding Line of Credit [Member]
Long-term Debt	$ 15,655	$ 17,307
Long-term debt	15,960	18,023
Line of Credit [Member]
Long-term Debt	7,000	5,000
Long-term debt	7,000	5,000
Long-term Debt	22,655	22,307
Long-term debt	$ 22,960	$ 23,023

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Note 11 - Partners' Capital (Details Textual) - USD ($)		3 Months Ended		9 Months Ended
	Jun. 30, 2016	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Royal Hawaiian Resources [Member] | General Partner [Member]
Proceeds from Sale of Interest in Partnership Unit	$ 224,000			$ 224,000
General Partner [Member]
Proceeds from Sale of Interest in Partnership Unit				$ 224,000
Net Loss, Percent Allocated to General Partner				1.00%
Net Loss, Percentage Allocated to Class A Unit Holders				99.00%
Proceeds from Sale of Interest in Partnership Unit				$ 224,000
Increase (Decrease) in Partners' Capital				$ 224,000

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Note 12 - Pension Plan - Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Pension Plan [Member]
Service cost	$ 16	$ 17	$ 49	$ 51
Interest cost	17	15	50	46
Expected return on plan assets	(16)	(17)	(49)	(51)
Amortization of net actuarial loss and prior service cost	1	2	5	5
Net periodic pension cost	18	17	55	51
Service cost	4	5	12	15
Interest cost	4	3	10	9
Amortization of net actuarial loss and prior service cost	(1)	(2)	(5)	(5)
Net periodic pension cost	$ 8	$ 8	$ 22	$ 24

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Note 13 - Intermittent Severance Plan - Components of Net Periodic Intermittent Severance Cost (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Service cost	$ 4	$ 5	$ 12	$ 15
Interest Cost	4	3	10	9
Net periodic pension cost	$ 8	$ 8	$ 22	$ 24

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Note 15 - Sale of RHR (Details Textual) - USD ($)		3 Months Ended		9 Months Ended
	Jun. 30, 2016	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Royal Hawaiian Resources [Member] | General Partner [Member]
Proceeds from Sale of Interest in Partnership Unit	$ 224,000			$ 224,000
General Partner [Member]
Proceeds from Sale of Interest in Partnership Unit				224,000
Proceeds from Sale of Interest in Partnership Unit				$ 224,000
Limited Liability Company (LLC) or Limited Partnership (LP), Managing Member or General Partner, Ownership Interest				1.00%
Annual Management Fee Entitlement, Percent of Operating Cash Flow				2.00%
Period Without Incentive Fee Earnings				15 years