<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND THE STATEMENT OF INCOME FILED AS PART OF THE QUARTERLY
REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE BY
REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 915318
<SECURITIES> 860486
<RECEIVABLES> 423391
<ALLOWANCES> 63943
<INVENTORY> 121698
<CURRENT-ASSETS> 3216613
<PP&E> 1551451
<DEPRECIATION> 57771
<TOTAL-ASSETS> 5556894
<CURRENT-LIABILITIES> 454365
<BONDS> 0
0
0
<COMMON> 437428
<OTHER-SE> 4627479
<TOTAL-LIABILITY-AND-EQUITY> 5556894
<SALES> 2195987
<TOTAL-REVENUES> 2195987
<CGS> 1526045
<TOTAL-COSTS> 1526045
<OTHER-EXPENSES> 511569
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 633
<INCOME-PRETAX> 317057
<INCOME-TAX> 117229
<INCOME-CONTINUING> 199828
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 468837
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-2288
(Unaudited)
HOSOI GARDEN MORTUARY, INC.
(Exact name of small business issuer as specified in its charter)
State of Hawaii No. 99-0088064
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 North Kukui Street
(Corner of Nuuanu Avenue
and Kukui Street)
Honolulu, Hawaii 96817
(Address of principal executive offices (Zip Code)
(808) 538-3877
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months,
and (2) has been subject to such filing requirements
for the past 90 days. Yes XX No
1,785,160 shares of Common Stock
Outstanding at February 28, 1997
<PAGE> 2
HOSOI GARDEN MORTUARY, INC.
- - - - - - - - - - - - - -
Nine-Months Ended February 28, 1997
and February 29, 1996
CONTENTS
- - - -
[CAPTION]
Pages
-----
[S] [C]
DISCLAIMER OF OPINION 1
PART I - Financial Information
Item 1. Financial Statements
Balance Sheet 2
Statements of Income 3
Statements of Cash Flows 4
Notes 5 - 8
Item 2. Management's Discussions and Analysis of Financial
Conditions and Results of Operations 9
PART II - Other Information 10
SIGNATURES 11
<PAGE> 3
DISCLAIMER OF OPINION
- - - - - - - - - - -
To the Board of Directors
Hosoi Garden Mortuary, Inc.
The accompanying balance sheet of
HOSOI GARDEN MORTUARY, INC.
as of February 28, 1997, and the related statements of income and cash flows
for the three-months and nine-months ended February 28, 1997 and February 29,
1996 were not audited by us and accordingly, we do not express an opinion on
them.
April 7, 1997
Honolulu, Hawaii
1
<PAGE> 4
HOSOI GARDEN MORTUARY, INC.
BALANCE SHEET
- - - - - - -
February 28, 1997
[CAPTION]
A S S E T S
- - - - - -
[S] [C]
CURRENT ASSETS
Cash and cash equivalents (Note 1) $ 715,318
Certificate of deposit 200,000
Securities available-for-sale, at market (Note 2) 860,486
Accounts receivable, less allowance for losses of $63,943 423,391
Dividend receivable from Garden Life Plan, Ltd. 744,298
Inventories 121,698
Prepaid expenses and others 115,026
Deferred income taxes (Note 4) 36,396
------------
TOTAL CURRENT ASSETS 3,216,613
------------
INVESTMENTS
Garden Life Plan, Ltd. (Note 3) 581,630
Cemetery plots 1,350
Securities held-to-maturity, at cost (Note 2) 74,653
------------
657,633
------------
PROPERTY, PLANT AND EQUIPMENT, at cost, less
accumulated depreciation 1,551,451
------------
OTHER ASSETS 131,197
------------
TOTAL ASSETS $ 5,556,894
===========
[CAPTION]
L I A B I L I T I E S
[S] [C]
CURRENT LIABILITIES
Accounts payable $ 338,520
Accrued liabilities 84,388
Note payable 686
Income tax payable 30,771
-----------
TOTAL CURRENT LIABILITIES 454,365
-----------
DEFERRED INCOME TAXES (Note 4) 37,622
-----------
[CAPTION]
S T O C K H O L D E R S' E Q U I T Y
[S] [C]
CAPITAL CONTRIBUTED
Common stock, par value $.20 per share; authorized
3,625,000 shares, issued 2,187,140 shares 437,428
Less 178,195 reacquired shares 35,859
------------
TOTAL CAPITAL CONTRIBUTED 401,569
------------
RETAINED EARNINGS 4,718,129
-----------
NET UNREALIZED GAIN ON SECURITIES AVAILABLE-FOR-SALE,
net of deferred taxes (Note 2) 26,491
----------
TREASURY STOCK, 223,785 shares, at cost (Note 7) (81,282)
----------
TOTAL STOCKHOLDERS' EQUITY 5,064,907
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,556,894
[FN]
See the Accompanying Notes to Financial Statements
(Unaudited)
2
<PAGE> 5
HOSOI GARDEN MORTUARY, INC.
STATEMENTS OF INCOME
- - - - - - - - - -
[CAPTION]
Three-Months Ended Nine-Months Ended
------------------ -------------------
February February February February
28, 1997 29, 1996 28, 1997 29, 1996
-------- -------- -------- --------
[S] [C] [C] [C] [C]
NET SALES AND SERVICES $712,978 $697,326 $2,195,987 $2,018,313
COST OF SALES AND SERVICES 525,372 534,569 1,526,045 1,409,409
-------- -------- ---------- ----------
GROSS PROFIT 187,606 162,757 669,942 608,904
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 188,161 138,733 511,569 449,055
-------- -------- ---------- ---------
OPERATING INCOME(LOSS) (555) 24,024 158,373 159,849
OTHER INCOME (EXPENSE)
Parking, dividends, interest
and miscellaneous income 45,281 33,306 159,317 111,459
Interest - - (633) -
-------- ------- ------- -------
INCOME BEFORE INCOME
TAXES AND EQUITY IN
EARNINGS OF GARDEN
LIFE PLAN, LTD. 44,726 57,330 317,057 271,308
INCOME TAXES (Note 5) 16,390 20,188 117,229 100,981
-------- -------- --------- --------
INCOME BEFORE EQUITY
IN EARNINGS OF GARDEN
LIFE PLAN, LTD. 28,336 37,142 199,828 170,327
--------- -------- --------- ---------
EQUITY IN EARNINGS OF GARDEN
LIFE PLAN, LTD. (net of
deferred income taxes)
(Note 3) 141,212 48,453 269,009 197,901
---------- ---------- -------- --------
NET INCOME $ 169,548 $ 85,595 $468,837 $368,228
========== ========== ======== ========
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (Note 6) 1,791,583 1,823,185 1,803,498 1,831,652
========= ========= ========= =========
EARNINGS PER COMMON SHARE
(Note 6) $ .09 $ .05 $ .26 $ .20
===== ===== ===== =====
[FN]
See the Accompanying Notes to Financial Statements
(Unaudited)
3
<PAGE> 6
HOSOI GARDEN MORTUARY, INC.
STATEMENTS OF CASH FLOWS
- - - - - - - - - - - -
[CAPTION]
Nine-Months Ended
-----------------
February February
28, 1997 29, 1996
-------- --------
[S] [C] [C]
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 468,837 $ 368,228
Adjustments to reconcile net income to net
cash provided by operations
Depreciation 57,771 54,387
Gain on sale of securities (53,621) (12,591)
Undistributed earnings of affiliate (222,567) (215,092)
Dividend from Garden Life Plan, Ltd. 200,000 -
Increase in cash value of life insurance policie (1,615) -
Deferred income taxes (54,853) 17,191
(Increase) decrease in certain assets
Accounts receivable (97,642) (88,521)
Income tax receivable - 46,421
Inventories (9,483) 6,291
Prepaid expenses and others (53,507) (57,329)
(Decrease) increase in certain liabilities
Accounts payable 100,173 (14,172)
Income taxes payable (7,442) 1,451
Accrued liabilities (66,723) (50,339)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 259,328 55,925
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equity securities 683,126 193,945
Purchase of property and equipment (22,268) (102,049)
Increase in securities (695,097) (206,393)
Purchase of certificate of deposit - (200,000)
Premium payments on life insurance policies (1,622) (2,442)
--------- --------
NET CASH USED IN INVESTING ACTIVITIES (35,861) (316,939)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of reacquired shares (137,555) (62,950)
Cash dividends paid (81,572) (82,419)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (219,127) (145,369)
-------- --------
NET INCREASE (DECREASE) 4,340 (406,383)
CASH AT BEGINNING OF YEAR 710,978 938,707
-------- --------
CASH AT END OF YEAR $715,318 $532,324
======== ========
[FN]
See the Accompanying Notes to Financial Statements
(Unaudited)
4
<PAGE> 7
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
- - - - - - - - - - - - - - -
February 28, 1997 and February 29, 1996
(1) Cash and cash equivalents
For purposes of the Statement of Cash Flows, cash equivalents include
certificate of deposit, money market accounts and highly liquid debt instruments
with maturities of three months or less at the date of acquisition. For debt
instruments, carrying value is a reasonable estimate of fair value.
The Company's cash are deposited with four local financial institution. At
February 28, 1997 the Company had deposits in two financial institutions in
excess of the deposit insurance of $100,000.
(2) Investment securities
The Company held investments in the following types of securities:
[CAPTION]
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
--------- ---------- ---------- ----------
[S] [C] [C] [C] [C]
February 28, 1997
Available-for-Sale
Equity Securities $ 77,587 $ 28,035 $ 1,187 $ 104,435
Mutual Funds 732,567 23,484 - 756,051
--------- --------- --------- ---------
810,154 51,519 1,187 860,486
Held-to-Maturity
U.S. Treasury Notes 74,653 35 3,770 70,918
--------- --------- --------- ---------
Total $ 884,807 $ 51,554 $ 4,957 $ 931,404
========= ========= ========= =========
[S] [C] [C] [C] [C]
February 29, 1996
Available-for-Sale
Equity Securities $ 69,315 $ 14,500 $ 3,078 $ 80,737
Mutual Funds 665,032 43,204 - 708,236
--------- --------- --------- ---------
734,347 57,704 3,078 788,973
Held-to-Maturity
U.S. Treasury Notes 105,749 - 6,094 99,655
--------- --------- --------- ---------
Total $ 840,096 $ 57,704 $ 9,172 $ 888,628
========= ========= ========= =========
[FN]
(Unaudited)
5
<PAGE> 8
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
- - - - - - - - - - - - - - -
February 28, 1997 and February 29, 1996
(2) Investment securities (continued)
The maturities for all debt securities held at February 28, 1997 were:
[CAPTION]
Available-for-Sale Held-to-Maturity
------------------ -------------------
Amortized Market Amortized Market
Cost Value Cost Value
--------- ------- --------- --------
[S] [C] [C] [C] [C]
Within 1 year $ - $ - $ - $ -
After 1 year
through 5 years - - 74,653 70,918
After 5 years - - - -
-------- -------- --------- --------
$ - $ - $ 74,653 $ 70,918
======== ======== ========= ========
The Company sold securities available-for-sale and securities held-to-maturity
for $683,126 and $193,945 in 1997 and 1996, respectively. The gross realized
gain of $53,621 in 1997 and $12,591 in 1996 is reflected in earnings. The cost
of the securities sold was based on the cost of all the shares of each such
security held at the time of sale.
(3) Garden Life Plan, Ltd.
Investments in Garden Life Plan, Ltd. represent the Company's 50% share, in the
underlying equity, accounted for under the equity method of accounting for
investments in common stock of Garden Life Plan, Ltd., (GLP), a Hawaii
corporation engaged in the sale of pre-need funeral plans which are serviced
solely by Hosoi Garden Mortuary, Inc.
All payments received from the sale of pre-need funeral plans up to an amount
equal to 30% of the total price plus any sales tax or other charges are retained
by Garden Life Plan, Ltd. as its compensation. The balance is deposited with
Hawaiian Trust Company, Limited to be held in trust. Garden Life Plan, Ltd. is
entitled to all earnings from funds held in trust which amounted to $705,222 and
$601,851 for the years ended May 31, 1996 and 1995, respectively. Trust assets
are not included in the financial statements of Hosoi Garden Mortuary, Inc. nor
Garden Life Plan, Ltd.
[FN]
(Unaudited)
6
<PAGE> 9
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
- - - - - - - - - - - - - - -
February 28, 1997 and February 29, 1996
(3) Garden Life Plan, Ltd. (continued)
Audited financial statements of this subsidiary as of May 31, 1996 showed the
following summarized financial position and results of operations:
[S] [C]
Total assets $ 2,991,958
Total liabilities 385,243
------------
Total stockholders' equity $ 2,606,715
============
[S] [C]
Net revenue $ 958,576
============
[S] [C]
Operating income $ (136,244)
============
[S] [C]
Net income $ 511,339
============
Equity in earnings of Garden Life Plan, Ltd. represents the Company's share of
the earnings of Garden Life Plan, Ltd. for its three-months and nine-months
ended February 28, 1997 and February 29, 1996.
Investment in Garden Life Plan, Ltd. as of February 28, 1997 is accounted for as
follows:
[S] [C]
Stockholders' equity as of February 28, 1997
per Garden Life Plan, Ltd.'s balance sheet $ 2,651,857
Less: dividends declared in February 1997 (1,488,596)
------------
1,163,261
Equity Ownership 50%
------------
581,631
Rounding (1)
------------
Total investment in Garden Life Plan, Ltd. $ 581,630
============
(4) Deferred income taxes
Deferred income taxes are provided for timing differences resulting from
inclusion of income and expense items in financial statements in years other
than recognized for income tax purposes. Timing differences result from the use
of the reserve method in accounting for uncollectible accounts receivable in the
financial statements and the use of the direct write-off method for income tax
purposes and from the use of the equity method of accounting for the investments
in subsidiary as explained under Garden Life Plan, Ltd. above. Under the equity
method, the Company's share of earnings of the subsidiary is reported for tax
purposes only when distributions of earnings are received as dividends.
At February 28, 1997 the Company's retained earnings included approximately
$581,130 of undistributed earnings of Garden Life Plan, Ltd.
[FN]
(Unaudited)
7
<PAGE> 10
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
- - - - - - - - - - - - - - -_
February 28, 1997 and February 29, 1996
(5) Income taxes
The provision for income taxes consists of the following:
[CAPTION]
February February
28, 1997 29, 1996
-------- --------
[S] [C] [C]
Federal:
Current $101,226 $ 85,749
Deferred (37,020) 13,306
-------- --------
Total Federal 64,206 99,055
-------- --------
State:
Current 16,003 15,232
Deferred (9,422) 3,885
-------- --------
Total State 6,581 19,117
-------- --------
Total income taxes $ 70,787 $118,172
======== ========
(6) Earnings per share
Earnings per common share has been computed on the basis of a weighted average
of shares outstanding of 1,803,498 for 1997 and 1,831,652 for 1996.
(7) Reacquired shares
Capital contributed has been reduced for shares reacquired after June 30, 1987.
Payments for shares in excess of the par value of each share acquired has been
charged to additional paid-in capital.
The 223,785 shares reflected as Treasury Stock as of February 28, 1997 reflects
shares acquired before July 1, 1987.
(8) Prior period adjustment
The Internal Revenue Service has completed its examination of the Company's 1994
federal income tax return which resulted in an assessment for additional income
taxes and interest of $25,699 which has been charged to Retained Earnings in the
current year.
[FN]
(Unaudited)
8
<PAGE> 11
HOSOI GARDEN MORTUARY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Changes in financial condition
There have been no material adverse changes in financial condition from the end
of the preceding fiscal year to the end of the current quarter ended February
28, 1997.
The working capital and working capital ratios at February 28, 1997 is as
follows:
[CAPTION]
February 28,
1997
-----------
[S] [C]
Working capital $ 2,762,248
Working capital ratio 7.1:1
Changes in results of operations
Cost of Sales and Services - Cost of sales and services as a percent of net
sales has remained relatively stable at 69.5% for the nine-months ended February
28, 1997 and 69.8% for the nine-months ended February 29, 1996.
Selling, General and Administrative Expenses - Selling, general and admin-
istrative expenses as a percent of net sales increased to 23.3% from 22.3% for
the nine-months ended February 28, 1997 over February 29, 1996. For the three-
months ended February 28, 1997, selling, general and administrative expenses
increased to 26.3% from 19.9% for the three-months ended February 29, 1996.
The increase is mainly due to an increase in professional services.
Income Taxes - The effective income tax rate has remained stable at 37.0% for
1997 and 37.2% for 1996.
Other Income - Other income as a percent of net sales increased from 5.5% to
7.3% for the nine-month ended February 28, 1997 over February 29, 1996. The
increase in other income is due to an increase in capital gain, gains from sale
of securities, and a non-recurring reimbursement from a former employee for
expenses previously advanced. The increase was partially offset by a decrease
in parking revenues and interest income.
[FN]
9
<PAGE> 12
HOSOI GARDEN MORTUARY, INC.
PART II - OTHER INFORMATION
- - - - - - - - - - - - - -
February 28, 1997 and February 29, 1996
Item 4. Submission of Matters to a Vote of Security Holders
At the regular Annual Meeting of Stockholders of Hosoi Garden Mortuary, Inc.
held on January 19, 1997, the stockholders elected the following persons as
members of the Board of Directors: Richard Dole, Robert Kuwahara and Julie
Shimonishi. The stockholder elected Endo & Company for the auditors for the
Company for the period January 1, 1997 to January 1, 1998.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K - There were no reports on Form 8-K filed for the nine-
months ended February 28, 1997.
[FN]
10
<PAGE> 13
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 under-
signed thereunto duly authorized.
The information furnished reflects all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the interim
periods.
HOSOI GARDEN MORTUARY, INC.
--------------------------
(Registrant)
Date: April 14, 1997 Clifford Hosoi
-------------------------
President
Date: April 14, 1997 Elaine Nakamura
-------------------------
Corporate Secretary and
Bookkeeper
<PAGE> 14
EXHIBIT INDEX
EXHIBITS
NO. DESCRIPTION
- --------- -----------
27 Financial Data Schedule, which is submitted electronically to the
Securities and exchange Commission for information only and not
filed.
