SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[Fee Required]
For the fiscal year ended May 31, 1998 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[No Fee Required]
For the transition period from to
Commission file number 0-2288
HOSOI GARDEN MORTUARY, INC.
STATE OF HAWAII
IRS Employer Identification No. 99-0088064
30 North Kukui Street
Honolulu, Hawaii 96817
Issuer's telephone number: 808-538-3877
Securities registered pursuant to Section 12(b) of the
Exchange Act:
None
Securities registered pursuant to Section 12(g) of the
Exchange Act:
Common Stock Par Value $.20 per share
Check whether the issuer (1) filed all reports required
to be filed by the Exchange Act during the past 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 X No
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B (is not)
contained in this form, and no disclosure will be
contained to the best of registrant's knowledge, in
definitive proxy or information statements incorporated
by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. ( )
<PAGE>
State issuer's revenue for its most recent fiscal year.
$2,664,488
State the aggregate market value of the voting stock
held by non-affiliates computed by reference to the
price at which the stock was sold, or the average bid
and asked prices of such stock, as of a specified date
within the past 60 days. (See definition of affiliate
in Rule 12b-2 of the Exchange Act): $7,415,455
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of
issuer's classes of common stock, as of the latest
practicable date: 1,744,813
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by
reference, briefly describe them and identify the part
of the 10-KSB (e.g. Part I, Part II, etc.) into which
the document is incorporated: (1) any annual report to
security holders; (2) any proxy or information
statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933
("Securities Act"). The listed documents should be
clearly described for identification purposes
(e.g. annual report to the security holders for fiscal
year ended May 31, 1992).
Transitional Small Business Disclosure Format
(Check one):Yes X No
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<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Hosoi Garden Mortuary, Inc. (the "Company") was
incorporated in 1957 under the laws of the State of
Hawaii as the successor to a business founded in 1900.
Professional funeral services are the principal
services rendered by the Company. The Company is
engaged in the funeral and mortuary business, including
the sale of pre-need funeral services contracts.
During the fiscal years ended May 31, 1998 and 1997,
funeral services accounted for 72.1% and 72.7%,
respectively, of revenues. The Company owns 50% of
Garden Life Plan, Ltd. ("Garden Life") which sells
pre-need funeral service contracts for which the
Company acts as the sole servicing mortuary.
The Company operates a mortuary business in Honolulu,
Hawaii. Although established to offer funeral services
to all persons in Hawaii, the Company serves
principally persons of Japanese ancestry who follow a
particular and special order of worship in accordance
with their religious beliefs. In addition to handling
funeral services for residents of Honolulu, the Company
conducts services for residents of other counties in
Hawaii and prepares remains for shipment to or receives
them from other counties in Hawaii, other states in the
United States and foreign countries.
Competition in the funeral business in Hawaii is based
upon (1) the location of a mortuary and (2) the
principal ethnic group that a mortuary serves. There
are 21 mortuaries in the State of Hawaii. Their
locations are as follows:
<TABLE>
<CAPTION>
LOCATION NUMBER OF MORTUARIES
<C> <C>
Island of Hawaii 3
Island of Maui 3
Island of Oahu 12 (one military)
Island of Kauai 2
Island of Molokai 1
</TABLE>
Because of the separation of the Hawaiian islands by
ocean, a mortuary is generally confined to the funeral
demands of a particular island. A very small
percentage of business constitutes service requiring
the use of funeral parlors on an island other than
where death has occurred.
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<PAGE>
<TABLE>
Comparative Statistical Information
<CAPTION>
Percent of Services
No. of Services by Company as
Calendar No. of Deaths No. of Deaths Performed by to No. of Deaths
Year End in State of HI in Oahu the Company in Oahu
<S> <C> <C> <C> <C>
1990 7,056 5,253 980 18.66%
1991 6,486 4,930 980 19.00%
1992 7,173 5,317 1,011 19.01%
1993 7,570 5,689 1,114 19.00%
1994 7,531 5,588 1,091 19.00%
1995 7,795 5,834 1,043 18.00%
1996 8,148 5,557 1,151 20.71%
1997 (1) (1) 1,050 (1)
<FN>
(1) As of the time of filing this Annual Report,
statistics on the number of deaths in the State of
Hawaii and the number of deaths in Oahu were unavailable.
</FN>
</TABLE>
In most cases, a substantial portion of the business of
a mortuary is from an ethnic group it principally
serves. Historically, a substantial portion of the
Company's total services were for families of Japanese
ancestry.
The larger mortuaries on the Island of Oahu and the
ethnic groups which they are believed to serve
primarily are as follows:
<TABLE>
<CAPTION>
Name Ethnic Groups Served
<C> <C>
Williams Mortuary Caucasian
Hosoi Garden Mortuary Japanese
Borthwick Mortuary Caucasian and Chinese
Hawaiian Memorial Park Mixed and Japanese
Mililani Memorial Park & Mortuary Mixed (Filipino and Japanese)
Leeward Funeral Home Mixed
Valley of the Temples Mortuary Japanese, Chinese and Caucasian
(also operating Kukui, Nuuanu
and Diamond Head Memorial Parks)
U.S. Army Mortuary All ethnic groups
</TABLE>
-4-
<PAGE>
On July 7, 1998, the Company entered into an agreement
with Woolsey Funeral & Cemetery Services, Inc. to form
Woolsey-Hosoi Mortuary Services, LLC, a limited
liability company under the laws of the State of Hawaii.
It is expected that the LLC will conduct funeral
services to persons other than those of Japanese
ancestry. Funeral services arranged by the LLC will
generally be conducted at churches and other locations
other than on the Company's premises.
Thirty-five (35) persons were employed by the Company
for the fiscal year ended May 31, 1997. Thirteen (13)
persons were employed full-time and twenty-two (22)
persons were employed part-time.
ITEM 2. DESCRIPTION OF PROPERTY
The Company operates its business at 30 North Kukui
Street, Honolulu, Hawaii, 96817, on the northwest
corner of Nuuanu Avenue and Kukui Street in Honolulu
Hawaii. The business site consists of 92,773 square
feet, of which the Company owns a 78/104th interest.
The Herman S. Hosoi Trust owns a 13.65/104th interest
and the Hosoi-Tamori-Shimonishi Trust owns the
remaining 12.35/104th interest. The trustees and
beneficiaries of both trusts include directors,
officers and shareholders of the Company.
The portion owned by the Company is owned in fee
simple. The Company leases the portion owned by the
Herman S. Hosoi Trust and Hosoi-Tamori-Shimonishi Trust
("Trusts") under a five-year lease that expired on May
31,1994, subject to an option to renew for an
additional five-year period. The option to renew the
lease was exercised while negotiations for the terms of
a new lease continued. In August 1997, the terms of a
new lease retroactive to June 1, 1994 were approved by
the Directors of the Company. The lease, which expires
on May 31, 1999, provides for an annual lease rent of
$312,498, including general excise taxes. In addition,
the Company is responsible for the payment of real
property taxes on the portion of the land owned by the
Trusts. Total rental expense was $356,469 and $356,432
in 1998 and 1997, respectively. For more information
on the lease between the Company and the Trusts, see
Footnote 12 on pages F-18 and F-19 of the Company's
Financial Statements, which are attached hereto and
incorporated by reference.
The main mortuary building, which was built in 1961,
contains a chapel area, which is capable of being used
for one service with a seating capacity of 600 or for
two chapels with a seating capacity of 300 each.
There is an altar and family room at each end of the
building. The office is located on the west end of the
main mortuary building. The embalming rooms are on the
second floor.
In addition, there is a combined garage, kitchen and
dining room annex. Parking
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<PAGE>
facilities for 147 cars have access to Nuuanu Avenue,
Kukui Street and Maunakea Street, and are one-half
block away from Vineyard Boulevard, which is one of
the main thoroughfares in Honolulu. The areas not
used for buildings or parking stalls have been
appropriately landscaped to qualify for partial real
property tax exemption.
No substantial addition or changes in the real
property or improvements of the Company were made
during the fiscal year ended May 31, 1997.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
On January 18, 1998, the annual meeting of the
shareholders was held. According to the Company's
stock transfer agent Chase Mellon Shareholder Services,
the total shares issued, outstanding and entitled to
vote were 1,755,518. The total shares present in
person and proxy were 1,136,160 (64.72%).
The election of three directors and the election of an
auditor were submitted to a vote of the shareholders.
Of the total shares present in person and proxy, the
following vote of the shareholders was taken:
<TABLE>
Election of Class A Directors (3 year term)
<CAPTION>
NAME FOR AGAINST ABSTAIN
<S> <C> <C> <C>
Clifford Hosoi 1,134,560 (64.63%) 1,600 (.09%)
Rene Mansho 1,119,450 (63.77%) 16,710 (.95%)
Ricky Manayan 1,134,885 (64.65%) 1,275 (.07%)
</TABLE>
The foregoing persons were elected at the annual
meeting to serve a three-year term until the 2001
annual meeting or until their successors shall be
elected.
<TABLE>
Election of Auditor (One Year Term)
<CAPTION>
NAME FOR AGAINST ABSTAIN
<S> <C> <C> <C>
Endo & Company, CPA 1,125,435 (64.11%) 750 (.04%) 9,975 (.57%)
(Jack Y. Endo)
</TABLE>
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<PAGE>
PART II
ITEM 5. MARKET FOR COMMON STOCK AND RELATED
SHAREHOLDERS MATTERS
The common shares of the Company are neither traded nor
listed on an exchange and has no established public
trading market. One stockbroker in Honolulu, Hawaii,
quotes the common stock, but the Company does not know
the prices at which the trades are made. During the
fiscal year ended May 31, 1998, the Company redeemed
32,447 shares as follows:
<TABLE>
<CAPTION>
No. Of Shares Redemption Price
<C> <C>
30,442 $4.00
2,005 4.25
</TABLE>
There were 1,660 record holders of common stock as of
May 31, 1998.
A cash dividend has been declared and paid once a year
since 1969. The dividend for the year ended May 31,
1997, which was declared on November 14, 1997, was
$.10 per share, and was paid to shareholders in
January 1998.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS
The following table sets forth items from Hosoi Garden
Mortuary, Inc.'s statement of income as percentages of
net revenues:
<TABLE>
<CAPTION>
Years Ended May 31,
1998 1997
<S> <C> <C>
Total revenues 100.0% 100.0%
Cost of sales and services 78.8 73.2
Gross profit 21.2 26.8
Selling, general and administrative 26.7 25.2
Operating income -5.5 1.6
Other income (expenses) 10.4 6.7
Income before income taxes 4.9 8.3
Provision for income taxes 1.5 3.0
Income before equity in earnings
of Garden Life Plan, Ltd. (GLP) 3.5 5.3
Equity in earnings of GLP, net 28.5 38.1
Net income 32.0 43.4%
</TABLE>
-7-
<PAGE>
RESULTS OF OPERATIONS
TOTAL REVENUES
The Company's revenues decreased by $205,749 in 1998
over 1997. The decrease of 7.2% is attributable to the
decrease in number of services performed from 1,170 in
1997 to 1,050 in 1998, which is a decrease of 10.3%.
The Company expects revenues to remain at the 1998
level, despite an increase in prices for funeral
services, because it is expected that the selection of
lower priced funeral services will continue because of
the poor economic conditions in Hawaii.
The affiliation with Woolsey Funeral & Cemetery
Services, Inc., described in ITEM 1. DESCRIPTION OF
BUSINESS, is a revenue source from a segment of the
community not currently served by the Company.
Initially, the Woolsey-Hosoi Mortuary Services, LLC is
not expected to have a major impact on the Company's
revenues.
The Company's operating expenses are increasing as the
Company continues to upgrade its professional staff
and continues to explore either the establishment of a
pre-need authority, the purchase of the interest of its
50% shareholder in Garden Life Plan, Ltd. or extending
the service agreement with Garden Life Plan, Ltd. beyond
the expiration in 2001. Operating results for fiscal
1999 will be adversely affected if revenues do not
increase correspondingly.
The Company's operating results may also be affected by
Hawaii's generally unfavorable economic conditions
which may be the cause of the shift to lower priced
funeral services.
COST OF SALES AND SERVICES
Cost of sales and services increased to 78.8% of
revenues in 1998 compared to 73.2% in 1997. The 5.6%
increase in cost of sales is attributable to an increase
of 2.9% in the cost of labor and increases of less than
1% each in rent, insurance and other expenses.
GROSS PROFIT
Gross profit as a percentage of total revenues
decreased to 21.2% in 1998 from 26.8% in 1997. The
decrease is due to the decrease in number of services
performed relative to the increase in the cost of labor
and to fixed costs such as rent and insurance expense.
-8-
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased
to $710,923 in 1998 from $723,642 in 1997. Because of
a decrease in revenues these expenses increased to 26.7%
of revenues in 1998 from 25.2% in 1997. As a percent of
revenues, there were no expense category which increased
more than 1% in 1998 over 1997.
It is expected that selling, general and administrative
expenses in 1999 will remain at the 1998 level.
EARNINGS OF GARDEN LIFE PLAN, LTD.
Revenues from the trust funds of the Company's
subsidiary, Garden Life Plan, Ltd. (GLP), whose earnings
are accounted for on the equity method of accounting
are included in the amount reflected as EQUITY IN
EARNINGS OF GARDEN LIFE PLAN, LTD. of $759,190 and
$1,093,897 for 1998 and 1997 respectively. In 1997,
GLP's earnings included a one time credit for a change
in its accounting for investments in securities at
market value. Previously, the Trust recorded its
investments at cost.
Earnings of the Trust fund of GLP are not directly
affected by decisions of the management of the Company.
Investment decisions are generally made by the money
manager of GLP's Trust funds. Fluctuations in GLP's
Trust fund income, which amounted to $1,641,352 and
$705,222 for the years ended May 31, 1998 and 1997
respectively are the result of fluctuations in interest
rates, capital gains and the mix of investment of the
Trust.
Information relating to Trust investments,
obligations and earnings are more fully described in
Footnote 2 of GLP's financial statements, which are
attached hereto and incorporated by reference.
Equity in the earnings of GLP accounted for 89.1% and
87.8% of the Company's net income in 1998 and 1997,
respectively.
INCOME TAXES
The Company's effective income tax rate was 36.5% of
pre-tax income in 1997 and 29.5% in 1998. Note (9) to
the Company's financial statements presents a
reconciliation of the Company's effective and
statutory income tax rates.
-9-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Total working capital increased by $895,447 from
$1,528,254 in 1997 to $2,389,586 in 1998. The
increase is attributable to an increase in current
assets, particularly in dividend receivable of
$750,000 and a decrease in current liabilities.
Working capital ratio was 6.9:1 at May 31, 1998 and
2.9:1 at May 31, 1997.
SECURITIES AVAILABLE FOR SALE decreased from
$906,020 in 1997 to $773,464 in 1998 as a result of
the liquidation of securities to pay the retroactive
rent and funds for working capital.
SECURITIES HELD TO MATURITY decreased from $1,101,423
in 1997 to $842,656 in 1998 principally as a result
of the liquidation of Treasury bills for the reasons
stated above.
At the end of 1997, the Company did not have any
long-term debt. The Company expects that cash flows
from operations, its cash reserves and investments
will be adequate to meet the Company's cash
requirements in the foreseeable future.
Dividends declared for the fiscal years ended 1998
and 1997, respectively, were $.10 and $.045 per share
which amounted to $175,569 and $81,572.
Cash out flows for the acquisition of the Company's
shares were $130,289 in 1998 and $169,629 in 1997.
The Company expects that future acquisitions will be
in the range of $100,000 to $150,000 per year.
YEAR 2000 ISSUE
The Company is working to resolve the potential impact
of the year 2000 on the ability of the Company's
computerized information system to accurately process
information that may be date-sensitive. The Company
utilizes an OFF-THE-SHELF accounting program, which it
expects to be year 2000 compliant before the end of
1999. The Company has not completed its overall
assessment, but believes that the cost of addressing
this issue will not have a material adverse impact on
the Company financial position.
ITEM 7. FINANCIAL STATEMENTS
An audited balance sheet as of May 31, 1998 and
audited statements of income, cash flows and changes
in shareholders' equity for each of the two fiscal
years preceding the date of such audited balances
sheet are on pages F-3 through F-6 of this
report.
-10-
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS: COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT
The Company has a total of nine (9) directors
constituting the entire Board of Directors, divided
into three (3) classes of three (3) directors each.
The Company's Articles of Association provide for each
class of directors to be elected for three-year terms
on a staggered basis.
Directors hold office for the duration of their terms
and thereafter until their successors are elected. The
executive officers serve at the pleasure of the Board
of Directors. See the table on pages 14 and 15 for
certain information about the directors and executive
officers of the Company.
The names, ages, positions and offices, terms of
office, and business experience of the directors and
executive officers of the Company during the past five
years are set forth below.
DIRECTORS WHOSE TERMS EXPIRED IN 1998 AND WHO WERE
ELECTED TO TERMS EXPIRING IN 2001
Clifford Hosoi has been a director of the Company
since 1989. He was a vice president from 1989 until
his appointment as president and chief executive
officer of the Company as of January 1, 1994. He has
been a licensed embalmer since 1979. He has been a
Funeral Director for the Company since 1985. He serves
as a director of Garden Life Plan, Ltd. He is the son
of Sadako Hosoi, director, and a brother of Julie S.
Shimonishi, director, and Anne T. Tamori, vice-
president, director and an employee of the Company.
Rene Mansho is an elected member of the City Council
of the City and County of Honolulu and has served on
the City Council since 1988. She has been a director
of the Company since 1993. She presently serves as
chairperson of the Board of Directors and was elected
to that position in 1994. She has been a school
teacher, Vice-Principal and Administrator with the
Department of Education of the State of Hawaii between
1971 through 1988. Other organizations with which
she is involved include the Hawaii State Association
of Counties, the Mililani Hongwanji, Mililani YMCA,
Honolulu Japanese Chamber of Commerce, Goodwill
Industries, Great Aloha Run, Salvation Army, Wahiawa
Lions, Muscular Dystrophy Association of Hawaii.
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<PAGE>
Ricky C. Manayan is currently a Manager - Prepaid
Card Programs with GTE Hawaiian Tel. He has been a
director of the Company since 1995. His other
business affiliations include Rick Manayan & Associates.
He is President of East-West Real Estate Co., Inc. ,
Inc., Ricky Manayan Associates and Transpacific
Empire, Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 2000
Julie S. Shimonishi is a school teacher and has been
employed by the Department of Education, State of
Hawaii, since 1970. She has been a director since
1979. She is a daughter of Sadako Hosoi, director,
and a sister of Clifford Hosoi, director and president
of the Company, and Anne T. Tamori, director and
vice-president of the Company.
Robert Kuwahara is a Certified Public Accountant and
has his own CPA practice. He has been a director of
the Company since 1995. He is actively involved in
human services organizations such as the YMCA.
Richard B. Dole is the Vice-President and Principal of
Kuroman Realty, Inc. He has been a director of the
Company since 1995. He holds many professional
designations, including the American Society of
Appraisers, Chartered Financial Analyst and Certified
Financial Planner designations. He is the Co-Trustee
of the James D. Dole Trust. He is involved with many
professional organizations, including the American
Society of Appraisers, the Association for Investment
Management Research (AIMR), the Hawaii Employee
Ownership and Participation Advisory Committee,
State of Hawaii, and the Hawaii Estate Planning Council.
DIRECTORS WHOSE TERMS EXPIRE IN 1999
Sadako Hosoi is the widow of Herman S. Hosoi, founder
of the Company. She has been a director of the Company
since 1957 and is the Chairperson of the Board
Emeritus. At the January 21, 1996, annual meeting, she
was elected to a new three-year term which will expire
in 1999. In the past, she has served as chairperson of
the Company and treasurer. She serves as a director of
Garden Life Plan, Ltd. She is the mother of Julie S.
Shimonishi, director, Clifford Hosoi, director and
president of the Company, and Anne T. Tamori, director
and vice president of the Company.
Roy T. Shimonishi is co-owner of Hungry Lion Coffee
Shop in Honolulu, Hawaii. He had been a director since
1979. At the January 21, 1996, annual meeting, he was
elected to a new three-year term to expire in 1999. He
serves on the Board of Directors of the Hawaii
Restaurant Association, Catholic Services for the
Elderly and Hungry Lion Charities. He is also an area
coordinator for Excel Telecommunications.
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<PAGE>
Roy T.Shimonishi resigned as a director in May 1997. The
Board of Directors nominated and elected Anne T. Tamori
to serve the remaining term of Roy T. Shimonishi as
director, which will expire in 1999.
Berton T. Kato is an attorney licensed in the State of
Hawaii and has his own law practice. At the January
21, 1996, annual meeting, he was elected to serve a
three-year term which will expire in 1999.
Anne T. Tamori has been employed by the Company since
1978. She has been a vice president of the Company
since 1994. She has served as an associate secretary
of the Company. She is a daughter of Sadako Hosoi,
director, and a sister of Clifford Hosoi, director and
president of the Company, and Julie S. Shimonishi,
director. Following the resignation of Roy T.
Shimonishi as a director, the Board of Directors
elected Anne T. Tamori to serve Roy T. Shimonishi's
remaining term as a director, which will expire in
1999.
OTHER EXECUTIVE OFFICERS ARE AS FOLLOWS:
David Fujishige has been employed by the Company since
1989. He has been a funeral director since 1991. He
has been a vice president of the Company since 1994.
Prior to joining the Company, he was a food production
supervisor at Rehabilitation Hospital of the Pacific.
Keith Numazu has been employed by the Company since
1992. He has been treasurer of the Company since 1994.
He has been an assistant bookkeeper and programmer
since 1992. Prior to joining the Company, he was a
systems operator/analyst for Consolidated Amusement,
Inc. and a senior systems analyst/programmer for
Holmes and Narver, Inc. and Raytheon Services Nevada.
Elaine Nakamura has been employed by the Company since
1963. She is the secretary of the Company.
<TABLE>
Directors and Executive Officers of the Company
<CAPTION>
Director No. Of Yrs.
Name Age Office Since Family Relationship Employed
<S> <C> <C> <C> <C> <C>
Sadako Hosoi 81 Director 1957 Mother of Julie S.
Shimonishi, Director
Clifford Hosoi, Director
and President, and Anne
Tamori, Director and
Vice President
-14-
<PAGE>
<CAPTION>
Director No. Of Yrs.
Name Age Office Since Family Relationship Employed
<S> <C> <C> <C> <C> <C>
Rene Mansho 49 Director/ 1993 None 0
Chairperson
of the Board
Clifford Hosoi 49 Director/ 1991 Son of Sadako Hosoi, 19
President Brother of Julie S.
Shimonishi and
Anne Tamori
Julie S. 52 Director 1979 Daughter of Sadako Part-time
Shimonishi Hosoi, Sister of since 1990
Clifford Hosoi and
Anne T. Tamori
Roy T. 56 Director 1979 None 0
Shimonishi(1)
Ricky C. 39 Director 1995 None 0
Manayan
Berton T. 50 Director 1996 None 0
Kato
Robert 50 Director 1995 None 0
Kuwahara
Richard B. 53 Director 1995 None 0
Dole
<CAPTION>
Director/
Officer No. of Years No. of Yrs.
Name Age Office Since Family Relationship Employed
<S> <C> <C> <C> <C> <C>
Anne T. 51 Director/ 1994 Daughter of Sadako 19
Tamori Vice Pres. Hosoi, Sister of
Clifford Hosoi and
Julie S. Shimonishi
Elaine 60 Secretary 1972 None 34
Nakamura
David 50 Vice 1994 None 8
Fujishige President
Keith Numazu 36 Treasurer 1994 None 5
<FN>
(1) Roy T. Shimonishi resigned as director in 1997. The Board
of Directors nominated and elected Anne T. Tamori to serve
the remaining term of Roy T. Shimonishi as director, which
will expire in 1999.
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<PAGE>
(2) None of the directors of the Company is a director of
an investment company or another company registered
under the Securities Exchange Act of 1934. All officers
serve at the pleasure of the Board of Directors.
</FN>
</TABLE>
CERTAIN REPORTS. The Company has been informed that
none of its directors, officers or holders of ten
percent or more of its securities were required to file
Forms 3 or 4 during the fiscal year ended May 31, 1998,
and that during this same time period none of the
holders of five percent or more of the Company's
securities were required to file a report on Schedule
13D.
ITEM 10.EXECUTIVE COMPENSATION
The following sets forth the information, on an accrual
basis, with respect to the compensation of the chief
executive officer of the Company for the three fiscal
years ended May 31, 1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION - ANNUAL COMPENSATION
Year ended All Other
Name and Position May 31 Salary Compensation
<S> <C> <C> <C>
Clifford Hosoi 1996 $60,502 $10,447 (1)
President/Chief 1997 $54,759 $ 7,955 (2)
Executive Officer 1998 $46,731 $ 7,420 (3)
<FN>
(1) Amount shown includes $3,025 contributed to the
Company's Money Purchase Pension Plan, $6,097
contributed to the Company's Profit Sharing Plan and
$1,325 fees paid as a director.
(2) Amount shown includes $2,738 contributed to the
Company's Money Purchase Pension Plan, $3,817
contributed to the Company's Profit Sharing Plan and
$1,400 fees paid as a director.
(3) Amount shown includes $2,337 contributed to the
Company's Money Purchase Pension Plan, $3,583
contributed to the Company's Profit Sharing Plan and
$1,500 fees paid as a director.
</FN>
</TABLE>
The total annual salary and bonus for any other
executive officer does not exceed $100,000.
-16-
<PAGE>
The standard fees paid to directors are $100 for each
Board of Directors meeting attended and $25 for each
committee meeting attended.
COMPENSATION PURSUANT TO PLANS.
(a) PROFIT-SHARING PLAN. The Company has established a
profit-sharing plan for the Company's employees. Every
employee, who has completed one year of service with
the Company, becomes eligible to participate in the
profit-sharing plan. An employee who has completed
1,000 hours of service commencing from the date of
employment or an anniversary date is considered to have
one year of service.
The Company's contribution to the profit-sharing plan
is discretionary and may be up to 15% of the
participant's eligible compensation. The Company's
total contributions shall not exceed the amount
allowable by income tax regulations. The amounts
charged against income for the profit-sharing plan
in 1998 and 1997 were $40,000 and $37,000,
respectively. The Company's allocation of
contributions among eligible members is based on
their respective compensation and is allocated
proportionately.
The investment decision for the profit-sharing plan is
formulated by a registered investment advisor through
Hawaiian Trust Company, Ltd.
(b) MONEY PURCHASE PENSION PLAN. The Company has
established a money purchase pension plan, which became
effective as of June 1, 1990, for the Company's
employees. Every employee, who has completed one year
of service with the Company, becomes eligible to
participate in the money purchase plan. An employee
who has completed 1,000 hours of service commencing
from the date of employment or an anniversary date is
considered to have one year of service.
The Company is required to contribute 5% of each
participant's eligible compensation to the money
purchase plan. The Company's total contributions
cannot exceed the amount allowable by income tax
regulations. The amounts charged against income for
the money purchase pension plan in 1998 and 1997 were
$26,560 and $27,122, respectively.
The investment decision for the money purchase plan is
formulated by a registered investment advisor through
Smith Barney, Inc.
-17-
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS & MANAGEMENT
A. PRINCIPAL SHAREHOLDERS
The Herman S. Hosoi Trust, whose trustees are Sadako
Hosoi and Julie S. Shimonishi, and the Hosoi Family
Limited Partnership, whose general partner is the Hosoi
Family Voting Trust, by its trustee Julie S.
Shimonishi, are the only persons who own of record or
are known to the Company to own beneficially more than
five percent of the common shares of the Company as of
May 31, 1998. Certain information about the holders is
set forth below.
<TABLE>
<CAPTION>
Nature of
Title of Name and Address of Beneficial No. of Percent of
Class Beneficial Owner Ownership Shares Class
<S> <C> <C> <C> <C>
Common Julie S. Shimonishi Co-trustee of 158,250 9.07%
30 N. Kukui Street the Herman S.
Honolulu, HI 96817 Hosoi Trust
General Partner of 160,250 9.18%
the Hosoi Family
Limited Partnership,
as Trustee of the
Hosoi Family
Voting Trust
Custodian for Chad 8,000 0.46%
Shimonishi and Lane
Shimonishi under
HUGMA
Direct 52,534 3.01%
Total 379,034 21.72%
-18-
<PAGE>
<CAPTION>
Nature of
Title of Name and Address of Beneficial No. of Percent of
Class Beneficial Owner Ownership Shares Class
<S> <C> <C> <C> <C>
Common Sadako Hosoi Co-trustee of 158,250 9.07%
30 N. Kukui Street the Herman S.
Honolulu, HI 96817 Hosoi Trust
Settlor of the Hosoi 160,250 9.18%
Family Voting Trust
and limited partner
of the Hosoi Family
Limited Partnership
Total 318,500 18.25%
Common Herman S. Hosoi Trust Direct 158,250 9.07%
Sadako Hosoi and
Julie S. Shimonishi,
Trustees
30 N. Kukui Street
Honolulu, HI 96817
Common Hosoi Family Limited Direct 160,250 9.18%
Partnership (1)
30 N. Kukui Street
Honolulu, HI 96817
<FN>
(1) The Sadako Hosoi Trust, by its trustees Sadako Hosoi
and Julie S. Shimonishi, transferred 160,250 shares of
the Company to the Hosoi Family Limited Partnership,
whose general partner is the Hosoi Family Voting Trust,
by its trustee Julie S. Shimonishi, and whose limited
partner is Sadako Hosoi. Julie S. Shimonishi, as
trustee, exercises voting and investment powers over
those shares pursuant to the Hosoi Family Voting Trust
Agreement dated December 30, 1994, between Sadako
Hosoi, as settlor, and Julie S. Shimonishi, as trustee.
</FN>
</TABLE>
-19-
<PAGE>
B. DIRECTORS AND EXECUTIVE OFFICERS
Certain information with respect to the holdings of
Common Stock of the directors and executive officers of
the Company as of May 31, 1998, is set forth below.
<TABLE>
<CAPTION>
Title of Name of Amount and Nature of Percent of
Class Beneficial Owner (1) Beneficial Ownership Class
<S> <C> <C> <C>
Common Julie S. Shimonishi 379,034 (2) 21.72%
Common Sadako Hosoi 318,500 (3) 18.25%
Common Clifford Hosoi 52,532 (4) 3.01%
Common Anne T. Tamori 56,534 (5) 3.24%
Common Richard B. Dole 1,000 (6) 0.06%
All directors and officers 489,100 28.02%
as a group (14 persons) (7)
<FN>
(1) The address of each person is 30 N. Kukui Street,
Honolulu, Hawaii 96817, except for Richard B. Dole
whose address is 1255 Nuuanu Avenue, Suite C-104,
Honolulu, Hawaii 96817.
(2) Includes:
<C> <C>
52,534 shares (3.01%) as to which Ms. Shimonishi exercises
sole voting and investment powers;
8,000 shares (0.46%) as to which Ms. Shimonishi exercises
sole voting and investment powers as
Custodian for Chad Shimonishi and
Lane Shimonishi under HUGMA;
158,250 shares (9.07%) as to which Ms. Shimonishi and Sadako
Hosoi share voting and investment
powers as trustees of the Herman S.
Hosoi Trust; and
160,250 shares (9.18%) as to which Ms. Shimonishi, as trustee
of the Hosoi Family Voting Trust, has
voting and investment powers over the
shares owned by the Hosoi Family
Limited Partnership.
-20-
</FN>
<PAGE>
<FN>
(3) Voting and investment powers over 158,250 shares
of the Company are shared by Sadako Hosoi and Julie S.
Shimonishi, as Trustees of the Herman S. Hosoi Trust,
which owns 158,250 shares of the Company.
Voting and investment power over 160,250 shares of the
Company are exercised by Julie S. Shimonishi, as
trustee under the Hosoi Family Voting Trust. See the
preceding table for more information about the Hosoi
Family Limited Partnership and the Hosoi Family Voting
Trust.
(4) Voting and investment powers exercised solely.
(5) Includes:
<C> <C>
52,534 shares (3.01%) as to which Ms. Tamori exercises sole
voting and investment powers; and
4,000 shares (0.23%) as to which Ms. Tamori exercises sole
voting and investment powers for Ryan
Tamori under HUGMA.
(6) Voting and investment powers exercised solely.
(7) Rene Mansho, Ricky C. Manayan, Berton T. Kato
and Robert Kuwahara, who are currently serving
as directors, and Elaine Nakamura, David Fujishige
and Keith Numazu, who are currently serving as
officers, do not own any shares of the Company.
</FN>
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See Item 2 on page 5 of this Report and Footnote 12 on
page F-18 of the Company's Financial Statements, for
information about the lease between the Company and the
Herman S. Hosoi Trust and the Hosoi-Tamori-Shimonishi
Trust.
-21-
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
A. EXHIBITS
Except as noted, the following exhibits were previously
filed on August 31, 1981, as exhibits to Form 10-K for
the fiscal year ended May 31, 1981, for the Company
and are incorporated herein by reference:
(2) PLAN OF PURCHASE, SALE, REORGANIZATION,
ARRANGEMENT, LIQUIDATION AND SUCCESSION
(3) ARTICLES OF ASSOCIATION AND BY LAWS
(a) Articles of Association, Affidavit of
Officers and Supplemental affidavit of
incorporation filed May 31, 1957
(1) Amendments
(i) January 18, 1962
(ii) January 16, 1963
(iii) February 3, 1972
(iv) February 2, 1977
(v) March 31, 1978
(vi) July 23, 1993 (1)
(b) By Laws dated May 31, 1957
(1) Amendments
(i) January 30, 1972
(ii) March 31, 1978
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY
HOLDERS, INCLUDING INDENTURES
(a) Equity securities: Articles of Association and
Affidavit of Officers, Certificate of Amendment
filed January 16, 1963, in the Hawaii Department
of Regulatory Agencies.
(b) Debt securities: Not applicable.
-22-
<PAGE>
(9) VOTING TRUST AGREEMENT
Hosoi Family Voting Trust Agreement dated December
30, 1994, between Sadako Hosoi, as settlor, and
Julie S. Shimonishi, as trustee, covering 160,250
shares owned by the Hosoi Family Limited
Partnership. (5)
(10) MATERIAL CONTRACTS
(i) Lease between the Company, as lessee, and
Sadako Hosoi and Julie Sakaye Shimonishi,
as trustees of the Herman S. Hosoi Trust,
and Clifford Isamu Sadao Hosoi, Anne Ume
Toyo Tamori and Julie Sakaye Shimonishi,
as trustees under the
Hosoi-Tamori-Shimonishi Trust, as lessor,
dated as of July 10, 1990. (2)
(ii) Deed conveying the interest of the late
Herman Hosoi to the Trustees of the Herman
S. Hosoi Trust, dated February 27, 1978.
(iii) Profit-sharing Plan. (3)
(iv) Annuities. (3)
(v) Amendment to profit-sharing plan. (4)
[FN]
(1) Filed August 30, 1993, as an exhibit to the
Annual Report on Form 10-KSB for the year ended May
31, 1993.
(2) Filed August 28, 1990, as an exhibit to the
Annual Report on Form 10-K for the year ended May
31, 1990.
(3) Filed August 30, 1984, as Exhibit 19 to the
Annual Report on Form 10-K for the year ended May
31, 1984.
(4) Filed August 30, 1985, as Exhibit 19 to the
Annual Report on Form 10-K for the year ended May
31, 1985.
(5) Filed August 30, 1995, as an exhibit to this
Annual Report on Form 10-KSB for the year ended
May 31, 1995.
</FN>
(11) STATEMENTS RE COMPUTATION OF PER SHARE EARNINGS
Not applicable.
-23-
<PAGE>
(13) ANNUAL REPORT TO SECURITY HOLDERS, FORM 10-Q OR
QUARTERLY REPORT TO SECURITY HOLDERS, FORM 10-Q
OR QUARTERLY REPORT TO SECURITIES HOLDERS
Not applicable.
(16) LETTER ON CHANGE IN CERTIFYING ACCOUNTANTS
Not applicable.
(18) LETTER RE CHANGE IN ACCOUNTING PRINCIPLES
Not applicable.
(21) SUBSIDIARIES OF THE REGISTRANT
Garden Life Plan, Ltd., a Hawaii corporation,
is 50 percent owned by the Company.
(22) PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO
TO VOTE OF SECURITY HOLDERS
Not applicable.
(23) CONSENTS OF EXPERTS AND COUNSEL
Not applicable.
(24) POWER OF ATTORNEY
Not applicable.
(28) INFORMATION FROM REPORTS TO STATE INSURANCE
REGULATORY AUTHORITIES
Not applicable.
(99) ADDITIONAL EXHIBITS
Not applicable.
B. REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K in the
quarter ended May 31, 1997.
-24-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, the
registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto
duly authorized.
Dated: Honolulu, Hawaii, August 28, 1998.
HOSOI GARDEN MORTUARY, INC.
By CLIFFORD HOSOI
President
-25-
<PAGE>
Pursuant to the requirements of the Securities
Exchange Act of 1934, this Form 10-KSB for the year
ended May 31, 1998, has been signed below by the
following persons on behalf of the registrant and
in the capacity and on the date indicated.
RENE MANSHO Dated: August 28, 1998
Director and Chairperson
of the Board of Directors
CLIFFORD HOSOI Dated: August 28, 1998
Director, President and
Chief Executive Officer
RICHARD B. DOLE Dated: August 28, 1998
Director
SADAKO HOSOI Dated: August 28, 1998
Director
BERTON T. KATO Dated: August 28, 1998
Director
ROBERT KUWAHARA Dated: August 2, 1998
Director
RICKY C. MANAYAN Dated: August 28, 1998
Director
JULIE S. SHIMONISHI Dated: August 28, 1998
Director
ANNE T. TAMORI Dated: August 28, 1998
Director
-26-
<PAGE>
REPORT OF CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors and Stockholders
HOSOI GARDEN MORTUARY, INC.
We have audited the accompanying balance sheets of
HOSOI GARDEN MORTUARY, INC.
as of May 31, 1998 and 1997, and the related statements
of income, retained earnings and cash flows for the
years then ended. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements based on our audits. We did not
audit the financial statements of Garden Life Plan,
Ltd., (a 50% owned subsidiary accounted for by the
equity method of accounting) for its years ended May 31,
1998 and 1997, which accounts 23.3% of total assets and
89.1% and 87.8% of net income in 1998 and 1997,
respectively. Those financial statements were audited
by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to the
amounts included in the Company's equity in the
underlying net assets and its equity in the earnings of
the subsidiary is based solely on the report of the
other auditors.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits and
the reports of other auditors provide a reasonable basis
for our opinion.
F-1
<PAGE>
In our opinion, based upon our audits and the report of
other auditors, the financial statements referred to
above present fairly, in all material respects, the
financial position of HOSOI GARDEN MORTUARY, INC. as of
May 31, 1998 and 1997, and the results of its operations
and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
ENDO & COMPANY
Honolulu, Hawaii
August 5, 1998
F - 2
<PAGE>
<TABLE>
HOSOI GARDEN MORTUARY, INC.
BALANCE SHEETS
_ _ _ _ _ _ _ _ _ _ _ _
May 31, 1998 and 1997
<CAPTION>
<S> 1998 1997
A S S E T S <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Notes 1 and 3) $ 498,871 $ 776,095
Securities available for sale, at market
(Notes 1 and 4) 773,464 906,020
Accounts receivable, less allowance of
$78,740 and $69,724 274,788 303,102
Income tax receivable 255,749 -
Dividend receivable (Note 2) 750,000 -
Inventories (Note 1) 149,268 136,946
Prepaid expenses and others 64,787 64,453
Deferred income taxes (Note 5) 43,588 140,242
TOTAL CURRENT ASSETS 2,810,515 2,326,858
INVESTMENTS
Garden Life Plan, Ltd. (Notes 1 and 2) 1,603,868 1,548,009
Cemetery plots 1,350 1,350
Securities held to maturity, at cost
(Notes 1 and 4) 842,656 1,101,423
2,447,874 2,650,782
PROPERTY AND EQUIPMENT, at cost, less
accumulated depreciation (Notes 1 and 6) 1,524,560 1,551,948
OTHER ASSETS 103,921 125,184
TOTAL ASSETS $ 6,886,870 $ 6,654,772
L I A B I L I T I E S
CURRENT LIABILITIES
Accounts payable (Note 7) $ 85,445 $ 352,689
Accrued liabilities (Note 8) 135,484 369,199
Income taxes payable (Note 9) - 76,716
TOTAL CURRENT LIABILITIES 420,929 798,604
DEFERRED INCOME TAXES (Note 5) 168,583 123,751
S T O C K H O L D E R S ' E Q U I T Y
CAPITAL CONTRIBUTED (Note 10)
Common stock, par value $.20 per share;
authorized 3,625,000 shares, issued 2,187,140
shares 437,428 437,428
Less 218,542 and 186,095 reacquired shares (43,928) (37,439)
TOTAL CAPITAL CONTRIBUTED 393,500 399,989
UNREALIZED GAINS ON SECURITIES AVAILABLE-FOR-SALE,
net of applicable deferred income taxes
(Notes 1 and 4) 65,994 46,998
RETAINED EARNINGS 5,919,146 5,366,712
TREASURY STOCK, 223,785 shares, at cost
(Note 10) (81,282) (81,282)
TOTAL STOCKHOLDERS' EQUITY 6,297,358 5,732,417
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,886,870 $ 6,654,772
<FN>
The accompanying Notes to Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
F - 3
<PAGE>
<TABLE>
HOSOI GARDEN MORTUARY, INC.
STATEMENTS OF INCOME
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
<CAPTION>
1998 1997
<S> <C> <C>
Revenues
Sale of urns and other items $ 742,913 $ 782,467
Funeral services 1,921,575 2,087,770
Total revenues 2,664,488 2,870,237
Cost of sales and services 2,100,550 2,100,481
Gross profit 563,938 769,756
Selling, general and administrative expenses
Salaries and wages 241,684 248,156
Profit sharing and pension fund contributions
(Note 11) 66,560 64,122
Professional services 241,057 233,437
Taxes and licenses 26,513 27,930
Advertising 37,071 38,635
Others 98,038 111,362
Total selling, general and administrative
expenses 710,923 723,642
Operating income (loss) (146,985) 46,114
Other income and (expenses)
Interest, dividends, and others (Note 13) 278,881 192,500
Interest and others (502) (1,001)
Total other income and (expenses) 278,379 191,499
Income before income taxes and equity in
earnings of Garden Life Plan, Ltd. 131,394 237,613
Income taxes (Note 9) 38,781 86,745
Income before equity in earnings of Garden
Life Plan, Ltd. 92,613 150,868
Equity in earnings of Garden Life Plan, Ltd.,
net of deferred taxes of $46,669 and $95,050
(Notes 2 and 5) 759,190 1,093,897
Net income $ 851,803 $1,244,765
Average number of shares common stock outstanding 1,753,998 1,797,907
Earnings per common share (Note 1) $ .49 $ .69
Dividends per common share $ .10 $ .045
<FN>
The accompanying Notes to Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
F - 4
<PAGE>
<TABLE>
HOSOI GARDEN MORTUARY, INC.
STATEMENTS OF RETAINED EARNINGS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
<CAPTION>
1998 1997
<S> <C> <C>
Balance beginning of year, as previously reported $5,366,712 $4,487,897
Retroactive rent, net of deferred taxes of
$68,035 (Note 16) - (93,089)
Prior year's income tax assessment (Note 16) - (30,094)
Balance beginning of year, as restated 5,366,712 4,364,714
Net income for the year 851,803 1,244,765
Cash dividends paid, $.10 and $.045 per share (175,569) (81,572)
Common stock reacquired in excess of par value
(Note 10) (123,800) (161,195)
Balance end of year $ 5,919,146 $ 5,366,712
<FN>
The accompanying Notes to Financial Statements are an
integral part of this statement.
</FN>
</TABLE>
F - 5
<PAGE>
<TABLE>
HOSOI GARDEN MORTUARY, INC.
STATEMENTS OF CASH FLOWS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
<CAPTION>
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 851,803 $1,244,765
Adjustments to reconcile net income to
net cash and cash equivalents provided
by (used in) operating activities:
Depreciation 67,340 63,343
Loss on write-off of assets - 479
Realized gain on sale of investment
securities, net (104,819) (53,621)
Increase in allowance for doubtful
accounts 9,016 5,801
Undistributed earnings of affiliate (55,859) (1,188,947)
Cash value of life insurance policies (3,210) 5,587
Deferred income taxes 135,212 60,646
(Increase) decrease in certain assets
Accounts receivable 19,298 16,846
Income tax receivable (255,749) -
Dividend receivable (750,000) -
Inventories (12,322) (24,731)
Prepaid expenses and other (334) (2,934)
(Decrease) increase in certain liabilities
Accounts payable (67,244) 108,070
Accrued liabilities (233,715) 56,964
Income taxes payable (76,716) 41,013
Note payable - (685)
Decrease in deferred income taxes - (75,468)
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (477,299) 257,128
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (39,952) (28,816)
Redemption of life insurance policy 27,284 -
Redemption of certificate of deposit - 200,000
Dividend from Garden Life Plan, Ltd. 944,298
Proceeds from sale of investment securities 4,363,649 683,126
Increase in investment securities (3,842,237) (1,736,607)
Increase in cash value of life insurance
policies (2,811) (2,811)
NET CASH PROVIDED BY INVESTING ACTIVITIES 505,933 59,190
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of reacquired stocks (130,289) (169,629)
Cash dividends paid (175,569) (81,572)
NET CASH USED IN FINANCING ACTIVITIES (305,858) (251,201)
NET INCREASE (DECREASE) (277,224) 65,117
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 776,095 710,978
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 498,871 $ 776,095
<FN>
The accompanying Notes to Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
F - 6
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Line of business - The Company is engaged in one line of
business that consists principally of providing mortuary
services in the State of Hawaii on the island of Oahu.
The significant accounting policies followed by the
Company are summarized below.
Fair value of financial instruments - The carrying
amount of cash and cash equivalents approximates fair
value due to the short-term maturities of these
instruments. The fair value of current and non-current
marketable securities and long-term debt were estimated
based on quotes obtained from brokers for those or
similar instruments. The fair value for long-term
investments were estimated based on quoted market price
at year end.
Cash and cash equivalents - For purpose of the statement
of cash flows, cash equivalents includes certificates of
deposit, money market accounts and highly liquid debt
instruments with maturities of three months or less at
the date of acquisition.
Investment securities - Management determines the
appropriate classification of securities at the time of
purchase. Those investments are classified in three
categories and accounted for as follows:
. Debt securities that the company intends to hold
to maturity are classified as SECURITIES HELD TO
MATURITY and reported at cost.
. Debt and equity securities that are purchased and
held for the purpose of selling in the near term
are classified as TRADING SECURITIES and reported
at fair value, with unrealized gains and losses
included in income.
. Debt and equity securities not classified as
SECURITIES HELD TO MATURITY or TRADING SECURITIES
are classified as securities available for sale
and reported at fair value, with unrealized gains
and losses reported as a separate component of
stockholders' equity. Securities available for
sale will be used as part of the Company's asset
management strategy and may be sold in response
to changes in interest rates or the need for
capital.
F - 7
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Investment in Garden Life Plan, Ltd. - The Company
accounts for its investment in Garden Life Plan, Ltd.
(a 50% owned Company) by the equity method of
accounting. The equity in earnings of Garden Life Plan,
Ltd., reflected on the statements of income, includes
the pro rata share of the earnings of Garden Life Plan,
Ltd., net of income taxes applicable to such earnings,
for its years ended May 31, 1998 and 1997.
Inventories - Inventories of caskets and urns are
stated at the lower of cost or market. Cost is
determined substantially by the first-in, first-out
method and market is based on replacement cost or
realizable value.
Property and equipment - Land, buildings and equipment
are carried at cost. Depreciation is computed using the
declining-balance and straight-line methods. Maintenance
and repairs are charged to income as incurred. Major
renewals and betterments are capitalized. Upon sale or
other disposition of assets, the cost and related
accumulated depreciation are removed from the accounts,
the proceeds applied thereto, and any resulting gain or
loss is reflected in income.
Compensated absences - Full-time employees of the
Company are entitled to paid vacations and sick days.
Unused vacation and sick leave are reflected in
accrued liabilities.
Earnings per common share - Earnings per common share
has been computed by dividing net income by the
weighted average number of common shares outstanding.
Revenue and cost recognition - Revenues from at-need
funeral services and pre-need funeral plan services are
recognized upon completion of the final funeral
ceremony. Revenues from at-need funeral services
include professional service revenues which are included
in FUNERAL SERVICES and sales of caskets, urns and other
items which are included in SALE OF URNS AND OTHER ITEMS.
Revenues from pre-need services, which accounted for
approximately 27.7% and 25.5% of funeral service
revenues in 1998 and 1997, respectively, are accounted
for in FUNERAL SERVICES since these plans are sold
inclusive of the merchandise selected.
F - 8
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Cost of sales and services includes all direct cost,
including merchandise, labor and other related cost
and indirect cost such as insurance, depreciation,
supplies and indirect labor costs, related to the
performance and completion of at-need and pre-need
funeral services.
Advertising - The Company follows the policy of
charging the costs of advertising to operations as
incurred.
Income taxes - Income tax expense is based on reported
earnings before income taxes. Deferred income taxes
reflect the impact of temporary differences between
assets and liabilities recognized for financial
reporting purposes and such amounts recognized for
tax purposes. In accordance with Statement of Financial
Accounting Standards (SFAS) 109, ACCOUNTING FOR INCOME
TAXES, these deferred taxes are measured by applying
currently enacted tax laws.
Use of estimates - The preparation of financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of
revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
(2) Garden Life Plan, Ltd.
Investment in Garden Life Plan, Ltd. (GLP) represents
the Company's 50% share in the underlying equity in the
net assets, accounted for under the equity method of
accounting for investments in common stock, of Garden
Life Plan, Ltd., a Hawaii corporation engaged in the
sales of pre-need funeral plans which are serviced
solely by the Company.
F - 9
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(2) GARDEN LIFE PLAN, LTD. (CONTINUED)
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 GLP as its compensation. The balance is
deposited with Hawaiian Trust Company, Limited (Trust)
to be held in trust. GLP is entitled to all earnings
from funds held in trust which earnings amounted to
$2,666,047 and $1,641,352 for the years ended May 31,
1998 and 1997, respectively. The assets of the Trust
are not included in the financial statements of the
Company nor GLP.
Effective June 1, 1996, the Trust began recording its
investments at market value. Previously, the Trust
recorded its investments at cost. The cumulative effect
of this change as of June 1, 1996 was an increase in
GLP's trust fund income receivable of $1,574,286 (net
of deferred taxes of $964,885) and is reflected in GLP's
net income of $2,377,893 as shown below.
Audited financial statements of this subsidiary as of
May 31, 1998 and 1997 showed the following summarized
financial position and results of operations.
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Total assets $6,981,992 $5,019,929
Total liabilities 2,274,260 1,923,917
Total stockholders' equity $4,707,732 $3,096,012
Total revenues $ 617,214 $1,184,909
Operating income (loss) $ (84,329) $ 172,255
Other income $2,666,047 $1,641,352
Cumulative effect of change
in accounting principle $ - $1,574,286
Net income $1,611,718 $2,377,893
</TABLE>
F - 10
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(2) GARDEN LIFE PLAN, LTD. (CONTINUED)
INVESTMENT IN GARDEN LIFE PLAN, LTD. as of May 31, 1998
and 1997 is accounted for as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Stockholders' equity of Garden Life Plan, Ltd. $4,707,732 $3,096,012
Less: dividend declared (1,500,000) -
3,207,732 3,096,012
Equity ownership 50% 50%
1,603,866 1,548,006
Rounding 2 3
Total investment in Garden Life Plan, Ltd. $1,603,868 $1,548,009
<FN>
Cash dividend declared and subsequently paid after
May 31, 1998 by Garden Life Plan, Ltd. is recorded as
dividend receivable in the amount of $750,000 as of
May 31, 1998.
</FN>
</TABLE>
(3) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Cash on hand $ 500 $ 500
Checking accounts 76,480 122,306
Savings accounts 316,313 354,486
Certificate of deposit - 200,000
Short-term investments 105,578 98,803
Total cash and cash equivalents $ 498,871 $ 776,095
</TABLE>
F - 11
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(4) INVESTMENT SECURITIES
As of May 31, 1998 and 1997, the Company held
investments in the following types of securities:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
<S> <C> <C> <C> <C>
MAY 31, 1998
Available for sale
Equity securities $ 74,346 $ 41,132 $ 1,760 $ 113,718
Mutual funds 592,721 67,128 103 659,746
667,067 108,260 1,863 773,464
Held to maturity
U.S. Treasury
bills 842,656 850 5,148 838,358
Totals $1,509,723 $109,110 $ 7,011 $1,611,822
MAY 31, 1997
Available for sale
Equity securities $ 84,713 $ 36,233 $ 2,698 $ 118,248
Mutual funds 740,181 50,630 3,039 787,772
824,894 86,863 5,737 906,020
Held to maturity
U.S. Treasury
bills 1,101,423 5,103 4,226 1,102,300
Totals $1,926,317 $ 91,966 $ 9,963 $2,008,320
</TABLE>
The maturities of all debt securities held at May 31,
1998 were as follows:
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C>
Within 1 year $ - $ - $ 753,932 $ 749,812
After 1 year
through 5 years - - 40,623 40,648
After 5 years - - 48,101 47,898
$ - $ - $ 842,656 $ 838,358
</TABLE>
F - 12
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(4) INVESTMENT SECURITIES (CONTINUED)
During the year ended May 31, 1998, the Company sold
SECURITIES AVAILABLE FOR SALE for $4,363,649. The net
gross realized gain of $104,819 is reflected in
earnings. The cost of the securities sold was based on
cost of all the shares of each such security held at the
time of sale.
During the year ended May 31, 1997, the Company sold
SECURITIES AVAILABLE FOR SALE for $683,126. The net
gross realized gain of $53,621 is reflected in earnings.
The cost of the securities sold was based on cost of all
the shares of each such security held at the time of
sale.
The unrealized holding gains on investment securities
AVAILABLE-FOR-SALE during the years ended May 31, 1998
and 1997, and reported as a separate component of
Stockholders' Equity, are as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Unrealized holding gains, net of losses $ 106,396 $ 81,126
Deferred income tax on the net unrealized
holding gains (40,402) (34,128)
$ 65,994 $ 46,998
</TABLE>
(5) DEFERRED INCOME TAXES
Deferred taxes are recognized for differences between
the basis of assets and liabilities for financial
statement and income tax purposes. The deferred assets
and liabilities represent the future tax consequences of
those differences, which will be either taxable or
deductible when the assets and liabilities are recovered
or settled. The deferred tax liability results from the
recognition of unrealized gains or losses on securities
for financial statements and the recognition of gains or
losses when securities are sold for income tax purposes,
the inclusion of deferred earnings on an annuity for
financial statements and the recognition of the earnings
when received for tax purposes
F - 13
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(5) DEFERRED INCOME TAXES (CONTINUED)
and the equity method of accounting for the investment
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.
The deferred tax asset results 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 purpose, the
accrual of the retroactive rent for financial statements
purposes and the recognition of the rent expense when
paid for income tax purposes and the accrual of vacation
and sick leave when earned for the financial statements
and the recognition for income tax purposes when paid.
(6) PROPERTY AND EQUIPMENT
Property and equipment consist of:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Land $ 517,040 $ 517,040
Buildings 1,262,530 1,262,530
Land improvements 94,710 94,710
Equipment and vehicles 373,877 333,926
Total cost 2,248,157 2,208,206
Accumulated depreciation 723,597 656,258
Net property and equipment $1,524,560 $1,551,948
</TABLE>
Aggregate depreciation charged to operations are as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Cost of sales and services $ 64,001 $ 57,709
Selling, general and administrative expenses 3,339 5,634
$ 67,340 $ 63,343
</TABLE>
F - 14
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(7) FUNERAL SERVICE DEPOSITS
Included in accounts payable is $33,066 of deposits made
by eleven individuals that the Company has been
collecting from since 1969 for future services or
purchase of merchandise. The payable of $33,066,
including interest of $25,041 accrued to May 31, 1998,
approximates fair value.
In an agreement with the Professional and Vocational
Licensing Division of the State of Hawaii, Department
of Commerce and Consumer Affairs (DCCA), the Company
consented to a plan to either convert these funeral
service deposits to a Garden Life Plan, Ltd.'s (GLP)
pre-need funeral plan identical to the services and/or
merchandise that the depositor originally contracted for
or refund the deposit plus accrued interest. The
agreement with the DCCA provides that the Company will
provide the funds for any difference between the cost of
a comparable GLP pre-need plan and the amount deposited
with the Company.
As of May 31, 1998, twenty-seven plans have been
converted to GLP pre-need plans. The difference between
the cost of plans converted and the amount of the
available deposit is reflected as a charge to
operations. Eleven plans remain to be converted. No
provision has been made for the cost of conversion of
the remaining eleven plans because of the uncertainty of
whether the holders of the deposits will elect to
convert to a GLP pre-need plan or elect to receive a
refund.
F - 15
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(8) ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Salaries and wages $ - $ 16,492
Bonus accrued 7,000 10,000
Payroll and general excise taxes 25,876 12,222
Accrued rent payable (Note 16) - 241,686
Profit sharing and money-purchase
plan contributions (Note 12) 66,560 64,122
Vacation and sick leave 36,048 24,677
Total accrued liabilities $135,484 $ 369,199
</TABLE>
(9) INCOME TAXES
The provisions for income taxes consist of the following:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Current:
Federal $ (60,760) $104,734
State (14,907) 16,415
(75,667) 121,149
Deferred:
Federal 99,715 (30,193)
State 14,733 (4,211)
114,448 (34,404)
Total $ 38,781 $ 86,745
</TABLE>
F - 16
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(9) INCOME TAXES (CONTINUED)
A reconciliation of income taxes at the United States
statutory rate, as a percentage of pretax income, to
the effective tax rate is as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Federal income tax statutory rate 34.0% 34.0%
State income tax, net of tax benefit (7.7) 9.4
Others, net 3.2 ( 6.9)
Effective tax rate 29.5% 36.5%
</TABLE>
(10) REACQUIRED SHARES
CAPITAL CONTRIBUTED has been reduced for shares
reacquired after June 30, 1987. Purchases of 32,447
and 42,170 reacquired shares in 1998 and 1997,
respectively, exceeded the balance of additional
paid-in capital and a charge of $123,800 and $161,195
for 1998 and 1997, respectively, were made to
RETAINED EARNINGS for the excess of reacquired shares
in excess of their par value.
The 223,785 shares reflected as Treasury Stock as of
May 31, 1998 reflects the shares acquired before July
1, 1987.
F - 17
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(11) RETIREMENT PLANS
The Company provides benefits to substantially all
full-time employees with a defined contribution profit
sharing plan and a money-purchase pension plan. Both
plans are non-contributory plans.
The money-purchase pension plan was adopted on June 1,
1990 and provides benefits to employees after one year
of service and upon completion of 1,000 hours of
service each year. The required contribution under
this plan is five-percent of compensation of all
employees who qualify.
Contribution to the defined contribution profit
sharing plan is discretionary up to a maximum of
fifteen-percent of compensation of eligible employees
after one year of service and upon completion of 1,000
hours of service each year.
Amounts charged against income for the retirement
benefit plans are as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Profit sharing $ 40,000 $ 37,000
Money-purchase 26,560 27,122
$ 66,560 $ 64,122
</TABLE>
(12) LEASE
The Company leases a portion of the land on which the
mortuary is situated from the Herman S. Hosoi Trust and
the Hosoi-Tamori-Shimonishi Trust (Trusts) which
respectively owns a 13% and 12% interest in the land.
As a group, members of the Hosoi family own
approximately 46.2% of the outstanding shares of the
Company. The lease which was for a term of five years
expired on May 31, 1994. In August 1997 the terms for
the five year option renewal period , retroactive to
June 1, 1994, were agreed upon between the Company and
the Trusts. The retroactive agreement provides for an
annual lease rent of $312,498, including general excise.
In addition, the
F - 18
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(12) LEASE (CONTINUED)
Company is responsible for the payment of real property
taxes on the share of the property owned by the Trust.
Total rental expense was $356,469 and $356,432 in 1998
and 1997, respectively.
Future minimum lease payment under the lease at May 31,
1998 for the year ending May 31, 1999 is $312,498.
On April 24, 1992, the Company entered into an operating
lease for a hearse. The term of the lease is 60 months
which expired on August 21, 1997. The noncancellable
operating lease required monthly payments of $1,151. The
lease agreement also required that the Company pays all
costs of operating the vehicle. Lease rent expense was
$2,302 and $13,812 for 1998 and 1997.
(13) OTHER INCOME
Other income consists of the following:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Interest $ 104,092 $ 74,431
Capital gains and dividends 17,589 10,964
Net gains from sale of securities 104,819 53,622
Parking 32,004 39,597
Others 20,377 13,886
Total other income $ 278,881 $ 192,500
</TABLE>
F - 19
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(14) CASH FLOW SUPPLEMENTARY DISCLOSURE
Cash payments for interest and income taxes were
as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Interest $ - $ 2,559
Income taxes $ 205,629 $ 154,967
</TABLE>
The Company had a non cash transaction during the year
ended May 31, 1997 consisting of the surrender of a
life insurance policy on the life of the former
President for $64,317 which was used to purchase an
insurance policy for the Company's current President.
(15) CONCENTRATIONS OF CREDIT RISK OF FINANCIAL INSTRUMENTS
The Company's cash and cash equivalents are deposited
with five local financial institutions. For the year
ended May 31, 1998, the Company had deposits in two
financial institutions in excess of the deposit
insurance of $100,000. At May 31, 1998 and 1997, the
Company's uninsured cash balances were $284,051 and
$419,221, respectively.
The Company performs funeral services for deaths
occurring principally on the island of Oahu located in
the State of Hawaii. In the normal course of business
the Company extends unsecured credit to its customers.
(16) PRIOR YEAR ADJUSTMENTS
In October 1996, an Internal Revenue Service's
examination for the year ended May 31, 1995 was
settled. The settlement resulted in income tax
assessments of $26,333 and $3,761 by the Internal
Revenue Service and the Hawaii State Tax Collector,
respectively, which is reflected as an adjustment
to retained earnings.
F - 20
<PAGE>
HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 1998 and 1997
(16) PRIOR YEAR ADJUSTMENTS (CONTINUED)
The Company exercised its option to renew the lease on
the portion of the land owned by the Herman S. Hosoi
Trust and Hosoi-Tamori-Shimonishi Trust as discussed in
Note (12). As a result, retroactive rents for the
fiscal years ended May 31, 1995 and 1996 was reflected
as a liability as of May 31, 1997.
<TABLE>
<CAPTION>
1997
<S> <C>
Rent accrual for May 31, 1995 $ 80,562
Rent accrual for May 31, 1996 80,562
161,124
Less deferred taxes (68,035)
$ 93,089
</TABLE>
(17) SUBSEQUENT EVENT
On July 7, 1998, the Company in partnership with Woolsey
Funeral & Cemetery Services, Inc. formed a limited
liability company named Woolsey-Hosoi Mortuary Services,
LLC (Woolsey-Hosoi) to provide funeral services to
market sectors not previously serviced by the Company.
The Company's initial capital contribution to
Woolsey-Hosoi was $15,000.
F - 21
<PAGE>
GARDEN LIFE PLAN, LTD.
Financial Statements for the Years Ended May 31,
1998 and 1996 and Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
Garden Life Plan, Ltd.:
We have audited the accompanying balance sheets of
Garden Life Plan, Ltd. as of May 31, 1998 and 1997, and
the related statements of income and retained earnings
and of cash flows for the years then ended. These
financial statements are the responsibility of the
Company's management. Our responsibility is to express
an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall,
financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present
fairly, in all material respects, the financial
position of Garden Life Plan, Ltd. at May 31, 1998 and
1997, and the results of its operations and its cash
flows for the years then ended in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
August 5, 1998
-1-
<PAGE>
<TABLE>
GARDEN LIFE PLAN, LTD.
BALANCE SHEETS
MAY 31, 1998 AND 1997
<CAPTION>
ASSETS 1998 1997
<S> <C> <C>
CASH $ 2,516,852 $ 808,750
CERTIFICATE OF DEPOSIT - Restricted (Note 1) 50,000 50,000
ACCOUNTS AND CONTRACTS RECEIVABLE:
Installment contracts receivable, including
amounts maturing after one year 7,037,871 7,592,527
Less equity of trust fund in receivables
(net of overpayments to the trust fund
of $57,095 in 1997) (6,665,404) (6,896,797)
372,467 695,730
Less allowance for cancellations (69,000) (63,000)
303,467 632,730
Trust fund income receivable (Note 2) 4,035,569 3,453,552
Total accounts and contracts receivable 4,339,036 4,086,282
INCOME TAXES RECEIVABLE 44,271 38,271
EQUIPMENT - Net of accumulated
depreciation of $64,492 and $44,584 (Note 1) 31,833 36,626
TOTAL $ 6,981,992 $ 5,019,929
LIABILITIES AND
STOCKHOLDERS' EQUITY 1998 1997
LIABILITIES:
Accounts payable and accrued liabilities $ 155,513 $ 186,463
Due to trust fund 296,225 332,704
Outstanding funeral service coupons (Note 5) 112,524 114,750
Accrued dividends 1,500,000
Deferred income taxes (Notes 1 and 4) 1,710,000 1,290,000
Total Liabilities 3,774,262 1,923,917
STOCKHOLDERS' EQUITY:
Capital stock, authorized, issued and
outstanding, 1,000 shares of no par value 1,000 1,000
Retained Earnings 3,206,730 3,095,012
Stockholders' equity $ 3,207,730 3,096,012
TOTAL $ 6,981,992 $ 5,019,929
<FN>
See notes to financial statements.
</FN>
</TABLE>
-2-
<PAGE>
<TABLE>
GARDEN LIFE PLAN, LTD.
STATEMENTS OF INCOME AND RETAINED EARNINGS
YEARS ENDED MAY 31, 1998 AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
REVENUE:
Income from pre-need funeral plan sales $ 657,525 $ 1,203,895
Less provision for cancellations (40,311) (18,986)
Total revenue 617,214 1,184,909
SELLING AND ADMINISTRATIVE EXPENSES:
Selling 296,219 619,036
Administrative (Note 5) 405,324 393,618
Total selling and administrative expenses 701,543 1,012,654
OPERATING INCOME (LOSS) (84,329) 172,225
OTHER INCOME - Trust fund income 2,666,047 1,641,352
INCOME BEFORE INCOME TAXES 2,581,718 1,813,607
INCOME TAXES (Note 4):
Current 550,000 444,835
Deferred 420,000 565,165
Total income taxes 970,000 1,010,000
NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 1,611,718 803,607
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE (Note 2) 1,574,286
NET INCOME 1,611,718 2,377,893
DIVIDENDS PAID (1,500,000) (1,888,596)
RETAINED EARNINGS, BEGINNING OF YEAR 3,095,012 2,605,715
RETAINED EARNINGS, END OF YEAR $ 3,206,730 $ 3,095,012
<FN>
See notes to financial statements.
</FN>
</TABLE>
-3-
<PAGE>
<TABLE>
GARDEN LIFE PLAN, LTD.
STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 31, 1998 AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,611,718 $ 2,377,893
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in accounting
principle (Note 2) (1,574,286)
Depreciation 19,908 14,721
Deferred income taxes 420,000 565,165
Changes in assets and liabilities:
Contracts receivable - net 329,263 18,450
Trust fund income receivable (582,017) 465,962
Accounts payable and accrued liabilities (30,950) 9,114
Due to (from) trust fund (36,479) 332,704
Outstanding funeral service coupons (2,226) (5,250)
Income taxes receivable (6,000) (126,165)
Net cash provided by operating activities 1,723,217 2,078,308
INVESTING ACTIVITY - Equipment purchases (15,115) (16,078)
FINANCING ACTIVITY - Payment of dividends - (1,888,596)
NET INCREASE IN CASH 1,708,102 173,634
CASH, BEGINNING OF YEAR 808,750 635,116
CASH, END OF YEAR $ 2,516,852 $ 808,750
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for income taxes $ 556,000 $ 571,000
Dividends declared but unpaid as of year end 1,500,000
<FN>
See notes to financial statements.
</FN>
</TABLE>
-4-
<PAGE>
GARDEN LIFE PLAN, LTD.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Garden Life Plan, Ltd. (the "Company")
is owned by Hawaiian Memorial Park Cemetery ("HMPC")
and Hosoi Garden Mortuary, Inc. ("Hosoi"). Each
company owns 50% of Garden Life Plan, Ltd.
BUSINESS - The Company is a sales organization that
sells pre-need mortuary services. Approximately 25%
of each sales contract is paid in cash and the
remainder is paid under an installment contract over
varying terms but usually 60 months. The first 30%
of each contract is earned and recorded as revenue by
the Company. This amount is used to cover the
Company's initial "acquisition costs" (i.e., sales
commissions and administrative costs) and is not
refundable to customers under the terms of the
contract. The remaining 70% is collected by the
Company and paid to Garden Life Funeral Plan Trust
(Trust), a trust administered by Pacific Century
Trust.
If a contract owner dies before the contract is
fully paid, his or her estate must pay the balance
of the contract.
When a contract owner dies, the Trust pays the
mortuary service provider (primarily Hosoi) for
the contracted services at prices stipulated in
the original contract (70% of the contract price).
Such payments are made from Trust principal. The
service provider absorbs any difference between the
actual costs to perform the contracted services and
the amounts received from the Trust under the terms
of the contract. Trust earnings are payable to the
Company and are recorded as income when earned by
the Trust.
REVENUE RECOGNITION - Revenue from pre-need funeral
plan sales is recognized at the date of the sale of
the contract.
CERTIFICATE OF DEPOSIT - Restricted - The certificate
of deposit is held by the State of Hawaii as
collateral for insurance purposes, as an alternative
to the Company obtaining a surety bond.
EQUIPMENT - Equipment consists primarily of computer
equipment and software. Depreciation is calculated
on the straight-line method over the estimated useful
lives of the assets.
INCOME TAXES - Income tax expense includes federal
and Hawaii income taxes. Deferred income taxes are
provided for significant temporary differences
between the financial statement and income tax bases
of assets and liabilities.
ALLOCATION OF EXPENSES - HMPC charges the Company a
management fee to cover allocated facilities and
personnel costs.
-5-
<PAGE>
USE OF ESTIMATES - The preparation of financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements, and the reported amounts of
revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
2. THE TRUST
As the Company collects on its pre-need funeral plan
sales, it is obligated to pay amounts collected in
excess of the first 30% of the original contract
price to the Trust. To ensure that these funds will
be available when the funeral services are performed,
the market value of the Trust assets must equal or
exceed the prospective obligation of the Trust. The
market value of the Trust assets exceeded this
contractual obligation by approximately $4,000,000
and $3,450,000 at May 31, 1998 and 1997,
respectively.
Information relating to Trust investments,
obligations and earnings at May 31, 1998 and 1997
follows:
<TABLE>
<CAPTION>
1998 1997
Market Market
INVESTMENTS Cost Value Cost Value
<S> <C> <C> <C> <C>
MAS Pooled Trust -
Fixed Income Fund $ 2,276,400 $2,276,337
Vanguard/Windsor Fund 1,517,600 1,780,706
Foreign Equity Fund 1,517,600 1,763,181
Pacific Capital Growth
Stock Fund 1,517,600 1,695,996
Dodge & Cox Stock Fund 1,517,600 1,677,374
Pacific Capital Growth
& Income Fund 1,517,600 1,675,650
JP Morgan Institutional
Bond Fund 1,669,300 1,659,219
Vanguard Fixed Income
Security Fund Intermediate
Term US Treasury Portfolio 1,669,300 1,648,418
AIM Constellation Fund 758,800 855,675
Putnam Voyager Fund 758,800 854,644
Hawaiian Tax-Free Trust $ 6,081,470 $ 6,149,598
HTCO Income Stock Fund 1,267,931 4,360,269
Pacific Capital Diversified
Fixed Income Fund 3,475,000 3,481,670
HTCO International Fund 190,700 209,681
Cash 841,360 841,360 793,770 793,770
Total - Trust Net Assets $15,561,960 $16,728,560 $11,808,871 $14,994,988
</TABLE>
Effective June 1, 1996, the Trust began recording its
investments at market value. Previously, the Trust
recorded its investments at cost. The cumulative
effect of this change as of June 1, 1996 was an
increase in the trust fund income receivable of
$1,574,286 (net of deferred taxes of $964,885) and is
shown as a "cumulative effect of change in accounting
principle" in the fiscal 1997 statement of income and
retained earnings.
The contractual obligation of the Trust to fund
pre-need funeral plans approximated $12,700,000 and
$11,500,000 at May 31, 1998 and 1997, respectively.
Trust income to be distributed to the Company
-6-
<PAGE>
amounted to $4,035,569, including unrealized
appreciation in the value of the Trust's investments
of $1,166,600, as of May 31, 1998.
The weighted average rate of earnings (including
unrealized gains and losses) on Trust assets
approximated 17% and 11% for the years ended May 31,
1998 and 1997, respectively.
The timing of distribution of the Company's trust
income receivable is generally dependent upon the
market value of the Trust assets in relation to
obligations.
The State of Hawaii requires that an annual
actuarial study be performed on the Trust to
determine if Trust principal along with anticipated
future net earnings are sufficient to meet the future
liability to contract owners. Results of the study
performed as of May 31, 1997 indicate that the value
of the fund exceeds the present value of future
claims. The actuarial study as of May 31, 1998 is
not yet available. However, it is management's
opinion that the value of the fund at May 31, 1998
is sufficient to meet the future obligation to
contract owners.
3. RELATED PARTY TRANSACTIONS
Hosoi is the primary servicing mortuary. Payments
made for services rendered on contracts are made
directly to Hosoi by the Trust and are not reflected
in these financial statements.
The management fee paid to HMPC was $174,000 for the
years ended May 31, 1998 and 1997.
4. INCOME TAXES
A reconciliation between the income tax provision
and the amount computed using the statutory federal
rate of 34% follows:
<TABLE>
<CAPTION>
1998 1997
Amount Percent Amount Percent
<S> <C> <C> <C> <C>
Federal provision at statutory $ 877,784 34.0% $ 616,626 34.0%
Adjusted for:
State income taxes (24,141) (0.9) (22,630) (1.2)
Dividend received deduction (17,938) (0.7) (20,541) (1.1)
Adjustments to prior years' accruals
relating to trust income reporting - 2.4 353,343 19.4
Other 63,292 2.4 16,642 0.9
Provision for federal taxes 898,997 34.8 943,440 52.0
Provision for state taxes 71,003 2.8 66,560 3.7
Total income tax provision $ 970,000 37.6% $1,010,000 55.7%
</TABLE>
The temporary differences which gave rise to
significant portions of deferred taxes at May 31,
1998 and 1997 were adjustments for a change in
accounting method, reserve for cancellations, timing
differences between book and tax recognition of
trust income, and funeral service coupons.
-6-
<PAGE>
The deferred tax assets and liabilities at May 31,
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Deferred tax assets $ 1,029,385 $ 455,475
Deferred tax liabilities (2,739,385) (1,745,475)
Net $ 1,710,000) $(1,290,000)
5. COMPENSATION OF CHARTER MEMBERS
In October 1995, the Company's Board of Directors
moved to compensate its charter members for
relinquishing their status as charter members with
a final distribution consisting of an option to
receive either $250 in cash or a $500 coupon for
future funeral services. Charter members are the
original customers of the Company, who had received
payments from the Company in prior years at the
discretion of the Board of Directors. The option
expired February 29, 1996, at which time all charter
members who had not exercised the $250 cash option
were mailed the $500 coupon for future funeral
services. The Company will pay the servicing
mortuary for such services upon the death of the
charter member and the receipt of the issued coupon.
In fiscal 1996, the Company accrued the $210,500
estimated future cost of the option, and at May 31,
1998, the net present value of future payments on
coupons outstanding approximated $112,500.
******
- -8-
<PAGE>
GARDEN LIFE FUNERAL PLAN TRUST
Statements of Assets and Trust Equity (Modified Cash
Basis) as of May 31, 1998 and 1997, Supplemental
Schedule (Modified Cash Basis) for the Year Ended May
31, 1998 and Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
Garden Life Funeral Plan Trust:
We have audited the accompanying statements of assets
and trust equity (modified cash basis) of Garden Life
Funeral Plan Trust as of May 31, 1998 and 1997.
These financial statements are the responsibility of
the Trust's management. Our responsibility is to
express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
As described in Note 1, these financial statements were
prepared on a modified cash basis of accounting, which
is a comprehensive basis of accounting other than
generally accepted accounting principles.
In our opinion, such financial statements present
fairly, in all material respects, the assets and trust
equity of Garden Life Funeral Plan Trust as of May 31,
1998 and 1997, on the basis of accounting described
in Note 1.
Our audits were made for the purpose of forming an
opinion on the basic financial statements taken as
a whole. The supplemental schedule of trust fund
deposits and withdrawals (modified cash basis) for
the year ended May 31, 1998 is presented for the
purpose of additional analysis and is not a required
part of the basic financial statements. The schedule
is the responsibility of the Trust's management.
Such supplemental schedule has been subjected to the
auditing procedures applied in our audit of the basic
financial statements and, in our opinion, is fairly
stated in all material respects when considered in
relation to the basic financial statements taken as
a whole.
DELOITTE & TOUCHE LLP
August 5, 1998
<PAGE>
GARDEN LIFE FUNERAL PLAN TRUST
</TABLE>
<TABLE>
STATEMENTS OF ASSETS AND TRUST EQUITY (MODIFIED CASH
BASIS) MAY 31, 1998 AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
ASSETS
INVESTMENTS, AT MARKET (Note 1):
MAS Pooled Trust-Fixed Income Fund
(cost of $2,276,400) $ 2,276,337
Vanguard/Windsor Fund (cost of $1,517,600) 1,780,706
Foreign Equity Fund (cost of $1,517,600) 1,763,181
Pacific Capital Growth Stock Fund
(cost of $1,517,600) 1,695,996
Dodge & Cox Stock Fund (cost of $1,517,600) 1,677,374
Pacific Capital Growth & Income Fund
(cost of $1,517,600) 1,675,650
JP Morgan Institutional Bond Fund
(cost of $1,669,300) 1,659,219
Vanguard Fixed Income Security Fund
Intermediate Term US Treasury Portfolio
(cost of $1,669,300) 1,648,418
AIM Constellation Fund (cost of $758,800) 855,675
Putnam Voyager Fund (cost of $758,800) 854,644
Hawaiian Tax-Free Trust (cost of $6,081,470) $ 6,149,598
HTCO Income Stock Fund (cost of $1,267,931) 4,360,269
Pacific Capital Diversified Fixed Income Fund
(cost of $3,475,000) 3,481,670
HTCO International Fund (cost of $190,700) 209,681
CASH INVESTMENTS (Note 1) 841,360 793,770
TOTAL ASSETS $16,728,560 $14,994,988
TRUST EQUITY (Note 2) $16,728,560 $14,994,988
<FN>
See notes to financial statements.
</FN>
</TABLE>
-2-
<PAGE>
GARDEN LIFE FUNERAL PLAN TRUST
NOTES TO FINANCIAL STATEMENTS (MODIFIED CASH BASIS)
MAY 31, 1998 AND 1997
1. SUMMARY OF BUSINESS AND ACCOUNTING POLICIES
Garden Life Funeral Plan Trust (the "Trust") was
established by Garden Life Plan, Ltd., with
Hawaiian Trust Company, Ltd., as trustee, to comply
with Chapter 441 of the Hawaii Revised Statutes
which requires every pre-need funeral licensee
(Garden Life Plan, Limited, the "Licensee") to set
up and maintain one or more trusts to hold,
administer, invest, and distribute pre-need funeral
service funds. Such funds are held in trust for
the contract owner or "trustor" to pay for his or
her contracted funeral services upon death.
The Trust comprises two separate trusts - one for
contracts written prior to 1988 (the "Pre-1988
Trust") and one for contracts written thereafter
(the "Post-1988 Trust"). The financial information
for the Pre-1988 Trust and the Post-1988 Trust has
been combined for this financial presentation.
BASIS OF ACCOUNTING - The statement of assets and
trust equity is prepared on the cash basis, except
that investment funds are stated at market values,
which have been determined by Hawaiian Trust
Company, Ltd., based on the closing market prices
of the underlying portfolio of funds at year end.
Certain revenue and the related assets are
recognized when received rather than when earned,
and certain expenses are recognized when paid
rather than when the obligation is incurred.
Accordingly, the accompanying financial statements
are not intended to present financial position in
conformity with generally accepted accounting
principles.
OPERATION OF TRUST - The Licensee, after recovery
of 30% of the pre-need funeral service contract
price, is required to deposit all subsequent
contract receipts in the Trust. The income from
investments of the Trust is to be distributed to
the Licensee. The principal amount deposited
should not be diminished or withdrawn except in
payment of the funeral services contracted for or
unless reclaimed by the trustor if the contract
is canceled.
CASH INVESTMENTS - Cash investments represent cash
deposited in the trustee's cash management funds.
INCOME TAXES - Investment income, net of Trust
expenses, is to be distributed to the Licensee.
In the case of the Pre-1988 Trust, income tax
attributes related to trust income and expenses
are reported to the Licensee for inclusion in the
Licensee's income tax returns. In the case of the
Post-1988 Trust, the Trust has elected to be
treated as a Qualified Funeral Trust (QFT). The
QFT reports the Trust income and expenses in its
tax returns and pays the related taxes (as an
expense of the Trust). The remainder is
distributed to the Licensee and is recognized as
service income on the Licensee's income tax returns.
-3-
<PAGE>
2. TRUST EQUITY
At May 31, 1998 and 1997, the Trust equity
consisted of:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Income from the Trust to be distributed to
the Licensee in the future $ 4,035,569 $ 3,453,552
Cumulative deposits - net of withdrawals for
funeral services and cancellations 12,692,991 11,541,436
$16,728,560 $14,994,988
</TABLE>
-4-
<PAGE>
GARDEN LIFE FUNERAL PLAN TRUST
SUPPLEMENTAL SCHEDULE OF TRUST FUND DEPOSITS AND
WITHDRAWALS (MODIFIED CASH BASIS)
YEAR ENDED MAY 31, 1998
The following is a summary of the principal deposits
to the Trust and withdrawals from the Trust for the
year ended May 31, 1998:
<TABLE>
<S> <C>
Cumulative deposits at beginning of year - net of
withdrawals for funeral services and cancellations $ 11,541,436
Principal deposits received for the year 1,725,609
Less withdrawals for funeral services and
cancellations for the year (574,054)
Cumulative deposits at end of year - net of
withdrawals funeral services and cancellations 12,692,991
</TABLE>
The following is a summary of principal amounts
received by the Licensee and principal deposits
made to the Trust for the year ended May 31, 1998: The
amounts reflected for principal receipts by the
Licensee represent the sales price of contracts sold
reduced by the first 30% of such sales prices which
is retained by the Licensee.
<TABLE>
<CAPTION>
Principal
Deposits
Principal to Trust
Receipts by (As recorded
the Licensee by Trust
<S> <C> <C>
June 1997 $ 127,724 $ 332,704
July 162,256 67,157
August 119,839
September 193,244 162,387
October 146,025 313,083
November 134,095
December 140,322 280,120
January 1998 143,737
February 116,060 140,322
March 170,039 259,797
April 149,488
May 146,737 170,039
Total $ 1,749,566 $ 1,725,609
<FN>
Principal deposits to the Trust as of May 31, 1997 were
overpaid by $57,095. The Licensee reduced the June
1997 principal deposit to reflect the overpayment.
Other adjustments totaling $3,341 were reflected in the
June and July 1997 principal deposits to the Trust. The
principal due the Trust at May 31, 1998 of $296,225 was
subsequently paid to the Trust by the Licensee.
</FN>
</TABLE>
-5-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from the balance sheets and the
statements of income filed as part of the annual report
on Form 10-KSB and is qualified in its entirety by
reference to such annual report on Form 10-KSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> MAY-31-1998
<CASH> 498,871
<SECURITIES> 773,464
<RECEIVABLES> 353,528
<ALLOWANCES> 78,740
<INVENTORY> 149,268
<CURRENT-ASSETS> 2,810,515
<PP&E> 1,524,560
<DEPRECIATION> 67,340
<TOTAL-ASSETS> 6,886,870
<CURRENT-LIABILITIES> 420,929
<BONDS> 0
0
0
<COMMON> 437,428
<OTHER-SE> 5,859,930
<TOTAL-LIABILITY-AND-EQUITY> 6,886,870
<SALES> 2,664,488
<TOTAL-REVENUES> 2,664,488
<CGS> 2,100,550
<TOTAL-COSTS> 2,100,550
<OTHER-EXPENSES> 710,923
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 502
<INCOME-PRETAX> 131,394
<INCOME-TAX> 38,781
<INCOME-CONTINUING> 92,613
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 851,803
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
</TABLE>