SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K405/A
AMENDMENT NO. 1
Filed Pursuant to Section 12, 13, or 15(d) of the
Securities Exchange Act of 1934
AMFAC/JMB HAWAII, INC.
-------------------------------
(Exact name of registrant as specified in its charter)
Commission File No. 33-24180 IRS Employer Identification
No. 99-0217738
AMFAC/JMB FINANCE, INC.
(Exact name of registrant as specified in its charter)
Commission File No. 33-24180-01 IRS Employer Identification
No. 36-3611183
The undersigned registrant hereby amends the following
section of its Report for the year ended December 31, 1996 on
Form 10-K405 as set forth in the pages attached hereto:
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for the Company's and Finance's Common
Equity and Related Security Holder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
AMFAC/JMB HAWAII, INC.
AMFAC/JMB FINANCE, INC.
BY: GARY SMITH
Gary Smith
Vice President and
Principal Accounting Officer
Dated: August 8, 1997
ADDITIONAL REGISTRANTS (1)
Address, including,
zip code,
Exact name of State or other IRS and telephone number,
registrant as jurisdiction of Employer including area code of
specified in its incorporation or Identification registrant's principal
Charter organization Number executive offices
Amfac Property Hawaii 99-0150751 900 North Michigan Avenue
Development Corp. Chicago, Illinois 60611
312/440-4800
Amfac Property Hawaii 99-0202331 900 North Michigan Avenue
Investment Chicago, Illinois 60611
Corp. 312/440-4800
Amfac Sugar and Hawaii 99-0185633 900 North Michigan Avenue
Agribusiness, Chicago, Illinois 60611
Inc. 312/440-4800
Kaanapali Water Hawaii 99-0185634 900 North Michigan Avenue
Corporation Chicago, Illinois 60611
312/440-4800
Amfac Agri- Hawaii 99-0176334 900 North Michigan Avenue
business, Inc. Chicago, Illinois 60611
312/440-4800
Kekaha Sugar Hawaii 99-0044650 900 North Michigan Avenue
Company, Chicago, Illinois 60611
Limited 312/440-4800
The Lihue Hawaii 99-0046535 900 North Michigan Avenue
Plantation Chicago, Illinois 60611
Company, 312/440-4800
Limited
Oahu Sugar Hawaii 99-0105277 900 North Michigan Avenue
Company, Chicago, Illinois 60611
Limited 312/440-4800
Pioneer Mill Hawaii 99-0105278 900 North Michigan Avenue
Company, Chicago, Illinois 60611
Limited 312/440-4800
Puna Sugar Hawaii 99-0051215 900 North Michigan Avenue
Company, Chicago, Illinois 60611
Limited 312/440-4800
H. Hackfeld Hawaii 99-0037425 900 North Michigan Avenue
& Co., Ltd. Chicago, Illinois 60611
312/440-4800
Waiahole Hawaii 99-0144307 900 North Michigan Avenue
Irrigation Chicago, Illinois 60611
Company, 312/440-4800
Limited
Waikele Golf Hawaii 99-0304744 900 North Michigan Avenue
Club, Inc. Chicago, Illinois 60611
312/440-4800
1) The Additional Registrants listed are wholly-owned
subsidiaries of the registrant and are guarantors of the
registrant's Certificate of Land Appreciation Notes due
2008.
TABLE OF CONTENTS
Page
PART I
Item 1. Business 1
Item 2. Properties 7
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
PART II
Item 5. Market for the Company's and Finance's Common
Equity and Related Security Holder Matters 13
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 8. Financial Statements and Supplementary Data 30
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 59
PART III
Item 10. Directors and Executive Officers of the Registrant 59
Item 11. Executive Compensation 62
Item 12. Security Ownership of Certain Beneficial Owners and
Management 63
Item 13. Certain Relationships and Related Transactions 63
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 65
SIGNATURES 71
PART I
Item 1. Business
All references to "Notes" are to Notes to the
Consolidated Financial Statements contained in this report.
Amfac/JMB Hawaii, Inc. (the "Company"), has assets
substantially all of which are agricultural and developmental
real property and related assets located in Hawaii. The
Company is an affiliate of JMB Realty Corporation ("JMB") as a
result of the 1988 merger (the "Merger") of an affiliate of
JMB into Amfac, Inc. ("Amfac"), the former parent corporation
of the Company (see Note 1 for discussion of Amfac, Inc.
merger into its parent, Northbrook Corporation, in May 1995),
and the subsequent merger of a subsidiary of such affiliate
into Amfac Hawaii, Inc., which (after changing its name to
Amfac/JMB Hawaii, Inc.) continues as the surviving
corporation. Unless otherwise indicated, references herein to
the Company shall include the Company's subsidiaries.
The assets of the Company, held primarily through its
wholly-owned subsidiaries, consist principally of
approximately 46,700 acres of land, portions of which include
acreage (i) in the process of development into residential,
resort, commercial and industrial projects, (ii) currently
being managed and operated as recreational facilities, and
(iii) used in connection with the cultivation and processing
of agricultural products, principally sugar cane and related
sugar products. In addition, the Company leases approximately
55,300 acres of land used primarily in the production of sugar
cane and for access to water sources.
The real properties owned by the Company are located on the
four principal islands of the State of Hawaii: Oahu, Maui,
Kauai and Hawaii. The Company has no real property located
outside of the State of Hawaii. The Company's real properties
are described in more detail under Item 2 below.
The real estate development and agricultural operations
of the Company comprise its two primary industry segments,
"Property" and "Agricultural", respectively. The Company
segregates total revenues, operating income (loss), total
assets, capital expenditures and depreciation and amortization
by each industry segment.
At December 31, 1996, the Company employed 967 persons.
PROPERTY. The Company is attempting to maximize the
value of its owned land through land use planning, management
and development. Such planning, management and development
take into account local zoning and economic and political
constraints in order to obtain the necessary land use
designations for development and realize appreciated values.
The Company also pursues opportunities, to the extent
economically advantageous, to sell undeveloped and partially
developed parcels of land, to develop directly the
improvements at a particular property and, in some instances,
to enter into joint venture arrangements for its land
development activities. The Company's land holdings on Maui
and Kauai are its primary sources of future land sale
revenues. However, as further discussed below, due to current
market conditions, the difficulty in obtaining land use
approvals and the high development cost of required
infrastructure, the planned development of these land holdings
and the ability to generate cash flow from these land holdings
are expected to be long-term in nature.
Current Market Conditions. The Hawaii economy took a
severe downturn in late 1990, which was around the same time
as the Persian Gulf War, the end of the Japanese "bubble
market" (paper wealth in dollars nearly doubled in Japan from
1986 to 1988, which led to significant investment and
speculation in Hawaii real estate) and the slowdown
experienced in California's economy. This combination of
events followed nine years of growth in Hawaii. The real
estate market in Hawaii has been negatively impacted by the
aforementioned events and has been considered to be in a
"slump" for the past six years, as demonstrated by general
decreases in the volume of transactions and a stagnation or
decrease in the perceived value and pricing for certain types
of real estate. A rebound in the real estate, in general, is
expected to be dependent on improvements in Hawaii's economy
and the strengthening of Japan's and California's economies,
which have been the propellants of Hawaii's economy since
statehood.
Difficulties in Obtaining Land Use Approvals. The
Company's real estate development approach is intended to
enhance the value of its real property in successive phases.
The determination of whether to develop a property is based on
factors such as location, physical characteristics,
demographic patterns and perceived absorption rates, as well
as regulatory and environmental considerations, zoning,
availability of utilities and governmental services and
estimated profitability. Generally, once the determination
has been made to develop a property, the first step is to
design a master development plan. The Company then seeks to
obtain regulatory and environmental approvals. The approval
process, which requires a lengthy period of time (often at
least three to five years), is a major factor in determining
the viability and prospects for profitability of the Company's
various development projects.
The first phase in the regulatory approval process
usually consists of obtaining proper state land use
designations and County planning and zoning approvals for the
intended development. Occasionally, environmental and special
management area approvals will be required, particularly if
the property borders the shoreline. Additionally, certain
other permits and approvals (such as grading permits, building
permits and subdivision approvals) must then be obtained.
All of the Company's development projects are subject to
approval and regulation by various federal, state and county
agencies, especially as it relates to the nature and extent of
improvements, zoning, building densities, environmental
impacts and in some instances marketing and sales. Generally,
governmental entities have the right to impose limits or
controls on growth in communities through limited land use
designations, restrictive zoning, density reduction, impact
fees and development requirements. Such limits and controls
have materially affected, and in the future may affect
materially, the utilization of the Company's real properties
and the costs associated with developing such properties.
Land use in Hawaii is regulated by both the State of
Hawaii and each county (Hawaii, Kauai, Maui and Oahu), each in
accordance with its own general set of objectives and
policies. At the State level, all land is classified into
four major land use districts: urban, rural, agricultural and
conservation. The Company believes that it will generally be
able to pursue development of that portion of its land for
which it has or can reasonably obtain an urban district
classification. Conservation land is that land which is
necessary for preserving natural conditions (e.g., watershed
or prevention of soil erosion) and, hence, generally cannot be
developed. Agricultural and rural districts are not permitted
to have concentrated development. Certain lands, particularly
shoreline parcels, are subject to special regulatory scrutiny.
For these lands, the Company must obtain additional federal,
state and/or county approvals, including a special management
area permit from the county in which such land is located.
Certain other approvals are also necessary once zoning has
been obtained. Obtaining any and all of these approvals can
involve a substantial amount of time and expense, and
approvals may need to be resubmitted if there is any
subsequent, substantial deviation from previously submitted
plans.
High Development Cost of Required Infrastructure. In
connection with seeking approvals for its development plans,
the Company has been required (and may be required in the
future) to make significant improvements in public facilities
(such as roads, water mains, sewer lines, etc.), to dedicate
property for public use, to provide employee and affordable
housing units and to make other concessions (monetary and
otherwise). The expenditures for infrastructure are generally
significant and usually required early in the project
development process. The ability of the Company to perform its
development activities may be materially adversely affected by
state or county restrictions or conditions that may be imposed
in certain communities because of inadequate public facilities
(such as roads and sewer facilities) and/or by local
opposition to continued growth.
Approximately 1,800 acres of the land owned by the
Company are currently classified as urban district by the
State of Hawaii Land Use Commission and have various zoning
and land use approvals for residential, resort, commercial and
industrial development, including approximately 500 acres for
the Company's three existing golf courses. Of the remaining
1,300 acres, approximately 550 acres relates to a master
planned community the Company is planning to develop on Kauai,
approximately 300 acres relates to the Puukolii Village
project on Maui, approximately 240 acres relates to the South
Beach Mauka project on Maui, approximately 60 acres relates to
the project planned on the mill site of Oahu Sugar Company and
the remaining approximately 100 acres relates to various land
parcels on Maui, Kauai and Hawaii. Each of the aforementioned
development projects are described in "Item 2.- Properties" of
the Form 10-K. Additional governmental approvals, permits and
certifications will be required to be obtained with respect to
each of the projects as part of the development process.
There can be no assurance, however, that all of the necessary
approvals or permits will be obtained.
An additional 2,100 acres of Company-owned land are in
the preliminary planning stages for urbanization and potential
future sale or development. Such acreage represent three
different projects areas on Maui, which are primarily
classified for agricultural use at the state and county
levels. The Company intends to sell or develop all of such
land in connection with various residential, resort,
commercial and light industrial projects. The Company's
development projects may be affected by competition from other
projects of a similar nature in Hawaii, as well as from other
states or countries offering resort-type properties.
The Company is subject to a number of statutes imposing
registration, filing and disclosure requirements with respect
to its residential real property developments including, among
others, the Federal Interstate Land Sales Full Disclosure Act,
the Federal Consumer Credit Protection Act and the State
Uniform Land Sales Practices Act.
During 1994, the Company derived a significant portion of
its property revenues from the sale of residential land
parcels to Schuler Homes, Inc., a local home builder in
Hawaii, as part of the development and sale of the Company's
Waikele project on Oahu, which was substantially completed in
1994. The Company did not derive a significant portion of its
property revenues from any single customer during 1995 or
1996.
The Company currently owns no patents, trademarks,
licenses or franchises which are material to its business.
AGRICULTURE. Substantially all of the Company's
agricultural activities relate to the cultivation and
processing of sugar cane. The Company owns and operates two
sugar plantations on Kauai and one sugar plantation on Maui.
Approximately 9,200 acres of the Company's land holdings and
approximately 14,800 acres of land leased by the Company are
currently under cultivation. The remaining approximately
77,900 acres of owned and leased land are predominantly
conservation land and land appurtenant to the cultivation of
sugar cane and are not used to generate significant
incremental revenues.
During 1995, the Company implemented plans to restructure
its sugar operations to improve efficiencies and reduce costs,
including consolidation of the operations at its two Kauai
plantations and changing to a seasonal mode of operation at
each of its plantations (consistent with many other sugar
operations). The 1995 restructuring of the Company's sugar
operations resulted in a reduction in staffing of
approximately 260 positions, which is an approximately 30%
decrease from 1994 and a reduction in annual employment costs
of approximately $4.2 million, which is an approximately 14%
decrease from 1994. The Company incurred and recognized costs
of approximately $1.8 million in 1995 related to the
restructuring.
The Company's sugar plantation subsidiaries sell their
raw sugar production to the Hawaiian Sugar and Transportation
Company ("HSTC"), which is an agricultural cooperative owned
by the major Hawaii producers of raw sugar (including the
Company), under a marketing agreement. HSTC sells the raw
sugar production to the California and Hawaiian Sugar Company
("C&H") pursuant to a long-term supply contract. The terms of
the supply contract do not require a specified level of
production by the Hawaii producers; however, HSTC is obligated
to sell and C&H is obligated to purchase any raw sugar
produced. HSTC returns to its raw sugar suppliers proceeds
based upon the domestic sugar price less delivery and
administrative costs. The Company recognizes revenues and
related cost of sales upon delivery of its raw sugar by HSTC
to C&H.
The price of raw sugar that the Company receives is based
upon the price of domestic sugar (less delivery and
administrative costs) as currently controlled by U.S.
Government price supports legislation. On April 4, 1996,
President Clinton signed the Federal Agriculture Improvement
and Reform Act of 1996 ("the Act"). The Act, which expires in
2002, keeps the "loan rate" at 18 cents per pound. The "loan
rate" refers to the minimum sugar price established by the
government, which is supported primarily by the setting of
import quotas. In addition, if prices fall below such minimum,
the sugar grower is able to receive a 18-cent-a-pound loan,
using their crop as collateral, and either repay the loan
(with interest) or forfeit the sugar. However, the Act
includes certain other adjustments to the sugar program
including making crop loans recourse to the producer and
repealing marketing allotments which may over time depress the
domestic price of raw sugar. There can be no assurance that,
in the future, the government price support will not be
reduced or eliminated entirely. Such a reduction or
elimination of price supports could have a material adverse
affect on the Company's agriculture operations, and possibly
could cause the Company to evaluate the cessation of its
remaining sugar cane operations.
In August 1993, the Company announced its plans to phase
out the sugar operations at its Oahu Sugar Company by mid-
1995, such phase out coinciding with the expiration of its
major land lease on Oahu. Oahu Sugar, which operated almost
entirely on leased land, had incurred losses in its sugar
operations in prior years and expected those losses to
continue in the future. Losses from operations at Oahu Sugar
totaled approximately $7.6 million for the three-year period
ended December 31, 1993. Oahu Sugar completed the final
harvest of its crop in April 1995. The Company has shutdown
Oahu Sugar and any estimated future costs related to the shut
down are not expected to have a material adverse effect on the
financial condition or results of operations of the Company.
Such future costs primarily relate to the Company's obligation
to, in general, restore the land it had been leasing to its
original condition. The Company is currently pursuing
development of the fee simple land it owns adjacent to the
Oahu Sugar mill site, including seeking the necessary
government approvals for a light industrial subdivision for a
portion of the property, as discussed below.
The sugar industry in Hawaii has experienced significant
difficulties during the past several years. Growers in Hawaii
have struggled with the high costs of production, which have
led to the closure of several plantations, including the
Company's sugar operations on Oahu in 1995. The Company has
tried to address these challenges through a number of
different measures, including the restructuring in 1995 that
was previously discussed.
While the above-noted changes have helped to reduce
expenses, the Company must continue to explore alternatives to
further address the high costs of sugar production. One such
alternative relates to the three-year labor contract the
Company has with its sugar plantation employees, which expires
in February 1998. Within the contract is a provision that
allows the Company and the union to renegotiate wages in 1997.
In light of the difficulties the Company has had in trying to
improve the operating results of its sugar business,
management has been meeting with union representatives to
discuss appropriate wage levels. After discussions and
negotiations with the union, it was agreed that wages would
remain at the current levels until the end of the contract.
This agreement is subject to ratification by the union
membership. The Company and the union have tentatively agreed
to return to the bargaining table during the summer of 1997 to
negotiate the terms for a new contract which will begin in
1998. Although the Company is hopeful that it will reach
agreement on contract modifications that would help improve
the viability of its sugar plantations, there can be no
assurance that sufficient changes will be agreed upon.
In September 1992, Hurricane Iniki struck the Island of
Kauai, causing considerable damage and loss to the people and
businesses on Kauai. The Company has two sugar plantations on
Kauai, both of which sustained considerable damage. Both
plantations were able to restart operations shortly after
Hurricane Iniki and are now fully operational. The Company's
real estate assets on Kauai suffered very little damage, since
most of the Company's development expenditures up to that time
had been focused on the islands of Oahu and Maui. The Company
settled its insurance claims in 1995 for the damage suffered
and collected approximately $30 million in proceeds over the
three year period subsequent to the hurricane.
In the past, the Company has considered various uses for
its sugar-growing lands, such as alternative crops, to address
the uncertainty of the long-term viability of the sugar
industry. Although the Company still continues to explore
alternative crops, including cultivating approximately 500
acres of coffee trees on Maui, alternative crops remain an
insignificant portion of the Company's agriculture segment.
The principal competitive factors in the Company's sugar
agricultural business are price, sugar yields, processing
capabilities, technological know-how and delivery. In
addition, the Company's agricultural business must contend
with high labor costs and with transportation expenses of
shipping its raw sugar from Hawaii to the C & H refinery in
California.
As part of the Company's agriculture operations, the
Company enters into commodities futures contracts and options
in sugar as deemed appropriate to reduce the risk of future
price fluctuations in sugar. These futures contracts and
options are accounted for as hedges and, accordingly, gains
and losses are deferred and recognized in cost of sales as
part of the production cost.
Except for C&H (through the Company's interest in HSTC,
as discussed above), there is no single agricultural customer
of the Company the loss of which would have a material adverse
effect on the Company. C&H is contractually bound to purchase
all of the sugar the Company produces. If, for any reason,
C&H were to cease its operations, the Company would seek other
purchasers for its sugar.
The Company historically has been involved in the
production of energy through the burning of bagasse, the
fibrous by-product from sugar cane processing, in the
Company's sugar plantations' boilers. The Company is
currently using these boilers to generate electrical energy
and steam for the sugar plantations' own consumption and for
the sale of the excess energy, if any, to the local public
utilities, pursuant to power purchase agreements entered into
between the Company's plantations and the utility companies.
Gross revenues related to such arrangements totaled
approximately $5.2 million, $4.6 million, and $4.9 million for
1996, 1995 and 1994, respectively.
WATER RESOURCES. On the islands of Kauai, Oahu and Maui,
the Company controls approximately 300 million gallons of
water per day, 100 million gallons of water per day on land
which the Company owns and the remainder on land which is
leased by the Company. The Company also owns extensive civil
engineering improvements including tunnels, ditches and pumps
which distribute water. Most of the Company's water is
currently used for irrigating sugar cane. If sugar cane
cultivation is curtailed, water resources may become available
for other uses. However, there can be no assurance that the
Company will be able to apply the water that it currently
controls to other uses since landowners' rights under laws
governing the use and ownership of water in Hawaii, especially
as it pertains to surface water, are restricted and unsettled
in many respects.
The Company must maintain access to its significant water
sources to conduct its agricultural operations and, in many
cases, must demonstrate a sufficient supply of water in order
to obtain land development permits. The Company believes that
it has sufficient water sources for its present and planned
uses; however, there can be no assurance that the Company
will be able to retain or obtain sufficient water rights to
support all of its current or future development plans.
The Company owns the Waiahole Ditch, which is a series of
tunnels and ditches (constructed in the early 1900's) that
collects and has the capacity to transport in excess of twenty
million gallons of water per day from the windward part of
Oahu to the central Oahu plain on the Leeward side of the
Koolau mountain range. The Company has filed a petition with
the State of Hawaii Water Commission (the "Commission") for
continued use of water that flows through the Waiahole Ditch
and is currently waiting for a decision from the Commission
regarding such petition. Water from the Waiahole Ditch had
previously been used to irrigate sugar cane by Oahu Sugar
Company, a wholly-owned subsidiary of the Company. With the
closure of the Company's sugar operations on Oahu, the Company
had to apply for a new use permit for the Waiahole Ditch
water. The Company is seeking to realize significant value
from this extensive ditch system by finding alternate end
users for the water. The State of Hawaii favors continuation
of the flow of water through the Waiahole Ditch for many
reasons, among them being the recharge of the central Oahu
aquifer and the fact that central Oahu is one of the fastest
growth areas in the State. However, there are a number of
individuals and certain environmental groups that oppose the
continued flow of water in the Waiahole Ditch and want the
water to remain on the windward side of Oahu. There has been
an interim determination by the Water Commission that over one-
half of the Waiahole Ditch water must remain on windward Oahu
temporarily. A final decision from the Water Commission is
expected late in the second quarter of 1997. There can be no
assurance that the Water Commission will issue long-term use
permits to the Company or to potential users on the leeward
side. Although an adverse decision from the Water Commission
could result in a significant decline in the market value of
the Waiahole Ditch, it would not have a material adverse
effect on the Company's results of operations or on its
financial condition.
AMFAC/JMB FINANCE, INC. Amfac/JMB Finance, Inc.
("Finance") is a wholly-owned subsidiary of Northbrook
Corporation ("Northbrook"). The sole business of Finance is to
repurchase, upon request of the holders thereof, the
Certificate of Land Appreciation Notes ("COLAS") pursuant to
the Repurchase Agreement. In connection with such repurchase
obligations of Finance, Northbrook has agreed to contribute
sufficient capital or make loans to Finance pursuant to a Keep-
Well Agreement, to enable Finance to meet its repurchase
obligations of the COLAS. For a description of such
obligations pursuant to the Repurchase Agreement and the Keep-
Well Agreement referred to above, see Notes 2 and 3 of Notes
to Balance Sheets of Finance. For a description of the COLAS,
see Note 5 of Notes to Consolidated Financial Statements of
the Company.
Item 2. Properties
LAND HOLDINGS. The major real properties owned by the
Company are described below by island.
(a) Oahu
At December 31, 1996, the Company owned approximately 800
acres of land on Oahu. These consist of approximately 136
acres for the Waikele Golf Course at Waikele, approximately 60
acres at the Oahu Sugar Company mill- site in Waipahu,
approximately 500 acres on the northeastern, watershed area of
windward Oahu (which have been designated by the State as
conservation lands) and certain other land parcels.
Waikele is a master-planned community developed by the
Company. It is situated on 577 acres of land located adjacent
to Waipahu, a rapidly growing town eight miles west of
downtown Honolulu, and at the intersection of Oahu's two major
highways. Construction of the Waikele Project commenced in
1989 and includes approximately 2,900 residential units on 19
parcels, a retail commercial center and an 18-hole golf
course. The development of the commercial center at Waikele
is complete, while development of residential units, ranging
from multi-family units to single-family homes, is continuing
and is expected to be completed by the end of 1998. All of
the residential land in Waikele was sold to 3 builders from
1990 through 1994. The Company sold the land used for the
retail commercial center in 1992. The Waikele golf course,
which is still owned by the Company, opened for public play in
May 1993. Waikele competes with other master-planned
communities on Oahu.
The Company expended approximately $1.3 million, $.5
million and $3.0 million in 1996, 1995 and 1994, respectively,
for project costs at Waikele. Such costs include construction
of roadways, utilities and related infrastructure improvements
and the golf course and clubhouse. On a cumulative project-to-
date basis, the Company has expended approximately $157
million on project costs and completed sales at Waikele of
approximately $231 million. Project costs include land
purchase costs, of which, approximately $39 million was
allocated at the time of the Merger in November 1988 (see Note
1 of Notes to the Consolidated Financial Statements of the
Company) to the portion of the Waikele project that has been
sold. Such sales have included commercial property and parcel
sales to home builders. Except for certain contingent
participation rights, the Company has already received all of
its proceeds from the sales of the residential and commercial
parcels at Waikele.
The Company is currently developing the approximately 60
acres of fee simple land it owns at the mill-site of Oahu
Sugar Company (which was shut down in 1995). The Company has
received zoning for a light industrial subdivision on a 37-
acre portion of the property, which excludes property
containing the sugar mill and adjacent buildings. In
connection with the development of this property, the Company
has received state land use urbanization for the entire 60-
acre site. Marketing of parcels within the light industrial
subdivision is slated for mid-to-late 1997 after the
subdivision is complete. In addition, the Company has begun
the process of seeking the necessary government approvals for
the redevelopment for the remainder of the mill-site parcels,
including planned commercial, public and quasi-public uses.
During 1996, the Company sold approximately 3 acres on
Oahu for $1 million, and received $.3 million for certain
contingent participation rights at Waikele.
(b) Maui
On the island of Maui, the Company owns approximately
13,800 acres of land, most of which is currently in
agriculture or classified as conservation land. Approximately
all of the Company's land holdings are located on West Maui
near the Kaanapali Beach Resort area. Approximately 900 acres
in West Maui are presently designated urban and zoned for
resort and residential development, including approximately
320 acres comprising the two Kaanapali Golf Courses. The
Company is currently pursuing development approvals for
portions of the surrounding acreage.
In March 1991, the Company received final land use
approval from the State for development of approximately 240
residential lots on approximately 125 acres of land, known as
"South Beach Mauka" and located adjacent to the existing
Kaanapali Beach Resort. In connection with this land use
approval, the Company is committed to providing additional
housing on Maui in the affordable price range and to
participating in the funding of the design and construction of
the planned bypass highway extending from Lahaina to the north
end of Kaanapali. The Company has entered into a development
agreement with the State Department of Transportation covering
the Company's participation in the design and construction of
the bypass highway. It is anticipated that the Company will
expend up to $3.5 million (in the aggregate), of which $2.2
million has been spent as of December 31, 1996, in the design
of the bypass highway and widening of the existing highway.
The Company is marketing Kaanapali Golf Estates, a residential
community that is part of South Beach Mauka adjacent to the
Kaanapali Beach Resort in West Maui. During 1996, the Company
sold 18 homesites for approximately $5.5 million, which
includes 10 homesites to a developer who plans to construct
and sell houses on these lots. The Company currently has 6
homesites on the market, which are priced at approximately $.5
million each.
During 1993, the Company obtained final land use approval
from the State, and certification through the State's Housing
Finance Development Corporation ("HFDC"), for the development
of a project on approximately 300 acres of Company land known
as "Puukolii Village", which is also located near Kaanapali
Beach Resort. A significant portion of the housing in this
project will be in the affordable price range. The final land
use approval and the HFDC development agreement contain
certain conditions which must be satisfied in order for the
Company to develop its lands in future periods. Moreover,
development of most of Puukolii Village cannot commence until
after completion of the state-planned Lahaina bypass highway
(mentioned above). The proposed development of Puukolii
Village is anticipated to satisfy the Company's affordable
housing requirements in connection with the South Beach Mauka
land use approval as well as for the Company's North Beach
property (described below). The Company commenced construction
of infrastructure for Puukolii Village in the last quarter of
1996, beginning with an access road.
The planned development of the Company's land on Maui is
longer term in nature than the time frame experienced at
Waikele. As Maui is less populated than Oahu and more
dependent on the resort/tourism industry, much of the
Company's land is intended for resort and resort-related uses.
Due to overall economic conditions and trends in tourism,
recent demand for these land uses has been relatively weak.
The Company's currently available inventory of homesites on
Maui, which is primarily targeted to the second home buyer,
has experienced very slow sales activity to date. The
Company's competitors on Maui have also experienced slow sales
activity in the second home market. In connection with the
development of North Beach Mauka and adjacent parcels, the
Company has committed an additional $6.7 million for the
construction of the bypass highway, subject to certain
conditions. The development and construction of the bypass
highway is expected to be a long-term project that will not be
completed until the year 2004 or later. The Company has over
300 acres of land in the adjacent North Beach Mauka area,
currently designated by the State Land Use Commission for
agricultural use, but with an underlying project district
designation in the county community plan. The Company plans
to seek State urbanization approval for this land. The Company
is continuing to evaluate its planned products and the timing
of development of its land holdings in light of the current
weak market demand and the capital resources needed for future
development. Concurrently, the Company is evaluating certain
land parcels for bulk sales. These parcels are not considered
strategic to the Company's long-term development plans.
In 1986, the Company entered into a joint venture agreement
with Tobishima Pacific Inc., a wholly-owned subsidiary of a
Japanese company, the purpose of which is to plan, manage and
develop approximately 96 acres of beachfront property at
Kaanapali (known as North Beach). The joint venture (in which
the Company has a 50% interest) has State land use and County
zoning approvals for the subdivision and development of the
infrastructure improvements necessary to accommodate up to
3,200 hotel and/or condominium units on this site. This North
Beach property constitutes nearly all of the remaining
developable beachfront acreage at Kaanapali. In October 1992,
the Company completed construction of a 3-acre park for public
use on the North Beach site, which is part of the master plan
for this property and was a requirement imposed by Maui County
in obtaining certain permits. The development of North Beach
continues to be tied to the completion of the aforementioned
Lahaina bypass highway or other traffic mitigation measures
satisfactory to the Maui County Planning Commission.
The Company is seeking final approvals to develop a time-
share resort on 14 acres of the North Beach property (the
"Site"). A land option/purchase agreement was entered into
with Tobishima in October 1996. This agreement gives the
Company an option to purchase Tobishima's 50% interest in the
Site for $7 million. The Company does not expect to
consummate the purchase until all discretionary land use
permits are received for development of the time-share resort.
In accordance with the land option/purchase agreement, the
Company has made a nonrefundable deposit of $.1 million (which
may be applied to the purchase price) to keep the option
available through September 30, 1997. Additional
nonrefundable deposits may be made to extend the option
through August 31, 2000. The Company has filed development
plans and related information with the County of Maui to
obtain a Special Management Area ("SMA") permit for the time-
share resort. Although there can be no assurance that the SMA
permit will be received (and that if such permit is received,
that its terms and conditions will be acceptable to the
Company), management is optimistic that the Company will
receive the necessary approvals to proceed with the project.
The Company believes that the potential for a successful
time-share development at North Beach will be greatly enhanced
by the involvement of a company with experience in the time-
share business. As a result, on February 1, 1997, the Company
entered into a partnership with affiliates of Interval Resorts
West, the developer of The Ridge Tahoe resort in South Lake
Tahoe, Nevada. The partnership will be responsible for
constructing, developing, operating, maintaining, owning and
managing the time-share resort project. The Company has a
majority ownership interest in the partnership. After receipt
of the SMA permit, the partnership will need to arrange
project financing for the development of the time-share
resort. In addition, the aforementioned land option/purchase
agreement with Tobishima Pacific, Inc. includes short-term
seller financing, which the time-share partnership may decide
to utilize.
In February 1996, the Maui County Council adopted a
Community Plan ordinance for West Maui that does not include
any amendments to the current Community Plan designation of
the Company's North Beach property, thus rejecting the
recommendation of certain citizens groups that wanted two-
third's of North Beach to be downzoned to "Park" designation.
The ordinance was signed by the Mayor of the County of Maui
and became effective on February 21, 1996.
Further, the Department of the Army has determined that
there are two wetlands sites on the North Beach property,
totaling approximately 21,800 square feet. The Company has
retained experts to evaluate these sites and to ensure
compliance with all laws. While there can be no assurance as
to the ultimate determinations with respect to the wetlands
issue, the Company does not anticipate that these sites will
materially adversely affect the development plans for North
Beach.
During 1996, the Company sold 10 acres on Maui for
approximately $8.4 million, including 18 residential lots at
Kaanapali Golf Estates.
The Company also owns and manages the championship
Kaanapali Golf Courses, consisting of a clubhouse and two 18-
hole golf courses located at the Kaanapali Beach Resort.
Approximately 4,900 acres of the Company's land on Maui
are designated as a conservation district.
(c) Kauai
The Company owns approximately 28,700 acres of land on the
island of Kauai, most of which is on the eastern (windward)
side of the island. The large parcels of Company land on
eastern Kauai are predominantly used for sugar cane
cultivation. Approximately 700 acres of this land is zoned for
urban development and approximately 12,300 acres has been
classified as conservation land.
In June 1994, the Company submitted a Land Use Boundary
Amendment Petition with the State of Hawaii Land Use
Commission ("LUC") and a General Plan Amendment Application
with the County of Kauai for the urbanization of approximately
552 acres of land on Kauai currently in sugar cane
cultivation. The Company proposed a project planned to be a
mixed use master planned community which will include a
variety of both affordable and market rate residential units,
commercial and industrial projects and a number of community
and public based facilities. The filing of these land use
applications is the first step required in converting
agriculture zoned land into urban zoned land. There are a
number of additional reports, studies, applications and
permits that will be required before final land use approvals
are obtained. In May 1995, the County of Kauai approved the
Company's General Plan Amendment Application, subject to a
number of conditions. In December 1995, the LUC granted the
land use amendments sought by the Company, subject to a number
of conditions. In May 1996, the Kauai County approved the
Company's application to rezone the project. Before
construction can commence, the Company must satisfy several
conditions imposed during the approval process and obtain
additional administrative development permits for requirements
such as grading and subdivision. The permitting process in
Hawaii has historically been a very difficult, time consuming
and arduous process. There can be no guarantee that all
permits will be obtained. Once construction commences, subject
to market conditions and profitability needs, the project is
expected to span over 20 years.
During 1996, the Company sold, in the aggregate, 711 acres
of miscellaneous land parcels on Kauai for approximately $5.6
million.
(d) Hawaii
The approximately 3,400 acres of land owned by the
Company on the island of Hawaii are located on the eastern
(windward) side of the island, primarily in the Keaau and
Pahoa districts, south of the town of Hilo. Portions of these
lands are currently leased to independent papaya growers. The
Company does not currently have any plans for real property
development on the island of Hawaii, but will continue to
pursue ad hoc parcel sales when opportunities exist.
During 1996, the Company sold, in the aggregate, 3,525
acres of miscellaneous land parcels on Hawaii for
approximately $3.6 million.
LONG-TERM LEASES. Each of the Company's plantation
subsidiaries leases agricultural lands from unrelated third
parties. Such leases vary in length from month-to-month to 9
years and cover parcels of land ranging in acreage from one
acre to 21,474 acres. Certain of such leases provide the
Company, as lessee, with licenses for water use. Almost all
of the leased land of the Company is used in its agricultural
businesses, primarily in connection with the cultivation and
processing of sugar cane, with almost 15,000 acres of leased
land currently under cultivation. Most of the leases provide
for the Company to pay fixed annual minimum rents (ranging
from $13 to $131 per usable acre), plus additional rents based
upon a percentage of gross receipts generated by the Company's
sugar cane operations on such land.
The following summary lists the material agricultural
land leases of the Company's subsidiaries, as lessees, and
certain material terms thereof:
Approximate Current
Current Approximate Annual Additional Rent
Expiration Sugar Cane Gross Minimum as % of Gross Renewal
Lease Date Acreage Acreage Rent Receipts Option
- -------- --------- --------- ----------- ------- ---------- --------
Kekaha month to month 7,926 21,474 $251,500 variable --
Lihue 10/30/99 4,054 6,200 $ 56,370 variable --
Lihue 12/15/02 0 3,106 $ 20,630 none --
Lihue 1/31/95(1) 1,919 5,151 $ 21,500 variable --
Pioneer month to month 889 1,639 $ 51,000 variable --
Pioneer 12/31/05 770 2,509 $100,917 7.25% --
(1) The Company is currently finalizing a new lease with
the lessor.
Item 3. Legal Proceedings
The Company is not involved in any material pending legal
proceedings, other than ordinary routine litigation incidental
to its business. The Company and/or certain of its affiliates
have been named as defendants in several pending lawsuits.
While it is impossible to predict the outcome of the pending
(or threatened) litigation and for which potential liability
is not covered by insurance, the Company is of the opinion
that the ultimate liability from such litigation will not
materially adversely affect the Company's results of
operations or its financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security
holders during 1995 and 1996.
PART II
Item 5. Market for the Company's and Finance's Common Equity
and Related Security Holder Matters
The Company is a wholly-owned subsidiary of Northbrook
Corporation and, hence, there is no public market for the
Company's common stock. Finance is a wholly-owned subsidiary
of Northbrook Corporation and there is no public market for
Finance's common stock.
<TABLE>
Item 6. Selected Financial Data
AMFAC/JMB HAWAII, INC.
For the years ended December 31, 1996, 1995, 1994, 1993 and 1992
(Dollars in Thousands)
<CAPTION>
1996 1995 1994 1993 1992(c)
------ ------ ------- -------- -------
<S> <C> <C> <C> <C> <C>
Total revenues (d) $97,406 101,607 157,963 140,462 230,212
======== ======= ======== ======== ========
Net income(loss)(e) $(34,166) 12,708 (13,033) (509) (60,979)
======== ======= ======== ======== ========
Net income (loss) per share (b)
Total assets $483,605 521,598 614,547 644,711 633,995
======== ======= ======= ======== ========
Amounts due affiliates -
financing $ 103,579 76,911 15,097 15,097 28,098
======== ======== ======= ======== ========
Certificate of Land Appreciation
Notes $220,692 220,692 384,737 384,737 384,737
======== ======== ======= ======== ========
<FN>
(a) The above selected financial data should be read in conjunction with the
financial statements and the related notes appearing elsewhere in this annual
report on Form 10-K.
(b) The Company is a wholly-owned subsidiary of Northbrook Corporation ;
therefore, net loss per share is not presented.
(c) In 1992, the Company adopted Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." The Company elected to immediately recognize the cumulative effect
of the change in accounting for postretirement benefits of $43,442 (after
reduction of income taxes of $26,626), which is reflected in the 1992 net loss.
(d) Total revenues includes interest income of $463 in 1996, $1,288 in 1995,
$1,977 in 1994, $1,070 in 1993 and $1,534 in 1992.
(e) In 1995, the Company recognized an extraordinary gain from the
extinguishment of debt of $32,544 (after reduction of income taxes of $20,807),
which is reflected in 1995 net income.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
All references to "Notes" herein are to Notes to
Consolidated Financial Statements contained in this report.
Liquidity and Capital Resources
A significant portion of the Company's cash needs result
from the nature of the real estate development business, which
requires significant investment in preparing development
plans, seeking land urbanization and other governmental
approvals, and completing infrastructure improvements prior to
the realization of sales proceeds. The Company has funded its
cash requirements to date primarily through the use of short-
term bank borrowings, long-term financing secured by its golf
courses on Maui and Oahu and by a planned real estate project
on Oahu, borrowings from affiliates and revenues generated
from the development and sale of its properties and
investments. Funding of the Company's future cash
requirements is dependent upon obtaining appropriate financing
and revenues generated from the development and sale of its
properties.
In order to generate additional cash flows for the
Company, management has identified certain land parcels that
are not included in the Company's long-term development plans.
During 1996, the Company generated approximately $13.4 million
from non-strategic land sales and an additional $5.5 million
from the sale of 18 lots at the Kaanapali Golf Estates
development on the island of Maui. During 1995, the Company
generated approximately $30.8 million in land sales, most of
which related to non-strategic parcels. In addition, during
1995 the Company received an approximate $1.0 million deposit,
which represents the purchase price for 10 acres on Oahu.
During 1994, the Company generated approximately $44.3
million in property sales primarily from the sale of the last
two remaining residential parcels at the Waikele project on
Oahu for approximately $37 million. In addition, approximately
$2.3 million of 1994 land sales related to the Kaanapali Golf
Estates. The remaining $5.0 million of property sales in 1994
related to non-strategic land sales on the islands of Maui,
Kauai and Hawaii. Additionally, the Company received an
approximate $4.2 million deposit, which represented the
purchase price for 452 acres on Maui.
At December 31, 1996, the Company had cash and cash
equivalents of approximately $8.7 million.
The Company intends to use its cash reserves, sales
proceeds and financing or joint venture arrangements to meet
its short-term (next 12 months) and long-term (beyond the next
12 months) liquidity requirements, which include funding the
remaining development costs at Waikele and on West Maui, Oahu
and Kauai, agricultural deficits, payment of interest expense,
and the repayment of principal on debt obligations, as
necessary. The Company's long-term remaining liquidity is
dependent upon its ability to obtain additional financing and
the consummation of certain property sales. There can be no
assurance that additional long-term financing can be obtained
or property sales consummated. The Company's land holdings on
Maui and Kauai are its primary source of future land sale
revenues. However, due to current market conditions, the
difficulty in obtaining land use approvals and the high
development cost of required infrastructure, the planned
development of these land holdings and the ability to generate
cash flow from these land holdings are longer term in nature
than the time frame experienced at Waikele. Accordingly, if
no such financing can be obtained or additional property sales
consummated, the Company will defer (to the extent possible)
development costs and capital expenditures to meet long-term
liquidity requirements. Additionally, the Company's plans for
property sales may also be adversely impacted by the inability
of potential buyers to obtain financing.
In 1996, net cash used in operating activities of $28.9
million and in investing activities of $8.4 million was
provided by $26.7 of long-term financing from the Company's
parent, $10.0 million in new long-term financing secured by a
mortgage on property under development at the mill-site of
Oahu Sugar (which was partially offset by total principal
payments on other Company long-term debt of approximately $2.4
million) and $3.0 million of cash and cash equivalents.
During 1996, net cash flow used in operating activities
was $28.9 million, compared to net cash provided by operating
activities of $2.7 million in 1995 and $21.9 million in 1994.
The $31.6 million decrease in cash flow related to operating
activities from 1995 to 1996 was due to: (i) an increase in
1996 of the net loss (after adjusting for items not requiring
or providing cash) by $9.8 million; (ii) the repayment or
refinancing into long-term debt in 1996 of operating advances
made in prior years by affiliates totaling $14.0 million, as
compared to $12.8 million of operating advances received by
the Company from affiliates in 1995, resulting in a total
decrease in cash flow of $26.8 million; and (iii) other
changes in cash flow netting to a decrease of $4.7 million,
which related primarily to working capital components, all of
which were partially offset by (iv) a greater decrease in
inventories in 1996 by $9.7 million (resulting in greater cash
flow), as compared to 1995, of which $3.6_ million related to
sales of land classified as inventory, $6.0 million related to
agricultural inventory and the remaining $.1 million related
to other miscellaneous inventories.
The $19.2 million decrease in cash flow related to
operating activities from 1994 to 1995 was due to: (i) an
increase in 1995 of the net loss (after adjusting for items
not requiring or providing cash) by $13.1 million and (ii) a
smaller decrease in inventories in 1995 by $21.1 million
(resulting in less cash flow), as compared to 1994, of which
$13.4 million related to sales of land classified as
inventory, $7.6 million related to agricultural inventory and
the remaining $.1 million related to other miscellaneous
inventories, all of which were partially offset by (iii) an
increase in operating advances in 1995 from affiliates of
$11.8 million and (iv) other changes in cash flow netting to
an increase of $3.2 million, which related primarily to
working capital components.
In 1996, net cash flow used in investing activities
totaled $8.4 million, principally due to property additions
and the incurrence of other capitalizable costs related to
future land development. In 1995, investing activities
provided net cash of $24.4 million, principally due to the
liquidation of $32.0 million of short-term investments, net of
property additions of $5.1 million (a level of spending
comparable to 1996). Included in 1995 was $4.5 million of net
cash flow from property sales, disposals and retirements that
principally related to the sale of certain assets that had
been used to operate Oahu Sugar plantation, which was closed
in 1995. In 1994, investing activities used net cash flow of
$38.8 million, principally due to the increase in short-term
investments by $32.0 million and property additions of $6.8
million.
In 1996, net cash provided by financing activities
totaled $34.3 million, due to the $26.7 of long-term financing
from the Company's parent and $7.6 million of net increase in
borrowings from others, as previously discussed. In 1995, net
cash used in financing activities totaled $47.0 million, which
primarily related to the $105.5 million redemption and
purchase of COLAS, of which $52.0 million was financed by a
long-term borrowing from the Company's parent. During 1995,
the Company borrowed an additional $9.8 million from its
parent to pay COLA interest and other operating needs. In
1994, net cash used in financing activities totaled $3.3
million, which primarily related to an $8.0 million repayment
of the Company's bank line-of-credit (fully repaid in January
1994), offset by an additional funding of $6.6 million related
to its Waikele Golf Course loan.
On December 5, 1988, the Company commenced an offering to
the public of COLAS pursuant to a Registration Statement on
Form S-1 under the Securities Act of 1933. A total of 384,737
COLAS were issued prior to the termination of the offering on
August 31, 1989. The net proceeds received from the sale of
the COLAS totaled approximately $352 million (after deduction
of organization and offering expenses of approximately $33
million). Such net proceeds have been used to repay a portion
of the acquisition-related financing, which was incurred to
pay certain costs associated with the Merger including a
portion of the Merger consideration paid to shareholders of
Amfac.
On March 14, 1989, Amfac/JMB Finance, Inc. ("Finance"), a
wholly-owned subsidiary of Northbrook Corporation
("Northbrook") and the Company entered into an agreement (the
"Repurchase Agreement") concerning Finance's obligations (on
June 1, 1995 and June 1, 1999) to repurchase, upon request of
the holders thereof, the COLAS. The COLAS were issued in
units consisting of one Class A COLA and one Class B COLA. As
specified in the Repurchase Agreement, the repurchase of the
Class A COLAS on June 1, 1995 may have been requested of
Finance by the holders of such COLAS at a price equal to the
original principal amount of such COLAS ($500) minus all
payments of principal and interest allocated to such COLAS.
The repurchase of the Class B COLAS on June 1, 1999 may be
requested of Finance by the holders of such COLAS at a price
equal to 125% of the original principal amount of such COLAS
($500) minus all payments of principal and interest allocated
to such COLAS. Through the date of this report, the
cumulative interest paid per Class A COLA and Class B COLA is
approximately $165 and $165, respectively.
On March 14, 1989, Northbrook entered into a keep-well
agreement with Finance, whereby it agreed to contribute
sufficient capital or make loans to Finance to enable Finance
to meet the COLA repurchase obligations, if any, described
above. Notwithstanding Finance's repurchase obligations, the
Company may elect to redeem any COLAS requested to be
repurchased at the specified price.
On March 15, 1995, pursuant to the indenture that governs
the terms of the COLAS (the "Indenture"), the Company elected
to offer to redeem (the "Redemption Offer") all Class A COLAS
from its registered holders. Pursuant to the Redemption
Offer, and in accordance with the terms of the Indenture, the
Company was therefore obligated to purchase any and all Class
A COLAS submitted pursuant to the Redemption Offer at a price
of $365 per Class A COLA. In conjunction with the Company's
Redemption Offer, the Company made a tender offer (the "Tender
Offer") to purchase up to approximately $68 million principal
value of the Class B COLAS at a price of $220 per Class B COLA
from COLA holders electing to have their Class A COLAS
repurchased. Approximately 229,000 Class A COLAS were
submitted for repurchase pursuant to the Redemption Offer and
approximately 99,000 Class B COLAS were submitted for
repurchase pursuant to the Tender Offer, requiring an
aggregate payment of the Company of approximately $105 million
on June 1, 1995. The Company used its available cash to
purchase Class B COLAS pursuant to the Tender Offer and
borrowed $52 million from Northbrook to purchase Class A COLAS
pursuant to the Redemption Offer. As of December 31, 1996,
the Company had approximately 156,000 Class A COLAS and
approximately 286,000 Class B COLAS outstanding, with a
principal balance of approximately $78 million and $143
million, respectively.
In addition to the $52 million borrowed from Northbrook
to redeem Class A COLAS pursuant to the Redemption Offer (see
Note 5), the Company has also borrowed approximately $18.8
million and $9.8 million during 1996 and 1995, respectively,
to fund COLA Base Interest payments and other operational
needs. These loans from Northbrook are payable interest only,
mature on June 1, 1998 and carry an interest rate per annum
equal to the prime interest rate plus two percent. Pursuant
to the Indenture relating to the COLAS, the amounts borrowed
from Northbrook are considered "Senior Indebtedness" to the
COLAS.
As a result of the COLA repurchases, the Company retired
approximately $164 million face value of debt and recognized a
financial statement gain in the second quarter of 1995 of
approximately $32.5 million (net of income taxes of $20.8
million, the write-off of deferred financing costs of $10.0
million, the write-off of accrued contingent base interest of
$5.7 million and expenses of $.9 million). Such gain was
treated as cancellation of indebtedness income for tax
purposes and, accordingly, the income taxes related to the
Class A Redemption Offer (approximately $9.1 million) were not
indemnified by the tax agreement with Northbrook (see Note 1).
Pursuant to the terms of the Indenture relating to the
COLAS, the Company is required to maintain a Value Maintenance
Ratio of 1.05 to 1.00. Such ratio is equal to the relationship
of the Company's Net Asset Value (defined as the excess of (i)
Fair Market Value of the gross assets of the Company over (ii)
the amount of the liabilities (excluding liabilities resulting
from generally accepted accounting principles enacted
subsequent to the date of the Indenture) of the Company other
than the outstanding principal balance of the COLAS, any
unpaid Mandatory and Contingent Base Interest, and certain
other liabilities, to the sum of (x) the outstanding principal
amount of the COLAS, plus (y) any unpaid Base Interest, plus
(z) the outstanding principal balance of any Indebtedness
incurred to redeem COLAS. The COLA Indenture requires the
Company to obtain independent appraisals of the fair market
value of the gross assets used to calculate the Value
Maintenance Ratio as of December 31 in each even-numbered
calendar year. Accordingly, the Company obtained independent
appraisals of substantially all of its gross real estate
assets as of December 31, 1996; the appraised values of such
assets were sufficient to meet the Value Maintenance Ratio. In
odd-numbered years (during which time appraisals are not
required) the Fair Market Value of the gross assets of the
Company used to compute the Value Maintenance Ratio is
determined by the Company's management. To the extent that
management believes that the aggregate Fair Market Value of
the Company's assets exceeds by more than 5% the Fair Market
Value of such assets included in the most recent appraisal,
the Company must obtain an updated appraisal supporting such
increase. It should be noted that the concept of Fair Market
Value is intended to represent the value that an independent
arm's-length purchaser, seeking to utilize such asset for its
highest and best use would pay, taking into consideration the
risks and benefits associated with such use or development,
current restrictions on development (including zoning
limitations, permitted densities, environmental restrictions,
restrictive covenants, etc.) and the likelihood of changes to
such restrictions; provided, however, that with respect to any
Fair Market Value determination of all of the assets of the
Company, such assets shall not be valued as if sold in bulk to
a single purchaser. There can be no assurance that the
Company's properties can be ultimately sold at prices
equivalent to their appraised values.
In June 1991, the Company obtained a five-year $66
million loan from the Employees' Retirement System of the
State of Hawaii ("ERS"). The nonrecourse loan is secured by a
first mortgage on the Kaanapali Golf Courses, and is
considered "Senior Indebtedness" (as defined in the Indenture
relating to the COLAS). The loan bore interest at a rate per
annum equal to the greater of (i) the base interest rate
announced by the Bank of Hawaii on the first of July for each
year or (ii) ten percent per annum through June 30, 1993 and
nine percent per annum thereafter. The annual interest
payments were in excess of the cash flow generated by the
Kaanapali Golf Courses.
In April 1996, the Company reached an agreement to amend
the loan with the ERS, extending the maturity date for five
years. In exchange for the loan extension, the ERS received
the right to participate in the "Net Disposition Proceeds" (as
defined) related to the sale or refinancing of the golf
courses or at the maturity of the loan. The ERS share of the
Net Disposition Proceeds increases from 30% through June 30,
1997, to 40% for the period from July 1, 1997 to June 30, 1999
and to 50% thereafter. The loan amendment effectively
adjusted the interest rate as of January 1, 1995 to 9.5% until
June 30, 1996. After June 30, 1996, the loan bears interest
at a rate per annum equal to 8.73%. The loan amendment
requires the Company to pay interest at the rate of 7% for the
period from January 1, 1995 to June 30, 1996, 7.5% from July
1, 1996 to June 30, 1997, 7.75% from July 1, 1997 to June 30,
1998 and 8.5% thereafter ("Minimum Interest"). The Company has
made payments in 1996 totaling $6.5 million, which represents
the Minimum Interest due through October 1, 1996. Accrued
Minimum Interest as of December 31, 1996 was $1.2 million. The
scheduled minimum payments are paid quarterly on the principal
balance of the $66 million loan. The difference between the
accrued interest expense and the Minimum Interest payment
accrues interest and is payable on an annual basis from excess
cash flow, if any, generated from the Kaanapali Golf Courses.
The total accrued interest payable from excess cash flow was
approximately $3.2 million as of December 31, 1996. Although
the outstanding loan balance remains nonrecourse, certain
payments and obligations, such as the Minimum Interest
payments and the ERS's share of appreciation, if any, are
recourse to the Company. However, the Company's obligations
to make future Minimum Interest payments and to pay the ERS a
share of appreciation would be terminated if the Company
tendered an executed deed to the golf course property to the
ERS in accordance with the terms of the amendment.
In October 1993, Waikele Golf Club, Inc. ("WGCI"), a
wholly-owned subsidiary of the Company that owns and operates
the Waikele Golf Course, obtained a five year $20 million loan
facility from two lenders. The loan consists of two $10
million amortizing loans. Each loan bore interest only for
the first two years with interest and principal payments based
upon a 20 year amortization period for the remaining three
years. The loans bear interest at prime (8.25% at December
31, 1996) plus 1/2% and LIBOR (5.5% at December 31, 1996) plus
3%, respectively. WGCI received an initial funding of $14
million of which $.6 million was held back by the lenders to
pay interest. In October 1994, in accordance with the loan
agreement, the Company received an additional funding of $6
million (part of the aggregate $20 million) and a release of
the $.6 million interest holdback, both of which were
contingent upon achieving a certain level of Net Operating
Income (as defined) by the golf course during the first six
months of 1994. The loan is secured by WGCI's assets (see
Note 6), is guaranteed by the Company and is considered
"Senior Indebtedness" (as defined in the COLA Indenture). In
February 1997, WGCI entered into an amended and restated loan
agreement with the Bank of Hawaii, whereby the outstanding
principal amount of the loan has been increased to $25
million, the maturity date has been extended to February 2007,
the interest rate has been changed to LIBOR plus 2% until the
fifth anniversary and LIBOR plus 2.5% thereafter and principal
is to be repaid based on a 30-year amortization schedule.
Pursuant to an agreement entered into with the City of
Honolulu in 1991 relating to the development of the Company's
Waikele project, if the Company sells the Waikele golf course
and depending on the price and resolution of certain issues, a
payment of up to $15 million might be required to be given to
the City to be used to assist in the City's affordable housing
developments.
In December 1996, Amfac Property Development Corporation,
a wholly-owned subsidiary of the Company, obtained a $10
million loan facility from a Hawaii bank. The loan is secured
by a mortgage on property under development at the former mill-
site of Oahu Sugar, and is considered "Senior Indebtedness"
(as defined in the Indenture relating to the COLAS). The loan
bears interest at the bank's base rate (8.25% at December 31,
1996) plus .5% and matures on December 1, 1998.
The Company uses the effective interest method and
accrued interest on the COLAS at 4% per annum ("Mandatory Base
Interest") for the years ended December 31, 1994, 1995 and
1996. The Company has not generated a sufficient level of Net
Cash Flow to pay Base Interest on the COLAS (see Note 5) in
excess of 4% ("Contingent Base Interest") from 1990 through
1996. Contingent Base Interest is payable only to the extent
of Net Cash Flow (Net Cash Flow for any period is generally an
amount equal to 90% of the Company's net cash revenues,
proceeds and receipts after payment of cash expenditures,
including the Qualified Allowance, other than federal and
state income taxes and after the establishment by the Company
of reserves) or Maturity Market Value (Maturity Market Value
generally means 90% of the excess of the Fair Market Value (as
defined below) of the Company's assets at maturity over its
liabilities (including Qualified Allowance, but only to the
extent earned and payable from Net Cash Flow generated through
maturity) at maturity, which liabilities have been incurred in
connection with its operations). Approximately $86.5 million
of the $94.2 million cumulative deficiency of Contingent Base
Interest related to the period from August 31, 1989 (Final
Issuance Date) through December 31, 1996 has not been accrued
in the accompanying consolidated financial statements as the
Company believes that it is not probable at this time that a
sufficient level of Net Cash Flow will be generated in the
future or that there will be sufficient Maturity Market Value
as of December 31, 2008 (the COLA maturity date) to pay any
such unaccrued Contingent Base Interest. The following table
is a summary of Mandatory Base Interest and Contingent Base
Interest for the years ended December 31, 1996, 1995 and 1994
(dollars are in millions):
1996 1995 1994
------- ------ ------
Mandatory Base Interest paid $ 8.8 12.1 15.4
Contingent Base Interest paid -- -- --
Cumulative deficiency of Contingent
Base Interest at end of year $ 94.2 80.9 118.0
Net Cash Flow was $0 for 1996, 1995 and 1994.
With respect to any calendar year, JMB or its affiliates
may receive a Qualified Allowance in an amount equal to: (i)
approximately $6.2 million during each of the calendar years
1989 through 1993, and (ii) thereafter, 1-1/2% per annum of
the Fair Market Value (Fair Market Value generally means the
value which an independent arm's-length purchaser, seeking to
utilize the asset for its highest and best use, would pay for
such asset taking into consideration the associated risks,
benefits, current restrictions and likelihood of changes to
such restriction; provided, however, that with respect to any
Fair Market Value determination of all of the Company's
assets, such assets shall not be valued as if sold in bulk to
a single purchaser) of the gross assets of the Company and its
subsidiaries, other than cash and cash equivalents and
Excluded Assets (Excluded Assets generally means assets
acquired by the Company without the expenditure of any amount
included in revenues or receipts for purposes of determining
Net Cash Flow or assets designated as Excluded Assets, as
restricted by the Indenture; the Company has not had any
Excluded Assets), for providing certain advisory services for
the Company. The aforementioned advisory services, which are
provided pursuant to a 30-year Services Agreement entered into
between the Company, certain of its subsidiaries and JMB in
November 1988, include making recommendations in the following
areas: (i) the construction and development of real property;
(ii) land use and zoning changes; (iii) the timing and pricing
of properties to be sold; (iv) the timing, type and amount of
financing to be incurred; (v) the agricultural business; and,
(vi) the uses (agricultural, residential, recreational or
commercial) for the land. However, the Qualified Allowance
shall be earned and paid for each year prior to maturity of
the COLAS only if the Company generates sufficient Net Cash
Flow to pay Base Interest to the holders of the COLAS for such
year of an amount equal to 8% of the average outstanding
principal balance of the COLAS for such year; any portion of
the Qualified Allowance not paid for any year shall cumulate
without interest and JMB or its affiliates shall be paid such
amount with respect to any succeeding year, after the payment
of all Contingent Base Interest for such year, to the extent
of 100% of remaining Net Cash Flow until an amount equal to
20% of the Base Interest with respect to such year has been
paid, and thereafter, to the extent of the product of (a)
remaining Net Cash Flow, multiplied by (b) a fraction, the
numerator of which is the cumulative deficiency as of the end
of such year in the Qualified Allowance and the denominator of
which is the sum of the cumulative deficiencies as of the end
of such year in the Qualified Allowance and Base Interest. A
Qualified Allowance for 1989 of approximately $6.2 million was
paid on February 28, 1990. Approximately $54.4 million of
Qualified Allowance related to the period from January 1, 1991
through December 31, 1996 has not been earned and paid, and is
payable only from future Net Cash Flow. Accordingly, because
the Company does not believe it is probable at this time that
a sufficient level of Net Cash Flow will be generated in the
future to pay Qualified Allowance, the Company has not accrued
for any Qualified Allowance in the accompanying consolidated
financial statements. JMB has informed the Company that no
incremental costs or expenses have been incurred relating to
the provision of these advisory services. The Company
believes that using an incremental cost methodology is
reasonable. The following table is a summary of the Qualified
Allowance for the years ended December 31, 1996, 1995 and 1994
(dollars are in millions):
1996 1995 1994
----- ------ -----
Qualified Allowance calculated $ 9.2 9.9 10.4
Qualified Allowance paid -- -- --
Cumulative deficiency of Qualified
Allowance at end of year $ 60.6 51.4 41.5
Net Cash Flow was $0 for 1996, 1995 and 1994.
After the maturity date of the COLAS, JMB will continue
to provide advisory services pursuant to the Services
Agreement, the Qualified Allowance for such years will
continue to be 1-1/2% per annum of the Fair Market Value of
the gross assets of the Company and its subsidiaries and the
Qualified Allowance will continue to be payable from the
Company's Net Cash Flow. Upon the termination of the Services
Agreement, if there has not been sufficient Net Cash Flow to
pay the cumulative deficiency in the Qualified Allowance, if
any, such amount would not be due or payable to JMB.
Upon maturity, holders of COLAS will be entitled to
receive the remaining outstanding principal balance of the
COLAS plus unpaid Mandatory Base Interest plus additional
interest equal to the unpaid Contingent Base Interest, to the
extent of the Maturity Market Value, plus 55% of the remaining
Maturity Market Value.
The Company continues to implement certain cost savings
measures and to defer development project costs and capital
expenditures for longer-term projects. The Company's Property
segment expended approximately $7.9 million in project costs
during 1996 and anticipates expending approximately $23.1pass
million in project costs during 1997. As of December 31,
1996, contractual commitments related to project costs totaled
approximately $2.1 million..
During 1995, the Company restructured its sugar
operations to improve efficiencies and reduce costs, including
consolidation of the operations at its two Kauai plantations
and changing to a seasonal mode of operations at each of its
plantations (consistent with other global sugar operations).
The 1995 restructuring of the Company's sugar operations
resulted in a reduction in staffing of approximately 260
positions, which is an approximately 30% decrease from 1994
and a reduction in annual employment costs of approximately
$4.2 million, which is an approximately 14% decrease from
1994. The Company incurred and recognized costs of
approximately $1.8 million in 1995 related to the
restructuring.
The price of raw sugar that the Company receives is based
upon the price of domestic sugar (less delivery and
administrative costs) as currently controlled by U.S.
Government price supports legislation. On April 4, 1996,
President Clinton signed the Federal Agriculture Improvement
and Reform Act of 1996 ("the Act"). The Act, which expires in
2002, keeps the "loan rate" at 18 cents per pound. The "loan
rate" refers to the minimum sugar price established by the
government, which is supported primarily by the setting of
import quotas. In addition, if prices fall below such minimum,
the sugar grower is able to receive a 18-cent-a-pound loan,
using their crop as collateral, and either repay the loan
(with interest) or forfeit the sugar. However, the Act
includes certain other adjustments to the sugar program
including making crop loans recourse to the producer and
repealing marketing allotments which may over time depress the
domestic price of raw sugar. There can be no assurance that,
in the future, the government price support will not be
reduced or eliminated entirely. Such a reduction or
elimination of price supports could have a material adverse
affect on the Company's agriculture operations, and possibly
could cause the Company to evaluate the cessation of its
remaining sugar cane operations.
In August 1993, the Company announced its plans to phase
out the sugar operations at its Oahu Sugar Company by mid-
1995, such phase out coinciding with the expiration of its
major land lease on Oahu. Oahu Sugar, which operated almost
entirely on leased land, had incurred losses in its sugar
operations in prior years and expected those losses to
continue in the future. Oahu Sugar completed the final
harvest of its crop in April 1995. The Company has shut down
Oahu Sugar and any estimated future costs related to the shut
down are not expected to have a material adverse effect on the
financial condition of the Company. The Company is currently
pursuing development of the fee simple land it owns adjacent
to the Oahu Sugar mill site, including seeking the necessary
government approvals for a light industrial subdivision for a
portion of the property, as discussed below.
The sugar industry in Hawaii has experienced significant
difficulties during the past several years. Growers in Hawaii
have struggled with the high costs of production, which have
led to the closure of several plantations, including the
Company's sugar operations on Oahu in 1995. The Company has
tried to address these challenges through a number of
different measures, including the restructuring in 1995 that
was previously discussed
While the above-noted changes have helped to reduce
expenses, the Company must continue to explore alternatives to
further address the high costs of sugar production. One such
alternative relates to the three-year labor contract the
Company has with its sugar plantation employees, which expires
in February 1998. Within the contract is a provision that
allows the Company and the union to renegotiate wages in 1997.
In light of the difficulties the Company has had in trying to
improve the operating results of its sugar business,
management has been meeting with union representatives to
discuss appropriate wage levels. After discussions and
negotiations with the union, it was agreed that wages would
remain at the current levels until the end of the contract.
This agreement is subject to ratification by the union
membership. The Company and the union have tentatively agreed
to return to the bargaining table during the summer of 1997 to
negotiate the terms for a new contract which will begin in
1998. Although the Company is hopeful that it will reach
agreement on contract modifications that would help improve
the viability of its sugar plantations, there can be no
assurance that sufficient changes will be agreed upon.
In early March 1997, the Company announced a management
restructuring that has resulted in the creation of six
separately operating entities in the following businesses:
Sugar, Golf, Coffee, Water, Land Management and Real Estate
Development. Each separate company or division will be
responsible for its own operations. The Company believes it
will operate more effectively as several smaller
entrepreneurial companies, rather than as one large
conglomerate. Approximately four percent of the Company's
total employees were released as a result of the
restructuring, which is expected to result in annual payroll
savings of approximately $1.1 million. The Company incurred
termination costs of approximately $.6 million related to the
restructuring during the first quarter of 1997.
Results of Operations
General:
The Company and its subsidiaries report its taxes as a
part of the consolidated tax return of the Company's parent,
Northbrook. The Company and its subsidiaries have entered
into a tax indemnification agreement with Northbrook, which
indemnifies the Company and its subsidiaries for
responsibility for all past, present and future federal and
state income tax liabilities (other than income taxes which
are directly attributable to cancellation of indebtedness
income caused by the repurchase or redemption of securities as
provided for in or contemplated by the Repurchase Agreement).
Current and deferred taxes have been allocated to the
Company as if the Company were a separate taxpayer in
accordance with the provisions of SFAS No. 109 - Accounting
for Income Taxes. However, to the extent the tax
indemnification agreement does not require the Company to
actually pay income taxes, current taxes payable or receivable
(excluding income taxes which are directly attributable to
cancellation of indebtedness income caused by the repurchase
or redemption of securities as provided for in or contemplated
by the Repurchase Agreement) have been reflected as deemed
contributions and distributions, respectively, to additional
paid-in capital in the accompanying consolidated financial
statements.
Accrued expenses decreased as of December 31, 1996 as
compared to December 31, 1995, primarily due to the
reclassification of $3.2 million of deferred interest on the
ERS loan to non-current, in conjunction with the April 1996
amendment of such loan (see Note 6).
Current portion of long-term debt decreased and long-term
debt increased as of December 31, 1996 as compared to December
31, 1995, due primarily to the reclassification of the $66
million ERS loan from current to long-term (see Note 6). In
addition, long-term debt increased as of December 31, 1996 as
compared to December 31, 1995 due to a new $10 million loan
obtained for the Oahu Industrial Project (see Note 6).
The current portion of amounts due to affiliates
decreased as of December 31, 1996 as compared to December 31,
1995 due to the payment of $4.9 million of interest on
financing provided by affiliates, which was accrued as of
December 31, 1995, and the reclassification of certain
intercompany payables totaling approximately $7.9 million from
current to long-term (see Note 9).
The long-term portion of amounts due to affiliates
increased as of December 31, 1996 as compared to December 31,
1995, due to the previously discussed reclassification of
certain intercompany payables totaling approximately $7.9
million from current to long-term (see Note 9). In addition,
the Company borrowed $18.7 million from Northbrook in 1996 to
fund COLA interest payments and other operational needs.
Other long-term liabilities increased as of December 31,
1996 as compared to December 31, 1995 primarily due to the
$3.2 million difference between the interest expense accrued
and Minimum Interest payments required under the amended terms
of the ERS loan (see Note 6) offset in part by $1.6_ million
of reductions to reserves for prior land sales.
Interest expense increased for the year ended December
31, 1996 as compared to the year ended December 31, 1995
primarily due to $3.8 million of interest expense related to
additional affiliated financing, partially offset by decreased
interest expense of $1.1 million related to the early
retirement of Class A and Class B COLAS and $.3 million of
decreased interest on other long-term debt, primarily due to a
decrease in the interest rate.
The following table sets forth operating results by
industry segment (see Note 13), for the years indicated (in
000's):
1996 1995 1994
------- ------- -------
Agriculture Segment:
Revenues $ 51,805 47,656 89,237
Cost of sales (54,640) (53,430) (86,181)
(2,835) ( 5,774) 3,056
Operating expenses ( 4,690) ( 5,108) ( 6,949)
Operating income (loss) ( 7,525) (10,882) ( 3,893)
Property Segment:
Revenues 45,138 52,663 66,749
Cost of sales (34,627) (30,853) (38,531)
10,511 21,810 28,218
Operating expenses:
Reduction to carrying value of
investments in real estate (18,315) -- ( 5,000)
Other ( 9,779) (10,688) (10,284)
Operating income (loss):
Reduction to carrying value of
investments in real estate (18,315) -- ( 5,000)
Other 732 11,122 17,934
Unallocated operating expenses
(primarily overhead) ( 3,045) ( 2,593) ( 3,800)
Total operating income (loss) $ (28,153) ( 2,353) 5,241
The variances in the above-noted results of operations for the
Agriculture segment and the Property segment are discussed in
the following two sections, respectively.
Agriculture:
The Company's Agriculture segment is responsible for
activities related to the cultivation, processing and sale of
sugar cane and other agricultural products. Agriculture's
revenues are primarily derived from the Company's sale of its
raw sugar.
Receivables decreased as of December 31, 1996 as compared
to December 31, 1995 primarily due to the timing of production
and related payments received for deliveries of raw sugar,
which accounted for $2.2 million of the variance, and the
collection of $1.4 million of insurance claims outstanding as
of December 31, 1995.
Machinery and equipment increased as of December 31, 1996
as compared to December 31, 1995 due primarily to the purchase
of $2.9 million of equipment and improvements at the sugar
plantations.
Agricultural revenues and cost of sales increased and the
operating loss decreased for the year ended December 31, 1996
as compared to the year ended December 31, 1995 due to
increased sales of raw sugar. During 1996, the Company sold
approximately 127,000 tons of sugar, a 19% increase over the
quantity sold in 1995. The average price of sugar sold during
1996 was approximately $374 per ton, a 3% decrease over the
average price in 1995. The Company harvested approximately
11,900 acres in 1996, as compared to approximately 12,000
acres in 1995. The increase in cost of sales in 1996 was
offset in part by $8.1 million of higher costs in 1995
associated with the final phase of operations at Oahu Sugar.
Agriculture's revenues from sugar operations decreased
for the year ended December 31, 1995 as compared to the year
ended December 31, 1994 as a result of lower production due to
less acres harvested. During 1995, the Company harvested
approximately 12,000 acres, as compared to approximately
17,400 acres in 1994. Approximately 64% of the decrease in
acres harvested was due to the shutdown of Oahu Sugar and the
remaining difference was primarily due to inclement weather,
which adversely affected operations at the Company's two Kauai
plantations. Inclement weather had a greater impact on the
Company's operations because of reduced flexibility in the
harvesting schedule, which was delayed in connection with the
consolidation of the two Kauai plantations. During 1995, the
Company sold approximately 106,000 tons of sugar, a 49%
decrease form the quantity sold in 1994. The average price of
sugar sold during 1995 was $386 per ton, a 5% increase over
the average price in 1994. Non-sugar agricultural revenues
decreased by $6.4 million in 1995 due to approximately $7.0
million of non-recurring revenues received in 1994 related to
Hurricane Iniki insurance proceeds. Agriculture's operating
loss for the year ended December 31, 1995 increased as
compared to the year ended December 31, 1994 due to a
deterioration of gross margin resulting from lower production
in 1995 and the receipt of $7.0 million of non-recurring non-
sugar revenues in 1994 previously noted.
The Company's sugar plantation subsidiaries sell their
raw sugar production to the Hawaiian Sugar and Transportation
Company ("HSTC"), which is an agricultural cooperative owned
by the major Hawaii producers of raw sugar (including the
Company), under a marketing agreement. HSTC sells the raw
sugar production to the California and Hawaii Sugar Company
("C&H") pursuant to a long-term supply contract. The terms of
the supply contract do not require a specified level of
production by the Hawaii producers; however, HSTC is obligated
to sell and C&H is obligated to purchase any raw sugar
produced. HSTC returns to its raw sugar suppliers proceeds
based upon the domestic sugar price less delivery and
administrative charges. The Company recognizes revenues and
related cost of sales upon delivery of its raw sugar to C&H.
The price of raw sugar that the Company receives is based
upon the price of domestic sugar (less delivery and
administrative costs) as currently controlled by U.S.
Government price supports legislation. On April 4, 1996,
President Clinton signed the Federal Agriculture Improvement
and Reform Act of 1996 ("the Act"). The Act, which expires in
2002, keeps the "loan rate" at 18 cents per pound. The "loan
rate" refers to the minimum sugar price established by the
government, which is supported primarily by the setting of
import quotas. In addition, if prices fall below such minimum,
the sugar grower is able to receive a 18-cent-a-pound loan,
using their crop as collateral, and either repay the loan
(with interest) or forfeit the sugar. However, the Act
includes certain other adjustments to the sugar program
including making crop loans recourse to the producer and
repealing marketing allotments which may over time depress the
domestic price of raw sugar. There can be no assurance that,
in the future, the government price support will not be
reduced or eliminated entirely. Such a reduction or
elimination of price supports could have a material adverse
affect on the Company's agriculture operations, and possibly
could cause the Company to evaluate the cessation of its
remaining sugar cane operations.
As part of the Company's agriculture operations, the
Company enters into commodities futures contracts and options
in sugar as deemed appropriate to reduce the risk of future
price fluctuations in sugar. These futures contracts and
options are accounted for as hedges and, accordingly, gains
and losses are deferred and recognized in cost of sales as
part of the production cost.
The sugar industry in Hawaii has experienced significant
difficulties during the past several years. Growers in Hawaii
have struggled with the high costs of production, which have
led to the closure of several plantations, including the
Company's sugar operations on Oahu in 1995. The Company has
tried to address these challenges through a number of
different measures, including a restructuring in 1995, whereby
its two Kauai plantations were consolidated and all of its
sugar plantations were changed to a seasonal mode. The 1995
restructuring of the Company's sugar operations resulted in a
reduction in staffing of approximately 260 positions, which is
an approximately 30% decrease from 1994 and a reduction in
annual employment costs of approximately $4.2 million, which
is an approximately 14% decrease from 1994. The Company
incurred and recognized costs of approximately $1.8 million in
1995 related to the restructuring.
While the above-noted changes have helped to reduce
expenses, the Company must continue to explore alternatives to
further address the high costs of sugar production. One such
alternative relates to the three-year labor contract the
Company has with its sugar plantation employees, which expires
in February 1998. Within the contract is a provision that
allows the Company and the union to renegotiate wages in 1997.
In light of the difficulties the Company has had in trying to
improve the operating results of its sugar business,
management has been meeting with union representatives to
discuss appropriate wage levels. After discussions and
negotiations with the union, it was agreed that wages would
remain at the current levels until the end of the contract.
This agreement is subject to ratification by the union
membership. The Company and the union have tentatively agreed
to return to the bargaining table during the summer of 1997 to
negotiate the terms for a new contract which will begin in
1998. Although the Company is hopeful that it will reach
agreement on contract modifications that would help improve
the viability of its sugar plantations, there are no
assurances that sufficient changes will be agreed upon.
In September 1992, Hurricane Iniki struck the Island of
Kauai causing considerable damage and loss to the people and
businesses on Kauai. The Company has two sugar plantations on
Kauai, both of which sustained considerable damage. Both
plantations were able to restart operations shortly after
Hurricane Iniki and are now fully operational. The Company's
real estate assets on Kauai suffered very little damage, since
most of the Company's development expenditures up to that time
had been focused on the islands of Oahu and Maui. The
Company finalized the settlement of its insurance claims in
1995 for damage suffered and collected approximately $30
million in proceeds over the approximately three year period
subsequent to the hurricane.
Property:
The Company's Property segment is responsible for the
following: land planning and development activities;
obtaining land use, zoning and other governmental approvals;
selling or financing developed and undeveloped land parcels;
and the management and operation of the Company's golf course
facilities.
Inventory increased as of December 31, 1996 as compared
to December 31, 1995 primarily due to the reclassification of
$29.5 million of land to inventory discussed below, offset in
part by a $5.6 million decrease in agricultural inventory,
sales of real estate inventory having a carrying cost of $16.5
million and a reduction in carrying value of certain assets of
$1.7 million.
Approximately $29.5 million of the decrease in land and
land improvements as of December 31, 1996 as compared to
December 31, 1995 was due to the reclassification of certain
land parcels held for sale to inventory and an additional
decrease of $16.6 million was due to the reduction in carrying
value of certain assets, as discussed below.
In accordance with the provisions of the COLA Indenture,
appraisals were performed for certain assets of the Company as
of December 31, 1996 and 1994, which reflected a decline in
value for certain properties. Certain of the assets appraised
as of December 31, 1996 are properties that are either being
actively marketed by the Company or properties for which the
Company has a plan to sell the assets in the near future.
Five of the land parcels expected to be disposed of by the
Company within the next two years, having a cost basis of
approximately $40.3 million were estimated by the Company to
have a total fair value, less costs to sell, of approximately
$22.0 million as of December 31, 1996. Accordingly, the
Company recorded a $18.3 million loss in the fourth quarter of
1996 related to these properties. Based on appraisals
performed as of December 31, 1994, the Company recorded, as a
matter of prudent accounting practice, reductions to the
carrying value of certain properties in 1994 in the amount
of$5.0 million to properly reflect the estimated market value
of the property in its current state of development.
Other assets increased as of December 31, 1996 as
compared to December 31, 1995 primarily due to $5.2 million of
deferred costs related to preliminary planning costs
associated with potential future development projects.
For the year ended December 31, 1996 and December 31,
1995, the Company generated approximately $18.9 million and
$30.8 million of land sales, respectively. Approximately $5.5
million of 1996 land sales related to the Kaanapali Golf
Estate (see discussion below) and the remaining $13.4 million
was primarily from the sale of non-strategic land parcels on
Maui, Kauai, Hawaii and Oahu. During 1995, $4.1 million of
land sales related to the ocean-front parcel developed by the
Company in Kaanapali (see discussion below), $1.4 million
related to the Kaanapali Golf Estate (see discussion below)
and the remaining $25.3 million was primarily from the sale of
non-strategic land parcels on Maui, Kauai, Hawaii and Oahu.
Property revenues also include the operations of the three
golf courses owned by the Company, which accounted for total
revenues of $15.2 million and $15.4 million for 1996 and 1995,
respectively.
Property cost of sales increased for the year ended
December, 31, 1996 as compared to the year ended December 31,
1995 primarily due to lower margins realized for the parcels
sold in 1996.
During 1994, the Company generated approximately $44.3
million of land sales, primarily from the sales of the
remaining two residential parcels at the Waikele project on
Oahu for approximately $37 million. In addition, approximately
$2.3 million of 1994 land sales related to the Kaanapali Golf
EstatesThe balance of the 1994 proceeds resulted from the sale
of non-strategic parcels on various islands for approximately
$5.0 million. Additionally, the Company received an
approximate $4.2 million deposit, which represented the
purchase price for 452 acres of agriculture-zoned land on
Maui. The gain from such sale is being deferred due to
certain profit participation rights retained by the Company.
Property revenues also include the operations of the three
golf courses owned by the Company, which accounted for total
revenues of $14.7 million for 1994.
Property cost of sales for 1995 was consistent with 1994,
as a percentage of property revenues.
OAHU ACTIVITY
The Company expended approximately $1.3 million, $.5
million and $3 million in 1996, 1995 and 1994, respectively,
for project costs at Waikele. Such costs include construction
of roadways, utilities and related infrastructure improvements
and the golf course and clubhouse. On a cumulative project-to-
date basis, the Company has expended approximately $118
million on project costs and has completed sales at Waikele of
approximately $231 million. Such sales have included
commercial property and parcel sales to home builders. Except
for certain contingent participation rights, the Company has
received all of its proceeds from the sales of the residential
and commercial parcels at Waikele.
The Company is currently developing the approximately 60
acres of fee simple land it owns at the mill-site of Oahu
Sugar Company (which was shut down in 1995). The Company has
received zoning for a light industrial subdivision on an
approximately 37-acre portion of the property, which excludes
property containing the sugar mill and adjacent buildings. In
connection with the development of this property, the Company
has received state land use urbanization for the entire 60
acre site. Marketing of parcels within the light industrial
subdivision is slated for mid-to-late 1997 after subdivision
is complete. In addition, the Company has begun the process of
seeking the necessary government approvals for the
redevelopment for the remainder of the mill-site parcels,
including planned commercial, public and quasi-public uses.
MAUI ACTIVITY
The planned development of the Company's land on Maui is
longer term in nature than the time frame experienced with
Waikele. As Maui is less populated than Oahu and more
dependent on the resort/tourism industry, much of the
Company's land is intended for resort and resort-related uses.
Due to overall economic conditions and trends in tourism,
recent demand for these land uses has been relatively weak.
The Company's currently available homesite product on Maui,
which is targeted to the second home buyer, has experienced
very slow sales activity to date. The Company's competitors
on Maui have also experienced slow sales activity in the
second home market. The Company is continuing to evaluate its
planned products and the timing of development of its land
holdings in light of the current weak market demand and the
capital resources needed for future development.
The Company is marketing Kaanapali Golf Estates, a
residential community that is part of South Beach Mauka,
adjacent to the Kaanapali Beach Resort in West Maui. During
1996, the Company sold 18 homesites for approximately $5.5
million, which includes 10 homesites to a developer who plans
to construct and sell houses on these lots. The Company
currently has 6 homesites on the market, which are priced at
approximately $.5 million.
In addition, the Company subdivided an ocean front parcel
in Kaanapali into six single family homesites of approximately
one acre each. The individual lot prices range from $1.9
million to $2.4 million. Sales of two of the lots in the
project closed in December 1995, generating total sales
proceeds of approximately $4.1 million. The Company is
marketing the remaining four lots individually, and as a
package to local builders.
In 1986, the Company entered into a joint venture
agreement with Tobishima Pacific Inc. ("Tobishima"), a wholly-
owned subsidiary of a Japanese company, the purpose of which
is to plan, manage and develop approximately 96 acres of
beachfront property at Kaanapali (known as "North Beach").
The joint venture (in which the Company has a 50% interest)
has State land use and County zoning approvals for the
subdivision and development of the infrastructure improvements
necessary to accommodate up to 3,200 hotel and/or condominium
units on this site. These development plans may be affected by
the current review of state land designations (discussed
below). This North Beach property constitutes nearly all of
the remaining developable beachfront acreage at Kaanapali. In
October 1992, the Company completed construction of a 3-acre
park on the North Beach site, which is part of the master plan
for this property and was a requirement imposed by the County
in obtaining certain permits. The development of North Beach
continues to be tied to the completion of the aforementioned
Lahaina bypass highway or other traffic mitigation measures
satisfactory to the Maui County Planning Commission.
The Company is seeking final approvals to develop a time-
share resort on 14 acres of the North Beach property (the
"Site"). A land option/purchase agreement was entered into
with Tobishima in October 1996. This agreement gives the
Company an option to purchase Tobishima's 50% interest in the
Site for $7 million. The Company does not expect to
consummate the purchase until all discretionary land use
permits are received for development of the time-share resort.
In accordance with the land option/purchase agreement, the
Company has made a nonrefundable deposit of $.1 million (which
may be applied to the purchase price) to keep the option
available through September 30, 1997. Additional
nonrefundable deposits may be made to extend the option
through August 31, 2000. The Company has filed development
plans and related information with the County of Maui to
obtain a Special Management Area ("SMA") permit for the time-
share resort. Although there can be no assurance that the SMA
permit will be received (and that if such permit is received,
that its terms and conditions will be acceptable to the
Company), management is optimistic that the Company will
receive the necessary approvals to proceed with the project.
The Company believes that the potential for a successful
time-share development at North Beach will be greatly enhanced
by the involvement of a company with experience in the time-
share business. As a result, in February 1997, the Company
entered into a partnership with affiliates of Interval Resorts
West, the developer of The Ridge Tahoe resort in South Lake
Tahoe, Nevada. The partnership will be responsible for
constructing, developing, operating, maintaining, owning and
managing the time-share resort project planned for the 14-acre
portion of North Beach. The Company has majority ownership
interest in the partnership. After receipt of the SMA permit,
the partnership will need to arrange project financing for the
development of the time-share resort. The aforementioned land
option/purchase agreement with Tobishima includes short-term
seller financing, which the time-share partnership may decide
to utilize.
In February 1996, the Maui County Council adopted a
Community Plan ordinance for West Maui that does not include
any amendments to the current Community Plan designation of
the Company's North Beach property, thus rejecting the
recommendation of certain citizens groups that wanted two-
third's of North Beach to be downzoned to "Park" designation.
The ordinance was signed by the Mayor of the County of Maui
and became effective on February 21, 1996.
Further, the Department of the Army has determined that
there are two wetlands sites on the North Beach property,
totaling approximately 21,800 square feet. The Company has
retained experts to evaluate these sites and to insure
compliance with all laws. While there can be no assurance as
to the ultimate determinations with respect to the wetlands
issue, the Company does not anticipate that these sites will
materially adversely affect the development plans for North
Beach.
In March 1991, the Company received final land use
approval from the State for development of approximately 240
residential lots on approximately 125 acres of land known as
"South Beach Mauka" and located adjacent to the existing
Kaanapali Beach Resort. In connection with this land use
approval, the Company is committed to providing additional
housing on Maui in the affordable price range, and to
participating in the funding of the design and construction of
the planned bypass highway extending from Lahaina to the north
end of Kaanapali. The Company has entered into a development
agreement with the State Department of Transportation covering
the Company's participation in the design and construction of
the bypass highway. It is anticipated that the Company will
expend up to $3.5 million (in the aggregate), of which $2.2
million has been spent as of December 31, 1996, in the design
of the bypass highway and/or the widening of the existing
highway.
In connection with the development of North Beach Mauka
and adjacent parcels, the Company has committed $6.7 million
for the construction of the bypass highway, subject to certain
conditions. The development and construction of the bypass
highway is expected to be a long-term project that will not be
completed until the year 2004 or later.
During 1993, the Company obtained final land use approval
from the State, and certification through the State's Housing
Finance Development Corporation ("HFDC"), for the development
of a project on approximately 300 acres of Company land known
as "Puukolii Village", which is also located near Kaanapali
Beach Resort. A significant portion of the housing in this
project will be in the affordable price range. The final land
use approval and the HFDC development agreement contain
certain conditions which must be satisfied in order for the
Company to develop Puukolii Village, including realigning the
access road, which will benefit uses for adjacent Company's to
develop its lands in future periods. Moreover, development of
most of Puukolii Village cannot commence until after
completion of the state-planned Lahaina bypass highway
(mentioned above). The proposed development of Puukolii
Village is anticipated to satisfy the Company's affordable
housing requirements in connection with the South Beach Mauka
land use approval as well as for the Company's North Beach
property (described above). The Company commenced construction
of infrastructure of Puukolii Village in the last quarter of
1996, beginning with an access road.
KAUAI ACTIVITY
In June 1994, the Company submitted a Land Use Boundary
Amendment Petition with the State of Hawaii Land Use
Commission ("LUC") and a General Plan Amendment Application
with the County of Kauai for the urbanization of approximately
552 acres of land on Kauai currently in sugar cane
cultivation. The proposed project is planned to be a mixed
use master planned community which will include a variety of
both affordable and market rate residential units, commercial
and industrial projects and a number of community and public
based facilities. The filing of these land use applications is
the first step required in converting agriculture zoned land
into urban zoned land. There are a number of additional
reports, studies, applications and permits that will be
required before final land use approvals are obtained. In May
1995, the County of Kauai approved the Company's General Plan
Amendment Application, subject to a number of conditions. In
December 1995, the LUC granted the Company the land use
amendments sought by the Company subject to a number of
conditions. In May 1996, the Kauai County approved the
Company's application to rezone the project. Before
construction can commence, the Company must satisfy several
conditions imposed during the approval process and obtain
additional administrative development permits for requirements
such as grading and subdivision. The permitting process in
Hawaii has historically been a very difficult and arduous
process and there is no guarantee that all permits will be
obtained. Once construction commences, subject to market
conditions, the project is expected to span over 20 years.
Inflation
Due to the lack of significant fluctuations in the level
of inflation in recent years, inflation generally has not had
a material effect on real estate development.
In the future, high rates of inflation may adversely
affect real estate development generally because of their
impact on interest rates. High interest rates not only
increase the cost of borrowed funds to the Company, but can
also have a significant effect on the affordability of
permanent mortgage financing to prospective purchasers.
However, high rates of inflation may permit the Company to
increase the prices that it charges in connection with real
property sales, subject to general economic conditions
affecting the real estate industry and local market factors.
Item 8. Financial Statements and Supplementary Data
AMFAC/JMB HAWAII, INC.
INDEX
Report of Independent Auditors
Consolidated Balance Sheets, December 31, 1996 and 1995
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Stockholder's Equity (Deficit) for
the years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Schedule
Valuation and Qualifying Accounts II
Schedules not filed:
All schedules other than the one indicated in the index
have been omitted as the required information is inapplicable
or the information is presented in the financial statements or
related notes.
AMFAC/JMB FINANCE, INC.
INDEX
Report of Independent Auditors
Balance Sheets, December 31, 1996 and 1995
Notes to the Balance Sheets
Schedules not filed:
All schedules have been omitted as the required
information is inapplicable or the information is presented in
the financial statements or related notes.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
AMFAC/JMB HAWAII, INC.
We have audited the accompanying consolidated balance
sheets of Amfac/JMB Hawaii, Inc. as of December 31, 1996 and
1995, and the related consolidated statements of operations,
stockholder's equity (deficit), and cash flows for each of the
three years in the period ended December 31, 1996. Our audits
also included the financial statement schedule listed in the
Index at Item 8. These financial statements and schedule are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and schedule 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, the consolidated financial statements
referred to above present fairly, in all material respects,
the consolidated financial position of Amfac/JMB Hawaii, Inc.
at December 31, 1996 and 1995, and the consolidated results of
its operations and its cash flows for each of the three years
in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Honolulu, Hawaii
March 21, 1997
<TABLE>
AMFAC/JMB HAWAII, INC.
Consolidated Balance Sheets
December 31, 1996 and 1995
(Dollars in Thousands)
A s s e t s
<CAPTION>
1996 1995
----- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents $8,736 11,745
Receivables - net 4,741 8,720
Inventories 56,808 49,641
Prepaid expenses 3,439 3,102
------- --------
Total current assets 73,724 73,208
------- --------
Investments 46,187 45,080
------- --------
Property, plant and equipment:
Land and land improvements 289,294 336,069
Machinery and equipment 60,981 56,882
Construction in progress 1,365 1,428
------- --------
351,640 394,379
Less accumulated depreciation and amortization 33,856 21,762
------- --------
317,784 366,617
Deferred expenses 12,975 14,225
Other assets 32,935 28,468
------- --------
$483,605 521,598
======== ========
L i a b i l i t i e s
Current liabilities:
Accounts payable $ 5,719 8,562
Accrued expenses 9,274 13,268
Current portion of long-term debt 1,471 67,730
Current portion of deferred income taxes 5,422 10,902
Amounts due to affiliates 8,905 22,862
------- -------
Total current liabilities 30,791 123,324
------- -------
Amounts due to affiliates 103,579 76,911
Accumulated postretirement benefit obligation 57,662 61,037
AMFAC/JMB HAWAII, INC.
Consolidated Balance Sheets - Continued
December 31, 1996 and 1995
(Dollars in Thousands)
1996 1995
------ ------
Long-term debt 100,606 26,765
Other long-term liabilities 35,501 34,366
Deferred income taxes 88,345 98,691
Certificate of Land Appreciation Notes 220,692 220,692
-------- --------
Total liabilities 637,176 641,786
-------- --------
Commitments and contingencies (notes 3, 4, 5, 6, 7, 8, 9, and 11)
S t o c k h o l d e r ' s E q u i t y ( D e f i c i t )
Common stock, no par value
Authorized, issued and outstanding 1,000 shares 1 1
Additional paid-in capital 6,278 11,495
Retained earnings (deficit) (159,850) (125,684)
-------- --------
Total stockholder's equity (deficit) (153,571) (114,188)
-------- --------
483,605 521,598
========= =========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<TABLE>
AMFAC/JMB HAWAII, INC.
Consolidated Statements of Operations
Years ended December 31, 1996, 1995 and 1994
(Dollars in Thousands)
<CAPTION>
1996 1995 1994
------ ------- --------
<S> <C> <C> <C>
Revenues:
Agriculture $51,805 47,656 89,237
Property 45,138 52,663 66,749
------- ------- --------
96,943 100,319 155,986
------- ------- --------
Cost of sales:
Agriculture 54,640 53,430 86,181
Property 34,627 30,853 38,531
------- ------- --------
89,267 84,283 124,712
Operating expenses:
Selling, general and administrative 11,160 11,666 13,817
Depreciation and amortization 6,354 6,723 7,216
Reduction to carrying value of investments in
real estate 18,315 -- 5,000
------- ------- --------
Total costs and expenses 125,096 102,672 150,745
------- ------- --------
Operating income (loss) (28,153) (2,353) 5,241
------- ------- --------
Non-operating income (expenses):
Amortization of deferred costs (1,222) (1,557) (2,086)
Interest income 463 1,288 1,977
Interest expense (26,297) (25,233) (25,929)
------- ------- --------
(21,056) (25,502) (26,038)
------- ------- -------
Loss before taxes and extraordinary item (55,209) (21,855) (20,797)
Income tax benefit (21,043) (8,019) (7,764)
------- -------- -------
Loss before extraordinary item (34,166) (19,836) (13,033)
Extraordinary gain from extinquishment of debt
(less applicable income taxes of $20,807) -- 32,544 --
------- -------- --------
Net income (loss) (34,166) 12,708 (13,033)
======== ======== ========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements
</TABLE>
<TABLE>
AMFAC/JMB HAWAII, INC.
Consolidated Statements of Stockholder's Equity (Deficit)
Years ended December 31, 1996, 1995 and 1994
(Dollars in Thousands)
<CAPTION>
Total
Stock-
Retained holder's
Common Paid-In Earnings Equity
Stock Capital (Deficit) (Deficit)
<S> <C> <C> <C> <C>
Balance, December 31, 1993 $ 1 (10,370) (125,35) (135,728)
Net loss -- -- (13,033) (13,033)
Capital contribution -
current income taxes (note 12) -- 24,754 -- 24,754
------- -------- -------- ---------
Balance, December 31, 1994 1 14,384 (138,392) (124,007)
Net income -- -- 12,708 12,708
Capital distribution -
current income taxes (note 12) -- (2,889) -- (2,889)
------- -------- --------- --------
Balance, December 31, 1995 $ 1 11,495 (125,684) (114,188)
Net loss -- -- (34,166) (34,166)
Capital distribution -
current income taxes (note 12) -- (5,217) -- (5,217)
------- -------- -------- ---------
Balance, December 31, 1996 $ 1 6,278 (159,850) (153,571)
====== ======== ======== ========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<TABLE>
AMFAC/JMB HAWAII, INC.
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
(Dollars in Thousands)
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (34,166) 12,708 (13,033)
Items not requiring (providing) cash:
Depreciation and amortization 6,354 6,723 7,216
Amortization of deferred costs 1,222 1,557 2,086
Equity in earnings of investments (14) 69 69
Income tax expense (benefit) (21,043) 12,788 (7,764)
Extraordinary gain from extinguishment of debt -- (53,351) --
Reduction to carrying value of investments
in real estate 18,315 -- 5,000
Changes in:
Receivables - net 3,979 6,223 29
Inventories 22,052 12,364 33,437
Prepaid expenses (337) 1,277 1,453
Accounts payable (2,843 ) (1,320) (4,093)
Accrued expenses (3,994 ) (2,104) (1,116)
Amounts due to affiliates (13,957 ) 12,751 922
Other long-term liabilities (4,489) (7,006) (2,258)
------- ------- --------
Net cash provided by (used in)
operating activities (28,921) 2,679 21,948
------- ------- --------
Cash flows from investing activities:
Property additions (4,257) (5,145) (6,763)
Property sales, disposals and retirements - net` 63 4,478 129
Investments in joint ventures and partnerships (1,093) (103) (174)
Short-term investments -- 31,998 (31,998)
Other assets (4,467) (1,927) (1,442)
Other long-term liabilities 1,388 (4,945) 1,413
------- ------- -------
Net cash provided by (used in)
investing activities (8,366) 24,356 (38,835)
------- ------- -------
Cash flows from financing activities:
Deferred expenses 28 29 (394)
AMFAC/JMB HAWAII, INC.
Consolidated Statements of Cash Flows - Continued
Years ended December 31, 1996, 1995 and 1994
(Dollars in Thousands)
1996 1995 1994
-------- -------- -------
Payment to redeem and purchase Certificate of
Land Appreciation Notes (COLAS) -- (105,452) --
Net borrowings (repayments) under bank
line-of-credit agreement -- -- (8,000)
Net amounts due to affiliates 26,668 61,814 --
Net (repayments) proceeds of long-term debt 7,582 (2,489) 5,103
Other costs related to extinguishment of debt -- (894) --
------- ------- -------
Net cash provided by (used in) financing activities 34,278 (46,992)(3,291)
------- ------- -------
Net decrease in cash and cash
equivalents (3,009) (19,957)(20,178)
Cash and cash equivalents, beginning of year 11,745 31,702 51,880
------- ------- -------
Cash and cash equivalents, end of year $ 8,736 11,745 31,702
======= ======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest(net of amount capitalized) $31,111 24,347 25,898
======= ======= =======
Schedule of non-cash investing and financing activities:
Transfer of property actively held for sale to
real estate inventories and accrued costs
relating to real estate sales 29,481 9,240 9,531
======= ======= =======
Disposition of debt:
Gain on extinguishment of debt $ -- 53,351 --
Face value of debt extinguished -- (164,045) --
Other costs related to debt extinguishment -- 894 --
Write-off of Contingent Base Interest -- (5,667) --
Write-off of deferred COLA costs -- 10,015 --
-------- ------- -------
Cash paid to redeem and purchase COLAS $ -- (105,452) --
======== ======= =======
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(Dollars in Thousands)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF ACCOUNTING
On November 17, 1988, the stockholders of Amfac, Inc. ("Amfac")
agreed to the merger ("Merger") of Amfac with an affiliate of JMB
Realty Corporation ("JMB"). The Merger was consummated on November
18, 1988. Amfac/JMB Hawaii, Inc. ("the Company") was wholly-owned by
Amfac, a subsidiary of Northbrook Corporation ("Northbrook"). In May
1995, Amfac merged into Northbrook, with Northbrook being the
surviving corporation.
The Company, or its subsidiaries, hold title to substantially
all of the agricultural and developmental real property and related
assets of its parent corporation, Northbrook, located in Hawaii.
The Company is wholly-owned by Northbrook, and is an affiliate of
JMB as a result of the Merger and the subsequent merger of a
subsidiary of an affiliate of JMB into Amfac Hawaii, Inc., which
(after changing its name to Amfac/JMB Hawaii, Inc.) continues as the
surviving corporation.
On December 5, 1988, the Company commenced a public offering of
Certificate of Land Appreciation Notes due 2008 ("COLAS") of which a
total of 384,737 COLAS were subscribed for and issued. The offering
terminated on August 31, 1989.
The Company has two primary business segments. The agriculture
segment ("Agriculture") is responsible for the Company's activities
related to the cultivation and processing of sugar cane and other
agricultural products. The real estate segment ("Property") is
responsible for land development activities related to the Company's
owned land in the State of Hawaii.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
STATEMENT OF CASH FLOWS
The Company's policy is to consider all amounts held with
original maturities of three months or less in U.S. government
obligations, certificates of deposit and money market funds
(approximately $4,900 and $3,700 at December 31, 1996 and 1995,
respectively) as cash equivalents which approximates market. These
amounts include $1,552 and $1,623 at December 31, 1996 and 1995,
respectively, which were restricted primarily to fund debt service
on long-term debt related to the acquisition of power generation
equipment (see note 6).
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 ("SFAS No.
107"), "Disclosures about Fair Value of Financial Instruments",
requires entities to disclose the SFAS No. 107 value of certain on-
and off-balance sheet financial instruments for which it is
practicable to estimate. Value is defined in SFAS No. 107 as the
amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or
liquidation sale. The Company believes the carrying amounts of its
financial instruments classified as current assets and liabilities
in its balance sheet approximate SFAS No. 107 value due to the
relatively short maturity of these instruments. The Company believes
the carrying value of its long-term debt (notes 4 and 6)
approximates fair value. SFAS No. 107 states that quoted market
prices are the best evidence of the SFAS No. 107 value of financial
instruments, even for instruments traded only in thin markets. On
March 15, 1995, pursuant to the indenture that governs the terms of
the COLAS (the "Indenture"), the Company elected to exercise its
right to redeem, and therefore was obligated to purchase, any and
all Class A COLAS submitted pursuant to the Redemption Offer at a
price of $.365 per Class A COLA (see note 5). In conjunction with
the Company's election to repurchase the Class A COLAS submitted for
repurchase, the Company made a tender offer (the "Tender Offer") to
purchase up to approximately $68,000 principal value of the Class B
COLAS at a price of $.220 per Class B COLA from COLA holders
electing to have their Class A COLAS repurchased. The Redemption
Offer and the Tender Offer expired on June 1, 1995. Since such
expiration, the secondary market for COLAS has been extremely thin.
Since June 1, 1995, a limited number of COLA units have been sold in
transactions arranged by brokers for amounts ranging from
approximately $.250 to $.330 per Class B COLA and from approximately
$.482 to $.545 per combined Class A and Class B COLA. Based on the
range of transactions since June 1, 1995 and the number of COLAS
outstanding (with a per unit carrying value of $1.0 and a total
carrying value of $220,692 at December 31, 1996 in the accompanying
consolidated financial statements), the implied SFAS No. 107 value
of the COLAS would range from approximately $108,000 to 128,000.
However, due to restrictions on prepayment and redemption as
specified in the COLA Indenture, as well as the methodology used to
determine such value, the Company does not believe that it would be
able to refinance or repurchase all of its outstanding COLA units as
of December 31, 1996 at this value. Reference is made to note 5 for
results of the Redemption and Tender Offer.
INVENTORY CAPITALIZATION AND RECOGNITION OF REVENUE FROM THE
SALE OF SUGAR
The Company capitalizes all of the expenditures incurred in
bringing crops to their existing condition and location. Such
capitalized expenditures include those costs related to the
planting, cultivation and growing of sugar cane grown on the
agricultural properties of the Company. Inventory reflected in the
accompanying consolidated balance sheets at December 31, 1996 and
1995 is not in excess
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
of its estimated net realizable value. Reductions in the estimated
net realizable value of unsold sugar are recognized when
anticipated. In determining the net realizable value of unsold
sugar, the price the Company uses is based upon the domestic price
of sugar. The Company recognizes revenue and related cost of sales
upon delivery of its raw sugar to the California and Hawaii Sugar
Company ("C&H").
The price of raw sugar that the Company receives is based upon
the price of domestic sugar (less delivery and administrative costs)
as currently controlled by U.S. Government price supports
legislation. On April 4, 1996, President Clinton signed the Federal
Agriculture Improvement and Reform Act of 1996 ("the Act"). The
Act, which expires in 2002, keeps the loan rate at 18 cents per
pound. However, the Act includes certain other adjustments to the
sugar program including making crop loans recourse to the producer
and repealing marketing allotments which may over time depress the
domestic price of raw sugar. There can be no assurance that, in the
future, the government price support will not be reduced or
eliminated entirely. Such a reduction or elimination of price
supports could have a material adverse affect on the Company's
agriculture operations, and possibly could cause the Company to
evaluate the cessation of its remaining sugar cane operations.
As part of the Company's agriculture operations, the Company
enters into commodities futures contracts and options in sugar as
deemed appropriate to reduce the risk of future price fluctuations
in sugar. These futures contracts and options are accounted for as
hedges and, accordingly, gains and losses are deferred and
recognized in cost of sales as part of the production cost.
INVESTMENTS
Investments in certain partnerships and joint ventures, if any,
over which the Company exercises significant influence are accounted
for by the equity method. To the extent the Company engages in such
activities as general partner, the Company is contingently liable
for the obligations of its partnership and joint venture
investments.
LAND DEVELOPMENT
Project costs associated with the acquisition, development and
construction of real estate projects are capitalized and classified
as construction in progress. Such capitalized costs are not in
excess of the project's estimated fair value as reviewed
periodically or as considered necessary. In addition, interest is
capitalized to qualifying assets during the period that such assets
are undergoing
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
activities necessary to prepare them for their intended use. Such
capitalized interest is charged to cost of sales as revenue from the
real estate development is recognized. Interest costs of
approximately $1,327 have been capitalized for the year ended 1996.
No material amounts have been capitalized for the year ended 1995
and 1994.
Land actively held for sale and any related development costs
transferred from construction in progress are reported as
inventories in the accompanying consolidated balance sheets and are
stated at the lower of cost or fair value less costs to sell.
LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standard Board issued
Statement of Financial Accounting Standards No. 121 ("SFAS No.
121"), Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, which requires impairment
losses to be recorded on long-lived assets used in operation when
indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company
adopted SFAS No. 121 in 1995, with no effect on the accompanying
financial statements.
In accordance with the provisions of the COLA Indenture,
appraisals were performed for certain assets of the Company as of
December 31, 1996 and 1994, which reflected a decline in value for
certain properties. Certain of the assets appraised as of December
31, 1996 are properties that are either being actively marketed by
the Company or properties for which the Company has a plan to sell
the assets in the near future. _Five of the land parcels expected to
be disposed of by the Company within the next two years, having a
cost basis of approximately $40,280_were estimated by the Company to
have a total fair market value, less costs to sell, of approximately
$21,965 as of December 31, 1996. Accordingly, the Company recorded a
$18,315 loss in the fourth quarter of 1996 related to these
properties. Based on appraisals performed as of December 31, 1994,
the Company recorded, as a matter of prudent accounting practice,
reductions to the carrying value of certain properties in1994 in the
amount of $5,000to properly reflect the estimated market value of
the property in its current state of development.
EFFECTIVE INTEREST
For financial reporting purposes, the Company uses the
effective interest rate method and accrued interest on the COLAS at
4% per annum ("Mandatory Base Interest") for the years ended
December 31, 1996, 1995 and 1994.
INTEREST RATE SWAPS AND CAPS
Net interest received (paid) on contracts that qualify as
hedges is recognized over the life of the contract as an adjustment
to interest income (expense) of the hedged financial instrument.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation
is based on the straight-line method over the estimated economic
lives of 20-40 years for land improvements and 3-18 years for
machinery and equipment, or the lease term, whichever is less.
Maintenance and repairs are charged to operations as incurred.
Renewals and significant betterments and improvements are
capitalized and depreciated over their estimated useful lives.
DEFERRED EXPENSES
Deferred expenses consist primarily of financing costs related
to the COLAS. Such costs are being amortized over the term of the
COLAS on a straight-line basis.
RECOGNITION OF PROFIT FROM REAL PROPERTY SALES
For real property sales, profit is recognized in full when the
collectibility of the sales price is reasonably assured and the
earnings process is virtually complete. When the sale does not meet
the requirements for full profit recognition, a portion of the
profit is deferred until such requirements are met.
INCOME TAXES
The Company and its subsidiaries report their taxes as part of
the consolidated tax return of the Company's parent, Northbrook.
The Company and its subsidiaries have entered into a tax
indemnification agreement with Northbrook that indemnifies the
Company and its subsidiaries for responsibility for all past,
present and future federal and state income tax liabilities (other
than income taxes which are directly attributable to cancellation of
indebtedness income caused by the repurchase or redemption of
securities as provided for in or contemplated by the Repurchase
Agreement).
Current and deferred taxes have been allocated to the Company
as if the Company were a separate taxpayer in accordance with the
provisions of SFAS No. 109-Accounting for Income Taxes. However, to
the extent the tax indemnification agreement does not require the
Company to actually pay income taxes, current taxes payable or
receivable have been reflected as deemed contributions or
distributions to additional paid-in capital in the accompanying
consolidated financial statements.
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 amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
(2) ASSETS AND LIABILITIES INFORMATION
1996 1995
------- -------
Receivables - net:
Trade accounts and notes (net of allowance) $ 2,161 2,252
Sugar and molasses 1,663 3,877
Insurance claims, net -- 1,440
Other 917 1,151
------- -------
$ 4,741 8,720
======= =======
Accrued expenses:
Payroll and benefits $ 2,540 2,592
Interest 4,470 7,929
Other 2,264 2,747
------- -------
$ 9,274 13,268
======= =======
(3) INVESTMENTS
The Company's investments at December 31, 1996 and 1995 consist
of the following:
Carrying Value
---------------
Ownership
Description Percentage 1996 1995
- ----------- ----------- ------ ------
Sugar Cooperatives 26.0% $ 41 40
North Beach Joint Venture 50.0% 46,146 45,040
------- -------
$46,187 45,080
======= =======
The Company's sugar plantation subsidiaries sell their raw
sugar production to the Hawaiian Sugar and Transportation Company
("HSTC"), which is an agricultural cooperative owned by the major
Hawaii producers of raw sugar (including the Company), under a
marketing agreement. HSTC sells the raw sugar production to C&H
pursuant to a long-term supply contract. The terms of the supply
contract do not require a specified level of production by the
Hawaii producers; however, HSTC is obligated to sell and C&H is
obligated to purchase any raw sugar produced. The Company holds a
26 percent equity interest in HSTC. HSTC returns to its raw sugar
suppliers proceeds based upon the domestic sugar price less delivery
and administrative charges. The Company recognizes revenues and
related cost of sales upon delivery of its raw sugar to C&H.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
The North Beach joint venture was formed during 1986 to plan,
manage and develop approximately 96 acres of beachfront property
located at the Kaanapali Beach Resort on West Maui.
The following is the condensed, combined financial statement
information (unaudited) of HSTC and the North Beach joint venture:
1996 1995
----------------- -----------------
North Beach North Beach
Joint Venture HSTC Joint Venture HSTC
-------------------- -------------------
Current assets $ 255 13,613 210 31,558
Noncurrent assets 40,100 1,907 40,122 3,797
Current liabilities (202) (14,011) (205) (31,046)
Noncurrent liabilities -- (1,400) -- (4,200)
-------- ------- ------- --------
Equity $ 40,153 109 40,127 109
======== ======= ======== ========
1996 1995 1994
------ ------ ------
Revenue $203,406 202,954 312,526
Cost and expenses 19,755 20,493 28,472
-------- -------- --------
Net income $183,651 182,461 284,054
=========== ========== =========
(4) AMOUNTS DUE AFFILIATES - FINANCING
The maturity date of the approximately $15,097 of remaining
acquisition-related financing owed to affiliates has been extended
to June 1, 1998 and bears interest at a rate per annum based upon
the prime interest rate (8.25% at December 31, 1996), plus one
percent.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
In addition to the $52,000 borrowed from Northbrook in 1995 to
redeem Class A COLAS pursuant to the Redemption Offer (see Note 5),
the Company has also borrowed approximately $18,746 and $9,814
during 1996 and 1995, respectively, to fund COLA Base Interest
payments and other operational needs. These loans from Northbrook
are payable interest only, mature on June 1, 1998 and carry an
interest rate per annum equal to the prime interest rate plus two
percent. Pursuant to the Indenture relating to the COLAS, the
amounts borrowed from Northbrook are considered "Senior
Indebtedness" to the COLAS.
In February 1997 the above noted affiliate loans, along with
certain other amounts due Northbrook, were converted into a new
$104,759 ten year note payable. The new note is payable interest
only, which accrues at the prime interest rate plus 2%.
(5) CERTIFICATE OF LAND APPRECIATION NOTES
The COLAS are unsecured debt obligations of the Company.
Interest on the COLAS is payable semi-annually on February 28 and
August 31 of each year. The COLAS mature on December 31, 2008, and
bear interest after the Final Issuance Date (August 31, 1989) at a
rate of 10% per annum ("Base Interest") of the outstanding principal
balance of the COLAS on a cumulative, non-compounded basis, of which
6% per annum is contingent ("Contingent Base Interest") and payable
only to the extent of Net Cash Flow (Net Cash Flow for any period is
generally an amount equal to 90% of the Company's net cash revenues,
proceeds and receipts after payment of cash expenditures, including
the Qualified Allowance (as defined) other than federal and state
income taxes and after the establishment by the Company of reserves)
or Maturity Market Value (as defined below). The Company has not
generated a sufficient level of Net Cash Flow to pay Contingent Base
Interest on the COLAS from 1990 through 1996. Approximately $86,545
of the $94,169 cumulative deficiency of Contingent Base Interest
related to the period from August 31, 1989 (Final Issuance Date)
through December 31, 1996 has not been accrued in the accompanying
consolidated financial statements as the Company believes that it is
not probable at this time that a sufficient level of Net Cash Flow
will be generated in the future or that there will be sufficient
Maturity Market Value (as defined below) as of December 31, 2008
(the COLA maturity date) to pay such unaccrued Contingent Base
Interest. The following table is a summary of Mandatory Base
Interest and Contingent Base Interest for the years ended December
31, 1996, 1995 and 1994:
1996 1995 1994
------- ------- -------
Mandatory Base Interest paid $ 8,828 12,109 15,389
Contingent Base Interest paid -- -- --
Cumulative deficiency of Contingent
Base Interest at end of year $ 94,169 80,927 117,986
Net Cash Flow was $0 for 1996, 1995 and 1994.
In each calendar year, principal reductions may be made from
remaining Net Cash Flow, if any, in excess of all current and unpaid
deferred Contingent Base Interest and will be made at the election
of the Company (subject to certain restrictions). The COLAS will
bear additional contingent interest in any year, after any principal
reduction, equal to 55% of remaining Net Cash Flow. Upon maturity,
holders of COLAS will be entitled to receive the remaining
outstanding principal balance of the COLAS plus unpaid Mandatory
Base Interest plus additional interest equal to the unpaid
Contingent Base Interest, to the extent of the Maturity Market Value
(Maturity Market Value generally means 90% of the excess of the Fair
Market Value (as defined) of the Company's assets at maturity over
its liabilities (including Qualified Allowance, but only to the
extent earned and payable from Net Cash Flow generated through
maturity) at maturity, which liabilites have been incurred in
connection with its operations), plus 55% of the remaining Maturity
Market Value.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
On March 14, 1989, Amfac/JMB Finance ("Finance"), a wholly-
owned subsidiary of Northbrook, and the Company entered into an
agreement (the "Repurchase Agreement") concerning Finance's
obligations to repurchase, on June 1, 1995 and 1999, the COLAS upon
request of the holders thereof. The COLAS were issued in two units
consisting of one Class A and one Class B COLA. As specified in the
Repurchase Agreement, the repurchase of the Class A COLAS may have
been requested by the holders of such COLAS on June 1, 1995 at a
price equal to the original principal amount of such COLAS ($.5)
minus all payments of principal and interest allocated to such
COLAS. The cumulative interest paid per Class A COLA through June 1,
1995 was $.135. The repurchase of the Class B COLAS may be
requested of Finance by the holders of such COLAS on June 1, 1999 at
a price equal to 125% of the original principal amount of such COLAS
($.5) minus all payments of principal and interest allocated to such
COLAS. As of December 31, 1996, the cumulative interest paid per
Class A and Class B COLA was approximately $.165 and $.165,
respectively.
On March 14, 1989, Northbrook entered into a keep-well
agreement with Finance, whereby it agreed to contribute sufficient
capital or make loans to Finance to enable Finance to meet its COLA
repurchase obligations described above. Notwithstanding Finance's
repurchase obligations, the Company may elect to redeem any COLAS
requested to be repurchased at the specified price.
On March 15, 1995, pursuant to the indenture that governs the
terms of the COLAS (the "Indenture"), the Company elected to offer
to redeem (the "Redemption Offer") all Class A COLAS from the
registered holders, thereby eliminating Finance's obligation to
satisfy the Class A COLA repurchase options requested by such
holders as of June 1, 1995. Pursuant to the Redemption Offer, and
in accordance with the terms of the Indenture, the Company was
therefore obligated to purchase any and all Class A COLAS submitted
pursuant to the Redemption Offer at a price of $.365 per Class A
COLA. In conjunction with the Company's Redemption Offer, the
Company made a tender offer (the "Tender Offer") to purchase up to
approximately $68,000 principal value of the Class B COLAS at a
price of $.220 per Class B COLA from COLA holders electing to have
their Class A COLAS repurchased. Approximately 229,000 Class A COLAS
were submitted for repurchase pursuant to the Redemption Offer and
approximately 99,000 Class B COLAS were submitted for repurchase
pursuant to the Tender Offer, requiring an aggregate payment by the
Company of approximately $105,450 on June 1, 1995. The Company used
its available cash to purchase Class B COLAS pursuant to the Tender
Offer and borrowed $52,000 from Northbrook to purchase Class A COLAS
pursuant to the Redemption Offer. As of December 31, 1996, the
Company had approximately 156,000 Class A COLAS and approximately
286,000 Class B COLAS outstanding, with a principal balance of
approximately $78,000 and $143,000, respectively.
As a result of the repurchases, the Company retired
approximately $164,045 in face value of COLA debt and recognized a
financial statement extraordinary gain of approximately $32,544 (net
of income taxes of $20,807, the write-off of deferred financing
costs of $10,015, the write-off of accrued Contingent Base Interest
of $5,667 and expenses of $894). Such gain was treated as
cancellation
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
of indebtedness income for tax purposes and, accordingly, the income
taxes related to the Class A Redemption Offer (approximately $9,106)
were not indemnified by the tax agreement with Northbrook (see note
1).
The terms of the Indenture relating to the COLAS place certain
restrictions on the Company's declaration and payment of dividends.
Such restrictions generally relate to the source, timing and amounts
which may be declared and/or paid. The COLAS also impose certain
restrictions on, among other things, the creation of additional
indebtedness for certain purposes, the Company's ability to
consolidate or merge with or into other entities, and the Company's
transactions with affiliates.
(6) LONG-TERM DEBT
In June 1991, the Company obtained a five-year $66,000 loan
from the Employees' Retirement System of the State of Hawaii
("ERS"). The nonrecourse loan is secured by a first mortgage on the
Kaanapali Golf Courses, and is considered "Senior Indebtedness" (as
defined in the Indenture relating to the COLAS). The loan bore
interest at a rate per annum equal to the greater of (i) the base
interest rate announced by the Bank of Hawaii on the first of July
for each year or (ii) ten percent per annum through June 30, 1993
and nine percent per annum thereafter. The annual interest payments
were in excess of the cash flow generated by the Kaanapali Golf
Courses.
In April 1996, the Company reached an agreement to amend the
loan with the ERS, extending the maturity date for five years. In
exchange for the loan extension, the ERS received the right to
participate in the "Net Disposition Proceeds" (as defined) related
to the sale or the refinancing of the golf courses or at the
maturity of the loan. The ERS share of the Net Disposition Proceeds
increases from 30% through June 30, 1997, to 40% for the period from
July 1, 1997 to June 30, 1999 and to 50% thereafter. The loan
amendment effectively adjusted the interest rate as of January 1,
1995 to 9.5% until June 30, 1996. After June 30, 1996, the loan
bears interest at a rate per annum equal to 8.73%. The loan
amendment requires the Company to pay interest at the rate of 7% for
the period from January 1, 1995 to June 30, 1996, 7.5% from July 1,
1996 to June 30, 1997, 7.75% from July 1, 1997 to June 30, 1998 and
8.5% thereafter ("Minimum Interest"). The Company made payments in
1996 totaling $6,512, which represents the Minimum Interest due
through October 1, 1996. Accrued Minimum Interest as of December 31,
1996 was $1,244. The scheduled minimum payments are paid quarterly
on the principal balance of the $66,000 loan. The difference
between the accrued interest expense and the Minimum Interest
payment accrues interest and is payable on an annual basis from
excess cash flow, if any, generated from the Kaanapali Golf Courses.
The total accrued interest payable from excess cash flow was
approximately $3,151 as of December 31, 1996. Although the
outstanding loan balance remains nonrecourse, certain payments and
obligations, such as the Minimum Interest payments and the ERS's
share of appreciation, if any, are recourse to the Company. However,
the Company's obligations to make future Minimum Interest payments
and to pay the ERS a share of appreciation would be terminated if
the Company tendered an executed deed to the golf course property to
the ERS in accordance with the terms of the amendment.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
In January 1993, The Lihue Plantation Company, Limited
("Lihue") obtained a ten-year $13,250 loan used to fund the
acquisition of Lihue's power generation equipment. The $13,250 loan,
constituting "Senior Indebtedness" under the COLAS' Indenture,
consists of two ten year amortizing term loans of $10,000 and
$3,250, respectively, payable in forty consecutive installments
commencing July 1, 1993 in the principal amount of $250 and $81,
respectively (plus interest). The $10,000 and $3,250 loans have
outstanding balances of $6,500 and $66, respectively, as of December
31, 1996 and bear interest at a rate equal to prime rate (8.25% at
December 31, 1996) plus three and one half percent and prime rate
plus four and one-half percent, respectively. Lihue has purchased
an interest rate agreement which protects against fluctuations in
interest rates and effectively caps the prime rate for the first
seven years of the loan agreement at eight percent. The loan is
secured by the Lihue power generation equipment, sugar inventories
and receivables, certain other assets and real property of the
Company and has limited recourse to the Company and certain other
subsidiaries.
In October 1993, Waikele Golf Club, Inc. ("WGCI"), a wholly-
owned subsidiary of the Company that owns and operates the Waikele
Golf Course, obtained a five year $20,000 loan facility from two
lenders. The loan consists of two $10,000 amortizing loans. Each
loan bears interest only for the first two years and interest and
principal payments based upon an assumed 20 year amortization period
for the remaining three years. The loans bear interest at prime
plus 1/2% and LIBOR (5.5% at December 31, 1996) plus 3%,
respectively. WGCI received an initial funding of $14,000, of which
$600 was held back by the lenders to pay interest. In October 1994,
in accordance with the loan agreement, the Company received an
additional funding of $6,000 and a release of the $600 interest
holdback, both of which were contingent upon achieving a certain
level of Net Operating Income (as defined) by the golf course during
the first six months of 1994. The loan is secured by WGCI's assets
(the golf course and related improvements and equipment), is
guaranteed by the Company, and is considered "Senior Indebtedness"
(as defined in the Indenture relating to the COLAS). As of December
31, 1996, the outstanding balance was $19,511, with scheduled annual
principal maturities of $405 in 1997 and the balance of $19,106 in
1998. In February 1997, WGCI entered into an amended and restated
loan agreement with the Bank of Hawaii, whereby the outstanding
principal amount of the loan has been increased to $25,000, the
maturity date has been extended to February 2007, the interest rate
has been changed to LIBOR plus 2% until the fifth anniversary and
LIBOR plus 2.5% thereafter and principal is to be repaid based on a
30-year amortization schedule.
In December 1996, Amfac Property Development Corporation, a
wholly-owned subsidiary of the Company, obtained a $10,000 loan
facility from a Hawaii bank. The loan is secured by a mortgage on
property under development at the mill-site of Oahu Sugar, and is
considered "Senior Indebtedness" (as defined in the Indenture
relating to the COLAS). The loan bears interest at the bank's base
rate (8.25% at December 31, 1996) plus .5% and matures on December
1, 1998.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
(7) RENTAL ARRANGEMENTS
As Lessee
The Company rents, as lessee, various land, facilities and
equipment under operating leases. Most land leases provide for
renewal options and minimum rentals plus contingent payments based
on revenues or profits. Included in rent expense are minimum
rentals and contingent payments for operating leases in the
following amounts:
1996 1995 1994
------ ------ ------
Minimum and fixed rents $2,357 2,789 3,956
Contingent payments 1,181 1,261 2,476
Property taxes, insurance and other
charges 1,241 445 669
------- ------ ------
$4,779 4,495 7,101
======== ======== =======
Future minimum lease payments under noncancelable operating
leases aggregate approximately $13,403 and are due as follows: 1997,
$1,960; 1998, $2,138; 1999, $1,959; 2000, $2,005; 2001, $1,663; and
thereafter, $3,678.
(8) EMPLOYEE BENEFIT PLANS
The Company participates in benefit plans covering
substantially all its employees, which provide benefits based
primarily on length of service and compensation levels. These plans
are administered by Northbrook in conjunction with other plans
providing benefits to employees of Northbrook and its affiliates.
Northbrook's policy is to fund pension costs in accordance with
the minimum funding requirements under provisions of the Employee
Retirement Income Security Act ("ERISA"). Under ERISA guidelines,
amounts funded may be more or less than the pension expense
recognized for financial reporting purposes. One of the Company's
defined benefit plans, the Retirement Plan for the Employees of
Amfac, Inc. (the "Plan"), terminated effective December 31, 1994.
The settlement of the plan occurred in May 1995. The Company
replaced this plan with the "Core Retirement Award Program", a
defined contribution plan that commenced on January 1, 1995. In the
new plan, an Eligible Employee (as defined) is credited with an
annual contribution equal to 3% of the employee's qualified
compensation. The new plan's cost to the Company and the benefits
provided to the participants are comparable to the former plan.
Charges for pension and Core Retirement Award costs allocated
to the Company aggregated approximately $628, $961 and $1,000 for
the years ended December 31, 1996, 1995 and 1994, respectively.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
In addition to providing pension benefits, the Company also
provides certain healthcare and life insurance benefits to eligible
retired employees of some of its businesses. Where such benefits
are offered, substantially all employees may become eligible for
such benefits if they reach a specified retirement age while
employed by the Company and if they meet a certain length of service
criteria. The postretirement healthcare plan is contributory and
contains cost-sharing features such as deductibles and copayments.
However, these features, as they apply to bargaining unit retirees,
are subject to collective bargaining provisions of a labor contract
between the Company and the International Longshoremen's &
Warehousemen's Union. The postretirement life insurance plan is non-
contributory. The Company continues to fund benefit costs for both
plans on a pay-as-you-go basis.
Net periodic postretirement benefit cost (credit) for 1996,
1995 and 1994 includes
the following components:
December 31, December 31, December 31,
1996 1995 1994
------------------ ----------------- ----------------
Life Life Life
Medical Insurance Medical Insurance Medical Insurance
Plans Plans Total Plans Plans Total Plans Plan Total
------ ------- ------ ----- ----- ------ ------ ---- ------
Svc cost $ 394 23 417 378 15 393 483 17 500
Int. cost 1,681 289 1,970 1,991 296 2,287 3,428 292 3,720
Amortization of
net(gain)
loss (3,396) 30 (3,366) (3,310) 24 (3,286) (1,290) 35 (1,255)
------- ------ ------ ------ ----- ------- ---- ----- -----
Net periodic
postretirement
benefit cost
(credit)$(1,321) 342 (979) (941) 335 (606) 2,621 344 2,965
====== ====== ====== ====== ====== ===== ====== ===== =====
The following table sets forth the plans' combined funded status
reconciled
with the amounts included in the Company's consolidated financial
statements
at December 31, 1996 and 1995:
December 31, December 31,
1996 1995
------------------- ------------------
Life Life
Medical Insurance Medical Insurance
Plans Plan Total Plans Plan Total
------ ------ ------ ---- ----- ------
Accumulated postretirement
benefit obligation:
Retirees $17,385 3,827 21,212 16,048 3,915 9,963
Fully eligible active
plan members 195 16 211 310 29 339
Other active plan members 4,514 164 4,678 6,928 153 7,081
------ ------ ------ ------ ------ -----
22,094 4,007 26,101 23,286 4,097 21,383
Unrecognized net gain
(loss) 31,912 (351)31,561 33,958 (304)33,654
------ ------ ------ ----- ----- ------
Acc. postretirement benefit
cost 54,006 3,656 57,662 57,244 3,793 61,037
====== ====== ====== ====== ===== ======
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
For measuring the expected postretirement benefit obligation,
an 11% annual rate of increase in the per capita claims cost was
assumed for 1996 through 2002. This rate was assumed to decrease to
6% in 2003 and remain at that level thereafter. The healthcare cost
trend rate assumption has a significant effect on the amount of the
obligation and periodic cost reported. An increase in the assumed
healthcare trend rate by 1% in each year would increase the medical
plans' accumulated postretirement benefit obligation as of December
31, 1996 by 7% and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for the year
then ended by 8%. During 1995, premiums for health benefits for
retirees were adjusted to match actual claims experience. This
adjustment resulted in a reduction to the cost absorbed by the
Company due to the cost sharing provisions of the health care
benefit plan. This adjustment also resulted in the reduction of the
accumulated postretirement benefit obligation as of December 31,
1995.
The Company currently amortizes unrecognized gains over the
shorter of 10 years or the average remaining service period of
active plan participants. However, due to the significant amount of
unrecognized gain at December 31, 1996, which is included in the
financial statements as a liability, and the disproportionate
relationship between the unrecognized gain and accumulated
postretirement benefit obligation at December 31, 1996, the Company
may, in the future, change its amortization policy to accelerate the
recognition of the unrecognized gain. In considering such change,
the Company would need to determine whether significant changes in
the accumulated postretirement benefit obligation and unrecognized
gain may occur in the future as a result of changes in actuarial
assumptions, experience and other factors. Any future change to
accelerate the amortization of the unrecognized gain would have no
effect on the Company's cash flows, but could have a significant
effect on its statement of operations.
The weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 7.5% as of
December 31, 1996 and 1995.
(9) TRANSACTIONS WITH AFFILIATES
The Company incurred interest expense of approximately $8,935,
$5,360 and $1,267 for the years ended December 31, 1996, 1995 and
1994, respectively, in connection with the financing obtained from
an affiliate (see note 4), all of which was paid as of December 31,
1996.
With respect to any calendar year, JMB or its affiliates may
receive a Qualified Allowance in an amount equal to: (i)
approximately $6,200during each of the calendar years 1989 through
1993; and (ii) thereafter, 1-1/2% per annum of the Fair Market Value
(as defined) of the gross assets of the Company and its subsidiaries
(other than cash and cash equivalents and Excluded Assets (as
defined)) for providing certain advisory services for the Company.
The aforementioned advisory services, which are provided pursuant to
a 30-year Services Agreement entered into between the Company,
certain of its subsidiaries and JMB in November 1988, include making
recommendations in the following areas: (i) the construction and
development of real property; (ii) land use and zoning changes;
(iii) the timing and pricing of properties to be sold; (iv) the
timing, type and amount of financing to be incurred; (v) the
agricultural business; and, (vi) the uses (agricultural,
residential, recreational or commercial) for the land. However, the
Qualified Allowance shall be earned and paid for each year prior to
maturity of the COLAS only if the Company generates sufficient Net
Cash Flow to pay Base Interest to the holders of the COLAS for such
year of an amount equal to 8% of the
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
balance of the COLAS for such year; any portion of the Qualified
Allowance not paid for any year shall cumulate without interest and
JMB or its affiliates shall be paid such amount with respect to any
succeeding year, after the payment of all Contingent Base Interest
for such year, to the extent of 100% of remaining Net Cash Flow
until an amount equal to 20% of the Base Interest with respect to
such year has been paid, and thereafter, to the extent of the
product of (a) remaining Net Cash Flow, multiplied by (b) a
fraction, the numerator of which is the cumulative deficiency as of
the end of such year in the Qualified Allowance and the denominator
of which is the sum of the cumulative deficiencies as of the end of
such year in the Qualified Allowance and Base Interest. A Qualified
Allowance for 1989 of approximately $6,200 was paid on February 28,
1990. Approximately $54,400 of Qualified Allowance related to the
period from January 1, 1991 through December 31, 1996 has not been
earned and paid and is payable only from future Net Cash Flow.
Accordingly, because the Company does not believe it is probable at
this time that a sufficient level of Net Cash Flow will be generated
in the future to pay Qualified Allowance, the Company has not
accrued for any Qualified Allowance in the accompanying consolidated
financial statements. JMB has informed the Company that no
incremental costs or expenses have been incurred relating to the
provision of these advisory services. The Company believes that
using an incremental cost methodology is reasonable. The following
table is a summary of the Qualified Allowance for the years ended
December 31, 1996, 1995 and 1994:
1996 1995 1994
Qualified Allowance calculated $9,240 9,901 10,366
Qualified Allowance paid -- -- --
Cumulative deficiency of Qualified
Allowance at end of year $60,632 51,392 41,491
Net Cash Flow was $0 for 1996, 1995 and 1994.
After the maturity date of the COLAS, JMB will continue to
provide advisory services pursuant to the Services Agreement, the
Qualified Allowance for such years will continue to be 1-1/2% per
annum of the Fair Market Value of the gross assets of the Company
and its subsidiaries and the Qualified Allowance will continue to be
payable from the Company's Net Cash Flow. Upon the termination of
the Services Agreement, if there has not been sufficient Net Cash
Flow to pay the cumulative deficiency in the Qualified Allowance, if
any, such amount would not be due or payable to JMB.
The Company, its subsidiaries and their joint ventures
reimburse Northbrook, JMB and their affiliates for direct expenses
incurred on their behalf, including salaries and salary-related
expenses incurred in connection with the management of the Company's
or its subsidiaries' and the joint ventures' operations. The total
of such costs for the years ended December 31, 1996, 1995 and 1994
was approximately $653, $587 and $500, respectively, of which $1,241
was unpaid as of December 31, 1996. In addition, as of December 31,
1996, the current portion of amounts due to affiliates includes
$9,106 of income tax payable related to the Class A COLA Redemption
Offer (see note 5). Also, the Company pays a non-accountable
reimbursement of approximately $30 per month to JMB or its
affiliates in respect of general overhead expense, all of which was
paid as of December 31, 1996.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
JMB Insurance Agency, Inc. earns insurance brokerage
commissions in connection with providing the placement of insurance
coverage for certain of the properties and operations of the
Company. Such commissions are comparable to those available to the
Company in similar dealings with unaffiliated third parties. The
total of such commissions for the years ended December 31, 1996,
1995 and 1994 was approximately $774, $653 and $983, respectively,
all of which was paid as of December 31, 1996.
Northbrook and its affiliates allocated certain charges for
services to the Company based upon the estimated level of services
for the years ended December 31, 1996, 1995 and 1994 of
approximately $1,460, $7,868 and $1,757, respectively, of which
$6,488 was unpaid as of December 31, 1996. These services and costs
are intended to reflect the Company's separate costs of doing
business and are principally related to the inclusion of the
Company's employees in the Northbrook pension plan, payment of
severance and termination benefits and reimbursement for insurance
claims paid on behalf of the Company. All amounts described above,
deferred or currently payable, do not bear interest and are expected
to be paid in future periods.
As discussed in note 4, in February 1997 certain intercompany
payables to Northbrook totaling $7,922 were converted into a new ten
year note payable. Accordingly, these intercompany amounts were
classified as long-term as of December 31, 1996 in the accompanying
consolidated financial statements.
(10) SIGNIFICANT CUSTOMER
During 1994, approximately 24% of the Company's revenues were
derived from the sale of land parcels at Waikele to a single
builder.
As a result of the Company's interest in HSTC, C&H is
contractually bound to purchase all of the sugar the Company
produces. If, for any reason, C&H were to cease its operations, the
Company would seek other purchasers for its sugar.
(11) COMMITMENTS AND CONTINGENCIES
The Company is involved in various matters of litigation and
other claims. Management, after consultation with legal counsel, is
of the opinion that the Company's liability (if any) when ultimately
determined will not have a material adverse effect on the Company's
financial position.
The Company's property segment had contractual commitments
(related to project costs) of approximately $2,100 as of December
31, 1996. Additional development expenditures are dependent upon the
ability to obtain financing and the timing and extent of property
development and sales.
As of December 31, 1996, certain portions of the Company's land
not currently under development or used in sugar operations are
mortgaged as security for $1,300 of performance bonds related to
property development.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
(12) INCOME TAXES
Total income tax expense (benefit) for the years ended December
31, 1996, 1995 and 1994 was allocated as follows:
1996 1995 1994
------ -------- -------
Loss before extraordinary gain $(21,043) (8,019) (7,764)
Extraordinary gain -- 20,807 --
------- ------- ------
$(21,043) 12,788 (7,764)
======= ======= ======
Income tax expense (benefit) attributable to loss before
extraordinary gain for the years ended December 31, 1996, 1995 and
1994 consists of:
Current Deferred Total
------- -------- -------
Year ended December 31, 1996:
U.S. federal $(4,414) (13,391) (17,805)
State (803) (2,435) (3,238)
-------- -------- --------
$(5,217) (15,826) (21,043)
======= ======= ========
Year ended December 31, 1995:
U.S. federal $(10,475) 3,689 (6,786)
State (1,904) 671 (1,233)
------- ------ ------
$(12,379) 4,360 (8,019)
======= ====== ========
Year ended December 31, 1994:
U.S. federal $ 20,946 (21,515) (6,569)
State 3,808 (5,003) (1,195)
------- ------- ---------
$ 24,754 (32,518) (7,764)
======== ======= =======
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
In 1995, income tax expense related to the COLA redemption
approximated $20,807. Of this amount, approximately $9,106 was
attributable to current taxes related to the redeemed Class A COLA's
and, accordingly, was not indemnified by Northbrook (see note 9).
schoolCurrent income tax expense attributable to the Class B COLA's
of approximately $9,490 was indemnified by Northbrook and,
accordingly, was deducted from the 1995 current tax benefit of
$12,379 attributable to loss before extraordinary gain to derive the
1995 capital contribution related to current income taxes.
Income tax benefit attributable to loss before extraordinary
gain differs from the amounts computed by applying the U.S. federal
income tax rate of 35 percent to pretax loss before extraordinary
gain as a result of the following:
1996 1995 1994
------ ------ ------
Computed "expected" tax benefit $(19,323) (9,749) (7,279)
Increase (reduction) in income taxes
resulting from:
Pension and Core Retirement Award expense 321 2,478 365
State income taxes, net of federal income
tax benefit (2,158) (823) (796)
Other, net 117 75 (54)
------- ------- -------
Total $ (21,043) (8,019) (7,764)
======== ======= =======
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax
liabilities and assets as of December 31, 1996 and 1995 are as
follows:
1996 1995
--------- --------
Deferred tax (assets):
Postretirement benefits $(22,488) (23,804)
Interest accruals (2,975) (3,149)
Other accruals (3,549) (3,074)
-------- --------
Total deferred tax assets (29,012) (30,027)
-------- -------
Deferred tax liabilities:
Accounts receivable related to profit on sales
of sugar 3,065 3,332
Inventories, principally due to sugar production
costs,capitalized costs, capitalized interest
and purchase accounting adjustments 258 4,716
Plant and equipment, principally due to
depreciation and purchase accounting adjustments 8,129 7,696
Land and land improvements, principally due to
purchase accounting adjustments 89,537 101,204
Deferred gains due to installment sales for
income tax purposes 7,429 8,492
Investments in unconsolidated entities,
principally due to purchase
accounting adjustments. 14,361 14,180
------- -------
Total deferred tax liabilities 122,779 139,620
------- -------
Net deferred tax liability $ 93,767 109,593
========= ========
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Concluded
(Dollars in Thousands)
(13) SEGMENT INFORMATION
Agriculture and Property comprise the separate industry
segments of the Company. Operating income (loss)-Other consists
primarily of unallocated overhead expenses and Total assets-Other
consists primarily of cash and deferred expenses.
Total revenues, operating income (loss), assets, capital
expenditures, and depreciation and amortization by industry segment
for 1996, 1995 and 1994 are set forth below:
1996 1995 1994
------- ------- -------
Revenues:
Agriculture $51,805 47,656 89,237
Property 45,138 52,663 66,749
-------- -------- --------
$96,943 100,319 155,986
======== ======== ========
Operating income (loss):
Property:
Reduction to carrying value
of investments in real
estate $(18,315) -- (5,000)
Other 732 11,122 17,934
Agriculture (7,525) (10,882) (3,893)
Other (3,045) (2,593) (3,800)
-------- -------- --------
$(28,153) (2,353) 5,241
======== ======== ========
Total assets:
Property $225,372 199,999 207,980
Agriculture 239,222 304,170 321,906
Other 19,011 23,429 84,661
-------- -------- --------
$483,605 521,598 614,547
======== ======== ========
Capital expenditures:
Property $ 845 1,529 2,872
Agriculture 3,160 3,616 3,891
Other 252 -- --
------- -------- --------
$ 4,257 5,145 6,763
======= ======== ========
Depreciation and amortization:
Property $ 2,179 1,991 2,128
Agriculture 4,120 4,538 4,889
Other 55 194 199
------- ------- --------
$ 6,354 6,723 7,216
======= ======= ========
(14) Subsequent Event
On February 28, 1997, an interest payment of approximately
$4,414 was paid to the holders of COLAS. The Company borrowed
approximately $4,414 from Northbrook to make the interest payment.
<TABLE>
Schedule II
AMFAC/JMB HAWAII, INC.
Valuation and Qualifying Accounts
Years ended December 31, 1996, 1995 and 1994
(Dollars in Thousands)
<CAPTION>
Additions Additions
Balance at Charges to Charges to Balance at
Beginning Cost and Other End
Description of Period Expenses Accounts Deductions of Period
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1996:
Allowance for doubtful
accounts:
Trade accounts $ 361 11 -- 54 318
Claims and other -- -- -- -- --
------- ------ ------ ------ ------
$ 361 11 -- 54 318
======= ====== ====== ====== ======
Year ended December 31,
1995:
Allowance for doubtful
accounts:
Trade accounts $ 285 102 -- 26 361
Claims and other 1,144 -- -- 1,144 --
------ ------ ------ ------ ------
$ 1,429 102 -- 1,170 361
====== ====== ====== ====== ======
Year ended December 31,
1994:
Allowance for doubtful
accounts:
Trade accounts $ 235 89 -- 39 285
Claims and other 1,144 -- -- -- 1,144
------ ------ ------ ------- -------
$1,379 89 -- 39 1,429
====== ====== ====== ======= =======
</TABLE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
AMFAC/JMB FINANCE, INC.
We have audited the accompanying balance sheets of
Amfac/JMB Finance, Inc. as of December 31, 1996 and 1995.
These balance sheets are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these balance sheets 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 balance sheets are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the balance
sheets. An audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall balance sheet presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the balance sheets referred to above
present fairly, in all material respects, the financial
position of Amfac/JMB Finance, Inc. at December 31, 1996 and
1995, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Honolulu, Hawaii
March 21, 1997
AMFAC/JMB FINANCE, INC.
Balance Sheets
December 31, 1996 and 1995
(Dollars in thousands, except per share information)
A S S E T S
1996 1995
Current assets:
Cash $ 1 1
======= ========
L I A B I L I T Y A N D S T O C K H O L D E R ' S E Q U I T Y
Repurchase obligation (note 3)
Common stock, $1 par value;
authorized, issued and outstanding - 1,000 shares $ 1 1
======= =======
The accompanying notes are an integral part of these balance sheets.
AMFAC/JMB FINANCE, INC.
Notes to the Balance Sheets
December 31, 1996 and 1995
(Dollars in Thousands)
(1) ORGANIZATION AND ACCOUNTING POLICY
Amfac/JMB Finance, Inc. ("Finance") was incorporated
November 7, 1988 in the State of Illinois. Finance has had no
financial operations. All of the outstanding shares of
Finance are owned by Northbrook Corporation ("Northbrook").
(2) KEEP-WELL AGREEMENT
On March 14, 1989, Northbrook entered into a keep-well
agreement with Finance, whereby it agreed to contribute
sufficient capital or make loans to Finance to enable Finance
to meet the COLA repurchase obligations described below in
note 3.
On March 15, 1995, pursuant to the indenture that governs
the terms of the COLAS (the "Indenture"), Amfac/JMB Hawaii,
Inc. elected to exercise its right to redeem, and therefore
was obligated to purchase, any and all Class A COLAS submitted
pursuant to the June 1, 1995 Redemption Offer at a price of
$.365 per Class A COLA. Pursuant to Amfac/JMB Hawaii, Inc.'s
election to redeem the Class A COLAS for repurchase, Amfac/JMB
Hawaii, Inc. assumed Finance's maximum amount of its liability
from the June 1, 1995 COLA repurchase obligation of $140,425.
(3) REPURCHASE OBLIGATION
On March 14, 1989, Finance and a subsidiary of Northbrook
(Amfac/JMB Hawaii, Inc.) entered into an agreement (the
"Repurchase Agreement") concerning Finance's obligation (on
June 1, 1995 and 1999) to repurchase, upon request of the
holders thereof, the Certificate of Land Appreciation Notes
due 2008 ("COLAS"), to be issued by Amfac/JMB Hawaii, Inc. in
conjunction with the acquisition of Amfac/JMB Hawaii, Inc.. A
total aggregate principal amount of $384,737 of COLAS were
issued during the offering, which terminated on August 31,
1989. The COLAS were issued in two units consisting of one
Class A and one Class B COLA. As specified in the Repurchase
Agreement, the repurchase of the Class A COLAS may have been
requested of Finance by the holders of such COLAS on June 1,
1995 at a price equal to the original principal amount of such
COLAS ($.500) minus all payments of principal and interest
allocated to such COLAS. The cumulative interest paid per
Class A COLA through June 1, 1995 was $.135. The repurchase
of the Class B COLAS may be requested of Finance by the
holders of such COLAS on June 1, 1999 at a price equal to 125%
of the original principal amount of such COLAS ($.500) minus
all payments of principal and interest allocated to such
COLAS. To date, the cumulative interest paid per Class A and
Class B COLA is approximately $.165 and $.165, respectively.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
There were no changes in or disagreements with the
accountants during the fiscal years 1996 and 1995.
PART III
Item 10. Directors and Executive Officers of the Registrant
As of December 31, 1996, the directors, executive
officers and certain other officers of the Company were as
follows:
Position
Held with
Name the Company
------------- ---------------
Judd D. Malkin Chairman
Neil G. Bluhm Vice Chairman
Edward G. Karl President, Chief Executive
Officer and Director
Gary Grottke Executive Vice President,
Chief Operating Officer
and Director
Chris J. Kanazawa Senior Vice President and
Director
Peggy H. Sugimoto Senior Vice President and
Chief Financial Officer
Timothy E. Johns Vice President
Teney K. Takahashi Vice President
Certain of these officers are also officers and/or
directors of JMB and numerous affiliated companies of JMB
(hereinafter collectively referred to as "JMB affiliates") and
many of such officers are also partners of certain
partnerships (herein collectively referred to as the
"Associate Partnerships") which are associate general partners
(or general partners thereof) in publicly offered real estate
limited partnerships. The publicly offered partnerships in
which the Associate Partnerships are partners have not engaged
in the agriculture business and have primarily purchased, or
made mortgage loans securing, existing commercial, retail,
office, industrial and multi-family residential rental
buildings. However, certain partnerships sponsored by JMB and
other affiliates of JMB are engaged in development activities
including planned communities, none of which are in Hawaii.
There is no family relationship among any of the
foregoing directors or officers.
The foregoing directors have been elected to serve one-
year terms until the next annual meeting to be held on the
Second Tuesday of August 1997 or until his successor is
elected and qualified.
There are no arrangements or understandings between or
among any of said directors or officers and any other person
pursuant to which any director or officer was selected as
such.
The business experience during the past five years of the
directors and such officers of the Company includes the
following:
Judd D. Malkin (age 59) is Chairman of the Company since
1988, Mr. Malkin is also Chairman of the Board of JMB, an
officer and/or director of various JMB affiliates and an
individual general partner of several publicly offered real
estate limited partnerships affiliated with JMB. Mr. Malkin
has been associated with JMB since October 1969. Mr. Malkin is
a director of Urban Shopping Centers, Inc., an affiliate of
JMB that is a real estate investment trust in the business of
owning, managing and developing shopping centers. He is a
Certified Public Accountant.
Neil G. Bluhm (age 59) is Vice Chairman of the Company
since 1994. Mr. Bluhm held various other officer positions
with the Company from 1988 through 1993 and served as a
Director from November 1989 to January 1994. Mr. Bluhm is
also President and director of JMB, an officer and/or director
of various JMB affiliates and an individual general partner of
several publicly offered real estate limited partnerships
affiliated with JMB. Mr. Bluhm has been associated with JMB
since August 1970. Mr. Bluhm is a director of Urban Shopping
Centers, Inc., an affiliate of JMB that is a real estate
investment trust in the business of owning, managing and
developing shopping centers. He is a member of the Bar of
the State of Illinois and a Certified Public Accountant.
Edward G. Karl (age 41) is President, Chief Executive
Officer and Director since January 1994. He was previously an
officer of JMB and various partnerships related to JMB. Prior
to joining JMB in 1984, Mr. Karl was a Manager at Peat,
Marwick, Mitchell & Co. He is a Certified Public Accountant.
Gary R. Grottke (age 41) is Executive Vice President and
Chief Operating Officer since January 1994 and has served as a
Director since August 1996. He was an officer of JMB from May
1989 to December 1993. Prior to joining JMB in 1989, Mr.
Grottke was a Senior Manager at Peat, Marwick, Mitchell & Co.
He holds a Masters degree in Business Administration from the
Krannert School of Management at Purdue University and is a
Certified Public Accountant.
Peggy H. Sugimoto (age 46) is Senior Vice President and
Chief Financial Officer since 1994. Ms. Sugimoto has been
associated with the Company since 1976. She is a Certified
Public Accountant.
Chris Kanazawa (age 44) is Senior Vice President of the
Company since April 1993 and has served as Director since
January 1994 Prior to April 1993, Mr. Kanazawa was Vice
President of Amfac Property Development Corporation since 1989
. He has been associated with the Registrant since September
1981. Mr. Kanazawa holds a Bachelors degree in Economics from
the University of Hawaii and a Masters degree in Business
Administration from the University of Southern California.
Teney K. Takahashi (age 58) is Vice President of
Amfac/JMB Hawaii - Properties since rejoining the Company in
April 1995. Prior to rejoining Amfac, Mr. Takahashi served as
President and Director of Princeville Corporation from
September 1991 to March 1995, and President and Director of
Malama Pacific, Inc. from July 1988 to August 1991. Mr.
Takahashi previously worked for Amfac from 1973 - 1988.
P. Eric Hohmann (age 38) is Vice President of Amfac/JMB
Hawaii, Inc. - Properties Division since 1994. Mr. Hohmann
served for 4 years as a Vice President of Amfac Property
Development Corporation, which is a wholly-owned subsidiary of
the Company. Prior to 1990, Mr. Hohmann was associated with
JMB for 5 years. He holds a Masters degree in Business
Administration from the UCLA Anderson Graduate School of
Business.
Timothy E. Johns (age 40) is Vice President of Amfac/JMB
Hawaii - Properties Division since January 1994. Mr. Johns
served as Counsel and Senior Counsel for the Company from 1990
through 1993. He holds a J.D. degree from the University of
Southern California Law Center and is a member of the Hawaii
State Bar Association.
Item 11. Executive Compensation
Certain of the officers and directors of the Company
listed in item 10 above are officers and/or directors of JMB
or Northbrook and are compensated by JMB, Northbrook, or an
affiliate thereof (other than the Company and its
subsidiaries). The Company will reimburse Northbrook, JMB and
their affiliates for any expenses incurred while providing
services to the Company as described under the caption
"Description of the COLAS - Limitations on Mergers and Certain
Other Transactions" at pages 42-43 of the Prospectus, a copy
of which description was filed herewith and incorporated
herein by reference. In addition, JMB and its affiliates may
earn an amount, the Qualified Allowance (as defined), as
described under the caption "Description of the COLAS -
Certain Definitions" at page 51 of the Prospectus, a copy of
which description was filed herewith and is incorporated
herein by reference. See Item 13 below.
SUMMARY COMPENSATION TABLE
Annual Compensation (1)
-------------------------------------
Other
Annual
Compensa-
Name Principal Salary Bonus tion
(2) Position Year ($) (3) ($) ($)
--------- ---------- ------- -------- ------- --------
Edward G. President, Chief Exec. 1996 80,000 N/A N/A
Karl Officer and Director 1995 75,000 N/A N/A
1994 72,000 N/A N/A
Gary Executive Vice Pres. 1996 199,500 N/A N/A
Grottke and Chief Operating 1995 190,000 N/A N/A
Officer 1994 187,500 N/A N/A
Chris J. Senior Vice President 1996 275,000 200,000 N/A
Kanazawa 1995 250,000 175,000 N/A
1994 250,000 75,000 N/A
Teney K. Vice President 1996 191,000 100,000 N/A
Takahashi 1995 128,076 N/A N/A
1994 N/A N/A N/A
P. Eric Vice President 1996 150,000 90,000 N/A
Hohmann 1995 142,000 85,000 N/A
1994 135,000 30,000 N/A
------------
(1) The Company does not have a compensation committee.
During 1996, Mr. Malkin, Mr. Karl and Mr. Grottke
participated in the deliberations concerning
executive officer compensation.
(2) Includes CEO and 4 most highly compensated executives
whose salary and bonus exceed $100,000.
(3) Salaries for Mr. Karl and Mr. Grottke represent the
portions of their total compensation allocated and charged
to the Company by Northbrook.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
All of the outstanding shares of the Company are owned by
Northbrook. Approximately 6% of the shares of Northbrook are
owned by JMB and approximately 90% are owned directly or
indirectly by individuals who are shareholders or employees of
JMB or members of their families (or trusts for their
benefit). Randi Malkin Steinberger, Stephen Malkin and Barry
Malkin, individually or through trusts which they control,
each have beneficial ownership of approximately 9.7% of the
shares of Northbrook. Leslie Bluhm, Andrew Bluhm and Meredith
Bluhm, individually or through trusts which they control, each
have beneficial ownership of approximately 10.0% of the shares
of Northbrook. Kathleen Schreiber, in her capacity as trustee
of various trusts for the benefit of members of her family,
which trusts comprise the managing partners of a partnership
which owns Northbrook shares, has beneficial ownership of
approximately 5.1% of the shares of Northbrook. Stuart Nathan,
Executive Vice President and a director and shareholder of
JMB, and his children, Scott Nathan and Robert Nathan,
collectively have beneficial ownership of slightly more than
5.1% of the shares of Northbrook; each of them, primarily by
virtue of their status as general partners of partnerships
which own such shares would also be considered to individually
have beneficial ownership of substantially all of such shares.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than as contained under Items 10 and 11 above, and
this Item 13, there were no other significant transactions or
business relationships with Northbrook, JMB, affiliates or
their management.
The Company, its subsidiaries and the joint ventures in
which the Company or its subsidiaries are partners are
permitted to engage in various transactions involving
Northbrook, JMB and their affiliates, as described under the
captions "Description of the COLAS - Limitation on Dividends,
Purchases of Capital Stock and Indebtedness" and "Limitations
on Mergers and Certain Other Transactions" and "Purchase or
Joint Venture of Properties by Affiliates; Development of
Properties as Excluded Assets; Residual Value of Company in
Certain Projects" at pages 41-45, and "Risk Factors -
Conflicts of Interest" at page 19 of the Prospectus, a copy of
which descriptions are hereby incorporated herein by reference
to Exhibit 28.1 to the Company's Report on Form 10-K for
December 31, 1988 (File No. 33-24180) dated March 21, 1989.
The relationship of the Company (and its directors and
executive officers and certain other officers) to its
affiliates is set forth above in Item 10.
The Company incurred interest expense of approximately
$8.9 million, $5.4 million and $1.3 million for the years
ended 1996, 1995 and 1994, respectively, in connection with
the acquisition and additional financing obtained from an
affiliate, all of which was paid as of December 31, 1996.
With respect to any calendar year, JMB or its affiliates
may receive a Qualified Allowance in an amount equal to: (i)
approximately $6.2 million during each of the calendar years
1989 through 1993; and (ii) thereafter, 1-1/2% per annum of
the Fair Market Value (as defined) of the gross assets of the
Company and its subsidiaries (other than cash and cash
equivalents and Excluded Assets (as defined)) for providing
certain advisory services for the Company. The aforementioned
advisory services, which are provided pursuant to a 30-year
Services Agreement entered into between the Company, certain
of its subsidiaries and JMB in November 1988, include making
recommendations in the following areas: (i) the construction
and development of real property; (ii) land use and zoning
changes; (iii) the timing and pricing of properties to be
sold; (iv) the timing, type and amount of financing to be
incurred; (v) the agricultural business; and, (vi) the uses
(agricultural, residential, recreational or commercial) for
the land. However, the Qualified Allowance shall be earned
and paid for each year prior to maturity of the COLAS only if
the Company generates sufficient Net Cash Flow to pay Base
Interest to the holders of the COLAS for such year of an
amount equal to 8% of the average outstanding principal
balance of the COLAS for such year; any portion of the
Qualified Allowance not paid for any year shall cumulate
without interest and JMB or its affiliates shall be paid such
amount with respect to any succeeding year, after the payment
of all Contingent Base Interest for such year, to the extent
of 100% of remaining Net Cash Flow until an amount equal to
20% of the Base Interest with respect to such year has been
paid, and thereafter, to the extent of the product of (a)
remaining Net Cash Flow, multiplied by (b) a fraction, the
numerator of which is the cumulative deficiency as of the end
of such year in the Qualified Allowance and the denominator of
which is the sum of the cumulative deficiencies as of the end
of such year in the Qualified Allowance and Base Interest. A
Qualified Allowance for 1989 of approximately $6.2 million was
paid on February 28, 1990. Approximately $54.4 million of
Qualified Allowance related to the period from January 1, 1991
through December 31, 1996 has not been earned and paid and is
payable only from future Net Cash Flow. Accordingly, because
the Company does not believe it is probable at this time that
a sufficient level of Net Cash Flow will be generated in the
future to pay Qualified Allowance, the Company has not accrued
for any Qualified Allowance in the accompanying consolidated
financial statements. JMB has informed the Company that no
incremental costs or expenses have been incurred relating to
the provision of these advisory services. The Company
believes that using an incremental cost methodology is
reasonable. The following table is a summary of the Qualified
Allowance for the years ended December 31, 1996, 1995 and 1994
(dollars are in millions):
1996 1995 1994
------ ------- -------
Qualified Allowance calculated $ 9.2 9.9 10.4
Qualified Allowance paid -- -- --
Cumulative deficiency of Qualified
Allowance at end of year $ 60.6 51.4 41.5
Net Cash Flow was $0 for 1996, 1995 and 1994.
After the maturity date of the COLAS, JMB will continue
to provide advisory services pursuant to the Services
Agreement, the Qualified Allowance for such years will
continue to be 1-1/2% per annum of the Fair Market Value of
the gross assets of the Company and its subsidiaries and the
Qualified Allowance will continue to be payable from the
Company's Net Cash Flow. Upon the termination of the Services
Agreement, if there has not been sufficient Net Cash Flow to
pay the cumulative deficiency in the Qualified Allowance, if
any, such amount would not be due or payable to JMB.
The Company, its subsidiaries and their joint ventures,
reimburse Northbrook, JMB and their affiliates for direct
expenses incurred on their behalf, including salaries and
salary related expenses incurred in connection with the
management of the Company's or its subsidiaries and the joint
ventures' operations. The total of such costs through
December 31, 1996, 1995 and 1994 was $.7 million, $.6 million,
$.5 million, respectively, of which $1.2 million was unpaid as
of December 31, 1996. In addition, as of December 31, 1996,
the current portion of amounts due affiliates includes
approximately $9.1 million of income tax payable related to
the Class A Redemption Offer. Also, the Company pays a non-
accountable reimbursement of approximately $.03 million per
month to JMB or its affiliates in respect of general overhead
expense, all of which was paid as of December 31, 1996.
JMB Insurance Agency, Inc. earns insurance brokerage
commissions in connection with providing the placement of
insurance coverage for certain of the properties and
operations of the Company. Such commissions are comparable to
those available to the Company in similar dealings with
unaffiliated third parties. The total of such commissions for
the years ended December 31, 1996, 1995 and 1994 was
approximately $.8 million, $.7 million and $1 million, all of
which was paid as of December 31, 1996.
Northbrook and its affiliates allocated certain charges
for services to the Company based upon the estimated level of
services for the years ended December 31, 1996, 1995 and 1994
of approximately $1.5 million, $7.9 million and $1.7 million,
respectively, of which $6.5 million was unpaid as of December
31, 1996. These services and costs are intended to reflect
the Company's separate costs of doing business and are
principally related to the inclusion of the Company's
employees in the Northbrook pension plan, payment of severance
and termination benefits and reimbursement for insurance
claims paid on behalf of the Company. All amounts described
above, deferred or currently payable, do not bear interest and
are expected to be paid in future periods.
In February 1997 certain intercompany payables to
Northbrook totaling $7.9 million were converted into a new ten
year note payable. Accordingly these intercompany payables
were classified as long-term as of December 31, 1996 in the
accompanying consolidated financial statements.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
(a) The following documents are filed as
part of this report:
(1) Financial Statements (See
Index to Financial Statements and Supplementary
Data filed with this report.)
(2) Exhibits
3.1* Articles of
Incorporation of Amfac/JMB
Hawaii, Inc.
3.2* Amended and
Restated By-Laws of Amfac/JMB
Hawaii, Inc.
3.3* Articles of
Incorporation of Amfac/JMB
Finance, Inc.
3.4* Amended and
Restated By-Laws of Amfac/JMB
Finance, Inc.
3.7* Articles of
Incorporation of Amfac Property
Development Corp.
3.8* Amended and
Restated By-Laws of Amfac
Property Developments Corp.
3.9* Articles of
Incorporation of Amfac Property
Investment Corp.
3.10* Amended and
Restated By-Laws of Amfac
Property Investment Corp.
3.11* Articles of
Incorporation of Amfac Sugar and
Agribusiness, Inc.
3.12* Amended and
Restated By-Laws of Kaanapali
Water Corporation
3.13* Articles of
Incorporation of Kaanapali Water
Corporation.
3.14* Amended and
Restated By-Laws of Amfac
Agribusiness, Inc.
3.15* Articles of
Incorporation of Amfac
Agribusiness, Inc.
3.16* Amended and
Restated By-Laws of Kekaha Sugar
Company, Limited.
3.17* Articles of
Association of Kekaha Sugar
Company, Limited.
3.18* Amended and
Restated By-Laws of The Lihue
Plantation Company, Limited.
3.19* Articles of
Association of The Lihue
Plantation Company, Limited
3.20* Amended and
Restated By-Laws of Oahu Sugar
Company, Limited.
3.21* Articles of
Association of Oahu Sugar
Company, Limited.
3.22 Amended and
Restated By-Laws of Pioneer Mill
Company, Limited
3.23* Articles of
Association of Pioneer Mill
Company, Limited.
3.24 Amended and
Restated By-Laws of Puna Sugar
Company, Limited.
3.25* Articles of
Association of Puna Sugar
Company, Limited.
3.26 Amended and
Restated By-Laws of H. Hackfeld &
Co., Ltd.
3.27* Articles of
Association of H. Hackfeld & Co.,
Ltd.
3.28 Amended and
Restated By-Laws of Waiahole
Irrigation Company, Limited.
3.29* Articles of
Incorporation of Waiahole
Irrigation Company, Limited.
4.1** Indenture,
including the form of COLAS,
among Amfac/JMB Hawaii, Inc., its
subsidiaries as Guarantors and
Continental Bank National
Association, as Trustee (dated as
of March 14, 1989).
4.2*** Amendment
dated as of January 17, 1990 to
the Indenture relating to the
COLAS.
4.3*** $28,097,832
Promissory Note from Amfac, Inc.
to Amfac/JMB Hawaii, Inc.
Extended and Reissued Effective
December 31, 1993.
4.4**** The five year
$66,000,000 loan with the
Employees' Retirement System of
the State of Hawaii to Amfac/JMB
Hawaii, Inc. as of June 25, 1991.
4.5***** $15,000,000
Credit Agreement dated March 31,
1993 among AMFAC/JMB Hawaii, Inc.
and Continental Bank N.A.
4.6****** $10,000,000
loan agreement between Waikele
Golf Club, Inc. and ORIX USA
Corporation.
$10,000,000 loan
agreement between Waikele Golf
Club, Inc. and Bank of Hawaii.
4.7*******
$52,000,000 Promissory Note to
Northbrook Corporation from
Amfac/JMB Hawaii, Inc., effective
May 31, 1995 is filed herewith.
4.8********
Agreement for delivery and sale
of raw sugar between Hawaii Sugar
Transportation Corporation, as
seller, and C&H, as Buyer, dated
June 4, 1993.
4.9*********
Previously filed as an exhibit to
the Company's Form 10-Q report
under the Securities Act of 1934
(File No. 33-24180) filed May 13,
1996 and hereby incorporated by
reference. Standard Sugar
Marketing Contracts between
Hawaiian Sugar Transportation
Company and Hawaii Sugar Growers
dated June 4, 1993.
4.10**********
Amendment to the $66,000,000 loan
with the Employees' Retirement
System of the State of Hawaii to
Amfac/JMB Hawaii, Inc. as of
April 18, 1996.
4.11***********
Amended and Restated $52,000,000
Promissory Note to Northbrook
Corporation from Amfac/JMB
Hawaii, Inc. extended and
reissued effective June 1, 1996.
4.12************
Amended and Restated $28,087,832
Promissory Note from Amfac, Inc.
to Amfac/JMB Hawaii, Inc.
extended and reissued effective
June 1, 1996.
4.13 $10,000,000
loan agreement between Amfac
Property Development Corp. and
City Bank at December 18, 1996
4.14 $104,759,324
promissory Note between
Northbrook Corporation and
Amfac/JMB Hawaii, Inc. dated
February 17, 1997
10.1* Escrow Deposit
Agreement.
10.2* General Lease S-4222,
dated January 1, 1969, by and
between the State of Hawaii and
Kekaha Sugar Company, Limited.
10.3* Grove Farm Haiku
Lease, dated January 25, 1974
by and between Grove Farm Company,
Incorporated and The Lihue
Plantation Company, Limited.
10.4* General Lease S-4412,
dated October 31, 1974, by and
between the State of Hawaii and
the Lihue Plantation Company,
Limited.
10.5* General Lease S-4576,
dated March 15, 1978, by and
between the State of Hawaii and
The Lihue Plantation Company,
Limited.
10.6* General Lease S-3821,
dated July 8, 1964, by and
between the State of Hawaii and
East Kauai Water Company, Ltd.
10.7* Amended and Restated
Power Purchase Agreement, dated
as of June 15, 1992, by and between
The Lihue Plantation Company,
Limited and Citizens Utilities
Company.
10.8* U.S. Navy
Waipio Peninsula Agricultural
Lease, dated May 26, 1964,
between The United States of
America (as represented by the
U.S. Navy) and Oahu Sugar
Company, Ltd.
10.9* Amendment to
the Robinson Estate Hoaeae Lease,
dated May 15, 1967, by and
between various Robinsons, heirs
of Robinsons, Trustees and
Executors, etc. and Oahu Sugar
Company, Limited amending and
restating the previous lease.
10.10* Amendment to
the Campbell Estate Lease, dated
April 16, 1970, between Trustees
under the Will and of the Estate
of James Campbell, Deceased, and
Oahu Sugar Company, Limited
amending and restating the
previous lease.
10.11* Bishop Estate
Lease No. 24,878, dated June 17,
1977, by and between the Trustees
of the Estate of Bernice Pauahi
Bishop and Pioneer Mill Company,
Limited.
10.12* General Lease
S-4229, dated February 25, 1969,
by and between the State of
Hawaii, by its Board of Land and
Natural Resources and Pioneer
Mill Company, Limited.
10.13* Honokohau
Water License, dated December 22,
1980, between Maui Pineapple
Company Ltd. and Pioneer Mill
Company, Limited.
10.14* Water
Licensing Agreement, dated
September 22, 1980, by and
between Maui Land & Pineapple
Company, Inc. and Amfac, Inc.
10.15* Joint Venture
Agreement, dated as of March 19,
1986, by and between Amfac
Property Development Corp. and
Tobishima Properties of Hawaii,
Inc.
10.16* Development
Agreement, dated March 19, 1986,
by and between Kaanapali North
Beach Joint Venture and Amfac
Property Investment Corp. and
Tobishima Pacific, Inc.
10.19** Keep-Well
Agreement between Northbrook
Corporation and Amfac/JMB
Finance, Inc.
10.20** Repurchase
Agreement, dated March 14, 1989,
by and between Amfac/JMB Hawaii,
Inc. and Amfac/JMB Finance, Inc.
10.21** Amfac Hawaii
Tax Agreement, dated November 21,
1988 between Amfac/JMB Hawaii,
Inc., and Amfac Property
Development Corp.; Amfac Property
Investment Corp.; Amfac Sugar and
Agribusiness, Inc.; Kaanapali
Water Corporation; Amfac
Agribusiness, Inc.; Kekaha Sugar
Company, Limited; The Lihue
Plantation Company, Limited; Oahu
Sugar Company, Limited; Pioneer
Mill Company, Limited; Puna Sugar
Company, Limited; H. Hackfeld &
Co., Ltd.; and Waiahole
Irrigation Company, Limited.
10.22** Amfac-Amfac
Hawaii Tax Agreement, dated
February 21, 1989 between Amfac,
Inc. and Amfac/JMB Hawaii, Inc.
10.23** Services
Agreement, dated November 18,
1988, between Amfac/JMB Hawaii,
Inc., and Amfac Property
Development Corp.; Amfac Property
Investment Corp.; Amfac Sugar and
Agribusiness, Inc.; Kaanapali
Water Corporation; Amfac
Agribusiness, Inc.; Kekaha Sugar
Company, Limited; The Lihue
Plantation Company, Limited; Oahu
Sugar Company, Limited; Pioneer
Mill Company, Limited; Puna Sugar
Company, Limited; H. Hackfeld &
Co., Ltd.; and Waiahole
Irrigation Company, Limited and
JMB Realty Corporation.
19.0*******
$35,700,000 agreement for sale of
C&H and certain other C&H assets,
to A&B Hawaii, Inc. in June of
1993.
22.1* Subsidiaries
of Amfac/JMB Hawaii, Inc.
28.1** A copy of
pages 19, 41-45 and 51 of the
Prospectus of the Company dated
December 5, 1988 (relating to SEC
Registration Statement on Form S-
1 (as amended) File No. 33-24180)
and hereby incorporated by
reference.
Pursuant to Item
6.01 (b)(4) of Regulation SK, the
registrant hereby undertakes to
provide the Commission upon its
request a copy of any agreement
with respect to long-term
indebtedness of the registrant
and its consolidated subsidiaries
that does not exceed 10 percent
of the total assets of the
registrant and its subsidiaries
on a consolidated basis.
* Previously filed as exhibits to the Company's
Registration Statement of Form S-1 (as amended) under the
Securities Act of 1933 (File No. 33-24180) and hereby
incorporated by reference.
** Previously filed as exhibits to the Company's Form 10-
K report under the Securities Act of 1934 (File No. 33-24180)
filed on March 21, 1989 and hereby incorporated by reference.
*** Previously filed as exhibits to the Company's Form 10-
K report under the Securities Act of 1934 (File No. 33-24180)
filed on March 21, 1991 and hereby incorporated by reference.
**** Previously filed as exhibits to the Company's Form 10-
Q report under the Securities Act of 1934 (File No. 33-24180)
filed on August 13, 1991 and hereby incorporated by reference.
***** Previously filed as exhibit to the Company's Form 10-
Q report under the Securities Act of 1934 (File No. 33-24180)
filed on May 14, 1993 and hereby incorporated by reference.
****** Previously filed as exhibit to the Company's Form 10-
Q report under the Securities Act of 1934 (File No. 33-24180)
filed on November 11, 1993 and hereby incorporated by
reference.
******* Previously filed as exhibits to the Company's Form 10-
K report under the Securities Act of 1934 (File No. 33-24180)
filed on March 21, 1994 and hereby incorporated by reference.
******* Previously filed as an exhibit to the Company's
Form 10-Q report under the Securities Act of 1934 (File No. 33-
24180) filed May 12, 1995 and hereby incorporated by
reference.
******** Previously filed as an exhibit to the Company's Form
10-Q report under the Securities Act of 1934 (File No. 33-
24180) filed May 13, 1996 and hereby incorporated by
reference.
********* Previously filed as an exhibit to the Company's Form
10-Q report under the Securities Act of 1934 (File No. 33-
24180) filed May 13, 1996 and hereby incorporated by
reference.
********** Previously filed as exhibit to the Company's
Form 10-K report under the Securities Act of 1934 (File No. 33-
24180) filed on August 13, 1996 and hereby incorporated by
reference.
*********** Previously filed as exhibit to the Company's
Form 10-Q report under the Securities Act of 1934 (File No. 33-
24180) filed August 13, 1996 and hereby incorporated by
reference.
************ Previously filed as exhibit to the Company's
Form 10-Q report under the Securities Act of 1934 (File No. 33-
24180) filed August 13, 1996 and hereby incorporated by
reference.
(b)No Reports on Form 8-K were required or filed
since the beginning of the last quarter of the
period covered by this report.
No annual report or proxy material for 1996 was sent to the
COLA holders of the Company. An annual report will be sent to
the COLA holders subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMFAC/JMB HAWAII, INC.
By: Gary Smith
Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: Edward G. Karl
President, Chief Executive Officer
and Director
Date: March 21, 1997
By: Peggy Sugimoto
Senior Vice President and
Chief Financial Officer
Date: March 21, 1997
By: Gary Grottke
Executive Vice President,
Chief Operating Officer and
Director
Date: March 21, 1997
By: Gary Smith
Vice President and
Principal Accounting Officer
Date: March 21, 1997
By: Chris Kanazawa
Senior Vice President and
Director
Date: March 21, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMFAC/JMB FINANCE, INC.
By: Gary Smith
Vice President
Date: March 27, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: Edward G. Karl
President and
Chief Executive Officer
Date: March 21, 1997
By: Steven E. Plonsker
Senior Vice President
Date: March 21, 1997
By: Gary Nickele
Director
Date: March 21, 1997
By: Gary Smith
Vice President Finance,
Principal Accounting Officer and
Principal Financial Officer
Date: March 21, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMFAC PROPERTY DEVELOPMENT CORP.
By: Gary Smith
Vice President
Date: March 21, 1997
Pursuant to the
requirements of the Securities
Exchange Act of 1934, this
report has been signed below by
the following persons on behalf
of the registrant and in the
capacities and on the dates
indicated.
By: Chris J. Kanazawa
President and
Director
Date: March 21, 1997
By: Gary Grottke
Vice President and Director
Date: March 21, 1997
By: Gary Smith
Vice President and
Principal Accounting Officer
Date: March 21, 1997
By: Edward G. Karl
Vice President and Director
Date: March 21, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMFAC PROPERTY INVESTMENT CORP.
By: Gary Smith
Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: Chris J. Kanazawa
President and
Director
Date: March 27, 1997
By: Gary Grottke
Vice President and Director
Date: March 21, 1997
By: Gary Smith
Vice President and
Principal Accounting Officer
Date: March 21, 1997
By: Edward G. Karl
Vice President and Director
Date: March 21, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMFAC SUGAR AND AGRIBUSINESS, INC.
By: Gary Smith
Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: Robert B. Heiserman, Jr.
President and Director
Date: March 21, 1997
By: Gary Grottke
Vice President and Director
Date: March 21, 1997
By: Gary Smith
Vice President and
Principal Accounting Officer
Date: March 21, 1997
By: Edward G. Karl
Vice President and Director
Date: March 21, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
KAANAPALI WATER CORPORATION
By: Gary Smith
Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: Chris J. Kanazawa
President and Director
Date: March 21, 1997
By: Gary Grottke
Vice President and Director
Date: March 21, 1997
By: Gary Smith
Vice President and
Principal Accounting Officer
Date: March 21, 1997
By: Edward G. Karl
Vice President and Director
Date: March 21, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMFAC AGRIBUSINESS, INC.
By: Gary Smith
Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: Robert B. Heiserman, Jr.
President and Director
Date: March 21, 1997
By: Gary Grottke
Vice President and Director
Date: March 21, 1997
By: Gary Smith
Vice President and
Principal Accounting Officer
Date: March 21, 1997
By: Edward G. Karl
Vice President and Director
Date: March 21, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
KEKAHA SUGAR COMPANY, LIMITED
By: Gary Smith
Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: Robert B. Heiserman, Jr.
President and Director
Date: March 21, 1997
By: Gary Grottke
Vice President and Director
Date: March 21, 1997
By: Gary Smith
Vice President and
Principal Accounting Officer
Date: March 21, 1997
By: Edward G. Karl
Vice President and Director
Date: March 21, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE LIHUE PLANTATION COMPANY,
LIMITED
By: Gary Smith
Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: Robert B. Heiserman, Jr.
President and Director
Date: March 21, 1997
By: Gary Grottke
Vice President and Director
Date: March 21, 1997
By: Gary Smith
Vice President and
Principal Accounting Officer
Date: March 21, 1997
By: Edward G. Karl
Vice President and Director
Date: March 21, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OAHU SUGAR COMPANY, LIMITED
By: Gary Smith
Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: Robert B. Heiserman, Jr.
President and Director
Date: March 21, 1997
By: Gary Grottke
Vice President and Director
Date: March 21, 1997
By: Gary Smith
Vice President and
Principal Accounting Officer
Date: March 21, 1997
By: Edward G. Karl
Vice President and Director
Date: March 21, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PIONEER MILL COMPANY, LIMITED
By: Gary Smith
Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: Robert B. Heiserman, Jr.
President and Director
Date: March 21, 1997
By: Gary Grottke
Vice President and Director
Date: March 21, 1997
By: Gary Smith
Vice President and
Principal Accounting Officer
Date: March 21, 1997
By: Edward G. Karl
Vice President and Director
Date: March 21, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PUNA SUGAR COMPANY, LIMITED
By: Gary Smith
Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: Robert B. Heiserman, Jr.
President and Director
Date: March 21, 1997
By: Gary Grottke
Vice President and Director
Date: March 21, 1997
By: Gary Smith
Vice President and
Principal Accounting Officer
Date: March 21, 1997
By: Edward G. Karl
Vice President and Director
Date: March 21, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
H. HACKFELD & CO., LTD.
By: Gary Smith
Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: Robert B. Heiserman, Jr.
President and Director
Date: March 21, 1997
By: Gary Grottke
Vice President and Director
Date: March 21, 1997
By: Gary Smith
Vice President and
Principal Accounting Officer
Date: March 21, 1997
By: Edward G. Karl
Vice President and Director
Date: March 21, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WAIAHOLE IRRIGATION COMPANY, LIMITED
By: Gary Smith
Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: Gary Grottke
Vice President and Director
Date: March 21, 1997
By: Gary Smith
Vice President and
Principal Accounting Officer
Date: March 21, 1997
By: Chris Kanazawa
President and Director
Date: March 21, 1997
By: Edward G. Karl
Vice President and Director
Date: March 21, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WAIKELE GOLF CLUB, INC.
By: Gary Smith
Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: Chris J. Kanazawa
President and
Director
Date: March 21, 1997
By: Gary Grottke
Vice President and Director
Date: March 21, 1997
By: Gary Smith
Vice President and
Principal Accounting Officer
Date: March 21, 1997
By: Edward G. Karl
Vice President and Director
Date: March 21, 1997
EXHIBIT INDEX
Document Sequentially
incorporated numbered
Exhibit No. Exhibit by reference page
3.1 to 3.30* Articles of Incorporation
and Amended and Restated By-Laws Yes --
4.1** Indenture, including the
forms of COLAS, among
Amfac/JMB Hawaii, Inc., its
subsidiaries and Continental
Illinois Bank National
Association, as Trustees
(dated March 14, 1989) Yes --
4.2*** Amendment dated as of
January 17, 1990 to the
Indenture relating to the
COLAS. Yes --
4.3*** $28,097,832 Promissory Note
from Amfac, Inc. to
Amfac/JMB Hawaii, Inc.
Extended and Reissued
Effective December 31,
1990. Yes --
4.4**** The five year $66,000,000 loan
with the Employees' Retirement
System of the State of Hawaii to
Amfac/JMB Hawaii, Inc. as of
June 25, 1991. Yes --
4.5***** $15,000,000 Credit Agreement dated March 31,
1993 among AMFAC/JMB Hawaii, Inc. and
Continental Bank N.A. Yes --
4.6****** $10,000,000 loan agreement between Waikele
Golf Club, Inc. and ORIX USA Corporation.
$10,000,000 loan agreement between Waikele
Golf Club, Inc. and Bank of Hawaii. Yes --
4.7******* $52,000,000 Promissory Note to Northbrook
Corporation from Amfac/JMB Hawaii, Inc.,
effective May 31, 1995 is filed herewith Yes
- --
4.8******** Agreement for delivery and sale of raw sugar
between Hawaii Sugar Transportation Corporation,
as seller, and C&H, as Buyer, dated
June 4, 1993. Yes --
4.9********* Previously filed as an exhibit to the Company's
Form 10-Q report under the Securities Act of 1934
(File No. 33-24180) filed May 13, 1996 and hereby
incorporated by reference. Standard Sugar
Marketing Contracts between Hawaiian Sugar
Transportation Company and Hawaii Sugar Growers
dated June 4, 1993. Yes --
4.10**********Amendment to the $66,000,000 loan with the
Employees' Retirement System of the State of
Hawaii to Amfac/JMB Hawaii, Inc. as of April
18, 1996. Yes --
4.11***********Amended and Restated $52,000,000 Promissory Note
to Northbrook Corporation from Amfac/JMB Hawaii,
Inc. extended and reissued effective June 1, 1996.
Yes --
4.12************Amended and Restated $28,087,032 Promissory
Note from Amfac, Inc. to Amfac/JMB Hawaii, Inc.
extended and reissued effective June 1, 1996.Yes --
10.1 to 10.22* Material Contracts Yes --
10.3* Grove Farm Haiku Lease, dated
January 25, 1974 by and between
Grove Farm Company, Incorporated
and The Lihue Plantation Company
Limited. Yes --
10.4* General Lease S-4412, dated
October 31, 1974 by and between
the State of Hawaii and the
Lihue Plantation Company
Limited. Yes --
10.5* General Lease S-4576, dated
March 15, 1978, by and between
the State of Hawaii and The
Lihue Plantation Company,
Limited. Yes --
10.6* General Lease S-3821, dated
July 8, 1964 by and between
the State of Hawaii and East
Kauai Water Company, Ltd. Yes --
10.8* U.S. Navy Waipio Peninsula
Agricultural Lease, dated May
26, 1964, between The United
States of America (as
represented by the U.S. Navy)
and Oahu Sugar Company, Ltd. Yes --
10.9* Amendment to the Robinson
Estate Hoaeae Lease, dated
May 15, 1967, by and between
various Robinsons, heirs of
Robinsons, Trustees and
Executors, etc. and Oahu Sugar
Company, Limited amending and
restating the previous lease. Yes --
10.10* Amendment to the Campbell Estate
Lease, dated April 16, 1970,
between Trustees under the
Will and of the Estate of
James Campbell, Deceased,
and Oahu Sugar Company,
Limited amending and restating
the previous lease. Yes --
10.11* Bishop Estate Lease No. 24,878,
dated June 17, 1977, by and
between the Trustees of the
Estate of Bernice Pauahi
Bishop and Pioneer Mill
Company, Limited. Yes --
10.12* General Lease S-4229, dated
February 25, 1969, by and
between the State of Hawaii,
by its Board of Land and
Natural Resources and Pioneer
Mill Company, Limited. Yes --
10.13* Honokohau Water License, dated
December 22, 1980, between Maui
Pineapple Company Ltd. and
Pioneer Mill Company, Limited. Yes --
10.14* Water Licensing Agreement, dated
September 22, 1980, by and between
Maui Land & Pineapple Company,
Inc. and Amfac, Inc. Yes --
10.15* Joint Venture Agreement, dated as
of March 19, 1986, by and between
Amfac Property Development Corp.
and Tobishima Properties of
Hawaii, Inc. Yes --
10.16* Development Agreement, dated
March 19, 1986, by and between
Kaanapali North Beach Joint
Venture and Amfac Property
Investment Corp. and Tobishima
Pacific, Inc. Yes --
10.19** Keep-Well Agreement between
Northbrook Corporation and
Amfac/JMB Finance, Inc.,
dated March 14, 1989. Yes --
10.20** Repurchase Agreement, dated
March 14, 1989, by and between
Amfac/JMB Hawaii, Inc. and
Amfac/JMB Finance, Inc. Yes --
10.21** Amfac Hawaii Tax Agreement,
dated November 21, 1988 between
Amfac/JMB Hawaii, Inc., and Amfac
Property Development Corp.; Amfac
Property Investment Corp.; Amfac
Sugar and Agribusiness, Inc.;
Kaanapali Water Corporation;
Amfac Agribusiness, Inc.; Kehaha
Sugar Company, Limited; The Lihue
Plantation Company, Limited; Oahu
Sugar Company, Limited; Pioneer
Mill Company, Limited; Puna
Sugar Company, Limited; H.
Hackfeld & Co., Ltd.; and
Waiahole Irrigation Company,
Limited. Yes --
10.22** Amfac-Amfac Hawaii Tax Agreement,
dated February 21, 1989 between
Amfac, Inc. and Amfac/JMB Hawaii,
Inc. Yes --
10.23** Services Agreement, dated November
18, 1988, between Amfac/JMB Hawaii,
Inc., and Amfac Property Develop-
ment Corp.; Amfac Property Invest-
ment Corp.; Amfac Sugar and Agri-
business, Inc.; Kaanapali Water
Corporation; Amfac Agribusiness,
Inc.; Kehaha Sugar Company,
Limited; The Lihue Plantation
Company, Limited; Oahu Sugar
Company, Limited; Pioneer Mill
Company, Limited; Puna Sugar
Company, Limited; H. Hackfeld &
Co., Ltd.; Waiahole Irriga-
tion Company, Limited and JMB
Realty Corporation Yes --
19.0******* $35,700,000 agreement for sale of
C&H and certain other C&H assets,
to A&B Hawaii, Inc. in June of 1993 Yes --
22.1 Subsidiaries of
Amfac/JMB Hawaii Inc. Yes --
28.1** A copy of pages 19, 41-45 and
51 of the Company's Prospectus
dated December 5, 1988
filed pursuant to Rules
424(b) and 424(c) (relating
to SEC Registration Statement
on Form S-1 (as amended)
File No. 33-24180) Yes --
* Previously filed as exhibits to the Company's
Registration Statement on Form S-1 (as amended) under the
Securities Act of 1933 (File No. 33-24180) and hereby
incorporated by reference.
** Previously filed as exhibits to the Company's
Form 10-K report under the Securities Act of 1934 (File No. 33-
24180) filed on March 21, 1989 and hereby incorporated by
reference.
*** Previously filed as exhibits to the Company's
Form 10-K report under the Securities act of 1934 (File No. 33-
24180) filed on March 21, 1991 and hereby incorporated by
reference.
**** Previously filed as exhibits to the Company's
Form 10-Q report under the Securities Act of 1934 (File No. 33-
24180) filed on August 13, 1991 and hereby incorporated by
reference.
***** Previously filed as exhibit to the Company's
Form 10-Q report under the Securities Act of 1934 (File No. 33-
24180) filed on May 14, 1993 and hereby incorporated by
reference.
****** Previously filed as exhibit to the Company's
Form 10-Q report under the Securities Act of 1934 (File No. 33-
24180) filed on November 11, 1993 and hereby incorporated by
reference.
******* Previously filed as exhibit to the Company's
Form 10-K report under the Securities Act of 1934 (File No. 33-
24180) filed on March 21, 1994 and hereby incorporated by
reference.
******* Previously filed as an exhibit to the Company's
Form 10-Q report under the Securities Act of 1934 (File No. 33-
24180) filed May 12, 1995 and hereby incorporated by
reference.
********** Previously filed as exhibit to the Company's Form
10-K report under the Securities Act of 1934 (File No. 33-
24180) filed on August 17, 1996 and hereby incorporated by
reference.
*********** Previously filed as exhibit to the Company's Form
10-Q report under the Securities Act of 1934 (File No. 33-
24180) filed August 13, 1996 and hereby incorporated by
reference.
************ Previously filed as exhibit to the Company's Form
10-K report under the Securities Act of 1934 (File No. 33-
24180) filed August 13, 1996 and hereby incorporated by
reference.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<CIK> 0000839437
<NAME> AMFAC/JMB HAWAII, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,736
<SECURITIES> 0
<RECEIVABLES> 8,180
<ALLOWANCES> 0
<INVENTORY> 56,808
<CURRENT-ASSETS> 73,274
<PP&E> 351,640
<DEPRECIATION> 33,856
<TOTAL-ASSETS> 483,605
<CURRENT-LIABILITIES> 30,791
<BONDS> 321,298
0
0
<COMMON> 1
<OTHER-SE> (153,571)
<TOTAL-LIABILITY-AND-EQUITY> 483,605
<SALES> 96,943
<TOTAL-REVENUES> 97,406
<CGS> 89,267
<TOTAL-COSTS> 125,096
<OTHER-EXPENSES> 1,222
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,297
<INCOME-PRETAX> (55,209)
<INCOME-TAX> 12,043
<INCOME-CONTINUING> (34,166)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (34,166)
<EPS-PRIMARY> (34.2)
<EPS-DILUTED> (34.2)
</TABLE>
