SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Act of 1934
For the quarter ended June 30, 1997 Commission File Number 33-24180
AMFAC/JMB HAWAII, INC.
(Exact name of registrant as specified in its charter)
Hawaii 99-0217738
(State of organization) (I.R.S. Employer Identification No.)
For the quarter ended June 30, 1997 Commission File Number 33-24180-01
AMFAC/JMB FINANCE, INC.
(Exact name of registrant as specified in its charter)
Illinois 36-3611183
(State of organization) (I.R.S. Employer Identification No.)
900 N. Michigan Ave., Chicago, Illinois 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312-440-4800
See Table of Additional Registrants Below.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
As of August 15, 1997, each of Amfac/JMB Hawaii, Inc. and
Amfac/JMB Finance, Inc. had 1,000 shares of Common Stock
outstanding. All such Common Stock is owned by its respective
parent and not traded on a public market.
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
Kaanapali Coffee Hawaii 99-0176334 900 North Michigan Avenue
Estates, Inc. Chicago, Illinois 60611
312/440-4800
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 Land Hawaii 99-0185633 900 North Michigan Avenue
Company, Ltd. Chicago, Illinois 60611
312/440-4800
Amfac Vacations Hawaii 94-3261831 900 North Michigan Avenue
Managers, Inc. Chicago, Illinois 60611
(312) 440-4800
Kaanapali Water Hawaii 99-0185634 900 North Michigan Avenue
Corporation Chicago, Illinois 60611
312/440-4800
Kekaha Sugar Hawaii 99-0044650 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
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
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
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 23
PART II OTHER INFORMATION
Item 1. Legal Proceedings 35
Item 6. Exhibits and Reports on Form 8-K 35
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
AMFAC/JMB HAWAII, INC.
Consolidated Balance Sheets
June 30, 1997 and December 31, 1996
(Dollars in Thousands)
(Unaudited)
A S S E T S
<CAPTION>
June 30, December 31,
1997 1996
-------------- -------------
<S> <C> <C>
A S S E T S
Current assets:
Cash and cash equivalents $9,093 8,736
Receivables-net 12,491 4,741
Inventories 51,059 56,808
Prepaid expenses 2,561 3,439
-------- --------
Total current assets 75,204 73,724
-------- --------
Investments 46,436 46,187
-------- --------
Property, plant and equipment:
Land and land improvements 285,636 289,294
Machinery and equipment 61,874 60,981
Construction in progress 2,834 1,365
-------- --------
350,344 351,640
Less accumulated depreciation
and amortization 36,905 33,856
-------- --------
313,439 317,784
Deferred expenses, net 12,498 12,975
Other assets 36,555 32,935
-------- --------
$ 484,132 483,605
========== ==========
L I A B I L I T I E S
Current liabilities:
Accounts payable $ 7,131 5,719
Accrued expenses 7,680 9,274
Current portion of
long-term debt 1,228 1,471
AMFAC/JMB HAWAII, INC.
Consolidated Balance Sheets - Continued
June 30, 1997 and December 31, 1996
(Dollars in Thousands)
(Unaudited)
June 30, December 31,
1997 1996
------------- -------------
Current portion of
deferred income taxes 3,790 5,422
Amounts due to affiliates 10,067 8,905
-------- --------
Total current liabilities 29,896 30,791
-------- --------
Amounts due to affiliates 121,236 103,579
Accumulated postretirement
benefit obligation 55,696 57,662
Long-term debt 105,529 100,606
Other long-term liabilities 34,735 35,501
Deferred income taxes 84,995 88,345
Certificate of Land
Appreciation Notes 220,692 220,692
-------- --------
Total liabilities 652,779 637,176
-------- --------
Commitments and contingencies
(notes 2, 3, 4, 6, 7 and 8)
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 3,569 6,278
Retained earnings (deficit) (172,217) (159,850)
--------- ---------
Total stockholder's equity
(deficit) (168,647) (153,571)
--------- ---------
$ 484,132 483,605
============ ===========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<TABLE>
AMFAC/JMB HAWAII, INC.
Consolidated Statements of Operations
Three and Six Months Ended June 30, 1997 and 1996
(Dollars in Thousands)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------- ---------------------
1997 1996 1997 1996
------- ------- ------ ------
<S> <C> <C> <C> <C>
Revenue:
Agriculture $ 7,591 16,744 8,266 22,432
Property 10,774 12,215 19,582 21,583
------- ------- ------- -------
18,365 28,959 27,848 44,015
------- ------- ------- -------
Cost of sales:
Agriculture 6,649 17,532 7,418 21,645
Property 10,475 8,385 16,213 13,724
------- ------- -------- -------
17,124 25,917 23,631 35,369
Selling, general
and administrative 3,512 2,793 6,578 5,942
Depreciation and
amortization 1,534 1,554 3,049 3,150
------- ------- ------- -------
Total costs and expenses 22,170 30,264 33,258 44,461
Operating loss (3,805) (1,305) (5,410) (446)
------- ------- ------- -------
Non-operating income
(expenses):
Amortization of
financing costs (302) (451) (721) (767)
Interest expense (7,331) (6,490) (14,007) (13,398)
Interest income 39 70 80 162
------- ------- ------- -------
(7,594) (6,871) (14,648) (14,003)
------- ------- --------------
Loss before taxes (11,399) (8,176) (20,058) (14,449)
Income tax benefit 4,377 3,060 7,691 5,393
------- ------- ------- -------
Net loss $ (7,022) (5,116) (12,367) (9,056)
======== ======= ======= =======
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<TABLE>
AMFAC/JMB HAWAII, INC.
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996
(Dollars in Thousands)
(Unaudited)
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(12,367) (9,056)
Items not requiring (providing) cash:
Depreciation and amortization 3,049 3,150
Amortization of deferred costs 721 767
Equity in earnings of investments 10 23
Income tax benefit (7,691) (5,393)
Deferred interest 545 2,621
Changes in:
Receivables - net (7,750) (5,402)
Inventories 9,450 4,437
Prepaid expenses 878 531
Accounts payable 1,412 (1,592)
Accrued expenses (1,594) (3,630)
Amounts due to affiliates 1,162 4,733
Other long-term liabilities (3,359) (2,134)
-------- --------
Net cash used in
operating activities (15,534) (10,945)
-------- --------
Cash flows from investing activities:
Property additions (2,405) (1,175)
Investments in joint ventures
and partnerships (259) (111)
Other assets (3,620) (1,496)
Other long-term liabilities 82 (598)
-------- --------
Net cash used in
investing activities (6,202) (3,380)
-------- --------
AMFAC/JMB HAWAII, INC.
Consolidated Statements of Cash Flows - Continued
Six Months Ended June 30, 1997 and 1996
(Dollars in Thousands)
(Unaudited)
1997 1996
------- --------
Cash flows from financing activities:
Deferred expenses (244) 15
Net repayments of long-term debt 4,680 (993)
Amounts due to affiliates 17,657 13,199
--------- --------
Net cash provided by financing
activities 22,093 12,221
--------- --------
Net increase (decrease) in cash and cash
equivalents 357 (2,104)
Cash and cash equivalents,
beginning of year 8,736 11,745
--------- --------
Cash and cash equivalents,
end of period $ 9,093 9,641
========= ========
Supplemental disclosure of cash flow
information:
Cash paid for interest
(net of amount capitalized) $ 8,134 10,275
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 $ 3,701 2,410
========= ========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements
June 30, 1997 and 1996
(Dollars in Thousands)
Readers of this quarterly report should refer to the Company's
audited financial statements for the fiscal year ended December
31, 1996, which are included in the Company's 1996 Annual Report,
as certain footnote disclosures which would substantially
duplicate those contained in such audited financial statements
have been omitted from this report.
(1) 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 was merged into
Northbrook, with Northbrook being the surviving corporation.
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 development and sales
activities related to the Company's owned land, all of which is
in the State of Hawaii, and the management and operation of the
Company's golf course facilities.
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.
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 $4,429 and $4,900 at June 30, 1997 and December
31, 1996, respectively) as cash equivalents, which approximates
market. These amounts include $2,005 and $1,552 at June 30, 1997
and December 31, 1996, respectively, which were restricted
primarily to fund debt service on long-term debt related to the
acquisition of power generation equipment (see note 4).
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 in certain partnerships and joint ventures, if
any, over which the Company exercises significant influence are
accounted for by the equity method. Revenues include the
Company's equity in net income or loss from such investments. To
the extent the Company engages in such activities as a general
partner, the Company is contingently liable for the obligations
of its partnership and joint venture investments.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
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.
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.
For financial reporting purposes, the Company uses the
effective interest rate method and accrued interest on the
Certificate of Land Appreciation Notes due 2008 ("COLAS") at 4%
per annum, which is the "Mandatory Base Interest" (see note 3).
Interest is capitalized to qualifying assets (principally
real estate under development) during the period that such assets
are undergoing 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 cots of $729 and $0 have been capitalized for the six
months ended June 30, 1997 and 1996, respectively.
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.
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, respectively, to additional paid-in capital in
the accompanying consolidated financial statements.
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) AMOUNTS DUE TO AFFILIATES - FINANCING
The approximately $15,097 of remaining acquisition-related
financing owed to affiliates had a maturity date of June 1, 1998
and bore interest at a rate per annum based upon the prime
interest rate (8.5% at June 30, 1997), plus 1%.
On June 1, 1995, the Company borrowed $52,000 from
Northbrook to redeem Class A COLAS pursuant to the Redemption
Offer (see note 3). The Company has also borrowed approximately
$18,746 and $9,814 during 1996 and 1995, respectively, to fund
COLA Mandatory Base Interest payments and other operational
needs. The loans from Northbrook were payable interest only,
matured on June 1, 1998 and carried an interest rate per annum
equal to the prime interest rate plus 2%.
In February 1997 the above noted affiliate loans, along with
certain other amounts due Northbrook, were converted into a new
ten-year note payable. The new note is payable interest only and
accrues interest at the prime rate plus 2%. The Company borrowed
an additional $12,214 during the six months ended June 30, 1997
to fund COLA Mandatory Base Interest payments and other
operational needs. The total amount due Northbrook as of June 30,
1997 was $121,236, which includes accrued interest of $5,443.
Pursuant to the Indenture relating to the COLAS, the amounts
borrowed from Northbrook are considered "Senior Indebtedness" to
the COLAS.
(3) 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 the current date. Approximately
$93,166 of the $100,790 cumulative deficiency of Contingent Base
Interest related to the period from August 31, 1989 (Final
Issuance Date) through June 30, 1997 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 six months ended June 30, 1997 and the year ended
December 31, 1996:
1997 1996
------ -------
Mandatory Base Interest paid $4,414 8,828
Contingent Base Interest paid -- --
Cumulative deficiency of Contingent
Base Interest at end of period $ 100,790 94,169
Net Cash Flow was $0 for 1996 and is expected to be $0 for 1997.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
In each calendar year, principal reductions may be made from
remaining Net Cash Flow, if any, in excess of all current and
unpaid deferred Contingent Base Interest. The COLAS will bear
additional contingent interest in any year, after any principal
reduction, equal to 55% of remaining Net Cash Flow. Upon
maturity, holders of COLAS will be entitled to receive the
remaining outstanding principal balance of the COLAS plus unpaid
Mandatory Base Interest (4%) plus additional interest equal to
the unpaid Contingent Base Interest, to the extent of the
Maturity Market Value (Maturity Market Value generally means 90%
of the excess of the Fair Market Value (as defined) of the
Company's assets
at maturity over its liabilities (including Qualified Allowance,
but only to the extent earned and payable from Net Cash Flow
generated through maturity) at maturity, which liabilities have
been incurred in connection with its operations), plus 55% of the
remaining Maturity Market Value.
On March 14, 1989, Amfac/JMB Finance ("Finance"), a wholly-
owned subsidiary of Northbrook, and the Company entered into an
agreement (the "Repurchase Agreement") concerning Finance's
obligations to repurchase, on June 1, 1995 and 1999, the COLAS
upon request of the holders thereof. The COLAS were issued in
two units consisting of one Class A and one Class B COLA. As
specified in the Repurchase Agreement, the repurchase of the
Class A COLAS may have been requested by the holders of such
COLAS on June 1, 1995 at a price equal to the original principal
amount of such COLAS ($.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. Through the
date of this report, the cumulative interest paid per Class A and
Class B COLA is approximately $.175 and $.175, 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 at the same price as would be required of
Finance under the Repurchase Agreement, 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 June 30, 1997, the
Company had approximately 156,000 Class A COLAS and approximately
286,000 Class
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
B COLAS outstanding, with a principal balance of approximately
$78,000 and $143,000, respectively.
As a result of the COLA repurchases in 1995, the Company
retired approximately $164,045 in face value of COLA debt and
recognized a financial statement gain in 1995 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 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 that 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.
(4) LONG-TERM DEBT
In June 1991, the Company obtained a five-year $66,000
nonrecourse loan from the Employees' Retirement System of the
State of Hawaii ("ERS"). The 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"). Accrued
Minimum Interest as of June 30, 1997 was $1,234. The scheduled
Minimum Interest 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 accrued
interest payable from excess cash flow was $3,695 as of June 30,
1997. 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 remaining
balance of the $3,250 loan was fully repaid in January 1997. The
$10,000 loan has an outstanding balance of $5,852 as of June 30,
1997 and bears interest at a rate equal to prime rate (8.5% at
June 30, 1997) plus three and one half percent. Lihue has
purchased an interest rate agreement which protects against
fluctuations in interest rates and effectively caps the prime
rate at eight percent for the first seven years of the loan
agreement. 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 consisted of two $10,000 amortizing
loans. Each loan bore 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 bore
interest at prime plus 1/2% and LIBOR (5.8164% at June 30, 1997)
plus 3%, respectively. 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 was
increased to $25,000, the maturity date was extended to February
2007, the interest rate was 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. As of June
30, 1997, the outstanding principal balance was $24,905, with
scheduled remaining annual principal maturities of $95 in 1997,
$228 in 1998, 1999, 2000, 2001 and $24,791 thereafter. 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).
In December 1996, Amfac Property Development Corp., 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 (the sugar
plantation was closed in 1995), and is considered "Senior
Indebtedness" (as defined in the Indenture relating to the
COLAS). The loan bears interest at the bank's base rate (8.5% at
June 30, 1997) plus .5% and matures on December 1, 1998.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
(5) SEGMENT INFORMATION
Agriculture and Property comprise separate industry segments
of the Company. "Operating Income-Other" consists primarily of
unallocated overhead expenses and "Total Assets-Other" consists
primarily of cash and deferred expenses. Total assets at the
balance sheet dates and capital expenditures, operating income
(loss) and depreciation and amortization during the six months
ended June 30, 1997 and 1996 are set forth below by each industry
segment:
June 30, December 31,
1997 1996
--------- ---------
[S] [C] [C]
Total Assets:
Agriculture $241,137 239,222
Property 223,254 225,372
Other 19,741 19,011
--------- ---------
$448,132 483,605
========= =========
Six Months Six Months
Ended Ended
June 30, June 30,
1997 1996
----------- -----------
Capital Expenditures:
Agriculture $ 906 711
Property 1,118 464
--------- ---------
$ 2,024 1,175
========= =========
Operating income (loss):
Agriculture $(1,408) (1,556)
Property (1,829) 2,363
Other (2,173) (1,253)
--------- ---------
$(5,410) (446)
========== =========
Depreciation and amortization:
Agriculture $1,961 2,048
Property 1,066 1,051
Other 22 51
--------- ---------
$3,049 3,150
========= =========
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
(6) TRANSACTIONS WITH AFFILIATES
The Company incurred interest expense of approximately
$5,443 for the six months ended June 30, 1997 and approximately
$4,200 for the six months ended June 30, 1996 in connection with
the acquisition and additional financing obtained from an
affiliate. Approximately $5,443 of such interest was unpaid as
of June 30, 1997.
With respect to any calendar year, JMB or its affiliates may
receive a Qualified Allowance in an amount equal to: (i)
approximately $6,200 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 $6,200 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 year ended December 31, 1996:
1996
-----
Qualified Allowance calculated $9,240
Qualified Allowance paid --
Cumulative deficiency of Qualified
Allowance at end of year $60,632
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
The Qualified Allowance for 1997, which will not be calculated
until the year is completed, is not expected to be paid. Net
Cash Flow was $0 for 1996 and is expected to be $0 for 1997.
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 was approximately $326 for
the six months ended June 30, 1997 and approximately $249 for the
six months ended June 30, 1996; approximately $326 of such costs
were unpaid as of June 30, 1997. In addition, as of June 30,
1997, the other amounts due to affiliates includes $9,106 of
income tax payable related to the Class A COLA Redemption Offer
(see note 3). 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 June 30, 1997.
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 six months
ended June 30, 1996 was approximately $543 and approximately $571
for the six months ended June 30, 1997, all of which was paid as
of June 30, 1997.
Northbrook and its affiliates allocate certain charges for
services to the Company based upon the estimated level of
services. Such charges totaled $715 and $644 for the six months
ended June 30, 1997 and June 30, 1996, respectively. The
affiliated charges for the second quarter of 1997 were offset by
$248 of charges for services provided by the Company for
Northbrook or reimbursement of costs paid by the Company on
behalf of Northbrook. As of June 30, 1997, on a net basis, the
amount due Northbrook totaled approximately $471 related to these
services. 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.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
(7) EMPLOYEE BENEFIT PLANS
The Company participates in benefit plans covering
substantially all of 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.
(8) 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 $4,605 as of June 30,
1997. Additional development expenditures are dependent upon the
Company's ability to obtain financing for such costs and on the
timing and extent of property development and sales.
As of June 30, 1997, certain portions of the Company's land
not currently under development or used in sugar operations are
mortgaged as security for approximately $6,297 of performance
bonds related to property development.
AMFAC/JMB HAWAII, INC.
Notes to Consolidated Financial Statements - Concluded
(Dollars in Thousands)
(9) INCOME TAXES
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 are as follows:
Deferred tax (assets):
Postretirement benefits $(22,488)
Interest accruals (2,975)
Other accruals (3,549)
---------
Total gross deferred tax assets (29,012)
---------
Deferred tax liabilities:
Accounts receivable, related to profit on sales of sugar 3,065
Inventories, principally due to sugar production
costs, capitalized costs, capitalized interest and
purchase accounting adjustments 258
Plant and equipment, principally due to depreciation
and purchase accounting adjustments 8,129
Land and land improvements, principally due
to purchase accounting adjustments 89,537
Deferred gains, due to installment sales for income
tax purposes 7,429
Investments in unconsolidated entities, principally
due to purchase accounting adjustments 14,361
--------
Total deferred tax liabilities 122,779
--------
Net deferred tax liability $93,767
=========
(10) ADJUSTMENTS
In the opinion of the Company, all adjustments (consisting
solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of
June 30, 1997 and for the three and six months ended June 30,
1997 and 1996.
<TABLE>
AMFAC/JMB FINANCE, INC.
Balance Sheets
June 30, 1997 and December 31, 1996
(Dollars in thousands, except per share information)
(Unaudited)
<CAPTION>
A s s e t s
June 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
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 2)
Common stock, $1 par value; authorized, issued
and outstanding - 1,000 shares $ 1 1
========== ==========
<FN>
The accompanying notes are an integral part of these balance sheets.
</TABLE>
AMFAC/JMB FINANCE, INC.
Notes to the Balance Sheets
(Unaudited)
(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) REPURCHASE OBLIGATIONS
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 $.175 and $.175,
respectively.
On March 14, 1989, Northbrook entered into a keep-well
agreement with Finance, whereby it agreed to contribute
sufficient capital to Finance to enable Finance to meet the COLA
repurchase obligations described above. Notwithstanding Finance's
repurchase obligations, Amfac/JMB Hawaii, Inc. may elect to
redeem any COLAS requested to be repurchased at the specified
purchase price in accordance with the terms in the indenture that
governs the terms of the COLAS (the "Indenture").
On March 15, 1995, pursuant to the Indenture, Amfac/JMB
Hawaii, Inc. elected to exercise its right to redeem, and
therefore was obligated to repurchase, any and all Class A COLAS
submitted pursuant to the redemption offer at a price of $.365
per Class A COLA.
PART I. FINANCIAL INFORMATION
ITEM 2. 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 the
six months ended June 30, 1997, the Company generated
approximately $9.6 million from these non-strategic land sales.
During 1996, the Company generated approximately $18.9 million in
land sales, most of which related to non-strategic parcels.
At June 30, 1997, the Company had cash and cash equivalents
of approximately $9.1 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 development
costs remaining 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 sources of future land sale revenues. However, due
to current market conditions, the difficulty in obtaining land
use approvals and the high development costs 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 liquidity requirements. Additionally, the Company's plans
for property sales may also be adversely impacted by the
inability of potential buyers to obtain financing.
During the first six months of 1997, net cash used in
operating activities of $15.5 million and in investing activities
of $6.2 million was primarily provided by $17.7 million of long-
term financing from the Company's parent and $4.7 million of
additional long-term financing related to the refinancing of the
WGCI loan (see Note 4).
During the first six months of 1997, net cash flow used in
operating activities was $15.5 million, as compared to net cash
used in operating activities of $10.9 million during the first
six months of 1996. The $4.6 million decrease in cash flow
related to operating activities was due to: (i) an increase in
1997 of the net loss (after adjusting for items not requiring or
providing cash) by $7.8 million partially offset by (ii) changes
in cash flow netting to an increase of $3.3 million, which
related primarily to working capital components.
During the first six months of 1997, net cash flow used in
investing activities totaled $6.2 million, principally due to
property additions of $2.4 million and the incurrence of other
capitalizable costs related to future land development. During
the first six months of 1996, investing activities used net cash
of $3.4 million, principally due to property additions of $1.2
million and the incurrence of capitalizable costs related to
future land developments of $1.5 million.
During the first six months of 1997, net cash flow provided
by financing activities totaled $22.1 million, due primarily to
$17.7 million of long-term financing from the Company's parent
and $4.7 million of additional long-term financing related to the
refinancing of the WGCI loan (see Note 4). During the first six
months of 1996, net cash flow provided by financing activities
totaled $12.2 million, due primarily to $13.2 million of long-
term financing from the Company's parent, partially offset by
$1.0 million of net repayments of long-term debt.
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 were 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 ("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
1999) to repurchase 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 ($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. Through the date of this report, the
cumulative interest paid per Class A and Class B COLA is
approximately $175 and $175, 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
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 June 30, 1997, the
Company has 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.
As a result of the COLA repurchases, the Company retired
approximately $164 million face value of debt and recognized a
financial statement gain in 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).
In addition to the $52 million borrowed from Northbrook to
redeem Class A COLAS pursuant to the Redemption Offer (see Note
3), the Company also borrowed approximately $18.7 million and
$9.8 million during 1996 and 1995, respectively, to fund COLA
Base Interest payments and other operational needs. These loans
from Northbrook, which have been subsequently refinanced, were
payable interest only, had a maturity date of June 1, 1998 and
carried an interest rate per annum equal to the prime interest
rate plus two percent.
In February 1997 the above noted affiliate loans, along with
certain other amounts due Northbrook, were converted into a new
ten-year note payable. The new note is payable interest only and
accrues interest at the prime rate plus 2%. The Company borrowed
an additional $12.2 million during the six months ended June 30,
1997 to fund COLA Base Interest payments and other operational
needs. The total amount due Northbrook as of June 30, 1997 was
$121.2 million, which includes accrued interest of $5.4 million.
Pursuant to the Indenture relating to the COLAS, the amounts
borrowed from Northbrook are considered "Senior Indebtedness" to
the COLAS.
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 the refinancing of the golf courses or at
the maturity of the loan. The ERS share of the Net Disposition
Proceeds increases from 30% from April 1996 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"). Accrued Minimum Interest as of June 30,
1997 was $1.2 million. The scheduled Minimum Interest 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 accrued interest payable from excess
cash flow was approximately $3.7 million as of June 30, 1997.
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 consisted 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 bore
interest at prime (8.5% at June 30, 1997) plus 1/2% and LIBOR
(5.8164% at June 30, 1997) plus 3%, respectively. In February
1997, WGCI entered into an amended and restated loan agreement
with the Bank of Hawaii, (they bought out the other lender's
interest), whereby the outstanding principal amount of the loan
was increased to $25 million, the maturity date was extended to
February 2007, the interest rate was changed to LIBOR plus 2%
until the fifth anniversary and LIBOR plus 2.5% thereafter and
principal will be repaid based on a 30-year amortization
schedule. The loan is secured by WGCI's assets (see Note 4), is
guaranteed by the Company and is considered "Senior Indebtedness"
(as defined in the COLA Indenture).
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
land, depending on the price and certain other contingencies, a
payment of up to $15 million might be required to be made to the
City to be used to assist in the City's affordable housing
developments.
In December 1996, Amfac Property Development Corp., 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 mill-site of Oahu Sugar (the
sugar plantation was closed in 1995), and is considered "Senior
Indebtedness" (as defined in the Indenture relating to the
COLAS). The loan bears interest at the bank's base rate (8.5% at
June 30, 1997) 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 six months ended June 30, 1996 and 1997. The Company has
not generated a sufficient level of Net Cash Flow to pay Base
Interest on the COLAS (see Note 3) in excess of 4% ("Contingent
Base Interest") from 1990 through the current date. 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
$93.1 million of the $100.8 million cumulative deficiency of
Contingent Base Interest related to the period from August 31,
1989 (Final Issuance Date) through June 30, 1997 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 six months ended June 30, 1997 and the year ended
December 31, 1996 (dollars are in millions):
1997 1996
------- --------
Mandatory Base Interest paid $ 4.4 8.8
Contingent Base Interest paid -- --
Cumulative deficiency of Contingent
Base Interest at end of period $100.8 94.2
Net Cash Flow was $0 for 1996 and is expected to be $0 for 1997.
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 year ended December 31, 1996 (dollars are in
millions):
1996
-------
Qualified Allowance calculated $ 9.2
Qualified Allowance paid --
Cumulative deficiency of Qualified
Allowance at end of year $ 60.6
The Qualified Allowance for 1997, which will not be calculated
until the year is completed, is not expected to be paid. Net
Cash Flow was $0 for 1996 and is expected to be $0 for 1997.
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 is anticipated to expend an additional approximately $6.6
million in project costs during the remainder of 1997. As of
June 30, 1997, contractual commitments related to project costs
totaled approximately $4.6 million.
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 support 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, maintains the loan
rate for raw sugar 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 an
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.
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 operations
(including the Maui plantation) were changed to a seasonal mode.
Currently the Company is exploring modifications to the terms of
its agreement with the International Longshoreman's &
Warehouseman's Union ("ILWU"), which represents approximately 85%
of the Company's agricultural employees. The Company and the
ILWU have agreed to meet during the summer of 1997 to discuss
various ideas on how to make operations profitable. After the
summer discussions are completed, negotiations for a new labor
contract will begin in late 1997 (the current labor agreement
expires on February 1, 1998). Although the Company is hopeful
that it will reach a consensus this summer on operational changes
that can be reflected in a new labor agreement, there can be no
assurance that sufficient changes will be identified or agreed
upon. The absence of a new labor agreement with significant
modifications from the existing agreement would cause the Company
to evaluate the cessation of its sugar operations.
In early March 1997, the Company announced a restructuring
that has resulted in the creation of six separate 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-minded entities, rather than as one
large, diverse conglomerate. Approximately four percent of the
Company's total employees were released as part 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 their taxes as a
part of the consolidated tax return of the Company's parent,
Northbrook. The Company and its subsidiaries 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.
Long-term debt increased as of June 30, 1997 as compared to
December 31, 1996, due primarily to the approximately $5.5
million of proceeds received related to the refinancing of the
WGCI loan (see Note 4).
The long-term portion of amounts due to affiliates increased
as of June 30, 1997 as compared to December 31, 1996, due
primarily to $12.2 million of financing provided by affiliates to
fund interest payments and other operational needs (see Note 6).
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 increased as of June 30, 1997 as compared to
December 31, 1996 primarily due to the timing of the harvest of
sugar cane and the subsequent payment for the delivery of raw
sugar.
Agricultural revenues and cost of sales decreased for the
three and six months ended June 30, 1997 as compared to the three
and six months ended June 30, 1996 due to a decrease in tons
produced and to the timing of sugar production and related sales.
For the six months ended June 30, 1997, the Company sold
approximately 20,036 tons of sugar, a 63% decrease over the same
period in 1996. The average price of sugar sold for the six
months ended June 30, 1997 of approximately $357 represents a 5%
decrease over the average price for the six months ended June 30,
1996. The Company harvested approximately 3,800 and 5,400 acres
for the six months ended June 30, 1997 and 1996, respectively.
For the three months ended June 30, 1997, the Company sold
approximately 20,063 tons of sugar, a 53% decrease over the same
period in 1996. The average price of sugar sold for the three
months ended June 30, 1997 of approximately $354 represents a 5%
decrease over the average price for the three months ended June
30, 1996. The Company harvested approximately 3,700 and 3,835
acres for the three months ended June 30, 1997 and 1996,
respectively.
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.
Reference is made to the "Liquidity and Capital Resources"
section of "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a discussion of
potential uncertainties regarding the price of raw sugar and the
continuation of the Company's 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.
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.
For the six months ended June 30, 1997 and 1996, the Company
generated approximately $9.6 million and $9.4 million of land
sales, respectively. Approximately $5.2 million of land sales for
the six months ended June 30, 1997 related to the remaining four
ocean front lots in Kaanapali (see discussion below) and the
remaining $4.4 million was primarily from the sale of non-
strategic land parcels on Kauai. For the six months ended June
30, 1996, approximately $5.0 million of land sales related to
Kaanapali Golf Estates and the remaining $4.4 million was
primarily from the sale of non-strategic land parcels on Kauai,
Oahu and Hawaii. Property revenues also include the operations of
the three golf courses owned by the Company, which accounted for
total revenues of $8.1 million and $8.2 million for the six
months ended June 30, 1997 and 1996, respectively.
For the three months ended June 30, 1997, the Company
generated approximately $5.2 million of land sales related to the
four ocean front lots in Kaanapali and the remaining $1.5 million
was primarily from the sale of non-strategic land parcels on
Kauai. For the three months ended June 30, 1996, the Company
generated approximately $2.6 million of land sales related to
Kaanapali Golf Estates and the remaining $3.7 million was
primarily from the sale of non-strategic land parcels on Kauai,
Oahu and Hawaii.
Land and inventory decreased as of June 30, 1997 compared to
December 31, 1996 due primarily to land sales having a cost basis
of $11.3 million.
Other assets increased as of June 30, 1997 as compared to
December 31, 1996 primarily due to a long-term receivable of $2.2
million arising from a land sale in 1997 and deferred costs of
$2.4 million related to preliminary planning costs associated
with potential future development projects.
Although property sales decreased, cost of sales increased
for the three and six months ended June 30, 1997 as compared to
the three and six months ended June 30, 1996 primarily due to
lower margins realized on property sold during the first quarter
of 1997.
MAUI ACTIVITY
The planned development of the Company's land on Maui is
expected to be 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 inventory on Maui, which
is targeted to the second home buyer, has experienced slower
sales activity to date than originally expected. 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. The Company obtained
final subdivision approval for a 32 lot subdivision of a parcel
referred to as "17B" at Kaanapali Golf Estates in May 1997.
Twenty of these lots are currently in escrow and are scheduled to
close in August and September 1997 for sales prices of $.15
million to $.17 million per lot. The Company commenced onsite
construction of the subdivision improvements for parcel 17B in
August 1997 and is expected to be completed in March 1998, at a
cost of approximately $1.6 million. In addition, five lots in an
adjacent parcel (referred to as "Parcel 14") are in escrow and
are expected to close by the end of 1997 for sales prices ranging
from $.3 million to $.6 million.
In 1995, the Company subdivided an ocean front parcel in
Kaanapali into six single family homesites of approximately one
acre each. Sales of two of the lots in the project closed in
December 1995, generating total sales proceeds of approximately
$4.1 million. The Company sold the four remaining lots to a
local builder in June 1997 for a price of $5.2 million.
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. This North Beach property constitutes nearly all of the
remaining developable beachfront acreage at Kaanapali. The
development of North Beach continues to be tied to the completion
of the 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. On March 12, 1997, the
Company filed an application for a special management area use
permit with the County of Maui ("SMA Permit") for the time-share
resort. A public hearing was held on the SMA Permits on July 10,
1997. Although there was a significant amount of testimony both
for and against the project, a final decision was not made on the
SMA Permit by the Maui Planning Commission at the public hearing.
Instead, "intervention status" was granted to several parties who
will be allowed to present their specific objections to the SMA
Permits in a judicial process commentary known as a "contested
case" hearing. The contested case hearing is expected to be
completed by the end of the year. Although there is no assurance
that the SMA permit will be received (and that if such permit is
received, that its terms 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 past experience in time-share
development, and in the marketing and sale of time-share
intervals (one week ownership rights). In February 1997, the
Company formed a limited partnership with an affiliate of an
experienced time-share development and management company. Known
as Kaanapali Ownership Resorts L.P., the new limited partnership
is owned 85% by affiliates of the Company and 15% by Kaanapali
Partners Limited Partnership, an affiliate of the owners of the
Ridge Tahoe in Nevada. After receipt of the SMA permit, the
partnership will need to arrange project financing for the
development of the resort. In addition, the land option/purchase
agreement with Tobishima includes short-term seller financing,
which the partnership may decide to utilize.
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 assurances 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", located adjacent to the existing Kaanapali Beach Resort.
In connection with this land use approval, the Company has agreed
to the State policy of 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 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 development. It is
anticipated that, upon the receipt of government approvals, the
Company will expend up to $3.5 million (in the aggregate), of
which approximately $1.5 million has been spent as of June 30,
1997, toward the design of the bypass highway and/or the widening
of the existing highway.
In connection with the development of a land parcel referred
to as "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. In connection with this land use approval, the Company
has committed to providing additional housing on Maui 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 adding the access road which will benefit uses for
adjacent Company lands in future periods. Moreover, development
of certain portions 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 and other development in the surrounding area. The
Company commenced construction of infrastructure of Puukolii
Village in the last quarter of 1996, beginning with the access
road.
OAHU ACTIVITY
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 of the remainder of the mill-site
parcels, including planned commercial, public and quasi-public
uses.
Waiahole Irrigation Company ("WIC") is a wholly-owned
subsidiary of the Company, which owns and operates a water
collection and transmission system. This system provided water
for the Company's sugar cane operations on Oahu from the early
1900's until 1995, when Oahu Sugar Company was closed. After the
closure of Oahu Sugar Company, WIC negotiated agreements with
several farmers and golf courses (the "Users") to deliver
irrigation water to them for a fee. However, to consummate these
agreements the Users' landlords are required by law to obtain
water permits from the State of Hawaii water commission (the
"Commission"). Therefore, the landowners and WIC applied to the
Commission for the appropriate approvals. There has been, and
continues to be, strong opposition to the water permit request.
The opposition consists primarily of environmental and native
Hawaiian groups who want the water to be used for stream
restoration purposes, rather than being transported by the
Waiahole System.
After over four years of processing, including about six
months of hearings, the Commission issued a draft decision in
July 1997. The decision was not favorable to the landowners and
WIC as it permits only a limited amount of water to be
transported through the Waiahole System (approximately one-third
of its capacity). At this low level and with the pricing
provided for in the agreement between WIC and the Users, it is
doubtful that WIC could generate enough revenues to cover its
annual operating and maintenance costs of approximately $1
million per year.
At this junction, the landowners and other supporting
parties, including the City and County of Honolulu and the State
Department of Agriculture, will work to have the Commission re-
consider their draft decision. WIC will also consider
terminating the Users' agreement, and re-negotiating the price
for delivery of water through the system. Finally, if
improvements cannot be made in either the pricing or volume of
Waiahole System water, WIC will be forced to consider closing
down the system or operating the system on a very limited basis.
Such closing or limitation of the Waiahole System would not have
a material adverse effect on the Company's financial condition or
on its results of operations.
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 project is 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. 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, Kauai County approved the Company's
application to rezone the project. The project is now entitled.
However, 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 Company does
not plan to pursue those final permits until the real estate
market on Kauai improves. Once construction commences, subject to
market conditions, the project is expected to span over 20 years.
PART II. OTHER INFORMATION
ITEM 1. 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 litigation that is
now pending (or threatened) and for which the potential liability
is not covered by insurance, the Company is of the opinion that
the ultimate liability from any of the litigation will not
materially adversely affect the Company's results of operations
or its financial condition.
<TABLE>
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)The following documents are included as an exhibits
to this report.
<C> <C>
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***** $13,250,000 Loan
Agreement among Heller, Financial,
Inc., as Lender, The Lihue Plantation
Company Limited, as Borrower, and
Amfac/JMB Hawaii, Inc., Kekaha Sugar
Company, Limited, Oahu Sugar Company
Limited and Pioneer Mill Company,
Limited, as Guarantors December 30,
1992.
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
4.15************ Amended
and Restated $25,000,000 loan agreement
with the Bank of Hawaii dated February
4, 1997.
4.16************ Limited
Partnership Agreement for Kaanapali
Ownership Resorts, L.P. dated February
1, 1997 for development of time-share
resort on Kaanapali.
4.17 Revolving Credit Note
between Amfac/JMB Hawaii, Inc. and Fred
Harvey Transportation Company, Inc.
dated February 27, 1997.
10.1* General Lease S-
4222, dated January 1, 1969, by and
between the State of Hawaii and Kekaha
Sugar Company, Limited.
10.2* Grove Farm Haiku
Lease, dated January 25, 1974 by and
between Grove Farm Company,
Incorporated and The Lihue Plantation
Company, Limited.
10.3* General Lease S-
4412, dated October 31, 1974, by and
between the State of Hawaii and the
Lihue Plantation Company, Limited.
10.4* General Lease S-
4576, dated March 15, 1978, by and
between the State of Hawaii and The
Lihue Plantation Company, Limited.
10.5* General Lease S-
3827, dated July 8, 1964, by and
between the State of Hawaii and East
Kauai Water Company, Ltd.
10.6* Amended and
Restated Power Purchase Agreement,
dated as of June 15, 1992 by and
between The Lihue Plantation Company,
Limited and Citizens Utilities Company.
10.7* 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.
10.8* 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.
10.9* 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.
10.10* Honokohau Water
License, dated December 22, 1980,
between Maui Pineapple Company Ltd. and
Pioneer Mill Company, Limited.
10.11* Water Licensing
Agreement, dated September 22, 1980, by
and between Maui Land & Pineapple
Company, Inc. and Amfac, Inc.
10.12* Joint Venture
Agreement, dated as of March 19, 1986,
by and between Amfac Property
Development Corp. and Tobishima
Properties of Hawaii, Inc.
10.13* Development
Agreement, dated March 19, 1986, by and
between Kaanapali North Beach Joint
Venture and Amfac Property Investment
Corp. and Tobishima Pacific, Inc.
10.14** Keep-Well Agreement
between Northbrook Corporation and
Amfac/JMB Finance, Inc.
10.15** Repurchase
Agreement, dated March 14, 1989, by and
between Amfac/JMB Hawaii, Inc. and
Amfac/JMB Finance, Inc.
10.16** 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.
10.17** Amfac-Amfac Hawaii
Tax Agreement, dated February 27, 1989
between Amfac, Inc. and Amfac/JMB
Hawaii, Inc.
10.18** 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.
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.
</TABLE>
* 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 27, 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 27, 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 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 March 27, 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-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-Q report under the Securities Act of 1934 (File No. 33-24180)
filed on August 13, 1996 and hereby incorporated by reference.
*********** Previously filed as an exhibit to the Company's Form
10-K report under the Securities Act of 1934 (File No. 33-24180)
filed March 21, 1997 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 May 15, 1997 and hereby incorporated by reference.
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: August 13, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: August 13, 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: August 13, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: August 13, 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 Coffee Estates, Inc.
By: Gary Smith
Vice President
Date: August 13, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: August 13, 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: August 13, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: August 13, 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: August 13, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: August 13, 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 LAND COMPANY, LTD.
By: Gary Smith
Vice President
Date: August 13, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: August 13, 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 VACATIONS MANAGERS, INC.
By: Gary Smith
Vice President
Date: August 13, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: August 13, 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: August 13, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: August 13, 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: August 13, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: August 13, 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: August 13, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: August 13, 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: August 13, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: August 13, 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: August 13, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: August 13, 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: August 13, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: August 13, 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: August 13, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: August 13, 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: August 13, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: August 13, 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: August 13, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following person in the capacity and on the date indicated.
Gary Smith
Principal Accounting Officer
Date: August 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENT INCLUDED IN SUCH REPORT
</LEGEND>
<CIK> 0000839437
<NAME> AMFAC/JMB HAWAII, INC
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 9,093
<SECURITIES> 0
<RECEIVABLES> 12,491
<ALLOWANCES> 0
<INVENTORY> 51,059
<CURRENT-ASSETS> 75,204
<PP&E> 350,344
<DEPRECIATION> 36,905
<TOTAL-ASSETS> 484,132
<CURRENT-LIABILITIES> 29,896
<BONDS> 326,221
0
0
<COMMON> 1
<OTHER-SE> (168,648)
<TOTAL-LIABILITY-AND-EQUITY> 484,132
<SALES> 27,848
<TOTAL-REVENUES> 27,928
<CGS> 23,631
<TOTAL-COSTS> 33,258
<OTHER-EXPENSES> 721
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,007
<INCOME-PRETAX> (20,058)
<INCOME-TAX> 7,691
<INCOME-CONTINUING> (12,367)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,367)
<EPS-PRIMARY> (12.4)
<EPS-DILUTED> (12.4)
</TABLE>
REVOLVING CREDIT NOTE
February 27, 1997
FOR VALUE RECEIVED, the undersigned, Amfac/JMB Hawaii,
Inc., a Hawaii corporation (the "Borrower") hereby
unconditionally promises to pay to the order of Fred Harvey
Transportation Company, Inc., an Arizona corporation (the
"Lender") at the offices of the Lender and located at 900
North Michigan Avenue, Chicago, IL 60611 in lawful money of
the United States and in immediately available funds, on
February 17, 2007 (the "Maturity Date") the aggregate unpaid
principal amount of all amounts loaned from the Lender to the
Borrower from time to time with interest (computed on the
basis of a 365- (or, if applicable, 366-) day year) on the
unpaid balance thereof at a per annum rate equal to the "Base
Rate" as announced from time to time by Bank of Hawaii plus 2%
per annum (changing as and when such "Base Rate" changes) from
the date hereof, payable on the 15th day of May, August,
November and February in each year, commencing November 15,
1997; provided, that the Borrower may, at its option, defer
all or any portion of the interest payable on any such date
(in which case such deferred amounts shall be added to the
principal of the loan), but in no event shall such payment be
deferred beyond the Maturity Date. Principal and interest may
be prepaid at any time without premium or penalty.
The holder of this Note is authorized to record on the
schedules annexed hereto and made a part hereof or on a
continuation thereof which shall be attached hereto and made a
part hereof the date and the amount of each loan made by the
Lender and the date and amount of each payment or prepayment
of principal thereof. Each such recordation shall constitute
prima facie evidence of the accuracy of the information so
recorded, provided that the failure to make any such
recordation any error in such recordation shall not effect the
obligations of the Borrower under this note.
If any of the following events ("Events of Default")
occurs and is continuing:
(a) Borrower fails to pay any principal hereon when the same
shall become due and payable, or fails, within five days after
the same becomes due and payable, to pay any undeferred
interest hereon;
(b) Borrower fails to make any payment in respect of any of
Borrower's indebtedness for borrowed money having an aggregate
principal amount of more than $1,000,000 when due (whether by
scheduled maturity, required prepayment, acceleration, demand
or otherwise, but subject to any applicable grace period) or
fails to perform or observe any other condition or covenant,
or any other event shall occur to condition shall exist, under
any agreement or instrument relating to any such indebtedness
for borrowed money, if the effect of such failure, event or
condition is to cause, or to permit holders of such
indebtedness to cause, such indebtedness to become due prior
to its expressed maturity;
(c) Borrower becomes insolvent or generally fails to pay, or
admits in writing its inability to pay its debts as they
become due; Borrower applies for a trustee, receiver or other
custodian for it or a substantial part of its property; a
trustee, receiver or other custodian is appointed for Borrower
or for a substantial part of its property; or any bankruptcy,
reorganization, debt arrangement, or other case or proceeding
under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is commenced in respect of Borrower;
or
(d) A final judgment or order for the payment of money in
excess of $50,000 shall be rendered against Borrower or any of
its subsidiaries and such judgment or order shall continue
unsatisfied and unstayed for a period of 30 days.
then in the case of any Event of Default under clause(c)
above, all indebtedness evidenced by this Note and all
interest hereon shall automatically be and become immediately
due and payable, and in the case of other Event of Default,
the holder hereof may, by notice to Borrower, declare all
indebtedness evidenced by this Note ad all interest thereon to
be forthwith due and payable, whereupon all indebtedness
evidenced by this Note and all such interest will become and
be forthwith due and payable, all without presentment, demand,
protest or further notice of any kind, all of which are hereby
expressly waived by Borrower.
The proceeds of any loans from the Lender to the Borrower
evidenced hereby are to be used for purposes which will
qualify as "Senior Indebtedness" as that term is defined in
the Indenture dated as of March 14, 1989 (the "Indenture") by
and among Borrower, Continental Bank, National Association,
Trustee and certain guarantors named therein as the same may
be amended, supplemented or otherwise modified form time to
time. Unless otherwise defined, the terms defined in the
Indenture and used herein shall have the meanings given to
them in the Indenture.
Notwithstanding anything to the contrary contained in
this Note, no director, officer or employee of the Borrower
shall have any personal liability of any kind or nature
directly or indirectly in connection with this Note.
This Note shall be governed by and construed in
accordance with the laws of the State of Illinois applicable
to contracts made and to be wholly performed in said State,
including, but not limited to, the legality of interest rate.
AMFAC/JMB HAWAII, INC.
By:_______________________
Name: Gary Smith
Title: Vice President
Schedule A
to Revolving Credit Note
--------------------------
LOANS AND REPAYMENTS OF LOANS
Date Amount of Loans Amount of Principal Unpaid Principal Notation
of Loans Repaid Balance of Loans Made By
2/27/97 $4,413,840
3/21/97 $3,300,000
4/17/97 $3,000,000
5/29/97 $1,500,000
