SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Act of 1934
For the fiscal year ended December 31, 1997 Commission File
Number 33-24180
AMFAC/JMB HAWAII, L.L.C.
(Exact name of registrant as specified in its charter)
Hawaii 36-3109397
(State of organization) (I.R.S. Employer Identification No.)
For the fiscal year ended December 31, 1997
Commission FileNumber 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.
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K X
State the aggregate market value of the voting stock held by
non-affiliates of the registrant. Not applicable.
As of March 31, 1998, all of Amfac/JMB Hawaii L.L.C.'s membership
interest is solely owned by Northbrook Corporation, an Illinois
corporation, and not traded on a public market.
As of March 31, 1998, Amfac/JMB Finance, Inc. had 1,000 shares of
Common Stock outstanding. All such Common Stock is owned by its
parent and not traded on a public market.
The Additional Registrants listed on the following page meet the
conditions set forth in General Instruction I1(a) and (b) of Form
10-K and therefore are filing this form with reduced disclosure
format.
Certain pages of the prospectus of the registrant dated December
5, 1988 and filed with the Commission pursuant to Rules 424(b)
and 424(c) under the Securities Act of 1933 are incorporated by
reference in Part III of this Annual Report on Form 10-K.
ADDITIONAL REGISTRANTS (1)
Address, including,
zip code,
Exact name of State or other IRS and telephone number,
registrant as jurisdiction of Employer including area code of
specified in its incorporation or Identification registrant's principal
Charter organization Number executive offices
Amfac Land Hawaii 99-0185633 900 North Michigan Avenue
Company Limited. 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
H. Hackfeld Hawaii 99-0037425 900 North Michigan Avenue
& Co., Ltd. Chicago, Illinois 60611
312/440-4800
Kaanapali Estate Hawaii 99-0176334 900 North Michigan Avenue
Coffee, 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
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
Page
PART I
Item 1. Business 1
Item 2. Properties 8
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
PART II
Item 5. Market for the Company's and Finance's Common
Equity and Related Security Holder Matters 13
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
Item 8. Financial Statements and Supplementary Data 26
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 59
PART III
Item 10. Directors and Executive Officers of the Registrant 60
Item 11. Executive Compensation 62
Item 12. Security Ownership of Certain Beneficial Owners and
Management 63
Item 13. Certain Relationships and Related Transactions 63
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 66
SIGNATURES 67
PART I
Item 1. Business
Amfac/JMB Hawaii, L.L.C. (the "Company") is a Hawaii
limited liability company. The Company is wholly-owned by
Northbrook Corporation. The primary business activities of the
Company are land development and sales, golf course management
and agriculture. The Company owns approximately 43,000 acres of
land located on the islands of Oahu, Maui, Kauai and Hawaii in
the State of Hawaii. All of this land is held by the Company's
wholly-owned subsidiaries. In addition to its owned lands, the
Company leases approximately 55,000 acres of land used
primarily in conjunction with its agricultural operations. The
Company's operations are subject to significant government
regulation.
In early March 1997, the Company restructured its
operations into the following six separate operating divisions:
Sugar, Golf, Coffee, Water, Land Management and Real Estate
Development. The Company also formed a corporate services
division to provide accounting, MIS, human resources, tax and
other administrative services for the six operating groups. The
Company believes it will operate more effectively as several
smaller entrepreneurial-minded divisions. Approximately four
percent(4%) of the Company's total employees were released as
part of the restructuring, which has resulted in annual payroll
savings of approximately $1.1 million. The Company incurred
termination costs of approximately $0.6 million related to the
restructuring during the first quarter of 1997. At December 31,
1997, the Company and its subsidiaries employed 845 persons.
In February 1998, the Company announced the relocation of
the headquarters for its real estate development division from
Honolulu to Kaanapali, Maui. Due to poor market conditions on
Kauai and a shortage of land inventory on Oahu, the focus of
the Company's land development operations is expected to be on
Maui. In connection with the office re-location, four
executives and one administrative person resigned their
positions with the Company. The Company is currently
organizing a management team for the Maui development office,
which will be smaller in number than the staff was on Oahu. At
the request of the Company, two of the resigning executives
have agreed to assist with the move and transition of the
headquarters to Maui. These changes are expected to result in
one-time termination and relocation costs of $.5 million during
1998. Annual recurring cost savings are expected to be
approximately $.7 million from lower compensation, rent and
other employee-related costs.
The Company is the successor to Amfac/JMB Hawaii, Inc.
("A/J Hawaii"). On March 3, 1998, A/J Hawaii was merged (the
"Merger") with and into the Company pursuant to an Agreement
and Plan of Merger dated February 27, 1998 (the "Merger
Agreement") by and between A/J Hawaii and the Company (which
was then named Amfac/JMB Mergerco, L.L.C.). The Merger was
consummated to change the Company's form of entity from a
corporation to a limited liability company. The Company was a
nominally capitalized limited liability company which was
formed on December 24, 1997, solely for the purpose of
effecting the Merger. The Company succeeded to all the assets
and liabilities of A/J Hawaii in accordance with the Hawaii
Business Corporation Act and the Hawaii Uniform Limited
Liability Company Act. In addition, A/J Hawaii, the Company,
The First National Bank of Chicago (the "Trustee") and various
guarantors entered into a Second Supplemental Indenture dated
as of March 1, 1998, pursuant to which the Company expressly
assumed all obligations of A/J Hawaii under the Indenture dated
as of March 14, 1989, as amended (the "Indenture") by and among
A/J Hawaii, the Trustee and the guarantors named therein and
the Certificates of Land Appreciation Notes due 2008 Class A
(the "Class A COLAS") and the Certificates of Land Appreciation
Notes Class B (the "Class B COLAS" and, collectively, with the
Class A COLAS the "COLAS"). The Merger did not require the
consent of the holders of the COLAS under the terms of the
Indenture. The Company has succeeded to A/J Hawaii's reporting
obligations under the Securities Exchange Act of 1934, as
amended. Unless otherwise indicated, references to the Company
prior to March 3, 1998 shall mean A/J Hawaii and A/J Hawaii's
subsidiaries.
The real estate development and agricultural operations of
the Company comprise its two primary industry segments,
"Property" and "Agriculture", respectively. The Company
segregates total revenues, operating income (loss), total
assets, capital expenditures and depreciation and amortization
by each industry segment. The Company owns no patents,
trademarks, licenses or franchises which are material to its
business.
All references to "Notes" are to Notes to the Consolidated
Financial Statements contained in this report.
PROPERTY.
The Company's Property segment is responsible for land
planning; obtaining land use, zoning and other governmental
approvals; development activities; selling or financing
developed and undeveloped land parcels; and the management and
operation of the Company's golf course facilities. The Land
Management, Real Estate Development and Golf Divisions make up
the Property segment. In general, the Company maintains and
manages its land holdings until: (i) market conditions are
favorable for their sale, or (ii) a feasible development plan
can be formed and approved. Once the Company has obtained the
necessary development approvals ("entitlements"), the Company
may elect to either sell the land with its entitlements or
develop all or a portion of the land. In the past, the Company
has typically done "horizontal" development work, including
site work (e.g., grading, excavation) and installation of
infrastructure (i.e., roadways and utilities). Once the
horizontal development is complete, the Company often sells the
"improved" development parcels to homebuilders, shopping center
developers and others who will complete the "vertical"
development of the site consistent with the Company's original
development plans and the entitlements.
The Company has developed three 18-hole golf courses on
certain of its lands, which are currently owned by the Company.
The Company's Golf Division manages these golf courses.
Sales of Agricultural Properties. The Company has listed
for sale a relatively large portion of its unentitled
agricultural and conservation land holdings. Approximately 25%
of the Company's land is being marketed to generate cash to
finance the Company's operations, meet debt service
requirements and raise cash should the holders exercise their
right to sell back to the Company their Class B COLAS on June
1, 1999. During 1997, 1996 and 1995 the Company generated $7.4
million , $13.4 million and $17.0 million, respectively,
primarily from the sale of unentitled agricultural and
conservation land parcels.
The Company has entered into contracts to sell bulk
parcels of land for approximately $20 million. The closings
are anticipated to take place during 1998. This amount is less
that the $30 million of bulk parcels sales under contract
reported in the September 30, 1997 Form 10-Q due to the
decision by the purchaser for a large parcel on Maui not to
proceed with the land acquisition. These land sale contracts
usually contain a number of contingencies, including a due
diligence investigation period after which the purchaser
decides whether to complete the transaction. As a result,
there can be no assurances that any of these land sales will be
consummated.
Development. Company management actively monitors
development opportunities for its land holdings. As
development opportunities arise, management typically prepares
feasibility analyses to assess the profit potential of the
development. As part of the feasibility analyses management
considers factors such as the location and physical
characteristics of the property, demographic patterns and
perceived market demand, estimated project costs, as well as
regulatory and environmental considerations and availability of
utilities and governmental services.
Once a decision is made to proceed with a development
project, approvals must be obtained from both the State and
County governments in Hawaii. The State of Hawaii Land Use
Commission has classified all lands in Hawaii as either urban,
agricultural or conservation. In general, only lands
classified as urban can be developed. Although in some cases
agricultural lands can be used for lower density residential
developments, agricultural lands are typically not developed..
Conservation lands also cannot be developed, and are typically
located in heavily forested, mountainous regions and along the
oceanfront.
There are multiple layers of approvals required from the
County governments in Hawaii. Initially a project must be
included in the "General" or "Community" plan for the
applicable county. Next, the developer must apply for formal
zoning. In general, zoning classifications are more detailed
than either the State urbanization designation or the general
or community plans. Zoning normally addresses the specific use
of each parcel of land and the density of the development. The
impact of the development on the local community is normally
assessed as part of the zoning process. Zoning approvals in
Hawaii are typically accompanied by impact fees and required
improvements to public facilities and infrastructure, such as
roadways, schools, utilities and parks that must be paid for by
the developer. For oceanfront parcels, in addition to general
or community plan and zoning approvals, a special management
area ("SMA") permit must also be obtained from the County
government. The SMA permitting process allows the County an
additional opportunity to review potential environmental,
ecological and other impacts from the development. The SMA
permitting process may also impose additional conditions on the
developer. The ability of the Company to develop its properties
may be materially and adversely affected by State or county
restrictions or conditions that may be imposed in certain
communities having inadequate public infrastructure and by
local opposition to continued growth.
After all of the discretionary approvals described above
have been received, a subdivision approval must be obtained
along with certain other permits such as grading and building
permits. Normally, these approvals are more ministerial in
nature. However, the Company has experienced certain problems
obtaining these permits in the past and, in one instance, has
had to pay an impact fee to obtain a grading permit for one of
its golf courses.
The following table shows the entitlement status of the
Company's land holdings (in acres)as of December 31, 1997.
State Classification County Zoning
-------------------- -----------------
Urban Agri. Cons. Hotel Com./Ind. Res. Agri. Cons.
------- ------- ------- ------ -------- ----- ------ -------
Maui 948 7,102 4,956 106 25 1,070 6,850 4,956
Kauai 729 14,818 12,309 -- 345 306 14,780 12,424
Oahu 200 -- 468 -- 61 -- -- 607
Hawaii 24 1,409 -- -- 4 20 1,409 --
----- ------ ------- ------- ------ ------- ------- -------
Total 1,901 23,329 17,733 106 435 1,396 23,039 17,987
====== ====== ======= ======= ======= ======== ====== ========
Explanations for the abbreviations used above are as follows:
Agri. - Agricultural
Cons. - Conservation
Com./Ind. - Commercial/Industrial
Res. - Residential (single or multi-family)
Cons. - Conservation/Preservation/Open space
SMA permits are needed for approximately 96 acres of
Company lands with state urbanization and county zoning for
development. The Company's development projects are described
in Item 2 below.
The Company's development projects may be affected by
competition from other projects of a similar nature in Hawaii,
as well as from other states or countries offering resort-type
properties.
The Company plans to focus its future development
activities on its Maui land holdings located adjacent to the
Kaanapali Beach Resort. As a result, the primary competition
for the Company's development activities will come from similar
types of master-planned resort developments at the Kapalua and
at Wailea resorts on Maui. To a lesser extent, competition
also comes from other master-planned resort communities located
on the islands of Kauai and Hawaii.
Market Conditions, Regulatory Approvals and Development
Costs. There are a number of current factors that negatively
impact the Company's development and land sale activities
including poor market conditions, the difficulty in obtaining
regulatory approvals and the high development cost of required
infrastructure. As a result, the planned development of many of
the Company's land holdings, and the ability to generate cash
flow from these land holdings, is expected to be long-term in
nature.
The Hawaii economy took a severe downturn beginning in
late 1990 after the Persian Gulf War, a recession in Japan and
a slowdown in California's economy. The real estate market in
Hawaii was negatively impacted by these events and has been
considered to be in a "slump" for the past seven years, as
demonstrated by general decreases in the volume of transactions
and a stagnation or decrease in the perceived value and pricing
for certain types of real estate. The Company believes that a
rebound in Hawaii real estate is dependent on improvements in
the economies of Hawaii and Japan. Recent economic trends in
Japan and much of Southeast Asia have further contributed to
continuing poor market conditions. Improvements in tourism
arrivals and the length of stay (in Hawaii) may also be
critical to turning around Hawaii's real estate market. There
can be no assurance that Hawaii's real estate market will
improve.
The current regulatory approval process for a development
project can take three to five years or more, and involves
substantial expense. There is no assurance that all necessary
approvals and permits will be obtained with respect to the
Company's current and future projects. Generally, entitlements
are extremely difficult to obtain in Hawaii. There is often
significant opposition to proposed developments from numerous
groups including native Hawaiians, environmental organizations,
various community and civic groups, condominium associations
and politicians advocating no-growth policies, among others.
The Company is subject to a number of statutes imposing
registration, filing and disclosure requirements with respect
to its residential real property developments including, among
others, the Federal Interstate Land Sales Full Disclosure Act,
the Federal Consumer Credit Protection Act, environmental
statutes and the State Uniform Land Sales Practices Act.
AGRICULTURE.
The Company's Agriculture segment is responsible for
activities related to the cultivation, processing and sale of
sugar cane and coffee. Agriculture's revenues are primarily
derived from the sale of raw sugar. Approximately 7,800 acres
of the Company's land holdings and approximately 16,000 acres
of land leased by the Company are currently under cultivation.
The remaining approximately 75,200 acres of owned and leased
land are predominantly conservation land and land appurtenant
to the cultivation of sugar cane and do not generate
significant revenues.
The Company owns and operates two sugar plantations on
Kauai and one on Maui. The principal competitive factors in the
Company's sugar business are sugar yields and processing
capabilities and costs.
Sales & Pricing. The Company's sugar plantations sell all
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). Pursuant to a long term supply
contract, HSTC is required to sell, and the California and
Hawaiian Sugar Company ("C&H") is required to purchase, all raw
sugar produced by the HSTC's cooperative members. HSTC remits
to its cooperative members the remaining proceeds from its
sugar sales after storage, delivery and administrative costs.
The Company recognizes revenues and related cost of sales upon
delivery of its raw sugar by HSTC to C&H.
Since the HSTC operates as the storage and transportation
"arm" of the Hawaii sugar growers, C&H is the ultimate and sole
customer for the Company's raw sugar. The loss of C&H could
have a material adverse impact on the Company's agricultural
operations. The domestic raw sugar price is a price that
includes delivery to New York, New York ("FOB New York, New
York"). As C&H's refinery is located in Crockett, California,
there are considerable delivery cost savings that accrue to the
HS&TC and the Company. These delivery costs savings result in
a "locational" discount given to C&H in the long-term supply
contract. If C&H ceased purchasing the Hawaii growers' raw
sugar, the HSTC would be free to sell raw sugar to various
sugar refineries located on the east coast and along the Gulf
of Mexico. It is unlikely that the HSTC would provide the
"locational" discount to these prospective customers if C&H
ceased being the sole customer. Accordingly, the higher costs
of storage and delivery would probably be offset by a higher
selling price. However, in the absence of C&H there is no
guarantee that the HSTC or the Company would be able to locate
buyers for raw sugar at acceptable prices.
The price of raw sugar that the Company receives is based
upon the price of domestic sugar as currently controlled by
U.S. Government price support legislation less the "locational"
discount described above and less the HSTC's storage, delivery
and administrative costs. On April 4, 1996, President Clinton
signed the Federal Agriculture Improvement and Reform Act of
1996 ("the Act"). The Act, which expires in 2002, sets a
target price range for raw sugar. The target raw sugar price,
established by the government, is supported primarily by
setting quotas to restrict the importation of raw sugar to the
U.S. There can be no assurance that the government price
supports will not be reduced or eliminated entirely in the
future. Such a reduction or an elimination of price supports
could have a material adverse affect on the Company's sugar
operations, and possibly could cause the Company to consider
shutting down its remaining sugar cane operations.
The Company enters into commodities futures contracts and
options in sugar as deemed appropriate to reduce the risk of
future price fluctuations in raw sugar. These futures
contracts and options are accounted for as hedges and,
accordingly, gains and losses are deferred and recognized in
cost of sales.
Sugar Operations in Hawaii. During 1995, the Company
restructured its sugar operations to improve efficiencies and
reduce costs by consolidating operations at its two Kauai
plantations and changing to a seasonal mode of operation at all
of its plantations (consistent with many other sugar operations
in the mainland U.S.). The 1995 restructuring resulted in a
staff reduction of approximately 260 positions, which was
approximately a 30% decrease from 1994, and a reduction in
annual employment costs of approximately $4.2 million, which
was approximately a 14% decrease from 1994. The Company
incurred and recognized costs of approximately $1.8 million in
1995 related to the restructuring.
In 1995, the Company ceased sugar operations at its wholly-
owned subsidiary, Oahu Sugar Company, Limited ("Oahu Sugar").
The Company's ongoing obligations relating to Oahu Sugar's
closure, which primarily relate to the obligations to generally
restore leased land to its original condition are not expected
to have a material adverse effect on the financial condition
and results of operations of the Company.
The sugar industry in Hawaii has experienced significant
difficulties for a number of years. Growers in Hawaii have long
struggled with the high costs of production, which have led to
the closure of many plantations, including Oahu Sugar Company.
Labor costs are high and transportation costs of raw sugar to
the C&H refinery are significant. During 1996 and 1997, the
Company has conducted a series of meetings and discussions
aimed at developing a plan to return its sugar operations on
Kauai to profitability. Participants in this process included
rank-and-file workers, supervisors, union officials and Company
management. The plan developed by this group was named "Imua,"
which is the Hawaiian word meaning "to move forward." Imua
included significant changes in how the Company's plantations
would be operated and how employees would be compensated. Imua
was the subject of formal negotiations with the union in late
1997 and early 1998. These negotiations were recently completed
and the union leadership supported the Imua plan. However, in
February 1998, Imua failed by a large margin in a ratification
vote by the union membership at the Kauai plantations. As a
result, some of the workers have been placed on furlough and
the Company is evaluating its alternative courses of action. As
an initial step, the Company has sent to the union a new
proposal, which is different from Imua but still contains
substantial wage and other concessions which are critical to
the survival of the Company's sugar plantations. The contract
covering employees at the Kauai plantations expired on January
31, 1998 and was extended on a day-to-day basis. The extension
agreement which covers 88% of the Kauai plantation workers, has
a provision which allows either party to cancel the extension
within three days notice. A contract covering the employees at
Pioneer Mill also expired on January 31, 1998, was extended to
March 31, 1998 and has been further extended on a day-to-day
basis. The covered employees represent 70% of Pioneer Mill's
employees. The absence of a new labor agreements with
significant modifications from the existing agreements would
cause the Company to consider the possible shutdown of its
sugar operations. There can be no assurance that necessary
modifications to existing labor agreements will be obtained.
Diversified Agriculture. The Company has considered
various alternative uses for its agricultural lands, such as
alternative crops, to address the uncertainty of the long-term
viability of the sugar industry. Although the Company still
continues to explore alternative crops, including cultivating
approximately 500 acres of coffee trees on Maui, alternative
crops remain an insignificant portion of the Company's
Agriculture segment.
Power Production. The Company historically has been
involved in the production of energy through the burning of
bagasse, the fibrous by-product from sugar cane processing, in
the sugar plantations' boilers. The Company generates
electrical energy and steam for the sugar plantations' own
consumption and for sale to the local public utilities,
pursuant to power purchase agreements entered into with the
local utilities. Gross revenues from the Company's operations
at its Lihue power plant totaled approximately $5.1 million,
$5.2 million and $4.6 million for 1997, 1996 and 1995,
respectively. Revenues are significantly smaller from the
Kekaha and Pioneer Mill power plants since the contracts with
the local utilities do not require the Company to commit to a
certain level of power production and, therefore, the Company
receives a significantly lower rate for its power sales.
Water Resources. The Company must maintain access to
significant water sources to conduct its agricultural
operations and, in many cases, must demonstrate a sufficient
supply of water in order to obtain land development permits.
To distribute most of this water, the Company owns extensive
civil engineering improvements including tunnels, ditches,
reservoirs and pumps. The Company believes that it has
sufficient water sources for its present and planned uses;
however, there can be no assurance that the Company will be
able to retain or obtain sufficient water rights to support all
of its current or future agricultural and development plans.
Currently, on the islands of Kauai and Maui, the Company
controls over 100 million gallons of water per day, most of
which is on land which the Company owns and the remainder on
land which is leased by the Company. Most of the Company's
water is currently used for irrigating sugar cane.
If the Company's sugar production decreases, the Company's
water needs will also decrease. Subject to significant
regulatory restrictions, excess water may be used for other
purposes and the Company is exploring alternative uses for such
water. Waiahole Irrigation Company, Limited ("WIC") is a
wholly-owned subsidiary of the Company and owns and operates a
water collection and transmission system commonly referred to
as the "Waiahole Ditch" (a series of tunnels and ditches
constructed in the early 1900's). The Waiahole Ditch has the
capacity to transport approximately 27 million gallons of water
per day from the windward part of Oahu to the central Oahu
plain leeward of the Ko'olau mountain range. This water was
used by the Company's Oahu Sugar operations from the early
1900s until 1995, when the plantation was closed.
After the closure of Oahu Sugar, WIC negotiated a
collective agreement with several farms and golf courses (the
"Users") to deliver irrigation water to them for a fee.
However, to consummate these agreements, water permits (the
"Water Permits") were applied for from the State of Hawaii
Water Commission (the "Water Commission"). The Water
Commission issued a final decision in December 1997 relating to
the Water Permits which allowed only about one-half of the
capacity of the Waiahole Ditch to be transported through the
system. The continued operation of the Waiahole Ditch and
receipt of the delivery fees (from the agreement with the
Users) were predicated upon an allocation (from the Water
Commission) at or near the capacity of the Waiahole Ditch.
When the lower allocation was received, WIC terminated the
agreement with the Users. Currently, water is delivered to the
Users on a month-to-month basis at the fees originally included
in the agreement.
After several months of discussions with prospective
purchasers, the Company reached an agreement with the State of
Hawaii pursuant to which the State will purchase the stock or
substantially all of the assets of WIC for $8.5 million (which
includes 450 acres of conservation land). The purchase is
subject to state legislative approval of which there can be no
assurance that such approval will be obtained. If the sale is
not consummated, WIC will then decide whether to re-negotiate
the fee for delivery of water through the system. Finally, if
improvements cannot be made in either the pricing or volume of
Waiahole Ditch water, WIC will consider reducing or terminating
the operations of the Waiahole Ditch. Such a closure or
limitation of the Waiahole Ditch would not have a material
adverse effect on the Company's financial condition or on its
results of operations.
AMFAC/JMB FINANCE, INC. Amfac/JMB Finance, Inc. ("AJF")
is a wholly-owned subsidiary of Northbrook Corporation
("Northbrook"). The sole business of AJF is to repurchase the
Class B COLAS on June 1, 1999 pursuant to the terms of a
repurchase agreement (the "Repurchase Agreement"). In
connection with such repurchase obligations of AJF, Northbrook
has agreed to contribute sufficient capital or make loans to
AJF pursuant to an agreement (a "Keep-Well Agreement"), to
enable AJF to meet its repurchase obligations of the COLAS
under the Repurchase Agreement. For a description of such
obligations pursuant to the Repurchase Agreement and the Keep-
Well Agreement referred to above, see Notes 2 and 3 of Notes to
Balance Sheets of AJF. For a description of the COLAS, see
Note 5.
Item 2. Properties
LAND HOLDINGS.
The major real properties owned by the Company are
described below by island.
(a) Oahu
On the island of Oahu, the Company owns approximately 700
acres of land of which approximately 200 acres is classified as
urban and approximately 470 acres is classified as conservation
open land. The Company is developing the 64-acre former Oahu
Sugar mill site located in Waipahu, Oahu, Hawaii, which is
approximately 10 miles west of downtown Honolulu near Pearl
Harbor. The Company also owns The Waikele Golf Course located
at the Company's nearly completed Waikele project. Waikele is
located directly north of the Oahu Sugar mill site development
in Central Oahu.
The Waikele project is a master-planned community
developed by the Company which consists of residential units, a
retail commercial center and the Waikele golf course. Although
the Company completed sales of the residential and commercial
portions of the Waikele project in 1994, it still owns and
manages the 136 acre golf course. The Company expended
approximately $.7 million, $1.3 million and $0.5 million in
1997, 1996 and 1995, respectively, for infrastructure costs at
Waikele. Such costs included construction of roadways,
utilities and related infrastructure improvements. On a
cumulative project-to-date basis, the Company has expended
approximately $157.7 million on project costs (which includes
approximately $39 million of land costs for the portion of the
Waikele project that has been sold) and completed sales at
Waikele of approximately $231.0 million. Except for certain
contingent participation rights, the Company has already
received all of its proceeds from the sales of the residential
and commercial parcels at Waikele. The Waikele golf course
generated $5.8 million in revenue in 1997.
In 1997, the Company began developing the 64 acres of fee
simple land it owns at the Oahu Sugar mill-site. The Company
has received county zoning for a light industrial subdivision
on a 37-acre portion of the property, which excludes property
containing the actual sugar mill and adjacent buildings. In
connection with the development of this property, the Company
has received state land use urbanization for the entire 64-acre
site.
Marketing of the first twenty-three lots within the light
industrial subdivision commenced in August 1997. Although the
Company received significant interest from potential buyers,
the Company has not received any acceptable firm offers on
these lots. The infrastructure for these first twenty-three
lots is expected to cost approximately $5.9 million, of which
$3.9 million has been spent through December 31, 1997. The
Company does not anticipate completing additional
infrastructure except in connection with a sufficient number of
purchase and sale agreements. If the light industrial lots
cannot be sold individually, the Company will pursue a bulk
land sale for this development. The Company has begun the
process of seeking the necessary government approvals for the
re-development of the remainder of the mill-site parcels,
including planned commercial, public and quasi-public uses.
The Company's approximately 470 acres of conservation
lands on Oahu located on the northeastern side of Oahu in the
Ko'olau mountains relate to the Waiahole Ditch. As such,
these lands will be sold as part of the purchase and sale
agreement with the State of Hawaii, assuming such transaction
ultimately is consummated.
(b) Maui
The Company owns approximately 13,000 acres of land on the
island of Maui, most of which are classified as agricultural
land (approximately 7,000 acres) and conservation land
(approximately 5,000 acres) for both State and county purposes.
All of the Company's land holdings are located on West Maui
near the Kaanapali Beach Resort area.
In general, the development of the Company's land on Maui
is expected to be long-term in nature. 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, demand for these land uses has been weak.
The Company's homesite inventory on Maui, which is targeted to
the second home buyer, has experienced slower sales activity
over the past five years than originally expected. The
Company's competitors on Maui have also experienced slow sales
activity. The Company is continuing to evaluate its plans 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 has determined that the focus of its
development efforts on Maui should be on its
Kaanapali/Honokowai land holdings (approximately 3,200 acres).
Although additional governmental approvals are required for
most of these lands, approximately 900 acres of the Company's
Kaanapali/Honokowai land holdings already have some form of
entitlements. Due to the strong market appeal of the Kaanapali
Beach Resort, the Company believes its development efforts are
best concentrated in this area where it has certain development
approvals already secured.
The Company's Kahoma, Launiupoko and Olowalu properties
(in total approximately 9,000 acres) are considered to be
better suited in the near term for agricultural uses and
possibly for lower density, more rural developments. To
generate cash, the Company has decided to sell certain portions
of these land holdings as unentitled parcels, and may consider
selling additional portions of these lands based upon market
conditions and the cash needs of the Company.
The Company owns and operates the Royal Kaanapali Golf
Courses ("RKGC") which are two 18-hole golf courses located at
the Kaanapali Beach Resort on West Maui. The courses occupy
approximately 320 acres of land. The two Kaanapali Golf Courses
generated approximately $9.8 million of revenue in 1997.
The Company's primary development projects located in the
Kaanapali/Honokowai area are as follows:
Project Acres Uses Status
------- ------- ------ ---------
Kaanapali Golf Estates 204 Single family residential Actively selling/
Pending infra-
structure
Kai Ala Place 6 Single family residential Fully sold
North Beach 96 Hotel/condo/time-share Need SMA
North Beach Mauka 318 Golf/retail/time-share/condo Need
urbanization &
zoning
Puukolii Village 249 Single and multi-family Pending major
residential/retail/commer- infrastructure
cial/community/civic
Each of these projects is described in greater detail below.
Kaanapali Golf Estates. The Company is marketing Kaanapali
Golf Estates, a residential community that is part of the
Kaanapali Beach Resort on West Maui. During 1997, the Company
generated approximately $4.8 million in land sales from
Kaanapali Golf Estates. Kaanapali Golf Estates is approved for
340 homesites, of which approximately 90 lots have been sold by
the Company. The residential property is divided into numerous
parcels. In May 1997, the Company obtained final subdivision
approval for a 32 lot subdivision of one such parcel (referred
to as "Parcel 17B"). Fifteen of these lots closed in August
and September 1997 for sales prices of approximately $150,000
per lot. The Company commenced on-site construction of the
subdivision improvements for Parcel 17B in August 1997.
Construction of the improvements was completed in March 1998,
at a cost of approximately $1.7 million. As of the date of this
report, all of the remaining homesites in parcel 17B have sold,
except four, at an average price of $170,000. In addition, the
six remaining lots in an adjacent parcel (referred to as
"Parcel 14") closed in 1997 for sales prices totaling $2.0
million.
Kai Ala Place. In 1995, the Company subdivided an
oceanfront parcel commonly known as Kai Ala Place into six
single family homesites of approximately one acre each. Two of
the lots were sold in 1995 generating sales proceeds of
approximately $4.1 million. The remaining four lots were sold
in 1997 as a package to a local developer at a discounted price
of $5.2 million.
North Beach. The Company is part of a joint venture 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 governmental approvals,
subject to receiving a Project SMA permit, for the development
of up to 3,200 hotel or condominium units on four separate
sites. The 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 ("MPC"). Although the joint venture has state
urbanization, county zoning and a Master SMA permit, a Project
SMA permit is required for each of the four sites as
development plans are completed.
The Company filed for a Project SMA in March 1997 to
develop a time-share resort on 14 acres of the North Beach
property (the "Site"). A land option/purchase agreement was
entered into by the Company with Tobishima in October 1996,
giving the Company an option to purchase Tobishima's 50%
interest in the Site for $7 million. The Company does not
expect to consummate this 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 nonrefundable deposits of $0.4 million,
which may be applied to the purchase price, to keep the option
available through March 31, 1998. Additional nonrefundable
deposits may be made on a quarterly basis after December 31,
1997 to extend the option through August 31, 2000. The Company
must close on the land purchase upon receipt of an acceptable
Project SMA permit.
A public hearing was held on the Project SMA permit on
July 10, 1997. Although there was a significant amount of
testimony both for and against the project, the MPC did not
make a final decision at the public hearing. Instead,
"intervention status" was granted to several parties who
presented their specific objections to the SMA permit in a
quasi-judicial process (known as a "contested case" hearing).
The hearing officer for the contested case issued his proposed
Decision and Order (the "D&O") in December 1997. Although the
proposed D&O recommended granting the Project SMA permit, there
were a significant number of new conditions with respect to the
development. The Company plans to object to many of these
conditions and to request that the MPC modify or delete these
conditions. Final MPC action on the Company's Project SMA
permit application is not anticipated until later in 1998.
Although there can be no assurance that the Project SMA permit
will be received (and that if such permit is approved, that its
terms and conditions will be acceptable to the Company),
Company management is hopeful that the Company will receive the
necessary approvals to proceed with the time-share development
of the Site.
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.
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 resort in Nevada. The partnership is in the process
of arranging project financing for the development of the time
share resort. In addition, the land option/purchase agreement
with Tobishima includes short-term seller financing, which the
partnership may decide to utilize.
In September 1997, the Company and Tobishima entered into
an agreement with Maui County providing the County with the
option to purchase 33 acres at North Beach (separate from the
Site) for $15 million. Maui County cannot exercise its option
to purchase unless and until the Company receives the Project
SMA permit in a form acceptable to the Company for development
of the Site. The acquisition of the 33 acres by Maui County
would reduce the overall density of the North Beach development
by approximately one-third. The Mayor of Maui County and the
County administration have agreed that, assuming the reduction
in density were to be effected, the infrastructure upgrades
proposed by the Company for the time-share resort would be
sufficient for the development of the Site.
North Beach Mauka. The Company has plans for an
additional 18-hole golf course, condominiums, commercial/retail
and residential uses. The Company also plans to evaluate
adding a significant time-share component to the development
plans for this 318-acre parcel. Currently, the Company has
Community Plan approvals and R-3 zoning (residential, minimum
10,000 square foot lots) for North Beach Mauka. State
urbanization is required, along with final zoning and
subdivision.
Puukolii Village. The Company has regulatory approval to
develop a project known as "Puukolii Village", on approximately
249 acres which is also located near Kaanapali Beach Resort. A
significant portion of this project will be affordable housing.
Development of most of Puukolii Village cannot commence until
after completion of the planned Lahaina/Kaanapali bypass
highway. The proposed development of Puukolii Village is
anticipated to satisfy the Company's affordable housing
requirements in connection with its Kaanapali/Honokowai land
use entitlements. For the portion of Puukolii Village that is
not dependent upon completion of the Lahaina/Kaanapali bypass
highway, the Company has unsuccessfully attempted to sell
several residential parcels to home builders and multi-family
residential developers. Until such time that an acceptable
agreement can be reached with a housing developer, limited
funds will be expended on infrastructure (including an access
road) for Puukolii Village.
In connection with certain of the Company's land use
approvals on Maui, the Company has agreed to provide employee
and affordable housing and to participate in the funding of the
design and construction of the planned Lahaina/Kaanapali
bypass highway. The Company has entered into an agreement with
the State of Hawaii Department of Transportation covering the
Company's participation in the design and construction of the
bypass highway. In conjunction with state urbanization of the
Company's Kaanapali Golf Estates project, the Company committed
to spend up to $3.5 million, (of which approximately $.8
million has been spent as of December 31, 1997) toward the
design of the highway. Due to lengthy delays by the State in
the planned start date for the bypass highway, the Company
recently funded approximately $.7 million for the engineering
and design of the widening (from 2 to 4 lanes) of the existing
highway through the Kaanapali Beach Resort. The Company
believes this $.7 million can be credited against the $3.5
million commitment discussed above. The Company's remaining
commitment of another $6.7 million for the construction of the
bypass highway is subject to the Company obtaining future
entitlements on Maui and the actual construction of the bypass
highway. 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.
(c) Kauai
The Company owns approximately 28,000 acres of land on the
island of Kauai, the vast majority of which is classified and
zoned by the State of Hawaii and the County of Kauai,
respectively, as agricultural and conservation lands. There
are three large contiguous parcels which comprise the bulk of
these Kauai land holdings: Kealia, Kapaa and Lihue/Hanamaulu.
Each of the parcels is located along the eastern shore of
Kauai. Large portions of the agricultural lands are currently
used for sugar cane cultivation, and portions of the
conservation lands are utilized by the Company's sugar
plantations to collect, store and transmit irrigation water
from mountainous areas to the sugar cane fields.
The Company has state urbanization and county zoning for a
552 acre master-planned community known as the Lihue/Hanamaulu
Town Expansion, which includes approximately 1,800 affordable
and market rate residential units, commercial and industrial
facilities and a number of community and other public uses. The
Company does not plan to pursue subdivision and building
permits for this project until the real estate market on Kauai
improves. Once construction commences the project is expected
to span 20 years.
The Company has decided to sell large portions of its
Kauai land holdings which includes all of Kealia and Kapaa.
The entire 6,700 Kealia parcel is currently under contract for
sale. The contract includes numerous contingencies and,
therefore, it is difficult to predict whether the buyer will
ultimately close the transaction. Approximately 2,000 acres in
Kapaa are currently listed for sale. The Company has certain
additional lands also listed for sale; however, many of these
are smaller remnant parcels. The Company may consider selling
additional portions of these lands based upon market conditions
and the cash needs of the Company.
(d) Hawaii
The Company owns approximately 1,400 acres of land on the
island of Hawaii of which almost all are classified by the
State of Hawaii and zoned by the County of Hawaii as
agricultural lands. These lands are located on the eastern
(windward) side of the island, primarily in the Keaau and Pahoa
districts, south of the town of Hilo.
LONG-TERM LEASES.
Several of the Company's plantation subsidiaries lease
agricultural lands from unrelated third parties. Such leases
vary in length from month-to-month to eight years and cover
parcels of land ranging in acreage from one acre to over 20,000
acres. Certain of such leases provide the Company, as lessee,
with licenses for water use. Almost all of the leased land of
the Company is used in connection with the cultivation and
processing of sugar cane. Most of the leases provide that the
Company pay fixed annual minimum rents (ranging from $10 to
$131 per usable acre), plus additional rents based upon a
percentage of gross receipts above a specified level. During
the past three years, the Company has paid only minor amounts
of percentage rent on the leases listed below.
The following summary lists the material land leases of
the Company's subsidiaries, as lessees, and certain material
terms thereof:
Annual
Expiration Sugar Cane Gross Minimum
Plantation Date Acreage Acreage Rent
---------- --------- --------- ----------- -------
Kekaha month to month 7,926 21,474 $251,500
Lihue 10/30/99 4,054 6,200 $ 56,370
Lihue 12/15/02 0 3,106 $ 20,630
Lihue 12/31/99 1,961 4,890 $ 19,610
Pioneer month to month 889 1,639 $ 51,000
Pioneer 12/31/05 770 2,509 $100,917
OTHER PROPERTY.
In addition to the real property discussed above, the
Company also owns three sugar mills each with its own power
plant. The mills and power plants are located in Lahaina,
Maui; Kekaha, Kauai and in Lihue, Kauai. Each of these
facilities is involved in the production of raw sugar from
sugar cane and the production of electrical and steam power.
Item 3. Legal Proceedings
The Company is not involved in any material pending legal
proceedings, other than ordinary routine litigation incidental
to its business. The Company and/or certain of its affiliates
have been named as defendants in several pending lawsuits.
While it is impossible to predict the outcome of the pending
(or threatened) litigation and for which potential liability is
not covered by insurance, the Company is of the opinion that
the ultimate liability from such litigation will not materially
adversely affect the Company's results of operations or its
financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security
holders during 1996 and 1997.
PART II
Item 5. Market for the Company's and AJF's Common Equity and
Related Security Holder Matters
The Company is a wholly-owned subsidiary of Northbrook
and, hence, there is no public market for the Company's common
stock. AJF is a wholly-owned subsidiary of Northbrook
Corporation and there is no public market for AJF's common
stock.
<TABLE>
Item 6. Selected Financial Data
AMFAC/JMB HAWAII, L.L.C.
For the years ended December 31, 1997, 1996, 1995, 1994 and 1993
(Dollars in Thousands)
<CAPTION>
1997 1996 1995 1994 1993
------ -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total revenues (c) $ 86,383 97,406 101,607 157,963 140,462
======== ======= ======== ======== =======
Net income (loss) (d) $ (25,572) (34,166) 12,708 (13,033) (509)
======== ======= ======== ======== =======
Net income (loss) per share (b)
Total assets $ 464,245 483,605 521,598 614,547 644,711
======== ======= ======= ======== ========
Amounts due affiliates -
financing $ 125,290 103,579 76,911 15,097 15,097
======== ======== ======= ======== ========
Certificate of Land Appreciation
Notes $ 220,692 220,692 220,692 384,737 384,737
======== ======= ======= ======== ========
<FN>
(a) The above selected financial data should be read in
conjunction with the financial statements and the related notes
appearing elsewhere in this annual report on Form 10-K.
(b) The Company is a wholly-owned subsidiary of Northbrook
Corporation ; therefore, net loss per share is not presented.
(c) Total revenues includes interest income of $386 in 1997,
$463 in 1996, $1,288 in 1995, $1,977 in 1994, $1,070 in 1993.
(d) In 1995, the Company recognized an extraordinary gain
from the extinguishment of debt of $32,544 (after reduction of
income taxes of $20,807), which is reflected in 1995 net
income.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
All references to "Notes" herein are to Notes to
Consolidated Financial Statements contained in this report.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL.
A significant portion of the Company's cash needs result
from the nature of the real estate development business, which
requires a substantial investment in preparing development
plans, seeking land urbanization and other governmental
approvals and completing infrastructure improvements prior to
sale. The Company's sugar operations incur a large cash
deficit during the first half of the year ranging from $10 to
$20 million. This seasonal cash need is due to the sugar
plantation's operating costs being incurred fairly ratably
during the year, while revenues are received typically between
April and December concurrent with raw sugar deliveries to C&H.
In addition to seasonal cash needs, in many years cash flow
from sugar operations has been negative requiring a net cash
investment to fund the operating deficits and any capital
costs. Cash needs also include principal maturities and the
obligation to repurchase Class B COLAS on June 1, 1999.
The Company believes that additional borrowings from
Northbrook Corporation ("Northbrook") will be necessary to meet
its short-term and long-term liquidity needs. Northbrook has
made such borrowings available to the Company in the past and
intends to make such borrowings available, at least in the
short-term. However, there is no assurance that Northbrook will
have sufficient funds, or that Northbrook will make such funds
available to the Company, to meet the Company's long-term
liquidity needs.
In recent years, the Company has funded its cash
requirements primarily through the use of long-term financings,
borrowings from Northbrook, and revenues generated from the
development and sale of its properties. The Company intends to
use its cash reserves, land sales proceeds and proceeds from
new financings or joint venture arrangements to meet its short-
term liquidity requirements. However, there can be no assurance
that new financings 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 Company does not believe that it will be
able to generate significant amounts of cash in the short-term
from the development of these lands. As a result, the Company
is marketing for sale certain unentitled agricultural and
conservation parcels. Significant short-term cash requirements
relate to the funding of agricultural deficits, interest
expenses, costs to process the SMA permit for North Beach,
development costs on Oahu and Maui and overhead expenses. At
December 31, 1997, the Company had cash and cash equivalents of
approximately $9.1 million.
The Company has placed a relatively large portion of its
land holdings (approximately 25%) on the market to generate
cash to finance the Company's operations, to meet debt service
requirements and to raise cash should the holders exercise
their right to sell back to the Company their Class B COLAS on
June 1, 1999. The Company has approximately 740 acres of land
listed for sale on Maui, approximately 8,700 acres on Kauai and
700 acres on the Big Island of Hawaii. These lands consist
primarily of unentitled agricultural and conservation parcels.
Significant interest has been expressed in many of these
parcels and several are under contract for sale for an
aggregate sales price of $20 million. However, these contracts
have due diligence investigation periods which have not expired
and which allow the purchasers to terminate the agreements. It
is difficult to predict how successful the Company will be in
selling these lands at acceptable prices. Although the lands
currently for sale represent a large portion of the Company's
overall land portfolio, these properties were not planned for
development during the next 15 to 20 years and, therefore, any
possible sales are not expected to result in a material impact
on the Company's real estate development operations for at
least the next ten years.
During 1997, the Company generated approximately $21.2
million of land sales, of which $4.8 million came from land
related to Kaanapali Golf Estates on Maui, $5.2 million from
the four remaining oceanfront residential lots at Kai Ala
Place; $7.4 million was from the sale of unentitled
agricultural and conservation land parcels on Kauai and the Big
Island of Hawaii. During 1996, the Company generated
approximately $13.4 million from sales of unentitled
agricultural and conservation parcels and an additional $5.5
million from lot sales at the Kaanapali Golf Estates. During
1995, the Company generated approximately $30.8 million in land
sales approximately $17 million related to bulk sales of
unentitled agricultural and conservation parcels.
The Company continues to implement certain cost savings
measures and to defer certain development costs and capital
expenditures for longer-term projects. The Company's Property
segment expended approximately $10.1 million and $7.9 million in
project costs during 1997 and 1996 and anticipates expending
approximately $13.8 million in project costs during 1998. As
of December 31, 1997, contractual commitments related to
project costs totaled approximately $.9 million.
The Company has made significant changes in the operations
of its sugar plantations in an effort to reduce operating costs
and increase productivity. However, additional improvements
are needed. The Company is currently negotiating with the
union, which represents its plantation workers, to obtain
substantial wage and other concessions. The absence of a new
labor agreement with significant modifications from the
existing agreement would cause the Company to consider the
possible shutdown of its sugar operations.
Company management cannot accurately predict the actual
cost of a potential shutdown as there are a significant number of
factors that would impact the actual cost including the exact
timing of the shutdown, potential environmental issues
(currently unknown), the market and pricing for the sale of the
plantation's field and mill equipment and employee termination
costs which are subject to negotiation with the union. Other
significant unknowns relate to the costs associated with
terminating the power sale agreements with the local utility
companies.
Changes in the price of raw sugar could also impact the
level of agricultural deficits, and as a result the annual cash
needs of the Company. Although government legislation is
currently in place (through 2002) that sets a target price
range for raw sugar, it is possible that such legislation could
be amended or repealed resulting in a reduction in the price of
raw sugar. Such a reduction could also cause the Company to
evaluate the shutdown of its sugar plantations.
1997 Compared to 1996
In 1997, cash increased by $.4 million from 1996. Net
cash used in operating activities of $10.3 million and in
investing activities of $9.0 million was primarily provided by
$16.6 million of long-term financing proceeds from Northbrook
and $5.0 million related to refinancing proceeds from the
Waikele Golf Club, Inc. ("WGCI") loan (see Note 6), partially
offset by principal loan repayments on long-term debt of
approximately $2.0 million.
During 1997, net cash flow used in operating activities
was $10.3 million, as compared to net cash used in operating
activities of $27.4 million during 1996. The $17.1 million
decrease in cash flow used in operating activities was due primarily
to: (i) a $15.7 million increase in working capital resulting from
a refinancing as long-term debt of operating advances from
Northbrook and (ii) a decrease in 1997 of the
Company's net loss by $1.4 million (after adjusting for items
not requiring or providing cash).
During 1997, net cash flow used in investing activities
was $9.0 million as compared to $9.8 million in 1996. The $.8
million decrease in net cash used in investing activities was
principally due to property additions of $2.8 million in 1997
as compared to $4.3 million of property additions in 1996. The
property additions consisted primarily of machinery and
equipment improvements at the Company's sugar plantations.
During 1997, net cash flow provided by financing
activities decreased to $19.7 million from $34.3 million in
1996. The $14.6 million decrease is due primarily to (i) a
decrease in net advances by affiliates totaling $16.6 million
in 1997 as compared to $26.7 million in 1996 (see Note 4) and
(ii) $5.0 million of additional long-term financing primarily
related to the loan secured by the golf course owned by WGCI in
1997 as compared to an additional $10 million in borrowings in
1996 related to the loan facility which is secured by a
mortgage on property under development on the former mill site
of Oahu Sugar (see Note 6). These amounts were also partially
offset by $2.0 million and $2.4 million of principal loan
repayment on long-term debt in 1997 and 1996, respectively.
1996 Compared to 1995
During 1996, net cash flow used in operating activities
was $27.4 million, compared to net cash provided by operating
activities of $2.7 million in 1995. The $30.1 million decrease
in cash flow related to operating activities from 1995 to 1996
was due to: (i) an increase in 1996 of the net loss (after
adjusting for items not requiring or providing cash) of $8.4
million; (ii) the refinancing as long-term debt in 1996 of
operating advances made by Northbrook in prior years by
affiliates totaling $14.0 million, as compared to $12.8 million
of operating advances received by the Company from affiliates
in 1995; and (iii) other changes in cash flow netting to a
decrease of $4.7 million, which related primarily to working
capital components, all of which were partially offset by (iv)
a decrease in inventories in 1996 by $9.7 million. The decrease
in inventories in 1996 includes $3.6 million related to sales
of land classified as inventory, $6.0 million related to
agricultural inventory and the remaining $.1 million related to
other miscellaneous inventories.
In 1996, net cash flow provided from investing activities
was a negative $9.8 million compared to a positive $24.4
million in 1995. This decrease in cash provided of $34.2
million is principally due to the liquidation of $32.0 million
of short-term investments in 1995 to pay for the tender offer
for the Class B COLAs and $4.5 million of costs relating to the
closure of Oahu Sugar and the sale of the mill and field
equipment in 1995 as compared to $.1 million from PP&E sales,
dispositions and retirement in 1996.
In 1996, net cash was provided by financing activities
totaling $34.3 million, due to the $26.7 of long-term financing
proceeds from Northbrook and the $7.6 million net increase in
borrowings from others. In 1995, net cash was used in
financings totaling $47.0 million. This was primarily the
result of the $105.5 million reduction in outstanding COLA
debt. This reduction resulted from the redemption of Class A
COLAs and the completion of the tender offer from the Class B
COLAs. Approximately $52 million of the Class A redemption
cost was financed by a long-term borrowing from Northbrook (see
Note 4). During 1995, the Company borrowed an additional $9.8
million from Northbrook to pay COLA interest and other
operating needs.
COLA Related Obligations. AJF and the Company are parties
to the Repurchase Agreement pursuant to which AJF is obligated
to repurchase the Class B COLAS tendered by the holders thereof
on June 1, 1999. Northbrook agreed pursuant to the Keep-Well
Agreement to contribute sufficient capital or make loans to
AJF to enable AJF to meet the COLA repurchase obligations, if
any, described above. Notwithstanding AJF's repurchase
obligations, the Company may elect to redeem any COLAS
requested to be repurchased at the specified price.
Northbrook Corporation, the ultimate parent of the
Company, is currently implementing plans intended to generate
sufficient funds to meet the maximum potential repurchase
obligation. Although there can be no assurances that any or
all of these plans will be successfully completed, the Company
is optimistic that the funds necessary to meet the repurchase
obligations will be raised if these plans are completed.
Failure to meet the repurchase obligations could lead to a
claim against AJF and, in turn, Northbrook.
The COLAS were issued in units consisting of one Class A
COLA and one Class B COLA. The repurchase of the Class B COLAS
on June 1, 1999 may be required of AJF by the holders of such
COLAS at a price equal to 125% of the original principal amount
of such COLAS ($500) minus all payments of principal and
interest allocated to such COLAS. As of December 31, 1997, the
Company had approximately 156,000 Class A COLAS units and
approximately 286,000 Class B COLAS units outstanding, with a
principal balance of approximately $78 million and $143
million, respectively. The Company estimates that assuming
only 4% per annum interest payments ("Mandatory Base Interest")
is paid that the redemption price for the Class B COLAS at June
1, 1999 would be approximately $410 per unit. Therefore, the
maximum potential repurchase obligation would be $117.3
million. At December 31, 1997, the cumulative interest paid
per Class A COLA unit and Class B COLA unit was approximately
$185 and $185, respectively.
On January 30, 1998, Amfac Finance Limited Partnership
("Amfac Finance"), an Illinois limited partnership and an
affiliate of the Company extended a tender offer to purchase
(the "Tender Offer") up to $65.4 million principal amount of
separately Certificated Class B COLAs ("Separate Class B
COLAs") for cash at a unit price of $375 to be paid by Amfac
Finance on each Separate Class B COLA on or about March 24,
1998. The maximum cash to be paid under the Tender Offer is
$49.0 million (130,842 Separate Class B COLAs at a unit price
of $375 each). Approximately 62,800 Separate Class B COLAs were
submitted to Amfac Finance for repurchase pursuant to the
Tender Offer requiring an aggregate payment by Amfac Finance of
approximately $23.5 million on March 31, 1998. The Tender Offer
will not reduce the outstanding indebtedness of the Company.
The Separate Class B COLAS to be purchased by Amfac Finance
pursuant to the Tender Offer will remain outstanding pursuant
to the terms of the Indenture. Except as provided in the last
sentence of this paragraph, Amfac Finance will be entitled to
the same rights and benefits of any other holder of Class B
COLAS, including having the right to have AJF repurchase on
June 1, 1999, the separate Class B COLAS that it owns. Amfac
Finance has not yet determined whether it will require AJF to
repurchase its separate Class B COLAS. Because Amfac Finance
is an affiliate of the Company, Amfac Finance will not be able
to participate in determining whether the holders of the
required principal amount of debt under the Indenture have
concurred in any direction, waiver or consent under the terms
of the Indenture.
Pursuant to the terms of the Indenture relating to the
COLAS, the Company is required to maintain a Value Maintenance
Ratio (defined in the Indenture) of 1.05 to 1.00. Such ratio is
equal to the relationship of the Company's Net Asset Value to
the sum of: (i) the outstanding principal amount of the COLAS,
(ii) any unpaid Base Interest, and (iii) the outstanding
principal balance of any Indebtedness incurred to redeem COLAS
(the "COLA Obligation"). Net Asset value represents the excess
of the Fair Market Value (as defined in the Indenture) of the
gross assets of the Company over the liabilities of the Company
other than the COLA obligations and certain other liabilities.
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.
The Company has received independent appraisals indicating
that the appraised value of substantially all of its gross
assets as of December 31, 1996, was approximately $653 million.
Based upon the appraisals, the Company was able to meet the
Value Maintenance Ratio as of December 31, 1996. As of
December 31, 1997, the Fair Market Value of the gross assets of
the Company is determined by Company 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 pursuant to the Indenture 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. Although the Company
believes the value of certain of its assets as of December 31,
1997, may be lower than their value one year earlier, the
Company believes that the values were sufficient to be in
compliance with the Value Maintenance Ratio. There can be no
assurance that the Company will be able to sell its real estate
assets for their aggregate appraised value. Because of the size
and diversity of the real estate holdings of the Company and
the uncertainty of the Hawaii real estate market, it is likely
that it would take a considerable period of time for the
Company to sell its assets. In recent years, the Company has
sold some of its real estate for less than their appraised
value to meet cash needs. In addition, the aggregate value of
the Company's assets could be negatively affected by the recent
financial difficulties in Southeast Asia and Japan.
The Company uses the effective interest method and as such
interest on the COLAS is accrued at the Mandatory Base Interest
rate (4% per annum). The Company has not generated a
sufficient level of Net Cash Flow to pay Contingent Base
Interest (interest in excess of 4%) on the COLAS (see Note 5)
from 1990 through 1997. Contingent Base Interest through 2008
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, excluding federal and state
income taxes and after the establishment by the Company of
reserves. At December 31, 2008, Contingent Base Interest may
also be payable to the extent of Maturity Market Value.
Maturity Market Value generally means 90% of the excess of the
Fair Market Value of the Company's assets at maturity over its
liabilities (including Qualified Allowance (described in the
next paragraph), but only to the extent earned and payable from
Net Cash Flow generated through maturity) at maturity.
Approximately $99.8 million of the $107.4 million cumulative
deficiency of Contingent Base Interest related to the period
from August 31, 1989 (Final Issuance Date) through December 31,
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 years ended
December 31, 1997, 1996 and 1995 (dollars are in millions):
1997 1996 1995
----- ----- -----
Mandatory Base Interest paid $ 8.8 8.8 12.1
Contingent Base Interest paid -- -- --
Cumulative deficiency of Contingent
Base Interest at end of year $ 107.4 94.2 80.9
Net Cash Flow was $0 for 1997, 1996 and 1995.
With respect to any calendar year, JMB or its affiliates
may receive a Qualified Allowance in an amount equal to 1.5%
per annum of the Fair Market Value of the gross assets of the
Company (other than cash and cash equivalents and certain other
types of assets as provided for in the Indenture) for providing
certain advisory services to the Company. The aforementioned
advisory services, which are provided pursuant to a 30-year
Services Agreement entered into between the Company and JMB
Realty Corporation ("JMB"), an affiliate of the Company, 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 Mandatory and Contingent Base Interest for such year in an
amount equal to 8% . Any portion of the Qualified Allowance not
paid for any year shall cumulate without interest and JMB or
its affiliates shall be paid such deferred amount in succeeding
years, only after the payment of all Contingent Base Interest
for such succeeding year and then, only to the extent that Net
Cash Flow exceeds levels specified in the Indenture.
A Qualified Allowance for 1989 of approximately $6.2
million was paid on February 28, 1990. Approximately $64.5
million of Qualified Allowance related to the period from
January 1, 1990 through December 31, 1997 has not been earned
and paid, and is payable only to the extent that future Net
Cash Flow is sufficient. 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 the
Qualified Allowance, the Company has not accrued for any
Qualified Allowance payments in the accompanying consolidated
financial statements. JMB has informed the Company that no
incremental costs or expenses have been incurred relating to
the provision of these advisory services. The Company believes
that using an incremental cost methodology is reasonable. The
following table is a summary of the Qualified Allowance for the
years ended December 31, 1997, 1996 and 1995 (dollars are in
millions):
1997 1996 1995
----- ----- -----
Qualified Allowance calculated $ 10.1 9.2 9.9
Qualified Allowance paid -- -- --
Cumulative deficiency of Qualified
Allowance at end of year $ 64.5 54.4 45.2
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 1.5%
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 (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.
RESULTS OF OPERATIONS
GENERAL:
The Company and its subsidiaries report its taxes as a
part of the consolidated tax return for Northbrook. The
Company and its subsidiaries have entered into a tax
indemnification agreement with Northbrook, which indemnifies
the Company and its subsidiaries for responsibility for all
past, present and future federal and state income tax
liabilities (other than income taxes which are directly
attributable to cancellation of indebtedness income caused by
the repurchase or redemption of securities as provided for in
or contemplated by the Repurchase Agreement).
Current and deferred taxes have been allocated to the
Company as if the Company were a separate taxpayer in
accordance with the provisions of SFAS No. 109 - Accounting for
Income Taxes. However, to the extent the tax indemnification
agreement does not require the Company to actually pay income
taxes, current taxes payable or receivable (excluding income taxes
which are directly attributable to cancellation of indebtedness
income caused by the repurchase or redemption of securities as
provided for in or contemplated by the Repurchase Agreement)
have been reflected as deemed contributions to additional paid-
in capital or distributions from related earnings (deficit)
in the accompanying consolidated financial statements.
As such, the deferred income tax liabilities
reflected on the Company's consolidated balance sheet are not
expected to result in cash payments by the Company.
The Company is assessing the modifications or replacement
of its software that may be necessary for its computer systems
to function properly with respect to dates in the year 2000 and
thereafter. The Company does not believe that the cost of
either modifying existing software or converting to new
software will have a material adverse impact on the financial
condition of the Company and the Company's management is taking
action to insure that that the year 2000 issue will not pose
significant operational problems for its computer systems. The
Company is initiating discussions with parties with whom it
does business to ensure that those parties have appropriate
plans to remediate year 2000 issues where their systems impact
the Company's operations. There is no assurance that the
systems of those parties will function properly and would not
have an adverse effect on the Company's operations.
Long-term debt decreased and the current portion of long-
term debt increased as of December 31, 1997 as compared to
December 31, 1996, due primarily to the reclassification of the
$10 million Mill Town Center loan from long-term to short-term
and principal payments made on long-term debt. The decrease in
long-term debt is partially offset by approximately $5.0
million of loan proceeds received related to the refinancing of
the WGCI loan in 1997.
Interest expense increased for the year ended December 31,
1997 as compared to the year ended December 31, 1996 due to
additional affiliated financing.
The following table sets forth operating results by
industry segment (see Note 13), for the years indicated (in
000's):
1997 1996 1995
------ ------ -------
Agriculture Segment:
Revenues $ 41,949 51,805 47,656
Cost of sales (40,862) (54,640) (53,430)
--------- --------- ---------
1,087 ( 2,835) ( 5,774)
Operating expenses (4,460) ( 4,690) ( 5,108)
------- -------- --------
Operating income (loss) (3,373) ( 7,525) (10,882)
------- -------- --------
Property Segment:
Revenues 44,048 45,138 52,663
Cost of sales (37,457) (34,627) (30,853)
-------- -------- --------
6,591 10,511 21,810
Operating expenses:
Reduction to carrying value of
investments in real estate (2,279) (18,315) --
Other (9,713) ( 9,779) (10,688)
-------- --------- --------
Operating income (loss):
Reduction to carrying value of
investments in real estate (2,279) (18,315) --
Other (3,122) 732 11,122
Unallocated operating expenses
(primarily overhead) (3,225) ( 3,045) ( 2,593)
------- -------- -------
Total operating loss $ (11,999) (28,153) ( 2,353)
The variances in the above-noted results of operations for
the Agriculture segment and the Property segment are discussed
in the following two sections, respectively.
AGRICULTURE SEGMENT:
The Company's Agriculture segment is responsible for
activities related to the cultivation, processing and sale of
sugar cane and coffee. Agriculture's revenues are primarily
derived from the Company's sale of its raw sugar. 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 raw sugar as deemed appropriate to reduce the risk of future
price fluctuations. 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.
1997 Compared to 1996
During 1997, agriculture revenues were $41.9 million as
compared to $51.8 million in 1996. The $9.9 million decrease
was due primarily to (i) a decrease of $6.6 million in revenues
resulting from a 14% decrease in the tons of sugar sold in 1997
as compared to 1996. During 1997, approximately 109,000 tons
of sugar were sold as compared to 127,000 tons of sugar sold in
1996. Approximately 12,000 tons of the raw sugar produced in
late 1995 were delivered to C&H and recognized in revenues in
1996; (ii) a $1.6 million decrease in revenues resulting from a
4% decrease in the price of sugar to $359 per ton in 1997 as
compared to $374 per ton in 1996; and (iii) a $1.4 million
decrease in other agricultural revenues.
During 1997, cost of sales were $40.8 million as compared
to $54.6 million in 1996. The $13.8 million decrease was due
primarily to: (i) a $7.2 million decrease in cost of sales
resulting from a 14% reduction in the tons of sugar sold in
1997 as compared to 1996 (as discussed above); and (ii) a $6.6
million decrease in cost of sales primarily attributable to
cost reduction efforts for certain expenditures related to
sugar production.
Agriculture operating revenues were $4.5 million and $4.7
million for 1997 and 1996, respectively, and consisted
primarily of depreciation expense.
The decrease in the operating loss of $7.5 million in 1996
as compared to $3.4 million in 1997 was due primarily to the
reductions in revenues and cost of sales (as discussed above).
1996 Compared to 1995
During 1996, agriculture revenues were $51.8 million as
compared to $47.7 million in 1995. The $4.1 million increase
was due primarily to: (i) a $7.9 million increase in revenues
resulting form a 19% increase in the tons of sugar sold in 1996
as compared to 1995. During 1996, approximately 127,000 tons
of sugar were sold as compared to 106,000 tons of sugar sold in
1995 (as discussed above); (ii) offset in part by a $1.6
million decrease in revenues resulting from a 3% decrease in
the price of sugar to $374 per ton in 1996 as compared to $386
per ton in 1995; and (iii) a $2 million increase in other
agriculture revenues due in part to the closure of Oahu Sugar
in 1995.
During 1996, cost of sales were $54.6 million as compared
to $53.4 million in 1995. The $1.2 million increase was due
primarily to: (i) a $10.3 million increase in cost of sales
resulting from a 19% increase in the tons of sugar sold in
1996, as compared to 1995 (as discussed above) offset in part
by (ii) a decrease in costs primarily due to approximately $8.1
million of costs associated with the closure of operations at
Oahu Sugar.
Agriculture operating expenses were $4.7 million and $5.1
million for 1996 and 1995, respectively, and consisted
primarily of depreciation expense.
The decrease in the operating loss of $10.8 million in
1995 as compared to $7.5 million in 1996 was due primarily to
the reductions in revenues and cost of sales (as discussed
above).
PROPERTY SEGMENT:
The Company's Property segment is responsible for 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.
1997 Compared to 1996
Revenues decreased slightly to $44.0 million in 1997 from
$45.1 million in 1996. Property revenues include revenues from
land sales of approximately $21.2 million and $18.9 million for
1997 and 1996, respectively, and revenues from the operations
of the three golf courses owned by the Company of approximately
$15.6 million for 1997 and $15.2 million for 1996. Land sales
included revenues in 1997 from $5.2 million of land sales
related to the remaining four oceanfront lots at Kai Ala Place
in Kaanapali, approximately $4.8 million of land sales related
to Kaanapali Golf Estates and $11.2 million primarily from the
sale of unentitled agricultural and conservation land parcels
on Kauai and Hawaii. Approximately $5.5 million of 1996 land
sales related to the Kaanapali Golf Estates and the remaining
$13.4 million was primarily from the sale of unentitled
agricultural and conservation land parcels on Maui, Kauai and
Hawaii.
During 1997, property cost of sales were $37.5 million as
compared to $34.6 million in 1996. The $2.9 million increase
was due primarily to an increase in costs associated with land
parcels sold (as discussed above).
Property operating expenses were $9.7 million and $9.8
million for 1997 and 1996, respectively, and consisted
primarily of employment costs and other general and
administrative expenses.
In accordance with the provisions of the Indenture,
appraisals were performed for certain assets of the Company as
of December 31, 1996 and 1994, which reflected a decline in
value for certain properties. Certain of the assets appraised
as of December 31, 1996 are properties that are either being
actively marketed by the Company or properties for which the
Company has a plan to sell the assets in the near future. Five
of the land parcels expected to be disposed of by the Company
within the next two years, having a cost basis of approximately
$40.3 million were estimated by the Company to have a total
fair value, less costs to sell, of approximately $22.0 million
as of December 31, 1996. Accordingly, the Company recorded an
$18.3 million loss in the fourth quarter of 1996 related to
these properties, and the Company reduced its carrying value of
one of its land parcels in the fourth quarter of 1997 by $2.3
million to properly reflect the estimated market value of this
land parcel.
Property sales and cost of sales increased for the year
ended December 31, 1997 as compared to the year ended December
31, 1996 (as discussed above), however, operating income
deteriorated primarily due to lower margins realized on
property sold during 1997.
1996 Compared to 1995
Revenues decreased to $45.1 million in 1996 from $52.6
million in 1995. Property revenues include land sales
approximately $18.9 million and $30.8 million for 1996 and
1995, respectively, and revenues from the operations of the
Company's three golf courses which accounted for $15.2 million
in 1996 and $15.4 million in 1995, respectively. The decrease
was due primarily to the decrease of $11.9 million in non-
strategic land sales. During 1995, $4.1 million of land sales
related to Kai Ala Place, $1.1 million related to the Kaanapali
Golf Estates and the remaining $25.6 million was primarily from
the sale of agricultural and conservation land parcels on Maui
and Hawaii.
During 1996, property costs of sales were $34.6 million as
compared to $30.8 million in 1995. The $3.8 million increase
was due primarily to an increase in costs associated with land
parcels sold (as discussed above) despite a decrease in revenue
from land sales which is primarily attributable to the weak
Hawaii economy.
Property operating expenses were $9.8 million and $10.6
million for 1996 and 1995, respectively, and consisted of
employment costs and other general and administrative expenses.
Property operating loss increased for the year ended
December, 31, 1996 as compared to the year ended December 31,
1995 primarily due to a reduction in carrying value of investments
in real estate and to lower margins realized for the parcels sold in 1996.
INFLATION
Due to the lack of significant fluctuations in the level
of inflation in recent years, inflation generally has not had a
material effect on real estate development.
In the future, high rates of inflation may adversely
affect real estate development generally because of their
impact on interest rates. High interest rates not only increase
the cost of borrowed funds to the Company, but can also have a
significant effect on the affordability of permanent mortgage
financing to prospective purchasers. However, high rates of
inflation may permit the Company to increase the prices that it
charges in connection with real property sales, subject to
general economic conditions affecting the real estate industry
and local market factors.
Item 8. Financial Statements and Supplementary Data
AMFAC/JMB HAWAII, L.L.C.
INDEX
Report of Independent Auditors
Consolidated Balance Sheets, December 31, 1997 and 1996
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Stockholder's Equity (Deficit) for
the years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Schedule
Valuation and Qualifying Accounts II
Schedules not filed:
All schedules other than the one indicated in the index
have been omitted as the required information is inapplicable
or the information is presented in the financial statements or
related notes.
AMFAC/JMB FINANCE, INC.
INDEX
Report of Independent Auditors
Balance Sheets, December 31, 1997 and 1996
Notes to the Balance Sheets
Schedules not filed:
All schedules have been omitted as the required
information is inapplicable or the information is presented in
the financial statements or related notes.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
AMFAC/JMB HAWAII, L.L.C.
We have audited the accompanying consolidated balance
sheets of Amfac/JMB Hawaii, L.L.C. as of December 31, 1997 and
1996, and the related consolidated statements of operations,
stockholder's equity (deficit), and cash flows for each of the
three years in the period ended December 31, 1997. Our audits
also included the financial statement schedule listed in the
Index at Item 8. These financial statements and schedule are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of Amfac/JMB Hawaii, L.L.C. at
December 31, 1997 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in
the period ended December 31, 1997, in conformity with
generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Honolulu, Hawaii
March 27 , 1998
<TABLE>
AMFAC/JMB HAWAII, L.L.C.
Consolidated Balance Sheets
December 31, 1997 and 1996
(Dollars in Thousands)
A s s e t s
<CAPTION>
1997 1996
------ -------
<S> <C> <C>
Current assets:
Cash and cash equivalents $9,115 8,736
Receivables - net 6,743 4,741
Inventories 61,469 56,808
Prepaid expenses 2,648 3,439
------- --------
Total current assets 79,975 73,724
------- --------
Investments 46,496 46,187
------- --------
Property, plant and equipment:
Land and land improvements 262,233 289,294
Machinery and equipment 63,497 60,981
Construction in progress 1,035 1,365
------- --------
326,765 351,640
Less accumulated depreciation and amortization 38,726 33,856
------- --------
288,039 317,784
Deferred expenses 11,872 12,975
Other assets 37,863 32,935
------- --------
$ 464,245 483,605
======== ========
L i a b i l i t i e s
Current liabilities:
Accounts payable $ 6,289 5,719
Accrued expenses 9,213 9,274
Current portion of long-term debt 11,243 1,471
Current portion of deferred income taxes 4,325 5,422
Amounts due to affiliates 10,719 8,905
------- --------
Total current liabilities 41,789 30,791
------- --------
Amounts due to affiliates 125,290 103,579
Accumulated postretirement benefit obligation 54,375 57,662
AMFAC/JMB HAWAII, L.L.C.
Consolidated Balance Sheets - Continued
December 31, 1997 and 1996
(Dollars in Thousands)
1997 1996
-------- -------
Long-term debt 94,312 100,606
Other long-term liabilities 34,525 35,501
Deferred income taxes 84,151 88,345
Certificate of Land Appreciation Notes 220,692 220,692
-------- --------
Total liabilities 655,134 637,176
-------- --------
Commitments and contingencies (notes 3, 4, 5, 6, 7, 8, 9, and 11)
S t o c k h o l d e r ' s E q u i t y ( D e f i c i t )
Common stock, no par value
Authorized, issued and outstanding 1,000 shares 1 1
Additional paid-in capital 14,384 14,384
Retained earnings (deficit) (205,274) (167,956)
-------- --------
Total stockholder's equity (deficit) (190,889) (153,571)
-------- --------
464,245 483,605
========= =========
<FN>
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<TABLE>
AMFAC/JMB HAWAII, L.L.C.
Consolidated Statements of Operations
Years ended December 31, 1997, 1996 and 1995
(Dollars in Thousands)
<CAPTION>
1997 1996 1995
------ ----- ------
<S> <C> <C> <C>
Revenues:
Agriculture $ 41,949 51,805 47,656
Property 44,048 45,138 52,663
------- ------- -------
85,997 96,943 100,319
------- ------- -------
Cost of sales:
Agriculture 40,862 54,640 53,430
Property 37,457 34,627 30,853
------- ------- -------
78,319 89,267 84,283
Operating expenses:
Selling, general and administrative 11,188 11,160 11,666
Depreciation and amortization 6,210 6,354 6,723
Reduction to carrying value of investments in
real estate 2,279 18,315 --
------- ------- -------
Total costs and expenses 97,996 125,096 102,672
------- ------- -------
Operating loss (11,999) (28,153) (2,353)
------- ------- -------
Non-operating income (expenses):
Amortization of deferred costs (1,347) (1,222) (1,557)
Interest income 386 463 1,288
Interest expense (29,649) (26,297) (25,233) --
------- ------- --------
(30,610) (27,056) (25,502)
------- ------- --------
Loss before taxes and extraordinary item (42,609) (55,209) (27,855)
Income tax benefit (17,037) (21,043) (8,019)
------- -------- -------
Loss before extraordinary item (25,572) (34,166) (19,836)
Extraordinary gain from extinquishment of debt
(less applicable income taxes of $20,807) -- -- 32,544
------- -------- ------
Net income (loss) (25,572) (34,166) 12,708
======== ======= ========
<FN>
The accompanying notes are an integral part of the consolidated
financial statements
</TABLE>
<TABLE>
AMFAC/JMB HAWAII, L.L.C.
Consolidated Statements of Stockholder's Equity (Deficit)
Years ended December 31, 1997, 1996 and 1995
(Dollars in Thousands)
<CAPTION>
Total
Stock-
Retained holder's
Common Paid-In Earnings Equity
Stock Capital (Deficit) (Deficit)
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $ 1 14,384 (138,392) (124,007)
Net income -- -- 12,708 12,708
Capital distribution -
current income taxes (note 12) -- -- (2,889) (2,889)
------- ------- -------- -------
Balance, December 31, 1995 $ 1 14,384 (128,573) (114,188)
Net loss -- -- (34,166) (34,166)
Capital distribution -
current income taxes (note 12) -- -- (5,217) (5,217)
------- ------- ------- --------
Balance, December 31, 1996 $ 1 14,384 (167,956) (153,571)
Net loss -- -- (25,572) (25,572)
Capital distribution -
current income taxes (note 12) -- -- (11,746) (11,746)
------- -------- -------- ---------
Balance, December 31, 1997 $ 1 14,384 (205,274) (190,889)
======== ======== ======== =========
<FN>
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<TABLE>
AMFAC/JMB HAWAII, L.L.C.
Consolidated Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
(Dollars in Thousands)
<CAPTION>
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (25,572) (34,166) 12,708
Items not requiring (providing) cash:
Depreciation and amortization 6,210 6,354 6,723
Amortization of deferred costs 1,347 1,222 1,557
Equity in earnings of investments 111 (14) 69
Income tax expense (benefit) (17,037) (21,043) 12,788
Extraordinary gain from extinguishment of debt -- -- (53,351)
Reduction to carrying value of investments
in real estate 2,279 18,315 --
Deferred interest 1,039 1,441 --
Interest on advances from affiliates 5,083 -- --
Changes in:
Receivables - net (2,002) 3,979 6,223
Inventories 19,201 22,052 12,364
Prepaid expenses 791 (337) 1,277
Accounts payable 570 (2,843) (1,320)
Accrued expenses (61) (3,994) (2,104)
Amounts due to affiliates 1,814 (13,957) 12,751
Other long-term liabilities (4,125) (4,489) (7,006)
------- ------- -------
Net cash provided by (used in)
operating activities (10,352) (27,480) 2,679
------- ------- ------
Cash flows from investing activities:
Property additions (2,766) (4,257) (5,145)
Property sales, disposals and retirements - net 160 63 4,478
Investments in joint ventures and partnerships (420) (1,093) (103)
Short-term investments -- -- 31,998
Other assets (4,928) (4,467) (1,927)
Other long-term liabilities (1,063) (53) (4,945)
------- ------- ------
Net cash provided by (used in)
investing activities (9,017) (9,807) 24,356
------- ------- ------
Cash flows from financing activities:
Deferred expenses (244) 28 29
Payment to redeem and purchase Certificate of
Land Appreciation Notes (COLAS) -- -- (105,452)
Net amounts due to affiliates 16,628 26,668 61,814
Net (repayments) proceeds of long-term debt 3,364 7,582 (2,489)
Other costs related to extinguishment of debt -- -- (894)
------- ------- -------
Net cash provided by (used in)
financing activities 19,748 34,278 (46,992)
------- ------- -------
Net increase (decrease) in cash and cash
equivalents 379 (3,009) (19,957)
Cash and cash equivalents, beginning of year 8,736 11,745 31,702
------- ------- -------
Cash and cash equivalents, end of year $ 9,115 8,736 11,745
======= ======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest
(net of amount capitalized) $ 24,816 31,111 24,347
======= ======= =======
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 23,862 29,219 9,240
======= ======= =======
AMFAC/JMB HAWAII, L.L.C.
Consolidated Statements of Cash Flows - Continued
Years ended December 31, 1997, 1996 and 1995
(Dollars in Thousands)
1997 1996 1995
-------- ------- -------
Disposition of debt:
Gain on extinguishment of debt $ -- -- 53,351
Face value of debt extinguished -- -- (164,045)
Other costs related to debt extinguishment -- -- 894
Write-off of Contingent Base Interest -- -- (5,667)
Write-off of deferred COLA costs -- -- 10,015
-------- ------- --------
Cash paid to redeem and purchase COLAS $ -- -- (105,452)
======== ======= =======
<FN>
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements
(Dollars in Thousands)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF ACCOUNTING
Amfac/JMB Hawaii, L.L.C. (the "Company") is a Hawaii
limited liability company. The Company is wholly-owned by
Northbrook Corporation. The primary business activities of the
Company are land development and sales, golf course management
and agriculture. The Company owns approximately 43,000 acres of
land located on the islands of Oahu, Maui, Kauai and Hawaii in
the State of Hawaii. All of this land is held by the Company's
wholly-owned subsidiaries. In addition to its owned lands, the
Company leases approximately 55,000 acres of land used
primarily in conjunction with its agricultural operations. The
Company's operations are subject to significant government
regulation.
The Company is the successor to Amfac/JMB Hawaii, Inc.
("A/J Hawaii"). On March 3, 1998, A/J Hawaii was merged (the
"Merger") with and into the Company pursuant to an Agreement
and Plan of Merger dated February 27, 1998 (the "Merger
Agreement") by and between A/J Hawaii and the Company (which
was then named Amfac/JMB Mergerco, L.L.C.). The Merger was
consummated to change the Company's form of entity from a
corporation to a limited liability company. The Company was a
nominally capitalized limited liability company which was
formed on December 24, 1997, solely for the purpose of
effecting the Merger. The Company succeeded to all the assets
and liabilities of A/J Hawaii in accordance with the Hawaii
Business Corporation Act and the Hawaii Uniform Limited
Liability Company Act. In addition, A/J Hawaii, the Company,
The First National Bank of Chicago (the "Trustee") and various
guarantors entered into a Second Supplemental Indenture dated
as of March 1, 1998, pursuant to which the Company expressly
assumed all obligations of A/J Hawaii under the Indenture dated
as of March 14, 1989, as amended (the "Indenture") by and among
A/J Hawaii, the Trustee and the guarantors named therein and
the Certificates of Land Appreciation Notes due 2008 Class A
(the "Class A COLAS") and the Certificates of Land Appreciation
Notes Class B (the "Class B COLAS" and, collectively, with the
Class A COLAS the "COLAS"). The Merger did not require the
consent of the holders of the COLAS under the terms of the
Indenture. The Company has succeeded to A/J Hawaii's reporting
obligations under the Securities Exchange Act of 1934, as
amended. Unless otherwise indicated, references to the Company
prior to March 3, 1998 shall mean A/J Hawaii and A/J Hawaii's
subsidiaries.
The Company has two primary business segments. The
agriculture segment ("Agriculture") is responsible for the
Company's activities related to the cultivation and processing
of sugar cane and other agricultural products. The real estate
segment ("Property") is responsible for land development
activities related to the Company's owned land in the State of
Hawaii.
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been
eliminated in consolidation.
STATEMENT OF CASH FLOWS
The Company's policy is to consider all amounts held with
original maturities of three months or less in U.S. government
obligations, certificates of deposit and money market funds
(approximately $5,400 and $4,900 at December 31, 1997 and 1996,
respectively) as cash equivalents which approximates market.
These amounts include $2,067 and $1,552 at December 31, 1997
and 1996, respectively, which were restricted primarily to fund
debt service on long-term debt related to the acquisition of
power generation equipment (see note 6).
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 ("SFAS
No. 107"), "Disclosures about Fair Value of Financial
Instruments", requires entities to disclose the SFAS No. 107
value of certain on-and off-balance sheet financial instruments
for which it is practicable to estimate. Value is defined in
SFAS No. 107 as the amount at which the instrument could be
exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. The Company
believes the carrying amounts of its financial instruments
classified as current assets and liabilities in its balance
sheet approximate SFAS No. 107 value due to the relatively
short maturity of these instruments. The Company believes the
carrying value of its long-term debt (notes 4 and 6)
approximates fair value. SFAS No. 107 states that quoted
market prices are the best evidence of the SFAS No. 107 value
of financial instruments, even for instruments traded only in
thin markets. On March 15, 1995, pursuant to the indenture
that governs the terms of the COLAS (the "Indenture"), the
Company elected to exercise its right to redeem, and therefore
was obligated to purchase, any and all Class A COLAS submitted
pursuant to the Redemption Offer at a price of $.365 per Class
A COLA (see note 5). In conjunction with the Company's
election to repurchase the Class A COLAS submitted for
repurchase, the Company made a tender offer (the "Tender
Offer") to purchase up to approximately $68,000 principal value
of the Class B COLAS at a price of $.220 per Class B COLA from
COLA holders electing to have their Class A COLAS repurchased.
The Redemption Offer and the Tender Offer expired on June 1,
1995. Since such expiration, the secondary market for COLAS
has been extremely thin. Since June 1, 1995, a limited number
of COLA units have been sold in transactions arranged by
brokers for amounts ranging from approximately $.250 to $.348
per Class B COLA and from approximately $.482 to $.565 per
combined Class A and Class B COLA. Based on the range of
transactions since June 1, 1995 and the number of COLAS
outstanding (with a per unit carrying value of $1.0 and a total
carrying value of $220,692 at December 31, 1997 in the
accompanying consolidated financial statements), the implied
SFAS No. 107 value of the COLAS would range from approximately
$108,000 to $133,000. However, due to restrictions on
prepayment and redemption as specified in the COLA Indenture,
as well as the methodology used to determine such value, the
Company does not believe that it would be able to refinance or
repurchase all of its outstanding COLA units as of December 31,
1997 at this value. Reference is made to note 5 for results of
the Redemption and Tender Offer. In January 1998, an affiliate
of the Company extended a Tender Offer to purchase up to
approximately $65,421 principal of Separately Certificated
Class B COLAs (see Note 5).
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
INVENTORY CAPITALIZATION AND RECOGNITION OF REVENUE FROM THE
SALE OF SUGAR
The Company capitalizes all of the expenditures incurred
in bringing crops to their existing condition and location.
Such capitalized expenditures include those costs related to
the planting, cultivation and growing of sugar cane grown on
the agricultural properties of the Company. Inventory reflected
in the accompanying consolidated balance sheets at December 31,
1997 and 1996, which includes $10,800 and $13,800,
respectively, related to agricultural operations, is not in
excess of its estimated net realizable value. Reductions in the
estimated net realizable value of unsold sugar are recognized
when anticipated. In determining the net realizable value of
unsold sugar, the price the Company uses is based upon the
domestic price of sugar. The Company recognizes revenue and
related cost of sales upon delivery of its raw sugar to the
California and Hawaii Sugar Company ("C&H").
The price of raw sugar that the Company receives is based
upon the price of domestic sugar (less delivery and
administrative costs) as currently controlled by U.S.
Government price 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, sets a target price range for raw sugar. The target raw
sugar price established by the government, is supported
primarily by the setting of quotas to restrict the importation
of raw sugar to the U.S. 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.
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. The sugar futures contracts
obligate the Company to make or receive a payment equal to the
net change in value of the contracts at its maturity. The
sugar option contracts permit, but do not require, the Company
to purchase specified numbers of futures contracts at specified
prices until the expiration dates of the contracts. The sugar
futures and options contracts are designated as hedges of the
Company's firm sales commitments, are short-term in nature to
correspond to the commitment period, and are effective in
hedging the Company's exposure to changes in sugar prices
during that cycle.
These contracts are marked to market with unrealized gains
and losses deferred and recognized in earnings when realized as
an adjustment to cost of sales as part of the production cost
(the deferral accounting method). The related amounts due to
or from the exchange are included in inventory. Unrealized
changes in fair value of contracts no longer effective as
hedges are recognized in income from the date the contracts
become ineffective until their expiration.
INVESTMENTS
Investments in certain partnerships and joint ventures, if
any, over which the Company exercises significant influence are
accounted for by the equity method. To the extent the Company
engages in such activities as general partner, the Company is
contingently liable for the obligations of its partnership and
joint venture investments.
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
LAND DEVELOPMENT
Project costs associated with the acquisition, development
and construction of real estate projects are capitalized and
classified as construction in progress. Such capitalized costs
are not in excess of the project's estimated fair value as
reviewed periodically or as considered necessary. In addition,
interest is capitalized to qualifying assets during the period
that such assets are undergoing activities necessary to prepare
them for their intended use. Such capitalized interest is
charged to cost of sales as revenue from the real estate
development is recognized. Interest costs of approximately
$1,272 and $1,327 have been capitalized for the years ended
1997 and 1996, respectively. No material amounts have been
capitalized for the year ended 1995.
Land actively held for sale and any related development
costs transferred from construction in progress are reported as
inventories in the accompanying consolidated balance sheets and
are stated at the lower of cost or fair value less costs to
sell.
LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standard Board
issued Statement of Financial Accounting Standards No. 121
("SFAS No. 121"), Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, which
requires impairment losses to be recorded on long-lived assets
used in operation when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. SFAS No. 121
also addresses the accounting for long-lived assets that are
expected to be disposed of. The Company adopted SFAS No. 121
in 1995, with no effect on the accompanying financial
statements.
In accordance with the provisions of the COLA Indenture,
appraisals were performed for certain assets of the Company as
of December 31, 1996, which reflected a decline in value for
certain properties. Certain of the assets appraised as of
December 31, 1996 are properties that are either being actively
marketed by the Company or properties for which the Company has
a plan to sell the assets in the near future. Five of the land
parcels expected to be disposed of by the Company within the
next two years, having a cost basis of approximately $40,280
were estimated by the Company to have a total fair market
value, less costs to sell, of approximately $21,965 as of
December 31, 1996. Accordingly, the Company recorded a $18,315
loss in the fourth quarter of 1996 related to these properties
and the Company reduced its carrying value of one of its land
parcels in the fourth quarter of 1997 by $2.3 million to
properly reflect the estimated market value of this land
parcel.
EFFECTIVE INTEREST
For financial reporting purposes, the Company uses the
effective interest rate method and accrued interest on the
COLAS at 4% per annum ("Mandatory Base Interest") for the years
ended December 31, 1997, 1996 and 1995.
INTEREST RATE SWAPS AND CAPS
Net interest received (paid) on contracts that qualify as
hedges is recognized over the life of the contract as an
adjustment to interest income (expense) of the hedged financial
instrument.
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost.
Depreciation is based on the straight-line method over the
estimated economic lives of 20-40 years for land improvements
and 3-18 years for machinery and equipment, or the lease term,
whichever is less. Maintenance and repairs are charged to
operations as incurred. Renewals and significant betterments
and improvements are capitalized and depreciated over their
estimated useful lives.
DEFERRED EXPENSES
Deferred expenses consist primarily of financing costs
related to the COLAS. Such costs are being amortized over the
term of the COLAS on a straight-line basis.
RECOGNITION OF PROFIT FROM REAL PROPERTY SALES
For real property sales, profit is recognized in full when
the collectibility of the sales price is reasonably assured and
the earnings process is virtually complete. When the sale does
not meet the requirements for full profit recognition, a
portion of the profit is deferred until such requirements are
met.
INCOME TAXES
The Company and its subsidiaries report their taxes as
part of the consolidated tax return of the Company's parent,
Northbrook. The Company and its subsidiaries have entered into
a tax indemnification agreement with Northbrook that
indemnifies the Company and its subsidiaries for responsibility
for all past, present and future federal and state income tax
liabilities (other than income taxes which are directly
attributable to cancellation of indebtedness income caused by
the repurchase or redemption of securities as provided for in
or contemplated by the Repurchase Agreement).
Current and deferred taxes have been allocated to the
Company as if the Company were a separate taxpayer in
accordance with the provisions of SFAS No. 109-Accounting for
Income Taxes. However, to the extent the tax indemnification
agreement does not require the Company to actually pay income
taxes, current taxes payable or receivable have been reflected
as deemed contributions to additional paid-in capital
or distributions to retained earnings (deficit) in the
accompanying consolidated financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the December 31, 1995 and 1996
financial statements have been reclassified to conform to the
December 31, 1997 presentation.
AMFAC/JMB HAWAII, L.L.C..
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
(2) ASSETS AND LIABILITIES INFORMATION
1997 1996
------- --------
Receivables - net:
Trade accounts and notes (net of allowance) $ 1,529 2,161
Sugar and molasses 4,055 1,663
Other 1,159 917
------- -------
$ 6,743 4,741
======= =======
Accrued expenses:
Payroll and benefits $ 2,537 2,540
Interest 4,454 4,470
Other 2,222 2,264
------- -------
$ 9,213 9,274
======= =======
(3) INVESTMENTS
The Company's investments at December 31, 1997 and 1996
consist of the following:
Carrying Value
---------------
Ownership
Description Percentage 1997 1996
----------- ----------- ------ ------
Sugar Cooperatives 26.0% $ 41 41
North Beach Joint Venture 50.0% 46,455 46,146
------- -------
$46,496 46,187
======= =======
The Company's sugar plantation subsidiaries sell their raw
sugar production to the Hawaiian Sugar and Transportation
Company ("HSTC"), which is an agricultural cooperative owned by
the major Hawaii producers of raw sugar (including the
Company), under a marketing agreement. HSTC sells the raw
sugar production to C&H pursuant to a long-term supply
contract. The terms of the supply contract do not require a
specified level of production by the Hawaii producers; however,
HSTC is obligated to sell and C&H is obligated to purchase any
raw sugar produced. The Company holds a 26 percent equity
interest in HSTC. HSTC returns to its raw sugar suppliers
proceeds based upon the domestic sugar price less delivery and
administrative charges. The Company recognizes revenues and
related cost of sales upon delivery of its raw sugar to C&H.
The North Beach joint venture was formed during 1986 to
plan, manage and develop approximately 96 acres of beachfront
property located at the Kaanapali Beach Resort on West Maui.
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
The following is the condensed, combined financial
statement information (unaudited) of HSTC and the North Beach
joint venture:
1997 1996
---------------------- -------------------
North Beach North Beach
Joint Venture HSTC Joint Venture HSTC
-------------- ----- ------------- -----
Current assets $ 319 21,260 255 13,313
Noncurrent assets 40,100 16 40,100 1,907
Current liabilities (274) (21,167) (202) (13,711)
Noncurrent liabilities -- -- -- (1,400)
------- ------- ------- -------
Equity $ 40,145 109 40,153 109
======= ======== ======== =======
1997 1996 1995
------ ------ ------
Revenue $135,993 203,406 202,954
Cost and expenses 16,332 19,755 20,493
-------- -------- --------
Net income $119,661 183,651 182,461
========= ========= ========
(4) AMOUNTS DUE 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 December 31, 1997), plus one percent.
In addition to the $52,000 borrowed from Northbrook in 1995 to
redeem Class A COLAS pursuant to the Redemption Offer (see Note
5), the Company had also borrowed approximately $18,746 and
$9,814 during 1996 and 1995, respectively, to fund COLA Base
Interest payments and other operational needs. These loans
from Northbrook were payable interest only, matured on June 1,
1998 and carried an interest rate per annum equal to the prime
interest rate plus two percent. Pursuant to the Indenture
relating to the COLAS, the amounts borrowed from Northbrook are
considered "Senior Indebtedness" to the COLAS.
In February 1997 the above noted affiliate loans, along
with certain other amounts due Northbrook, were converted into
a new $104,759 ten year note payable. The new note is payable
interest only, which accrues at the prime interest rate plus
2%. The Company borrowed an additional $16,628 during 1997 to
fund COLA Mandatory Base Interest and operational needs from a
subsidiary of Northbrook under a separate note which is payable
interest only and accrues at the prime rate plus 2%.
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
(5) CERTIFICATE OF LAND APPRECIATION NOTES
The COLAS are unsecured debt obligations of the Company.
Interest on the COLAS is payable semi-annually on February 28
and August 31 of each year. The COLAS mature on December 31,
2008, and bear interest after the Final Issuance Date (August
31, 1989) at a rate of 10% per annum ("Base Interest") of the
outstanding principal balance of the COLAS on a cumulative, non-
compounded basis, of which 6% per annum is contingent
("Contingent Base Interest") and payable only to the extent of
Net Cash Flow (Net Cash Flow for any period is generally an
amount equal to 90% of the Company's net cash revenues,
proceeds and receipts after payment of cash expenditures,
including the Qualified Allowance (as defined) other than
federal and state income taxes and after the establishment by
the Company of reserves) or Maturity Market Value (as defined
below). The Company has not generated a sufficient level of
Net Cash Flow to pay Contingent Base Interest on the COLAS from
1990 through 1997. Approximately $99,787 of the $107,411
cumulative deficiency of Contingent Base Interest related to
the period from August 31, 1989 (Final Issuance Date) through
December 31, 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 years ended December 31, 1997, 1996 and 1995:
1997 1996 1995
----- ----- -----
Mandatory Base Interest paid $ 8,828 8,828 12,109
Contingent Base Interest paid -- -- --
Cumulative deficiency of Contingent
Base Interest at end of year $107,411 94,169 80,927
Net Cash Flow was $0 for 1997, 1996 and 1995.
In each calendar year, principal reductions may be made
from remaining Net Cash Flow, if any, in excess of all current
and unpaid deferred Contingent Base Interest and will be made
at the election of the Company (subject to certain
restrictions). The COLAS will bear additional contingent
interest in any year, after any principal reduction, equal to
55% of remaining Net Cash Flow. Upon maturity, holders of
COLAS will be entitled to receive the remaining outstanding
principal balance of the COLAS plus unpaid Mandatory Base
Interest plus additional interest equal to the unpaid
Contingent Base Interest, to the extent of the Maturity Market
Value (Maturity Market Value generally means 90% of the excess
of the Fair Market Value (as defined) of the Company's assets
at maturity over its liabilities (including Qualified
Allowance, but only to the extent earned and payable from Net
Cash Flow generated through maturity) at maturity, which
liabilities have been incurred in connection with its
operations), plus 55% of the remaining Maturity Market Value.
On March 14, 1989, Amfac/JMB Finance ("AJF"), a wholly-
owned subsidiary of Northbrook, and the Company entered into an
agreement (the "Repurchase Agreement") concerning AJF's
obligations to repurchase, on June 1, 1995 and 1999, the COLAS
upon request of the holders thereof. The COLAS were issued in
two units consisting of one Class A and one Class B COLA. As
specified in the Repurchase Agreement, the repurchase of the
Class A COLAS may have been requested by the holders of such
COLAS on June 1, 1995 at a price equal to the original
principal amount of such COLAS ($.5) minus all payments of
principal and interest allocated to such COLAS. The cumulative
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
interest paid per Class A COLA through June 1, 1995 was $.135.
The repurchase of the Class B COLAS may be requested of AJF by
the holders of such COLAS on June 1, 1999 at a price equal to
125% of the original principal amount of such COLAS ($.5) minus
all payments of principal and interest allocated to such COLAS.
Northbrook Corporation, the ultimate parent of the Company, is
currently implementing plans intended to generate sufficient
funds to meet the maximum potential repurchase obligations.
Although there can be no assurances that any or all of these
plans will be successfully completed, the Company is optimistic
that the funds necessary to meet the repurchase obligations
will be raised if these plans are completed. Failure to meet
the repurchase obligations could lead to a claim against
Finance and, in turn, Northbrook. As of December 31, 1997, the
cumulative interest paid per Class A and Class B COLA was
approximately $.185 and $.185, respectively.
On March 14, 1989, Northbrook entered into a keep-well
agreement with AJF, whereby it agreed to contribute sufficient
capital or make loans to AJF to enable AJF to meet its COLA
repurchase obligations described above. Notwithstanding AJF's
repurchase obligations, the Company may elect to redeem any
COLAS requested to be repurchased at the specified price.
On March 15, 1995, pursuant to the indenture that governs
the terms of the COLAS (the "Indenture"), the Company elected
to offer to redeem (the "Redemption Offer") all Class A COLAS
from the registered holders, thereby eliminating Finance's
obligation to satisfy the Class A COLA repurchase options
requested by such holders as of June 1, 1995. Pursuant to the
Redemption Offer, and in accordance with the terms of the
Indenture, the Company was therefore obligated to purchase any
and all Class A COLAS submitted pursuant to the Redemption
Offer at a price of $.365 per Class A COLA. In conjunction
with the Company's Redemption Offer, the Company made a tender
offer (the "Tender Offer") to purchase up to approximately
$68,000 principal value of the Class B COLAS at a price of
$.220 per Class B COLA from COLA holders electing to have their
Class A COLAS repurchased. Approximately 229,000 Class A COLAS
were submitted for repurchase pursuant to the Redemption Offer
and approximately 99,000 Class B COLAS were submitted for
repurchase pursuant to the Tender Offer, requiring an aggregate
payment by the Company of approximately $105,450 on June 1,
1995. The Company used its available cash to purchase Class B
COLAS pursuant to the Tender Offer and borrowed $52,000 from
Northbrook to purchase Class A COLAS pursuant to the Redemption
Offer. As of December 31, 1997, the Company had approximately
156,000 Class A COLAS units and approximately 286,000 Class B
COLAS units outstanding, with a principal balance of
approximately $78,000 and $143,000, respectively.
As a result of repurchases, the Company retired
approximately $164,045 in face value of COLA debt and
recognized a financial statement extraordinary gain of
approximately $32,544 (net of income taxes of $20,807, the
write-off of deferred financing costs of $10,015, the write-off
of accrued Contingent Base Interest of $5,667 and expenses of
$894). Such gain was treated as cancellation 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).
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
On January 30, 1998, Amfac Finance Limited Partnership
("Amfac Finance"), an Illinois limited partnership and an
affiliate of the Company extended a Tender Offer to Purchase
(the "Tender Offer") up to approximately $65,421 Principal
amount of Separately Certificated Class B COLAS ("Separate
Class B COLAS") for cash at a unit price of $.375 to be paid by
Amfac Finance on each Separate Class B COLA on or about March
24, 1998. The maximum cash to be paid under the Tender Offer
is approximately $49,066 (130,842 Separate Class B COLAS at a
unit price of $.375 for each separate Class B COLA).
Approximately 62,800 Separate Class B COLAs were submitted to
Amfac Finance for repurchase pursuant to the Tender Offer
requiring an aggregate payment by Amfac Finance of
approximately $23,542 on March 31, 1998. The Tender Offer will
not reduce the outstanding indebtedness of the Company. The
Separate Class B COLAS to be purchased by Amfac Finance
pursuant to Tender Offer will remain outstanding pursuant to
the terms of the Indenture that governs the terms of the COLAS
(the "Indenture"). Except as provided in the last sentence of
this paragraph, Amfac Finance will be entitled to the same
rights and benefits of any other holder of Separate Class B
COLAS, including having the ability to have AJF to repurchase
on June 1, 1999, the Separate Class B COLAS that it owns.
Amfac Finance has not yet determined whether it will require
AJF to so repurchase the Separate Class B COLAS which it will
own on such date. Since Amfac Finance is an affiliate of the
Company, Amfac Finance will not be able to participate in
determining whether the holders of the required principal
amount of debt under the Indenture have concurred in any
direction, waiver or consent under the terms of the Indenture.
The terms of the Indenture relating to the COLAS place
certain restrictions on the Company's declaration and payment
of dividends. Such restrictions generally relate to the
source, timing and amounts which may be declared and/or paid.
The COLAS also impose certain restrictions on, among other
things, the creation of additional indebtedness for certain
purposes, the Company's ability to consolidate or merge with or
into other entities, and the Company's transactions with
affiliates.
(6) LONG-TERM DEBT
In June 1991, the Company obtained a five-year $66,000
loan from the Employees' Retirement System of the State of
Hawaii ("ERS"). The nonrecourse loan is secured by a first
mortgage on the Kaanapali Golf Courses, and is considered
"Senior Indebtedness" (as defined in the Indenture relating to
the COLAS). The loan bore interest at a rate per annum equal
to the greater of (i) the base interest rate announced by the
Bank of Hawaii on the first of July for each year or (ii) ten
percent per annum through June 30, 1993 and nine percent per
annum thereafter. The annual interest payments were in excess
of the cash flow generated by the Kaanapali Golf Courses.
In April 1996, the Company reached an agreement to amend
the loan with the ERS, extending the maturity date for five
years. In exchange for the loan extension, the ERS received
the right to participate in the "Net Disposition Proceeds" (as
defined) related to the sale or the refinancing of the golf
courses or at the maturity of the loan. The ERS share of the
Net Disposition Proceeds increases from 30% through June 30,
1997, to 40% for the period from July 1, 1997 to June 30, 1999
and to 50% thereafter. The loan amendment effectively adjusted
the interest rate as of January 1, 1995 to 9.5% until June 30,
1996. After June 30, 1996, the loan bears interest at a rate
per annum equal to 8.73%. The loan amendment requires the
Company to pay interest at the rate of 7% for the period from
January 1, 1995 to June 30, 1996, 7.5% from July 1, 1996 to
June 30, 1997, 7.75% from July 1,
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
1997 to June 30, 1998 and 8.5% thereafter ("Minimum Interest").
The Company made payments in 1997 totaling $4,989, which
represents the Minimum Interest due through October 1, 1996.
Accrued Minimum Interest as of December 31, 1997 was $1,289.
The scheduled minimum payments are paid quarterly on the
principal balance of the $66,000 loan. The difference between
the accrued interest expense and the Minimum Interest payment
accrues interest and is payable on an annual basis from excess
cash flow, if any, generated from the Kaanapali Golf Courses.
The total accrued interest payable from excess cash flow was
approximately $4,189 as of December 31, 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 January 1993, The Lihue Plantation Company, Limited
("Lihue") obtained a ten-year $13,250 loan used to fund the
acquisition of Lihue's power generation equipment. The $13,250
loan, constituting "Senior Indebtedness" under the COLAS'
Indenture, consists of two ten year amortizing term loans of
$10,000 and $3,250, respectively, payable in forty consecutive
installments commencing July 1, 1993 in the principal amount of
$250 and $81, respectively (plus interest). The $10,000 and
$3,250 loans have outstanding balances of $4,765 and $0,
respectively, as of December 31, 1997 and bear interest at a
rate equal to prime rate (8.5% at December 31, 1997) plus three
and one half percent and prime rate plus four and one-half
percent, respectively. Lihue has purchased an interest rate
agreement which protects against fluctuations in interest rates
and effectively caps the prime rate for the first seven years
of the loan agreement at eight percent. The loan is secured by
the Lihue power generation equipment, sugar inventories and
receivables, certain other assets and real property of the
Company and has limited recourse to the Company and certain
other subsidiaries.
In October 1993, Waikele Golf Club, Inc. ("WGCI"), a
wholly-owned subsidiary of the Company that owns and operates
the Waikele Golf Course, obtained a five year $20,000 loan
facility from two lenders. The loan 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
(5.8125% at December 31, 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 has been increased to $25,000, the
maturity date has been extended to February 2007, the interest
rate has been changed to LIBOR plus 2% until the fifth
anniversary and LIBOR plus 2.5% thereafter and principal is to
be repaid based on a 30-year amortization schedule. The loan is
secured by WGCI's assets (the golf course and related
improvements and equipment), is guaranteed by the Company, and
is considered "Senior Indebtedness" (as defined in the
Indenture relating to the COLAS). As of December 31, 1997, the
outstanding balance was $24,790, with scheduled annual
principal maturities of $243 in 1998, $248 in 1999 through 2006
and the balance of $22,563 in 2007.
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
In December 1996, Amfac Property Development Corporation,
a wholly-owned subsidiary of the Company, obtained a $10,000
loan facility from a Hawaii bank. The loan is secured by a
mortgage on property under development at the mill-site of Oahu
Sugar, and is considered "Senior Indebtedness" (as defined in
the Indenture relating to the COLAS). The loan bears interest
at the bank's base rate (8.5% at December 31, 1997) plus .5%
and matures on December 1, 1998.
(7) RENTAL ARRANGEMENTS
As Lessee
The Company rents, as lessee, various land, facilities and
equipment under operating leases. Most land leases provide for
renewal options and minimum rentals plus contingent payments
based on revenues or profits. Included in rent expense are
minimum rentals and contingent payments for operating leases in
the following amounts:
1997 1996 1995
------ ------ ------
Minimum and fixed rents $2,280 2,357 2,789
Contingent payments 1,340 1,181 1,261
Property taxes, insurance and other
charges 1,008 1,241 445
------- ------ ------
$ 4,628 4,779 4,495
======== ======== =======
Future minimum lease payments under noncancelable operating
leases aggregate approximately $12,466 and are due as follows:
1998, $2,130; 1999, $2,000; 2000, $1,892; 2001, $1,631; 2002,
$1,251; 2003 and thereafter $3,562.
8) EMPLOYEE BENEFIT PLANS
The Company participates in benefit plans covering
substantially all its employees, which provide benefits based
primarily on length of service and compensation levels. These
plans are administered by Northbrook in conjunction with other
plans providing benefits to employees of Northbrook and its
affiliates.
Northbrook's policy is to fund pension costs in accordance
with the minimum funding requirements under provisions of the
Employee Retirement Income Security Act ("ERISA"). Under ERISA
guidelines, amounts funded may be more or less than the pension
expense recognized for financial reporting purposes. One of
the Company's defined benefit plans, the Retirement Plan for
the Employees of Amfac, Inc. (the "Plan"), terminated effective
December 31, 1994. The settlement of the plan occurred in May
1995. The Company replaced this plan with the "Core Retirement
Award Program", a defined contribution plan that commenced on
January 1, 1995. In the new plan, an Eligible Employee (as
defined) is credited with an annual contribution equal to 3% of
the employee's qualified compensation. The new plan's cost to
the Company and the benefits provided to the participants are
comparable to the former plan.
Charges for pension and Core Retirement Award costs
allocated to the Company aggregated approximately $545, $628
and $961 for the years ended December 31, 1997, 1996 and 1995,
respectively.
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
In addition to providing pension benefits, the Company
also provides certain healthcare and life insurance benefits to
eligible retired employees of some of its businesses. Where
such benefits are offered, substantially all employees may
become eligible for such benefits if they reach a specified
retirement age while employed by the Company and if they meet a
certain length of service criteria. The postretirement
healthcare plan is contributory and contains cost-sharing
features such as deductibles and copayments. However, these
features, as they apply to bargaining unit retirees, are
subject to collective bargaining provisions of a labor contract
between the Company and the International Longshoremen's &
Warehousemen's Union. The postretirement life insurance plan
is non-contributory. The Company continues to fund benefit
costs for both plans on a pay-as-you-go basis.
For measuring the expected postretirement benefit
obligation, an 11% annual rate of increase in the per capita
claims cost was assumed for 1997 through 2003. This rate was
assumed to decrease to 6% in 2003 and remain at that level
thereafter. The healthcare cost trend rate assumption has a
significant effect on the amount of the obligation and periodic
cost reported. An increase in the assumed healthcare trend
rate by 1% in each year would increase the medical plans'
accumulated postretirement benefit obligation as of December
31, 1997 by 6% and the aggregate of the service and interest
cost components of net periodic postretirement benefit cost for
the year then ended by 7%.
Net periodic postretirement benefit cost (credit) for 1997,
1996 and 1995 includes the following components:
December 31, December 31, December 31,
1997 1996 1995
------------------ ----------------- ----------------
Life Life Life
Medical Insurance Medical Insurance Medical Insurance
Plans Plans Total Plans Plans Total Plans Plan Total
------ -------- ------ ----- ----- ----- ------ ------ -----
Service cost $ 291 12 303 394 23 417 378 15 393
Interest cost 1,585 282 1,867 1,681 289 1,970 1,991 296 2,287
Amortization of
net(gain)loss(3,195) 35 (3,160)(3,396) 30 (3,366)(3,310) 24 (3,286)
---- ---- ----- ------ ----- ----- ----- ----- -----
Net periodic
postretirement
benefit cost
(credit) $(1,319) 329 (990) (1,321) 342 (979) (941) 335 (606)
====== ====== ====== ====== ====== ===== ====== ===== =====
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
The following table sets forth the plans' combined funded
status reconciled
with the amounts included in the Company's consolidated
financial statements
at December 31, 1997 and 1996:
December 31, December 31,
1997 1996
------------------- ------------------
Life Life
Medical Insurance Medical Insurance
Plans Plan Total Plans Plan Total
------- ----- ----- ----- ----- ------
Accumulated postretirement
benefit obligation:
Retirees $15,821 3,753 19,574 17,385 3,827 21,212
Fully eligible active plan
members 173 22 195 195 16 211
Other active plan members 5,446 169 5,615 4,514 164 4,678
------ ------ ------ ------ ------ ------
21,440 3,944 25,384 22,094 4,007 26,101
Unrecognized net gain (loss) 29,437 (446) 28,991 31,912 (351) 31,561
------ ------ ------ ------ ------ -----
Accumulated postretirement
benefit cost 50,877 3,498 54,375 54,006 3,656 57,662
====== ====== ====== ====== ====== ======
The Company currently amortizes unrecognized gains over
the shorter of 10 years or the average remaining service period
of active plan participants. However, due to the significant
amount of unrecognized gain at December 31, 1997, which is
included in the financial statements as a liability, and the
disproportionate relationship between the unrecognized gain and
accumulated postretirement benefit obligation at December 31,
1997, the Company may, in the future, change its amortization
policy to accelerate the recognition of the unrecognized gain.
In considering such change, the Company would need to determine
whether significant changes in the accumulated postretirement
benefit obligation and unrecognized gain may occur in the
future as a result of changes in actuarial assumptions,
experience and other factors. Any future change to accelerate
the amortization of the unrecognized gain would have no effect
on the Company's cash flows, but could have a significant
effect on its statement of operations.
The weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 7.5% as of
December 31, 1997 and 1996.
(9) TRANSACTIONS WITH AFFILIATES
The Company incurred interest expense of approximately
$12,083, $8,935, and $5,360 for the years ended December 31,
1997, 1996 and 1995, respectively, in connection with the
financing obtained from an affiliate (see note 4), of which
$1,666 was unpaid as of December 31, 1997.
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
With respect to any calendar year, JMB Realty Corporation
("JMB"), an affiliate of the Company, 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 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 $64,489 of Qualified Allowance related to the
period from January 1, 1990 through December 31, 1997 has not
been earned and paid and is payable only from future Net Cash
Flow. Accordingly, because the Company does not believe it is
probable at this time that a sufficient level of Net Cash Flow
will be generated in the future to pay Qualified Allowance, the
Company has not accrued for any Qualified Allowance in the
accompanying consolidated financial statements. JMB has
informed the Company that no incremental costs or expenses have
been incurred relating to the provision of these advisory
services. The Company believes that using an incremental cost
methodology is reasonable. The following table is a summary of
the Qualified Allowance for the years ended December 31, 1997,
1996 and 1995.
1997 1996 1995
----- ------ ------
Qualified Allowance calculated $ 10,082 9,240 9,901
Qualified Allowance paid $ -- -- --
Cumulative deficiency of Qualified
Allowance at end of year $ 64,489 54,407 45,167
Net Cash Flow was $0 for 1997, 1996 and 1995.
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.
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
The Company, its subsidiaries and their joint ventures
reimburse Northbrook, JMB and their affiliates for direct
expenses incurred on their behalf, including salaries and
salary-related expenses incurred in connection with the
management of the Company's or its subsidiaries' and the joint
ventures' operations. The total of such costs for the years
ended December 31, 1997, 1996 and 1995 was approximately $658,
$653 and $587, respectively, of which $658 was unpaid as of
December 31, 1997. In addition, as of December 31, 1997, the
current portion of amounts due to affiliates includes $9,106 of
income tax payable related to the Class A COLA Redemption Offer
(see note 5). Also, the Company pays a non-accountable
reimbursement of approximately $30 per month to JMB or its
affiliates in respect of general overhead expense, all of which
was paid as of December 31, 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 years
ended December 31, 1997, 1996 and 1995 was approximately $742,
$774 and $653, respectively, all of which was paid as of
December 31, 1997.
Northbrook and its affiliates allocated certain charges
for services to the Company based upon the estimated level of
services for the years ended December 31, 1997, 1996 and 1995
of approximately $780, $1,460 and $7,868, respectively, of
which $1,005 was unpaid as of December 31, 1997. These
services and costs are intended to reflect the Company's
separate costs of doing business and are principally related to
the inclusion of the Company's employees in the Northbrook
pension plan, payment of severance and termination benefits and
reimbursement for insurance claims paid on behalf of the
Company. All amounts described above, deferred or currently
payable, do not bear interest and are expected to be paid in
future periods.
As discussed in note 4, in February 1997 certain
intercompany payables to Northbrook totaling $7,922 were
converted into a new ten year note payable. The Company
borrowed an additional $16,628 during 1997 to fund COLA
Mandatory Base Interest and operational needs from a subsidiary
of Northbrook under a separate note, which is payable interest
only and accrues at the prime interest rate plus 2%.
(10) SIGNIFICANT CUSTOMER
As a result of the Company's interest in HSTC, C&H is
contractually bound to purchase all of the sugar the Company
produces. If, for any reason, C&H were to cease its
operations, the Company would seek other purchasers for its
sugar.
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
(11) COMMITMENTS AND CONTINGENCIES
The Company is involved in various matters of litigation
and other claims. Management, after consultation with legal
counsel, is of the opinion that the Company's liability (if
any) when ultimately determined will not have a material
adverse effect on the Company's financial position.
The Company's property segment had contractual commitments
(related to project costs) of approximately $877 as of December
31, 1997. Additional development expenditures are dependent
upon the ability to obtain financing and the timing and extent
of property development and sales.
As of December 31, 1997, certain portions of the Company's
land not currently under development or used in sugar
operations are mortgaged as security for $7,300 of performance
bonds related to property development.
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
(12) INCOME TAXES
Total income tax expense (benefit) for the years ended
December 31, 1997, 1996 and 1995 was allocated as follows:
1997 1996 1995
------ ------ ------
Loss before extraordinary gain $(17,037) (21,043) (8,019)
Extraordinary gain -- -- 20,807
------- ------ ------
$(17,037) (21,043) 12,788
======= ======= =======
Income tax expense (benefit) attributable to loss before
extraordinary gain for the years ended December 31, 1997, 1996
and 1995 consists of:
Current Deferred Total
------- --------- -------
Year ended December 31, 1997:
U.S. federal $ (9,939) (4,477) (14,416)
State (1,807) (814) (2,621)
------- -------- --------
$(11,746) (5,291) (17,037)
======== ======= ========
Year ended December 31, 1996:
U.S. federal $ (4,414) (13,391) (17,805)
State (803) (2,435) (3,238)
-------- -------- --------
$ (5,217) (15,826) (21,043)
======= ======= ========
Year ended December 31, 1995:
U.S. federal $(10,475) 3,689 (6,786)
State (1,904) 671 (1,233)
------- ------ ------
$(12,379) 4,360 (8,019)
======= ======= =======
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
In 1995, income tax expense related to the COLA redemption
approximated $20,807. Of this amount, approximately $9,106 was
attributable to current taxes related to the redeemed Class A
COLA's and, accordingly, was not indemnified by Northbrook (see
note 9). Current income tax expense attributable to the Class B
COLA's of approximately $9,490 was indemnified by Northbrook
and, accordingly, was deducted from the 1995 current tax
benefit of $12,379 attributable to loss before extraordinary
gain to derive the 1995 capital contribution related to current
income taxes.
Income tax benefit attributable to loss before
extraordinary gain differs from the amounts computed by
applying the U.S. federal income tax rate of 35 percent to
pretax loss before extraordinary gain as a result of the
following:
1997 1996 1995
------ ------ ------
Computed "expected" tax benefit $(14,914) (19,323) (9,749)
Increase (reduction) in income taxes
resulting from:
Pension and Core Retirement Award expense 226 321 2,478
State income taxes, net of federal income
tax benefit (1,747) (2,158) (823)
Other, net 42 117 75
Charitable deduction of appreciated property (644) -- --
------- ------- -------
Total $(17,037) (21,043) (8,019)
======== ======= =======
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of
December 31, 1997 and 1996 are as follows:
1997 1996
--------- --------
Deferred tax (assets):
Postretirement benefits $ (21,206) (22,488)
Interest accruals (3,021) (2,975)
Other accruals (3,274) (3,549)
-------- --------
Total deferred tax assets (27,501) (29,012)
-------- --------
Deferred tax liabilities:
Accounts receivable related to profit on sales
of sugar 3,960 3,065
Inventories, principally due to sugar production
costs, capitalized costs, capitalized interest
and purchase accounting adjustments (1,422) 258
Plant and equipment, principally due to
depreciation and purchase accounting adjustments 8,759 8,129
Land and land improvements, principally due to
purchase accounting adjustments 84,004 89,537
Deferred gains due to installment sales for
income tax purposes 7,456 7,429
Investments in unconsolidated entities,
principally due to purchase
accounting adjustments. 13,220 14,361
------- -------
Total deferred tax liabilities 115,977 122,779
------- -------
Net deferred tax liability $ 88,476 93,767
========= ========
(13) SEGMENT INFORMATION
Agriculture and Property comprise the separate industry
segments of the Company. Operating income (loss)-Other consists
primarily of unallocated overhead expenses and Total assets-
Other consists primarily of cash and deferred expenses.
AMFAC/JMB HAWAII, L.L.C.
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands)
Total revenues, operating income (loss), assets, capital
expenditures, and depreciation and amortization by industry
segment for 1997, 1996 and 1995 are set forth below:
1997 1996 1995
----- ------ ------
Revenues:
Agriculture $41,949 51,805 47,656
Property 44,048 45,138 52,663
-------- -------- --------
$85,997 96,943 100,319
======== ======== ========
Operating income (loss):
Property:
Reduction to carrying value
of investments in real
estate $(2,279) (18,315) --
Other (3,122) 732 11,122
Agriculture (3,373) (7,525) (10,882)
Other (3,225) (3,045) (2,593)
-------- -------- --------
$(11,999) (28,153) (2,353)
======== ======== ========
Total assets:
Property $222,745 225,372 199,999
Agriculture 222,693 239,222 304,170
Other 18,807 19,011 23,429
-------- -------- --------
$ 464,245 483,605 527,598
======== ======== ========
Capital expenditures:
Property $ 621 845 1,529
Agriculture 2,132 3,160 3,616
Other 13 252 --
------- -------- --------
$ 2,766 4,257 5,145
======= ======== ========
Depreciation and amortization:
Property $ 2,275 2,179 1,991
Agriculture 3,890 4,120 4,538
Other 45 55 194
------- ------- --------
$ 6,210 6,354 6,723
======= ======= ========
(14) Subsequent Events
COLA Interest Payment
On March 2, 1998, an interest payment of approximately
$4,414 was paid to the holders of COLAS. The Company borrowed
approximately $4,414 from an affiliate to make the interest
payment.
Sugar Growers Union Vote
The sugar industry in Hawaii has experienced significant
difficulties for a number of years. Growers in Hawaii have long
struggled with the high costs of production, which have led to
the closure of many plantations, including Oahu Sugar Company.
Labor costs are high and transportation costs of raw sugar to
the C&H refinery are significant. During 1996 and 1997, the
Company has conducted a series of meetings and discussions
aimed at developing a plan to return its sugar operations on
Kauai to profitability. Participants in this process included
rank-and-file workers, supervisors, union officials and Company
management. The plan developed by this group was named "Imua,"
which is the Hawaiian word meaning "to move forward." Imua
included significant changes in how the Company's plantations
would be operated and how employees would be compensated. Imua
was the subject of formal negotiations with the union in late
1997 and early 1998. These negotiations were recently completed
and the union leadership supported the Imua plan. However, in
February 1998, Imua failed by a large margin in a ratification
vote by the union membership at the Kauai plantations. As a
result, some of the workers have been placed on furlough and
the Company is evaluating its alternative courses of action. As
an initial step, the Company has sent to the union a new
proposal, which is different from Imua but still contains
substantial wage and other concessions which are critical to
the survival of the Company's sugar plantations. The contract
covering employees at the Kauai plantations expired on January
31, 1998 and was extended on a day-to-day basis. The extension
agreement which covers 88% of the Kauai plantation workers, has
a provision which allows either party to cancel the extension
within three days notice. A contract covering the employees at
Pioneer Mill also expired on January 31, 1998, was extended to
March 31, 1998 and has been further extended on a day-to-day
basis. The covered employees represent 70% of Pioneer Mill's
employees. The absence of a new labor agreements with
significant modifications from the existing agreements would
cause the Company to consider the possible shutdown of its
sugar operations. There can be no assurance that necessary
modifications to existing labor agreements will be obtained.
<TABLE>
Schedule II
AMFAC/JMB HAWAII, L.L.C.
Valuation and Qualifying Accounts
Years ended December 31, 1997, 1996 and 1995
(Dollars in Thousands)
<CAPTION>
Additions Additions
Balance at Charges to Charges to Balance at
Beginning Cost and Other End
Description of Period Expenses Accounts Deductions of Period
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1997:
Allowance for doubtful
accounts:
Trade accounts $ 318 394 -- 87 625
Claims and other -- -- -- -- --
------ ------ ------ ------- -------
$ 318 394 -- 87 625
====== ====== ====== ======= =======
Year ended December 31,
1996:
Allowance for doubtful
accounts:
Trade accounts $ 361 11 -- 54 318
Claims and other -- -- -- -- --
------- ------ ------ ------ ------
$ 361 11 -- 54 318
======= ====== ====== ====== ======
Year ended December 31,
1995:
Allowance for doubtful
accounts:
Trade ccounts $ 285 102 -- 26 361
Claims and other 1,144 -- -- 1,144 --
------ ------ ------ ------ ------
$ 1,429 102 -- 1,170 361
====== ====== ====== ====== =======
</TABLE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
AMFAC/JMB FINANCE, INC.
We have audited the accompanying balance sheets of
Amfac/JMB Finance, Inc. as of December 31, 1997 and 1996.
These balance sheets are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these balance sheets based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the balance sheets are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheets.
An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall balance sheet presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the balance sheets referred to above
present fairly, in all material respects, the financial
position of Amfac/JMB Finance, Inc. at December 31, 1997 and
1996, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Honolulu, Hawaii
March 27 , 1998
AMFAC/JMB FINANCE, INC.
Balance Sheets
December 31, 1997 and 1996
(Dollars in thousands, except per share information)
A S S E T S
1997 1996
----- -----
Current assets:
Cash $ 1 1
======= ======
L I A B I L I T Y A N D S T O C K H O L D E R ' S E Q U I T Y
Repurchase obligation (note 3)
Common stock, $1 par value;
authorized, issued and outstanding
- 1,000 shares $ 1 1
======= ======
The accompanying notes are an integral part of these balance sheets.
AMFAC/JMB FINANCE, INC.
Notes to the Balance Sheets
December 31, 1997 and 1996
(Dollars in Thousands)
(1) ORGANIZATION AND ACCOUNTING POLICY
Amfac/JMB Finance, Inc. ("AJF") was incorporated November
7, 1988 in the State of Illinois. AJF has had no financial
operations. All of the outstanding shares of AJF are owned by
Northbrook Corporation ("Northbrook").
(2) KEEP-WELL AGREEMENT
On March 14, 1989, Northbrook entered into a keep-well
agreement with AJF, whereby it agreed to contribute sufficient
capital or make loans to AJF to enable AJF to meet the COLA
repurchase obligations described below in note 3.
On March 15, 1995, pursuant to the indenture that governs
the terms of the COLAS (the "Indenture"), Amfac/JMB Hawaii,
L.L.C. elected to exercise its right to redeem, and therefore
was obligated to purchase, any and all Class A COLAS submitted
pursuant to the June 1, 1995 Redemption Offer at a price of
$.365 per Class A COLA. Pursuant to Amfac/JMB Hawaii, L.L.C.'s
election to redeem the Class A COLAS for repurchase, Amfac/JMB
Hawaii, L.L.C. assumed AJF's maximum amount of its liability from
the June 1, 1995 COLA repurchase obligation of $140,425.
(3) REPURCHASE OBLIGATION
On March 14, 1989, AJF and a subsidiary of Northbrook
(Amfac/JMB Hawaii, L.L.C.) entered into an agreement (the
"Repurchase Agreement") concerning AJF'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, L.L.C. in
conjunction with the acquisition of Amfac/JMB Hawaii, L.L.C. A
total aggregate principal amount of $384,737 of COLAS were
issued during the offering, which terminated on August 31,
1989. The COLAS were issued in two units consisting of one
Class A and one Class B COLA. As specified in the Repurchase
Agreement, the repurchase of the Class A COLAS may have been
requested of AJF by the holders of such COLAS on June 1, 1995
at a price equal to the original principal amount of such COLAS
($.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 $.135. The repurchase of the Class B
COLAS may be requested of AJF by the holders of such COLAS on
June 1, 1999 at a price equal to 125% of the original principal
amount of such COLAS ($.500) minus all payments of principal
and interest allocated to such COLAS. Northbrook Corporation,
the ultimate parent of the Company, is currently implementing
plans intended to generate sufficient funds to meet the maximum
potential repurchase obligation. Although there can be no
assurances that any or all of these plans will be successfully
completed, the Company is optimistic that the funds necessary
to meet the repurchase obligations will be raised if these
plans are completed. Failure to meet the repurchase obligation
could lead to a claim against Finance and, in turn, Northbrook.
To date, the cumulative interest paid per Class A and Class B
COLA is approximately $.185 and $.185, respectively.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
There were no changes in or disagreements with the
accountants during the fiscal years 1997 and 1996.
PART III
Item 10. Directors and Executive Officers of the Registrant
As of December 31, 1997, the directors, executive officers
and certain other officers of the Company were as follows:
Position
Held with
Name the Company
---------- ------------
Judd D. Malkin Chairman
Neil G. Bluhm Vice Chairman
H. Rigel Barber Director
Gary Grottke President and Director
Peggy H. Sugimoto Senior Vice President,
Chief Financial Officer
and Director
Tamara G. Edwards Vice President
Chris J. Kanazawa Senior Vice President*
Timothy E. Johns Vice President*
Teney K. Takahashi Vice President*
* resigned as of February 1998
Certain of these officers are also officers and/or
directors of JMB and numerous affiliated companies of JMB
(hereinafter collectively referred to as "JMB affiliates") and
many of such officers are also partners of certain partnerships
(herein collectively referred to as the "Associate
Partnerships") which are associate general partners (or general
partners thereof) in publicly offered real estate limited
partnerships. The publicly offered partnerships in which the
Associate Partnerships are partners have not engaged in the
agriculture business and have primarily purchased, or made
mortgage loans securing, existing commercial, retail, office,
industrial and multi-family residential rental buildings.
However, certain partnerships sponsored by JMB and other
affiliates of JMB are engaged in development activities
including planned communities, none of which are in Hawaii.
There is no family relationship among any of the foregoing
directors or officers.
The foregoing directors have been elected to serve one-
year terms until the next annual meeting to be held on the
second Tuesday of August 1998 or until his successor is elected
and qualified.
There are no arrangements or understandings between or
among any of said directors or officers and any other person
pursuant to which any director or officer was selected as such.
The business experience during the past five years of the
directors and such officers of the Company includes the
following:
Judd D. Malkin (age 60) is Chairman of the Company since
1988, Mr. Malkin is also Chairman of the Board of JMB, an
officer and/or director of various JMB affiliates and an
individual general partner of several publicly offered real
estate limited partnerships affiliated with JMB. Mr. Malkin
has been associated with JMB since October 1969. Mr. Malkin is
a director of Urban Shopping Centers, Inc., an affiliate of JMB
that is a real estate investment trust in the business of
owning, managing and developing shopping centers. He is a
Certified Public Accountant.
Neil G. Bluhm (age 60) is Vice Chairman of the Company
since 1994. Mr. Bluhm held various other officer positions
with the Company from 1988 through 1993 and served as a
Director from November 1989 to January 1994. Mr. Bluhm is also
President and director of JMB, an officer and/or director of
various JMB affiliates and an individual general partner of
several publicly offered real estate limited partnerships
affiliated with JMB. Mr. Bluhm has been associated with JMB
since August 1970. Mr. Bluhm is a director of Urban Shopping
Centers, Inc., an affiliate of JMB that is a real estate
investment trust in the business of owning, managing and
developing shopping centers. He is a member of the Bar of the
State of Illinois and a Certified Public Accountant.
H. Rigel Barber (age 49) is Director of the Company since
April 1997. Mr. Barber is an Executive Vice President and Chief
Executive Officer of JMB Realty Corporation. He has a
Bachelors degree from Yale University and a law degree from
Northwestern University. Prior to joining JMB, Mr. Barber was
a partner in the law firm of Mayer Brown & Platt.
Gary R. Grottke (age 42) is President since April 1997 and
has served as a Director since August 1996. He was an officer
of JMB from May 1989 to December 1993. Prior to joining JMB in
1989, Mr. Grottke was a Senior Manager at Peat, Marwick,
Mitchell & Co. He holds a Masters degree in Business
Administration from the Krannert School of Management at Purdue
University and is a Certified Public Accountant.
Edward G. Karl (age 42) served as President, Chief
Executive Officer and Director from January 1994 until April
1997, when he resigned from the Company. He was previously an
officer of JMB and various partnerships related to JMB. Prior
to joining JMB in 1984. Mr. Karl was a Manager at Peat,
Marwick, Mitchell & Co. He is a Certified Public Accountant.
Peggy H. Sugimoto (age 47) is Senior Vice President and
Chief Financial Officer since 1994 and has been Director since
August 1996. Ms. Sugimoto has been associated with the Company
since 1976. She is a Certified Public Accountant.
Tamara G. Edwards (age 43) is Vice President since August
1996 and President and Director of one of the subsidiaries,
Amfac Land Company, Limited, since March 1997. Ms. Edwards
served as Senior Counsel for the Company from 1995 through
1997. She is a member of the California and Florida Bar
Associations.
Chris Kanazawa (age 45) served as Senior Vice President of
the Company from April 1993 until February 1998 and a Director
from January 1994 until April 1997. In February 1998, Mr.
Kanazawa resigned from the Company. He had been associated
with the Registrant since September 1981.
Timothy E. Johns (age 41) served as Vice President of
Amfac/JMB Hawaii - Properties Division from January 1994 until
February 1998, when he resigned from the Company. Mr. Johns
served as Senior legal Counsel for the Company from 1990
through 1993.
Teney K. Takahashi (age 59) served as Vice President of
Amfac/JMB Hawaii - Properties since rejoining the Company in
April 1995 until February 1998, when he resigned from the
Company. Prior to April 1995, Mr. Takahashi previously worked
for Amfac from 1973 to 1988.
Item 11. Executive Compensation
Certain of the officers and directors of the Company
listed in item 10 above are officers and/or directors of JMB or
Northbrook and are compensated by JMB, Northbrook, or an
affiliate thereof (other than the Company and its
subsidiaries). The Company will reimburse Northbrook, JMB and
their affiliates for any expenses incurred while providing
services to the Company as described under the caption
"Description of the COLAS - Limitations on Mergers and Certain
Other Transactions" at pages 42-43 of the Prospectus, a copy of
which description was filed herewith and incorporated herein by
reference. In addition, JMB and its affiliates may earn an
amount, the Qualified Allowance (as defined), as described
under the caption "Description of the COLAS - Certain
Definitions" at page 51 of the Prospectus, a copy of which
description was filed herewith and is incorporated herein by
reference. See Item 13 below.
SUMMARY COMPENSATION TABLE
Annual Compensation (1)(3)
-------------------------------------
Other
Annual
Compensa-
Name Principal Salary Bonus tion
(2) Position Year ($) (4) ($) ($)
-------- ------------ ------- ------- ------- --------
Gary President 1997 350,000 N/A N/A
Grottke and Director 1996 199,500 N/A N/A
1995 190,000 N/A N/A
Peggy Senior Vice Pres. 1997 140,000 30,000 N/A
Sugimoto Chief Financial 1996 132,000 23,000 N/A
Officer and Director1995 125,000 20,000 N/A
Chris J. Senior Vice 1997 275,000 75,000 N/A
Kanazawa President 1996 275,000 200,000 N/A
1995 250,000 175,000 N/A
Teney K. Vice President 1997 191,000 40,000 N/A
Takahashi 1996 191,000 100,000 N/A
1995 128,076 N/A N/A
Timothy E. Vice President 1997 121,000 18,000 N/A
Johns 1996 121,000 10,350 N/A
1995 115,000 15,000 N/A
------------
(1)Compensation for Edward G. Karl, former President and CEO
and Director, was allocated and charged to the Company by
Northbrook. Allocated salary for 1997, 1996 and 1995 was
$0, $75,000 and $72,000, respectively. No bonus or other
compensation for Mr. Karl was allocated and charged to the
Company by Northbrook for 1997, 1996 and 1995.
(2) The Company does not have a compensation committee. During
1997 and 1996, Mr. Malkin and Mr. Grottke
participated in the deliberations concerning
executive officer compensation.
(3) Includes CEO and 4 most highly compensated executives
whose salary and bonus exceed $100,000.
(4) Salary for Mr. Grottke represents the portion of his
total compensation allocated and charged to the Company by
Northbrook.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
All of the outstanding shares of the Company are owned by
Northbrook. Approximately 6% of the shares of Northbrook are
owned by JMB and approximately 90% are owned directly or
indirectly by individuals who are shareholders or employees of
JMB or members of their families (or trusts for their benefit).
Randi Malkin Steinberger, Stephen Malkin and Barry Malkin,
individually or through trusts which they control, each have
beneficial ownership of approximately 9.7% of the shares of
Northbrook. Leslie Bluhm, Andrew Bluhm and Meredith Bluhm,
individually or through trusts which they control, each have
beneficial ownership of approximately 10.0% of the shares of
Northbrook. Kathleen Schreiber, in her capacity as trustee of
various trusts for the benefit of members of her family, which
trusts comprise the managing partners of a partnership which
owns Northbrook shares, has beneficial ownership of
approximately 5.1% of the shares of Northbrook. Stuart Nathan,
Executive Vice President and a director and shareholder of JMB,
and his children, Scott Nathan and Robert Nathan, collectively
have beneficial ownership of slightly more than 5.1% of the
shares of Northbrook; each of them, primarily by virtue of
their status as general partners of partnerships which own such
shares would also be considered to individually have beneficial
ownership of substantially all of such shares.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than as contained under Items 10 and 11 above, and
this Item 13, there were no other significant transactions or
business relationships with Northbrook, JMB, affiliates or
their management.
The Company, its subsidiaries and the joint ventures in
which the Company or its subsidiaries are partners are
permitted to engage in various transactions involving
Northbrook, JMB and their affiliates, as described under the
captions "Description of the COLAS - Limitation on Dividends,
Purchases of Capital Stock and Indebtedness" and "Limitations
on Mergers and Certain Other Transactions" and "Purchase or
Joint Venture of Properties by Affiliates; Development of
Properties as Excluded Assets; Residual Value of Company in
Certain Projects" at pages 41-45, and "Risk Factors - Conflicts
of Interest" at page 19 of the Prospectus, a copy of which
descriptions are hereby incorporated herein by reference to
Exhibit 28.1 to the Company's Report on Form 10-K for December
31, 1988 (File No. 33-24180) dated March 21, 1989. The
relationship of the Company (and its directors and executive
officers and certain other officers) to its affiliates is set
forth above in Item 10.
The Company incurred interest expense of approximately
$12.8 million, $8.9 million and $5.4 million for the years
ended 1997, 1996 and 1995, respectively, in connection with the
acquisition and additional financing obtained from an
affiliate, of which $1.6 million was unpaid as of December 31,
1997.
With respect to any calendar year, JMB or its affiliates
may receive a Qualified Allowance in an amount equal to 1-1/2%
per annum of the Fair Market Value (as defined) of the gross
assets of the Company and its subsidiaries (other than cash and
cash equivalents and Excluded Assets (as defined)) for
providing certain advisory services for the Company. The
aforementioned advisory services, which are provided pursuant
to a 30-year Services Agreement entered into between the
Company, certain of its subsidiaries and JMB in November 1988,
include making recommendations in the following areas: (i) the
construction and development of real property; (ii) land use
and zoning changes; (iii) the timing and pricing of properties
to be sold; (iv) the timing, type and amount of financing to be
incurred; (v) the agricultural business; and, (vi) the uses
(agricultural, residential, recreational or commercial) for the
land. However, the Qualified Allowance shall be earned and
paid for each year prior to maturity of the COLAS only if the
Company generates sufficient Net Cash Flow to pay Base Interest
to the holders of the COLAS for such year of an amount equal to
8% of the average outstanding principal balance of the COLAS
for such year; any portion of the Qualified Allowance not paid
for any year shall cumulate without interest and JMB or its
affiliates shall be paid such amount with respect to any
succeeding year, after the payment of all Contingent Base
Interest for such year, to the extent of 100% of remaining Net
Cash Flow until an amount equal to 20% of the Base Interest
with respect to such year has been paid, and thereafter, to the
extent of the product of (a) remaining Net Cash Flow,
multiplied by (b) a fraction, the numerator of which is the
cumulative deficiency as of the end of such year in the
Qualified Allowance and the denominator of which is the sum of
the cumulative deficiencies as of the end of such year in the
Qualified Allowance and Base Interest. A Qualified Allowance
for 1989 of approximately $6.2 million was paid on February 28,
1990. Approximately $64.5 million of Qualified Allowance
related to the period from January 1, 1990 through December 31,
1997 has not been earned and paid and is payable only from
future Net Cash Flow. Accordingly, because the Company does not
believe it is probable at this time that a sufficient level of
Net Cash Flow will be generated in the future to pay Qualified
Allowance, the Company has not accrued for any Qualified
Allowance in the accompanying consolidated financial
statements. JMB has informed the Company that no incremental
costs or expenses have been incurred relating to the provision
of these advisory services. The Company believes that using an
incremental cost methodology is reasonable. The following table
is a summary of the Qualified Allowance for the years ended
December 31, 1997, 1996 and 1995 (dollars are in millions):
1997 1996 1995
----- ------ -------
Qualified Allowance calculated $ 10.1 9.2 9.9
Qualified Allowance paid -- -- --
Cumulative deficiency of Qualified
Allowance at end of year $ 64.5 54.4 45.2
Net Cash Flow was $0 for 1997, 1996 and 1995.
After the maturity date of the COLAS, JMB will continue to
provide advisory services pursuant to the Services Agreement,
the Qualified Allowance for such years will continue to be 1-
1/2% per annum of the Fair Market Value of the gross assets of
the Company and its subsidiaries and the Qualified Allowance
will continue to be payable from the Company's Net Cash Flow.
Upon the termination of the Services Agreement, if there has
not been sufficient Net Cash Flow to pay the cumulative
deficiency in the Qualified Allowance, if any, such amount
would not be due or payable to JMB.
The Company, its subsidiaries and their joint ventures,
reimburse Northbrook, JMB and their affiliates for direct
expenses incurred on their behalf, including salaries and
salary related expenses incurred in connection with the
management of the Company's or its subsidiaries and the joint
ventures' operations. The total of such costs through December
31, 1997, 1996 and 1995 was $.7 million, $.7 million and $.6
million, respectively, of which $.7 million was unpaid as of
December 31, 1997. In addition, as of December 31, 1997, the
current portion of amounts due affiliates includes
approximately $9.1 million of income tax payable related to the
Class A Redemption Offer. Also, the Company pays a non-
accountable reimbursement of approximately $.03 million per
month to JMB or its affiliates in respect of general overhead
expense, all of which was paid as of December 31, 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 years
ended December 31, 1997, 1996 and 1995 was approximately $.7
million, $.8 million and $.7 million, all of which was paid as
of December 31, 1997.
Northbrook and its affiliates allocated certain charges
for services to the Company based upon the estimated level of
services for the years ended December 31, 1997, 1996 and 1995
of approximately $.8 million, $1.5 million and $7.9 million,
respectively, of which $1.0 million was unpaid as of December
31, 1997. These services and costs are intended to reflect the
Company's separate costs of doing business and are principally
related to the inclusion of the Company's employees in the
Northbrook pension plan, payment of severance and termination
benefits and reimbursement for insurance claims paid on behalf
of the Company. All amounts described above, deferred or
currently payable, do not bear interest and are expected to be
paid in future periods.
In February 1997, certain intercompany payables to
Northbrook totaling $7.9 million were converted into a new ten
year note payable. The Company borrowed an additional $16.6
million during 1997 to fund COLA Mandatory Base Interest and
operational needs from a subsidiary of Northbrook under a
separate note which is payable interest only and accrues at the
prime rate plus 2%.
On January 30, 1998, Amfac Finance Limited Partnership
("Amfac Finance"), an Illinois limited partnership and an
affiliate of the Company, extended a Tender Offer to Purchase
(the "Tender Offer") up to $65,421,000 Principal amount of
Separately Certificated Class B COLAS ("Separate Class B
COLAS") for cash at a unit price of $375 to be paid by Amfac
Finance on each Separate Class B COLA on or about March 24,
1998. The maximum cash to be paid under the Tender Offer is
$49,065,750 (130,842 Separate Class B COLAS at a unit price of
$375 for each separate Class B COLA). Approximately 62,800
Separate Class B COLAS were submitted for repurchase pursuant
to the Tender Offer requiring an aggregate payment by Amfac
Finance of approximately $23,542,000 on March 31, 1998. The
Tender Offer will not reduce the outstanding indebtedness of
the Company. The Separate Class B COLAS to be purchased by
Amfac Finance pursuant to Tender Offer will remain outstanding
pursuant to the terms of the Indenture that governs the terms
of the COLAS (the "Indenture"). Except as provided in the last
sentence of this paragraph, Amfac Finance will be entitled to
the same rights and benefits of any other holder of Separate
Class B COLAS, including having the ability to have AJF to
repurchase on June 1, 1999, the Separate Class B COLAS that it
owns. Amfac Finance has not yet determined whether it will
require AJF to so repurchase the Separate Class B COLAS which
it will own on such date. Since Amfac Finance is an affiliate
of the Company, Amfac Finance will not be able to participate
in determining whether the holders of the required principal
amount of debt under the Indenture have concurred in any
direction, waiver or consent under the terms of the Indenture.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements
See Index to Financial Statements and
Supplementary Data filed with this report.
(2) Exhibits
See Index to Exhibits, which is incorporated
herein by reference.
(b) Reports on Form 8-K: The following reports on Form 8-
K were filed during the last quarter of the period
covered by this report
None.
(c) Exhibits:
The Exhibits required by Item 601 of Regulation S-K are
listed in the Index to Exhibits, which is incorporated herein
by reference.
All other schedules have been omitted since the required
information is presented in the financial statements and the
related notes or is not applicable.
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, L.L.C.
By: Edward J. Kroll
Vice President
Date:March 31, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: Gary R. Grottke
President, Chief Executive
Officer and Director
Date:March 31, 1998
By: Peggy Sugimoto
Senior Vice President,
Chief Financial Officer and
Director
Date:March 31, 1998
By: Edward J. Kroll
Vice President and
Principal Accounting Officer
Date:March 31, 1998
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: Edward J. Kroll
Vice President
Date:March 31, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: Gary R. Grottke
President and
Chief Executive Officer
Date: March 31, 1998
By: Gary Nickele
Director
Date: March 31, 1998
By: Edward J. Kroll
Vice President Finance,
Principal Accounting Officer
Date: March 31, 1998
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: Edward J. Kroll
Vice President
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: Tamara G. Edwards
President and Director
Date: March 31, 1998
By: Gary R. Grottke
Vice President and Director
Date: March 31, 1998
By: Peggy Sugimoto
Vice President and Director
Date: March 31, 1998
By: Edward J. Kroll
Vice President and
Principal Accounting Officer
Date: March 31, 1998
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: Edward J. Kroll
Vice President
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: Gary R. Grottke
President and Director
Date: March 31, 1998
By: Peggy Sugimoto
Senior Vice President - Finance
and Director
Date: March 31, 1998
By: Edward J. Kroll
Vice President and
Principal Accounting Officer
Date: March 31, 1998
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: Edward J. Kroll
Vice President
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: Gary R. Grottke
President and Director
Date: March 31, 1998
By: Peggy Sugimoto
Vice President and Director
Date: March 31, 1998
By: Edward J. Kroll
Vice President and
Principal Accounting Officer
Date: March 31, 1998
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: Edward J. Kroll
Vice President
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: Gary R. Grottke
President and Director
Date: March 31, 1998
By: Tamara G. Edwards
Vice President and Director
Date: March 31, 1998
By: Peggy Sugimoto
Vice President and Director
Date: March 31, 1998
By: Edward J. Kroll
Vice President and
Principal Accounting Officer
Date: March 31, 1998
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 ESTATE COFFEE, INC.
By: Edward J. Kroll
Vice President
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: Gary R. Grottke
President and Director
Date: March 31, 1998
By: Peggy Sugimoto
Vice President and Director
Date: March 31, 1998
By: Edward J. Kroll
Vice President and
Principal Accounting Officer
Date: March 31, 1998
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: Edward J. Kroll
Vice President
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: Gary R. Grottke
President and Director
Date: March 31, 1998
By: Peggy Sugimoto
Senior Vice President - Finance
and Director
Date: March 31, 1998
By: Edward J. Kroll
Vice President and
Principal Accounting Officer
Date: March 31, 1998
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: Edward J. Kroll
Vice President
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: Gary R. Grottke
President and Director
Date:March 31, 1998
By: Tamara G. Edwards
Director and Vice President
Date: March 31, 1998
By: Peggy Sugimoto
Vice President and Director
Date: March 31, 1998
By: Edward J. Kroll
Vice President and
Principal Accounting Officer
Date: March 31, 1998
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: Edward J. Kroll
Vice President
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: Gary R. Grottke
President and Director
Date: March 31, 1998
By: Tamara G. Edwards
Vice President & Director
Date: March 31, 1998
By: Peggy Sugimoto
Vice President and Director
Date: March 31, 1998
By: Edward J. Kroll
Vice President and
Principal Accounting Officer
Date: March 31, 1998
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: Edward J. Kroll
Vice President
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: Gary R. Grottke
President and Director
Date: March 31, 1998
By: Tamara G. Edwards
Vice President & Director
Date: March 31, 1998
By: Peggy Sugimoto
Vice President and Director
Date:March 31, 1998
By: Edward J. Kroll
Vice President and
Principal Accounting Officer
Date: March 31, 1998
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: Edward J. Kroll
Vice President
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: Gary R. Grottke
President and Director
Date: March 31, 1998
By: Tamara G. Edwards
Vice President & Director
Date: March 31, 1998
By: Peggy Sugimoto
Vice President and Director
Date: March 31, 1998
By: Edward J. Kroll
Vice President and
Principal Accounting Officer
Date:March 31, 1998
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: Edward J. Kroll
Vice President
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: Gary Grottke
President and Director
Date: March 31, 1998
By: Tamara G. Edwards
Vice President & Director
Date: March 31, 1998
By: Peggy Sugimoto
Vice President and Director
Date: March 31, 1998
By: Edward J. Kroll
Vice President and
Principal Accounting Officer
Date: March 31, 1998
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: Edward J. Kroll
Vice President
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: Gary R. Grottke
President and Director
Date: March 31, 1998
By: Peggy Sugimoto
Senior Vice President
and Director
Date: March 31, 1998
By: Edward J. Kroll
Vice President and
Principal Accounting Officer
Date: March 31, 1998
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: Edward J. Kroll
Vice President
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: David H. Gleason
President and Director
Date: March 31, 1998
By: Gary R. Grottke
Vice President and Director
Date:March 31, 1998
By: Peggy Sugimoto
Vice President - Finance
Date: March 31, 1998
By: Edward J. Kroll
Vice President and
Principal Accounting Officer
Date: March 31, 1998
100
EXHIBIT INDEX
Exhibit No. Exhibit
2.1 Agreement and Plan of Merger by and between Amfac/JMB
Hawaii, Inc. and Amfac/JMB Hawaii, L.L.C. dated as of
February 27, 1998. (13)
3.1 Articles of Incorporation of Amfac/JMB Hawaii, Inc. (1)
3.2 Amended and Restated By-Laws of Amfac/JMB Hawaii, Inc. (1)
3.3 Articles of Incorporation of Amfac/JMB Finance, Inc. (1)
3.4 Amended and Restated By-Laws of Amfac/JMB Finance, Inc. (1)
3.7 Articles of Incorporation of Amfac Property Development Corp.
3.8 Amended and Restated By-Laws of Amfac Property
Developments Corp. (1)
3.9 Articles of Incorporation of Amfac Property Investment Corp. (1)
3.10 Amended and Restated By-Laws of Amfac Property
Investment Corp. (1)
3.11 Articles of Incorporation of Amfac Sugar and
Agribusiness, Inc. (1)
3.12 Amended and Restated By-Laws of Kaanapali Water
Corporation (1)
3.13 Articles of Incorporation of Kaanapali Water
Corporation. (1)
3.14 Amended and Restated By-Laws of Amfac Agribusiness, Inc. (1)
3.15 Articles of Incorporation of Amfac Agribusiness, Inc. (1)
3.16 Amended and Restated By-Laws of Kekaha Sugar Company, Limited. (1)
3.17 Articles of Association of Kekaha Sugar Company, Limited. (1)
3.18 Amended and Restated By-Laws of The Lihue Plantation
Company, Limited. (1)
3.19 Articles of Association of The Lihue Plantation Company,
Limited (1)
3.20 Amended and Restated By-Laws of Oahu Sugar Company, Limited. (1)
3.21 Articles of Association of Oahu Sugar Company, Limited.(1)
3.22 Amended and Restated By-Laws of Pioneer Mill Company, Limited (1)
3.23 Articles of Association of Pioneer Mill Company, Limited. (1)
3.24 Amended and Restated By-Laws of Puna Sugar Company, Limited. (1)
3.25 Articles of Association of Puna Sugar Company, Limited. (1)
3.26 Amended and Restated By-Laws of H. Hackfeld & Co., Ltd.
3.27 Articles of Association of H. Hackfeld & Co., Ltd. (1)
3.28 Amended and Restated By-Laws of Waiahole Irrigation
Company, Limited.
3.29 Articles of Incorporation of Waiahole Irrigation
Company, Limited. (1)
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). (2)
4.2 Amendment dated as of January 17, 1990 to the Indenture
relating to the COLAS. (2)
4.3 $28,097,832 Promissory Note from Amfac, Inc. to
Amfac/JMB Hawaii, Inc. Extended and Reissued Effective
December 31, 1993. (3)
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)
4.5 $15,000,000 Credit Agreement dated March 31, 1993 among
AMFAC/JMB Hawaii, Inc. and Continental Bank N.A (5).
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. (6)
4.7 $52,000,000 Promissory Note to Northbrook Corporation
from Amfac/JMB Hawaii, Inc., effective May 31, 1995 is
filed herewith. (7)
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. (8)
4.9 Standard Sugar Marketing Contracts between Hawaiian
Sugar Transportation Company and Hawaii Sugar Growers
dated June 4, 1993. (9)
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. (9)
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. (10)
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. (10)
4.13 $10,000,000 loan agreement between Amfac Property
Development Corp. and City Bank at December 18, 1996.
(11)
4.14 Amended and Restated $25,000,000 loan agreement with the
Bank of Hawaii dated February 4, 1997. (12)
4.15 Limited Partnership Agreement for Kaanapali Ownership
Resorts, L.P. dated February 1, 1997 for development of
time-share resort on Kaanapali. (11)
4.16 Second Supplement to the Indenture dated as of March 1,
1998. (13)
4.17 $104,759,324 promissory Note between Northbrook
Corporation and Amfac Land Company, Ltd. dated January
1, 1998. (13)
4.18 Revolving Credit Note between Fred Harvey Transportation
Company, Inc. and Amfac Land Company, Ltd., dated
January 1, 1998. (13)
10.1 Escrow Deposit Agreement. (1)
10.2 General Lease S-4222, dated January 1, 1969, by and
between the State of Hawaii and Kekaha Sugar Company,
Limited. (1)
10.3 Grove Farm Haiku Lease, dated January 25, 1974 by and
between Grove Farm Company, Incorporated and The Lihue
Plantation Company, Limited. (1)
10.4 General Lease S-4412, dated October 31, 1974, by and
between the State of Hawaii and the Lihue Plantation
Company, Limited. (1)
10.5 General Lease S-4576, dated March 15, 1978, by and
between the State of Hawaii and The Lihue Plantation
Company, Limited. (1)
10.6 General Lease S-3821, dated July 8, 1964, by and between
the State of Hawaii and East Kauai Water Company, Ltd.
(1)
10.7 Amended and Restated Power Purchase Agreement, dated as
of June 15, 1992, by and between The Lihue Plantation
Company, Limited and Citizens Utilities Company. (1)
10.8 U.S. Navy Waipio Peninsula Agricultural Lease, dated May
26, 1964, between The United States of America (as
represented by the U.S. Navy) and Oahu Sugar Company,
Ltd. (1)
10.9 Amendment to the Robinson Estate Hoaeae Lease, dated May
15, 1967, by and between various Robinsons, heirs of
Robinsons, Trustees and Executors, etc. and Oahu Sugar
Company, Limited amending and restating the previous
lease. (1)
10.10 Amendment to the Campbell Estate Lease, dated April 16,
1970, between Trustees under the Will and of the Estate
of James Campbell, Deceased, and Oahu Sugar Company,
Limited amending and restating the previous lease. (1)
10.11 Bishop Estate Lease No. 24,878, dated June 17, 1977, by
and between the Trustees of the Estate of Bernice Pauahi
Bishop and Pioneer Mill Company, Limited. (1)
10.12 General Lease S-4229, dated February 25, 1969, by and
between the State of Hawaii, by its Board of Land and
Natural Resources and Pioneer Mill Company, Limited. (1)
10.13 Honokohau Water License, dated December 22, 1980,
between Maui Pineapple Company Ltd. and Pioneer Mill
Company, Limited. (1)
10.14 Water Licensing Agreement, dated September 22, 1980, by
and between Maui Land & Pineapple Company, Inc. and
Amfac, Inc. (1)
10.15 Joint Venture Agreement, dated as of March 19, 1986, by
and between Amfac Property Development Corp. and
Tobishima Properties of Hawaii, Inc. (1)
10.16 Development Agreement, dated March 19, 1986, by and
between Kaanapali North Beach Joint Venture and Amfac
Property Investment Corp. and Tobishima Pacific, Inc.
(1)
10.19 Keep-Well Agreement between Northbrook Corporation and
Amfac/JMB Finance, Inc. (2)
10.20 Repurchase Agreement, dated March 14, 1989, by and
between Amfac/JMB Hawaii, Inc. and Amfac/JMB Finance,
Inc. (2)
10.21 Amfac Hawaii Tax Agreement, dated November 21, 1988
between Amfac/JMB Hawaii, Inc., and Amfac Property
Development Corp.; Amfac Property Investment Corp.;
Amfac Sugar and Agribusiness, Inc.; Kaanapali Water
Corporation; Amfac Agribusiness, Inc.; Kekaha Sugar
Company, Limited; The Lihue Plantation Company, Limited;
Oahu Sugar Company, Limited; Pioneer Mill Company,
Limited; Puna Sugar Company, Limited; H. Hackfeld & Co.,
Ltd.; and Waiahole Irrigation Company, Limited. (2)
10.22 Amfac-Amfac Hawaii Tax Agreement, dated February 21,
1989 between Amfac, Inc. and Amfac/JMB Hawaii, Inc. (2)
10.23 Services Agreement, dated November 18, 1988, between
Amfac/JMB Hawaii, Inc., and Amfac Property Development
Corp.; Amfac Property Investment Corp.; Amfac Sugar and
Agribusiness, Inc.; Kaanapali Water Corporation; Amfac
Agribusiness, Inc.; Kekaha Sugar Company, Limited; The
Lihue Plantation Company, Limited; Oahu Sugar Company,
Limited; Pioneer Mill Company, Limited; Puna Sugar
Company, Limited; H. Hackfeld & Co., Ltd.; and Waiahole
Irrigation Company, Limited and JMB Realty Corporation.
(2)
19.0 $35,700,000 agreement for sale of C&H and certain other
C&H assets, to A&B Hawaii, Inc. in June 1993. (7)
22.1 Subsidiaries of Amfac/JMB Hawaii, Inc. (1)
99.1 A copy of pages 19, 41-45 and 51 of the Prospectus of
the Company dated December 5, 1988 (relating to SEC
Registration Statement on Form S-1 (as amended) File No.
33-24180) and hereby incorporated by reference. (2)
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.
(1) 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.
(2) 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.
(3) 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.
(4) 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.
(5) 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.
(6) Previously filed as exhibit to the Company's Form 10-Q
report under the Securities Act of 1934 (File No. 33-24180)
filed on November 11, 1993 and hereby incorporated by
reference.
(7) 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, 1994 and hereby incorporated by reference.
(8) 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.
(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.
(10) 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.
(11) Previously filed as 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.
(12) 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, 1996 and hereby incorporated by reference.
(13) Previously filed as exhibit to the Company's Form 8-K
report under the Securities Act of 1934 (File No. 33-
24180)filed March 3, 1998 and hereby incorporated by reference.
No annual report or proxy material for 1997 was sent to the
COLA holders of the Company. An annual report will be sent to
the COLA holders subsequent to this filing.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<CIK> 0000839437
<NAME> AMFAC/JMB HAWAII, L.L.C.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 9,115
<SECURITIES> 0
<RECEIVABLES> 6,743
<ALLOWANCES> 0
<INVENTORY> 61,469
<CURRENT-ASSETS> 79,975
<PP&E> 326,765
<DEPRECIATION> 38,726
<TOTAL-ASSETS> 464,245
<CURRENT-LIABILITIES> 41,789
<BONDS> 315,004
0
0
<COMMON> 1
<OTHER-SE> (190,889)
<TOTAL-LIABILITY-AND-EQUITY> 464,245
<SALES> 85,997
<TOTAL-REVENUES> 86,383
<CGS> 78,319
<TOTAL-COSTS> 97,996
<OTHER-EXPENSES> 1,347
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,649
<INCOME-PRETAX> (42,609)
<INCOME-TAX> 17,037
<INCOME-CONTINUING> (25,572)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,572)
<EPS-PRIMARY> (25.6)
<EPS-DILUTED> (25.6)
</TABLE>
