UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from__________ to __________
Commission file number 0-2288
(Unaudited)
HOSOI GARDEN MORTUARY, INC.
(Exact name of small business issuer as specified in its charter)
State of Hawaii No. 99-0088064
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 North Kukui Street
(Corner of Nuuanu Avenue
and Kukui Street)
Honolulu, Hawaii 96817
(Address of principal executive offices)
(Issuer's telephone number) (808) 538 - 3877
N/A
(Former name, former address and former fiscal year, if changed since last
report)
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes XX No
1,649,556 shares of Common Stock
Outstanding at November 30, 2000
1
HOSOI GARDEN MORTUARY, INC.
_ _ _ _ _ _ _ _ _ _ _ _ _ _
[CAPTION]
CONTENTS
_ _ _ _
[S] [C]
Pages
REPORT OF INDEPENDENT PUBLIC ACCOUNTANT 1
PART I - Financial Information
Item 1.Financial Statements
Balance Sheet 2
Statements of Income and Comprehensive Income 3
Statements of Cash Flows 4
Notes to Financial Statements 5 - 9
Item 2.Management's Discussions and Analysis of Financial
Condition and Results of Operations 10
PART II - Other Information 11
SIGNATURES 12
2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANT
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
To the Board of Directors
Hosoi Garden Mortuary, Inc.
We have reviewed the accompanying balance sheet of
HOSOI GARDEN MORTUARY, INC.
as of November 30, 2000 and the related statements of income and comprehensive
income and cash flows for the six months ended November 30, 2000 and 1999, in
accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation of
the management of Hosoi Garden Mortuary, Inc.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of person responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express an opinion.
Based on our review, we are not aware of any material modifications, except
for the recognition of Equity in Earnings of Garden Life Plan, Ltd. as
discussed in Note (4) to the financial statements, that should be made to the
accompanying financial statements in order for them to be in conformity with
generally accepted accounting principles.
January 2, 2001
/S/ ENDO & COMPANY
Honolulu, Hawaii
1
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HOSOI GARDEN MORTUARY, INC.
BALANCE SHEET
_ _ _ _ _ _ _
November 30, 2000
[CAPTION]
A S S E T S
[S] [C]
CURRENT ASSETS
Cash and cash equivalents (Note 2) $1,852,860
Securities available-for-sale, at market (Note 3) 922,339
Accounts receivable, less allowance for doubtful
accounts of $82,110 275,060
Inventories 216,117
Prepaid expenses and others 52,186
Deferred income taxes (Note 6) 40,478
__________
TOTAL CURRENT ASSETS 3,359,040
__________
INVESTMENTS
Garden Life Plan, Ltd. (Note 4) 2,090,156
Woolsey-Hosoi Mortuary Service, LLC (Note 5) 9,718
Cemetery plots 1,350
Securities held-to-maturity, at cost (Note 3) 97,344
__________
2,198,568
__________
PROPERTY AND EQUIPMENT, at cost, less accumulated
depreciation 1,443,478
__________
OTHER ASSETS 118,538
__________
TOTAL ASSETS $7,119,624
==========
[CAPTION]
L I A B I L I T I E S
[S] [C]
CURRENT LIABILITIES
Accounts payable $ 351,095
Accrued liabilities 173,677
Income taxes payable 13,486
___________
TOTAL CURRENT LIABILITIES 538,258
___________
DEFERRED INCOME TAXES (Note 6) 155,427
___________
[CAPTION]
S T O C K H O L D E R S ' E Q U I T Y
[S] [C]
CAPITAL CONTRIBUTED (Note 7)
Common stock, par value $.20 per share; authorized
3,625,000 shares, issued 2,187,140 shares 437,428
Less 313,799 reacquired shares (62,980)
__________
TOTAL CAPITAL CONTRIBUTED 374,448
__________
RETAINED EARNINGS (Note 7) 6,071,239
__________
ACCUMULATED OTHER COMPREHENSIVE INCOME, net of
deferred taxes (Notes 3 and 9) 61,534
__________
TREASURY STOCK, 223,785 shares, at cost (Note 7) (81,282)
TOTAL STOCKHOLDERS' EQUITY 6,425,939
__________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,119,624
===========
[FN]
See the accompanying Notes to Financial Statements
See Accountant's Report
2
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HOSOI GARDEN MORTUARY, INC.
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
[CAPTION]
Three-Months Ended Six-Months Ended
November 30, November 30,
_____________________ ______________________
1999 (As 1999 (As
2000 Restated 2000 Restated
__________ __________ ___________ ___________
[S] [C] [C] [C] [C]
NET SALES AND SERVICES $ 586,766 $ 618,006 $ 1,303,635 $ 1,304,519
COST OF SALES AND SERVICES 401,313 465,008 843,875 956,181
__________ __________ ___________ __________
GROSS PROFIT 185,453 152,998 459,760 348,338
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 185,297 192,055 372,632 378,385
__________ _________ __________ __________
OPERATING INCOME (LOSS) 156 (39,057) 87,128 (30,047)
OTHER INCOME (EXPENSE)
Parking, dividends, interest
and miscellaneous income 38,707 49,545 106,507 93,041
Interest and miscellaneous
expenses (20,921) (268) (20,921) (268)
__________ _________ ________ __________
INCOME BEFORE INCOME
TAXES AND EQUITY IN
EARNINGS OF GARDEN
LIFE PLAN, LTD. 17,942 10,220 172,714 62,726
INCOME TAXES (Note 8) 6,782 160 63,253 17,890
__________ ________ _________ _________
INCOME BEFORE EQUITY
IN EARNINGS OF GARDEN
LIFE PLAN, LTD. 11,160 10,060 109,461 44,836
EQUITY IN EARNINGS OF GARDEN
LIFE PLAN, LTD., net of
deferred income taxes
(Note 4) - - - -
_________ ________ ________ _________
NET INCOME 11,160 10,060 109,461 44,836
OTHER COMPREHENSIVE INCOME-
Net unrealized gains(loss)
on available- for-sale
securities, net of income
taxes (32,781) 18,580 (15,111) (4,347)
__________ ________ __________ __________
COMPREHENSIVE INCOME
(LOSS) $ (21,621) $ 28,640 $ 94,350 $ 40,489
========== ========= ========== ==========
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (Note 10) 1,651,356 1,670,649 1,654,400 1,671,908
========== ========= ========== ==========
EARNINGS PER COMMON SHARE
(Note 10) $.01 $.01 $.07 $.03
==== ==== ==== ====
[FN]
See the accompanying Notes to Financial Statements
See Accountant's Report
3
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HOSOI GARDEN MORTUARY, INC.
STATEMENTS OF CASH FLOWS
_ _ _ _ _ _ _ _ _ _ _ _
Six-Months Ended November 30, 2000 and 1999
[CAPTION]
1999 (As
2000 Restated
____________ _________
[S] [C] [C]
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 109,461 $ 44,836
Adjustments to reconcile net income to net cash
provided by operations
Depreciation 33,670 33,669
Gain on sale of securities (20,600) (7,139)
Increase (decrease) in allowance for doubtful
accounts 15,000 (16,050)
Cash value of life insurance policies (2,740) (415)
Deferred income taxes (5,696) (6,094)
(Increase) decrease in certain assets
Accounts receivable 10,446 66,549
Income taxes receivable 50,956 (6,773)
Inventories 7,557 (192,493)
Prepaid expenses and others 6,167 (2,944)
(Decrease) increase in certain liabilities
Accounts payable 65,444 194,752
Accrued liabilities 24,898 54,312
Income taxes payable 13,486 -
__________ _________
NET CASH PROVIDED BY OPERATING ACTIVITIES 308,049 162,210
__________ _________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (10,081) (20,817)
Purchase of securities (911,069) (138,412)
Proceeds from sale of securities 1,665,307 877,272
Distribution from investment in LLC 16,000 7,500
Premiums payments on life insurance policies (2,811) (2,811)
__________ _________
NET CASH PROVIDED BY INVESTING ACTIVITIES 757,346 722,732
__________ _________
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of reacquired shares (41,353) (16,894)
__________ _________
NET CASH USED IN FINANCING ACTIVITIES (41,353) (16,894)
__________ _________
NET INCREASE 1,024,042 868,048
CASH AND CASH EQUIVALENTS, beginning of period 828,818 928,162
__________ _________
CASH AND CASH EQUIVALENTS, end of period $1,852,860 $1,796,210
========== ==========
[FN]
See the accompanying Notes to Financial Statements
See Accountant's Report
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HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
November 30, 2000 and 1999
(1)Basis of presentation
Use of estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
Reclassification - Certain amounts in 1999 have been reclassified to conform
with the 2000 presentation.
(2)Cash and cash equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
(3)Investment securities
The Company held investments in the following types of securities:
[CAPTION]
Gross Gross Fair
Amortized Unrealized Unrealized Market
Cost Gain Loss Value
__________ __________ __________ __________
[S] [C] [C] [C] [C]
November 30, 2000
Available-for-sale
Equity securities $ 144,794 $ 23,145 $ 18,449 $ 149,490
Mutual Funds 678,340 96,743 2,234 772,849
__________ __________ __________ __________
823,134 119,888 20,683 922,339
Held-to-Maturity
U. S. Treasury Notes 97,344 685 499 97,530
__________ __________ __________ __________
Totals $ 920,478 $ 120,573 $ 21,182 $1,019,869
========== ========== ========== ==========
November 30, 1999
Available-for-sale
Equity securities $ 106,911 $ 21,402 $ 8,758 $ 119,555
Mutual Funds 635,980 127,084 7,960 755,104
_________ __________ __________ __________
742,891 148,486 16,718 874,659
Held-to-Maturity
U. S. Treasury Notes 125,922 125 3,582 122,465
_________ __________ _________ __________
Totals $ 868,813 $ 148,611 $ 20,300 $ 997,124
========= ========== ========= ==========
[FN]
See Accountant's Report
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HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
November 30, 2000 and 1999
(3)Investment securities (continued)
The maturities for all debt securities held at November 30, 2000 were:
[CAPTION]
Available-for-Sale Held-to-Maturity
____________________ ________________________
Amortized Market Amortized Market
Cost Value Cost Value
_________ ______ _________ _________
[S] [C] [C] [C] [C]
Within 1 year $ - $ - $ 9,986 $ 9,998
After 1 year
through 5 years - - 53,477 53,480
After 5 years - - 33,881 34,052
_________ _______ ________ ________
$ - $ - $ 97,344 $ 97,530
========= ======== ======== ========
The Company sold available-for-sale and held-to-maturity securities for
$1,665,308 and $877,272 in 2000 and 1999, respectively. The realized gains of
$23,044 and $13,556 in 2000 and 1999, respectively, is reflected in earnings.
The realized losses of $ 2,444 and $6,417 in 2000 and 1999, respectively, is
reflected in earnings. The cost of the securities sold was based on the cost
of all the shares of each such security held at the time of sale.
The unrealized holding gains on investment securities available-for-sale as of
November 30, 2000, and reported as a separate component of Stockholders'
Equity, are as follows:
[CAPTION]
2000
__________
[S] [C]
Unrealized holding gains, net of losses $ 99,205
Deferred income tax on net unrealized holding gains (37,671)
__________
$ 61,534
==========
(4)Garden Life Plan, Ltd.
Investment in Garden Life Plan, Ltd. (GLP) represents the Company's 50% share,
in the underlying equity in the net assets, accounted for under the equity
method of accounting for investments in common stock, of Garden Life Plan,
Ltd., a Hawaii corporation engaged in the sales of pre-need funeral plans
which are serviced solely by the Company.
[FN]
See Accountant's Report
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HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
November 30, 2000 and 1999
(4)Garden Life Plan, Ltd. (continued)
All payments received from the sale of pre-need funeral plans up to an amount
equal to 30% of the total price plus any sales tax or other charges are
retained by GLP as its compensation. The balance is deposited in trust funds
at Pacific Century Trust. GLP is entitled to all earnings from funds held in
trust.
Earnings of GLP is not reflected in these financial statements because the
audits of GLP's financial statements for the years ended May 31, 2000 and 1999
have not been completed. GLP's successor auditors are in the process of
auditing GLP's financial statements as of and for the year ended May 31, 1999
and will thereafter audit GLP's financial statements as of and for the year
ended May 31, 2000.
Until the completion of the audit of GLP's financial statements for 2000 and
1999, interim earnings of GLP will not be reported because of unresolved
issues regarding GLP's revenue recognition policies.
(5)Woolsey-Hosoi Services, LLC
On July 7, 1998, the Company in partnership with Woolsey Funeral & Cemetery
Services, Inc. formed Woolsey-Hosoi Mortuary Services, LLC (Woolsey-Hosoi), a
limited liability company, to provide funeral services to market sectors not
previously serviced by the Company. The Company's initial capital
contribution to Woolsey-Hosoi was $15,000.
The Company provides Woolsey-Hosoi with embalming services, assistance with
funeral arrangements and facilities use and related charges. The revenues
from these services provided to Woolsey-Hosoi is reflected in Net sales and
services which amounted to $14,491 or 1.1% and $6,663 or .5% of Net sales and
services in 2000 and 1999, respectively.
(6)Deferred income taxes
Deferred taxes are recognized for differences between the basis of assets and
liabilities for financial statements and income tax purposes. The deferred
assets and liabilities represent the future tax consequences of those
differences, which will be either taxable or deductible when the assets and
liabilities are recovered or settled. The deferred tax liability results from
the recognition of unrealized gains, net of losses, on investment securities
for financial statement purposes and recognition of gains or losses when
securities are sold for income tax purposes, and the equity method of
accounting for the investment in subsidiary as explained under Garden Life
Plan, Ltd. above. Under the equity method the Company's share of earnings of
the subsidiary is reported for tax purposes only when distributions of
earnings are received as dividends.
[FN]
See Accountant's Report
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HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
November 30, 2000 and 1999
(6)Deferred income taxes (continued)
The deferred tax asset results from the use of the reserve method in
accounting for uncollectible accounts receivable in the financial statements
and the use of the direct write-off method for income tax purpose and the
accrual of vacation and sick leave when earned for the financial statements
and the recognition for income tax purposes when paid.
(7)Reacquired shares
Capital contributed is reduced for shares of the Company reacquired after June
30, 1987. Payments for shares in excess of the par value of each share
acquired has been charged to additional paid-in capital. Purchase of reacquired
shares have exceeded the balance of additional paid-in capital and therefore,
Retained Earnings is charged for the cost in excess of par value.
The 223,785 shares reflected as Treasury Stock as of November 30, 1999
reflects the shares acquired before July 1, 1987.
(8)Income taxes
The provision for income taxes consists of the following:
[CAPTION]
2000 1999
________ _________
[S] [C] [C]
Current:
Federal $ 59,966 $ 20,518
State 8,983 3,466
________ _________
Total Current 68,949 23,984
________ _________
Deferred:
Federal (4,793) (5,128)
State (903) (966)
________ ________
Total Deferred (5,696) (6,094)
________ _________
Total Federal and State $ 63,253 $ 17,890
======== =========
[FN]
See Accountant's Report
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HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
November 30, 2000 and 1999
(9)Comprehensive income
In the year ended May 31, 1999, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income, which requires
that unrealized gains and losses on available-for-sale securities be included
in other comprehensive income.
(10)Earnings per share
Earnings per common share has been computed on the basis of a weighted average
shares outstanding of 1,654,400 for 2000 and 1,671,908 for 1999.
[FN]
See Accountant's Report
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HOSOI GARDEN MORTUARY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
November 30, 2000 and 1999
Changes in financial condition
There have been no material adverse changes in financial condition from the
end of the preceding fiscal year to the end of the current quarter ended
November 30, 2000.
The working capital and working capital ratio at November 30, 2000 is as
follows:
[S] [C]
Working capital $ 2,820,782
Working capital ratio 6.2:1
Changes in results of operations
Cost of Sales and Services - Cost of sales and services as a percent of net
sales decreased to 64.7% from 73.3% for the six-months ended November 30, 2000
over 1999. The decrease is due principally to decreases in rent, real
property taxes and cost of merchandise.
Selling, General and Administrative Expenses - Selling, general and
administrative expenses as a percent of net sales remained virtually unchanged
at 28.6% and 29.0% for the six-months ended November 30, 2000 and 1999,
respectively. Increases in advertising, office supplies, legal fees and
telephone expenses were offset by decrease in educational, accounting and
stockholders' meeting expenses.
Income Taxes - The effective income tax rate decreased to 36.6% for 2000 from
28.5% for 1999.
Other income (expense) - Other income(expense) as a percent of net sales
decreased to 6.6% fro resulted from decreases in parking revenues and the
incurrence of a non-recurring expense for data processing which were partially
offset by an increase in investment interest income.
[FN]
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HOSOI GARDEN MORTUARY, INC.
PART II - OTHER INFORMATION
_ _ _ _ _ _ _ _ _ _ _ _ _ _
November 30, 2000 and 1999
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K -
The Company filed a current report on Form 8-K and Form 8-K/A, dated May 10,
2000, reporting the resignation Deloitte & Touche as auditor for the
registrant's subsidiary for its year ended May 31, 2000.
The Company filed a current report on Form 8 - K and Form 8 - K/A, dated
August 31, 2000, reporting the dismissal of Deloitte & Touche as auditor for
the registrant's subsidiary for its year ended May 31, 1999 and the engagement
of the firm of Nishihama & Kishida, CPA's as successor auditors for the
registrant's subsidiary for the fiscal years ended May 31, 2000 and 1999.
[FN]
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
The information furnished reflects all adjustments which are, in the opinion
of management, necessary to a fair statement of the results for the interim
periods.
HOSOI GARDEN MORTUARY, INC.
___________________________________
(Registrant)
Date 01/12/01 /S/ CLIFFORD HOSOI
___________________________________
Clifford Hosoi, President
Date 01/12/01 /S/ KEITH NUMAZU
___________________________________
Keith Numazu, Treasurer
Corporate Treasurer and Bookkeeper
[FN]
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