<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended July 31, 1995 Commission file Number 0-4179
CAPITAL INVESTMENT OF HAWAII, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
HAWAII 99-0065664
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No)
733 Bishop Street, Suite 1700
Honolulu, Hawaii 96813
---------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (808) 537-3981
---------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
Name of each exchange on
Title of each class which registered
None None
------------------- ------------------------
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
--------------------------
(Title of class)
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
--- ---
The Company's voting stock is not actively traded on any exchange, and
accordingly the aggregate market value is not determinable.
There were 1,032,683 shares outstanding of common stock, no par value,
as of October 23, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Articles of Association and By-Laws are incorporated by reference into
Part IV of this report.
<PAGE> 2
PART I
Item 1. BUSINESS
Capital Investment of Hawaii, Inc. (Registrant) was incorporated in
Hawaii in 1944. The Registrant and its subsidiaries are engaged principally in
real estate, security and other investing, and wholesale bakery activities. As
of July 31, 1995, the Registrant and its subsidiaries had 143 employees.
The Registrant has classified its business activities into
significant segments for the years ended July 31, 1995, 1994 and 1993. The
Registrant's operations have been classified into real estate activities,
security and other investing activities, wholesale bakery activities and other
activities for the fiscal year ended July 31, 1995. In April 1993 the board of
directors ratified management's decision to discontinue the aviation fuel
business. The segment was disposed of as of July 31, 1993. Financial
information about industry segments is presented in note 14 of the notes to the
consolidated financial statements.
REAL ESTATE
Real estate activities include the acquisition and development of
undeveloped real estate, the sale and leasing of developed real estate and the
investment in undeveloped land located principally on the island of Oahu in the
state of Hawaii. Also included in real estate activities is interest income on
notes receivable arising from property sales and income earned from financing
acquisition, development and construction loan commitments in connection with
residential real estate projects in Las Vegas, Nevada. Since real estate sales
and developments are not made and undertaken on a continuous basis, there exist
significant fluctuations from year to year. The results of any one year are
not necessarily comparable to other years and should not be a basis of
expectation for future years. The identification and location of the
Registrant's real estate holdings are discussed in Item 2, PROPERTIES.
SECURITY AND OTHER INVESTING ACTIVITIES
Security and other investing activities include gains and losses from
marketable securities and other investments and dividend and interest income
related to the ownership of such investments. The timing of sales and related
gains/losses, which tend to vary with market conditions and the Registrant's
cash requirements, are subject to significant fluctuations from year to year.
1
<PAGE> 3
WHOLESALE BAKERY ACTIVITIES
Wholesale bakery activities include the production and sale of bakery
products primarily to major hotels, commercial airlines and U. S. military
installations in Hawaii. The Registrant acquired the assets of an existing
bakery in August 1990 and additional assets of another smaller bakery in May
1991. The bakery operations incurred substantial amortization costs related to
not-to-compete agreements, goodwill and certain reorganizational costs during
the years ended July 31, 1994 and 1993.
DISCONTINUED AVIATION FUEL ACTIVITIES
Aviation fuel activities included spot and contract purchase and
resale of aviation fuel primarily in Hawaii and California. Effective July
1992, the Registrant discontinued aviation fuel activities in California. The
aviation fuel activities were all together discontinued during fiscal year
1993.
OTHER ACTIVITIES
Other activities include a real estate management division in
Waikiki, Hawaii that in fiscal year 1995 had revenues of $611,670 and net
income of $282,715, compared with revenues of $597,364 and net income of
$287,450 in fiscal year 1994.
Item 2. PROPERTIES
As of July 31, 1995, the Registrant and its subsidiaries owned
properties used in connection with its real estate activities as set forth
below. All properties are located in the City and County of Honolulu, and the
titles are held in fee.
<TABLE>
<CAPTION>
DESCRIPTION AREA
----------- ----
<S> <C>
Developed Real Estate and Undeveloped Land
5 condominium apartments, Makaha Valley Towers in Mahaha, Hawaii
5 condominimum apartments, Ilikai Apartment Building and Ilikai Marina
Apartment Building in Honolulu, Hawaii
1 lot, Makaha, Hawaii .19 acres
1 Commercial warehouse and land in Honolulu, Hawaii .22 acres
</TABLE>
2
<PAGE> 4
The Company also owns parcels of unimproved real estate totaling
approximately 39 acres and interests in real estate at Makaha Valley, Hawaii
owned by the Company's 85.8 percent-owned subsidiary, Makaha Valley,
Incorporated, among which are (a) 3.825 acres of land zoned "agricultural"
fronting the fifth fairway of the Sheraton Makaha Resort golf course, carried
at nil on the balance sheet; (b) 2.823 acres of land near Makaha beach zoned
"country," but designated on the development plan of the City and County of
Honolulu, Hawaii general plan as "commercial," carried at $3,065 on the balance
sheet; and (c) a reversionary interest in 8.454 acres of land within the
Maunaolu residential subdivision at Makaha zoned "country," title to which will
revert to the subsidiary if the land ceases to be used as a reservoir, which is
carried at nil on the balance sheet.
See note 7 of notes to the consolidated financial statements for
information with respect to real estate pledged as security for indebtedness.
Item. 3 LEGAL PROCEEDINGS
There is no litigation which, in the opinion of management, will have
a materially adverse affect on the Company's consolidated financial position or
results of operations.
Item. 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters that were submitted to a vote of security
holders during the fourth quarter of the fiscal year ended July 31, 1995.
3
<PAGE> 5
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Registrant's common shares are not listed on any stock exchange,
and there is no active trading of the shares. The following is the high and
low quarterly bid information for each of the full quarterly periods within the
years ended July 31, 1995 and 1994:
<TABLE>
<CAPTION>
LOW HIGH
BID BID
--- ----
<S> <C> <C>
Quarter ended:
October 31, 1993 1-1/2 1-5/8
January 31, 1994 1-1/2 1-9/16
April 30, 1994 1-1/4 1-1/2
July 31, 1994 1-1/4 1-1/4
October 31, 1994 1 1-1/4
January 31, 1995 3/4 1-3/16
April 30, 1995 3/4 1-3/16
July 31, 1995 3/8 1/2
</TABLE>
The aforementioned quotations were received from Abel-Behnke
Corporation which makes a market in the Company's stock.
On July 31, 1995, there were approximately 560 stockholders of record
of common stock, excluding individuals and institutions for whom shares are
held in the names of nominees or brokerage firms.
There were no common stock dividends declared or paid during fiscal
years 1995, 1994 and 1993.
Item 6. SELECTED FINANCIAL DATA
(Not Covered By Independent Auditors' Report)
SUMMARY OF CONSOLIDATED OPERATIONS
For the five years ended July 31, 1995
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $7,570,954 $ 7,536,249 $7,392,644 $8,833,016 $7,276,829
Loss from continuing operations
before extraordinary credit (807,926) (1,423,453) (997,381) (966,427) (501,024)
Loss per common share from
continuing operations before
extraordinary credit (A) (.78) (1.38) (.97) (.93) (.48)
=== ==== === === ===
</TABLE>
4
<PAGE> 6
(A) Loss per common share from continuing operations before extraordinary
credit for each period was computed by dividing loss from continuing
operations before extraordinary credit by the weighted average number
of shares of common stock outstanding in each period. A detailed
analysis of the loss per share computation for each period is
presented in Exhibit 11. There were no cash dividends paid on common
stock for the five years ended July 31, 1995.
FINANCIAL CONDITION
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total assets $10,617,753 11,498,301 11,440,892 13,169,193 14,566,117
=========== ========== ========== ========== ==========
Indebtedness:
Mortgage notes 1,874,247 1,200,000 1,200,000 1,200,000 698,350
Other notes, secured 2,670,016 3,416,384 3,229,042 2,982,154 3,170,386
Debentures 2,108,245 2,221,895 2,378,595 2,550,845 2,843,690
Other notes, unsecured 499,605 507,253 463,450 560,592 577,140
----------- ---------- ---------- --------- ---------
$ 7,152,113 7,345,532 7,271,087 7,293,591 7,289,566
=========== ========== ========== ========== ==========
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company recorded a net loss of $807,926 for the fiscal year ended
July 31, 1995, (fiscal year 1995), compared with net losses of $1,423,453 and
$1,020,779 for fiscal years 1994 and 1993, respectively.
The net loss for fiscal year 1995 included depreciation and
amortization totaling $323,700, as compared to $642,851 and $902,935 in fiscal
years 1994 and 1993, respectively. The fiscal year 1995, 1994 and 1993 charges
for depreciation and amortization were comprised of the following:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Depreciation $318,523 361,966 394,754
Amortization of covenants not-to-compete -- 275,708 503,004
Other 5,177 5,177 5,177
-------- ------- -------
$323,700 642,851 902,935
======== ======= =======
</TABLE>
The Company's subsidiary, Latipac Fine Foods, Incorporated (which does
business as Bakery Europa) accounted for $264,878, $297,245 and $317,256 of
depreciation for fiscal years ended July 31, 1995, 1994 and 1993, respectively.
All amortization of covenants not-to-compete related to Bakery Europa.
5
<PAGE> 7
The Company's gross revenues for fiscal years 1993 through 1995
reflect the diversification of the Company's business activities away from its
historical real estate focus. The investments in the past three years included
diversification into specialty baking on the island of Oahu, Hawaii and
residential "acquisition, development and construction" lending in Las Vegas,
Nevada. The Company has sought to diversify in order to provide regular,
recurring revenues in contrast to the Company's long history of irregular real
estate gains and income.
In fiscal year 1996, the Company plans to continue its short-term
construction lending activities in Las Vegas. The Company will also attempt to
position Bakery Europa to ride out the weak local economy and to preserve its
place as a major supplier of specialty baked products to the airlines and
hotels that comprise the tourist industry on Oahu.
Bakery Operations
Fiscal year 1995's net loss was primarily due to Bakery Europa's poor
performance in a tourist-driven economy that remains lack-luster. Bakery
Europa's operating loss for fiscal years 1995, 1994 and 1993 is summarized as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Operating loss before certain interest and depreciation
and amortization $198,982 230,475 185,304
Interest on loan to acquire this subsidiary's asset 57,000 62,000 75,000
Depreciation 264,878 297,245 317,256
Amortization of goodwill and covenants not-to-compete -- 275,708 503,005
Other 5,177 5,177 5,177
-------- ------- ---------
Operating loss $526,037 870,605 1,085,742
======== ======= =========
</TABLE>
6
<PAGE> 8
Bakery Europa's business is heavily oriented towards tourism. In July
1995, airlines and airline catering companies accounted for 25% and hotels for
22% of Bakery Europa's sales revenue for that month. The subsidiary recorded
net product sales of $4,965,794 for fiscal year 1995, compared with net sales
of $5,410,698 and $5,004,683 for fiscal years 1994 and 1993, respectively. In
addition to the downturn in sales, gross profit margins were pressured by an
inability to increase prices to deal with the rising cost of goods.
This subsidiary's plan for fiscal year 1996, under new leadership, is
to break-even on earnings before depreciation and amortization. This plan is
based on eliminating marginal accounts, a modest price increase that is already
in effect, and a restructuring of the production force. Debt service on the
loan incurred with the purchase of assets of Bakery Europa will be paid by the
parent until business conditions improve. The unpaid principal balance of this
loan was $473,850 as of July 31, 1995.
Income From Investments
and Other Income
Since fiscal year 1991, the Company has engaged in making acquisition,
development and construction loans to home builders in Las Vegas, Nevada. The
Company has made ten such loans since 1991, of which seven have been repaid.
Acquisition, development and construction (ADC) loans, are loans to finance the
acquisition of land, the improvement of the land into roads and finished house
lots and construction of houses. In recent years, banks and other
federally-insured lending institutions, operating under more restrictive laws
and oversight, have made ADC financing standards and terms more stringent. The
more difficult lending environment has caused many builders in Las Vegas to
seek alternative sources of financing.
Income from investments in 1995 was $1,867,281 as compared to
$1,310,432 and $1,461,822 in 1994 and 1993, respectively. Included in income
from investments was $1,360,568 of income from Las Vegas lending activities in
fiscal year 1995 as compared to $1,097,137 and $982,108 for fiscal years 1994
and 1993, respectively. The 1994 and 1993 amounts also include interest income
from loans to Las Vegas developers of $235,543 and $194,012, respectively.
Deferred income on the ADC arrangements amounted to $495,000 as of July 31,
1995 as compared to $373,476 and $276,534 as of July 31, 1994 and 1993,
respectively.
7
<PAGE> 9
At the end of fiscal year 1995, the Company held three secured loans
made to a single builder doing business as MVL, Inc., QCL, Inc., and LSR, Inc.
in the aggregate principal amounts of $3,574,360 (including one loan in which
loan participations in the aggregate amount of $1,562,620 were held by third
parties), payable with interest rates of 20% per annum plus a profit
participation. The builder was ranked among the top 20 builders in Las Vegas
in terms of new home sales closed in 1994. In the case of the participated
loan, the Company receives 25% of each participant's interest revenue and
one-half of each participant's share of profit.
ADC loans bear higher than average risk. The Company adheres to a
policy of concentrating its lending activity with experienced builders building
for the "low-end" of the Las Vegas housing market on well-located sites
acquired at low cost. The Company also limits the outstanding loan balance to
an amount sufficient to acquire land and to build on only a portion of the
total lots in the project. The effect of the loan limit is to require the
builder to sell completed homes to finance remaining construction costs.
Despite the high level of home building activity in the Las Vegas area, the
Company believes that 1996 will be another excellent year for the Las Vegas
home building industry, with job growth driven by 14,500 hotel rooms now under
construction or about to break ground.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated balance of cash and cash equivalents at
July 31, 1995 was $1,287,636 compared with $1,146,248 at the end of fiscal
year 1994.
Cash provided by operating activities amounted to $582,742 in 1995 and
resulted primarily from the collection on real estate investments, net of
purchase of investments in real estate, of $1,639,596 related to the Company's
Las Vegas ADC arrangements.
Cash inflows in 1995 provided by investing activities amounted to
$366,445. Proceeds from the sale of marketable securities amounted to $401,704
for fiscal year 1995. Cash used in financing activities of $810,799 included
proceeds received under loan participation agreements of $700,000 (see note 6
to the consolidated financial statements) and payments on indebtedness of
$1,326,256.
8
<PAGE> 10
The Company, during fiscal year 1995, was able to meet operating cash
requirements with cash flow generated from investing and financing activities.
Cash inflows and outflows from investments in MVL, Inc., QCL, Inc. and LSR,
Inc. will continue into fiscal year 1996. Cash requirements for fiscal year
1996 will be satisfied from institutional borrowings, net collections of notes
receivable, cash in banks at year end and/or net collections of ADC loans.
Item 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements and Schedules.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in accountants nor disagreements on accounting
or financial disclosure matters for the years ended July 31, 1995 and 1994.
9
<PAGE> 11
PART III
Item 10. DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANT
The following table lists all directors of the Registrant as of July
31, 1995:
<TABLE>
<CAPTION>
Number
Office of years
held with served as Business Other public
Name Age Registrant director experience directorships
---- --- -------------- --------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
Stuart T. K. Ho 59 Chairman of the 28 Positions held with Bancorp Hawaii,
Board and Registrant Inc.; Gannett
President Co., Inc.;
College Retirement
Equities Fund
Dean T. W. Ho(1) 57 Vice Chairman 14 Positions held with --
and Secretary Registrant
Donald M. Wong 77 Senior Vice 21 Positions held with --
President, Registrant
Chief Financial
Officer and
Treasurer
Pedro P. Ada 65 None 24 President of Ada's --
Incorporated;
real estate, insur-
ance agency and
investments
Stanely W. Hong(2) 59 None 10 Business consultant Central Pacific
formally senior Bank; First
Vice President of Insurance Co. of
McCormack Hawaii
Properties, Ltd.
C. B. Sung 70 None 10 Chairman of Unison
International;
President and
Chief Executive
Officer of Unison
Pacific
Corporation
</TABLE>
(1) Mr. Dean T. W. Ho is the brother of Mr. Stuart T. K. Ho.
(2) Mr. Stanley W. Hong is the brother-in-law of Mr. Stuart T. K. Ho.
10
<PAGE> 12
The present terms of office of all directors will expire at the next
annual meeting of the stockholders of the Registrant or upon election of their
respective successors. No events have occurred during the past five years that
are material to an evaluation of the ability or integrity of any director.
The following table lists all executive officers of the Registrant as
of July 31, 1995:
<TABLE>
<CAPTION>
Name Age Office Position held
---- --- ------ -------------
<S> <C> <C> <C>
Stuart T. K. Ho 59 Chairman of the Board Chairman of the Board since 1982, President
and President from 1975 to 1982 and since 1988, Vice
President and Secretary from 1966 to 1975
Dean T. W. Ho(1) 57 Vice Chairman and Secretary since 1991, Vice Chairman since
Secretary 1988, President from 1982 to 1987,
Executive Vice President from 1975 to 1982
and Vice President from 1965 to 1975
Donald M. Wong 77 Senior Vice President Senior Vice President since 1990, Financial
and Treasurer Vice President from 1965 to 1990 and
Treasurer since 1965
Harriet H. Matsuo 70 Assistant Secretary and Secretary from 1975 to 1991 and Assistant
Assistant Treasurer Secretary and Assistant Treasurer from
1965 to 1975 and since 1991
Greta U. Nakao 73 Assistant Secretary and Assistant Treasurer since 1975 and Assistant
Assistant Treasurer Secretary since 1981
Walter Lum 54 Assistant Treasurer Appointed in March 1995
</TABLE>
(1) Mr. Dean T. W. Ho is the brother of Mr. Stuart T. K. Ho.
The term of office of the above executive officers is for a period of
one year. No events have occurred during the past five years that are material
to an evaluation of the ability or integrity of any executive officer.
Item 11. EXECUTIVE COMPENSATION
The following table shows the compensation for each of the years ended
July 31, 1995, 1994 and 1993 for (a) the Chairman of the Board and President,
and (b) all executive officers of the Registrant whose annual compensation
exceeds $100,000.
11
<PAGE> 13
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
---------------------------------------------
Annual Compensation Awards Payouts
----------------------- -------------- ------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
annual Restricted other
compensa- stock LTIP compensa-
Name and Salary Bonus sation award(s) Option/ Payouts sation
principal postion Year ($) ($) ($) ($) SARs(#) ($) ($)
- ----------------- ---- --- --- --- --- ------- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stuart T.K. Ho,
Chairman of the
Board and
President 1995 147,839 -- -- -- -- -- --
1994 152,004 -- -- -- -- -- --
1993 158,798 -- -- -- -- -- --
James Groebe,
Latipac Fine
Foods President
SCEO 1995 13,125 -- -- -- -- -- --
1994 108,520 -- -- -- -- -- --
1993 104,288 -- -- -- -- -- --
</TABLE>
Item 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following sets forth, as of July 31, 1995, shareholders of record
who beneficially own more than 5% of the voting stock of the Registrant:
<TABLE>
<CAPTION>
Amount and
nature of
beneficial Percent
Name and address of beneficial owner: ownership of class
- ------------------------------------- ---------- --------
<S> <C> <C>
Cede & Co. 120,613 11.7%
P.O. Box 20
New York, New York 10004
Drake & Co. 55,690 5.4
20 Exchange Place, Level D
New York, New York 10043
Stuart T.K. Ho, Dean T. Ho, and Karen Ho Hong, 168,650 16.3
Trustees of the Chinn Ho Trust
733 Bishop Street, Suite 1700
Honolulu, Hawaii 96813
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
Amount and
nature of
beneficial Percent
Name and address of beneficial owner, continued: ownership of class
- ------------------------------------ --------- --------
<S> <C> <C>
Stuart T. K. Ho 225,813(1) 21.9%
733 Bishop Street, Suite 1700
Honolulu, Hawaii 96813
Dean T. W. Ho 225,850(2) 21.9
733 Biship Street, Suite 1700
Honolulu, Hawaii 96813
Karen Ho Hong 212,425(3) 20.6
4976 Poola Street
Honolulu, Hawaii 96821
Robin Lee 77,250 7.5
977 Longridge Road
Oakland, California 94610
</TABLE>
<TABLE>
<S> <C> <C> <C>
(1) Includes: (a) sole voting and investment power, 16,813 shares.
(b) shared voting and investment power for 168,650 shares owned by the Chinn Ho Trust, of which
Stuart Ho is one of 3 Trustees, and 29,500 shares owned by the Chinn Ho Foundation, of which
Stuart Ho is one of 4 Trustees.
(c) 10,850 shares owned by Mary L. Ho, spouse, who has sole voting and investment power.
(2) Includes: (a) sole voting and investment power, 27,700 shares.
(b) shared voting and investment power for 168,650 shares owned by the Chinn Ho Trust, of which
Dean Ho is one of 3 Trustees, and 29,500 shares owned by the Chinn Ho Foundation, of which
Dean Ho is one of 4 Trustees.
(3) Includes: (a) sole voting and investment power, 38,775 shares.
(b) shared voting and investment power for 168,650 shares owned by the Chinn Ho Trust, of which
Karen Ho Hong is one of 3 Trustees.
(c) shared voting and investment power for 5,000 shares owned by Karen Ho Hong and Stanley Hong as
trustees for David Hong.
</TABLE>
13
<PAGE> 15
The following table sets forth, as of July 31, 1995, the number of
shares of the Registrant's equity securities held by each director and all
directors and officers of the Registrant as a group:
<TABLE>
<CAPTION>
Sole Shared
voting voting
and and
Title Name of Amount and nature of investment investment
of class beneficial owner beneficial ownership Total power power
-------- ---------------- -------------------- ----- ---------- ----------
<S> <C> <C> <C> <C> <C>
Common Stock Stuart T. K. Ho 225,813 shares owned of record 21.9% 1.6% 20.2%(1)
Common Stock Dean T. W. Ho 225,850 shares owned of record 21.9% 2.7 19.2 (1)
Common Stock Donald M. Wong 39,750 shares owned of record 3.8 - 3.8
Common Stock Pedro Ada 5,444 shares owned of record .5 .5 -
Common Stock Stanley Hong 5,000 shares owned of record .5 - .5
Common Stock All directors and 279,007 shares owned of record 27.0 5.3 21.7 (1)
officers of Registrant
(9 persons)
</TABLE>
(1) Includes (a) 168,650 shares owned by the Chinn Ho Trust as to which
two executive officers of the Registrant are Trustees. The trust
agreement is effective until 2 years after the death of Mrs. Chinn Ho
or at such time as the personal representative of Mrs. Ho's estate is
discharged and appropriately released, whichever occurs later, not to
exceed 21 years after the death of the last survivor of Chinn Ho, Mrs.
Ho and the children of Chinn Ho; and (b) 29,500 shares owned by the
Chinn Ho Foundation qualified under Section 501(c)(3) of the Internal
Revenue Service Code, as to which four executive officers of the
Registrant are Trustees.
During fiscal year 1995, the Company borrowed $100,000 from
certain officers of the Company and $250,000 from a shareholder of the Company
through unsecured short-term notes. As of July 31, 1995, the balances of these
short-term notes were $105,000 and $0 due officers and a shareholder,
respectively.
The Company had entered into loan participation agreements in
fiscal year 1994 which provided that the Company sell, without recourse, to
participants an undivided participating interest in the loan to LSR, Inc. (see
footnote 6 to the consolidated financial statements). Included in the total
participant's share of the loan commitment amounting to $1,562,620 at July 31,
1995, was $1,090,200 borrowed from an officer and a director of the Company and
an officer of a subsidiary of the Company.
14
<PAGE> 16
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K
(A) Consolidated Financial Statements - See Index to Consolidated
Financial Statements and Schedules.
(B) There were no reports on Form 8-K filed during the last
quarter of the year ended July 31, 1995.
(C) Exhibits:
<TABLE>
<CAPTION>
Exhibit Form 10-K
number Description Page
------- ----------- ---------
<S> <C> <C>
3 Articles of Incorporation and By-Laws *
11 Computation of Loss Per Common Share 17
11a Computation of Weighted Average Number of Common Shares 18
22 Subsidiaries of Capital Investment of Hawaii, Inc. 19
</TABLE>
Exhibits not listed above are omitted because of the absence
of the conditions under which they are required.
* Incorporated by reference as Exhibits 1A and 1B to
Registration Statement number 0-4179 filed on November 29,
1969.
(D) Financial Statement Schedules - See Index to Consolidated
Financial Statements and Schedules.
15
<PAGE> 17
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedules
Independent Auditors' Report
Consolidated Financial Statements:
Consolidated Balance Sheets - July 31, 1995 and 1994
Consolidated Statements of Operations and Retained Earnings - Years
ended July 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows - Years ended July 31, 1995,
1994 and 1993
Notes to Consolidated Financial Statements
Schedules:
VIII Valuation and Qualifying Accounts and Reserves - Years ended
July 31, 1995, 1994 and 1993
XI Real Estate and Accumulated Depreciation - July 31, 1995
XII Mortgage Loans on Real Estate - July 31, 1995
Schedules not listed above are omitted because of the absence of the conditions
under which they are required or because the required information is included
elsewhere in the consolidated financial statements or notes thereto.
16
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Capital Investment of Hawaii, Inc.:
We have audited the consolidated financial statements of Capital Investment of
Hawaii, Inc. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedules as listed in the accompanying
index. These consolidated financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedules 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 consolidated 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
consolidated 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
Capital Investment of Hawaii, Inc. and subsidiaries as of July 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
years in the three-year period ended July 31, 1995, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
As discussed in notes 1 and 3 to the consolidated financial statements, the
Company changed its method of accounting for investments in fiscal year 1995 to
adopt the provisions of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities.
KPMG Peat Marwick LLP
Honolulu, Hawaii
October 23, 1995
<PAGE> 19
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
July 31, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
----------- ----------
<S> <C> <C>
Cash and cash equivalents $ 1,287,636 1,146,248
Marketable equity securities (notes 1 and 3) 111,046 49,310
Receivables:
Trade accounts and notes, less allowance for doubtful
receivables of $31,860 and $58,544 in 1995 and 1994,
respectively 1,065,991 762,765
Long-term receivables (including installments due within
one year of $360,472 in 1995 and $1,647,729 in 1994)
(notes 4 and 7) 1,656,314 1,663,685
----------- ----------
Total receivables 2,722,305 2,426,450
----------- ----------
Inventories 53,113 56,636
Developed real estate, less accumulated depreciation of
$186,345 in 1995 and $176,259 in 1994 (notes 5 and 7) 1,465,832 97,584
Undeveloped land held for sale (note 6) 134,474 134,474
Other investments:
Real estate (note 6) 3,691,860 5,331,456
Securities, at cost (notes 3 and 7) 808,912 954,953
----------- ----------
4,500,772 6,286,409
----------- ----------
Property and equipment, at cost (note 7):
Leasehold improvements 214,463 209,713
Furniture and equipment 1,886,920 1,800,309
----------- ----------
2,081,383 2,010,022
Less accumulated depreciation and amortization (1,780,476) (1,477,573)
----------- ----------
Net property and equipment 300,907 532,449
----------- ----------
Deferred charges and other assets:
Deposit on purchase of developed real estate (note 11) -- 658,537
Other 41,668 110,204
----------- ----------
41,668 768,741
----------- ----------
$10,617,753 11,498,301
=========== ==========
</TABLE>
<PAGE> 20
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
July 31, 1995 and 1994
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
----------- -----------
<S> <C> <C>
Indebtedness (note 7):
Mortgage notes $ 1,874,247 1,200,000
Other notes, secured 2,670,016 3,416,384
Debentures 2,108,245 2,221,895
Other notes, unsecured 499,605 507,253
----------- -----------
Total indebtedness 7,152,113 7,345,532
----------- -----------
Accounts payable, trade 429,433 371,619
Accrued expenses:
Interest 57,854 71,081
Taxes other than income 17,108 17,956
Other 532,929 662,678
----------- -----------
Total accrued expenses 607,891 751,715
----------- -----------
Other payables:
Loans under participation agreements (note 6):
Related parties 1,090,200 1,200,000
Other 472,420 250,000
Covenants not-to-compete (note 2) -- 30,000
Other (notes 6 and 9) 740,839 682,033
----------- -----------
Total other payables 2,303,459 2,162,033
----------- -----------
Commitments and contingent liabilities (notes 6, 10 and 11)
Stockholders' equity:
Common stock without par value. Authorized 2,531,765
shares; issued 1,723,765 shares at stated value of $1 1,723,765 1,723,765
Additional paid-in capital 469,321 469,321
Retained earnings 1,923,877 2,731,803
----------- -----------
4,116,963 4,924,889
Cost of 691,082 common shares in treasury (4,057,487) (4,057,487)
Unrealized gain on marketable equity securities 65,381 --
----------- -----------
Net stockholders' equity 124,857 867,402
----------- -----------
$10,617,753 $11,498,301
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 21
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Consolidated Statements of Operations
and Retained Earnings
Years ended July 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Real estate sales $ -- -- 137,000
Net product sales 4,965,794 5,410,698 5,004,119
Income from investments 1,867,281 1,310,432 1,461,822
Other 737,879 815,119 789,703
---------- ---------- ----------
7,570,954 7,536,249 7,392,644
---------- ---------- ----------
Costs and expenses:
Cost of real estate sales -- -- 38,614
Cost of products sales 3,185,615 3,485,855 3,110,420
Other direct operating expenses (note 10) 1,998,299 2,141,105 2,262,939
General and administrative expenses
(notes 9 and 10) 2,165,530 2,635,303 2,651,456
Interest 1,029,436 677,098 553,196
---------- ---------- ----------
8,378,880 8,939,361 8,616,625
---------- ---------- ----------
Loss from continuing operations
before income taxes (807,926) (1,403,112) (1,223,981)
Credit (provision) for income taxes (note 8) -- (20,341) 226,600
---------- ---------- ----------
Loss from continuing operations
before discontinued operations (807,926) (1,423,453) (997,381)
---------- ---------- ----------
Discontinued operations - loss from
discontinued operations, less applicable
credit for income taxes (note 15) -- -- (23,398)
---------- ---------- ----------
Net loss (807,926) (1,423,453) (1,020,779)
Retained earnings at beginning of year 2,731,803 4,155,256 5,176,035
---------- ---------- ----------
Retained earnings at end of year $1,923,877 2,731,803 4,155,256
========== ========== ==========
</TABLE>
(Continued)
<PAGE> 22
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Consolidated Statements of Operations
and Retained Earnings, Continued
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Loss per common share (note 13):
Continuing operations $ (.78) (1.38) (.97)
Discontinued operations -- -- (.02)
--------- --------- ---------
Net loss per common share $ (.78) (1.38) (.99)
========= ========= =========
Weighted average number of common
shares outstanding during the period 1,032,683 1,032,683 1,032,683
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 23
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended July 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 5,751,175 6,284,269 5,856,944
Cash paid to suppliers/employees (6,967,784) (7,425,711) (7,795,190)
Capital expenditures - real estate (29,251) (10,310) (9,095)
Collections on long-term receivables
arising from real estate sales 3,681 16,744 7,727
Purchase of investments in real estate
(note 6) (6,372,767) (9,366,513) (8,017,993)
Collections from investments in real
estate (note 6) 8,012,363 7,472,238 6,387,445
Proceeds from real estates sales (net of
selling expenses) -- -- 121,259
Income tax refunds received -- 378,327 776,138
Dividends received 10,536 4,934 21,055
Interest received 1,220,452 1,097,533 1,235,490
Interest paid (1,042,663) (669,090) (535,706)
Partnership loss -- -- (17,045)
----------- ---------- ----------
Net cash provided by (used in)
operating activities 585,742 (2,217,579) (1,968,971)
----------- ---------- ----------
Cash flows from investing activities:
Proceeds from partnership capital
distributions -- -- 66,198
Purchases of marketable securities -- (16,926) (267,150)
Purchases of other investments (63,618) (137,080) (14,962)
Proceeds from sale of marketable
securities 401,704 44,711 575,514
Proceeds from sale of other investments 100,647 12,367 186,184
Loans made -- (2,168,053) (5,900,935)
Collections on long-term receivables 3,690 3,200,306 6,915,926
Capital expenditures (75,978) (77,723) (148,310)
Proceeds from sales of fixed assets -- -- 14,175
----------- ---------- ----------
Net cash provided by investing
activities 366,445 857,602 1,426,640
----------- ---------- ----------
</TABLE>
(Continued)
<PAGE> 24
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from indebtedness $ 432,837 4,169,674 831,744
Payments on indebtedness (1,326,256) (4,095,229) (854,248)
Payments on covenants not-to-compete (30,000) (120,881) (144,395)
Proceeds received under loan participation
agreements (note 6) 700,000 1,450,000 --
Payments made under loan participation
agreements (note 6) (587,380) -- --
----------- ---------- ----------
Net cash provided by (used in)
financing activities (810,799) 1,403,564 (166,899)
----------- ---------- ----------
Net increase (decrease) in cash 141,388 43,587 (709,230)
Cash and cash equivalents at beginning of
year 1,146,248 1,102,661 1,811,891
----------- ---------- ----------
Cash and cash equivalents at end of year $ 1,287,636 1,146,248 1,102,661
=========== ========== ==========
Reconciliation of net loss to cash used in
operating activities:
Net loss $ (807,926) (1,423,453) (1,020,779)
----------- ---------- ----------
Adjustments to reconcile net loss to cash
used in operating activities:
Carrying value of real estate sold -- -- 22,873
Capital expenditures - real estate (29,251) (10,310) (9,095)
Depreciation and amortization 323,700 642,851 902,935
Gain on sale of marketable securities (236,323) (15,050) (116,989)
Loss (gain) on sale of other
investments (52,724) 5,897 (112,536)
Decline in market value of securities
deemed to be other than temporary -- -- 21,900
Loss on sale of property and
equipment -- 1,720 3,645
Deferred income taxes -- -- 97,300
Change in assets and liabilities:
Decrease (increase) in inventories 3,523 3,260 (13,910)
Increase in trade accounts and notes
receivable (303,226) (17,396) (14,037)
Decrease in long-term receivables
arising from real estate sales 3,681 16,744 7,727
Decrease (increase) in investment in
real estate 1,639,596 (1,894,275) (1,630,548)
Decrease (increase) in deferred
charges and other assets 71,896 (7,359) (5,952)
</TABLE>
(Continued)
<PAGE> 25
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Change in assets and liabilities,
continued:
Decrease in cash surrender value
of life insurance $ -- 3,826 19,317
Increase (decrease) in accounts
payable, trade 57,814 (156,449) (256,402)
Changes in income taxes receivable
and payable -- 398,668 438,738
(Decrease) increase in accrued
expenses and other payables (85,018) 233,747 (303,158)
---------- ---------- ----------
Total adjustments 1,393,668 (794,126) (948,192)
---------- ---------- ----------
Net cash provided by
(used in) operating
activities $ 585,742 (2,217,579) (1,968,971)
========== ========== ==========
</TABLE>
Supplemental schedule of noncash operating, investing and financing activities:
(1) A capital lease obligation of $18,937 was incurred in fiscal year 1993
when the Company entered into a lease for new equipment.
(2) In fiscal year 1992, the Company entered into an agreement to acquire
land and a warehouse for $1,350,000 (see note 11). The Company
assumed the existing mortgage loan with an original balance of
$700,000 and applied $650,000 of the existing deposit towards the
purchase of the property.
(3) Under SFAS No. 115, unrealized holding gains and losses of marketable
securities that are classified as available-for-sale are reported as a
separate component of stockholder's equity until realized. Unrealized
holding gains amounted to $65,381 in 1995.
(4) In fiscal year 1995, $161,736 of other investment securities
transferred to marketable equity securities.
See accompanying notes to consolidated financial statements.
<PAGE> 26
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
July 31, 1995 and 1994
(1) SUMMARY OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of Capital Investment of
Hawaii, Inc. and all of its subsidiaries (collectively referred to as
the "Company"). All material intercompany balances and transactions
have been eliminated from the consolidated financial statements.
REAL ESTATE ACCOUNTING
CARRYING AMOUNTS
Developed real estate and undeveloped land held for sale are carried
at the lower of cost or market value.
INCOME RECOGNITION
Profit is recognized in full from sales of real estate only when a
significant down payment has been received, risks of ownership have
passed to the buyer, collectibility of the sales price is reasonably
assured and other criteria set forth in Statement of Financial
Accounting Standards (SFAS) No. 66 are met.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization are computed generally by use of the
straight-line method. Depreciation and amortization rates are based
upon the estimated useful lives of the assets or, if applicable, the
remaining terms of leases, whichever is shorter. In general, the
ranges of annual rates of depreciation and amortization applicable to
major classifications of property and equipment are as follows:
<TABLE>
<CAPTION>
CLASS OF ASSETS RATE OF DEPRECIATION
--------------------
<S> <C>
Leasehold improvements 5% to 20%
Furniture and equipment 10% to 33-1/3%
</TABLE>
Maintenance and repairs are charged to income as incurred;
expenditures for major renewals and betterments that materially extend
the economic lives of property and equipment are capitalized. Gains
or losses arising from dispositions of depreciable assets are credited
or charged to income.
Debt expense is being amortized by the straight-line method over the
term of the debt.
CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments purchased with original
maturities of three months or less to be cash
1
<PAGE> 27
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
July 31, 1995 and 1994
equivalents. At July 31, 1995 and 1994, the Company held no
instruments that would be considered cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
SECURITY INVESTMENTS
For its investments in marketable equity securities, the Company
adopted the provisions of Statement of Financial Accounting Standards
No. 115, Accounting for Certain Investments in Debt and Equity
Securities (Statement 115) at July 31, 1995. Under Statement 115, the
Company classifies its marketable equity securities in one of three
categories: trading, available-for-sale, or held-to-maturity.
Trading securities are bought and held principally for the purpose of
selling them in the near term. Held-to-maturity securities are those
securities in which the Company has the ability and intent to hold the
security until maturity. All other securities not included in trading
or held-to-maturity are classified as available-for-sale.
Trading and available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted
for the amortization or accretion of premiums or discounts.
Unrealized holding gains and losses on trading securities are included
in earnings. Unrealized holding gains and losses, net of the related
tax effect, on available-for-sale securities are excluded from
earnings and are reported as a separate component of stockholders'
equity until realized.
Marketable equity securities at July 31, 1994 were valued at the lower
of their aggregate cost or market value.
Other investment securities for which no ready market exists are
valued at cost.
For all security investments, declines in value below cost that are
determined to be other than temporary are reflected in operations and
the written-down value of the securities is established as the new
cost basis for those securities.
The cost of securities sold is determined on a first-in, first-out
basis.
INVESTMENTS IN REAL ESTATE - ACQUISITION, DEVELOPMENT AND CONSTRUCTION
LOANS
The Company has originated acquisition, development, and construction
loans (ADC loans) with the following characteristics: (1) the borrower
has title to but little or no equity in the underlying security and
(2) the Company participates in the profit on the ultimate sale of the
project. For financial reporting purposes, the loans have been
presented as real estate investments.
The Company recognizes the interest and fees the Company is entitled
to under ADC loans ratably as profits are earned on the sale of
individual units in the underlying real estate projects.
2
<PAGE> 28
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
July 31, 1995 and 1994
INTANGIBLES
The costs of the covenants not-to-compete were being amortized on a
straight-line basis over the term of the related covenants which range
from three to four years (see note 2).
(2) ACQUISITIONS OF BAKERY OPERATIONS
On August 10, 1990, the Company entered into an agreement to purchase
substantially all of the assets and assume certain liabilities of
Bakery Europa, Inc., a Hawaii corporation engaged in the business of
producing and wholesaling bakery goods in the state of Hawaii.
Further, the Company entered into a second agreement on May 23, 1991,
to purchase certain assets of Old Vienna Bake Shop, Inc., a Hawaii
corporation also engaged in the business of producing and wholesaling
of bakery goods.
In addition to the purchase consideration paid for the aforementioned
acquisitions, the Company entered into not-to-compete agreements. As
of July 31, 1995, the Company paid all amounts due under the
not-to-compete agreements.
The excess of purchase price over the fair value of the net assets
acquired in the acquisitions was recorded as goodwill. Due to the
continuing losses of the bakery (see note 14) the remaining balance of
goodwill amounting to $215,220 was amortized in the fourth quarter of
fiscal year 1993.
(3) SECURITY INVESTMENTS
For fiscal year 1995, the Company's investments in marketable equity
securities have been classified as available-for-sale and are recorded
at fair value. Net unrealized holding gains have been reported as a
separate component of stockholders' equity.
At July 31, 1995 and 1994, the aggregate cost and aggregate fair
value of marketable equity securities were as follows:
<TABLE>
<CAPTION>
1995 1994
-------- ------
<S> <C> <C>
Aggregate cost $ 45,665 49,310
======== ======
Aggregate fair value $111,046 67,499
======== ======
</TABLE>
Gross unrealized gains (losses) on the portfolio of marketable equity
securities at July 31, 1995, 1994 and 1993 and net realized gains
(losses) for the years then ended pertaining to all security
investments were as follows:
<TABLE>
<CAPTION>
UNREALIZED NET
--------------------------- REALIZED
1995: GAINS LOSSES NET GAINS GAINS
------- ------ --------- --------
<S> <C> <C> <C> <C>
Marketable equity securities $68,872 3,491 65,381 236,323
======= ===== ======
Other security investments 52,724
--------
$289,047
========
</TABLE>
3
<PAGE> 29
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
NET
UNREALIZED REALIZED
--------------------------- GAINS
1994: GAINS LOSSES NET GAINS (LOSSES)
------- ------- --------- --------
<S> <C> <C> <C> <C>
Marketable equity securities $29,240 $11,051 $18,189 $ 15,050
======= ======= =======
Other security investments (5,897)
--------
$ 9,153
========
1993:
Marketable equity securities $26,560 $6,390 $20,170 $116,989
======= ====== =======
Other security investments 90,636
--------
$207,625
========
</TABLE>
Net realized gains from the sale of securities amounted to $289,047,
$9,153, and $207,625 in fiscal years 1995, 1994 and 1993,
respectively. Losses from write-downs in the carrying amounts of
other security investments as a result of declines in estimated fair
values determined to be other than temporary amounted to $21,900 in
fiscal year 1993, and are included in the aforementioned realized
gains (losses).
(4) LONG-TERM RECEIVABLES
The maturities of long-term receivables over the next five fiscal
years ending on July 31 are shown in the following summary:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 360,472
1997 420,126
1998 4,859
1999 870,857
----------
$1,656,314
==========
</TABLE>
The long-term receivables have a weighted average interest rate of
10%. At June 30, 1995, substantially all long-term receivables were
secured by real estate.
4
<PAGE> 30
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) DEVELOPED REAL ESTATE
The components of developed real estate at July 31, 1995 and 1994 were
as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Held for sale, at cost:
Condominium apartment units, a portion of
which includes undivided interest in land $ 302,154 $273,820
Commercial property (see note 11) 1,350,000 --
Other 23 23
---------- --------
1,652,177 273,843
Less accumulated depreciation 186,345 176,259
---------- --------
$1,465,832 $ 97,584
========== ========
</TABLE>
(6) REAL ESTATE INVESTMENTS
UNDEVELOPED LAND
Undeveloped land held for sale as of July 31, 1995 was comprised of
approximately 39 acres in Makaha Valley on the island of Oahu, state
of Hawaii.
OTHER REAL ESTATE INVESTMENTS
The Company has extended various acquisition, development and
construction loan commitments (ADC loans) to corporate real estate
ventures to finance residential real estate projects in Las Vegas,
Nevada. These financing arrangements are being accounted for as
in-substance investments in real estate, whereby the interest and fees
the Company is entitled to will be recognized ratably as profits are
earned on the sale of units in the underlying real estate projects.
Each loan commitment has restrictive loan covenants which limit the
maximum amount of loan proceeds available for site acquisition and
development and building construction.
At July 31, 1995 and 1994, all ADC loans were made to corporate real
estate ventures which are owned by an individual who, together with
his spouse, have personally guaranteed payment of the ADC loans.
The following paragraphs summarize the ADC loan arrangements and
present summary financial information for the corporate real estate
ventures.
TBW, INC.
On April 29, 1993, the Company extended a $5,205,025 acquisition,
development and construction loan commitment to TBW, Inc. to finance
a residential real estate project in Clark County, Nevada. At July
31, 1994, the Company's aggregate investment in the real estate
project amounted to $529,470 which includes $38,900 of capitalized
interest. Restrictive loan covenants limit the maximum amount of loan
proceeds available to $2,200,000. During the year ended July 31,
1995, the real estate project was completed with all loan advances
being fully repaid.
5
<PAGE> 31
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Condensed financial information of TBW, Inc. is as follows:
BALANCE SHEET
JULY 31, 1994
ASSETS
<TABLE>
<S> <C>
Cash $ 92,906
Prepaid fees and deposits 400
Construction 1,104,304
----------
$1,197,610
==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Trade accounts payable $ 69,192
Customers' deposits 33,685
Due to related party 258,541
Due to Capital Investment of Hawaii, Inc. 490,570
----------
851,988
Stockholder's equity:
Capital stock 5,000
Retained earnings 340,622
----------
$1,197,610
==========
INCOME STATEMENT
YEAR ENDED JULY 31, 1994
Sales revenue $6,376,554
Cost of sales 6,017,176
----------
Gross profit 359,378
Other expenses (18,756)
----------
Net income $ 340,622
==========
</TABLE>
MVL, INC.
On November 12, 1993, the Company extended a $6,101,056 acquisition,
development and construction loan commitment to MVL, Inc. to finance a
residential real estate project in Clark County, Nevada. At July 31,
1995 and 1994, the Company's aggregate investment in the real estate
project amounted to $1,516,732 and $1,072,839, respectively, including
$65,000 and
6
<PAGE> 32
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
$43,400, respectively, of capitalized interest, with an outstanding
unfunded commitment totaling $557,200 and $4,048,600, respectively.
Restrictive loan covenants limit the maximum amount of the loan proceeds
available during various phases of the project.
Condensed financial information of MVL, Inc. is as follows:
BALANCE SHEETS
JULY 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Cash $ 196,245 158,781
Prepaid fees and deposits 214,487 200,522
Land 2,298,994 3,638,810
Construction work in progress 1,226,994 1,023,935
---------- ---------
$3,936,720 5,022,048
========== =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Trade accounts payable $ 593,254 526,890
Customers deposits 168,362 144,946
Related party note payable 588,205 742,182
Note and interest payable 763,851 2,542,030
Due to Capital Investment of Hawaii, Inc. 1,451,732 1,029,439
---------- ---------
Total liabilities 3,565,404 4,985,487
---------- ---------
Capital stock 5,000 5,000
Retained earnings 366,316 31,561
---------- ---------
Total stockholder's equity 371,316 36,561
---------- ---------
$3,936,720 5,022,048
========== =========
</TABLE>
INCOME STATEMENTS
YEARS ENDED JULY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ----------
<S> <C> <C>
Sales revenue $ 11,161,649 3,621,084
Cost of sales (10,815,642) (3,576,678)
------------ ----------
Gross profit 346,007 44,406
Other expenses (11,252) (12,845)
------------ ----------
Net income $ 334,755 31,561
============ ==========
</TABLE>
In October 1995, the Company has agreed to provide additional funding to
construct up to 58 single-family residences of the MVL, Inc. Project.
The additional construction costs are anticipated to be approximately
$2,800,000.
7
<PAGE> 33
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
QCL, INC.
On March 9, 1994, the Company extended a $2,900,000 acquisition,
development and construction loan commitment to QCL, Inc. to finance a
residential real estate project in Clark County, Nevada. At July 31,
1995 and 1994, the Company's aggregate investment in the real estate
project amounted to $662,300 and $1,909,647, respectively, including
$47,000 and $59,800, respectively, in capitalized interest, with an
outstanding unfunded commitment totaling nil and $1,050,200,
respectively. Restrictive loan covenants limit the maximum amount of the
loan proceeds available to $1,900,000.
Condensed financial information of QCL, Inc. is as follows:
BALANCE SHEETS
JULY 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Cash $ 27,604 29,102
Prepaid fees and deposits 90,827 308,781
Related party note receivable 203,417 --
Land 946,843 2,184,130
Construction work in progress 923,023 1,008,879
---------- ---------
$2,191,714 3,530,892
========== =========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY)
Trade accounts payable $ 385,184 426,827
Customer deposits 58,626 81,205
Related party note payable -- 252,879
Note and interest payable 797,257 921,491
Due to Capital Investment of Hawaii, Inc. 615,300 1,849,847
---------- ---------
Total liabilities 1,856,367 3,532,249
---------- ---------
Capital stock 5,000 5,000
Retained earnings (deficit) 330,347 (6,357)
---------- ---------
Total stockholder's equity (deficiency) 335,347 (1,357)
---------- ---------
$2,191,714 3,530,892
========== =========
</TABLE>
8
<PAGE> 34
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
INCOME STATEMENTS
YEAR ENDED JULY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- ---------
<S> <C> <C>
Sales Revenue $ 10,535,939 --
Cost of sales (10,205,426) --
------------ ---------
Gross profit 330,513 --
Other expenses 6,191 (6,357)
------------ ---------
Net income (loss) $ 336,704 (6,357)
============ =========
</TABLE>
LSR, INC.
On July 8, 1994, the Company extended a $15,288,287 acquisition, development
and construction loan commitment to LSR, Inc. to finance a residential real
estate project in Clark County, Nevada. On March 2, 1995, the loan was
modified, which reduced the loan commitment to $8,187,879. At July 31, 1995
and 1994, the Company's aggregate investment in the real estate project
amounted to $1,512,828 and $1,819,500, respectively, including $5,500 and
$19,500, respectively, in capitalized interest, with an outsanding unfunded
commitment totaling $4,810,800 and $13,488,300, respectively. At July 31, 1995
and 1994, restrictive loan covenants limit the maximum amount of loan proceeds
available to $1,800,000 and $2,400,000, respectively.
Condensed financial information of LSR, Inc. is as follows:
BALANCE SHEETS
JULY 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Cash $ 104,630 --
Prepaid fees and deposits 305,546 --
Land 2,602,340 2,039,142
Construction work in progress 1,349,314 --
---------- ---------
$4,361,830 2,039,142
========== =========
</TABLE>
9
<PAGE> 35
\ CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Trade accounts payable $ 475,487 --
Customers' deposits 16,580 --
Related party note payable 447,302 239,150
Note and interest payable 1,893,099 --
Due to Capital Investment of Hawaii, Inc.* 1,507,328 1,800,000
---------- ---------
Total liabilities 4,339,796 2,039,150
Retained earnings 22,034 (8)
---------- ---------
Total stockholder's equity 22,034 (8)
---------- ---------
$4,361,830 2,039,142
========== =========
</TABLE>
INCOME STATEMENTS
YEAR ENDED JULY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- ---------
<S> <C> <C>
Sales revenue $ 1,621,475 --
Cost and sales (1,582,384) --
----------- ---------
Gross profit 39,091 --
Other expense (17,049) (8)
----------- ---------
Net income $ 22,042 (8)
=========== =========
</TABLE>
* The Company has entered into loan participation agreements which
provide that the Company sell, without recourse, to participants an
undivided participating interest in the loan to LSR, Inc.
Participants share of the loan commitment amounted to $1,562,620 and
$1,450,000 at July 31, 1995 and 1994. Certain participants are
related parties which, in the aggregate, have a 72% and 67% interest,
respectively, in the loan commitment.
The loan participation agreements further provide that the Company,
from time to time, may repurchase from the participants, their
participating interests, in whole or in part, for an amount equal to
the principal amount of the participating interests. Generally
accepted accounting principles require that these participation
agreements be accounted for as financing arrangements rather than as
sales due to the Company's option to repurchase the participating
interests. Accordingly, the participants loans amounting to
$1,562,620 and $1,450,000, respectively, have been presented as "Other
investments in real estate" and as
10
<PAGE> 36
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
"Loans under participation agreements" in the accompanying
consolidated balance sheets as of July 31, 1995 and 1994. Loans under
these participation agreements earn interest at the rate of 15% and
participants share pro-rata with the Company as to all payments,
collections and recoveries. Payments on the loans are received from
the proceeds from the sales of the residential units.
The following summarizes the Company's other investments in real
estate and related deferred income which is presented as "other
payables" in the accompanying consolidated balance sheets.
As of July 31, 1995:
<TABLE>
<CAPTION>
CAPITALIZED DEFERRED
PROJECT ADVANCES INTEREST TOTAL INCOME
- --------- ---------- -------- --------- -------
<S> <C> <C> <C> <C>
MVL, Inc. $1,451,732 65,000 1,516,732 237,000
QCL, Inc. 615,300 47,000 662,300 153,000
LSR, Inc. 1,507,328 5,500 1,512,828 105,000
---------- ------- --------- -------
$3,574,360 117,500 3,691,860 495,000
========== ======= ========= =======
</TABLE>
As of July 31, 1994:
<TABLE>
<CAPTION>
CAPITALIZED DEFERRED
PROJECT ADVANCES INTEREST TOTAL INCOME
- --------- ---------- -------- --------- --------
<S> <C> <C> <C> <C>
TBW, Inc. $ 490,570 38,900 529,470 69,686
MVL, Inc. 1,029,439 43,400 1,072,839 155,800
QCL, Inc. 1,849,847 59,800 1,909,647 121,490
LSR, Inc. 1,800,000 19,500 1,819,500 26,500
---------- ------- --------- -------
$5,169,856 161,600 5,331,456 373,476
========== ======= ========= =======
</TABLE>
(7) INDEBTEDNESS
Indebtedness at July 31, 1995 and 1994 is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<C> <C>
Mortgage notes:
9-1/2%, payable to individuals in monthly
installments of interest only, due on demand $ 200,000 200,000
9-1/2%, payable to a corporation in monthly
installments of interest only, due November 30, 1995 1,000,000 1,000,000
9-1/2%, payable to a financial institution in monthly
installments of $6,125 including interest, due
July 1, 2001 674,247 --
---------- ---------
1,874,247 1,200,000
---------- ---------
</TABLE>
11
<PAGE> 37
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Other notes, secured:
Interest at index rate (9.25% at July 31,
1995) plus 1.5%, payable to a financial
institution in monthly installments of
$762 including interest, due February 2,
1997 $ 9,289 17,046
Interest at prime (8.75% at July 31, 1995)
plus 1.5%, payable to a financial
institution in monthly installments of
principal of $18,225, plus interest, due
November 1, 1995, but payable on demand
as subsidiary is in violation of certain
financial covenants in loan agreement 473,850 692,550
10%, payable to a financial institution in
monthly installments of $14,539 including
interest, due June 1, 1997 1,448,585 1,476,653
Interest at prime (8.75% at July 31, 1995)
plus 1%, payable to a financial institution
in monthly installments of interest only,
due November 1, 1995 100,000 50,000
Interest at prime (8.75% at July 31, 1995)
plus 1.5%, payable to a financial
institution in monthly installments of
$1,706 including interest, due through
July 23, 1997 29,371 47,204
10%, payable to a financial institution in
monthly installments of $7,161 including
interest, paid in full -- 484,931
11%, payable to a financial institution in
monthly installments of $2,477 including
interest, due on demand 258,921 260,000
11%, payable to a financial institution in
monthly installments of $3,208 including
interest, paid in full on August 1, 1995 350,000 350,000
8.5%, payable to a financial institution in
monthly installments of $6,491 including
interest, paid in full -- 38,000
---------- ----------
2,670,016 3,416,384
---------- ----------
Debentures - at stated rates (7% to 9.5%),
payable to individuals in quarterly
installments of interest only, all of which
have matured and are payable on demand;
amount authorized by indenture, $19,000,000 2,108,245 2,221,895
---------- ----------
</TABLE>
12
<PAGE> 38
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Other notes, unsecured:
Interest at stated rates (6% to 9.5%), term
notes payable to individuals in quarterly
installments of interest only, due two
years from date of issuance $ 269,605 236,768
Interest at stated rates (7.5% to 12%),
payable to individuals in quarterly
installments of interest only, payable
on demand except $75,000 due February
14, 1996 (of which $105,000 and $130,000
at July 31, 1995 and 1994, respectively,
due to related parties) 230,000 255,000
7%, payable to a corporation in monthly
installments of $3,000 plus interest,
paid in full -- 15,485
---------- ----------
499,605 507,253
---------- ----------
$7,152,113 7,345,532
========== ==========
</TABLE>
The Company has a $300,000 line of credit allocated between working
capital of $100,000 and equipment purchases of $200,000 with a bank.
As of July 31, 1995, the outstanding drawings amounted to $100,000 and
$29,371 on the working capital and equipment purchase line of credit,
respectively. The line of credit expires on November 1, 1995.
Maturities of indebtedness over the next five fiscal years ending on
July 31 are shown in the following summary:
<TABLE>
<S> <C>
1996 $5,025,642
1997 1,472,942
1998 11,925
1999 13,108
2000 14,409
Thereafter 614,087
----------
$7,152,113
==========
</TABLE>
The carrying amounts of assets pledged as collateral for indebtedness
as of July 31, 1995 were as follows:
<TABLE>
<S> <C>
Notes receivable $1,637,562
Developed real estate 1,452,450
Property and equipment 10,743
Investment in other securities 500,380
==========
</TABLE>
13
<PAGE> 39
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
In addition, the rights and interests in insurance policies, income or
profits, and other contracts and agreements of Latipac Fine Foods,
Inc., a wholly owned subsidiary of the Company, were pledged as
collateral for indebtedness as of July 31, 1995.
(8) INCOME TAXES
The components of the provision (credit) for income taxes are as
follows:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
--------- --------- ---------
<S> <C> <C> <C>
1994:
Federal $ 20,575 -- 20,575
State (186) -- (186)
Foreign (48) -- (48)
--------- --------- ---------
$ 20,341 -- 20,341
========= ========= =========
1993:
Federal $(383,100) 81,700 (301,400)
State 59,200 15,600 74,800
--------- --------- ---------
$(323,900) 97,300 (226,600)
========= ========= =========
</TABLE>
Deferred income tax expense for fiscal year 1993 results from timing
differences in the recognition of income and expense for tax and
financial reporting purposes. The sources and tax effects of these
timing differences are as follows:
<TABLE>
<CAPTION>
<S> <C>
Partnership income for financial statement purposes greater
than for tax purposes $ 10,334
Excess of tax over financial statement amortization (99,639)
Additional costs inventoried for tax purposes pursuant
to the Tax Reform Act of 1986 21,829
Depreciation for tax purposes greater than for financial
statement purposes 4,926
Excess of tax over financial statement recognition of real
estate investment fees and interest (note 6) 163,936
Other, net (4,086)
--------
$ 97,300
========
</TABLE>
14
<PAGE> 40
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The provision (credit) for income taxes applicable to loss from
continuing operations before income taxes for fiscal years 1995, 1994
and 1993 differ from the "expected credit for income taxes" for those
years (computed by applying the U. S. federal income tax rate of 34%
to loss from continuing operations before income taxes) as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Computed "expected" tax credit $(274,695) $(477,058) $(416,154)
State income tax, net of federal tax
effect -- -- 1,518
Net operating losses for which no
deferred income tax benefit has been
recognized 255,602 448,157 39,724
Dividends received deduction (2,508) (1,174) (4,811)
Over accrual of prior years' income tax
benefit -- 20,341 61,300
Amortization of goodwill -- -- 75,146
Officers' life insurance 17,794 24,495 12,658
Other, net 3,807 5,580 4,019
--------- --------- ---------
$ -- $ 20,341 $(226,600)
========= ========= =========
</TABLE>
In February 1992, the Financial Accounting Standards Board issued
Statement of Accounting Standards No. 109 (Statement 109), "Accounting
for Income Taxes." Statement 109 requires a change from the deferred
method of accounting for income taxes of APB Opinion 11 to the asset
and liability method of accounting for income taxes. Under the asset
and liability method of Statement 109, deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to difference between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates in effect for the year in which those temporary differences
are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in the period that includes the enactment date.
Effective August 1, 1993, the Company adopted Statement 109. There
was no cumulative effect of a change in accounting method as of August
1, 1993 and prior fiscal years were not restated.
15
<PAGE> 41
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
July 31, 1995 and 1994 are presented below.
<TABLE>
<CAPTION>
1995 1994
----------- ---------
<S> <C> <C>
Deferred tax assets:
Deferred compensation agreement $ 79,700 $ 102,700
Other investment securities, permanent
decline in market value 83,100 150,800
Deferred income on other real estate
investment 188,100 149,400
Net tax operating loss carryforwards 749,800 496,600
Other 102,600 81,200
----------- ---------
Total gross deferred tax assets 1,203,300 980,700
Less valuation allowance (1,157,400) (914,700)
----------- ---------
Net deferred tax assets $ 45,900 $ 66,000
=========== =========
Deferred tax liabilities:
Capitalized interest on other real
estate investments $ 44,700 $ 64,700
Other 1,200 1,300
----------- ---------
Total gross deferred tax
liabilities $ 45,900 $ 66,000
=========== =========
</TABLE>
The valuation allowance for deferred tax assets as of August 1, 1993
was $387,500, and the net change in the total valuation allowance for
the years ended July 31, 1995 and 1994 were increases of $242,700 and
$527,200, respectively.
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment.
As of July 31, 1995, the Company had tax net operating loss
carryforwards of $1,800,000 and $2,900,000 for federal and state
income tax purposes, respectively, which can be used to offset future
taxable income through 2010.
(9) DEFERRED COMPENSATION
The Company has a deferred compensation agreement under which the
Company is obligated to pay $5,000 each month for 120 consecutive
months to the spouse of the late Mr. Chinn Ho, the former chairman of
the Executive Committee. The Company commenced monthly payments in
accordance with the deferred compensation agreement to Mrs. Chinn Ho
in November 1989. The accrued obligation as of July 31, 1995 and 1994
amounted to $209,777 and $256,705, respectively, and is included in
the consolidated balance sheet as other payables.
16
<PAGE> 42
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) LEASE COMMITMENTS
The Company leases various facilities for its office premises, rental
agency and its bakery operations. These operating leases provide that
the Company pay all taxes, maintenance and insurance applicable to the
leased properties.
Consolidated future minimum payments required under noncancelable
operating leases as of July 31, 1995 are summarized as follows:
<TABLE>
<S> <C>
Year ending July 31:
1996 $ 501,243
1997 504,995
1998 447,823
1999 286,626
2000 281,747
Thereafter 2,809,487
----------
$4,831,921
==========
</TABLE>
Net rent expense for all operating leases was $449,900, $423,000 and
$427,200 for the years ended July 31, 1995, 1994 and 1993,
respectively.
(11) COMMITMENT AND CONTINGENT LIABILITIES
In fiscal year 1992, the Company entered into an agreement to acquire
land and a warehouse for $1,350,000. The acquisition was to be
consummated as a nonmonetary exchange for tax purposes whereby the
Company was to divest its interest in certain Makaha Valley Towers
condominium apartments to qualify the exchange under Section 1031 of
the Internal Revenue Code. As the transaction was not completed by
the date required to qualify as a nonmonetary exchange the Company
purchased the property in the current year. The Company assumed the
existing mortgage loan of $700,000 at July 31, 1995 and applied
$650,000 of the existing deposit towards the purchase of the property.
At July 31, 1995, the deposit was presented as "other assets-deposit"
in the accompanying consolidated balance sheets.
Under the provision of various agreements relating to its
participation in mortgage notes receivable sold with recourse, the
Company is committed to repurchase notes that become delinquent, as
specified in the agreements, if requested to do so by the holder of
the notes. At July 31, 1995 the outstanding balances of notes
receivable sold that were subject to the aforementioned recourse
provisions aggregated $306,000. The Company may be subject to similar
recourse provisions with respect to additional outstanding balances of
notes aggregating approximately $122,000 at July 31, 1995, although
management does not believe this was the intent of the parties to the
agreements related to the sale of its participation in notes
receivable. The mortgage notes referred to above relate to
condominium unit sales in 1972 and 1973. Management believes that if
the Company is required to repurchase delinquent notes, no losses will
be incurred as the proceeds from the sale of real estate securing the
notes would be adequate to satisfy the related debt obligations.
17
<PAGE> 43
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(12) FOURTH QUARTER RESULTS (UNAUDITED)
Fourth quarter results for the year ended July 31, 1995 are as follows:
<TABLE>
<S> <C>
Revenues $1,914,047
==========
Net loss ($.10 per common share) $ 105,222
==========
</TABLE>
(13) LOSS PER COMMON SHARE
Loss per common share was computed by dividing the applicable loss by
the weighted average number of shares of common stock outstanding.
(14) SEGMENT INFORMATION
The Company has classified its business activities into significant
segments for the years ended July 31, 1995, 1994 and 1993. The
Company's operations have been classified into real estate, security
and other investing, wholesale bakery and other activities. During
1993, the Company discontinued its aviation fuel activities. Real
estate activities include the acquisition and development of
undeveloped real estate, the sale and leasing of developed real estate
and investment in undeveloped real estate. Also included in real
estate activities are interest income on notes receivable arising from
property sales and from loans made to development projects. Security
and other investing include gain or loss from security investments,
investment income related to the ownership of such investments and
income from a partnership. Other activities include the Company's
rental agency businesses and other miscellaneous activities. The
following is a summary of segment financial information for the years
ended July 31, 1995, 1994 and 1993:
18
<PAGE> 44
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Real estate activities:
Real estate sales $ -- -- 137,000
Property rentals 87,741 59,631 59,794
Income from ADC loan
arrangements 1,360,568 861,594 788,096
Interest income 181,077 399,300 355,770
Other -- 17,847 50,835
----------- ---------- ----------
Total real estate
activities 1,629,386 1,338,372 1,391,495
----------- ---------- ----------
Security and other
investing activities:
Gains from securities 289,047 9,153 207,625
Partnership loss -- -- (17,045)
Dividends and interest 36,589 40,385 115,820
----------- ---------- ----------
Total security and
other investing
activities 325,636 49,538 306,400
----------- ---------- ----------
Wholesale bakery activities 4,965,794 5,410,698 5,004,683
Other activities 650,138 737,641 690,066
----------- ---------- ----------
$ 7,570,954 7,536,249 7,392,644
=========== ========== ==========
Operating loss from continuing
operations:
Real estate activities $ 1,191,284 792,363 818,188
Security and other
investing activities 278,666 1,587 233,832
Wholesale bakery activities (526,037) (870,605) (1,085,742)
Other activities (14,817) 107,759 88,890
----------- ---------- ----------
929,096 31,104 55,168
Interest expense (1,029,436) (677,098) (553,196)
Corporate expenses (707,586) (757,118) (725,953)
Credit (provision) for
income taxes -- (20,341) 226,600
----------- ---------- ----------
Loss from continuing
operations $ (807,926) (1,423,453) (997,381)
=========== ========== ==========
</TABLE>
19
<PAGE> 45
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- ----------
<S> <C> <C> <C>
Deprecaition and
amortization:
Real estate activities $ 18,210 20,732 21,062
Security and other
investing activities 1,412 1,893 2,671
Wholesale bakery
activities 270,055 578,130 825,438
Other acivities 21,075 24,746 27,785
----------- ---------- ----------
Total segments 310,752 625,501 876,956
Corporate 12,948 17,350 24,479
Discontinued operation -
Aviation fuel (note 15) -- -- 1,500
----------- ---------- ----------
$ 323,700 642,851 902,935
=========== ========== ==========
Capital expenditures:
Real estate activities $ 1,379,251 10,310 28,255
Wholesale bakery
activities 65,896 69,920 116,467
Other activities 341 5,597 3,044
Corporate 9,741 2,206 28,576
----------- ---------- ----------
$ 1,455,229 88,033 176,342
=========== ========== ==========
Identifiable assets:
Real estate activities $ 6,975,918 7,921,148 7,107,022
Security and other investing
activities 922,165 1,007,298 902,977
Wholesale bakery activities 674,742 945,097 1,666,199
Other activities 728,060 405,385 213,535
----------- ---------- ----------
Total segments 9,300,885 10,278,928 9,889,733
Corporate 1,316,868 1,219,373 1,551,159
----------- ---------- ----------
$10,617,753 11,498,301 11,440,892
=========== ========== ==========
</TABLE>
Sales between business segments are immaterial and are netted against
the sales of the respective segment.
(15) DISCONTINUED OPERATIONS - AVIATION FUEL SEGMENT
On April 23, 1993, the board of directors voted to discontinue its
operations of Latipac Fuels Corporation and liquidate the assets of
Latipac Fuels which purchased and resold aviation fuel primarily in
Hawaii and California. Latipac Fuel Corporation's sales for the year
ended July 31, 1993 were $116,122. There was no gain/loss from the
liquidation of the business.
20
<PAGE> 46
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Operating losses before income taxes for the year ended July 31, 1993
amounted to $36,898. Applicable credits for income taxes for the year
ended July 31, 1993 amounted to $13,500. As of July 31, 1993, the
asset and liabilities of Latipac Fuel Corporation were nil.
(16) BUSINESS AND CREDIT CONCENTRATIONS
Substantially all of the Company's business activity is with customers
located in the state of Hawaii and Las Vegas, Nevada. The majority of
customers of the Company's operating businesses are related to the
hospitality industry.
The Company's business activities in Las Vegas related solely to
financing residential real estate development projects. At July 31,
1995 and 1994, the Company had outstanding ADC loans of $3,574,360 and
$5,169,856 due from corporate real estate ventures which are owned by
an individual developer. Under participation agreements the Company
has sold $1,562,620 and $1,450,000 of these loans without recourse as
of July 31, 1995 and 1994, respectively (see note 6).
21
<PAGE> 47
Schedule VIII
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Valuation an Qualifying Accounts and Reserves
Years ended July 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
COLUMN C COLUMN D COLUMN E
----------------------------- ----------- -------------
ADDITIONS
-----------------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING OF COSTS AND OTHER ACCOUNTS DEDUCTIONS- BALANCE AT
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
----------- ------------ ---------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Year ended July 31, 1995:
Allowance for doubtful receivables $58,544 (3,482) -- 23,202(1) 31,860
======= ======= ====== ======= ======
Year ended July 31, 1994:
Allowance for doubtful receivables $56,641 126,788 -- 124,885(1) 58,544
======= ======= ====== ======= ======
Year ended July 31, 1993:
Allowance for doubtful receivables $27,355 37,000 -- 7,714(1) 56,641
======= ======= ====== ======= ======
</TABLE>
(1) Accounts receivable written off.
<PAGE> 48
SCHEDULE XI
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
JULY 31, 1995
<TABLE>
<CAPTION>
BUILDINGS BUILDINGS
AND AND
IMPROVE- IMPROVE- CARRYING IMPROVE-
DESCRIPTION ENCUMBRANCES LAND MENTS MENTS COST LAND MENTS TOTAL
- ---------------------------- ------------------ ---------- --------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Developed real estate - held
for sale
Condominium apartments:
Makaha, Hawaii None $ (2,323) 30,138 13,451 (2,323) 43,589 41,266
Honolulu, Hawaii Mortgage payable
on one apartment
to various indi-
viduals 24,578 166,705 69,605 24,578 236,310 260,888
Commercial/industrial:
Honolulu, Hawaii Mortgage payable 743,000 607,000 -- 743,000 607,000 1,350,000
Other miscellaneous
developed real estate
located in Hawaii None 23 -- -- 23 -- 23
-------- ------- ------- ------- ------- ---------
Total developed
real estate 765,278 803,843 83,056 765,278 886,899 1,652,177(A)
Undeveloped land helf for
sale -- Makaha, Hawaii None 73,290 -- 61,184 73,290 61,184 134,474(C)
-------- ------- ------- ------- ------- ---------
Grand total $838,568 803,843 144,240 838,568 948,083 1,786,651
======== ======= ======= ======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
LIFE IN WHICH DEPRECIATION IN
ACCUMULATED DATE OF LATEST INCOME STATEMENT IS
DESCRIPTION DEPRECIATION CONSTRUCTION DATE ACQUIRED COMPUTED
- ---------------------------- ----------------- -------------- ------------- -----------------------------
<S> <C> <C> <C> <C>
Developed real estate - held
for sale
Condominium apartments:
Makaha, Hawaii 7,641 Completed Various 1973 36 to 40 years for
February 1971 to 1985 apartments, 5 years for
furnishings
Honolulu, Hawaii 178,704 Completed Various 1964 40 years for apartments,
1964 and 1968 to 1985 5 years for furnishings
Commercial/industrial:
Honolulu, Hawaii -- 1986 July 1995 39 years
Other miscellaneous
developed real estate
located in Hawaii -- April 1956 July 1953
-------
Total developed
real estate 186,345(B)
Undeveloped land helf for
sale -- Makaha, Hawaii --(D) May 1973 Primarily over 20 years
-------
Grand total 186,345
=======
</TABLE>
<PAGE> 49
Schedule XI, Cont.
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Real Estate and Accumulated Depreciation, Continued
(1) Changes during the two years ended July 31, 1995:
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Cost of real estate:
Balance at beginning of period $ 408,317 398,631
Additions during period - improve-
ments to real estate 1,379,251 10,310
Deductions during period - cost of
real estate sold (917) (624)
---------- ---------
Balance at end of period $1,786,651 408,317
========== =========
Accumulated depreciation of
real estate:
Balance at beginning of period $ 176,259 164,267
Additions during the period -
charged to costs and expenses 11,003 12,616
Deductions during the period -
retirements and sales (917) (624)
---------- ---------
Balance at end of period $ 186,345 176,259
========== =========
</TABLE>
(2) Aggregate original cost for federal income tax purposes amounted to
$1,862,640 for 1995.
(3) Presentation on consolidated balance sheet as of July 31, 1995:
<TABLE>
<CAPTION>
UNDEVELOPED
DEVELOPED LAND HELD
REAL ESTATE FOR SALE
----------- -----------
<S> <C> <C>
Cost $1,652,177 (A) 134,474 (C)
Less accumulated depreciation 186,345 (B) -- (D)
-------------- -----------
$1,465,832 134,474
============== ===========
</TABLE>
<PAGE> 50
Schedule XII
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Mortgage loans on Real Estate
July 31, 1995
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------- ----------------- ------------------ ---------------------- ---------------
FINAL PERIODIC
DESCRIPTION INTEREST RATE MATURITY DATE PAYMENT TERMS PRIOR LINES
- ----------------------------------------- ----------------- ------------------ ---------------------- ---------------
<S> <C> <C> <C> <C>
First mortgage - payable to a corporation
on condominium apartments located in Monthly installments
Honolulu, Hawaii 9-1/2% February 28, 1995 of interest only $ --
First mortgages - payable to individuals
on condominium apartment located Monthly installments
in Honoluly, Hawaii 9-1/2% On Demand of interest only --
First mortgages - payable to a financial Monthly installments
institution on land and warehouse of $6,125, including
located in Honolulu, Hawaii 9-1/2% July 1, 2001 interest --
-------
$ --
=======
<CAPTION>
COLUMN F COLUMN G COLUMN H
----------- ------------- ---------------------
PRINCIPAL AMOUNT OF
FACE CARRYING LOANS SUBJECT TO
AMOUNT OF AMOUNT OF DELINQUENT PRINCIPAL
DESCRIPTION MORTGAGES MORTGAGE (1) OR INTEREST
- ----------------------------------------- ---------- ------------ ---------------------
<S> <C> <C> <C>
First mortgage - payable to a corporation
on condominium apartments located in
Honolulu, Hawaii 1,000,000 1,000,000 --
First mortgages - payable to individuals
on condominium apartment located
in Honoluly, Hawaii 200,000 200,000 --
First mortgages - payable to a financial
institution on land and warehouse
located in Honolulu, Hawaii 700,000 674,247 --
--------- --------- --
1,900,000 1,874,247 --
========= ========= ==
</TABLE>
(1) Changes during the two years ended July 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Balance at beginning of period $1,200,000 1,200,000
Additions during the period 700,000 --
Deductions during the period (25,753) --
---------- ---------
Balance at end of period $1,874,247 1,200,000
========== =========
</TABLE>
<PAGE> 51
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CAPITAL INVESTMENT OF HAWAII, INC.
Date: October 23, 1995 By Stuart T. K. Ho
--------------------------------------
Stuart T. K. Ho, Chairman of the Board,
President and Director
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.
<TABLE>
<S> <C> <C>
Date: October 23, 1995 Dean T. W. Ho
------------------------------------------
Dean T. W. Ho, Vice Chairman, Secretary
and Director
Date: October 23, 1995 Donald M. Wong
------------------------------------------
Donald M. Wong, Senior Vice President,
Chief Financial Officer, Treasurer
and Director
Date: October 23, 1995 Harriet H. Matsuo
------------------------------------------
Harriet H. Matsuo, Assistant Secretary and
Assistant Treasurer
Date: October 23, 1995 Greta U. Nakao
------------------------------------------
Greta U. Nakao, Assistant Secretary
and Assistant Treasurer
Date: October 23, 1995 Pedro P. Ada
------------------------------------------
Pedro P. Ada, Director
Date: October 23, 1995 C. B. Sung
------------------------------------------
C. B. Sung, Director
Date: October 23, 1995 Stanley W. Hong
------------------------------------------
Stanley W. Hong, Director
</TABLE>
<PAGE> 1
Exhibit 11
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Computation of Loss Per Common Share
Five years ended July 31, 1995
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Loss from continuing operations
before extraordinary credit
applicable to common shareholders $ (807,926) (1,423,453) (997,381) (966,427) (501,024)
Discontinued operations -- -- (23,398) (121,352) (46,069)
Extraordinary credit -- -- -- 507,000 172,400
----------- ----------- ----------- ----------- -----------
Net loss applicable to
common shareholders $ (807,926) (1,423,453) (1,020,779) (580,779) (374,693)
=========== =========== =========== =========== ===========
Divided by weighted average number of
common shares outstanding during the
period* 1,032,683 1,032,683 1,032,683 1,032,683 1,035,624
=========== =========== =========== =========== ===========
Loss per common share:
Loss before extraordinary credit (.78) (1.38) (.97) (0.93) (0.48)
Discontinued operations -- -- (.02) (.12) (.05)
Extraordinary credit -- -- -- .49 .17
---------- ----------- ---------- ----------- -----------
Net loss (.78) (1.38) (.99) (0.56) (0.36)
=========== =========== ========== =========== ===========
*Per Exhibit 11a.
</TABLE>
<PAGE> 1
Exhibit 11a
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Computation of Weighted Average Number of Common Shares
Five years ended July 31, 1995
<TABLE>
<CAPTION>
1995 1994 1993
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted number of of common shares outstanding:
Common shares oustanding at beginning of the period 1,723,765 1,723,765 1,723,765
Less common shares in treasury at beginning of the
period (691,082) (691,082) (691,082)
--------- --------- ---------
1,032,683 1,032,683 1,032,683
--------- --------- ---------
August 1.0000 -- -- -- -- -- --
September .9167 -- -- -- -- -- --
October .8333 -- -- -- -- -- --
November .7500 -- -- -- -- -- --
December .6667 -- -- -- -- -- --
January .5833 -- -- -- -- -- --
February .5000 -- -- -- -- -- --
March .4167 -- -- -- -- -- --
April .3333 -- -- -- -- -- --
May .2500 -- -- -- -- -- --
June .1667 -- -- -- -- -- --
July .0833 -- -- -- -- -- --
------ --------- ------ --------- ------ --------
-- -- -- -- -- --
====== --------- ====== --------- ====== --------
Weighted average shares outstanding during the period 1,032,683 1,032,683 1,032,683
========= ========= =========
<CAPTION>
1992 1991
-------------------- --------------------
<S> <C> <C> <C> <C>
Weighted number of of common shares outstanding:
Common shares oustanding at beginning of the period 1,723,765 1,723,765
Less common shares in treasury at beginning of the
period (691,082) (679,318)
--------- ---------
1,032,683 1,044,447
--------- ---------
August 1.0000 -- -- -- --
September .9167 -- -- -- --
October .8333 -- -- -- --
November .7500 -- -- 11,764 8,823
December .6667 -- -- -- --
January .5833 -- -- -- --
February .5000 -- -- -- --
March .4167 -- -- -- --
April .3333 -- -- -- --
May .2500 -- -- -- --
June .1667 -- -- -- --
July .0833 -- -- -- --
------ --------- ------ ---------
-- -- -- --
====== --------- ====== ---------
Weighted average shares outstanding during the period 1,032,683 1,035,624
========= =========
</TABLE>
18
<PAGE> 1
Exhibit 22
CAPITAL INVESTMENT OF HAWAII, INC.
AND SUBSIDIARIES
Subsidiaries of
Capital Investment of Hawaii, Inc.
The Registrant, Capital Investment of Hawaii, Inc., has no parent.
The Registrant has the following subsidiaries, all of which are included in the
accompanying consolidated financial statements. All companies are wholly-owned
subsidiaries of the Registrant except for Makaha Valley, Incorporated.
<TABLE>
<CAPTION>
STATE OF
NAME INCORPORATION
---- -------------
<S> <C>
Latipac Fine Foods, Incorporated Hawaii
Latipac Mortage Company, Limited and its wholly Hawaii
owned subsidiary - Latipac, Limited California
Makaha Valley, Incorporated (85.8% - owned) Hawaii
Resources, Incorporated Hawaii
</TABLE>
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JULY 31, 1995 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS AND RETAINED EARNINGS FOR THE YEAR ENDED JULY 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-01-1994
<PERIOD-END> JUL-31-1995
<EXCHANGE-RATE> 1
<CASH> 1,287,636
<SECURITIES> 111,046
<RECEIVABLES> 2,722,305
<ALLOWANCES> 31,860
<INVENTORY> 53,113
<CURRENT-ASSETS> 0
<PP&E> 2,081,383
<DEPRECIATION> (1,780,476)
<TOTAL-ASSETS> 10,617,753
<CURRENT-LIABILITIES> 0
<BONDS> 7,152,113
<COMMON> 1,723,765
0
0
<OTHER-SE> (1,598,908)
<TOTAL-LIABILITY-AND-EQUITY> 10,617,753
<SALES> 4,965,794
<TOTAL-REVENUES> 7,570,954
<CGS> 3,185,615
<TOTAL-COSTS> 8,378,880
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,029,436
<INCOME-PRETAX> (807,926)
<INCOME-TAX> 0
<INCOME-CONTINUING> (807,926)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (807,926)
<EPS-PRIMARY> (.78)
<EPS-DILUTED> (.78)
</TABLE>
