<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
----------------------------
For Quarterly Period Ended January 31, 1996
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 Identification No.)
Incorporation or Organization)
</TABLE>
<TABLE>
<S> <C>
Suite 1700, PRI Tower, 733 Bishop Street
Honolulu, Hawaii 96813
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(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (808) 537-3981
No Change
- -------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (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 .
There were 1,032,683 shares outstanding of common stock, no par value,
as of January 31, 1996.
<PAGE> 2
PART I - FINANCIAL INFORMATION
CAPITAL INVESTMENT OF HAWAII, INC. & SUBSIDIARIES
Condensed Consolidated Balance Sheets
January 31, 1996 and July 31, 1995
ASSETS
<TABLE>
<CAPTION>
January 31,
1996 July 31,
(Unaudited) 1995
----------- -------------
<S> <C> <C>
Cash and cash equivalents $ 1,675,225 1,287,636
Marketable equity securities 102,424 111,046
Receivables:
Trade accounts and notes, less allowance
for doubtful receivables of $37,260
at January 31, 1996 and $31,860 at
July 31, 1995 1,850,259 1,065,991
Long-term receivables (including current
installments of $773,081 at January
31, 1996 and $360,472 at July 31,
1995 1,651,643 1,656,314
--------------- ---------------
Total receivables 3,501,902 2,722,305
--------------- ---------------
Inventories 66,855 53,113
Developed real estate, less accumulated depre-
ciation of $198,874 at January 31, 1996
and $186,345 at July 31, 1995 1,453,302 1,465,832
Undeveloped land held for sale 134,474 134,474
Other investments:
Real estate 1,689,649 3,691,860
Securities 720,983 808,912
--------------- ---------------
2,410,632 4,500,772
--------------- ---------------
Property and equipment, at cost, less accumulated
depreciation of $1,955,616 at January 31,
1996 and $1,780,476 at July 31, 1995 210,292 300,907
Deferred charges and other assets 196,768 41,668
--------------- ---------------
$ 9,751,874 10,617,753
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
January 31, 1996 and July 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
January 31,
1996 July 31,
(Unaudited) 1995
----------- -------------
<S> <C> <C>
Indebtedness (current installment maturing
within one-year of $4,790,508 at January 31,
1996 and $5,025,642 at July 31, 1995):
Debentures $ 2,103,245 2,108,245
Mortgage notes 1,869,704 1,874,247
Other notes, secured 2,287,545 2,670,016
Other notes, unsecured 414,722 499,605
--------------- ---------------
Total indebtedness 6,675,216 7,152,113
--------------- ---------------
Accounts payable, trade 816,390 429,433
Accrued expenses 540,737 607,891
Other payables:
Loans under participation agreement:
Related parties 1,058,023 1,090,200
Other 191,839 472,420
Other 720,626 740,839
--------------- ---------------
1,970,488 2,303,459
--------------- ---------------
Stockholders' equity (deficiency):
Common stock without par value
Authorized 2,531,765 shares; issued
1,723,765 shares at stated value of
$1 per share. (No shares reserved
for conversion, warrants, options
or other rights) 1,723,765 1,723,765
Additional paid-in capital 469,321 469,321
Retained earnings 1,544,885 1,923,877
--------------- ---------------
3,737,971 4,116,963
Deduct cost of 691,082 common shares
in treasury (4,057,487) (4,057,487)
Unrealized gain on marketable equity securities 68,559 65,381
--------------- ---------------
Net stockholders' equity (deficiency) (250,957) 124,857
--------------- ---------------
$ 9,751,874 10,617,753
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months ended January 31, 1996 and 1995
and
Six months ended January 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
January 31, January 31,
----------- -----------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Net product sales $ 1,411,370 1,333,856 $ 2,754,748 2,612,575
Income from investments 419,067 393,213 839,733 837,848
Commissions and fees 202,343 198,088 335,638 305,749
Miscellaneous 29,289 17,197 68,096 20,950
-------------- ------------- ------------- ---------
2,062,069 1,942,354 3,998,215 3,777,122
-------------- ------------- -------------- ---------
Cost and expenses:
Cost of product sales 851,683 849,611 1,683,462 1,666,666
Other direct operating expenses
and general and administrative
expenses 1,178,539 1,025,156 2,372,546 2,196,932
Interest 89,997 276,529 321,199 598,271
-------------- ------------- -------------- ---------
2,120,219 2,151,296 4,377,207 4,461,869
-------------- ------------- -------------- ---------
Net loss $ (58,150) (208,942) $ (378,992) (684,747)
============== ============= ============== =========
Net loss per common share $ (.06) (.20) $ (.37) (.66)
============== ============= ============== =========
Dividends per common share NONE NONE NONE NONE
============== ============== ============== =========
Weighted average number of common
shares outstanding during the
period 1,032,683 1,032,683 1,032,683 1,032,683
============== ============= ============== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Consolidated Statements of Retained Earnings
Six months ended January 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Retained earnings at July 31 $1,923,877 2,731,803
Net loss (378,992) (684,747)
---------- ---------
Retained earnings at January 31 $1,544,885 2,047,056
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Six months ended January 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net cash provided by operating activities $ 1,183,450 189,691
--------------- --------------
Cash flows from investing activities:
Purchase of securities and other investments - (25,600)
Proceeds from sales of securities 247,168 31,500
Capital expenditures (61,535) (28,558)
--------------- --------------
Net cash provided by (used in) investing activities 185,633 (22,658)
--------------- --------------
Cash flows from financing activities:
Proceeds from long-term borrowings 87,062 38,762
Principal payments on indebtedness (563,959) (851,086)
Payments on covenants not-to-compete - (30,000)
Proceeds under loan participation agreements - 700,000
Payments made under loan participation
agreements (504,597) -
--------------- --------------
Net cash used in financing activities (981,494) (142,324)
--------------- --------------
Net increase in cash and cash
equivalents 387,589 24,709
Cash and cash equivalents at beginning of period 1,287,636 1,146,248
--------------- --------------
Cash and cash equivalents at end of period $ 1,675,225 1,170,957
=============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Notes to Condensed Financial Information
(Unaudited)
(1) Basis of presentation
The accompanying unaudited consolidated financial information have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
accompanying unaudited consolidated financial statements should be
read in conjunction with the report on SEC Form 10-K for the fiscal
year ended July 31, 1995 and the consolidated financial statements and
the notes thereto in the Company's Quarterly Report on SEC Form 10-Q
for the quarter ended October 31, 1995.
In the opinion of the Company's management, the accompanying unaudited
financial information contains all material adjustments required by
generally accepted accounting principles to present fairly the
Company's financial position as of January 31, 1996 and July 31, 1995,
the results of its operations for the three months and six months
ended January 31, 1996 and 1995, and its cash flows for the six months
ended January 31, 1996 and 1995. All such adjustments are of a normal
recurring nature, unless otherwise disclosed in this Form 10-Q or
other referenced material. Results of operations for interim periods
are not necessarily indicative of results for the full year.
(2) Notes Receivable Sold with Recourse and Mortgage Notes Payable Assumed
by Others
Under the provision of various agreements relating to their
participation in mortgage notes receivables sold with recourse, the
Company and its subsidiaries are committed to repurchase notes that
become delinquent, as specified in the agreements, if requested to do
so by the holder of the notes. At January 31, 1996, the outstanding
balances of notes receivable sold that are subject to the
aforementioned recourse provisions aggregated approximately $243,000.
The Company and its subsidiaries may be subject to similar recourse
provisions with respect to additional outstanding balances of notes
aggregating approximately $89,000 at January 31, 1996, 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 related 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.
(3) Subsequent Event
On February 7, 1996, the Company received approximately $2,460,000
representing payments due from MVL, Inc., QCL, Inc. and LSR, Inc. for
acquisition, development and construction loans advanced and accrued
interest receivable thereon. Additionally, in February, 1996, the
Company repaid amounts due under loan participation agreements for
LSR, Inc. of $1,391,000.
<PAGE> 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company and its subsidiaries are engaged principally in the
business of acquiring, developing, leasing and dealing in real estate,
product sales, including bakery goods and investing in securities,
which activities are subject to various factors which cause
fluctuations between periods. Accordingly, the results of operations
for the three and six months ended January 31, 1996 are not
necessarily indicative of results to be expected for the year and are
not necessarily comparable to the results of operations for the three
and six months ended January 31, 1995.
Net Product Sales
The increase in net product sales of $77,514 and $142,173,
respectively for the three and six months ended January 31, 1996 as
compared to the same periods in 1995 is due to the increase in sales
of Latipac Fine Foods, Incorporated, which operates under the name
Bakery Europa. This increase is attributed primarily to the increase
in tourism in the State of Hawaii for 1996 which affects the airline
and hotel industries which Bakery Europa supplies.
Cost of Product Sales
The increase in cost of product sales of $2,072 and $16,796,
respectively for the three and six months ended January 31, 1996 as
compared to the same periods in 1995 is due to the increase in product
sales for Bakery Europa.
As a percentage of net sales, the cost of bakery sales decreased to
60% and 61%, respectively for the three and six months ended January
31, 1996 as compared to 64% for the same periods in 1995.
Interest Expense
The decrease in interest expense of $186,532 and $277,072 for the
three and six months ended January 31, 1996 as compared to the same
periods in 1995 is due to a decrease in borrowings related to the
financing of real estate investments.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 1996, the Company held cash and cash equivalents of
$1,675,225. The increase in cash of $387,589 for the six months ended
January 31, 1996 is primarily due to cash provided by operating
activities.
Included in cash provided by operating activities for the three months
ended October 31, 1995 was approximately $1,701,000 of advances for
the construction of residential developments in Las Vegas, Nevada.
Payments received on the advances for the same period amounted to
approximately $3,523,000. The Company's net loss of $378,992 and the
increase in accounts receivable of $779,597 for the six months ended
January 31, 1996 are also included in cash provided by operating
activities.
<PAGE> 9
Cash flows from financing activities for the six months ended January
31, 1996 includes principal payments on indebtedness which amounted to
$563,959. Payments on loan participation agreements in the Company's
loan to LSR, Inc. amounted to $504,597 for the six months ended
January 31, 1996.
The Company, during the six months ended January 31, 1996, was able to
meet operating cash requirements with cash on hand at July 31, 1995.
Cash requirements for the remaining quarters of fiscal 1996 will be
satisfied from cash on hand, operations, institutional borrowings, and
net collections of ADC loans.
<PAGE> 10
PART II - OTHER INFORMATION
Items 1,2,3,5. None
Item 4. The following actions were taken at the annual stockholders meeting
held on January 31, 1996:
a. Directors were re-elected for the year as follows:
Stuart T.K. Ho
Dean T.W. Ho
Donald M. Wong
Stanley W. Hong
Pedro Ada
C.B. Sung
b. KPMG Peat Marwick was re-elected independent auditors for the
year ending July 31, 1996 by a vote of 570,858 shares in the
affirmative and none in the negative.
Item 6 Exhibits and Reports on Form 8-K
a. Exhibit 11 - computation of net loss per common share for three
and six months ended January 31, 1996 and 1995.
b. No reports on Form 8-K were required to be filed during the
quarter ended January 31, 1996.
<PAGE> 1
EXHIBIT 11
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Computation of Net Loss Per Common Share
Three months ended January 31, 1996 and 1995
and
Six months ended January 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
January 31, January 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING:
Common shares issued 1,723,765 1,723,765 1,723,765 1,723,765
Less common shares in
treasury 691,082 691,082 691,082 691,082
-------------- ------------- -------------- ---------------
Weighted average shares outstanding
during the period 1,032,683 1,032,683 1,032,683 1,032,683
============== ============= ============== ===============
Net loss $ (58,150) (208,942) $ (378,992) (684,747)
============== ============= ============== ===============
Net loss per common share $ (.06) (.20) $ (.37) (.66)
============== ============= ============== ===============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT JANUARY 31, 1996 AND THE CONDENSED,
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS FOR THE SIX MONTHS
ENDED JANUARY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 1,675,225
<SECURITIES> 102,424
<RECEIVABLES> 1,850,259
<ALLOWANCES> 37,260
<INVENTORY> 66,855
<CURRENT-ASSETS> 0
<PP&E> 2,165,908
<DEPRECIATION> 1,955,616
<TOTAL-ASSETS> 9,751,874
<CURRENT-LIABILITIES> 0
<BONDS> 6,675,216
<COMMON> 1,723,765
0
0
<OTHER-SE> (1,974,722)
<TOTAL-LIABILITY-AND-EQUITY> 9,519,029
<SALES> 2,754,748
<TOTAL-REVENUES> 3,998,215
<CGS> 1,683,462
<TOTAL-COSTS> 4,377,207
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 321,199
<INCOME-PRETAX> (378,992)
<INCOME-TAX> 0
<INCOME-CONTINUING> (378,992)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (378,992)
<EPS-PRIMARY> (.37)
<EPS-DILUTED> (.37)
</TABLE>
