<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ______________________
Commission File Number 0-4179
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CAPITAL INVESTMENT OF HAWAII, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Hawaii 99-0065664
- ---------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Suite 1700, Makai Tower, 733 Bishop Street
Honolulu, Hawaii 96813
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (808) 537-3981
-------------------------
No Change
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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 .
------ -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
There were 1,032,683 shares outstanding of common stock, no par value,
as of October 31, 1996.
<PAGE> 2
PART I - FINANCIAL INFORMATION
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
October 31, 1996 and July 31, 1996
ASSETS
<TABLE>
<CAPTION>
October 31,
1996 July 31,
(Unaudited) 1996
--------------- ---------------
<S> <C> <C>
Cash and cash equivalents $ 159,769 757,399
Marketable equity securities 42,647 42,647
Receivables:
Trade accounts and notes, less allowance
for doubtful receivables of $30,001
at October 31, 1996 and $25,001 at
July 31, 1996 479,434 470,042
Long-term receivables (including current
installments of $504,275 at October 31,
1996 and $504,428 at July 31, 1996 964,839 965,908
--------------- ---------------
Total receivables 1,444,273 1,435,950
--------------- ---------------
Inventories 61,077 65,322
Developed real estate, less accumulated depre-
ciation of $214,824 at October 31, 1996
and $208,766 at July 31, 1996 1,437,196 1,443,255
Undeveloped land held for sale 134,474 134,474
Other investments:
Real estate 2,530,546 1,917,209
Securities 845,450 700,454
--------------- ---------------
3,375,996 2,617,663
--------------- ---------------
Property and equipment, at cost, less accumulated
depreciation of $1,990,697 at October 31,
1996 and $1,953,414 at July 31, 1996 218,664 224,646
Deferred charges and other assets 252,324 71,226
--------------- ---------------
$ 7,126,420 6,792,582
=============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 3
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
October 31, 1996 and July 31, 1996
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
October 31,
1996 July 31,
(Unaudited) 1996
--------------- ---------------
<S> <C> <C>
Indebtedness (current installments of $4,268,780
at October 31,1996 and $4,331,451 at
July 31, 1996):
Debentures $ 2,047,245 2,062,245
Mortgage notes 1,861,969 1,864,493
Other notes, secured 1,081,740 1,160,111
Other notes, unsecured 450,772 427,567
--------------- ---------------
Total indebtedness 5,441,726 5,514,416
--------------- ---------------
Accounts payable, trade 680,171 651,407
Accrued expenses 614,539 686,928
Other payables:
Loans under participation agreement:
Related parties 350,000 -
Other 400,000 -
Other 286,371 230,376
--------------- ---------------
1,036,371 230,376
--------------- ---------------
Stockholders' deficit:
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 1,194,677 1,550,519
--------------- ---------------
3,387,763 3,743,605
Deduct cost of 691,082 common shares in
treasury (4,057,487) (4,057,487)
Unrealized gain on marketable equity securities 23,337 23,337
--------------- ---------------
Stockholders' deficit (646,387) (290,545)
--------------- ---------------
$ 7,126,420 6,792,582
=============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three months ended October 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues:
Net product sales $ 1,294,952 1,343,378
Commission and fees 139,609 133,295
Income from investments 199,291 420,666
Other 763 38,807
-------------- -------------
1,634,615 1,936,146
-------------- -------------
Cost and expenses:
Cost of product sales 779,823 831,779
Other direct operating expenses and general
and administrative expenses 1,118,516 1,194,007
Interest 92,118 231,202
-------------- -------------
1,990,457 2,256,988
-------------- -------------
Net loss $ (355,842) $ (320,842)
============== =============
Net loss per common share $ (.34) (.31)
============== ==============
Dividends per common share NONE NONE
-------------- -------------
Weighted average number of common shares
outstanding during the period 1,032,683 1,032,683
============== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Consolidated Statements of Retained Earnings
Three months ended October 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Retained earnings at July 31 $ 1,550,519 1,923,877
Net loss (355,842) (320,842)
-------------- -------------
Retained earnings at October 31 $ 1,194,677 1,603,035
============== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three months ended October 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net cash provided by (used in) operating activities $ (1,209,078) 166,310
-------------- -------------
Cash flows from investing activities:
Purchase of securities and other investments (179,015) -
Proceeds from sales of securities 125,743 92,395
Capital expenditures (12,590) (17,396)
-------------- -------------
Net cash provided by (used in) investing activities (65,862) 74,999
-------------- -------------
Cash flows from financing activities:
Proceeds from long-term debt 23,205 40,665
Principal payments on indebtedness (95,895) (504,431)
Proceeds received under loan participa-
tion agreements 750,000 -
Payments made under loan participation
agreements - (211,268)
-------------- -------------
Net cash provided by (used in) financing activities 677,310 (675,034)
-------------- -------------
Decrease in cash and cash equivalents (597,630) (433,725)
Cash and cash equivalents at beginning of period 757,399 1,287,636
-------------- -------------
Cash and cash equivalents at end of period $ 159,769 853,911
============== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 7
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated 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, 1996 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, 1996.
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 October 31, 1996 and July 31, 1996, the results of
its operations for the three months ended October 31, 1996 and 1995, and
its cash flows for the three months ended October 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) Other Real Estate Investments
PAGEANTRY COMMUNITIES, INC.
In September 1996, the Company extended the remaining acquisition,
development and construction (ADC) loan commitment to Pageantry
Communities, Inc. of $206,391.
In September 1996 and October 1996, the Company entered into loan
participation agreements which provide that the Company sell, without
recourse, to participants an undivided participating interest in the loan
to Pageantry Communities, Inc. Participants share of the loan commitment
is $750,000 of which $350,000 is from an officer of a subsidiary of the
Company. 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.
RED ROCK CANYON
On September 27, 1996, the Company extended a $500,000 ADC loan commitment
to finance a residential real estate project in Washington County, Utah.
At October 31, 1996, the Company's aggregate investment in the real estate
project amounted to $356,819, with an outstanding unfunded commitment
totaling $150,000.
<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 months ended October 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 months ended October 31, 1995.
Net Product Sales
The decrease in net product sales of $48,426 for the three months
ended October 31, 1996 as compared to the same period in 1995 is
due to the decrease in sales of Latipac Fine Foods, Incorporated,
which operates under the name Bakery Europa. This decrease is
attributed primarily to the general decline in the economy in the
State of Hawaii for 1996 which affects the airline and hotel
industries which Bakery Europa supplies.
Income from Investments
The decrease in income from investments of $221,375 for the three
months ended October 31, 1996 as compared to the same period in
1995 is primarily due to the decrease in income from acquisition,
development and construction (ADC) loans in Las Vegas, Nevada.
The projects which the ADC loans were funding for the three months
ended October 31, 1995 were in their completion stages as compared
to the same period in 1996 when the ADC projects were in the
early stages of construction. As such, the decline in sales
activity of the projects in 1996 resulted in the decrease in
income from the ADC loans.
Cost of Product Sales
The decrease in cost of product sales of $51,956 for the three
months ended October 31, 1996 as compared to the same period in
1995 is due to the decrease in product sales for Bakery Europa.
As a percentage of net sales, the cost of bakery sales decreased
to 60% for the three months ended October 31, 1996 as compared to
62% for the same period in 1995.
Interest Expense
The decrease in interest expense of $139,084 for the three months
ended October 31, 1996 as compared to the same period in 1995 is
due to a decrease in borrowings related to the financing of real
estate investments.
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1996, the Company held cash and cash equivalents
of $159,769. The decrease in cash of $597,630 for the three
months ended October 31, 1996 is primarily due to cash used in
operating activities.
Included in cash used in operating activities for the three months
ended October 31, 1996 was approximately $556,400 of advances for
the construction of residential developments in Las Vegas, Nevada
and Washington County, Utah. The Company's net loss of $355,842 is
also included in cash used in operating activities.
Cash flows from financing activities for the three months ended
October 31, 1996 includes principal payments on indebtedness which
amounted to $95,895. Proceeds received on loan participation
agreements in the Company's loan to Pageantry Communities, Inc.
amounted to $750,000 for the three months ended October 31, 1996.
The Company, during the three months ended October 31, 1996, was
able to meet operating cash requirements with cash on hand at July
31, 1996 and proceeds from loan participation agreements. Cash
requirements for the remaining quarters of fiscal 1997 will be
satisfied from operations, institutional borrowings, loan
participation agreements and collections of principal and interest
on ADC loans.
<PAGE> 10
PART II - OTHER INFORMATION
Items 1,2,3,4,5,6. None
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities and 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.
Dated: December 10, 1996 ----------------------------------------
Stuart T.K. Ho, Chairman of the Board
and President
Dated: December 10, 1996 ----------------------------------------
Donald M. Wong, Senior Vice President
and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT OCTOBER 31, 1996 AND THE CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE THREE MONTHS
ENDED OCTOBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 159,769
<SECURITIES> 42,647
<RECEIVABLES> 1,474,274
<ALLOWANCES> 30,001
<INVENTORY> 61,077
<CURRENT-ASSETS> 0
<PP&E> 2,209,361
<DEPRECIATION> 1,990,697
<TOTAL-ASSETS> 7,126,420
<CURRENT-LIABILITIES> 0
<BONDS> 5,441,726
0
0
<COMMON> 1,723,765
<OTHER-SE> (2,370,152)
<TOTAL-LIABILITY-AND-EQUITY> 7,126,420
<SALES> 1,294,953
<TOTAL-REVENUES> 1,634,615
<CGS> 779,823
<TOTAL-COSTS> 1,990,457
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92,118
<INCOME-PRETAX> (355,842)
<INCOME-TAX> 0
<INCOME-CONTINUING> (355,842)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (355,842)
<EPS-PRIMARY> (.34)
<EPS-DILUTED> (.34)
</TABLE>
