<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 April 30, 1997
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
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
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
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 .
---- ----
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 April 30, 1997.
<PAGE> 2
PART I - FINANCIAL INFORMATION
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
April 30, 1997 and July 31, 1996
ASSETS
<TABLE>
<CAPTION>
April 30,
1997 July 31,
(Unaudited) 1996
----------- ----------
<S> <C> <C>
Cash and cash equivalents $ 752,627 757,399
Marketable equity securities 13,435 42,647
Receivables:
Trade accounts and notes, less allowance for doubtful receivables of
$31,448 at April 30, 1997 and $25,001 at
July 31, 1996 669,361 470,042
Long-term receivables (including current
installments of $4,404 at April 30,
1997 and $504,428 at July 31, 1996 8,616 965,908
---------- ----------
Total receivables 677,977 1,435,950
---------- ----------
Inventories 77,103 65,322
Developed real estate, less accumulated depre-
ciation of $226,335 at April 30, 1997
and $208,766 at July 31, 1996 1,425,685 1,443,255
Undeveloped land held for sale 134,474 134,474
Other investments:
Real estate 2,856,938 1,917,209
Securities 854,624 700,454
---------- ----------
Total other investments 3,711,562 2,617,663
---------- ----------
Property and equipment, at cost, less accumulated
depreciation of $2,019,224 at April 30,
1997 and $1,953,414 at July 31, 1996 206,347 224,646
Deferred charges and other assets 105,984 71,226
---------- ----------
$7,105,194 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
April 30, 1997 and July 31, 1996
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
April 30,
1997 July 31,
(Unaudited) 1996
----------- -----------
<S> <C> <C>
Indebtedness (current installments of $4,020,034
at April 30,1997 and $4,331,451
at July 31, 1996):
Debentures $ 1,988,245 2,062,245
Mortgage notes 1,856,432 1,864,493
Other notes, secured 814,348 1,160,111
Other notes, unsecured 467,772 427,567
----------- -----------
Total indebtedness 5,126,797 5,514,416
----------- -----------
Accounts payable, trade 871,017 651,407
Accrued expenses 511,172 686,928
Other payables:
Loans under participation agreement:
Related parties 465,720 -
Other 603,680 -
Other 462,296 230,376
----------- -----------
Total other payables 1,531,696 230,376
----------- -----------
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 932,404 1,550,519
----------- -----------
3,125,490 3,743,605
Deduct cost of 691,082 common shares in
treasury (4,057,487) (4,057,487)
Unrealized gain (loss) on marketable equity
securities (3,491) 23,337
----------- -----------
Stockholders' deficit (935,488) (290,545)
----------- -----------
$ 7,105,194 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 April 30, 1997 and 1996
and
Nine months ended April 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
April 30, April 30,
----------------------------- -----------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Net product sales $ 1,118,371 1,453,702 $ 3,665,415 4,208,450
Income from investments 450,966 715,625 806,621 1,555,358
Commissions and fees 191,115 187,681 524,955 523,319
Miscellaneous 8,773 10,272 16,192 78,368
----------- ----------- ----------- -----------
1,769,225 2,367,280 5,013,183 6,365,495
----------- ----------- ----------- -----------
Cost and expenses:
Cost of product sales 665,562 939,195 2,174,422 2,622,657
Other direct operating expenses
and general and administrative
expenses 1,031,261 991,399 3,174,993 3,363,945
Interest 81,999 262,437 281,883 583,636
----------- ----------- ----------- -----------
1,778,822 2,193,031 5,631,298 6,570,238
----------- ----------- ----------- -----------
Net income (loss) $ (9,597) 174,249 $ (618,115) (204,743)
=========== =========== =========== ===========
Net income (loss) per common share $ (.01) .17 $ (.60) (.20)
=========== =========== =========== ===========
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 condensed consolidated financial statements.
<PAGE> 5
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Nine months ended April 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net cash provided by (used in) operating activities $(1,078,690) 4,578,102
----------- -----------
Cash flows from investing activities:
Proceeds from sales of securities and other
investments 428,394 308,953
Capital expenditures (36,257) (84,857)
----------- -----------
Net cash provided by investing
activities 392,137 224,096
----------- -----------
Cash flows from financing activities:
Proceeds from long-term borrowings 40,205 94,891
Principal payments on indebtedness (427,824) (1,885,445)
Proceeds received under loan participa-
tion agreements 1,250,000 -
Payments made under loan participation
agreements (180,600) (1,562,620)
----------- -----------
Net cash provided by (used in) financing activities 681,781 (3,353,174)
----------- -----------
Net increase (decrease) in cash and
cash equivalents (4,772) 1,449,024
Cash and cash equivalents at beginning of period 757,399 1,287,636
----------- -----------
Cash and cash equivalents at end of period $ 752,627 2,736,660
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Consolidated Statements of Retained Earnings
Nine months ended April 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ----------
<S> <C> <C>
Retained earnings at July 31 $1,550,519 1,923,877
Net loss (618,115) (204,743)
---------- ----------
Retained earnings at April 30 $ 932,404 1,719,134
========== ==========
</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)
BASIS OF PRESENTATION
The accompanying unaudited condensed 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 condensed 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 April
30, 1997.
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 April 30, 1997 and July 31, 1996, the results of
its operations for the three and nine months ended April 30, 1997 and 1996,
and its cash flows for the nine months ended April 30, 1997 and 1996. 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 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 $569,400 as of April 30, 1997, of which 265,720 is from an officer of a
subsidiary of the Company. Loans under these participation agreements earn
interest at a rate of 15% per annum and participants share pro rata with
the Company as to all payments, collections and recoveries. The loan
participation agreements further provide that the Company, from time to
time, may repurchase from the participants, their participating interest.
RED ROCK CANYON, LLC
On September 27, 1996, the Company extended a $500,000 ADC loan commitment
to Red Rock Canyon, LLC to finance a residential real estate project in
Washington County, Utah. At April 30, 1997, the Company's aggregate
investment in the real estate project amounted to $501,183.
<PAGE> 8
TOUCHSTONE DEVELOPMENT OF UTAH, LLC
On February 4, 1997, the Company extended a $2,337,437 ADC loan commitment
to Touchstone Development of Utah, LLC to finance a residential real estate
project in Tooele County, Utah. At April 30, 1997, the Company's aggregate
investment in the real estate project amounted to $505,971.
In February 1997, 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 Touchstone Development of
Utah, LLC. Participants' share of the loan commitment is $500,000 as of
April 30, 1997, of which $200,000 are from directors of the Company. Loans
under these participation agreements earn interest at a rate of 15% per
annum and participants share pro rata with the Company as to all payments,
collections and recoveries. The loan participation agreements further
provide that the Company, from time to time, may repurchase from the
participants, their participating interest.
<PAGE> 9
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 nine months ended April 30, 1997 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 nine months ended April 30, 1996.
Net Product Sales
The decrease in net product sales of $335,331 and $543,035,
respectively for the three and nine months ended April 30, 1997 as
compared to the same periods in 1996 is due to the decrease in
sales of Latipac Fine Foods, Incorporated, which operates under
the name Bakery Europa. This decrease is attributed to the general
decline in the economy in the state of Hawaii for 1997 which
affects the airline and hotel industries that Bakery Europa
supplies. Further, in September 1996, Bakery Europa discontinued
sales to certain airline caterers which accounts for approximately
$350,000 of the decrease in net product sales for the nine months
ended April 30, 1997 as compared to the same period in 1996.
Income from Investments
The decrease in income from investments of $264,659 and $748,737
for the three and nine months ended April 30, 1997 as compared to
the same periods in 1996 is primarily due to the status of the
real estate projects funded by the Company's ADC loans. Such real
estate projects in fiscal 1997 were primarily in the early stages
of development with few parcels sold as compared to the real
estate projects in 1996 which were in the final stages of
development and sales. Since real estate sales and developments
are not made and undertaken on a continuous basis, there exist
significant fluctuations from year to year.
Included in income from investments for the three months ended
April 30, 1997 is approximately $269,600 of gains from sales of
other security investments.
Cost of Product Sales
The decrease in cost of product sales of $273,633 and $448,235 for
the three and nine months ended April 30, 1997 as compared to the
same periods in 1996 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% and 59% for the three and nine months ended April 30, 1997,
respectively as compared to 65% and 62%, respectively for the same
periods in 1996.
<PAGE> 10
Interest Expense
The decrease in interest expense of $180,438 and $301,753 for the
three and nine months ended April 30, 1997, respectively as
compared to the same periods in 1996 is due to a decrease in
borrowings related to the financing of real estate investments.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1997, the Company held cash and cash equivalents of
$752,627. The decrease in cash of $4,772 for the nine months ended
April 30, 1997 is primarily due to cash used in operating
activities.
Included in cash used in operating activities for the nine months
ended April 30, 1997 was approximately $2,079,600 of advances for
the construction of residential developments in Las Vegas, Nevada,
Washington County, Utah and Tooele County, Utah. Further, cash
used in operating activities for the nine months ended April 30,
1997 include approximately $1,160,700 in collections from
investments in real estate. The Company's net loss of $618,115 is
also included in cash used in operating activities.
Cash flows from financing activities for the nine months ended
April 30, 1997 includes principal payments on indebtedness which
amounted to $427,824. Proceeds received on loan participation
agreements in the Company's loan to Pageantry Communities, Inc.
and Touchstone Development of Utah, LLC amounted to $1,250,000 for
the nine months ended April 30, 1997.
The Company, during the nine months ended April 30, 1997 was able
to meet operating cash requirements with cash on hand at July 31,
1996 and proceeds from sales of securities and loan participation
agreements. Cash requirements for the remaining quarter of fiscal
1997 will be satisfied from institutional borrowings, loan
participation agreements and collections of principal and interest
on ADC loans.
<PAGE> 11
PART II - OTHER INFORMATION
Items 1,2,3,5,6 None
Item 4. The following actions were taken at the annual stockholders meeting
held on January 31, 1997:
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, 1997 by a vote of 570,958 shares in the
affirmative and none in the negative.
<PAGE> 12
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: June 5, 1997 /s/ STUART T.K. HO
---------------------------------------
Chairman of the Board and President
Dated: June 5, 1997 /s/ 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 APRIL 30, 1997 AND THE CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS FOR THE NINE MONTHS
ENDED APRIL 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1997
<PERIOD-END> APR-30-1997
<CASH> 752,627
<SECURITIES> 13,435
<RECEIVABLES> 677,977
<ALLOWANCES> 31,448
<INVENTORY> 77,103
<CURRENT-ASSETS> 0
<PP&E> 2,225,571
<DEPRECIATION> 2,019,224
<TOTAL-ASSETS> 7,105,194
<CURRENT-LIABILITIES> 0
<BONDS> 5,126,797
0
0
<COMMON> 1,723,765
<OTHER-SE> (2,659,253)
<TOTAL-LIABILITY-AND-EQUITY> 7,105,194
<SALES> 3,665,415
<TOTAL-REVENUES> 5,013,183
<CGS> 2,174,422
<TOTAL-COSTS> 5,631,298
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 281,883
<INCOME-PRETAX> (618,115)
<INCOME-TAX> 0
<INCOME-CONTINUING> (618,115)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (618,115)
<EPS-PRIMARY> (.60)
<EPS-DILUTED> (.60)
</TABLE>
