<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 January 31, 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
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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
- -------------------------------------------------------------------------------
(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 January 31, 1997.
<PAGE> 2
PART I - FINANCIAL INFORMATION
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
January 31, 1997 and July 31, 1996
ASSETS
<TABLE>
<CAPTION>
January 31, July 31,
1997 1996
(Unaudited)
----------- -----------
<S> <C> <C>
Cash and cash equivalents $ 727,551 757,399
Marketable equity securities 13,435 42,647
Receivables:
Trade accounts and notes, less allowance
for doubtful receivables of $35,001
at January 31, 1997 and $25,001 at
July 31, 1996 579,284 470,042
Long-term receivables (including current
installments of $4,326 at January 31,
1997 and $504,428 at July 31, 1996 9,756 965,908
----------- -----------
Total receivables 589,040 1,435,950
----------- -----------
Inventories 59,673 65,322
Developed real estate, less accumulated depre-
ciation of $220,803 at January 31, 1997
and $208,766 at July 31, 1996 1,431,217 1,443,255
Undeveloped land held for sale 134,474 134,474
Other investments:
Real estate 2,719,486 1,917,209
Securities 855,003 700,454
----------- -----------
3,574,489 2,617,663
----------- -----------
Property and equipment, at cost, less accumulated
depreciation of $2,008,376 at January 31,
1997 and $1,953,414 at July 31, 1996 207,090 224,646
Deferred charges and other assets 209,899 71,226
----------- -----------
$ 6,946,868 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
January 31, 1997 and July 31, 1996
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
January 31,
1997 July 31,
(Unaudited) 1996
----------- -----------
<S> <C> <C>
Indebtedness (current installments of $4,079,770
at January 31,1997 and $4,331,451 at
July 31, 1996):
Debentures $ 2,033,745 2,062,245
Mortgage notes 1,859,382 1,864,493
Other notes, secured 867,895 1,160,111
Other notes, unsecured 459,172 427,567
----------- -----------
Total indebtedness 5,220,194 5,514,416
----------- -----------
Accounts payable, trade 776,234 651,407
Accrued expenses 825,627 686,928
Other payables:
Loans under participation agreement:
Related parties 313,880 -
Other 358,720 -
Other 378,104 230,376
----------- -----------
1,050,704 230,376
----------- -----------
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 942,001 1,550,519
----------- -----------
3,135,087 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 (925,891) (290,545)
----------- -----------
$ 6,946,868 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 January 31, 1997 and 1996
and
Six months ended January 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
January 31, January 31,
----------- -----------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Net product sales $ 1,252,092 1,411,370 $ 2,547,044 2,754,748
Income from investments 156,364 419,067 355,655 839,733
Commissions and fees 194,231 202,343 333,840 335,638
Miscellaneous 6,656 29,289 7,419 68,096
----------- ----------- ----------- -----------
1,609,343 2,062,069 3,243,958 3,998,215
----------- ----------- ----------- -----------
Cost and expenses:
Cost of product sales 729,037 851,683 1,508,860 1,683,462
Other direct operating expenses
and general and administrative
expenses 1,025,216 1,178,539 2,143,732 2,372,546
Interest 107,766 89,997 199,884 321,199
----------- ----------- ----------- -----------
1,862,019 2,120,219 3,852,476 4,377,207
----------- ----------- ----------- -----------
Net loss $ (252,676) (58,150) $ (608,518) (378,992)
=========== =========== =========== ===========
Net loss per common share $ (.24) (.06) $ (.59) (.37)
=========== =========== =========== ===========
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
Six months ended January 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net cash provided by (used in) operating activities $ (547,935) 1,183,450
----------- -----------
Cash flows from investing activities:
Proceeds from sales of securities 158,404 247,168
Capital expenditures (18,695) (61,535)
----------- -----------
Net cash provided by investing
activities 139,709 185,633
----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt 31,605 87,062
Principal payments on indebtedness (325,827) (563,959)
Proceeds received under loan participa-
tion agreements 750,000 -
Payments made under loan participation
agreements (77,400) (504,597)
----------- -----------
Net cash provided by (used in) financing activities 378,378 (981,494)
----------- -----------
Net increase (decrease) in cash and
cash equivalents (29,848) 387,589
Cash and cash equivalents at beginning of period 757,399 1,287,636
----------- -----------
Cash and cash equivalents at end of period $ 727,551 1,675,225
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
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
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 January 31, 1997 and July 31, 1996,
the results of its operations for the three and six months ended
January 31, 1997 and 1996, and its cash flows for the six months ended
January 31, 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 $672,600 as of January 31 1997, of which $313,880 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 January 31, 1997, the
Company's aggregate investment in the real estate project amounted to
$489,821.
<PAGE> 7
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Consolidated Statements of Retained Earnings
Six months ended January 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Retained earnings at July 31 $ 1,550,519 1,923,877
Net loss (608,518) (378,992)
----------- -----------
Retained earnings at January 31 $ 942,001 1,544,885
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 8
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> 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 six months ended January 31, 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 six months ended January 31, 1996.
Net Product Sales
The decrease in net product sales of $159,278 and $207,704,
respectively for the three and six months ended January 31, 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 primarily to the general
decline in the economy in the state of Hawaii for 1997 which affects
the airline and hotel industries which Bakery Europa supplies.
Income from Investments
Income from investments decreased $262,703 and $484,078 respectively
for the three and six months ended January 31, 1997 as compared to the
same periods in 1996 primarily due to the status of the real estate
projects funded by the Company's ADC loans. Such real estate
projects in fiscal 1997 are currently 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.
Cost of Product Sales
The decrease in cost of product sales of $122,646 and $174,602 for the
three and six months ended January 31, 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
58% and 59% for the three and six months ended January 31, 1997 as
compared to 60% and 61%, respectively for the same periods in 1996.
<PAGE> 10
Interest Expense
The decrease in interest expense of $121,315 for the six months ended
January 31, 1997 as compared to the same period in 1996 is due to a
decrease in borrowings related to the financing of real estate
investments. The increase in interest expense of $17,769 for the
three months ended January 31, 1997 as compared to the same period in
1996 is primarily due to the loans under participation agreements
related to the financing of real estate investments made in September
1996 and October 1996.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 1997, the Company held cash and cash equivalents of
$727,551. The decrease in cash of $29,848 for the six months ended
January 31, 1997 is primarily due to cash used in operating
activities.
Included in cash used in operating activities for the six months ended
January 31, 1997 was approximately $824,600 of advances for the
construction of residential developments in Las Vegas, Nevada and
Washington County, Utah. The Company's net loss of $608,518 is also
included in cash used in operating activities.
Cash flows from financing activities for the six months ended January
31, 1997 includes principal payments on indebtedness which amounted to
$325,827. Proceeds received on loan participation agreements in the
Company's loan to Pageantry Communities, Inc. amounted to $750,000 for
the six months ended January 31, 1997.
The Company, during the six months ended January 31, 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 quarters of fiscal
1997 will be satisfied from operations, institutional borrowings,
loan participation agreements and collections of principal and
interest on ADC loans.
<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.
STUART T.K. HO
Dated: March 11, 1997 ---------------------------------------
Stuart T.K. Ho, Chairman of the Board
and President
DONALD M. WONG
Dated: March 11, 1997 ---------------------------------------
Donald M. Wong, Senior Vice President
and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JAN-31-1997
<CASH> 727,551
<SECURITIES> 13,435
<RECEIVABLES> 589,040
<ALLOWANCES> 35,001
<INVENTORY> 59,673
<CURRENT-ASSETS> 0
<PP&E> 2,215,466
<DEPRECIATION> 2,008,376
<TOTAL-ASSETS> 6,946,869
<CURRENT-LIABILITIES> 0
<BONDS> 5,220,194
0
0
<COMMON> 1,723,765
<OTHER-SE> (2,649,655)
<TOTAL-LIABILITY-AND-EQUITY> 6,946,869
<SALES> 2,547,044
<TOTAL-REVENUES> 3,243,958
<CGS> 1,508,860
<TOTAL-COSTS> 3,852,476
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 199,884
<INCOME-PRETAX> (608,518)
<INCOME-TAX> 0
<INCOME-CONTINUING> (608,518)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (608,518)
<EPS-PRIMARY> (.59)
<EPS-DILUTED> (.59)
</TABLE>
