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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, 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)
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<S> <C>
HAWAII 99-0065664
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
SUITE 1700, MAKAI TOWER, 733 BISHOP STREET 96813
HONOLULU, HAWAII (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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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 October 31, 1997.
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PART I - FINANCIAL INFORMATION
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1997 AND JULY 31, 1997
ASSETS
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<CAPTION>
OCTOBER 31,
1997 JULY 31,
(UNAUDITED) 1997
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<S> <C> <C>
Cash and cash equivalents.......................................... $ 323,015 797,514
Receivables:
Trade accounts and notes, less allowance for doubtful receivables
of $26,908 at October 31, 1997 and $27,191 at July 31, 1997... 776,276 676,242
Long-term receivables (including current installments of $4,469
at October 31, 1997 and $5,344 at July 31, 1997............... 6,143 7,470
----------- ----------
Total receivables............................................. 782,419 683,712
----------- ----------
Inventories........................................................ 77,336 67,425
Developed real estate, less accumulated depreciation of $837,179 at
October 31, 1997 and $231,788 at July 31, 1997................... 1,416,207 1,420,523
Undeveloped land held for sale..................................... 134,474 134,474
Other investments:
Real estate...................................................... 3,255,046 2,959,237
Securities....................................................... 817,723 817,723
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4,072,769 3,776,960
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Property and equipment, at cost:
Leasehold improvements........................................... 221,413 221,413
Furniture and equipment.......................................... 1,779,176 1,772,820
----------- ----------
2,000,589 1,994,233
Less accumulated depreciation and amortization................... (1,812,856) (1,791,381)
----------- ----------
Net property and equipment.................................... 187,733 202,852
Deferred charges and other assets.................................. 168,091 40,470
----------- ----------
$ 7,162,044 7,123,930
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CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
OCTOBER 31, 1997 AND JULY 31, 1997
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
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<CAPTION>
October 31,
1997 July 31,
(Unaudited) 1997
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<S> <C> <C>
Indebtedness (current installments of $4,202,277 at
October 31, 1997 and $4,094,639 at July 31, 1997):
Debentures....................................................... $ 1,961,245 1,976,245
Mortgage notes................................................... 1,850,840 1,853,583
Other notes, secured............................................. 821,747 735,723
Other notes, unsecured........................................... 478,301 469,457
------------ ----------
Total indebtedness....................................... 5,112,133 5,035,008
------------ ----------
Accounts payable, trade............................................ 870,289 635,013
Accrued expenses................................................... 656,353 845,184
Other payables:
Loans under participation agreement:
Related parties............................................... 434,165 451,590
Other......................................................... 861,554 783,960
Other............................................................ 626,596 534,041
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1,922,315 1,769,591
------------ ----------
Stockholders' deficiency:
Common stock, no par value, stated value $1 per share:
Authorized 2,531,765 shares; issued 1,723,765 shares. (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................................................ 465,355 703,535
------------ ----------
2,658,441 2,896,621
Deduct cost of 691,082 common shares in treasury................. (4,057,487) (4,057,487)
------------ ----------
Stockholders' deficiency...................................... (1,399,046) (1,160,866)
------------ ----------
$ 7,162,044 7,123,930
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See accompanying notes to condensed consolidated financial statements.
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CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 1997 AND 1996
(UNAUDITED)
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<CAPTION>
1997 1996
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<S> <C> <C>
Revenues:
Commission and fees................................................. $ 130,522 139,609
Income from investments............................................. 192,721 199,291
Other............................................................... 80,075 763
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403,318 339,663
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Cost and expenses:
Other direct operating expenses and general and administrative
expenses......................................................... 523,326 535,586
Interest............................................................ 87,333 92,118
--------- ---------
610,659 627,704
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Loss from continuing operations............................. (207,341) (288,041)
Loss from discontinued operations..................................... (30,839) (67,801)
--------- ---------
Net loss.................................................... (238,180) (355,842)
Retained earnings at beginning of period.............................. 703,535 1,550,519
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Retained earnings at end of period.................................... $ 465,355 1,194,677
========= =========
Loss per common share:
Loss from continuing operations..................................... (.20) (.27)
Loss from discontinued operations................................... (.03) (.07)
--------- ---------
Net loss per common share................................... $ (.23) (.34)
========= =========
Dividends per common share............................................ NONE NONE
--------- ---------
Weighted average number of common shares outstanding during the
period.............................................................. 1,032,683 1,032,683
========= =========
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See accompanying notes to condensed consolidated financial statements.
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CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED OCTOBER 31, 1997 AND 1996
(UNAUDITED)
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<CAPTION>
1997 1996
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Net cash used in operating activities............................... $(603,552) (1,209,078)
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Cash flows from investing activities:
Capital expenditures.............................................. (8,241) (12,590)
Purchase of securities and other investments...................... -- (179,015)
Proceeds from sales of securities................................. -- 125,743
--------- ----------
Net cash used in investing activities..................... (8,241) (65,862)
--------- ----------
Cash flows from financing activities:
Proceeds from long-term debt...................................... 159,705 23,205
Principal payments on indebtedness................................ (82,580) (95,895)
Proceeds received under loan participation agreements............. 406,061 750,000
Payments made under loan participation agreements................. (345,892) --
--------- ----------
Net cash provided by financing activities................. 137,294 677,310
--------- ----------
Net decrease in cash and cash equivalents................. (474,499) (597,630)
Cash and cash equivalents at beginning of period.................... 797,514 757,399
--------- ----------
Cash and cash equivalents at end of period.......................... $ 323,015 159,769
========= ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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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, 1997 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, 1997 and July 31, 1997, the results of its operations
for the three months ended October 31, 1997 and 1996, and its cash flows for the
three months ended October 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. ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share
and SFAS No. 129, Disclosure of Information About Capital Structure. SFAS No.
128 simplifies the calculation of earnings per share and revises related
disclosure requirements. SFAS No. 129 consolidates existing guidance related to
an entity's capital structure. SFAS No. 128 is effective for interim periods and
fiscal years ending after December 15, 1997. Earlier application is not
permitted. SFAS No. 129 is effective for financial statements and periods ending
after December 15, 1997. The adoption of these statements is not expected to
have a material effect on the Company's financial condition, results of
operations or liquidity.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income
and SFAS No. 131, Disclosures About Segments of An Enterprise and Related
Information. SFAS No. 130 requires that changes in comprehensive income be
reported in a financial statement. Comprehensive income is defined as all
changes in equity, including net income, except those resulting from investments
by and distributions to owners. SFAS No. 131 requires public companies to report
selected quarterly information about business segments, including information on
products and services, geographic areas and major customers based on a
management approach to reporting. SFAS No. 130 and 131 are effective for fiscal
years beginning after December 15, 1997, although SFAS No. 131 need not be
applied to interim periods in the initial year of implementation.
Reclassification of financial statements for prior periods will be required for
comparative purposes. As these statements relate solely to disclosure
requirements, their implementation will not have an affect on the Company's
financial condition, results of operations or liquidity.
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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, investing in
securities, and wholesale business activities which are subject to various
factors which cause fluctuations between periods. Accordingly, the results of
operations for the three months ended October 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 months ended October 31,
1996.
Income from Investments
The decrease in income from investments of $6,570 for the three months
ended October 31, 1997 as compared to the same period in 1996 is primarily due
to the income from the sale of security investments of $91,700 for the three
months ended October 31, 1996 and nil for the three months ended October 31,
1997. This decrease was offset by an increase in interest income from the
Company's acquisition, development and construction (ADC) loans in Nevada and
Utah of approximately $77,000 for the three months ended October 31, 1997 as
compared to the same period in 1996.
Other Income
The increase in other income of $79,312 for the three months ended October
31, 1997 as compared to the same period in 1996 is primarily due to the receipt
of the cash surrender value of officer life insurance policies which were
canceled by the Company.
DISCONTINUED 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. In October 1997, the Company entered into an agreement
to sell certain assets and liabilities of its subsidiary Latipac Fine Foods,
Inc. and to discontinue its bakery operations.
The decrease in loss from discontinued operations of $36,962 for the three
months ended October 31, 1997 as compared to the same period in 1996 is due to
the decrease in operating and administrative expenses of Latipac Fine Foods,
Incorporated of approximately $47,000.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1997, the Company held cash and cash equivalents of
$323,015. The decrease in cash of $474,499 for the three months ended October
31, 1997 is primarily due to cash used in operating activities.
Included in cash used in operating activities for the three months ended
October 31, 1997 was approximately $421,200 of advances for the construction of
residential developments in Nevada and Utah. The Company's net loss of $238,180
is also included in cash used in operating activities.
Cash flows from financing activities for the three months ended October 31,
1997 includes proceeds from long-term debt of $159,705. Proceeds received on
loan participation agreements in the Company's loans to Pageantry Communities,
Inc. and Touchstone Development of Utah, LLC amounted to $406,061 for the three
months ended October 31, 1997 which were partially offset by $345,892 in
repayments on the participation loan agreements during the three months ended
October 31, 1997.
The Company met its operating cash requirements for the three months ended
October 31, 1997 by using cash on hand at July 31, 1997 and proceeds from loan
participation agreements. Cash inflows and outflows from ADC loans in Copper
Bluffs, LLC, Sunset Bay, LLC, Red Rock Canyon, Pageantry Communities, Inc. and
Touchstone Development of Utah, LLC will continue throughout fiscal year 1998.
Cash requirements will continue to be satisfied from institutional borrowings,
loan participation agreements and net collections on ADC loans.
7
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PART II -- OTHER INFORMATION
ITEMS 1, 2, 3, 4, 5.
None
ITEM 6.
(a) None
(b) Form 8-K dated November 3, 1997 was filed during the three months ended
October 31, 1997 reporting the sale of assets and liabilities of the
Company's wholly-owned Subsidiary, Latipac Fine Foods, Ltd.
8
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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 11, 1997 /s/ STUART T. K. HO
-----------------------------------
Chairman of the Board and President
Dated: December 11, 1997 /s/ DONALD M. WONG
-----------------------------------
Senior Vice President and Treasurer
9
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT OCTOBER 31, 1997 AND THE CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 1997
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-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 333,015
<SECURITIES> 0
<RECEIVABLES> 782,419
<ALLOWANCES> 26,908
<INVENTORY> 77,336
<CURRENT-ASSETS> 0
<PP&E> 2,000,589
<DEPRECIATION> 1,812,856
<TOTAL-ASSETS> 7,162,044
<CURRENT-LIABILITIES> 0
<BONDS> 5,112,133
0
0
<COMMON> 1,723,765
<OTHER-SE> (3,122,811)
<TOTAL-LIABILITY-AND-EQUITY> 7,162,044
<SALES> 0
<TOTAL-REVENUES> 403,318
<CGS> 0
<TOTAL-COSTS> 610,660
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87,333
<INCOME-PRETAX> (207,342)
<INCOME-TAX> 0
<INCOME-CONTINUING> (207,342)
<DISCONTINUED> (30,839)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (238,101)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
</TABLE>
