<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, 1998
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
incorporation or organization) Identification No.)
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, 1998.
<PAGE> 2
PART I - FINANCIAL INFORMATION
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
April 30, 1998 and July 31, 1997
ASSETS
<TABLE>
<CAPTION>
April 30, July 31,
1998 1997
(Unaudited)
----------- -----------
<S> <C> <C>
Cash and cash equivalents $ 342,261 797,514
Receivables:
Trade accounts and notes, less allowance
for doubtful receivables of $21,157
at April 30, 1998 and $27,191 at
July 31, 1997 816,450 676,242
Long-term receivables (including current
installments of $3,335 at April 30,
1998 and $5,344 at July 31, 1997 3,737 7,470
----------- -----------
Total receivables 820,187 683,712
----------- -----------
Inventories -- 67,425
Developed real estate, less accumulated depre-
ciation of $248,041 at April 30, 1998
and $231,788 at July 31, 1997 1,406,292 1,420,523
Undeveloped land held for sale 134,474 134,474
Other investments:
Real estate 2,284,360 2,959,237
Securities 816,259 817,723
----------- -----------
Total other investments 3,100,619 3,776,960
----------- -----------
Property and equipment, at cost:
Leasehold improvements 66,531 221,413
Furniture and equipment 397,809 1,772,820
----------- -----------
464,340 1,994,233
Less accumulated depreciation and amortization (419,854) (1,791,381)
----------- -----------
Net property and equipment 44,486 202,852
Deferred charges and other assets 10,192 40,470
----------- -----------
$ 5,858,511 7,123,930
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 3
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
April 30, 1998 and July 31, 1997
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
April 30, July 31,
1998 1997
(Unaudited)
----------- -----------
<S> <C> <C>
Indebtedness (current installments of $4,196,000
at April 30,1998 and $4,094,639 at
July 31, 1997):
Debentures $ 1,948,245 1,976,245
Mortgage notes 1,844,810 1,853,583
Other notes, secured 667,624 735,723
Other notes, unsecured 492,184 469,457
----------- -----------
Total indebtedness 4,952,863 5,035,008
----------- -----------
Accounts payable, trade 145,890 635,013
Accrued expenses 530,776 845,184
Other payables:
Loans under participation agreement:
Related parties 213,527 451,590
Other 527,530 783,960
Other 721,233 534,041
----------- -----------
Total other payables 1,462,290 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 con-
version, warrants, options
or other rights) 1,723,765 1,723,765
Additional paid-in capital 469,321 469,321
Retained earnings 631,093 703,535
----------- -----------
2,824,179 2,896,621
Deduct cost of 691,082 common shares in
treasury (4,057,487) (4,057,487)
----------- -----------
Stockholders' deficiency (1,233,308) (1,160,866)
----------- -----------
$ 5,858,511 7,123,930
=========== ===========
</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, 1998 and 1997
and
Nine months ended April 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
April 30, April 30,
--------- ---------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Commissions and fees $ 201,415 191,115 $ 542,837 524,955
Income from investments 157,808 450,966 621,040 806,621
Other (885) 8,773 79,190 16,192
----------- ----------- ----------- -----------
358,338 650,854 1,243,067 1,347,768
----------- ----------- ----------- -----------
Cost and expenses:
Other direct operating expenses
and general and administrative
expenses 395,995 437,299 1,354,201 1,431,357
Interest 91,560 109,536 340,535 281,883
----------- ----------- ----------- -----------
487,555 546,835 1,694,736 1,713,240
----------- ----------- ----------- -----------
Gain (loss) from continuing
operations (129,217) 104,019 (451,669) (365,472)
----------- ----------- ----------- -----------
Discontinued operations:
Loss from operations of discon-
tinued bakery operations -- (113,616) (36,272) (252,643)
Gain from sale of certain assets
and liabilities of discontinued
bakery operations -- -- 415,499 --
----------- ----------- ----------- -----------
Net earnings (loss) from
discontinued operations -- (113,616) 379,227 (252,643)
----------- ----------- ----------- -----------
Net loss (129,217) (9,597) (72,442) (618,115)
Retained earnings at beginning of
period 760,310 942,001 703,535 1,550,519
----------- ----------- ----------- -----------
Retained earnings at end of period $ 631,093 932,404 $ 631,093 932,404
=========== =========== =========== ===========
</TABLE>
<PAGE> 5
Condensed Consolidated Statements of Operations - cont'd.
<TABLE>
<CAPTION>
Three Months Nine Months
April 30, April 30,
--------- ---------
1998 1997 1998 1997
--------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Earnings (loss) per common share:
Gain (loss) from continuing
operations $ (.13) .10 $ (.44) (.35)
Loss from discontinued
operations -- (.11) .37 (.25)
--------- ------------ ------------- ------------
Loss per common share $ (.13) (.01) $ (.07) (.60)
========= ============ ============= ============
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> 6
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Nine months ended April 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Net cash provided by (used in) operating activities $ 138,108 (1,078,690)
----------- ----------
Cash flows from investing activities:
Proceeds from sales of securities -- 428,394
Capital expenditures (16,723) (36,257)
----------- ----------
Net cash provided by (used in)
investing activities (16,723) 392,137
----------- ----------
Cash flows from financing activities:
Proceeds from long-term debt 176,190 40,205
Principal payments on indebtedness (258,335) (427,824)
Proceeds received under loan participa-
tion agreements 810,283 1,250,000
Payments made under loan participation
agreements (1,304,776) (180,600)
----------- ----------
Net cash provided by (used in)
financing activities (576,638) 681,781
----------- ----------
Net decrease in cash and
cash equivalents (455,253) (4,772)
Cash and cash equivalents at beginning of period 797,514 757,399
----------- ----------
Cash and cash equivalents at end of period $ 342,261 752,627
=========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 7
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Statements of Retained Earnings
Nine months ended April 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- ----------
<S> <C> <C> <C>
Retained earnings at July 31 $ 703,535 1,550,519
Net loss (72,442) (618,115)
--------- ----------
Retained earnings at April 30 $ 631,093 932,404
========= ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 8
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 January 31, 1998.
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, 1998 and July 31, 1997, the results of
its operations for the nine months ended April 30, 1998 and 1997, and its
cash flows for the nine months ended April 30, 1998 and 1997. 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 Pronouncement
In June 1997, the Financial Accounting Standards Board issued Statement of
Accounting Standards (SFAS) No. 131, Disclosures About Segments of An
Enterprise and Related Information. 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. 131 is effective for
fiscal years beginning after December 15, 1997, although its provisions
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 this statement relates solely
to disclosure requirements, its implementation will not have an affect on
the Company's financial condition, results of operations or liquidity.
(3) Other Real Estate Investments
HEARTHSTONE HOMES, INC.
In February 1998, the Company extended a $425,000 acquisition, development
and construction loan commitment to Hearthstone Homes, Inc. to finance a
residential real estate project in Clark County, Nevada. At April 30, 1998,
the Company's aggregate investments in the real estate project amounted to
$225,000.
Further, the Company entered into a participation agreement in February
1998 which provides that the Company sell without recourse, to the
participant an undivided participating interest in the loan to Hearthstone
Homes, Inc. The participant's share of the loan commitment is $112,500 as
of April 30, 1998. The loan under this participation agreement earns
interest at a rate of 15% per annum and the participant shares pro rata
with the Company as to all payments, collections and recoveries. The loan
participation agreement provides that the Company, from time to time, may
repurchase from the participant, his 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, 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 and
nine months ended April 30, 1998 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, 1997.
Income from Investments
The decrease in income from investments of $293,158 and $185,581
respectively for the three and nine months ended April 30, 1998 as
compared to the same periods in 1997 is primarily due to a decrease
of interest income from the Company's acquisition, development and
construction (ADC) loans in Nevada and Utah. The decline in
investment income is also attributed to a decrease in income from the
sale of security investments of $91,700 for the nine months ended
April 30, 1997 as compared to nil for the nine months ended April 30,
1998.
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.
In December 1997, the Company finalized the sale of the assets and
liabilities of its discontinued bakery operations and recorded a
gain on sale of $415,499. The decrease in loss from discontinued
operations of $216,371 for the nine months ended April 30, 1998 as
compared to the same period in 1997 is due to the decrease in
operating and administrative expenses of Latipac Fine Foods,
Incorporated.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1998, the Company held cash and cash equivalents of
$342,261. The decrease in cash of $455,253 for the nine months ended
April 30, 1998 is primarily due to cash used in financing activities.
Included in cash provided by operating activities for the nine months
ended April 30, 1998 was approximately $677,000 of advances made and
$894,000 of repayments received on advances for the construction of
residential developments in Nevada and Utah. The Company's net loss
of $72,442 is also included in cash provided by operating activities.
<PAGE> 10
Cash flows from financing activities for the nine months ended April
30, 1998 includes repayments on loan participation agreements in the
Company's loans to Pageantry Communities, Inc. and Touchstone
Development of Utah, LLC of $1,304,776. Proceeds received on loan
participation agreements in the Company's loans to Pageantry
Communities, Inc. and Touchstone Development of Utah, LLC amounted
to $810,283 for the nine months ended April 30, 1998.
The Company met its operating cash requirements for the nine months
ended April 30, 1998 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., Touchstone Development of
Utah, LLC and Hearthstone Homes, Inc. 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.
<PAGE> 11
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 30, 1998:
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 LLP was re-elected independent
auditors for the year ending July 31, 1998 by a
vote of 557,558 shares in the affirmative and none
in the negative.
Item 6. (a) None
(b) Form 8-K dated November 3, 1997 was filed during the
six months ended January 31, 1998 reporting the sale
of assets and liabilities of the Company's
wholly-owned subsidiary, Latipac Fine Foods, Ltd.
<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 11, 1998 /s/ STUART T.K. HO
-----------------------------------
Chairman of the Board and President
Dated: June 11, 1998 /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 OF APRIL 30, 1998 AND THE CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED APRIL 30, 1998
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-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> APR-30-1998
<CASH> 342,261
<SECURITIES> 0
<RECEIVABLES> 841,344
<ALLOWANCES> 21,157
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 464,340
<DEPRECIATION> 419,854
<TOTAL-ASSETS> 5,858,511
<CURRENT-LIABILITIES> 0
<BONDS> 4,952,863
0
0
<COMMON> 1,723,765
<OTHER-SE> (2,957,073)
<TOTAL-LIABILITY-AND-EQUITY> 5,858,511
<SALES> 0
<TOTAL-REVENUES> 1,243,067
<CGS> 0
<TOTAL-COSTS> 1,694,736
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 340,535
<INCOME-PRETAX> (451,669)
<INCOME-TAX> 0
<INCOME-CONTINUING> (451,669)
<DISCONTINUED> 379,227
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (72,442)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
