<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, 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)
<TABLE>
<S> <C>
Hawaii 99-0065664
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
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 January 31, 1998.
<PAGE> 2
PART I - FINANCIAL INFORMATION
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
January 31, 1998 and July 31, 1997
ASSETS
<TABLE>
<CAPTION>
January 31, July 31,
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 491,901 797,514
Receivables:
Trade accounts and notes, less allowance
for doubtful receivables of $20,946
at January 31, 1998 and $27,191 at
July 31, 1997 813,376 676,242
Long-term receivables (including current
installments of $3,780 at January 31,
1998 and $5,344 at July 31, 1997 4,825 7,470
----------- -----------
Total receivables 818,201 683,712
----------- -----------
Inventories -- 67,425
Developed real estate, less accumulated depre-
ciation of $242,594 at January 31, 1998
and $231,788 at July 31, 1997 1,410,792 1,420,523
Undeveloped land held for sale 134,474 134,474
Other investments:
Real estate 2,325,687 2,959,237
Securities 817,698 817,723
----------- -----------
3,143,385 3,776,960
----------- -----------
Property and equipment, at cost:
Leasehold improvements 62,409 221,413
Furniture and equipment 359,271 1,772,820
----------- -----------
421,680 1,994,233
Less accumulated depreciation and amortization (379,662) (1,791,381)
----------- -----------
Net property and equipment 42,018 202,852
Deferred charges and other assets 22,814 40,470
----------- -----------
$ 6,063,585 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, cont'd.
January 31, 1998 and July 31, 1997
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
January 31, July 31,
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Indebtedness (current installments of $4,210,476
at January 31,1998 and $4,094,639
at July 31, 1997):
Debentures $ 1,958,245 1,976,245
Mortgage notes 1,848,028 1,853,583
Other notes, secured 732,482 735,723
Other notes, unsecured 483,019 469,457
----------- -----------
Total indebtedness 5,021,774 5,035,008
----------- -----------
Accounts payable, trade 142,697 635,013
Accrued expenses 679,319 845,184
Other payables:
Loans under participation agreement:
Related parties 148,193 451,590
Other 503,498 783,960
Other 672,195 534,041
----------- -----------
1,323,886 1,769,591
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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 760,310 703,535
----------- -----------
2,953,396 2,896,621
Deduct cost of 691,082 common shares in
treasury (4,057,487) (4,057,487)
----------- -----------
Stockholders' deficiency (1,104,091) (1,160,866)
----------- -----------
$ 6,063,585 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 January 31, 1998 and 1997
and
Six months ended January 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
January 31, January 31,
--------------------------- ---------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Commissions and fees $ 210,900 194,231 $ 341,422 355,655
Income from investments 270,511 156,364 463,232 333,840
Other -- 6,656 80,075 7,419
----------- ----------- ----------- -----------
481,411 357,251 884,729 696,914
----------- ----------- ----------- -----------
Cost and expenses:
Other direct operating expenses
and general and administrative
expenses 434,880 444,450 958,206 994,058
Interest 161,642 94,251 248,975 172,347
----------- ----------- ----------- -----------
596,522 538,701 1,207,181 1,166,405
----------- ----------- ----------- -----------
Loss from continuing
operations (115,111) (181,450) (322,452) (469,491)
----------- ----------- ----------- -----------
Discontinued operations:
Loss from operations of discon-
tinued bakery operations (5,433) (71,226) (36,272) (139,027)
Gain from sale of certain assets
and liabilities of discontinued
bakery operations 415,499 -- 415,499 --
----------- ----------- ----------- -----------
Net earnings (loss) from
discontinued operations 410,066 (71,226) 379,227 (139,027)
----------- ----------- ----------- -----------
Net earnings (loss) 294,955 (252,676) 56,775 (608,518)
Retained earnings at beginning of
period 465,355 1,194,677 703,535 1,550,519
----------- ----------- ----------- -----------
Retained earnings at end of period $ 760,310 942,001 $ 760,310 942,001
=========== =========== =========== ===========
</TABLE>
<PAGE> 5
Condensed Consolidated Statements of Operations - cont'd
<TABLE>
<CAPTION>
Three Months Six Months
January 31, January 31,
--------------------------- ---------------------------
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Earnings (loss) per common share:
Loss from continuing
operations $ (.11) (.17) $ (.31) (.45)
Earnings (loss) from discontinued
operations .40 (.07) .36 (.14)
----------- ----------- ----------- -----------
Net earnings (loss) per
common share $ .29 (.24) $ .05 (.59)
=========== =========== =========== ===========
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
Consolidated Statements of Retained Earnings
Six months ended January 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Retained earnings at July 31 $ 703,535 1,550,519
Net earnings (loss) 56,775 (608,518)
---------- ----------
Retained earnings at January 31 $ 760,310 942,001
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 7
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Six months ended January 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Net cash provided by (used in) operating activities $ 300,703 (547,935)
----------- -----------
Cash flows from investing activities:
Capital expenditures (9,223) (18,695)
Proceeds from sales of securities -- 158,404
----------- -----------
Net cash provided by (used in)
investing activities (9,223) 139,709
----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt 167,023 31,605
Principal payments on indebtedness (180,257) (325,827)
Proceeds received under loan participa-
tion agreements 435,493 750,000
Payments made under loan participation
agreements (1,019,352) (77,400)
----------- -----------
Net cash provided by (used in) financing activities (597,093) 378,378
----------- -----------
Net decrease in cash and
cash equivalents (305,613) (29,848)
Cash and cash equivalents at beginning of period 797,514 757,399
----------- -----------
Cash and cash equivalents at end of period $ 491,901 727,551
=========== ===========
</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 October 31, 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 January 31, 1998 and July 31, 1997, the results of
its operations for the six months ended January 31, 1998 and 1997, and its
cash flows for the six months ended January 31, 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 relate solely
to disclosure requirements, its implementation will not have an affect on
the Company's financial condition, results of operations or liquidity.
<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 six months ended January 31, 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 six months ended January 31, 1997.
Income from Investments
The increase in income from investments of $114,147 and $129,392,
respectively for the three and six months ended January 31, 1998
as compared to the same periods in 1997 is primarily due to an
increase of interest income from the Company's acquisition,
development and construction (ADC) loans in Nevada and Utah of
approximately $199,200 for the six months ended January 31, 1998
as compared to the same period in 1997. This increase was offset
by a decrease in income from the sale of security investments of
$91,700 for the six months ended January 31, 1997 and nil for the
six months ended January 31, 1998.
Other Income
The increase in other income of $72,656 for the six months ended
January 31, 1998 as compared to the same period in 1997 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.
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 $102,755 for the six months ended January 31, 1998
as compared to the same period in 1997 is due to the decrease in
operating and administrative expenses of Latipac Fine Foods,
Incorporated.
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 1998, the Company held cash and cash equivalents of
$491,901. The decrease in cash of $305,613 for the six months
ended January 31, 1998 is primarily due to cash used in financing
activities.
Included in cash provided by operating activities for the six
months ended January 31, 1998 was approximately $615,000 of
advances made and $1,185,000 of repayments received on advances
for the construction of residential developments in Nevada and
Utah. The Company's net earnings of $56,775 is also included in
cash provided operating activities.
Cash flows from financing activities for the six months ended
January 31, 1998 includes repayments on loan participation
agreements in the Company's loans to Pageantry Communities, Inc.
and Touchstone Development of Utah, LLC of approximately
$1,019,352. Proceeds received on loan participation agreements in
the Company's loans to Pageantry Communities, Inc. and Touchstone
Development of Utah, LLC amounted to $435,493 for the six months
ended January 31, 1998.
The Company met its operating cash requirements for the six months
ended January 31, 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. 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.
<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: March 12, 1998 /s/ STUART T.K. HO
-----------------------------------
Chairman of the Board and President
Dated: March 12, 1998 /s/ DONALD M. WONG
-----------------------------------
Senior Vice President and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONDENSED CONSOLIDATED BALANCE SHEET AT JANUARY 31, 1998 AND THE CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JANUARY 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 491,901
<SECURITIES> 0
<RECEIVABLES> 813,376
<ALLOWANCES> 20,946
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 421,680
<DEPRECIATION> 379,662
<TOTAL-ASSETS> 6,063,585
<CURRENT-LIABILITIES> 0
<BONDS> 5,021,774
0
0
<COMMON> 1,723,765
<OTHER-SE> (2,827,856)
<TOTAL-LIABILITY-AND-EQUITY> 6,063,585
<SALES> 0
<TOTAL-REVENUES> 884,729
<CGS> 0
<TOTAL-COSTS> 1,207,181
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 248,975
<INCOME-PRETAX> (322,452)
<INCOME-TAX> 0
<INCOME-CONTINUING> (322,452)
<DISCONTINUED> 379,227
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,775
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
