<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1995
Commission file number 0-11404
PACIFIC INTERNATIONAL SERVICES CORP.
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-2877371
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1600 KAPIOLANI BLVD., SUITE 825, HONOLULU, HAWAII
(Address of principal executive office)
Registrant's telephone number, including area code (808) 926-4242
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 for each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS SHARES OUTSTANDING AT AUGUST 11, 1995
----------------- -------------------------------------
<S> <C>
Common Stock 8,079,800
</TABLE>
Page 1 of 13
<PAGE> 2
PACIFIC INTERNATIONAL SERVICES CORP.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheets.................................. 3
Condensed Consolidated Statements of Operations........................ 4
Condensed Consolidated Statements of Operations........................ 5
Condensed Consolidated Statements of Cash Flows........................ 6
Note to Condensed Consolidated Financial Statements.................... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................... 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................................... 12
Computation of Earnings Per Common Share............................... 13
Signatures............................................................. 14
</TABLE>
Page 2
<PAGE> 3
PACIFIC INTERNATIONAL SERVICES CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 427,922 $ 831,952
Receivables, net 12,078,821 10,023,512
Automobile dealership vehicle
inventories 9,238,175 4,961,600
Inventories and prepaid expenses 1,709,205 899,453
Rental vehicles, at cost, less
accumulated depreciation 9,250,585 42,367,410
Furniture, equipment and
leasehold improvements, net
of accumulated depreciation
and amortization 7,655,056 8,149,846
Other assets 2,034,941 2,038,462
----------- -----------
Total assets $42,394,705 $69,272,235
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 7,774,627 $ 5,744,507
Accrued expenses and other liabilities 7,125,689 8,152,270
Senior debt 22,131,009 48,034,463
Convertible subordinated debentures 5,250,000 5,250,000
----------- -----------
Total liabilities 42,281,325 67,181,240
----------- -----------
Preferred stock with no par value,
authorized 15,000,000 shares; none issued - -
Common stock, stated value
$0.10 per share, authorized
50,000,000 shares, issued and
outstanding 8,079,800 shares 807,980 807,980
Additional paid-in capital 9,102,181 9,102,181
Accumulated deficit (9,796,781) (7,819,166)
----------- -----------
Total shareholders' equity 113,380 2,090,995
----------- -----------
Total liabilities and shareholders'
equity $42,394,705 $69,272,235
=========== ===========
</TABLE>
See accompanying Note to Condensed Consolidated Financial Statements Page 3
<PAGE> 4
PACIFIC INTERNATIONAL SERVICES CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Operating revenues:
Vehicle rental $11,921,078 $13,283,130
Vehicle sales 11,950,869 10,883,066
----------- -----------
Total operating revenues 23,871,947 24,166,196
----------- -----------
Operating costs and expenses:
Cost of vehicles sold 9,124,519 8,364,102
Depreciation of rental vehicles 1,693,586 969,558
Interest on fleet debt 491,977 517,488
Other direct fleet 4,077,710 3,138,941
Personnel 3,340,155 3,750,420
Occupancy 2,147,973 2,156,534
Other direct operating 2,562,232 3,095,202
Other selling, general and
administrative 1,930,327 1,939,547
----------- -----------
Total operating costs and expenses 25,368,479 23,931,792
----------- -----------
Income (loss) from operations (1,496,532) 234,404
Interest income 11,003 15,720
Other interest expense (245,985) (229,906)
Other, net 132,040 (17,853)
----------- -----------
Net income (loss) $(1,599,474) $ 2,365
=========== ===========
Earnings (loss) per common share: $ (0.20) $ 0.00
=========== ===========
</TABLE>
See accompanying Note to Condensed Consolidated Financial Statements Page 4
<PAGE> 5
PACIFIC INTERNATIONAL SERVICES CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Operating revenues:
Vehicle rental $24,535,550 $27,184,699
Vehicle sales 22,697,361 20,933,924
----------- -----------
Total operating revenues 47,232,911 48,118,623
----------- -----------
Operating costs and expenses:
Cost of vehicles sold 17,194,272 15,847,197
Depreciation of rental vehicles 3,508,142 2,901,337
Interest on fleet debt 1,392,995 1,142,441
Other direct fleet 6,620,770 5,450,425
Personnel 6,736,082 7,316,757
Occupancy 4,311,281 4,303,128
Other direct operating 5,443,502 6,596,890
Other selling, general and
administrative 3,712,335 3,605,229
----------- -----------
Total operating costs and expenses 48,919,379 47,163,404
----------- -----------
Income from operations (1,686,468) 955,219
Interest income 20,068 25,265
Other interest expense (443,255) (430,490)
Other, net 132,040 (36,010)
----------- -----------
Net income (loss) $(1,977,615) $ 513,984
=========== ===========
Earnings (loss) per common share: $ (0.24) $ 0.06
=========== ===========
</TABLE>
See accompanying Note to Condensed Consolidated Financial Statements Page 5
<PAGE> 6
PACIFIC INTERNATIONAL SERVICES CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------
1995 1994
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,977,615) $ 513,984
Adjustments to reconcile net
income (loss) to net cash provided
by operating activities:
(Gain) or Loss on sale of rental vehicles 710,042 (572,064)
Depreciation of rental vehicles and
amortization of related costs 4,062,886 3,701,469
Depreciation and amortization, other 594,536 506,824
Provision for losses on rental vehicles 399,897 389,289
Provision for losses on receivables 369,237 108,490
Provision for self-insurance 103,994 881,742
Change in assets and liabilities:
Receivables (2,424,546) (2,749,231)
Automobile dealership vehicle inventories (4,276,575) 2,239,130
Inventories, prepaid expenses
and other assets (806,231) (694,582)
Accounts payable 2,030,120 1,501,796
Accrued expenses and other liabilities (1,130,575) (37,452)
Notes payable for automobile
dealership vehicle inventories 13,609,831 6,583,005
------------ ------------
Net cash provided by
operating activities 11,265,001 12,372,400
------------ ------------
Cash flows from investing activities:
Proceeds from the sale of rental vehicles 10,977,352 6,587,676
Purchases of rental vehicles (230,510) (1,278,992)
Proceeds from the sale of furniture,
equipment and leasehold improvements 160,476 -
Additions to furniture, equipment and
leasehold improvements (274,864) (913,953)
------------ ------------
Net cash provided by
investing activities 10,632,454 4,394,731
------------ ------------
Cash flows from financing activities:
Principal payments of senior debt (22,301,485) (16,530,790)
Net cash used in ------------ ------------
financing activities (22,301,485) (16,530,790)
------------ ------------
Net increase (decrease) in cash (404,030) 236,341
Cash and cash equivalents at beginning of period 831,952 1,719,123
------------ ------------
Cash and cash equivalents at end of period $ 427,922 $ 1,955,464
============ ============
</TABLE>
See accompanying Note to Condensed Consolidated Financial Statements
Page 6
<PAGE> 7
PACIFIC INTERNATIONAL SERVICES CORP.
Condensed Consolidated Statments of Cash Flows, continued
Supplemental schedule of noncash investing and financing activities:
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------------
1995 1994
------------- -------------
<S> <C> <C>
Senior debt incurred for additions to rental vehicles $ 827,660 $ 20,484,068
Senior debt incurred from conversion of lease obligations $ - $ 1,400,000
Rental vehicle purchases not yet financed $ 39,688 $ 1,350,619
Reduction of senior debt resulting from turnback of rental vehicles $(18,063,993) $(25,739,992)
Capital lease obligation incurred from purchase of equipment $ - $ 72,911
</TABLE>
Page 7
<PAGE> 8
PACIFIC INTERNATIONAL SERVICES CORP.
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
In the opinion of management, the unaudited financial information
included in this report contains all adjustments, consisting of normal
recurring adjustments only, necessary for a fair presentation of the
results of operations for the interim periods covered and the financial
condition of the Company at the dates of the balance sheets. The
operating results for the interim periods are not necessarily indicative
of the results to be expected for the full fiscal year. The accounting
policies followed by the Company are set forth in Note 1 to the financial
statements included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1994.
Certain prior year amounts have been reclassified to conform to 1995
presentation.
Page 8
<PAGE> 9
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Pacific International Services Corp., the ("Company"), reported a consolidated
net loss of $1,599,474 or $0.20 per share for the second quarter of 1995,
compared to net income of $2,365 or $0.00 per share for the same quarter last
year. For the six months ended June 30, 1995, the Company reported a net loss
of $1,977,615 or $0.24 per share, compared to net income of $513,984 or $0.06
per share for the same period last year.
Operating revenues from the Company's vehicle rental division for the three
months ended June 30, 1995, totaled $11,921,078, a decrease of 10.25% from
revenues of $13,283,130 for the second quarter of 1994. The decrease in
revenue for the quarter resulted from lower rental day volume compared to the
same period in 1994, continuing a decline that also affected the first quarter.
Rental division operating revenues totaled $24,535,550 for the six month period
ended June 30, 1995, versus $27,184,699. Although the reduction in unit volume
period affected most of the Company's markets, the sharpest declines were in
the Company's business generated through reservations from the Dollar Systems,
Inc. on the U.S. mainland, and from the local impulse market. The Company
continued to make progress in increasing its average daily rental yield,
however the increase of approximately 7.4% in second quarter yield was not
sufficient to offset lower utilization as unit volume suffered.
Total direct fleet holding costs, which include lease payments, depreciation,
interest, car sales and other fleet expenses (freight, dealer profit and
license) increased by 22% for the second quarter of 1995 compared to the same
period in 1994, based on an average fleet size 11% lower than in 1994,
reflecting the continuing significant increase in holding costs on a per unit
basis.
Other operating costs and expenses, including personnel, occupancy and other
direct operating costs were down by almost $500,000 for the three months ended
June 30, 1995 compared to the same period in 1994, and would have been down
even more, except for approximately $250,000 incurred in legal fees relating
the Company's efforts to settle various issues with its licensor, Dollar
Systems, Inc. (see "Financial Condition").
The Company's vehicle sales operations generated revenues of $22,697,361 and
$11,950,869 for the six months and three months ended June 30, 1995, as
compared with $20,933,924 and $10,883,066 for the same periods in 1994. The
increase in revenues from vehicle sales reflects price increases on new vehicle
sales and higher sales of used vehicles. Operating expenses related to the
Company's vehicle sales division increased from prior year levels in proportion
to the revenue increases.
Page 9
<PAGE> 10
Financial Condition
In March of 1995, after lengthy negotiations, the Company obtained a commitment
in principle from Dollar Systems, Inc. for certain assistance related to the
Company's vehicle rental operations (the "1995 Assistance Commitment"). Under
this commitment, the Company would have received substantial economic benefits
and a number of disputes between the Company and Dollar Systems, Inc. would
have been resolved. However, the parties were unable to agree upon the final
documentation with respect to the 1995 Assistance Commitment.
Pending further negotiations, the Company withheld certain payments due to
Dollar Systems, Inc. under its License Agreement and Master Lease Agreement.
Dollar Systems, Inc. filed a legal action in U.S. District Court to compel the
Company to execute the documentation proposed by Dollar Systems, Inc. to embody
its understanding of the 1995 Assistance Agreement, The Company responded by
commencing its own legal action against Dollar Systems for damages and
injunctive relief based on violations of the franchise agreement and Hawaii
law, whereupon Dollar Systems sent the Company notices purporting to terminate
the License and Master Lease Agreement. Subsequent discussions led to
execution of a Standstill Agreement, later amended and extended, and, finally
to negotiation of a Settlement Agreement. The parties have terminated all
litigation without prejudice to recommence proceedings should the transactions
contemplated be the Settlement Agreement fail to close.
Under the terms of the Settlement Agreement, dated July 17, 1995, the parties
agreed to stay the litigation and signed documents under which Dollar Systems,
Inc. will acquire substantially all of the assets and certain liabilities of
the Company's vehicle rental division. This transaction is subject to due
diligence review and other conditions and to consents and approvals of certain
persons, including the Company's shareholders and bondholders. The assets and
liabilities of the Company's vehicle sale division, as well as certain other
liabilities and obligations, will remain with the Company. The parties will
also release various claims against each other. The transaction is scheduled
to close by October 31, 1995. In the meantime, the Company continues to
operate the vehicle rental division, including efforts to increase revenue,
utilization and yield per rental day, and to control its operating costs.
While the transaction is pending, the Company is incurring and will continue to
incur substantial transaction costs including legal and accounting and other
professional fees. Although Dollar Systems, Inc. has agreed to certain interim
financial assistance, there is no assurance of continuing support from Dollar
Systems, Inc. if the transaction does not close as planned. If the transaction
does not close, and further assistance from Dollar Systems, Inc. is not made
available, it is doubtful that the vehicle rental operations and PISC could
continue as going concerns, although the vehicle sales subsidiary should
continue to be viable.
Upon the closing of the Dollar Systems, Inc. transaction, the Company plans to
seek to exchange common stock and cash for certain of its outstanding
publicly-held debt. The terms of such an exchange have not been determined.
In view of the reduced operations of the Company after the Dollar Systems, Inc.
transaction, management believes that such a re capitalization will be
necessary to place the Company on a sound financial basis.
Page 10
<PAGE> 11
Update
The Company's primary source of capital for financing its rental vehicle fleet
has traditionally been through borrowings from manufacturer financing
affiliates, banks and other lenders. The Company maintains credit lines with
General Motors Acceptance Corporation ($20,000,000), FINOVA Capital Corporation
($15,000,000), Ford Motor Credit Company ($7,500,000) and Bank of Hawaii
($3,645,000). The following amounts were outstanding under each respective
line of credit as of June 30, 1995, $550,000, $7,996,000, $281,000 and
$735,000. The Company finances its automobile dealership vehicle inventories
through a $13,500,000 line of credit with Chrysler Credit Corporation, of which
$9,258,000 remains outstanding as of June 30, 1995.
Page 11
<PAGE> 12
PART 11. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The Exhibits noted herein as previously filed are
hereby incorporated as an exhibit to this document by
this reference as though set forth herein:
Exhibit 11 - Statement re: Computation of Earnings
Per Share
(b) None
Page 12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf of the undersigned thereunto duly authorized.
PACIFIC INTERNATIONAL SERVICES CORP.
By /s/ Alan M. Robin
-------------------------------------
Alan M. Robin
President and Chief Executive Officer
By /s/ Richard Bauman
-------------------------------------
Richard Bauman
Chief Financial Officer
(Principal Financial Officer)
By /s/ Tyrus Kawashima
-------------------------------------
Tyrus Kawashima
Controller and
Chief Accounting Officer
August 11, 1995
Page 13
<PAGE> 1
EXHIBIT 11
PACIFIC INTERNATIONAL SERVICES CORP.
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Three Months Ended June 30,
-------------------------------
1995 1994
------------ ----------
<S> <C> <C>
Weighted average common shares outstanding 8,079,800 9,009,300
=========== ==========
Net income (loss) $(1,599,474) $ 2,365
=========== ==========
Earnings per common share:
Net income (loss) $ (0.20) $ 0.00
=========== ==========
<CAPTION>
Six Months Ended June 30,
-------------------------------
1995 1994
------------ ----------
<S> <C> <C>
Weighted average common shares outstanding 8,079,800 9,009,300
=========== ==========
Net income (loss) $(1,977,615) $ 513,984
=========== ==========
Earnings per common share:
Net income (loss) $ (0.24) $ 0.06
=========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 428
<SECURITIES> 0
<RECEIVABLES> 12,079
<ALLOWANCES> 0
<INVENTORY> 10,947
<CURRENT-ASSETS> 0
<PP&E> 16,906
<DEPRECIATION> 0
<TOTAL-ASSETS> 42,395
<CURRENT-LIABILITIES> 42,281
<BONDS> 0
<COMMON> 808
0
0
<OTHER-SE> (694)
<TOTAL-LIABILITY-AND-EQUITY> 42,395
<SALES> 47,233
<TOTAL-REVENUES> 47,233
<CGS> 0
<TOTAL-COSTS> 48,920
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 291
<INCOME-PRETAX> (1,978)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,978)
<EPS-PRIMARY> (0.24)
<EPS-DILUTED> (0.19)
</TABLE>
