<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 _March 31, 1996___________________________
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.)
2841 N. Nimitz Highway, Honolulu, HI 96819
(Address of principal executive office)
Registrant's telephone number, including area code (808)836-0515
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.
Class Shares outstanding at May 10, 1996
Common Stock 13,234,599
Page 1 of 12
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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 Cash Flows........................5
Note to Condensed Consolidated Financial Statements....................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................................9
Item 6. Exhibits and Reports on Form 8-K ......................................10
Computation of Earnings Per Common Share...............................11
Signatures.............................................................12
</TABLE>
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PACIFIC INTERNATIONAL SERVICES CORP
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
----------------- -------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 294,952 $ 521,932
Receivables, net 3,923,842 2,980,560
Automobile dealership vehicle inventories 6,963,019 9,011,840
Inventories and prepaid expenses 84,101 58,213
---------------- ------------------
Current assets 11,265,914 12,572,545
---------------- ------------------
Furniture, equipment and leasehold improvements
Furniture and equipment 1,332,418 1,272,676
Leasehold Improvements 3,261,053 3,252,653
Vehicles 443,882 394,744
---------------- ------------------
5,037,353 4,920,073
Accumulated depreciation and amortization (1,722,135) (1,629,863)
---------------- ------------------
3,315,218 3,290,210
---------------- ------------------
Other assets 858,806 885,330
---------------- ------------------
Total Assets $ 15,439,938 $ 16,748,085
================ ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 1,530,961 $ 1,018,941
Accrued expenses and other liabilities 1,668,301 1,495,151
Vehicle flooring and current portion of long-term debt 7,890,836 9,585,696
---------------- ------------------
Current liabilities 11,090,098 12,099,788
---------------- ------------------
Long-term debt 1,640,584 1,788,389
Convertible subordinated debentures 271,000 271,000
---------------- ------------------
Total liabilities 13,001,682 14,159,177
---------------- ------------------
Shareholder's equity
Preferred stock, 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
13,234,599 shares 1,323,460 1,323,460
Additional paid-in capital 8,689,797 8,689,797
Accumulated deficit (7,575,001) (7,424,349)
---------------- ------------------
Total shareholders' equity 2,438,256 2,588,908
---------------- ------------------
Total Liabilities and shareholders' equity $ 15,439,938 $ 16,748,085
================ ==================
</TABLE>
See accompanying note to consolidated financial statements
Page 3
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31
-----------------------------------
1996 1995
------------- ------------
<S> <C> <C>
Revenues
Vehicle sales $ 10,943,480 $ 9,628,972
Parts and services 1,261,969 1,045,174
Financial and insurance income 244,219 203,643
------------ ------------
Total revenues 12,449,668 10,877,789
------------ ------------
Cost of sales
Vehicle sales 8,574,988 7,438,365
Parts and services 799,748 631,388
------------ ------------
Total cost of sales 9,374,736 8,069,753
------------ ------------
Gross profit on sales 3,074,932 2,808,036
Selling, general and administrative expenses 2,994,211 2,682,982
------------ ------------
Operating income (loss) 80,721 125,054
Other income (expense)
Interest expense 231,373 70,865
Interest income 0 0
------------ ------------
Income (loss) before income taxes (150,652) 54,189
Provisions for income taxes 0 0
------------ ------------
Income (loss) from continuing operations before
extraordinary items and discontinued operations (150,652) 54,189
Discontinued operations
Loss from operations of discontinued
vehicle rental division (432,330)
------------ ------------
Net income (loss) $ (150,652) $ (378,141)
------------ ------------
Earnings (loss) per common and common
equivalent share
Continuing operations $ (0.01) $ 0.01
Discontinued operations (0.06)
------------ ------------
Net income (loss) $ (0.01) $ (0.05)
------------ ------------
Weighted average number of
common shares outstanding 13,234,599 8,079,800
------------ ------------
</TABLE>
See accompanying note to consolidated financial statements
Page 4
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PACIFIC INTERNATIONAL SERVICES CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
----------------------------------
1996 1995
------------ --------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) (150,652) (378,141)
Adjustments to reconcile net income
(loss) to net cash provided (used) by operating
activities:
Gain on sale of rental vehicles - (692,591)
Depeciation of rental vehicles and amortization of
related costs 2,673,152
Depreciation and amortization, other 92,272 298,059
Provision for loss on rental vehicles 112,801
Provision for loss on receivables - 299,105
Provision for self insurance - 319,876
Change in assets and liabilities
Receivables (943,282) (3,380,473)
Automobile dealership vehicle inventories 2,048,821 (4,668,589)
Inventories, prepaid expenses and other assets 636 (486,794)
Notes payable for automobile dealership
vehicle inventories (1,785,678) 9,086,823
Accounts payable 512,020 1,677,784
Accrued expenses and other liabilities 173,150 (609,051)
------------ -------------
Net cash provided (used in) by operating activities (52,713) 4,251,961
------------ -------------
Cash flow from investing activities
Proceeds from the sale of rental vehicles - 7,336,554
Purchases of rental vehicles - (166,373)
Proceeds from the sale of furniture, equipment &
leasehold improvements - 160,475
Additions to fixed assets, furniture, fixtures and
leasehold improvements (117,280) (124,391)
------------ -------------
Net cash provided (used in) by investing activities (117,280) 7,206,265
------------ -------------
Cash flow from financing activities
Principal payments of notes payable and long term debt (56,987) (10,762,052)
------------ -------------
Net cash used in financing activities (56,987) (10,762,052)
------------ -------------
Net increase (decrease) in cash (226,980) 696,174
Cash and cash equivalents at beginning of period 521,932 831,952
------------ -------------
Cash and Cash equivalents at end of period 294,952 1,528,126
============ =============
</TABLE>
See accompanying note to consolidated financial statements
Page 5
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PACIFIC INTERNATIONAL SERVICES CORP
Condensed Consolidated Statements of Cash Flows, continued
Supplemental schedule of noncash investing and financing activities:
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------
1996 1995
-------------- --------------
<S> <C> <C>
Senior debt incurred for additions to rental vehicles $ - $ 85,664
Rental vehicle purchases not yet financed $ - $ 7,974
Reduction of senior debt resulting from turnback
rental vehicles - $ (12,374,279)
</TABLE>
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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, 1995.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Pacific International Services Corp. (the "Company") sold its rental car
division during December 1995. The results of operations reported for the
three months period ended March 31, 1996 reflect only the operations of the
Company's continuing business. The results of operations of the vehicle rental
division for the three months ended March 31, 1995 are shown separately in the
consolidated statements of operation as a loss from discontinued operations.
The financial results reported for the first quarter of 1996 include
approximately $126,000 in administrative expenses directly attributable to the
sale of the Company's vehicle rental operations. These expenses included:
Board of Directors' liability insurance of $28,000, amortization of assets of
$8,000 and professional expenses of $90,000.
The Company reported a consolidated net loss of $150,652 ($0.01 per share) for
the first quarter of 1996, as compared to a net loss of $378,000 ($0.05 per
share) for the same quarter during 1995. The Company's consolidated revenues
increased by $1,571,879 (or 14%) for the first quarter of 1996 to $12,449,668,
as compared with $10,877,789 for the same quarter in 1995. The improved first
quarter results are primarily attributable to increased sales in the new and
used car operations.
Unit sales of new vehicles increased by 23 units (or 9%) from 258 units in the
first quarter of 1995 to 281 units in the first quarter of 1996. Unit sales of
used vehicles increased by 38 units (or 9%) from 430 units in the first quarter
of 1995 to 468 units in the first quarter of 1996. The increased sales in the
first quarter of 1996 are attributable to a reorganization of the Company's
management aimed at shifting the Company's focus to its vehicle sales
operations.
Aggregate gross profit increased by $266,896 (or 10%) from $2,808,036 in the
first quarter of 1995 to $3,074,932 during the first quarter of 1996. This is
due primarily to increase in sales volume.
Interest expense increased by $160,508 to $231,373 during the first quarter of
1996 from $70,865 during the same quarter in 1995. This increase was due
primarily to interest on notes that resulted from the sale of the rental car
division. There was also an increase in flooring interest due to less
flooring assistance from the manufacturers. Selling, general and
administrative expense increase of $311,229 is due primarily to increase in
commission expenses and increase in customers satisfaction program.
Page 8
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FINANCIAL CONDITION
The Company finances its new vehicles pursuant to lines of credit issued by the
Chrysler Corporation having a principal amount of up to $13.5 million. These
loans bear interest at a floating rate equal to the prime rate plus 1%.
Interest on loans pursuant to these lines of credit is payable monthly, and
final maturity of such loans occurs upon sales of the related vehicles but no
later than August of the year following the model year to which such loans
apply. The Company had approximatedly$7,608,000 and $9,400,000 outstanding
under these lines of credit at March 31, 1996 and 1995, respectively.
In April 1996, Chrysler Financial Corporation extended an additional line of
credit to the Company, secured by the Company's used car inventory. This line
of credit permits borrowing up to the lesser of $1,000,000 or sixty five
percent (65%) of the Company's used car inventory. As of May 10, 1996,
approximately $950,000 was outstanding under this line of credit. The credit
agreement provides that the line of credit will be reduced to $750,000 in
September 1996. Management does not believe that the reduction in this line of
credit will have a material detrimental effect on its operations, as management
believes that the Company has sufficient liquidity from its non-floored
vehicles and its contracts in transit. There can be no assurance, however,
that the Company will not experience a reduction in its sales or that the
reduction in the Company' lines of credit will not have a negative impact on
the Company's operations.
In May of 1996, the Company entered into a lease for a third vehicle sales
facility. The Company currently plans to utilize this facility primarily for
sales of its trade-in vehicles and vehicles of vintage earlier than 1991 model
year. This new facility, which is scheduled to open May 17, 1996, is located
directly across the street from, and will share the same management and service
departments as, the Company's South Seas Jeep Eagle/Hyundai dealership.
PART II
ITEM 1. LEGAL PROCEEDINGS
In 1994, a former employee of South Seas filed a claim against the Company
seeking damages allegedly sustained as a result of discrimination based upon
her age and gender. (This litigation was described in detail in the company's
annual report on Form 10-K for the fiscal year ended December 31, 1995). On
May 7, 1996, the Company's insurance carrier settled this litigation pursuant
to the terms of a confidential settlement agreement. The Company's insurer
assumed all costs of the defense and settlement of this case.
The Company currently is a party to various other claims and legal actions
which are incidental to the conduct of its business. In the opinion of
management, after consultation with legal counsel, the ultimate disposition of
these matters will not have a material effect on the Company's operations and
financial condition.
Page 9
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on For 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 10
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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/ Steve Robin____________________________
Steve Robin
Vice President
By /s/ Dung Ngoc Le__________________________
Dung Ngoc Le
Acting Chief Financial Officer
May 10, 1996
Page 11
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EXHIBIT 11
PACIFIC INTERNATIONAL SERVICES CORP
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Three Months Ended March 31
-----------------------------------
1996 1995
---------- ---------
<S> <C> <C>
Weighted average common shares
outstanding 13,234,599 8,079,800
========== =========
Net income (loss) from continuing operations (150,652) 54,189
before extraordinary items and discontinued operations
Discontinued operations
Loss from operations of discontunued vehicle rental
division (432,330)
========== =========
Earnings per common share:
Continuing Operations (0.01) 0.01
Discontinued Operations (0.06)
---------- ---------
Net Income (loss) (0.01) (0.05)
========== =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 295
<SECURITIES> 0
<RECEIVABLES> 3,924
<ALLOWANCES> 0
<INVENTORY> 7,046
<CURRENT-ASSETS> 11,265
<PP&E> 4,174
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,439
<CURRENT-LIABILITIES> 11,090
<BONDS> 1,911
0
0
<COMMON> 1,323
<OTHER-SE> 1,115
<TOTAL-LIABILITY-AND-EQUITY> 15,439
<SALES> 12,450
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 9,375
<OTHER-EXPENSES> 2,994
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 231
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (150)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (150)
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
