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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended February 28, 2003
Commission File Number 0-9599
HIA, INC.
(Exact name of Registrant as specified in its charter)
New York 16-1028783
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification Number
4275 Forest Street
Denver, Colorado 80216
(Address of principal executive offices, zip code)
(303) 394-6040
(Registrant's telephone number, including area code)
_____________________________________________________________________
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 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: 9,985,526 shares
of the Registrant's $.01 par value common stock were outstanding at February
28, 2003.
HIA, INC.
INDEX
Part I. Financial Information
Item 1.Consolidated Financial Statements . . . . . . . . . . . . . 3
Item 2.Management's Discussion and Analysis or Financial
Condition and Results of Operation . . . . . . . .10
Part II. Other Information
Item 1. Legal Proceedings . . .. . . . . . . . . . . . . . . . . .13
Item 2. Changes in Securities and Use of Proceeds . . . . . . . . .13
Item 3. Defaults upon Senior Securities .. . . . . . . . . . . . .13
Item 4. Submission of Matters to a Vote of Security Holders .. . .13
Item 5. Certificate Pursuant to Section 1350 of Chapter 63 and 906.14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . .14
SIGNATURES . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Part 1.
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of February 28, 2003
and November 30, 2002 . . . . . . . . . . . . . . . . . . . . . .. 4
Consolidated Statements of Operations for the three months
ended February 28, 2003 and 2002.. . . . . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows for the three months
ended February 28, 2003 and 2002 . . . . . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . .8
Forward Looking Statements
Statements made in this Form 10-Q that are historical or current facts are
"forward-looking statements" made pursuant to the safe harbor provisions of
Section 27A of the Securities Act of 1933 ("The ACT") and Section 21E of the
Securities Exchange Act of 1934. These statements often can be identified
by the use of terms such as "may," "will," "expect," "believes,"
"anticipate," "estimated," "approximate," or "continue," or the negative
thereof. The Company intends that such forward-looking statements be
subject to the safe harbors for such statements. The Company wishes to
caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. Any forward-looking
statements represent management's best judgements as to what may occur in
the future. However, forward-looking statements are subject to risks,
uncertainties and important factors beyond the control of the Company that
could cause actual results and events to differ materially from historical
results of operations to revise any forward-looking statements to reflect
events or circumstances after the date of such statement or to reflect the
occurrence of anticipated or unanticipated events.
HIA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Information as of November 30, 2002 is based upon an audited balance sheet.
All other information is unaudited.)
February 28, November 30,
2003 2002
ASSETS
Current Assets:
Cash $ 2,000 $ 7,000
Accounts receivable, net of allowance for
doubtful accounts of $178,000 and $225,000 2,455,000 2,702,000
Inventories 5,493,000 4,011,000
Other current assets 229,000 184,000
Total current assets 8,179,000 6,904,000
Property and equipment, at cost:
Leasehold Improvements 343,000 337,000
Equipment 1,401,000 1,387,000
1,744,000 1,724,000
Less accumulated depreciation 1,475,000 1,437,000
Net property and equipment 269,000 287,000
Other assets 523,000 204,000
Goodwill, net of amortization 1,151,000 1,151,000
of $383,000 and $383,000
Non-compete agreement, net of amortization
of $56,000 and $52,000 94,000 98,000
TOTAL ASSETS $10,216,000 $8,644,000
The accompanying notes are an integral part of the consolidated financial
statements.
HIA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Continued)
(Information as of November 30, 2002 is based upon an audited balance sheet.
All other information is unaudited).
February 28, November 30,
LIABILITIES 2003 2002
Current Liabilities:
Note payable to bank $1,757,000 $1,009,000
Current maturities of long-term obligations 341,000 424,000
Accounts payable 2,232,000 294,000
Checks written in excess of deposits 379,000 86,000
Accrued expenses and other current
liabilities 271,000 1,004,000
Total current liabilities 4,980,000 2,817,000
Long-term Obligations:
Notes payable, less current maturities 785,000 860,000
Total long-term obligations 785,000 860,000
TOTAL LIABILITIES 5,765,000 3,677,000
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock of $.01 par value;
authorized 20,000,000 shares: issued
13,108,196; outstanding 9,984,526
and 9,861,525 131,000 131,000
Additional paid-in capital 3,109,000 3,109,000
Retained earnings 1,974,000 2,527,000
5,214,000 5,767,000
Less treasury stock: 3,123,670 and
3,246,671 shares at cost (763,000) (800,000)
Total stockholders' equity 4,451,000 4,967,000
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $10,216,000 $8,644,000
The accompanying notes are an integral part of the consolidated financial
statements.
HIA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
Three Months Ended
Feb 28, 2003 Feb 28, 2002
Net sales $3,523,000 $3,718,000
Cost of sales 2,345,000 2,643,000
Gross profit 1,178,000 1,075,000
Selling, general
and administrative
expenses 2,041,000 1,893,000
Operating loss (863,000) (818,000)
Other income (expense):
Interest income 19,000 17,000
Interest expense (41,000) (54,000)
Misc. income 12,000 3,000
Total other expense (10,000) (34,000)
Loss before income taxes (873,000) (852,000)
Tax benefit 320,000 290,000
NET LOSS ($553,000) ($562,000)
Basic and diluted loss
per share ($ .06) ($ .06)
Weighted average common
shares outstanding
Basic 9,932,593 10,233,637
Dilutive 9,932,593 10,233,637
The accompanying notes are an integral part of the consolidated financial
statements.
HIA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
For the Three Months Ended
February 28, 2003 February 28, 2002
Increase (decrease) in cash
OPERATING ACTIVITIES:
Net loss ($553,000) ($562,000)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 42,000 55,000
Deferred income taxes (319,000) (290,000)
Changes in current assets and
current liabilities:
Accounts receivable 247,000 609,000
Inventory Reserve (67,000) (48,000)
Inventories (1,415,000) (1,777,000)
Other current assets (45,000) 7,000
Accounts payable 1,938,000 2,300,000
Accrued expenses and other
current liabilities (816,000) (399,000)
NET CASH USED IN
OPERATING ACTIVITIES (988,000) (105,000)
INVESTING ACTIVITIES:
Purchases of property and equipment (20,000) (4,000)
Decrease (increase) in other assets - 0 - (6,000)
NET CASH USED IN
INVESTING ACTIVITIES (20,000) (10,000)
FINANCING ACTIVITIES:
Proceeds from note payable to bank 1,878,000 1,635,000
Payments on borrowings on note
payable to bank (1,130,000) (1,490,000)
Repayments of long-term debt (75,000) (72,000)
Payments on capital lease obligations - 0 - (45,000)
Increase in checks written in
excess of deposits 293,000 41,000
Purchase of treasury stock - 0 - - 0 -
Sale of treasury stock 37,000 47,000
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,003,000 116,000
NET DECREASE IN CASH (5,000) 1,000
CASH, BEGINNING OF PERIOD 7,000 1,000
CASH, END OF PERIOD $ 2,000 $ 2,000
The accompanying notes are an integral part of the consolidated financial
statements
HIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Basis for Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions of Form 10-Q and do not include
all the information and footnotes required by generally accepted accounting
principles for complete financial statement. In the opinion of management,
all adjustments (consisting of normal recurring adjustments) considered
necessary for fair presentation have been included. Operating results for
the three months ended February 28, 2003 are not necessarily indicative of
the results that may be obtained for the year ending November 30, 2003.
These statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Registration's Form
10-K for the year ended November 30, 2002 filed with the Securities and
Exchange Commission on February 28, 2003.
B. Net Loss Per Common Share
Statement of Financial Accounting Standards No. 128, "Earnings Per Share",
provides for the calculation of "Basic" and "Diluted" earnings per share.
Basic earnings per share includes no dilution and is computed by dividing
income available to common stockholders by the weighted-average number of
shares outstanding during the period (9,932,593 and 10,233,637 for 2003
and 2002). Diluted earnings per share reflect the potential of securities
that could share in the earnings of the Company, similar to fully diluted
earnings per share.
For the periods ended February 28, 2003 and February 28, 2002, total stock
options in the amount of 750,000 and 1,020,000 are not considered in the
computation of diluted earnings per share as their inclusion would be
anti-dilutive.
C. Stockholders' Equity
Purchase of Treasury Stock
On January 1, 2001, the Board of Directors granted an option to each of the
officers of the Company to purchase a total of 750,000 shares of treasury
stock at $.20 per share by December 31, 2003. The options' exercise price
was greater than the common stock's market price at the date of grant.
On July 18, 2001, the Board of Directors granted common stock options to
ten middle and senior managers of the Company. The options totaled 460,000
shares of which 165,000 shares of options expired on December 31, 2001 if
not subscribed by that date. The option price was $.30 per share. The
remainder of the options were to be exercised no later than December 31,
2002. As of December 31, 2001, 105,000 shares were subscribed to by the
managers which meant that the remaining 60,000 options expired as of that
date. Three senior managers were given, as a bonus for 2001, an additional
16,667 shares (valued at $.30 per share) which were granted on December 20,
2001 when the market price was $.21 per share.
As of December 31, 2002, senior managers subscribed to 124,000 shares of
options at a price of $.30 per share. The remaining options outstanding,
a total of 171,000 shares, expired on that date.
D. Supplemental Disclosure of Cash Flow Information
Cash payments for interest were $41,000 and $54,000 for the three months
ended February 28, 2003 and February 28, 2002. Cash payments for income
taxes were $73,000 and $35,000 for the three months ended February 28,
2003 and February 28, 2002.
Item 2. Management's Discussion and Analysis of Financial Condition and
Result of Operation
Liquidity and Capital Resources
The net cash used in operating activities increased by $883,000 for the
three months ended February 28, 2003 as compared to the same period last
year, due to the decrease in inventory of $362,000, an increase in accounts
receivable of $362,000, an decrease in accounts payable of $362,000 and a
decrease in accrued expenses and other current liabilities of $417,000.
The increase in accounts receivable was due to slower pay in customers
primarily due to the continued drought conditions and economic
circumstances in the Rocky Mountain region. The decrease in inventory is
primarily attributable due to smaller purchases of inventories on vendor
early buy programs opting for more just-in-time purchases during the year
as merchandise is required. The decrease in accounts payables is due to
the lower inventory purchases. The decrease in accrued expenses and other
current liabilities was primarily due to the much greater net income levels
of fiscal 2002 as compared to fiscal 2001 which resulted in significantly
greater accruals for management bonus, profit sharing and income taxes at
the end of fiscal 2002 combined with the cash payments of those
liabilities in the 1st quarter of 2003
The net cash used in investing activities increased by
$10,000 as compared to same period last year.
The net cash provided by financing activities increased as compared to same
period last year by $887,000 primarily as a result of the increase in net
borrowings to the bank of $603,000 (primarily due to the cash payments made
in order to decrease accounts payable, accrued expenses and other current
liabilities) and the increase of $252,000 in checks written in excess of
deposits.
On July 18, 2001, the Board of Directors granted common stock options to
ten middle and senior managers of the Company. The options totaled 460,000
shares of which 165,000 shares of options expired on December 31, 2001 if
not subscribed by that date. The option price was $.30 per share. The
remainder of the options were to be exercised no later than December 31,
2002. As of December 31, 2001, 105,000 shares were subscribed to by the
managers which meant that the remaining 60,000 options expired as of that
date. Three senior managers were given, as a bonus for 2001, an additional
16,667 shares (valued at $.30 per share) which were granted on December 20,
2001 when the market price was $.21 per share.
As of December 31, 2002, senior managers subscribed to 124,000 shares of
options at a price of $.30 per share. The remaining options outstanding,
a total of 171,000 shares, expired on that date.
The following is a summary of working capital and current ratio for the
periods presented:
February 28, 2003 November 30, 2002
Working Capital $3,199,000 $4,087,000
Current Ratio 1.64 to 1 2.45 to 1
The Company's working capital decreased by $888,000 during the three months
ended February 28, 2003 as compared to November 30, 2002 primarily as a
result of a decrease in accounts receivable of $247,000, an increase in
inventory of $1,482,000, an increase in notes payable to banks to $748,000,
an increase in accounts payable & checks written against future deposits of
$2,231,000 and a decrease in accrued expenses of $733,000.
Management believes that the present working capital is adequate to conduct
its present operations. The Company does not anticipate any additional
material capital expenditures for fiscal 2003. As of February 28, 2003,
the Company and its subsidiary have an available line-of-credit of
$5,750,000. As of February 28, 2003, $3,993,000 is unused under the line
of credit. The line of credit expires on June 30, 2004. The line-of-credit
agreement limits the payment of dividends by CPS Distributors, inc. and its
subsidiaries ("CPS") to the Company. CPS is the wholly-owned subsidiary of
the Company. The line-of-credit agreement also limits the payment of any
expenses of the Company by CPS in excess of $50,000 during any twelve-month
period except for specific expenditures provided for in additional
amendments to the agreement. This restriction does not have a significant
impact of the Company's ability to meet its cash needs as its cash needs
are minimal.
The decrease in the current ratio as of February 28, 2003 as compared to
November 30, 2002 is attributable to the increase in accounts payable and
bank borrowings and a decrease in accrued expenses, a decrease in accounts
receivable offset partially by the increase in inventories.
Income Taxes
As of February 28, 2003, the Company has recorded a current net deferred
tax asset totaling $170,000 and has recorded a noncurrent net deferred tax
asset totaling $373,000. Based upon the Company's recent history of taxable
income and its projections for future earnings, management believes that it
is more likely than not that sufficient taxable income will be generated in
the near term to utilize the net deferred tax assets.
Results of Operations
Three Months Ended February 28, 2003 Compared to Three Months Ended
February 28, 2002.
Net sales for the three months ended February 28, 2003 were down $195,000
as compared to the first quarter of 2002 due to the continued drought
conditions and economic circumstances in the Rocky Mountain region.
Gross profit for the three months ended February 28, 2003 were 33.40%
during the three months ended February 28, 2003 as compared to 28.90%
during the three months ended February 28, 2002 (an increase of 4.50%).
This was primarily due to the continuing purchasing and pricing efforts
instituted by management beginning the second quarter of 2002.
Selling, general and administrative expenses increased by $148,000 during
the three months ended February 28, 2003 as compared to the three months
ended February 28, 2002 primarily due the increase in sales expenses of
$119,000 which was primarily a result of additional promotional and
advertising programs instituted in the first quarter of 2003 which
required significant front end cash down payments.
Other expenses decreased $24,000 during the three months ended February 28,
2003 as compared to the three months ended February 28, 2002 primarily due
to the decrease in interest expense of $13,000. The decrease in interest
expense was primarily due to a lower average line-of-credit balance
($1,376,000 for first quarter 2003 compared to $1,757,000 for first quarter
2002).
Net loss in the first quarter of 2003 was $9,000 less than the first
quarter of 2002 primarily
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk through interest rates related to
its investment of current cash and cash equivalents. These funds are
generally highly liquid with short-term maturities, and the related market
risk is not considered material. The Company's note payable to bank has a
variable interest rate. A 10% increase in short-term interest rates on the
note payable to bank of $1,757,000 would increase the Company's yearly
interest expense by approximately $8,000, assuming borrowed amounts remain
outstanding at current levels. The Company's management believes that
fluctuation in interest rates in the near term will not materially affect
the Company's consolidated operating results, financial position or cash
flow.
Part II
Item 1. Legal Proceedings
NONE
Item 2. Changes in Securities and Use of Proceeds
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Item 5. Certification Pursuant to Section 1350 of Chapter 63
Exhibit A - Certification Pursuant to Section 906
Item 6. Exhibits and Reports on Form 8-K
NONE
Item 5.
Certification Pursuant to Section 1350 of Chapter 63
Of Title 18 of the United States Code
I, Alan C. Bergold the [CEO/CFO] of HIA, Inc., certify that:
(i) the [report] fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 and (ii) the information
contained in the [report] fairly presents, in all material respects, the
financial condition and results of operations of HIA, Inc.
___________________________________________
/s/4-11-2003 Alan C. Bergold
Chief Financial Officer & President
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HIA, INC.
Date:_______________________________ _______________________________
/s/4-11-2003 Alan C. Bergold
Chief Financial Officer &
President
ACTION PURSUANT TO
18 U.S. C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of HIA, Inc (the "Company") on
Form 10-Q for the quarter ending February 28, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report").
I Alan C. Bergold, the President, Treasurer and Director of the Company,
certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that;
The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934, and
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
____________________
/s/04-11-03 Alan C. Bergold,
President and Treasurer and Director
___________________________________________________________________________
CERTIFICATION
I, Alan C. Bergold, certify that:
1. I have reviewed this quarterly report on Form 10-Q of HIA, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: April ____, 2003 --------------------------------------------
/s/4-11-2003 Alan C. Bergold, President and
Treasurer and Director
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