Back to GetFilings.com
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q PRIVATE
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended May 31, 2004
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: 9,280,735 shares of
the Registrant's $.01 par value common stock were outstanding at May 31, 2004.
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 Operations . . . . . . . . . . . . .10
Item 3. Quantitative and Qualitative Disclosures about
Market Risk . . . . . . . . . . . . . . . . . . . . . . . . .13
Item 4. Controls and Procedures . . . . . . . . . . . . . . . . . . .13
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . .14
Item 2. Changes in Securities and Use of Proceeds . . . . . . . . . .14
Item 3. Defaults upon Senior Securities . . . . . . . . . . . . . . .14
Item 4. Submission of Matters to a Vote of Security Holders . . . . .14
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . .14
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . .15
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Part 1.
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of May 31, 2004
and November 30, 2003. . . . . . . . . . . . . . . . . . . . . . . . .4
Consolidated Statements of Operations for the three and six months
ended May 31, 2004 and 2003. . . . . . . . . . . . . . . . . . . . . .6
Consolidated Statements of Cash Flows for the six months
ended May 31, 2004 and 2003 . . . . . . . . . . . . . . . . . . . . .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, 2003 is based upon an audited balance sheet.
All other information is unaudited.)
May 31, November 30,
2004 2003
ASSETS ----- ------
Current Assets:
Cash $ 5,000 $ 1,000
Accounts receivable, net of allowance for
doubtful accounts of $146,000 and $107,000 5,854,000 3,612,000
Inventories 6,509,000 4,079,000
Other current assets 176,000 270,000
----------- ----------
Total current assets 12,544,000 7,962,000
Property and equipment, at cost:
Leasehold improvements 385,000 349,000
Equipment 995,000 1,405,000
----------- -----------
1,380,000 1,754,000
Less accumulated depreciation
and amortization 1,206,000 1,594,000
----------- -----------
Net property and equipment 174,000 160,000
Other assets 211,000 211,000
Goodwill, net of amortization 1,151,000 1,151,000
of $383,000 and $383,000
Non-compete agreement, net of amortization
of $75,000 and $67,500 75,000 83,000
----------- ----------
TOTAL ASSETS $14,155,000 $9,567,000
=========== ==========
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, 2003 is based upon an audited balance sheet.
All other information is unaudited).
May 31, November 30,
2004 2003
LIABILITIES ------- --------
Current Liabilities:
Note payable to bank $3,007,000 $ 1,288,000
Current maturities of long-term obligations 131,000 215,000
Accounts payable 3,540,000 974,000
Checks written in excess of deposits 533,000 342,000
Accrued expenses & other current liabilities 934,000 963,000
---------- ----------
Total current liabilities 8,145,000 3,782,000
Long-term Obligations:
Notes payable, less current maturities 590,000 646,000
---------- ----------
Total long-term obligations 590,000 646,000
TOTAL LIABILITIES 8,735,000 4,428,000
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock of $.01 par value;
authorized 20,000,000 shares: issued
13,108,196; outstanding 9,280,735
and 9,303,310 131,000 131,000
Additional paid-in capital 3,109,000 3,109,000
Retained earnings 3,541,000 3,247,000
---------- ----------
6,781,000 6,487,000
Less treasury stock: 3,827,461 and
3,804,886 shares at cost (1,361,000) (1,348,000)
---------- ----------
Total stockholders' equity 5,420,000 5,139,000
---------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $14,155,000 $ 9,567,000
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
HIA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Six Months Ended Three Months Ended
May 31, 2004 May 31, 2003 May 31, 2004 May 31, 2003
------------------------- -------------------------
Net sales $14,528,000 $11,760,000 $10,965,000 $8,237,000
Cost of sales 9,437,000 7,863,000 7,139,000 5,518,000
----------- ----------- ----------- ----------
Gross profit 5,091,000 3,897,000 3,826,000 2,719,000
Selling, general &
administrative expenses 4,597,000 4,067,000 2,509,000 2,026,000
----------- ----------- ----------- ----------
Operating income (loss) 494,000 (170,000) 1,317,000 693,000
Other income (expense):
Interest income 34,000 27,000 13,000 8,000
Interest expense (79,000) (88,000) (47,000) (47,000)
Misc. income (expense) 15,000 19,000 7,000 7,000
----------- ----------- ----------- ---------
Total other expense (30,000) (42,000) (27,000) (32,000)
----------- ----------- ----------- ---------
Income (loss) before income
tax expense 464,000 (212,000) 1,290,000 661,000
Income tax expense (170,000) 78,000 (473,000) (242,000)
----------- ----------- ----------- ---------
NET INCOME (LOSS) $ 294,000 ($ 134,000) $ 817,000 $ 419,000
=========== =========== =========== =========
Net income (loss) per share
Basic $ .03 ($ .01) $ .08 $ .04
Diluted $ .03 ($ .01) $ .08 $ .04
Weighted average common
shares outstanding:
Basic 9,315,123 9,958,446 9,325,350 9,983,737
Dilutive 9,315,123 9,958,446 9,325,350 9,983,737
The accompanying notes are an integral part of the consolidated financial
statements.
HIA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Six Months Ended
May 31, 2004 May 31, 2003
------------ ------------
OPERATING ACTIVITIES:
Net Income (loss) $ 294,000 ($ 134,000)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 66,000 86,000
Deferred income taxes - 0 - (78,000)
Inventory reserve 29,000 32,000
Changes in current assets and
current liabilities:
Accounts receivable (2,242,000) (2,312,000)
Inventories (2,459,000) (2,307,000)
Other current assets 94,000 (37,000)
Accounts payable 2,566,000 3,014,000
Accrued expenses and
other current liabilities (29,000) (336,000)
---------- -----------
NET CASH USED IN OPERATING ACTIVITIES ($1,681,000) ($2,072,000)
INVESTING ACTIVITIES:
Purchases of property and equipment (72,000) (25,000)
Decrease (increase) in other assets - 0 - - 0 -
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (72,000) (25,000)
FINANCING ACTIVITIES:
Proceeds from note payable to bank 5,005,000 4,589,000
Payments on borrowings on note payable to bank (3,286,000) (2,935,000)
Repayments of long-term debt (140,000) (147,000)
Payments on capital lease obligations - 0 - (99,000)
Increase (decrease) in checks written
in excess of deposits 191,000 649,000
Purchase of Treasury Stock (13,000) - 0 -
Sale of treasury stock - 0 - 37,000
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES $1,757,000 $2,094,000
---------- ----------
NET INCREASE (DECREASE) IN CASH 4,000 (3,000)
CASH, BEGINNING OF PERIOD 1,000 7,000
---------- ----------
CASH, END OF PERIOD $ 5,000 $ 4,000
========== ==========
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 six months ended
May 31, 2004 are not necessarily indicative of the results that may be obtained
for the year ending November 30, 2004. 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, 2003
filed with the Securities and Exchange Commission on February 25, 2004.
B. Net Income (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 (9,315,123 and 9,958,446 for 2004 and 2003).
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 May 31, 2004 and May 31, 2003, total stock options in the
amount of 750,000 and 750,000 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 September 15, 2003, the Company sent a tender offer to all its shareholders
which offered to re-purchase up to 1 million shares of HIA, Inc. common stock,
for $.50 per share. The expiration date of the offer was October 13, 2003. On
October 10, 2003 the Company sent a letter to all its shareholders amending the
original expiration date from October 13, 2003 to October 31, 2003 at 5:00 p.m.
Mountain Time. On October 16, 2003 the Company sent a letter to all its
shareholders amending the original offer to re-purchase 1 million shares of its
common stock to 1.5 million shares of its common stock (an increase of 500,000
shares) at the same purchase price and the same expiration date.
A preliminary accounting was made by the Company's transfer agent during
January of 2004 whereby the Company was issued a certificate for 1,430,390
shares of common stock (treasury stock). The Company paid a total of $735,000
(including $20,000 of legal and transfer fees) for the 1,430,390 shares of
common stock at an average price of $.51 per share. At the time of
reconciliation in January there still remained 14,224 shares of stock,
representing 13 shareholders, for which the proper documentation had not been
completed by the representative shareholders per the requirements of the tender
offer. A final settlement of those outstanding shares were made during the
second quarter of 2004 by the receipt of a certificate for 8,200 shares from
the transfer agent for the purchase price of $4,100 or $.50 per share (the
option to purchase expired on the remaining 6,024 shares).
On January 8, 2004, the Board of Directors granted common stock options to the
officers of the Company and 3 senior managers to purchase a total of 750,000
shares of treasury stock at $.50 per share to expire December 31, 2005. As of
May 31, 2004, none of the shares have been subscribed to by the officers or
senior management. The options' exercise price was equal to or greater than the
common stock market price at the date of grant.
During fiscal 2004 the Company purchased 14,375 shares of common stock from
non-affiliated stockholders for $.50 per share, a total purchase price of
$7,188.
Stock Option Plans - The Company applies Accounting Principles Board ("APB")
Opinion 25, "Accounting for Stock Issued to Employees," and the related
interpretations in accounting for all stock option plans. Under APB Opinion 25,
no compensation cost has been recognized for stock options issued to employees
as the exercise price of the Company's stock options granted equals or exceeds
the market price of the underlying common stock on the date of grant.
SFAS No. 123 requires the Company to provide pro forma information regarding
net income and net income per share as if compensation costs for the Company's
stock option plans and other stock awards had been determined in accordance
with the fair value based method prescribed in SFAS No. 123. The Company
estimates the fair value of each stock award at the grant date by using the
Black-Scholes option-pricing model with the following weighted-average
assumptions for quarter ended February 29, 2004. No options were granted in
2003 and 2002.
2004
----------
Dividend yield 0%
Volatility 75.5%
Risk free interest rate 2.08%
Expected life 2 years
Under the accounting provisions of SFAS No. 123, the Company's net income per
share would have been adjusted to the following pro forma amounts for the six
months ended May 31, 2004 and May 31, 2003:
2004 2003
------------ ------------
Net income (loss) - as reported $ 294,000 $ (134,000)
Effect of employee stock-based
compensation included in
reported net income - 0 - - 0 -
Effect of employee stock-based
compensation per SFAS 123 (101,000) - 0 -
Net income (loss) applicable ----------- ------------
to common stock - pro forma $ 193,000 $ (134,000)
=========== ============
Basic and diluted:
Income per share - as reported $ .02 $ (.01)
Per share effect of employee
stock-based compensation
included in reported
net income - 0 - - 0 -
Per share effect of employee
stock-based compensation
per SFAS 123 - 0 - - 0 -
Income per share applicable ----------- ------------
to common stock - pro forma $ .02 $ (.01)
D. Supplemental Disclosure of Cash Flow Information
------------------------------------------------
Cash payments for interest were $79,000 and $88,000 for the six months ended
May 31, 2004 and May 31, 2003. Cash payments for income taxes were $0 and
$75,000 for the six months ended May 31, 2004 and May 31, 2003.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
- -------------------------------
The net cash used in operating activities decreased by $391,000 for the six
months ended May 31, 2004 as compared the six months ended May 31, 2003
primarily due to the increase in net income of $483,000 (adjusted for non-cash
activities) and the increase in accrued expenses and other current liabilities
of $307,000 primarily offset by the decrease in accounts payable of $448,000.
Net income increased primarily due to the increase in gross profit of $1,194,000
(sales increased by $2,768,000) offset substantially by the increase in selling,
general and administrative expenses of $530,000 and the increase in income tax
expense of $248,000. The decrease in accounts payable was primarily due to a
decrease in inventory purchases (during the winter and spring periods of 2004)
with extended dating terms resulting in a decrease average days outstanding on
trade payables. The increase in accrued expenses and other current liabilities
was primarily due to the increase in the accrual for income tax of $170,000 and
the increase in bonuses and pension plan payable of approximately $35,000 as
compared to the prior fiscal period.
The net cash used in investing activities increased by $47,000 primarily due to
the increase in purchases of property, plant and equipment. In the first fiscal
quarter of 2004 the Company disposed of $446,000 of computer equipment which was
fully depreciated. The reason for the write-off was that the Company purchased
new enterprise software and hardware equipment in the second quarter of 2000,
which replaced equipment previously purchased and completely disposed of at the
end of 2003.
The decrease in net cash provided by financing activities of $337,000 was
primarily due to the decrease of $458,000 in checks written in excess of
deposits and the increase of $100,000 for payments of capital lease obligations.
The decrease in checks written in excess of deposits was primarily due to the
decrease in inventory purchases (during the winter and spring periods of 2004)
with extended dating terms resulting in an increase in payments to suppliers on
a shorter-term trade-payable basis.
On September 15, 2003, the Company sent a tender offer to all its shareholders
which offered to re-purchase up to 1 million shares of HIA, Inc. common stock,
for $.50 per share. The expiration date of the offer was October 13, 2003. On
October 10, 2003 the Company sent a letter to all its shareholders amending the
original expiration date from October 13, 2003 to October 31, 2003 at 5:00 p.m.,
Mountain Time. On October 16, 2003 the Company sent a letter to all its
shareholders amending the original offer to re-purchase 1 million shares of its
common stock to 1.5 million shares of its common stock (an increase of 500,000
shares) at the same purchase price and the same expiration date.
A preliminary accounting was made by the Company's transfer agent during January
of 2004 whereby the Company was issued a certificate for 1,430,390 shares of
common stock (treasury stock). The Company paid a total of $735,000 (including
$20,000 of legal and transfer fees) for the 1,430,390 shares of common stock at
an average price of $.51 per share. At the time of reconciliation in January
there still remained 14,224 shares of stock, representing 13 shareholders, for
which the proper documentation had not been completed by the representative
shareholders per the requirements of the tender offer. A final settlement of
those outstanding shares were made during the second quarter of 2004 by the
receipt of a certificate for 8,200 shares from the transfer agent for the
purchase price of $4,100 or $.50 per share (the option to purchase expired on
the remaining 6,024 shares).
On January 8, 2004, the Board of Directors granted common stock options to the
officers of the Company and 3 senior managers to purchase a total of 750,000
shares of treasury stock at $.50 per share to expire December 31, 2005. As of
May 31, 2004, none of the shares have been subscribed to by the officers or
senior management. The options' exercise price was equal to or greater than the
common stock market price at the date of grant.
During fiscal 2004 the Company purchased 14,375 shares of common stock from non-
affiliated stockholders for $.50 per share, a total purchase price of $7,188.
The following is a summary of working capital and current ratio for the periods
presented:
May 31, 2004 November 30, 2003
------------ -----------------
Working Capital $ 4,399,000 $ 4,180,000
Current Ratio 1.54 to 1 2.11 to 1
The Company's working capital increased by $219,000 during the six months ended
May 31, 2004 as compared to November 30, 2003 primarily as a result of the
increase of $428,000 in net income. The decrease in current ratio changed from
2.11 to 1.54 (a change of .57) due to the substantially similar increase of
approximately 4.5 million dollars to both current assets and current liabilities
occurring in the first six months of fiscal 2004 resulting in a substantial
change of the ratio.
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 2004 with the exception of the following
possible transaction:
On April 13, 2004 the Company entered into a contract with a construction
management company to design and build a new corporate and warehouse facility.
The new structure is proposed to be built on 8.27 acres of land located in the
north-central part of metropolitan Denver. The facility as proposed consists of
45,000 square feet of offices and warehouse. The estimated cost, including land
is approximately $3,500,000 (excluding interest and financing costs). The
Company has secured financing on the proposed building and site through Wells
Fargo Bank based upon a completed appraisal of $3,800,000. The terms of the
permanent loan will be: maximum 80% loan to value, 15 year fixed principal-
plus-interest amortization and a 6.6% interest rate for the life of the loan.
The down payment and construction loan will also be carried by Wells Fargo at
prime interest rate less 1/2% on the line of credit for the down payment and
construction advances based upon LIBOR plus 2%.
If the proposed building is built, the Company plans on letting its current
lease on the Forest Street location in Denver expire on February 28, 2005 and
move into the new facility on or before that date. It is not expected that the
additional monthly loan payments for the facility ($15,500 principal plus
interest on the remaining loan balance; $15,400 the first month for interest;
less the $12,200 currently paid on leased property on Forest Street, Denver)
will have a material negative effect on the ability of the Company to meet its
normal working capital needs.
As of May 31, 2004, the Company and its subsidiary have an available line-of-
credit of $5,750,000. As of May 31, 2004, $2,743,000 is unused under the line
of credit. The line of credit expires on June 30, 2006. The line-of-credit
agreement limits the payment of dividends by CPS Distributors, Inc. and its
subsidiaries ("CPS") to HIA, Inc. CPS is the wholly-owned subsidiary of HIA,
Inc. The line-of-credit agreement also limits the payment of any expenses of
HIA, Inc. by CPS in excess of $50,000 during any twelve-month period. This
restriction does not have a significant impact on HIA, Inc.'s ability to meet
its cash needs as its cash needs are minimal.
Income Taxes
- ------------
As of May 31, 2004, the Company has recorded a current net deferred tax asset
totaling $138,000 and has recorded a noncurrent net deferred tax asset totaling
$62,000. 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 May 31, 2004 Compared to Three Months Ended May 31, 2003.
Net sales for the three months ended May 31, 2004 were up $2,728,000 as compared
to May 31, 2003 primarily due to the evolving economic recovery for the Rocky
Mountain Region, increased consumer confidence and changing consumer attitudes
towards complying with drought watering restrictions (i.e. landscape development
and drought tolerant alternatives).
Cost of Sales were up $1,621,000 for the three months ended May 31, 2004 as
compared to the three months ended May 31, 2003 substantially relative to
increase in net sales.
Gross profit was 34.9% during the three months ended May 31, 2004 as compared to
33.0% during the three months ended May 31, 2003 an increase of 1.9%. This was
primarily due to the continuing purchasing and pricing efforts instituted by
management beginning second quarter of 2003.
Selling, general and administrative expenses for the three months ended May 31,
2004 were up $483,000 as compared to the three months ended May 31, 2003.
Selling, general and administrative expenses increased primarily due to an
increase of $207,000 in payroll and commissions relative to the increase in net
sales and a net change of $147,000 in bad debts expense primarily as a result of
a downward adjustment in the allowance for doubtful accounts in the 2nd fiscal
quarter of 2003.
Other expenses for the three months ended May 31, 2004 were down $6,000 as
compared to the three months ended May 31, 2003.
Net income increased $398,000 for the three months ended May 31, 2004 as
compared to the three months ended May 31, 2003 primarily due to the increase
in operating income of $624,000 partially offset by an increase in income tax
expense of $231,000. The increase in operating income was primarily due to the
increase in gross profit of $1,107,000 substantially offset by the increase in
selling, general and administrative expenses of $483,000 and the increase in
income tax expense of $231,000.
Six Months Ended May 31, 2004 Compared to Six Months Ended May 31, 2003.
Net sales increased by $2,768,000 for the six months ended May 31, 2004 as
compared to May 31, 2003 primarily due to the evolving economic recovery for
the Rocky Mountain Region, increased consumer confidence and changing consumer
attitudes towards complying with drought watering restrictions (i.e. landscape
development and drought tolerant alternatives).
Cost of Sales increased by $1,574,000 for the six months ended May 31, 2004 as
compared to May 31, 2003 substantially relative to the increase in sales.
Gross profit was 35.0% during the six months ended May 31, 2004 as compared to
33.1% during the six months ended May 31, 2003 an increase of 1.9%. This was
primarily due to the continuing purchasing and pricing efforts instituted by
management beginning second quarter of 2003.
Selling, general and administrative expenses increased by $530,000 during the
six months ended May 31, 2004 as compared to May 31, 2003 primarily due to an
increase of $311,000 in payroll and commissions relative to the increase in net
sales and a net change of $150,000 in bad debts expense primarily as a result
of a downward adjustment in the allowance for doubtful accounts in the 2nd
fiscal quarter of 2003.
Other expenses decreased by $12,000 during the six months ended May 31, 2004 as
compared to May 31, 2003 primarily due to the reduction of interest expense. The
decrease was primarily attributable to the decrease on interest paid on the long
term notes.
Net income increased $428,000 for the six months ended May 31, 2004 as compared
to the six months ended May 31, 2003 primarily due to the increase in gross
profit of $1,194,000 offset by the increase in selling, general and
administrative expenses of $530,000 substantially offset by an increase in
income tax expense of $248,000.
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 equal to Wells Fargo's existing bank prime rate (4% as of May 31, 2004).
A 10% increase in short-term interest rates on the note payable to bank of
$2,400,000 would increase the Company's yearly interest expense by approximately
$10,000, 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.
Item 4. Controls and Procedures
The Company maintains a set of disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the reports
filed by the Company under the Securities Exchange Act of 1934, as amended is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms. As of the end of the quarterly period covered by
this report, the Company carried out an evaluation, under the supervision of
the President and Chief Financial Officer, of the effectiveness of the design
and operation of our disclosure controls and procedures pursuant to Rule 13a-14
of the Exchange Act. Based on that evaluation, the President and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective.
There have been no significant changes in the Company's internal controls or
other factors that could significantly affect those controls subsequent to the
date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
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. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
a.) The following documents are filed as exhibits to this Form 10Q:
Exhibit (32) Section 1350 Certification
Exhibit (31) Rule 13a-14(a)/15d-14(a) Certification
b.) Reports of Form 8-K
NONE
Exhibit 32
Certification Pursuant to Section 1350 of Chapter 63
Of Title 18 of the United States Code
I, Alan C. Bergold, the President and Chief Financial Officer of HIA, Inc.,
certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, 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/_________________________
Alan C. Bergold
President & Chief Financial Officer
- -------------------------------------------------------------------------------
Exhibit 31
CERTIFICATION
I, Alan C. Bergold certify that:
1. I have reviewed this report on Form 10-Q of HIA, Inc.;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 report is being prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: ____July 9, 2004____ ________/s/__________________
Alan C. Bergold, President and
Treasurer and Director
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: _________July 9, 2004_________ ___________/s/_________________
Alan C. Bergold
Chief Financial Officer &
President