FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Under Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For Quarter Ended May 31, 1998
Commission File Number 0-9599
HIA, INC.
(Exact name of registrant specified in its charter)
New York 16-1028783
State or other jurisdiction of I.R.S. Employer
Incorporated 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)
(Former name, former address and former fiscal year, if changed since
last
report.)
Indicate by check mark whether the issuer (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:
10,153,383 fully diluted shares of the Registrant's $.01 par value
common stock were outstanding at May 31, 1998.
HIA, Inc.
INDEX
Part I. Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis
or Plan of Operation
Part II Other Information
Item 1. Legal Proceedings.
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a vote of Security
Holders
Item 5. Other information
Item 6. Exhibits and Reports on form 8-K
Part I
Item 1. Financial Statements
Consolidated Balance Sheets as of May 31, 1998
and November 30, 1997
Consolidated Statements of Operations for the six months
and three months ended May 31, 1998 and May 31, 1997
Consolidated Statements of Cash Flows for the six months
ended May 31, 1998 and May 31, 1997
<TABLE>
<CAPTION>
HIA, Inc and SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Information as of November 30, 1997 is based upon an audited balance sheet.
All other information is unaudited.)
May 31 November 30,
1998 1997
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 29,650 $ 15,295
Accounts receivable, net of allowance for
doubtful accounts 3,364,046 1,676,222
Inventories 3,567,734 2,498,970
Other current assets 214,845 148,029
- ----------------------------------------------------------------------------
Total current assets 7,176,275 4,338,516
- -----------------------------------------------------------------------------
Property and Equipment, at Cost:
Land and improvements 45,295 45,295
Buildings 288,240 286,441
Equipment 802,864 761,623
- ---------------------------------------------------------------------------
1,136,399 1,093,359
Less accumulated depreciation
and amortization ( 575,264) ( 525,997)
Net property and equipment 561,135 567,362
- ---------------------------------------------------------------------------
Other Assets/Investments 132,834 127,002
- ---------------------------------------------------------------------------
TOTAL ASSETS $7,870,244 $5,032,280
===========================================================================
The accompanying notes are an integral part of the Consolidated
Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
HIA, Inc. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Information as of November 30, 1997 is based upon an audited balance
sheet. All other information is unaudited.)
</CAPTION>
LIABILITIES May 28, November 30,
1998 1997
<S> <C> <C>
Current Liabilities:
Notes payable to banks $1,664,128 $1,804,681
Accounts payable 2,780,944 307,006
Accured expenses &
other current liabilities 194,177 236,280
Total current liabilities 4,639,249 2,347,967
- ----------------------------------------------------------------------
Long Term Liabilities:
Notes Payable to Banks 335,612 0
Total Long Term Liabilities 335,612 0
TOTAL LIABILITIES $4,974,861 $2,347,967
======================================================================
STOCKHOLDERS' EQUITY
Common Stock of $.01 par
value; Authorized 20,000,000
shares: Issued 13,107,896
and outstanding 9,553,383
and 9,103,383 131,079 131,079
Additional paid-in capital 3,109,271 3,109,271
Retained earnings (deficit) 323,756 181,519
- ---------------------------------------------------------------------
3,564,106 3,421,869
- ---------------------------------------------------------------------
LESS: Treasury stock 3,554,513
And 4,004,513 shares at cost ( 668,723) ( 736,956)
- ----------------------------------------------------------------------
Total Stockholders' Equity 2,895,383 2,684,913
- ---------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $7,870,244 $5,032,880
=====================================================================
<CAPTION>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
</CAPTION>
</TABLE>
<TABLE>
<CAPTION>
HIA, Inc. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF Operations
</CAPTION>
Six Months Ended Three Months Ended
May 31, 1998 May 31, 1997 May 31, 1998 May 31, 1997
<S> <C> <C> <C> <C>
Net Sales $7,577,924 $7,199,397 $5,507,491 $5,417,009
Cost of
Sales 5,224,288 4,828,026 3,713,987 3,626,795
- -----------------------------------------------------------------------
Gross Profit 2,353,636 2,371,371 1,793,504 1,790,214
Selling,
general &
Administrative
expenses 2,095,139 2,176,761 1,127,499 1,194,007
- -----------------------------------------------------------------------
Operating
Income
(Loss) 258,497 194,610 666,005 596,207
Other Income
(Deduction);
Interest
Income 12,791 8,209 1,902 3,681
Interest
Expense (78,548) ( 60,005) (44,241) (48,291)
Misc. Income
(Expense) 15,501 8,852 9,827 (12,489)
- -----------------------------------------------------------------------
Total Other
Income
(Expense) (50,256) ( 42,944) (32,512) (57,099)
Income before
tax 208,241 151,666 633,493 539,108
Income tax ( 66,000) ( 49,000) ( 66,000) (49,000)
=======================================================================
Net Income
(Loss) 142,241 102,666 567,493 490,108
Basis and
Diluted per
share data:
Basis .01 .01 .06 .05
Diluted .01 .01 .06 .05
</TABLE>
<TABLE>
<CAPTION>
HIA, Inc. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
</CAPTION>
For the six Months Ended
May 31, May 31,
1998 1997
Increase (Decrease) In Cash
OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 142,241 $ 102,666
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 49,267 15,020
Changes in current assets and
current liabilities:
Accounts Receivable (1,687,824) (1,017,874)
Inventories (1,068,764) (2,166,154)
Other current assets (66,816) (1,179)
Accounts Payable 2,473,938 2,140,078
Accrued expenses and
Other current liabilities (42,103) (116,774)
- ----------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES ( 200,061) (1,044,217)
- ----------------------------------------------------------------
INVESTING ACTIVITIES:
(Purchase) of property, plant
and equipment (43,044) (59,659)
(Increase) decrease in other
assets ( 5,832) ( 8,346)
Purchase of Treasury Stock (15,400) 0
NET CASH USED IN INVESTING
ACTIVITIES (64,276) (68,005)
================================================================
FINANCING ACTIVITIES:
Net borrowings (payments) on notes
payable to banks 195,059 1,200,000
Sale of treasury stock 83,633 -0-
- ----------------------------------------------------------------
Net Cash provided by (used in)
financing Activities 278,692 1,200,000
NET INCREASE(DECREASE) IN CASH 14,355 87,778
CASH, BEGINNING OF PERIOD 15,295 141,584
CASH, END OF PERIOD 29,650 229,362
================================================================
The accompanying notes are an integral part of the Consolidated
Financial Statements.
(*see note from page 6)
</TABLE>
HIA, Inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Basis for Presentation
The accompanying consolidated financial statements have been
prepared in accordance with the instructions of Form 10-QSB 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, 1998 are not necessarily indicative
of the results that may be obtained for year ending November 30,
1998. These statements should be read in conjunction with the
financial statements and notes thereto included in the
Registration's form 10KSB for the year ended November 30, 1997
filed with the Securities and Exchange Commission on February 27,
1998.
B. Per Share Amounts
Statement of financial Accounting Standards No. 128 provides for
the calculation of Basic and Diluted earnings per share.
Basic earnings per share included no dilution and is computed by
dividing income available to common stockholders by the weighted-
average number of shares outstanding during the period (9,398,383
and 8,904,124 for 1998 and 1997.) 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. As of May 31, 1998 and May 31, 1997, options in the
amount of 600,000 and 1,200,000 are not considered in the
computation of diluted earnings per share as their inclusion
would be anti-dilutive. The implementation of this standard did
not have a material effect on the consolidated financial
statements.
C. Recent Accounting Pronouncements
In June 1997, and statement of Financial Accounting Standard No.
131 Disclosures about Segments of an enterprise and Related
Information (SFAS 131). issued Statement of Financial
Accounting Standard No. 130 Reporting Comprehensive Income
(SFAS 130) the financial Accounting Standards Board (FASB.)
SFAS 130 establishes standards for reporting and display of
comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity
except those resulting from investments by owners an
distributions to owners. Among other disclosures, SFAS 130
requires that all items that are required to be recognized under
current accounting standards as components of comprehensive
income be reported in a financial statement that displays with
the same prominence as other financial statements. SFAS 131
supercedes Statement of Financial Accounting Standard No. 14
Financial Reporting for Segments of a Business Enterprise.
SFAS 131 establishes standards of the way that public companies
report information about operating segments in annual financial
statements and requires reporting of selected information about
operating segments in interim financial statements issued to the
public. It also establishes standard for disclosures regarding
products and services, geographic areas and major customers.
SFAS 131 defines operating segments as components of a company
about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
SFAS 130 and SFAS 131 are effective for financial statements for
periods beginning after December 15, 1997 and require comparative
information for earlier years to be restated. Because of the
recent issuance of these standards, management has been unable to
fully evaluate the impact, if any, the standards may have on
future financial statement disclosures. Results of operations
and financial position, however, will be unaffected by the
implementation of these standards.
In February 1998, the FASB issued SFAS No. 132, Employers
Disclosures about Pensions and Other Postretirement Benefits
which standardizes the disclosure requirements for pensions and
other postretirement benefits and requires additional information
on changes in the benefit obligations and fair values of plan
assets that will facilitate financial analysis. SFAS No. 132 is
effective for years beginning after December 15, 1997 and
requires comparative information for earlier years to be
restated, unless such information is not readily available.
Management believes the adoption of this statement will have no
material impact on the Company's financial statements.
Item 2. Management's Discussion and Analysis or Plan of Operation
The Registrant's working capital increased by $546,477 during the
six months ended May 31, 1998 principally as a result of the following
factors:
(1) purchase of equipment of $43,044,
(2) increase in others assets of $5,832,
(3) net borrowing from banks of $195,059,
(4) proceeds received from the sale of treasury stock of
$83,633 partially offset by the purchase of treasury stock
of $15,400.
(5) cash provided by operations for the six months ended May
31, 1998 of $191,508.
The net cash provided by operating activities increased by $844,156
primarily as a result of the decrease in inventories as compared to the
previous six months of 1997 ($1,097,390) offset partially by the
increase in accounts receivable as compared to the previous six months
of 1997 ($669,950). The decrease in inventories was primarily a result
of the effort by management to reduce the amount of early order
purchases normally required by the manufacturers of the products the
company distributes. The larger manufacturers (Rainbird, Hunter,
Lasco, Hardie, etc) normally require their distributors to purchase up
to 100% or more of last years purchases in order to keep their
factories profitable during the winter months. It became burdensome to
the company to continue this practice to the extent demanded of the
manufacturers (i.e. increase in the average inventories carried and
decreased merchandise turnover ratios resulting in higher operating and
financing costs relative to income generated from sales of the
products). The increase in accounts receivable were primarily a result
of slower overall payments by the company's customers and the increase
in sales of $378,527 over the same six month period in 1997. The heavy
spring rains in 1997 slowed the installation work of the contractors in
the Rocky Mountain region, thereby reducing the amount of irrigation
work that could be performed and effecting the cash flow of the
company's customer base (small to medium size contractors). The
company's customers usually are small, undercapitalized businesses
depending largely upon the distributor to provide it with the credit to
cash flow the business financial needs.
The net decrease of cash used in financing activities was primarily a
result of the decrease in bank borrowings as compared to the same six
months of 1997 ($1,004,941) and the sale of common stock options to the
company's management ($83,633) during the first quarter of 1998. The
decrease in bank borrowings was primarily attributable to the decrease
in cash used by inventories. The increase in the cash provided by the
decrease in inventories was primarily offset by the fact that the
majority of the increase in inventories during the first two quarters
of each year is financed by the vendors or their financing institutions
on a protracted dating basis (e.g. 90 to 180 day term financing).
Therefore, the company does not normally need to finance the increase
in inventories during this period with its own short term bank
borrowings.
At February 28, 1998 the Company's subsidiary had a line-of-credit
totaling $4,000,000 of which $2,510,387 was available for future
borrowing. The line-of-credit is guaranteed by the Company.
Results of Operation
Net sales for the three months ended May 31, 1998 were up $90,482
or 2% greater than the second quarter of 1997.
The gross profit was 32.6% during the three months ended May 31,
1998, compared to the second quarter of 1997 at 33.9% of net sales
The selling, general and administrative expenses were down
$66,508 for the quarter ended May 31, 1998 as compared to the first
quarter of the previous year. Other income was up $24,587 as compared
to the second quarter of 1997 due to the increase in miscellaneous
income of $22,316.
The income from operations for the second quarter of 1998 was
$77,385 more than the second quarter of the previous year primarily
attributable to the decrease in general expenses of $66,508 and the
increase in other income of $24,587.
Recent Accounting Pronouncement
In June 1997, the Financial Accounting Standards Boaard (FASB)
issued Statement of Financial Accounting Standard No. 130 Reporting
Comprehensive Income (SFAS 130) and Statement of Financial Accounting
Standard No. 131 Disclosures about Segments of an Enterprise and
Related Information (SFAS 131). SFAS 130 establishes standards for
reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all
changes in equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, SFAS 130 requires
that all items are required to be recognized under current accounting
standards as components of comprehensive income be reported in a
financial statement that displays with the same prominence as other
financial statements. SFAS 131 supersedes Statement of financial
Accounting Standard No. 14 Financial Reporting for Segments of a
Business Enterprise. SFAS 131 establishes standards of the way that
public companies report information about operating segments in annual
financial statements and requires reporting of selected information
about operating segments in interim financial statements issued to the
public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS 131
defines operating segments as components of a company about which
separate financial information is available that is evaluated regularly
by the chief operating decision maker in deciding how to allocate
resources and in assessing performance.
SFAS 130 and SFAS 131 are effective for financial statements for
periods beginning after December 15, 1997 and require comparative
information for earlier years to be restated. Because of the recent
issuance of these standards, management has been unable to fully
evaluate the impact, if any, the standards may have on future financial
statement disclosures. Results of operations and financial position,
however, will be unaffected by the implementation of these standards.
In February 1998, the FASB issued SFAS No. 132, Employers
Disclosures about Pensions and Other Postretirement Benefits which
standardizes the disclosure requirements for pensions and other
postretirement benefits and requires additional information on changes
in the benefit obligations and fair values of plan assets that will
facilitate financial analysis. SFAS No. 132 is effective for years
beginning after December 15, 1997 and requires comparative information
for earlier years to be restated, unless such information is not
readily available. Management believes the adoption of this statement
will have no material impact on the Company's financial statements.
Year 2000 Compliant
Subsequent to November 30 1997, the Company began converting its
computer system to be year 2000 compliant (e.g. to recognize the
difference between 99 and '00 as one year instead of negative 99
years.) The Company expects all of its computer systems to be in
compliance by January 1999. The total cost of the project is estimated
to be $450,000 and is being funded through a long-term capital lease
obligation.
Part II
Item 1. Legal Proceedings
NONE
Item 2. Changes in Securities
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
(a) The following exhibits are filed with this report.
NONE
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
registrant has duly caused this report to be signed on its behalf by
the under signed hereunto duly authorized.
HIA Inc.
Date: July 14, 1998 /s/ Alan C. Bergold
Alan C. Bergold
Chief financial Officer & President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Nov-30-1998
<PERIOD-START> Dec-01-1997
<PERIOD-END> May-31-1998
<CASH> 30
<SECURITIES> 0
<RECEIVABLES> 3364
<ALLOWANCES> 0
<INVENTORY> 3568
<CURRENT-ASSETS> 215
<PP&E> 1136
<DEPRECIATION> 575
<TOTAL-ASSETS> 7870
<CURRENT-LIABILITIES> 4639
<BONDS> 0
<COMMON> 131
0
0
<OTHER-SE> 2764
<TOTAL-LIABILITY-AND-EQUITY> 7870
<SALES> 7578
<TOTAL-REVENUES> 7578
<CGS> 5224
<TOTAL-COSTS> 2095
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78
<INCOME-PRETAX> 2082
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1422
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
