UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KSB
Annual Report Pursuant to
Section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the fiscal year ended Commission File
November 30, 1997 #09-9599
HIA, INC.
(Exact name of small business issuer as specified in its charter)
New York 16-1028783
(State or other jurisdiction of (Federal employer
Incorporation or Organization) identification number)
4275 Forest Street
Denver, Colorado 80216
(Address of principal executive office)
(303) 394-6040
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01
(Title of Class)
The check mark below indicates 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 twelve months (or reports),
and (2) has been subject to such filing requirements for the past ninety
days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B is not contained herein, and will not be
contained to the best of registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. (X).
The Issuer had revenues of $17,049,693 for the fiscal year ended
November 30, 1997.
The aggregate market value of voting stock held by non-affiliates of the
Issuer as of February 1, 1998 was approximately $966,214 based on
insider transactions which took place in 1997.
The number of shares of the only class of Common Stock of the Issuer
outstanding as of January 1, 1998 was 10,153,383 fully diluted,
9,553,383 non-diluted.
Transitional Small Business Disclosure Format (check one):
YES NO X
PART I
Item 1. Business
(a) General Development of Business
HIA, Inc. (the Company) was incorporated in 1974. The Company is a
holding company with all of its business conducted through its wholly-
owned subsidiary, CPS Distributors, Inc. (CPS). Through CPS, the
Company distributes turf irrigation equipment and commercial, industrial
and residential well pumps and equipment on a wholesale basis. The
principal executive offices of the Company are located at 4275 Forest
Street, Denver, Colorado 80216, telephone (303) 394-6040.
(b) Narrative Description of Business
General The Company acquired CPS, a one hundred-year-old company based
in Denver, Colorado, in February 1984. CPS serves customers in the
Rocky Mountain region in five states consisting of Colorado, Wyoming,
New Mexico, Kansas and Nebraska. CPS carries a variety of brand name
products, including pumps and water systems, water conditioning
equipment, pump and well accessories, pipe valves and fittings and
sprinkler system equipment. The industrial, commercial and residential
pumps and turf irrigation equipment represented approximately 19% and
81%, respectively, of net sales for 1997 and approximately 21% and 79%,
respectively, of net sales in 1996.
CPS' line of products has changed in response to the supply and demand
forces of the marketplace. The management of CPS believes that its two
divisions (i.e., turf and irrigation equipment and industrial,
commercial and residential pumps and equipment) reduce the cyclicality
of sales and earnings that would otherwise be affected by product line
shifts caused by economic and demographic changes; however, the Company
is subject to the ups and downs of the overall construction activity in
the Rocky Mountain region. The Company purchases approximately 25% of
its products from one manufacturer. However, the products purchased can
be obtained from other competing manufacturers but not as a consolidated
product group.
CPS' sales and service engineers provide technical support to assist
customers in developing a system specifically tailored to the customers'
needs.
The Company uses computer resources for its order entry, inventory,
payroll and accounting functions.
Customer Base; Seasonality CPS' customers include contractors, dealers
and municipalities with the majority of sales derived from contractors.
The Company believes
that neither its aggregate sales nor those of any of its business units
are concentrated in or materially dependent upon any single customer or
small group of customers.
Quotation activity is especially intense in the winter and spring months
(December to April) when contracts are reviewed and eventually awarded
for spring or summer construction. Since over 81% of CPS' business
relates to turf and irrigation products, its sales are concentrated from
March to October and are therefore seasonal in nature.
Competition The Company operates in a highly competitive market. During
at least the past seven years, manufacturers have abandoned the
exclusive relationships with their distributors. As a result, the
Company is competing with other wholesalers of the same products.
In the past several years, most manufacturers have also abandoned prices
based on volume buying and have gone to a pricing system based on a
percentage of purchases over the previous years' business. This change
allows smaller wholesalers to buy at the same price levels as the larger
wholesalers. Therefore, a medium-sized wholesaler, such as CPS, no
longer has a price advantage to cover the higher operating costs of a
larger operation.
CPS offers standard discounts on merchandise to its customers.
Additional discounts are given based on quantity of order or annual
volume of purchases, depending on product and competitive conditions.
The Company has monthly specials on certain of its inventory and
provides discounts for orders placed at trade shows. The majority of
the programs offered are based on discounts received from the Company's
suppliers. Therefore, there is no material effect on operating results
from providing these discounts.
Each salesperson receives a draw against commission. Commission is
determined as a percentage of the gross profit generated from sales to
the accounts in the sales representative's territory. Sales quotas are
established for each area. Sales personnel are eligible to receive a
bonus for meeting or exceeding their assigned quota.
CPS emphasizes customer service, convenient availability of products and
knowledge of the industry. However, pricing, currently an important
factor, is expected to become even more important in the late 1990s
because the competition can provide the same products and warranties.
CPS has seven major competitors in its market area for turf and
irrigation equipment and six major competitors in its market area for
industrial, commercial and residential pumps and equipment. It is
estimated by management that CPS has over 20% of the total market in
Colorado for residential pumps and 34% of the total market in Colorado
for turf and irrigation equipment. Some of CPS' competitors have
financial resources greater than CPS.
CPS estimated that in the past two years its market share in the turf
and irrigation equipment market in Colorado increased because of the
cumulative effect of opening satellite operations in Thornton, Colorado,
in March 1992; Littleton, Colorado, in March 1993; Aurora, Colorado, in
March 1994; in the central section of Denver in March 1995; and in
Broomfield, Colorado in February 1997; all located in the Denver
metropolitan area. CPS opened a branch in Cheyenne, Wyoming in June 1996
and Colorado Springs, Colorado in July 1997. Management believes that
CPS can continue to consolidate its market share in the turf and
irrigation market by opening additional local warehousing and sales
operations.
Management believes CPS has an established reputation as a distributor
of quality product lines such as Rainbird, Hunter, Lasco and Jacuzzi.
CPS competes primarily on service and, to a lesser extent, on price,
quality and reliability of products, technical services and availability
of products.
Employees - At November 30, 1997, the Company employed approximately 63
persons, of which 30 were warehouse employees and 33 were sales and
administrative employees. The Company considers its employee relations
to be good. None of the Company's employees are covered by union
contracts or collective bargaining agreements.
Item 2. Properties
The Company's leased facilities in Denver, Colorado are comprised of an
aggregate of 32,265 square feet of offices and warehouse on 166,000
square feet of land. This building serves as the main warehouse of CPS
and the executive offices of the Company. In addition, the Company owns
property in Casper, Wyoming, which consists of 6,159 square feet of
office/warehouse space on 33,600 square feet of land. The Company also
leases a warehouse and small office in Colorado Springs, Colorado
comprised of 6,370 square feet of office/warehouse space on 21,781
square feet of land; 4,000 square feet of office and warehouse space on
14,000 square feet of land in Fort Collins, Colorado; 10,000 square feet
of office and warehouse space in Thornton, Colorado; 5,000 square feet
of office and warehouse space in Littleton, Colorado; 4,000 square feet
of office and warehouse space in Aurora, Colorado; 8,400 square feet of
office and warehouse space in the central section of Denver, Colorado;
9,120 square feet of office and warehouse space in Cheyenne, Wyoming;
6,400 square feet of office and warehouse space in Broomfield, Colorado
and 2,550 square feet of office and warehouse space in Colorado Springs,
Colorado (North store).
During November 1994, the Company entered into a new agreement to lease
warehouse space for its main warehouse. The lease has a ten year term,
beginning March 1995, with monthly rent at $9,500 for the first five
years, after which the monthly rent may be adjusted by the percentage
increase in the Consumer Price Index. The Company has an option to
purchase the related property at the end of the initial ten year term at
a price approximating the market value at that time, subject to certain
conditions. The Company also has two five-year options to extend the
lease term, one at the beginning of the eleventh year and one at the
beginning of the 16th year. The Company is to pay for all taxes,
insurance and maintenance on the property.
The Company believes its leased facilities are adequate to meet its
needs for the next several years and anticipates that it would encounter
little difficulty in locating alternative facilities should its
requirements change.
Item 3. Legal Proceedings
The Company knows of no material pending legal proceedings to which the
Company is a party or of which any of its properties is the subject and
no such proceedings are known to the Company to be contemplated by
governmental authorities.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a shareholder vote during the fiscal
year ended November 30, 1997.
PART II
Item 5. Market for the Company's Common Stock and Related Security
Holders Matters
The principal market on which HIA Shares are traded is the Denver over-
the-counter market. Prior to June 6, 1986, the Company's stock was
traded on the NASDAQ National Market System. On June 6, 1986, HIA
Shares were de-listed from NASDAQ because the Company no longer
satisfied the minimum total capital and surplus requirement for
continued listing. Although one market maker continues to quote prices
for HIA Shares, the Company is not aware of any established public
trading market for HIA Shares since June 6, 1986.
The approximate number of holders of record of HIA Shares as of November
30, 1997 was 2,000.
The Company has never declared any dividends with respect to HIA Shares.
The Company has not in the past and is currently restricted from paying
cash dividends under its existing line-of-credit agreement.
Item 6. Management's Discussion and Analysis or Plan of Operation
Liquidity and Capital Resources
At November 30, 1997, the Company had total cash balances of $15,295.
Cash flows used in operating activities decreased $502,251 during the
year ended November 30, 1997 primarily as a result of net income of
$417,562 offset by increases in accounts receivable and inventory levels
of $161,306 and $420,168, respectively, and decreases in accounts
payable of $296,128. The increase in accounts receivable resulted
directly from increased sales levels. The increased level of
inventories resulted primarily from the opening of new satellite
operations during fiscal 1997.
The following is a two-year summary of working capital and current
ratios:
<TABLE>
1997 1996
<S> <C> <C>
Working Capital $1,990,549 $2,027,665
Current Ratios 1.85 to 1 2.10 to 1
At November 30, 1997, the Company and its subsidiaries have an available
line-of-credit totaling $4,000,000, of which $2,501,387 was unused.
On September 9, 1997, the Company entered into an agreement with
Colorado National Bank to finance up to $500,000 of computer and related
equipment. The Company has contracted with a local software company to
provide software, equipment and technical services to upgrade and
enhance its enterprise data and information systems. As of November 30,
1997 the Company spent $306,068 on the project which is financed by
Colorado National Bank on an interim basis at prime rate. The purchase
of equipment is shown as a fixed asset (equipment) on the financial
statements and the loan as a short-term debt (note payable to bank).
It is anticipated by the Company that the total project will cost
approximately $450,000 and the short-term financing will be converted to
a five year capital lease sometime during the first quarter of 1998.
Management believes that the present working capital is adequate to
conduct its present operations. The Company does not have any
commitments nor anticipates material capital expenditures for fiscal
1998.
During March 1994, the Company entered into an agreement to purchase
1,386,011 of the common shares in the Company held by R. Thomas Dalbey,
then President, Director, and principal owner, at $.14 per share for a
total cost of $194,042. This amount was paid in cash. The agreement
also gave the Company the option to purchase 1,386,011 of Mr. Dalbey's
remaining shares at $.15 per share by April 1, 1996, and 1,386,011
shares (or all remaining shares) at $.16 per share by April 1, 1998.
The per share cost to acquire the remaining 2,772,022 shares held by Mr.
Dalbey was to be adjusted for the net profit or loss generated by the
Company during the option period.
On November 30, 1995, the Company exercised its option and purchased
1,386,011 common shares held by R. Thomas Dalbey at $.18585 per share,
for a total cost of $257,590 under this agreement. On October 31, 1996,
the Company exercised its option and purchased 1,386,011 common shares
held by R. Thomas Dalbey at $.22282 per share, for a total cost of
$308,833 under this agreements.
The Company acquired from other stockholders 529,288 shares of its
common stock at approximately $.20 per share during fiscal 1997 and
338,357 shares of its common stock at $.183 to $.20 per share during
fiscal 1996. During fiscal 1997, the Company issued 529,288 shares from
treasury to its officers for cash proceeds of $45,000 and $58,958 in
consideration of accrued bonuses owed its officers. During fiscal 1996,
the Company issued 338,357 shares from treasury to its officers for cash
proceeds of $66,600.
On November 30, 1995, the Board of Directors granted an option to each
of the three executive officers of CPS to purchase up to 200,000 shares
at $.18585 per share by December 31, 1997. The options' exercise price
was equal to the common stock's market price at the date of grant.
On November 30, 1996, the Board of Directors granted an option to each
of the three executive officers of CPS to purchase up to 200,000 shares
at $.22282 per share by December 31, 1998. The options' exercise price
was equal to the common stock's market price at the date of grant.
On December 31, 1997, the officers and directors of the Company
exercised a total of 450,000 shares of the November 30, 1995 option at
.18585 per share. Concurrently, 150,000 shares of the original option
total of 600,000 shares expired.
Results of Operations
Comparison 1997 vs. 1996
Net sales were up $531,917 primarily as a result of the opening of two
new satellite operations; northern Colorado Springs, Colorado (July
1997) and Broomfield, Colorado (February 1997). Cost of sales increased
by $299,662 proportional to the increase in sales for the year. Gross
profit percent was 31% for both fiscal years 1997 and 1996. Selling,
general and administrative expenses were up $395,649 primarily as a
result of the additional expenses of the two new branches of $136,683,
payroll compensation (including taxes) of $101,860 and insurance
expenses of $78,371. The increase in insurance expenses were primarily
due to the increase in employee health insurance rates, workers
compensation rate increases and the premium cap the Company placed on
the co-payment by employees with dependent coverage. Due to a very
competitive labor market in the Rocky Mountain region, pay rates
increased greater than the rate of inflation and other types of
compensation or accommodations were required to attract and keep
valuable employees.
Net income decreased by $120,107 primarily due to the additional
expenses incurred by the two new branches; a total of $136,683. This
amount was partially offset by the income tax effect of the loss.
The weighted-average interest rates on bank borrowings was 9.1% and 9.5%
for 1997 and 1996, respectively. The weighted-average balance
outstanding of $1,697,363 for 1997 increase by $461,236 over 1996
primarily as a result of the additional inventory carried by the Company
in 1997.
Income Taxes
At November 30, 1997, the Company has recorded a current net deferred
tax asset totaling $76,000 and has recorded a noncurrent net deferred
tax asset totaling $5,000. Based upon the Company's recent history of
taxable income and its projections for future earnings, management
believes that is more likely than not that sufficient taxable income
will be generated in the near term to utilize the net deferred tax
assets. See note 3 to the Company's consolidated financial statements.
Year 2000 Compliant
Subsequent to November 30, 1997, the Company began converting its
computer systems 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.
Recent Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") recently issued
Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
("SFAS 128") and Statement of Financial Accounting Standards No. 129
"Disclosure of Information About an Entity's Capital Structure ("SFAS
129"). SFAS 128 provides a different method of calculating earnings per
share than is currently used in accordance with Accounting Board Opinion
("ABP") No. 15, "Earnings Per Share." SFAS 128 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 common
shares outstanding for the period. Diluted earnings per share reflects
the potential dilution of securities that could share in the earnings of
an entity, similar to fully diluted earnings per share. SFAS 129
establishes standards for disclosing information about an entity's
capital structure. SFAS 128 and SFAS 129 are effective for financial
statements issued for periods ending after December 15, 1997. Their
implementation is not expected to have a material effect on the
consolidated financial statements.
PRIVATE
In June 1997, 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 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 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.
Item 7. Financial Statements
The response to this item is submitted as a separate section of this
report.
Report of Independent Certified Public Accountants
Consolidated Financial Statements:
Balance Sheet
Statements of Income
Statements of Stockholders' Equity
Statements of Cash Flows
Summary of Accounting Policies
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
To the Stockholders and Board of Directors
HIA, Inc.
Denver, Colorado
We have audited the accompanying consolidated balance sheet of HIA, Inc.
and subsidiaries (the "Company") as of November 30, 1997 and the related
consolidated statements of income, stockholders' equity and cash flows
for each of the years in the two year period ended November 30, 1997.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of HIA,
Inc. and its subsidiaries as of November 30, 1997 and the results of
their operations and their cash flows for each of the years in the two
year period ended November 30, 1997 in conformity with generally
accepted accounting principles.
BDO Seidman, LLP
Denver, Colorado
January 9, 1998
Hia, Inc. and Subsidiaries
Consolidated Balance Sheet
</TABLE>
<TABLE>
November 30, 1997
<S> <C>
Assets (Note 1)
Current:
Cash $ 15,295
Accounts receivable, less allowance of
$ 86,000 for possible losses 1,676,222
Inventories 2,498,970
Other current assets 148,029
Total current assets 4,338,516
Property and equipment:
Land and improvements 45,295
Buildings and improvements 286,441
Equipment 761,623
- ------------------------------------------------------------------------
1,093,359
Less accumulated depreciation and
Amortization 525,997
- ------------------------------------------------------------------------
Net property and equipment 567,362
Investments and other assets 127,002
- ------------------------------------------------------------------------
$5,032,880
<CAPTION>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
</CAPTION>
</TABLE>
Hia, Inc. and Subsidiaries
Consolidated Balance Sheet, (Continued)
<TABLE>
November 30, 1997
<S> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to banks (Note 1) $ 1,804,681
Accounts payable 181,508
Checks written against future deposits 125,498
Accrued bonuses 124,042
Accrued profit sharing plan contribution (Note 5) 63,500
Income taxes payable (Note 3) 10,077
Other current liabilities 38,661
Total current liabilities 2,347,967
- ------------------------------------------------------------------------
Commitments (Notes 2 and 5)
Stockholders' equity (Note 4):
Common stock, $.01 par value; 20,000,000 shares
authorized; 13,107,896 issued and 9,103,383
outstanding 131,079
Additional paid-in capital 3,109,271
Retained earnings 181,519
- -----------------------------------------------------------------------
3,421,869
Less treasury stock at cost; 4,004,513 shares 736,956
- -----------------------------------------------------------------------
Total stockholders' equity 2,684,913
- -----------------------------------------------------------------------
$ 5,032,880
<CAPTION>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
</CAPTION>
</TABLE>
Hia, Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
Years Ended November 30, 1997 1996
<S> <C> <C>
Revenues:
Net sales $ 17,015,690 $ 16,483,773
Interest income 18,006 10,780
Other income 15,997 23,327
Total revenues 17,049,693 16,517,880
- --------------------------------------------------------------------
Costs and expenses:
Cost of sales 11,732,498 11,432,836
Selling, general and administrative 4,557,382 4,161,733
Interest expense 154,876 117,526
- --------------------------------------------------------------------
Total costs and expenses 16,444,756 15,712,095
- --------------------------------------------------------------------
Income before taxes on income 604,937 805,785
Taxes on income (Note 3) 187,375 268,116
- --------------------------------------------------------------------
Net income $ 417,562 $ 537,669
Net income per common share $ .04 $ .05
Weighted-average common
shares and common share
equivalents outstanding 9,878,192 11,575,475
<CAPTION>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
</CAPTION>
</TABLE>
Hia, Inc. and Subsidiaries
Consolidated Statement of Shareholders' Equity
<TABLE>
Additional Retained
Paid-In Earnings Treasury Total
Stock-
Years Ended November 30, Common Stock holders'
1997 and 1996 Shares Amount Capital (Deficit) Stock Equity
<S> <C> <C> <C> <C> <C> <C>
Balance, December
1, 1995 13,107,896 $131,079 $ 3,109,271 $(773,712) $(428,123) $2,038,515
Acquisition of
treasury stock (375,493) (375,493)
Issuance of shares
held in treasury 66,660 66,660
Net income 537,669 537,669
==========================================================================================
Balance, November
30, 1996 13,107,896 131,079 3,109,271 (236,043) (736,956) 2,267,351
Acquisition of
treasury stock (103,958) (103,958)
Issuance of shares
held in treasury 103,958 103,958
Net income 417,562 417,562
Balance, November
30, 1997 13,107,896 $ 131,079 $ 3,109,271 $ 181,519 $(736,956) $ 2,684,913
<CAPTION>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
</CAPTION>
</TABLE>
Hia, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
<TABLE>
Increase (Decrease) in Cash
Years Ended November 30, 1997 1996
<S> <C> <C>
Operating activities:
Net income $ 417,562 $ 537,669
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 40,892 33,566
Allowance for doubtful accounts 13,215 (20,153)
Deferred income taxes (32,114) (27,563)
Changes in operating assets and liabilities:
Accounts receivable (161,306) (209,007)
Inventories (420,168) (112,518)
Other current assets (15,908) (42,413)
Accounts payable (296,128) 247,340
Other current liabilities (48,296) (148,957)
- -----------------------------------------------------------------------
Net cash provided by (used in)
operating activities (502,251) 257,964
- ------------------------------------------------------------------------
Investing activities:
Disposal of property and equipment 4,478
Purchase of property and equipment (138,045) (73,485)
Change in investments and other assets (46,350) (3,178)
- ------------------------------------------------------------------------
Net cash used in investing activities (184,395) (72,185)
- -----------------------------------------------------------------------
</TABLE>
Hia, Inc. and Subsidiaries
Consolidated Statement of Cash Flows, (Continued)
<TABLE>
Increase (Decrease) in Cash
Years Ended November 30, 1997 1996
<S> <C> <C>
Financing activities:
Proceeds from note payable to bank 5,790,000 5,144,333
Repayments on note payable to bank (5,170,000) (5,030,000)
Payments on installment obligations (6,504)
Acquisitions of treasury stock (103,958) (375,493)
Proceeds from sale of treasury stock 45,000 66,660
Checks written against future deposits (685) 41,697
- ----------------------------------------------------------------------
Net cash provided by (used in)
financing activities 560,357 (159,307)
- ----------------------------------------------------------------------
Increase (decrease) in cash (126,289) 26,472
Cash, beginning of year 141,584 115,112
- ---------------------------------------------------------------------
Cash, end of year $ 15,295 $ 141,584
<CAPTION>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
</CAPTION>
</TABLE>
Hia, Inc. and Subsidiaries
Summary of Accounting Policies
Principles of Consolidation The consolidated financial statements
include the accounts of HIA, Inc. (the "Company" or "HIA"), its wholly-
owned subsidiary CPS Distributors, Inc. ("CPS"), and CPS's wholly-owned
subsidiary, Water Systems, Inc. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Lines of Business The principal business of HIA, conducted through its
subsidiary CPS, is the wholesale distribution of turf irrigation
equipment and pumps.
Concentration of Risk Financial instruments which potentially subject
the Company to concentrations of credit risk consist primarily of cash
and trade accounts receivable. The Company invests temporary cash in
demand deposits with federally insured financial institutions. Such
deposit accounts at times may exceed federally insured limits. The
Company has not experienced any losses in such accounts.
Concentrations of credit risk with respect to accounts receivables are
limited due to the large number of customers, generally short payment
terms, and their dispersion across geographic areas. The Company
reviews a customer's credit history before extending credit and
establishes an allowance for doubtful accounts based upon the credit
risk of specific customers, historical trends and other information.
Generally, the Company does not require collateral from its customers.
Use of Estimates - The preparation of consolidated financial statements
in conformity with generally accepted accounting principles necessarily
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting periods.
Actual results could differ from those estimates.
Financial Instruments The following methods and assumptions were used to
estimate the fair value of each class of financial instruments for which
it is practicable to estimate that value:
Accounts Receivable, Accounts Payable and Other Current Liabilities
Fair values of accounts receivables, accounts payable and other current
liabilities are assumed to approximate carrying values for these
financial instruments since they are short term in nature and their
carrying amounts approximate fair value or they are receivable or
payable on demand.
Notes Payable to Banks
The notes payable to banks bear interest at floating rates of interest
based upon lending institutions' prime lending rate. Accordingly, their
fair value approximates their reported carrying amounts at November 30,
1997.
Inventories Inventories consist of wholesale goods held for resale which
are primarily valued at the lower of cost (as determined using first-in,
first-out method) or market.
Property and Equipment Property and equipment are stated at cost.
Depreciation is computed using straight-line and accelerated methods
over the estimated useful lives of the assets, ranging from three to ten
years. Upon sale or retirement, the cost and related accumulated
depreciation of disposed assets are eliminated from the respective
accounts and the resulting gain or loss is included in the statement of
operation. At November 30, 1997, property and equipment includes
$306,068 of data and information systems equipment under installation
and not yet in service.
Long-Lived Assets Long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may
not be recoverable. If the expected undiscounted future cash flow from
the use of the assets and its eventual disposition is less than the
carrying amount of the assets, an impairment loss is recognized and
measured using the asset's fair value.
Revenue Recognition The Company recognizes revenue at the time sales are
shipped to customers in the normal course of business.
Income Taxes The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109"). Temporary
differences are differences between the tax basis of assets and
liabilities and their reported amounts in the financial statements that
will result in taxable or deductible amounts in future years.
Net Income Per Common Share Net income per common share is computed
using the weighted-average number of shares outstanding during each
period presented. Options to purchase stock (1,200,000 options
outstanding at November 30, 1997 and 1996) are included as common stock
equivalents, when dilutive.
Statements of Cash Flows For purposes of the statements of cash flows,
the Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.
Stock Option Plans The Company applies APB Opinion 25, "Accounting for
Stock Issued to Employees", and the related Interpretation 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, "Accounting for Stock-Based Compensation", requires the
Company to provide pro forma information regarding net income as if
compensation cost for the Company's stock options plans had been
determined in accordance with the fair value based method prescribed in
SFAS No. 123. To provide the required pro forma information, the
Company estimates the fair value of each stock option at the grant date
by using the Black-Scholes option-pricing model.
Recent Accounting Pronouncements The Financial Accounting Standards
Board ("FASB") recently issued Statement of Financial Accounting
Standards No. 128 "Earnings Per Share" ("SFAS 128") and Statement of
Financial Accounting Standards No. 129 "Disclosure of Information About
an Entity's Capital Structure ("SFAS 129"). SFAS 128 provides a
different method of calculating earnings per share than is currently
used in accordance with Accounting Board Opinion ("ABP") No. 15,
"Earnings Per Share." SFAS 128 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 common shares outstanding
for the period. Diluted earnings per share reflects the potential
dilution of securities that could share in the earnings of an entity,
similar to fully diluted earnings per share. SFAS 129 establishes
standards for disclosing information about an entity's capital
structure. SFAS 128 and SFAS 129 are effective for financial statements
issued for periods ending after December 15, 1997. Their implementation
is not expected to have a material effect on the consolidated financial
statements.
In June 1997, 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 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 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.
Hia, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Notes Payable to Banks
Line-of-Credit Agreement
CPS and its subsidiary have a line-of-credit agreement with a bank which
expires April 30, 1999. The available loan amount is the lesser of
$4,000,000 or the computed borrowing base, as defined. The line-of-
credit provides for interest at the bank's base rate (8.5% at November
30, 1997) plus 1/2%. The agreement is collateralized by primarily all
of the Company's business assets including trade accounts receivable,
inventories and property and equipment, excluding owned real estate.
Additionally, the bank has the right of set-off under this agreement.
The agreement is also guaranteed by HIA.
The agreement contains several covenants which, among other things,
require that the Company maintain certain financial ratios, minimum net
worth and minimum working capital as defined in the line of credit
agreement. In addition, the agreement limits the payment of dividends,
the purchase of property and equipment, and officer and stockholder
compensation. As of November 30, 1997, the Company was in compliance
with the line of credit agreement.
As of November 30, 1997, $1,498,613 was outstanding under this line-of-
credit agreement.
Note Payable
During September 1997, the Company entered into a $500,000 short term
financing commitment with Colorado National Bank for the purchase of
computer and related equipment. The note payable bears interest at 8.5%
with interest only payable monthly. The note payable is due September
30, 1998 at which time the note payable will be converted into a long-
term capital lease obligation. The note payable is collateralized by
the computer and related equipment. As of November 30, 1997, the note
payable balance was $306,068.
2. Lease Commitments
CPS leases its main warehouse under a non-cancelable operating lease
requiring monthly payments of $9,500 through February 2005. CPS has an
option to purchase the related property at the end of the initial ten-
year term at a price approximating the market value at that time,
subject to certain conditions. CPS also has two five-year options to
extend the lease term.
CPS also leases vehicles, equipment and warehouse space under non-
cancelable operating leases. Total lease expense was approximately
$487,000 and $429,000 for fiscal 1997 and 1996.
As of November 30, 1997 future annual minimum lease payments under non-
cancelable operating leases are as follows:
November 30, Total
1998 $ 483,000
1999 412,000
2000 318,000
2001 248,000
2002 132,000
Thereafter 273,000
- ---------------------------------------------------------------
$ 1,866,000
2. Taxes on Income
The provision for taxes on income for the years ended November 30, 1997
and 1996 consisted of the following:
<TABLE>
1997 1996
<S> <C> <C>
Current:
Federal $ 209,412 $ 256,044
State 10,077 39,635
Deferred:
Federal (29,511) (26,185)
State (2,603) (1,378)
$ 187,375 $ 268,116
</TABLE>
A reconciliation of taxes on income at the federally statutory rate to
the effective tax rate is shown below:
<TABLE>
Years ended November 30, 1997 1996
<S> <C> <C>
Income taxes computed at
the federal statutory rate $ 192,672 $ 273,967
State income taxes, net of
federal benefit 6,651 9,408
Other (11,948) (15,259)
Taxes on income $ 187,375 $ 268,116
</TABLE>
Temporary differences between the financial statement carrying amounts
and the tax basis of assets and liabilities that give rise to
significant portions of the net deferred tax asset at November 30, 1997
relate to the following:
<TABLE>
Current Long-term
<S> <C> <C>
Inventories $ 44,000 $ -
Accounts receivable 32,000 -
Property and equipment - 3,000
Other - 2,000
- ---------------------------------------------------------------------
$ 76,000 $ 5,000
</TABLE>
At November 30, 1997, $76,000 of the net deferred tax asset is
classified as current and included in other current assets in the
accompanying consolidated balance sheet. At November 30, 1997, $5,000
of the net deferred tax asset is classified as long-term and included in
other current assets in the accompanying consolidated balance sheet.
The Company has recorded no valuation allowance to offset the net
deferred tax asset because management believes that it is more likely
than not that sufficient taxable income will be generated in the
foreseeable future to realize the net deferred tax asset.
4. Stockholders' Equity
Treasury Stock and Common Stock Options
During March 1994, the Company entered into a stock purchase agreement
with an officer under which the Company had an option to purchase
2,772,022 shares of its common stock from the officer. The agreement
provided for the purchase of 1,386,011 shares between March 1, 1994 and
April 1, 1996 at $.15 per share, and the remaining purchase of 1,386,011
shares between March 31, 1994 and April 1, 1998 at $.16 per share.
Under the agreement, the option price was to be adjusted annually to
reflect cumulative net income or loss for each year. During fiscal
1995, the Company exercised its option to purchase 1,386,011 shares at
$.18585 per share, adjusted to reflect fiscal 1994 net income. During
fiscal 1996, the Company exercised its option to purchase the remaining
1,386,011 shares at $.22282 per share, adjusted to reflect fiscal 1995
net income. The Company acquired from other stockholders 529,288 shares
of its common stock at approximately $.20 per share during fiscal 1997
and 338,357 shares of its common stock at $.183 to $.20 per share during
fiscal 1996. During fiscal 1997, the Company issued 529,288 shares from
treasury to its officers for cash proceeds of $45,000 and $58,958 in
consideration of accrued bonuses owed its officers. During fiscal 1996,
the Company issued 338,357 shares from treasury to its officers at cost
for $66,660 cash.
On November 30, 1996, the board of directors of the Company granted
options to officers of CPS to purchase up to 600,000 treasury shares at
$.22282 per share through December 31, 1998. On November 30, 1995, the
board of directors of the Company granted options to officers of CPS to
purchase up to 600,000 treasury shares at $.18585 per share through
December 31, 1997. The options granted during fiscal 1996 and 1995 were
granted at an exercise price equal to the common stock's market price at
the date of grant. No options were exercised during fiscal 1997 and
1996 under the 1996 and 1995 option plans. As of November 30, 1997 and
1996, the Company has 1,200,000 options outstanding.
In addition, HIA has incentive and non-incentive stock option plans for
officers, directors and employees of HIA and its subsidiaries under
which options to purchase HIA's common stock are granted at no less than
100 percent of the market price of the stock at the date of the grant.
At November 30, 1997 and 1996, there were 684,250 shares reserved for
future grants. Under these plans, there were no options granted or
outstanding as of November 30, 1997 and 1996.
The following table summarizes information on stock option activity:
<TABLE>
Weighted
Average
Exercise
Number of Exercise Price Price Expiration
Shares Per share Per share Dates
<S> <C> <C> <C> <C>
Outstanding at
December 1,
1995 600,000 $0.18585 $0.18585 12/31/97
Granted 600,000 $0.22282 $0.22282 12/31/98
Expired - - - -
Outstanding at
November 30,
1996 1,200,000 $.18585-$.2282 $0.204 1997-1998
Granted - - - -
Expired - - - -
Outstanding
at
November 30,
1997 1,200,000 $.18585-$.2282 $0.204 1997-1998
</TABLE>
FASB Statement 123, "Accounting for Stock-Based Compensation" ("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 used for grants in 1997 and 1996,
respectively: dividend yield of 0 percent for all years; no expected
volatility; risk-free interest rates of 6.21 and 5.4 percent; and
expected lives of two years for the stock options.
Under the accounting provisions for SFAS No. 123, the Company's net
income and net income per common share would have been decreased by the
pro forma amounts indicated below:
<TABLE>
Years Ended November 30, 1997 1996
<S> <C> <C>
Net income:
As reported $ 417,562 $ 537,669
Pro forma $ 403,488 $ 521,665
Net income per common share:
As reported $ .04 $ .05
Pro forma $ .04 $ .05
</TABLE>
The following information summarizes stock options outstanding at
November 30, 1997.
Outstanding Exercisable
Weighted Average
Remaining Weighted
Number Contractual Exercise Number Average
Exercise Prices Outstanding Life in years Price Exercisable Exercise
$.18585 600,000 Less than 1 $.18585 600,000 $.18585
$.22282 600,000 Less than 2 $.22282 600,000 $.22282
- -----------------------------------------------------------------------
$.18585-$.22282 1,200,0000 Less than 2 $ .204 600,000 $ .204
5. Profit Sharing Plan
HIA, Inc. maintains a noncontributory profit sharing plan (the "Plan")
for the benefit of all full-time employees of CPS and CPS' wholly-owned
subsidiary, Water Systems, Inc., who are at least 18 years of age.
Interests vest ratably after two years and are fully vested after seven
years. The Plan is funded by the Company's contribution determined
annually by the Board of Directors.
Contributions to the Plan amounted to $63,500 and $95,000 for the years
ended November 30, 1997 and 1996.
6. Supplemental Disclosures of Cash Flow Information 1997 1996
Cash paid during the year for:
Interest $ 154,876 $ 117,526
Income taxes $ 255,206 $ 237,988
Excluded from the statement of cash flows for the years ended November
30, 1997 and 1996 were the effects of certain noncash investing and
financing activities as follows:
1997 1996
Purchase of equipment with
third party financing $ 306,068 $ -
Payment of officers' bonuses
through issuance of
treasury stock $ 58,958 $ -
7. Subsequent Event
On December 31, 1997, the officers of the Company exercised a total of
450,000 shares of the November 30, 1995 options at an exercise price of
$.18585 per share. Concurrently, the remaining 150,000 of the November
30, 1995 options expired (see Note 4).
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no disagreements between the Company and its independent
accountants on any matter of accounting principles or practices or
financial statement disclosure since the Company's inception.
PART III
Item 9. Directors and Executive Officers of the Company
(a) Identification of Directors
The list presented below sets forth the names and ages of all directors
of the Company indicating all positions and offices with the Company
held by each such person and his term of office as director and the
period during which he has served as such.
Name Age Positions Director Since
Carl J. Bentley 64 Chairman of the Board 1994
and Director
Alan C. Bergold 49 President, Treasurer 1981
and Director
Donald Champlin 46 Executive Vice President, 1994
Secretary and Director
(b) Identification of Executive Officers
The list presented below sets forth the names and ages of all executive
officers of the Company indicating all positions and offices held by
such person and the period during which he has served as such.
Name Age Positions Year First Elected (1)
Carl J. Bentley 64 Chairman of the Board 1996
and Director 1994
Alan C. Bergold 49 President, Treasurer 1996
and Director 1981
Donald L. Champlin 46 Executive Vice President, 1996
Secretary
and Director 1994
(1) All officers serve at the discretion of the Board of Directors.
(c) Business Experience
The material presented below sets forth a brief account of the business
experience during at least the past five years of each director,
executive officer and significant employee.
Carl J. Bentley, age 64, was appointed Chairman of the Board in October
1996. He joined the Company as General Manager of CPS in July 1985. In
November 1986, he became President and a member of the Board of
Directors of CPS. He was appointed to the Company's Board of Directors
in 1994.
Alan C. Bergold was appointed President in October 1996 and Executive
Vice President of the Company in July 1983. He served as Vice President
and Secretary of the Company from 1981 to 1983. Mr. Bergold, who is 49
years old, has been a director of the Company since 1981. In addition,
Mr. Bergold is a Colorado Real Estate Broker and a Certified Public
Accountant.
Donald Champlin, age 46, was appointed Executive Vice President in
October 1996. He joined the Company as Pump Product Manager in October
1983. In February 1989, he became Vice President of Marketing and a
member of the Board of Directors of CPS. He was appointed to the
Company's Board of Directors in 1994.
(d) Involvement in Certain Legal Proceedings
None.
(e) Promoters and Control Persons
Not applicable.
Item 10. Executive Compensation
Summary Compensation Table
The following table reflects cash and non-cash compensation paid or
accrued by the Company during the fiscal years ended November 30, 1997,
1996 and 1995 to or for the account of the chief executive officer and
each executive officer whose cash compensation exceeded $100,000, and
all executives of the Company as a group:
<TABLE>
Annual Compensation Name and
Principal Position Year Ended Nov. 30 Salary Bonus Other
Annual
Compensation
<S> <C> <C> <C> <C>
Carl J. Bentley 1997 $ 132,750 $ 61,000 -
Chairman of the 1996 122,541 91,316 -
Board 1995 113,550 76,521 -
Alan C. Bergold 1997 $ 130,250 $ 61,000 -
President 1996 120,042 91,316 -
1995 111,050 76,521 -
Donald Champlin 1997 $ 127,750 $ 61,000 -
Executive Vice- 1996 117,546 91,316 -
President 1995 108,550 76,521 -
</TABLE>
Long-term Compensation
<TABLE>
Restricted Stock Options LTIP All Other
Award SARs Payouts Compensation
<S> <C> <C> <C> <C>
Carl J. Bentley -
Chairman of the - 200,000 (1) - -
Board - 200,000 (2) - -
Alan C. Bergold -
President - 200,000 (1) - -
- 200,000 (2) - -
Donald Champlin -
Executive Vice- - 200,000 (1) - -
President - 200,000 (2) - -
(1) Options to purchase shares of common stock at $.222822 each
expiring December 31, 1998.
(2) Options to purchase shares of common stock at $.18585 each expiring
December 31, 1997.
The preceding table does not include any amounts for non-cash
compensation, including personal benefits, paid to the above-listed
officers. The Company believes that the value of such non-cash benefits
and compensation paid during the periods presented did not exceed the
lessor of $50,000 or 10% of the cash compensation reported.
The Company has employment agreements as follows:
Carl J. Bentley (1): $134,500 annual salary per year, adjusted for cost
of living plus five percent per annum base increase; plus seven and one-
half percent bonus of net pretax income exclusive of parent company
expenses and profit-sharing contribution; term of six years beginning
February 1, 1994.
Alan C. Bergold (1): $132,000 annual salary per year, adjusted for cost
of living plus five percent per annum base increase; plus seven and one-
half percent bonus of net pretax income exclusive of parent company
expenses and profit-sharing contribution; term of six years beginning
February 1, 1994.
Donald Champlin (1): $129,500 annual salary per year, adjusted for cost
of living plus five percent per annum base increase; plus seven and one-
half percent bonus of net pretax income exclusive of parent company
expenses and profit-sharing contribution; term of six years beginning
February 1, 1994.
(1) There is a provision for payment of one year's compensation as a
result of the sale of all or substantially all of the Company's assets.
(b) Option/SAR Grants in Last Fiscal Year
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options Employees Exercise
SARs in Fiscal or Base Expiration
Name Granted Year Price/($ Share) Date
None
(c) Aggregated Option/SAR Exercise and Fiscal Year-End Option/SAR Value
Table
</TABLE>
<TABLE>
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/
Shares Options/SARs SARs at
Acquired Value at FY-end FY-end
Name on Exercise Realized (all exercisable)(all exercisable)
<S> <C> <C> <C> <C>
Alan C. Bergold 0 $ 0 400,000 $ 81,734
Carl J. Bentley 0 0 400,000 81,734
Donald Champlin 0 0 400,000 81,734
</TABLE>
Refer to Note 4 to the Consolidated Financial Statements for description
of Stock Option Plan.
Item 11.Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
The following table shows, as of November 30, 1997, the beneficial
ownership of Common Stock by each person known by the Company to own
beneficially more than 5 percent of the outstanding shares of its Common
Stock. The Company has no other class of voting securities.
Common Stock
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Carl J. Bentley 1,753,392 (1) 17.0%
4275 Forest Street
Denver, CO 80216
Alan C. Bergold 2,040,884 (1) 19.8%
4275 Forest Street
Denver, CO 80216
Don Champlin 1,678,035 (1) 16.3%
4275 Forest Street
Denver, CO 80216
(1) Includes 400,000 shares which may be acquired pursuant to the
exercise of stock options exercisable within 2 years.
(b) Security Ownership of Management
The following table shows, as of November 30, 1997, the equity
securities beneficially owned by all directors of the Company and all
directors and officers of the Company as a group.
(1) Directors
Common Stock
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Carl J. Bentley 1,753,392 (1) 17.0%
4275 Forest Street
Denver, CO 80216
Alan C. Bergold 2,040,884 (1) 19.8%
4275 Forest Street
Denver, CO 80216
Don Champlin 1,678,035 (1) 16.3%
4275 Forest Street
Denver, CO 80216
(1) Includes 400,000 shares which may be acquired pursuant to the
exercise of stock options exercisable within 2 years.
(2) Directors and Officers as a Group
Amount and Nature of Percent
Title of Class Beneficial Ownership of Class
Common Stock 5,472,311 53.1%
(par value $.01)
(c) Changes in Control
None.
Item 12. Certain Relationships and Related Transactions
(a) Transactions With Management and Others
On November 30, 1996, the Board of Directors granted an option to each
of the three executive officers of CPS to purchase up to 200,000 shares
at $.22282 per share by December 31, 1998. The options' exercise price
was equal to the common stock's market price at the date of grant.
On November 30, 1995, the Board of Directors granted an option to each
of the three executive officers of CPS to purchase up to 200,000 shares
at $.18585 per share by December 31, 1997. The options' exercise price
was equal to the common stock's market price at the date of grant.
During March 1994, the Company entered into an agreement to purchase
1,386,011 of the common shares in the Company held by R. Thomas Dalbey,
then President, Director, and principal owner, at $.14 per share for a
total cost of $194,042. This amount was paid in cash. On November 30,
1995, the Company purchased an additional 1,386,011 shares at $.18585,
adjusted for fiscal 1994 net income, per share for a total of $257,590.
This amount was paid in cash. On October 31, 1996, the Company
purchased the remaining 1,386,011 shares at $.22282 per share for a
total cost of $308,333 from R. Thomas Dalbey. This amount was paid in
cash.
During fiscal 1997, the Company issued 529,288 shares from treasury to
its officers for cash proceeds of $45,000 and $58,958 in consideration
of accrued bonuses owed its officers. During fiscal 1996, the Company
issued 338,357 shares from treasury to its officers for cash proceeds of
$66,600.
(b) Certain Business Relationships
None.
(c) Indebtedness of Management
None.
(d) Transactions with Promoters
Not applicable.
PART IV
Item 13. Exhibits and Reports on Form 8-K
Exhibits
(a) The documents listed below have been filed as exhibits to this
report. As used in this exhibit list, "Form 10" means the Company's
Registration Statement on Form 10 filed with the Securities and Exchange
Commission in March 1981.
3.1 Articles of Incorporation (incorporated by reference to Exhibits
3.1 and 3.2 to Form 10).
3.2 By-laws (incorporated by reference to Exhibit 3.3 to the Form 10).
11 Statement Regarding Computation of Per Share Earnings.
21 Subsidiaries of the Company.
24 Power of Attorney
(b) No reports on Form 8-K were filed by the Company during the last
quarter of the period covered by this report.
HIA, Inc. and Subsidiaries
Exhibit 11--Statement Re: Computation of Earnings Per Share
Historical weighted average number of shares outstanding is summarized as
follows:
<TABLE>
Year Ended November 30, 1997
Days Weighted Average
Number of Outstanding Shares Outstanding
Shares in Fiscal 1997 11/30/97
<S> <C> <C> <C>
Common stock issued 13,107,896 365 13,107,896
Treasury stock
Outstanding (4,004,513) 20 (219,425)
Treasury stock
Outstanding (4,160,513) 3 (34,196)
Treasury stock
Outstanding (4,165,513) 4 (45,649)
Treasury stock
Outstanding (4,187,935) 3 (34,421)
Treasury stock
Outstanding (4,189,935) 11 (126,272)
Treasury stock
Outstanding (4,279,623) 9 (105,525)
Treasury stock
Outstanding (4,295,023) 34 (400,084)
Treasury stock
Outstanding (4,317,523) 7 (82,802)
Treasury stock
Outstanding (4,330,976) 14 (166,120)
Treasury stock
Outstanding (4,426,664) 6 (72,767)
Treasury stock
Outstanding (4,457,464) 34 (415,216)
Treasury stock
Outstanding (4,458,464) 7 (85,505)
Treasury stock
Outstanding (4,508,464) 63 (778,173)
Treasury stock
Outstanding (4,508,664) 115 (1,420,538)
Treasury stock
Outstanding (4,533,801) 18 (223,585)
Treasury stock
Outstanding (4,004,513) 20 (219,424)
Weighted average
common stock
outstanding 8,678,192
Assumed exercise
of stock options 1,200,000
Weighted average
number of common
shares outstanding 9,878,192
</TABLE>
<TABLE>
Year Ended November 30, 1996
Days Weighted Average
Number of Outstanding Shares Outstanding
Shares in Fiscal 1996 11/30/96
<S> <C> <C> <C>
Common stock
Issued 13,107,896 365 13,107,896
Treasury stock
Outstanding (2,618,502) 365 (2,618,502)
Treasury stock
Outstanding (1,386,011) 30 (113,919)
Weighted average
common stock
outstanding 10,375,475
Assumed exercise
of stock options 1,200,000
Weighted average
number of common
shares outstanding 11,575,475
</TABLE>
<TABLE>
Primary and Fully Diluted Earnings per Share
For the Year Ended November 30,
1997 1996
<S> <C> <C>
Income applicable to common stock $ 417,562 $ 537,669
Weighted average number of common
shares outstanding 9,878,192 11,575,475
Primary and Fully Diluted Earnings
Per Share $0.04 $0.05
</TABLE>
HIA, INC. AND SUBSIDIARIES
Exhibit 21
SUBSIDIARIES OF THE COMPANY
Name State of Incorporation
CPS Distributors, Inc. Colorado
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
HIA, INC.
By:
Alan C. Bergold, President,
Treasurer and Director
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant in the capacities and on the dates indicated.
Signature Title Date
Chairman of the Board
Carl J. Bentley and Director
President,
Alan C. Bergold Treasurer and Director
Executive Vice
Donald Champlin President, Secretary
and Director
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