**SECURITIES AND EXCHANGE COMMISSION**

** **

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

 

| **ý** |   | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|------------|--------|----------------------------------------------------------------------------------------------|
|       |   |                                                                                         |
|       |   | **For the quarterly period ended  December 31, 2002**                                        |
|       |   |                                                                                         |
| **o**      |   | **TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT**                         |

 

**Commission file no. 1-12888**

 

**SPORT-HALEY, INC.**

(Exact name of smallbusiness issuer as specified in its charter)

 

| **COLORADO**                                                      |   | **84-1111669**                         |
|-------------------------------------------------------------------|--------|----------------------------------------|
| (State of other  jurisdiction of   incorporation or organization) |   | (I.R.S. Employer   Identification No.) |
|                                                              |   |                                   |
| **4600 E. 48th Avenue, Denver,  Colorado  80216**            |
| (Address of principal  executive offices)                         |
|                                                              |   |                                   |
| **(303) 320-8800**                                                |
| (Issuer’s telephone  number including area code)             |

 

Indicate by check mark whether the registrant (1)filed all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days:   Yes ý   No  o

 

Indicate the number of shares outstanding in each ofthe issuer’s classes of common stock, as of the latest practicable date.

 
| **Class**                      |   | **Outstanding  at January 23, 2003** |
|--------------------------------|--------|--------------------------------------|
| **Common Stock, no par value** |   | **2,660,485**                        |

 

 

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**TABLE OF CONTENTS**

 
| **PART 1  – CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)** |          |
|-------------------------------------------------------------------|---------------|
|                                                              |          |   |   |
|                                                              | ITEM 1 – |  FINANCIAL  STATEMENTS |
|                                                              |          |   |   |
|                                                              |          |   | BALANCE SHEETS |
|                                                              |          |   |   |
|                                                              |          |   | STATEMENTS OF OPERATIONS |
|                                                              |          |   |   |
|                                                              |          |   | STATEMENTS OF CASH FLOWS |
|                                                              |          |   |   |
|                                                              |          |   | NOTES TO FINANCIAL  STATEMENTS |
|                                                              |          |   |   |
|                                                              | ITEM  2 -     | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|                                                              |          |
|                                                              |          |
|                                                              | ITEM 4 -      | CONTROLS AND PROCEDURES |
|                                                              |          |   |
| **PART  II - OTHER INFORMATION**                                  |
|                                                              |
| **SIGNATURES**                                                    |
|                                                              |
| **CERTIFICATIONS**                                                |
|                                                                   |               |  |  |  |  |

 

2

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**SPORT-HALEY, INC.**

**BALANCESHEETS**

 
|                                                                                                                            |   | **December  31,  2002** |       | **June 30,  2002** |   |
|---------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|------------|--------------------|--------|
|                                                                                                                            |   | **(Unaudited)**         |       | **(***)**          |   |
|                                                                                                                            |   |                    |       |               |   |
| **ASSETS**                                                                                                                      |   |                    |       |               |   |
| Current assets:                                                                                                                 |   |                    |       |               |   |
| Cash and cash  equivalents                                                                                                      |   | $                       | 5,703,000  |               | $      | 8,428,000 |   |
| Marketable  securities                                                                                                          |   | 3,267,000               |       | 1,099,000          |   |
| Accounts  receivable, net of allowances of $287,000 and $256,000, respectively                                                  |   | 3,264,000               |       | 4,135,000          |   |
| Inventories                                                                                                                     |   | 8,556,000               |       | 6,704,000          |   |
| Other current  assets                                                                                                           |   | 787,000                 |       | 702,000            |   |
| Taxes receivable                                                                                                                |   | 95,000                  |       | 1,071,000          |   |
| Deferred taxes                                                                                                                  |   | 353,000                 |       | 380,000            |   |
| Total current  assets                                                                                                           |   | 22,025,000              |       | 22,519,000         |   |
|                                                                                                                            |   |                    |       |               |   |
| Property and  equipment, net                                                                                                    |   | 839,000                 |       | 787,000            |   |
| Deferred taxes                                                                                                                  |   | 222,000                 |       | 197,000            |   |
| Other assets                                                                                                                    |   | 21,000                  |       | 22,000             |   |
|                                                                                                                            |   |                    |       |               |   |
| Total Assets                                                                                                                    |   | $                       | 23,107,000 |               | $      | 23,525,000 |   |
|                                                                                                                            |   |                    |       |               |   |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                                                  |   |                    |       |               |   |
|                                                                                                                            |   |                    |       |               |   |
| Current  liabilities:                                                                                                           |   |                    |       |               |   |
| Accounts payable                                                                                                                |   | $                       | 1,317,000  |               | $      | 1,129,000 |   |
| Accrued  commissions and other expenses                                                                                         |   | 426,000                 |       | 624,000            |   |
| Total current  liabilities                                                                                                      |   | 1,743,000               |       | 1,753,000          |   |
|                                                                                                                            |   |                    |       |               |   |
| Commitments and  Contingencies (Note 5)                                                                                         |   |                    |       |               |   |
|                                                                                                                            |   |                    |       |               |   |
| Shareholders’  equity:                                                                                                     |   |                    |       |               |   |
| Preferred stock,  no par value; 1,500,000 shares authorized; none issued and outstanding                                        |   | —                  |       | —             |   |
| Common stock, no  par value; 15,000,000 shares authorized; 2,660,485 and 2,730,985 shares  issued and outstanding, respectively |   | 10,674,000              |       | 10,919,000         |   |
| Additional  paid-in capital                                                                                                     |   | 1,309,000               |       | 1,309,000          |   |
| Retained  earnings                                                                                                              |   | 9,381,000               |       | 9,544,000          |   |
| Total  shareholders’ equity                                                                                                |   | 21,364,000              |       | 21,772,000         |   |
|                                                                                                                            |   |                    |       |               |   |
| Total  Liabilities and Shareholders’ Equity                                                                                |   | $                       | 23,107,000 |               | $      | 23,525,000 |   |

 

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***  Taken from the auditedbalance sheet at that date.

 

See accompanying notes tofinancial statements.

 

3

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**SPORT-HALEY, INC.**

**STATEMENTSOF OPERATIONS**

 
|                                                |   | **Three  Months Ended  December 31,** |      | **Six Months  Ended  December 31,** |   |
|-----------------------------------------------------|--------|---------------------------------------|-----------|-------------------------------------|--------|
|                                                |   | **2002**                              |      | **2001**                            |   | **2002** |   | **2001** |   |
|                                                |   | **(Unaudited)**                       |      | **(Unaudited)**                     |   | **(Unaudited)** |   | **(Unaudited)** |   |
|                                                |   |                                  |      |                                |   |   |   |   |   |
| Net sales                                           |   | $                                     | 4,041,000 |                                | $      | 3,569,000 |   | $ | 7,822,000 |   | $ | 7,544,000 |   |
|                                                |   |                                  |      |                                |   |   |   |   |   |
| Cost of goods  sold                                 |   | 2,483,000                             |      | 2,158,000                           |   | 4,786,000 |   | 4,888,000 |   |
|                                                |   |                                  |      |                                |   |   |   |   |   |
| Gross profit                                        |   | 1,558,000                             |      | 1,411,000                           |   | 3,036,000 |   | 2,656,000 |   |
|                                                |   |                                  |      |                                |   |   |   |   |   |
| Selling, general  and administrative expense        |   | 1,618,000                             |      | 1,655,000                           |   | 3,408,000 |   | 3,172,000 |   |
|                                                |   |                                  |      |                                |   |   |   |   |   |
| Loss from  operations                               |   | (60,000                               | )         | (244,000                            | )      | (372,000 | ) | (516,000 | ) |
|                                                |   |                                  |      |                                |   |   |   |   |   |
| Other income,  net                                  |   | 62,000                                |      | 116,000                             |   | 105,000 |   | 218,000 |   |
|                                                |   |                                  |      |                                |   |   |   |   |   |
| Income (loss)  before provision for income taxes    |   | 2,000                                 |      | (128,000                            | )      | (267,000 | ) | (298,000 | ) |
|                                                |   |                                  |      |                                |   |   |   |   |   |
| Benefit from income  taxes                          |   | 8,000                                 |      | 47,000                              |   | 104,000 |   | 74,000 |   |
|                                                |   |                                  |      |                                |   |   |   |   |   |
| Net income  (loss)                                  |   | $                                     | 10,000    |                                | $      | (81,000 | ) | $ | (163,000 | ) | $ | (224,000 | ) |
|                                                |   |                                  |      |                                |   |   |   |   |   |
| Basic and  diluted earnings (loss) per common share |   | $                                     | 0.00      |                                | $      | (0.03 | ) | $ | (0.06 | ) | $ | (0.07 | ) |

 

See accompanying notes tofinancial statements.

 

4

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**SPORT-HALEY, INC.**

**STATEMENTSOF CASH FLOWS**

 
|                                                                                                 |   | **Six Months  Ended  December 31,** |     |
|------------------------------------------------------------------------------------------------------|--------|-------------------------------------|----------|
|                                                                                                 |   | **2002**                            |     | **2001** |   |
|                                                                                                 |   | **(Unaudited)**                     |     | **(Unaudited)** |   |
|                                                                                                 |   |                                |     |   |   |
| **Cash flows from operating  activities:**                                                           |   |                                |     |   |   |
| Net income  (loss)                                                                                   |   | $                                   | (163,000 | ) | $ | (224,000 | ) |
|                                                                                                 |   |                                |     |   |   |
| Adjustments to  reconcile net income (loss) to net cash provided by (used in) operating  activities: |   |                                |     |   |   |
| Depreciation and  amortization                                                                       |   | 180,000                             |     | 274,000 |   |
| Deferred taxes  and other                                                                            |   | 2,000                               |     | (38,000 | ) |
| Allowance for  doubtful accounts                                                                     |   | 99,000                              |     | 72,000 |   |
| Gain on sale of  fixed assets                                                                        |   | (2,000                              | )        | — |   |
| Cash provided  (used) due to changes in assets and liabilities:                                      |   |                                |     |   |   |
| Accounts  receivable                                                                                 |   | 772,000                             |     | 2,031,000 |   |
| Inventories                                                                                          |   | (1,852,000                          | )        | 1,259,000 |   |
| Other assets                                                                                         |   | (69,000                             | )        | (85,000 | ) |
| Income taxes  receivable                                                                             |   | 976,000                             |     | 143,000 |   |
| Accounts payable                                                                                     |   | 188,000                             |     | (86,000 | ) |
| Accrued  commissions and other expenses                                                              |   | (198,000                            | )        | (124,000 | ) |
|                                                                                                 |   |                                |     |   |   |
| **Net cash provided by (used in) by  operating activities**                                          |   | (67,000                             | )        | 3,222,000 |   |
|                                                                                                 |   |                                |     |   |   |
| **Cash flows from investing  activities:**                                                           |   |                                |     |   |   |
| Redemption of  held-to-maturity investments                                                          |   | 150,000                             |     | 1,000,000 |   |
| Purchases of  held-to-maturity investments                                                           |   | (2,334,000                          | )        | (1,950,000 | ) |
| Sales of fixed  assets                                                                               |   | 2,000                               |     | 89,000 |   |
| Purchase of  fixed assets                                                                            |   | (231,000                            | )        | (27,000 | ) |
|                                                                                                 |   |                                |     |   |   |
| **Net cash used by investing  activities**                                                           |   | (2,413,000                          | )        | (888,000 | ) |
|                                                                                                      |        |                                     |          |  |  |  |  |

 

See accompanying notes tofinancial statements.

 

5

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|                                                      |   | **Six Months  Ended  December 31,** |      |
|-----------------------------------------------------------|--------|-------------------------------------|-----------|
|                                                      |   | **2002**                            |      | **2001** |   |
|                                                      |   | **(Unaudited)**                     |      | **(Unaudited)** |   |
|                                                      |   |                                |      |   |   |
| **Cash flows from financing  activities:**                |   |                                |      |   |   |
| Net proceeds  from issuance of common stock               |   | $                                   | —    |   | $ | — |   |
| Repurchase of  common stock                               |   | (245,000                            | )         | (1,201,000 | ) |
|                                                      |   |                                |      |   |   |
| **Net cash used by financing  activities**                |   | (245,000                            | )         | (1,201,000 | ) |
|                                                      |   |                                |      |   |   |
| **Net increase (decrease) in cash and  cash equivalents** |   | (2,725,000                          | )         | 1,133,000 |   |
|                                                      |   |                                |      |   |   |
| **Cash and cash equivalents,  beginning**                 |   | 8,428,000                           |      | 4,413,000 |   |
|                                                      |   |                                |      |   |   |
| **Cash and cash equivalents, ending**                     |   | $                                   | 5,703,000 |   | $ | 5,546,000 |   |
|                                                      |   |                                |      |   |   |
| **Supplemental disclosure of cash  flow information:**    |   |                                |      |   |   |
|                                                      |   |                                |      |   |   |
| Cash paid during  the period for:                         |   |                                |      |   |   |
| Income taxes                                              |   | $                                   | —    |   | $ | 145,000 |   |
|                                                      |   |                                |      |   |   |
| Interest                                                  |   | $                                   | 9,000     |   | $ | 29,000 |   |
|                                                      |   |                                |      |   |   |
| Cash received  during the period for:                     |   |                                |      |   |   |
| Income taxes                                              |   | $                                   | 1,066,000 |   | $ | 323,000 |   |

 

See accompanying notes tofinancial statements.

 

6

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**SPORT-HALEY, INC.**

**NOTESTO FINANCIAL STATEMENTS**

 

**NOTE1****                CONDENSEDFINANCIAL STATEMENTS**

 

The financial statements included herein have beenprepared by Sport-Haley, Inc. (the “Company”) without audit, pursuant to therules and regulations of the Securities and Exchange Commission. Certaininformation and footnote disclosures normally included in financial statementsprepared in accordance with generally accepted accounting principles in theUnited States of America have been condensed or omitted as allowed by suchrules and regulations. The Company believes that the disclosures are adequateto make the information presented not misleading. These financial statementsshould be read in conjunction with the Company’s annual audited consolidatedfinancial statements dated June 30, 2002, included in the Company’s annualreport on Form 10-K as filed with the Securities and Exchange Commission. Theresults for interim periods are not necessarily indicative of results that maybe expected for any other interim period or for the full year.

 

The management of the Company believes that theaccompanying unaudited condensed financial statements prepared in conformitywith generally accepted accounting principles in the United States of America,which require the use of management estimates, contain all adjustments(including normal recurring adjustments) necessary to present fairly the operationsand cash flows for the periods presented.

 

The consolidated quarterly unaudited and annualaudited financial statements for the fiscal year ended June 30, 2002 includedthe accounts of Sport-Haley, Inc. and its former wholly-owned subsidiary,B&L Sportswear, Inc. (the “Subsidiary”). All significant inter-companyaccounts and transactions were eliminated from those consolidated financialstatements. The Subsidiary ceased business operations in August 2001 and wasliquidated in May 2002.

 

**NOTE2****                 INVENTORIES**

 
|                                    |   | **December  31,  2002** |      | **June 30,  2002** |   |
|-----------------------------------------|--------|-------------------------|-----------|--------------------|--------|
| Inventories consisted of the following: |   |                    |      |               |   |
| Component                               |   | $                       | 560,000   |               | $      | 455,000 |   |
| Finished goods                          |   | 7,996,000               |      | 6,249,000          |   |
|                                    |   |                    |      |               |   |
|                                    |   | $                       | 8,556,000 |               | $      | 6,704,000 |   |

 

7

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**NOTE3****                 REPURCHASE OFCOMMON STOCK**

 

In October 2002, the Company repurchased 70,500 sharesof its common stock at a cumulative cost of approximately $245,000.

 

As of December 31, 2002, theCompany’s Board of Directors had authorized the repurchase of up to 2,520,000shares of the Company’s issued and outstanding common stock. From theinception of the repurchase plan in December 1994 through December 31, 2002,the Company had repurchased a total of 2,296,900 shares of its common stock ata cumulative cost of approximately $12,682,000.

 

On February 6, 2003, the Company’s Board of Directorsapproved an increase of 300,000 shares in the number of shares authorized forrepurchase. As of February 6, 2003, the net number of shares authorized forrepurchase totaled 523,100.

 

The Company may repurchaseshares from time to time in compliance with applicable Securities and ExchangeCommission regulations in open market transactions at prevailing market prices.The Company has no commitment to repurchase all or any portion of the sharesauthorized for repurchase. All shares repurchased by the Company are requiredto be canceled and returned to the status of authorized but unissued commonstock.

 

**NOTE4****                 COMMON STOCKOPTIONS**

 

As of December 31, 2002, the remaining number ofshares of common stock available for award grants (including incentive stockoptions) under the Company’s common stock option plan was 401,180.

 

At December 31, 2002, there were outstanding optionsto purchase 886,457 shares of the Company’s common stock at prices ranging from$2.50 to $9.78, with expiration dates between May 2003 and February 2012.

 

On January 20, 2003, the Compensation Committee of theboard of directors approved the granting to certain officers and directors theoptions to purchase 400,000 shares of the Company’s common stock at exerciseprices of $2.71 per share, pursuant to the Company’s stock option plan, whichexpires by its terms on February 28, 2003. The options expire ten years afterthe date of issuance.

 

**NOTE5****                 COMMITMENTS ANDCONTINGENCIES**

 

At December 31, 2002, the Company had approximately$2,366,000 in outstanding letters of credit that were issued to foreignsuppliers in accordance with finished goods inventory purchase commitments.

 

8

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**NOTE6****                 EARNINGS PERSHARE**

 

The Company adopted the provisions of Statement ofFinancial Accounting Standards No. 128 (SFAS No. 128), *Earnings per Share,*effective with the year ended June 30, 1998. SFAS No. 128 requires thepresentation of basic and diluted earnings (loss) per common share. Thefollowing table provides a reconciliation of the numerator and denominator ofbasic and diluted earnings (loss) per common share:

 
|                                   |   | **Three  Months ended December 31, 2002** |     |
|----------------------------------------|--------|-------------------------------------------|----------|
|                                   |   | **Net  Income  (Loss)**                   |     | **Weighted  Average Shares** |   | **Per Share** |   |
| Earnings Per Common Share              |   |                                      |     |   |   |   |   |
|                                   |   |                                      |     |   |   |   |   |
| Basic earnings  per share              |   | $                                         | 10,000   |   | 2,665,474 |   | $ | 0.00 |   |
|                                   |   |                                      |     |   |   |   |   |
| Effect of  dilutive securities options |   | —                                    |     | 43,369 |   | — |   |
|                                   |   |                                      |     |   |   |   |   |
| Diluted earnings  per share            |   | $                                         | 10,000   |   | 2,708,843 |   | $ | 0.00 |   |
|                                   |   |                                      |     |   |   |   |   |
|                                   |   |                                      |     |   |   |   |   |
|                                   |   | **Six Months  ended December 31, 2002**   |     |
|                                   |   | **Net  Income  (Loss)**                   |     | **Weighted  Average Shares** |   | **Per Share** |   |
| Loss Per Common  Share                 |   |                                      |     |   |   |   |   |
|                                   |   |                                      |     |   |   |   |   |
| Basic loss per  share                  |   | $                                         | (163,000 | ) | 2,698,586 |   | $ | (0.06 | ) |
|                                   |   |                                      |     |   |   |   |   |
| Effect of  dilutive securities options |   | —                                    |     | — |   | — |   |
|                                   |   |                                      |     |   |   |   |   |
| Diluted loss per  share                |   | $                                         | (163,000 | ) | 2,698,586 |   | $ | (0.06 | ) |

 

9

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|                                   |   | **Three  Months ended December 31, 2001** |     |
|----------------------------------------|--------|-------------------------------------------|----------|
|                                   |   | **Net  Income  (Loss)**                   |     | **Weighted  Average Shares** |   | **Per Share** |   |
| Loss Per Common Share                  |   |                                      |     |   |   |   |   |
|                                   |   |                                      |     |   |   |   |   |
| Basic loss per  share                  |   | $                                         | (81,000  | ) | 2,973,357 |   | $ | (0.03 | ) |
|                                   |   |                                      |     |   |   |   |   |
| Effect of  dilutive securities options |   | —                                    |     | — |   | — |   |
|                                   |   |                                      |     |   |   |   |   |
| Diluted loss per  share                |   | $                                         | (81,000  | ) | 2,973,357 |   | $ | (0.03 | ) |
|                                   |   |                                      |     |   |   |   |   |
|                                   |   | **Six Months  ended December 31, 2001**   |     |
|                                   |   | **Net  Income  (Loss)**                   |     | **Weighted  Average Shares** |   | **Per Share** |   |
| Loss Per Common  Share                 |   |                                      |     |   |   |   |   |
|                                   |   |                                      |     |   |   |   |   |
| Basic loss per  share                  |   | $                                         | (224,000 | ) | 3,123,171 |   | $ | (0.07 | ) |
|                                   |   |                                      |     |   |   |   |   |
| Effect of  dilutive securities options |   | —                                    |     | — |   | — |   |
|                                   |   |                                      |     |   |   |   |   |
| Diluted loss per  share                |   | $                                         | (224,000 | ) | 3,123,171 |   | $ | (0.07 | ) |
|                                        |        |                                           |          |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

10

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**SPORT-HALEY, INC.**

**ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF**

**FINANCIAL CONDITION AND RESULTS OFOPERATIONS**

 

This Report on Form 10-Qcontains certain forward-looking statements. When used in this report, thewords “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,”“intend,” “believe” and similar expressions are intended to identify forward-lookingstatements within the meaning of Section 27A of the Securities Act of 1933 andSection 21E of the Securities Exchange Act of 1934 regarding events, conditionsand financial trends including, without limitation, business conditions andgrowth in the fashion golf apparel market and the general economy, competitivefactors, and price pressures in the high-end golf-apparel market; generaleconomic conditions resulting from threats or acts of war or terrorism; risksassociated with an increasing percentage of sales relating to licensed apparel,such as the Ben Hogan® collections; inventory risks due to shifts in marketand/or price erosion of purchased apparel, raw fabric and trim; cost controls;changes in product mix; loss or reduced manufacturing capacity of significantsuppliers; loss or delay of shipments of finished goods from foreign suppliers;and other risks or uncertainties detailed in other Securities and ExchangeCommission (“SEC”) filings made by Sport-Haley. Such statements are based onmanagement’s current expectations and are subject to risks, uncertainties andassumptions. Should one or more of these risks or uncertainties materialize, orshould underlying assumptions prove incorrect, the actual plan of operations,business strategy, operating results and financial position of Sport-Haleycould differ materially from those expressed in, or implied by, suchforward-looking statements.

 

##### **CRITICAL ACCOUNTING POLICIES AND ESTIMATES**

 

The Company’s condensedfinancial statements have been prepared in accordance with accountingprinciples generally accepted in the United States of America, which requirethe Company to make estimates and judgments that affect the reported amounts ofassets, liabilities, revenues and expenses, and the related disclosures. Asummary of those significant accounting policies can be found in the Company’sNotes to the Consolidated Financial Statements included in its Report on 10-Kfor the year ended June 30, 2002, which was filed with the SEC on September 27,2002. The estimates used by managementare based upon the Company’s historical experiences combined with management’sunderstanding of current facts and circumstances. Certain of the Company’saccounting policies are considered critical as they are both important to theportrayal of the Company’s financial condition and the results of itsoperations and require significant or complex judgments on the part ofmanagement. Management believes that the following represent the criticalaccounting policies of the Company as described in Financial Reporting ReleaseNo. 60, “Cautionary Advice Regarding Disclosure About Critical AccountingPolicies,” which was issued by the Securities and Exchange Commission:inventories; deferred income taxes; allowance for doubtful accounts; and,allowance for sales returns.

 

Thevaluation of inventories involves complex judgments on the part of management.Excess finished goods inventories are a natural component of a seasonal apparelbusiness. Management continually evaluates and balances the levels of currentseasons’ inventories to meet market demands based upon sales projections,current bookings for future delivery and at-once business. While certainfinished goods items will sell out in any particular selling season, quantitiesof other finished goods items will remain at the end of each selling season.The Company markets previous seasons’ finished goods inventories at reducedwholesale prices. However, economic conditions and other factors may depresssales prices for previous seasons’ finished goods inventories to less thanhistorical costs.

 

11

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TheCompany’s management has significantly improved controls with respect to theamount of finished goods inventories that are anticipated to remain at the endof each selling season. While management believes that the Company’s processesproduce a fair valuation of inventories, detrimental changes in generaleconomic conditions or in the golf apparel industry could materially affectvaluation of the Company’s inventories.

 

Deferred income taxes arerecognized for the expected tax consequences in future years for differencesbetween the tax bases of assets and liabilities and their financial reportingamounts, based upon enacted tax laws and statutory tax rates applicable to theperiods in which the differences are expected to affect taxable income. TheCompany’s significant deferred tax assets are related to net operating losscarryforwards for state income tax purposes, a change in accounting methods forfederal income tax purposes, stock options compensation and an unrealized lossfor tax purposes on a common stock investment. The Company has established avaluation allowance to reduce deferred tax assets to the net amount expected tobe recovered in future periods. The estimates for deferred tax assets and thecorresponding valuation allowance require management to exercise complexjudgments. Management periodically reviews and adjusts those estimates basedupon the most current information available. However, because therecoverability of deferred tax assets is directly dependent upon the futureoperating results of the Company, actual recoverability of deferred tax assetsmay differ materially from management’s estimates.

 

The Company’s allowance fordoubtful accounts reflects a reserve that reduces customer accounts receivableto the net amount estimated to be collectible. Estimating the credit worthinessof customers and the recoverability of customer accounts requires management toexercise considerable judgment. In estimating uncollectible amounts, managementconsiders factors such as general economic and industry-specific conditions,historical customer performance and anticipated customer performance. Whilemanagement considers the Company’s processes to be adequate to effectivelyquantify its exposure to doubtful accounts, changes in economic, industry orspecific customer conditions may require the Company to adjust its allowancefor doubtful accounts.

 

The Company records itsallowance for sales returns as a net adjustment to customer accountsreceivable. When recording an allowance, the net method reduces customeraccounts receivable and net sales by the estimated gross margin effect of theanticipated sales return. Generally, the Company’s selling terms precludereturn of its products subsequent to the sale. However, the Company hastraditionally maintained limited programs that offer some customers the rightto return certain finished goods items under predefined conditions. Managementreviews historical data and considers factors such as general economic andindustry-specific conditions and anticipated customer performance whenevaluating the Company’s allowance for sales returns. Significant changes ingeneral economic or industry conditions may require the Company to adjust itsallowance for sales returns.

 

12

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### **FINANCIALCONDITION**

 

The Company intends to rely on cash generated from operations andavailable cash on hand to finance its working capital requirements for at leastthe next 12 months. To the extent such amounts are insufficient to finance theCompany’s working capital requirements, the Company may also make periodicborrowings under its revolving line of credit. Working capital at December 31,2002 was approximately $20,282,000 and $20,766,000 at June 30, 2002.

 

Cash and cash equivalents plus marketable securities decreased sinceJune 30, 2002 by approximately $557,000, to $8,970,000 from $9,527,000. Netaccounts receivable decreased by approximately $871,000 to $3,264,000 atDecember 31, 2002 from $4,135,000 at June 30, 2002. Because the Company’s netsales for its second fiscal quarter (December 31) are normally less than netsales for its fourth fiscal quarter (June 30), the Company’s net accountsreceivable are historically lower at December 31 when compared with theprevious June 30 balance. Due to a combination of several factors, during thesix months ended December 31, 2002, the Company’s operating activities usedcash of approximately $67,000.

 

Since June 30, 2002, inventories increased by approximately $1,852,000to $8,556,000 at December 31, 2002 from $6,704,000 at June 30, 2002. Asignificant portion of the increase in inventories was attributable to pendingdeliveries of ocean shipments of finished goods from foreign suppliers. Pendingocean deliveries of finished goods were approximately $1,060,000 at December31, 2002 and $399,000 at June 30, 2002. The Company’s foreign suppliersgenerally deliver finished goods with shipping terms of free on board at theshipping location. Therefore, the Company’s reliance on foreign supplierssustains the risk that the Company’s revenues could be adversely affected if aforeign shipment or shipments were received late or lost. One of the Company’ssignificant suppliers is located in South Korea. The current political unrestin the Koreas poses a risk that shipments from this supplier could be lost ordelayed. The Company maintains insurance for risk of loss relating to goodsshipped from its foreign and domestic suppliers. However, the Company’ssignificant reliance on foreign suppliers sustains the risk that the Companymay be left with inadequate or unsatisfactory recourse should the goodsreceived from the foreign suppliers be nonconforming or should the foreignsupplier fail to deliver finished goods due to a political conflict or otherunforeseen circumstances. Also included in the increase in inventories was anincrease in Ben Hogan® finished goods inventories necessary to support the increasingsales of Ben Hogan® apparel collections. Ben Hogan® finished goods inventoriestotaled approximately $1,312,000 at December 31, 2002 and $728,000 at June 30,2002.

 

Taxes receivable decreased by approximately $976,000 since June 30,2002 to $95,000 from $1,071,000. The decrease includes approximately $1,066,000in federal income tax refunds received during the six months ended December 31,2002.

 

For the six months ended December 31, 2002, the Company expendedapproximately $231,000 for the purchase of property and equipment, andapproximately $180,000 in depreciation and amortization was charged to currentoperations. In December 2002, the Company expended approximately $158,000 fornew information systems software that management expects to be fullyoperational as of July 1, 2003. During the six-month period, investingactivities used cash of approximately $2,413,000, primarily due to thepurchases and redemptions of held-to-maturity federally insured marketablesecurities.

 

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Accounts payable and accrued expenses decreased by approximately$10,000 since June 30, 2002, to $1,743,000 from $1,753,000. The decrease wascomprised of an increase in trade accounts payable and decreases in accruedsales commissions and other expenses payable.

 

Total shareholders’ equity decreased by approximately $408,000 for thesix-month period. The decrease was attributable to repurchases of common stockcombined with the loss for the same period. Book value per share at December31, 2002 was approximately $8.03 per share, an increase of $0.06 per share ascompared with $7.97 at June 30, 2002.

 

**RESULTSOF OPERATIONS**

 

The Company’s business is seasonal in nature, with disproportionatelyhigher sales occurring from January through June, which are the Company’s thirdand fourth quarters of each fiscal year.

 

Net sales for the fiscal quarter and six months ended December 31,2002, were approximately $4,041,000 and $7,822,000, respectively, increases ofapproximately $472,000 or 13%, and $278,000 or 4%, from net sales ofapproximately $3,569,000 and $7,544,000 for the same periods in the priorfiscal year. Management attributes the increases in net sales to the successfulintroduction of Ben Hogan® apparel collections into upscale golf apparelmarkets. Net sales of Ben Hogan® apparel were approximately $1,446,000 and $0for the six months ended December 31, 2002 and 2001, respectively. Thepercentage of net sales relating to Ben Hogan® apparel is indicative of theCompany’s efforts to increase revenues in accordance with the Spalding SportsWorldwide licensing agreement for such apparel. The increasing relativepercentage of sales relating to licensed apparel sustains a risk of loss,should the licensing agreement be terminated by either party. The sluggish USAeconomy continued to negatively impact the travel and leisure markets withinwhich the Company operates. The soft economic conditions had already negativelyimpacted the Company’s sales for its first fiscal quarter, and the Company’ssales for its second fiscal quarter were similarly negatively affected by thecontinued sluggish economy. The Company continues to concentrate its efforts onincreasing sales and creating new markets for both its HALEY® and Ben Hogan®products. In an effort to bolster sales, management recently reduced theCompany’s sales prices for certain finished apparel items to pass along tocustomers the Company’s reduced costs associated with duty-free imports offinished apparel from foreign suppliers located in Peru. Based upon bookings asof December 31, 2002 for shipments after that date, management expects theCompany’s overall sales trend to continue to improve within the current fiscalyear ending June 30, 2003.

 

The Company’s gross profit, as a percentage of net sales, wasapproximately 39% and 39% for the quarter and six months ended December 31,2002, respectively, and 40% and 35% for the same periods in the prior fiscalyear. The gross profit percentages are reflective of management’s successful effortsto source its finished apparel at competitive prices from foreign suppliers andto minimize closeout inventories that must be sold at reduced prices.

 

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Selling, general and administrative expenses for the quarter endedDecember 31, 2002 decreased by approximately $37,000, or 2%, to $1,618,000 from$1,655,000 for the same three-month period in the prior fiscal year. Thedecrease was primarily attributable to management’s continued efforts to controloperating costs. Selling, general and administrative expenses for the sixmonths ended December 31, 2002 increased by approximately $236,000, or 7%, to$3,408,000 from $3,172,000 for the same six-month period in the prior fiscalyear. The increase was primarily attributable to selling, general andadministrative expenses with respect to Ben Hogan® apparel. The Company iscontinually refining its business operations in an effort to operate asefficiently as possible in an ever increasingly difficult economic climate.Selling, general and administrative expenditures were approximately 40% and 44%of net sales for the quarter and six months ended December 31, 2002, ascompared with 46% and 42% for the same periods in the prior fiscal year.

 

Other income, net, decreased by approximately $54,000 and $113,000, or47% and 52%, respectively, to $62,000 and $105,000 for the quarter and sixmonths ended December 31, 2002, from $116,000 and $218,000 for the same periodsin the prior fiscal year. The decreases were primarily attributable todifferences between the periods in the respective rates of interest earned oncash, cash equivalents and federally insured marketable securities.

 

Income (loss) before provision for income taxes increased byapproximately $130,000, or 102%, to $10,000 for the fiscal quarter endedDecember 31, 2002, from ($128,000) for the same quarter in the prior fiscalyear. Income (loss) before provision for income taxes improved by approximately$31,000, or 10%, to ($267,000) for the six months ended December 31, 2002, from($298,000) for the same period in the prior fiscal year.

 

The Company’s effective tax rates for the six months ended December 31,2002 and 2001 were 39% and 25%, respectively. The effective tax rate in anyfiscal period can vary significantly from the effective tax rate in anotherperiod due to differences between the recognition of certain transactions forfinancial versus tax purposes. Certain deductions recognized for tax purposesmay not be expensed for financial statement purposes, and certain expensesrecorded for financial statement purposes may not be deductible for taxpurposes.

 

Net income for the fiscal quarter ended December 31, 2002 wasapproximately $10,000, an increase of $91,000, or 112%, when compared with theloss of ($81,000) for the same three-month period in the prior fiscal year. Theloss for the six months ended December 31, 2002 was approximately ($163,000),an improvement of $61,000, or 27%, when compared with the loss of ($224,000)for the same six-month period in the prior fiscal year. The differences wereprimarily due the comparative increases in net sales.

 

Both the basic and diluted earnings (loss) per share were ($0.00) and($0.06) for the fiscal quarter and six months ended December 31, 2002,respectively. Both the basic and diluted earnings (loss) per share were ($0.03)and ($0.07) for the same periods in prior fiscal year.

 

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**SPORT-HALEY, INC.**

**ITEM4  CONTOLS AND PROCEDURES**

 

**(a) Evaluation of Disclosure Controls and Procedures**

 

The management ofthe Company, including the Chief Executive Officer and the Chief FinancialOfficer, have conducted an evaluation of the effectiveness of the Company’sdisclosure controls and procedures pursuant to Rule 13a-14 under the SecuritiesExchange Act of 1934 as of a date (the “Evaluation Date”) within 90 days priorto the filing date of this report. Based on that evaluation, the ChiefExecutive Officer and the Chief Financial Officer concluded that, as of theEvaluation Date, the Company’s disclosure controls and procedures wereeffective in ensuring that all material information relating to the Companyrequired to be filed in this quarterly report has been made known to them in atimely manner.

 

**(b) Changes in Internal Controls**

 

There have been nosignificant changes made in the Company’s internal controls or in other factorsthat could significantly affect internal controls subsequent to the EvaluationDate.

 

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**SPORT-HALEY, INC.**

**PARTII**

**OTHER INFORMATION**

 

### **ITEM1      LEGAL PROCEEDINGS**

 

As previously reported, a former shareholder commenced a putative classaction lawsuit against Sport-Haley and three of its officers and directors (the“Defendants”). The action, which seeks unspecified damages, alleges that theDefendants violated Section 10(b) of the Securities Exchange Act of 1934 (the“Exchange Act”), and Rule 10b-5 promulgated thereunder, by knowinglyoverstating Sport-Haley’s financial results, thereby causing Sport-Haley’sstock price to be artificially inflated. The complaint further alleges that theindividual Defendants are liable by virtue of being controlling persons ofSport-Haley, pursuant to Section 20(a) of the Exchange Act. The allegationsarise out of Sport-Haley’s restatements of its financial statements for thefiscal years ended June 30, 1999 and 1998, which Sport-Haley previouslyreported. The Court appointed a group of investors (the “Plaintiffs”), to actas lead plaintiffs in the action.

 

The Defendants believe that the action is without merit and intend tocontinue their vigorous defense of the lawsuit. As previously reported, inDecember 2001, the Defendants filed a motion to dismiss the action. In February2002, the Plaintiffs filed their first amended complaint, alleging the sameclaims. The Defendants moved to dismiss the first amended complaint in February2002. The Defendants’ motion to dismiss is still pending before the court.Based upon information that is currently available, management is not able toestimate the amount of damages, if any, that might be awarded to the Plaintiffsand the class if the action were certified by the court as a class action andif the lawsuit were determined in favor of the Plaintiffs.

 

As previously reported, the staff of the United States Securities andExchange Commission (the “Commission”) advised Sport-Haley and its Chairman andformer Chief Executive Officer, Robert G. Tomlinson, that the staff plans torecommend to the Commission that an enforcement action should be taken againstSport-Haley and Mr. Tomlinson to obtain an injunction prohibiting futureviolations of certain provisions of the securities laws and possibly otherrelief. The staff’s planned recommendation primarily relates to errors inSport-Haley’s previously issued financial statements that Sport-Haleypreviously reported when it restated its financial statements for fiscal years1999 and 1998 and subsequently corrected material financial information for thequarterly periods of fiscal year 2000. Sport-Haley and Mr. Tomlinson providedthe staff with written submissions setting forth legal and factual reasons whysuch an action should not be brought. Sport-Haley and Mr. Tomlinson do not knowwhat action, if any, the staff will ultimately recommend to the Commission. Ifthe staff recommends that the Commission initiate an enforcement action, it isnot known whether the Commission will accept the staff’s recommendation. Shouldthe Commission bring such an action, Sport-Haley and Mr. Tomlinson intend to vigorouslycontest it. Based upon the information that is currently available, managementdoes not believe that the impact, if any, of such an enforcement action wouldhave a material adverse effect upon Sport-Haley’s financial position.

 

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As previously reported, Sport-Haley retained legal counsel to possiblypursue claims against its former auditors in connection with damages sufferedas a result of the restatements of its financial statements for the fiscalyears ended June 30, 1999 and 1998 and the corrections of material financialinformation for the quarterly periods of the fiscal year ended June 30, 2000.Further, counsel to the former auditors has advised Sport-Haley that the formerauditors may bring certain claims against Sport-Haley. Management believes thatthe claims threatened by Sport-Haley’s former auditors relate to allegations ofunpaid fees. Each party continues to deny any liability to the other party. Nolegal action has been filed by Sport-Haley or its former auditors that assertsany of these claims. As of December 31, 2002, the Company had incurredapproximately $523,000 in cumulative expenses related to the restatements ofits financial statements and material quarterly information noted above.

 

Sport-Haley is subject to various other legal proceedings and claimswhich arise in the ordinary course of its business. In the opinion ofmanagement, the amount of ultimate liability with respect to those actions willnot materially affect the financial position or results of operations ofSport-Haley.

 

### **ITEM5      OTHER INFORMATION**

 

On October 5 and 7, 2002, the Company repurchased a total of 70,500shares of its common stock at prices of $3.50 and $3.27 per share,respectively. The shares were repurchased as part of the Company’s previouslydisclosed repurchase program, which was established in 1994. On February 6,2003, the Company’s Board of Directors approved an increase of 300,000 in thenumber of shares authorized for repurchase. As of February 6, 2003, the netnumber of shares authorized for repurchase totaled 523,100, or approximately20% of the Company’s issued and outstanding common stock. The Company mayrepurchase shares from time to time in compliance with applicable Securitiesand Exchange Commission regulations in open market transactions at prevailingmarket prices. The Company has no commitment to repurchase all or any portionof the shares authorized for repurchase.

 

On December 20, 2002, the Company announced that it entered into a contractwith a major Microsoft® reseller to purchase a new management informationsystem designed specifically for the fashion industry. The new software willenable the Company to significantly improve its internal controls with respectto order processing, purchasing requirements and timing, receiving and shippingoperations and finished goods inventories management. The software will alsostreamline the Company’s controls with respect to EDI orders received frommajor customers. Management expects the new software to be fully operational byJuly 1, 2003.

 

On January 20, 2003, the Compensation Committee of the board ofdirectors approved the granting of options to purchase 400,000 shares of theCompany’s common stock to certain officers and directors at exercise prices of$2.71 per share, pursuant to the Company’s stock option plan. The non-qualifiedstock options were issued to the following directors and officers of theCompany:  James H. Everest (100,000),Ronald J. Norick (100,000), Kevin M. Tomlinson (100,000), Robert G. Tomlinson(75,000) and Mark J. Stevenson (25,000). The options expire ten years after thedate of issuance. The Company’s stock option plan expires by its terms onFebruary 28, 2003. Options granted under the plan prior to that date will remainexercisable according to the terms of their issuance.

 

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On January 21, 2003, the Board of Directors approved a reduction fromsix to five in the number of board members. The board member nominees recommendedfor reelection at the upcoming shareholder meeting, scheduled for March 27,2003, are such that, if the nominees are approved, the Board of Directors willbe comprised of a majority of independent, outside directors. The reduction ofboard members was approved by the Board in anticipation of the enactment of newSecurities and Exchange Commission or Nasdaq rules which would, when effective,require the Board to have a majority of independent, outside directors.

### ** **

### ** **

### **ITEM6      EXHIBITS AND REPORTS ON FORM 8-K**

 
| (A)    | EXHIBITS                                                                                                                          |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                              |
|   | 10.1 Board of Directors resolutions amending the  Sport-Haley, Inc. Amended and Restated 1993 Stock Option Plan                   |
|   |                                                                                                                              |
|   | 99.1 Certification  pursuant to 18 U.S.C. Sub-Section 1350, as adopted pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002 |
|   |                                                                                                                              |
|   | 99.2 Press Release dated February 10, 2003                                                                                        |
|   |                                                                                                                              |
| (B)    | REPORTS ON FORM 8-K - NONE                                                                                                        |

 

 

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#### **SIGNATURES**

 

 

In accordance with the requirements of the Securities Exchange Act of1934, the Registrant caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 

 
|   |              |   |   | **SPORT-HALEY,  INC.**  |   |
|--------|-------------------|--------|--------|-------------------------|--------|
|   |              |   |   | (Registrant)            |   |
|   |              |   |   |                    |   |
|   |              |   |   |                    |   |
| Date:  | February 12, 2003 |   |   | /s/ Kevin M. Tomlinson  |   |
|   |              |   |   | Kevin M. Tomlinson      |   |
|   |              |   |   | Chief Executive Officer |   |
|   |              |   |   |                    |   |
|   |              |   |   |                    |   |
| Date:  | February 12, 2003 |   |   | /s/ Patrick W. Hurley   |   |
|   |              |   |   | Patrick W. Hurley       |   |
|   |              |   |   | Chief Financial Officer |   |

 

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**Exhibit99.1**

 

**CERTIFICATION**

 

 

I, Kevin M. Tomlinson, Chief Executive Officer of Sport-Haley, Inc.,certify that:

 

1.   I have reviewedthis quarterly report on Form 10-Q of Sport-Haley, Inc.;

 

2.   Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report; and

 

3.   Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report.

 

4.   The registrant’sother certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

(a) designed such disclosure controls and proceduresto ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this quarterly report is beingprepared;

 

(b) evaluated the effectiveness of the registrant’sdisclosure controls and procedures as of a date within 90 days prior to thefiling date of this quarterly report (the “Evaluation Date”); and

 

(c) presented in this quarterly report our conclusionsabout the effectiveness of the disclosure controls and procedures based on ourevaluation as of the Evaluation Date;

 

5.   The registrant’sother certifying officers and I have disclosed, based on our most recentevaluation, to the registrant’s auditors and the audit committee of registrant’sboard of directors (or persons performing the equivalent function):

 

(a) all significant deficiencies in the design oroperation of internal controls which could adversely affect the registrant’sability to record, process, summarize and report financial data and haveidentified for the registrant’s auditors any material weaknesses in internalcontrols; and

 

(b) any fraud, whether or not material, that involvesmanagement or other employees who have a significant role in the registrant’sinternal controls; and

 

6.   The registrant’sother certifying officers and I have indicated in this quarterly report whetheror not there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 
| Date:                   | February 12, 2003 |
|-------------------------|-------------------|
|                    |              |
|                    |              |
|                    |
| /s/ Kevin M. Tomlinson  |              |
| Kevin M. Tomlinson      |              |
| Chief Executive Officer |              |
|                         |                   |  |

 

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**CERTIFICATION**

 

I, Patrick W. Hurley, Chief Financial Officer of Sport-Haley, Inc.,certify that:

 

1.   I have reviewedthis quarterly report on Form 10-Q of Sport-Haley, Inc.;

 

2.   Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report; and

 

3.   Based on my knowledge,the financial statements, and other financial information included in thisquarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report.

 

4.   The registrant’sother certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

(a) designed such disclosure controls and proceduresto ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this quarterly report is beingprepared;

 

(b) evaluated the effectiveness of the registrant’sdisclosure controls and procedures as of a date within 90 days prior to thefiling date of this quarterly report (the “Evaluation Date”); and

 

(c) presented in this quarterly report our conclusionsabout the effectiveness of the disclosure controls and procedures based on ourevaluation as of the Evaluation Date;

 

5.   The registrant’sother certifying officers and I have disclosed, based on our most recentevaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

(a) all significant deficiencies in the design oroperation of internal controls which could adversely affect the registrant’sability to record, process, summarize and report financial data and haveidentified for the registrant’s auditors any material weaknesses in internalcontrols; and

 

(b) any fraud, whether or not material, that involvesmanagement or other employees who have a significant role in the registrant’sinternal controls; and

 

6.   The registrant’sother certifying officers and I have indicated in this quarterly report whetheror not there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 
| Date:                   | February 12, 2003 |
|-------------------------|-------------------|
|                    |              |
|                    |              |
|                    |
| /s/ Patrick W. Hurley   |              |
| Patrick W. Hurley       |              |
| Chief Financial Officer |              |
|                         |                   |  |

 

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