UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1995
-----------------
Commission file number 1-7633
------
Hi-Shear Industries Inc.
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
A Delaware Corporation I.R.S. Employer
Identification No. 11-2406878
3333 New Hyde Park Road, North Hills, NY 11042
Registrant's telephone number, including area code: (516) 627-8600
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
5,854,618 Common Shares were outstanding as of April 7, 1995.
<PAGE>
HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
-----------------------------------------
INDEX
-----
Page
Number
------
Part I. Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets as of
February 28, 1995 and May 31, 1994 1
Consolidated Statements of Operations
for the three and nine month
periods ended February 28, 1995
and 1994 2
Consolidated Statements of Cash Flows
for the nine month periods ended
February 28, 1995 and 1994 3
Notes to Consolidated Financial
Statements 4
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 5
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 7
<PAGE>
HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(000 Omitted)
----------------------
February 28, May 31,
1995 1994
--------- ---------
ASSETS
Current assets:
Cash and equivalents $587 $940
Accounts receivable - net 10,880 9,976
Inventory 23,710 23,417
Other current assets 1,127 1,326
-------- --------
Total current assets 36,304 35,659
Property, plant and equipment, at cost 26,750 25,233
Less: Accumulated depreciation 15,459 13,824
-------- --------
Net property, plant & equipment 11,291 11,409
Other assets 3,052 2,047
-------- --------
$50,647 $49,115
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $1,376 $1,121
Accounts payable 2,995 2,668
Accrued income taxes 256 188
Accrued salaries and wages 1,752 1,601
Other accrued expenses 5,862 6,435
-------- --------
Total current liabilities 12,241 12,013
Long-term debt 11,556 9,953
Stockholders' equity:
Common stock 614 614
Paid-in capital 34,572 34,572
Accumulated deficit (2,022) (1,426)
Cumulative translation and pension adjustment (3,610) (3,907)
Less treasury stock (2,704) (2,704)
-------- --------
Total Stockholders' Equity 26,850 27,149
-------- --------
$50,647 $49,115
======== ========
See notes to consolidated financial statements.
-1-
<PAGE>
HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(000 Omitted)
----------------------------------------
Three Months Ended Nine Months Ended
-------------------- -----------------
February 28, February 28,
-------------------- -----------------
1995 1994 1995 1994
--------- -------- ------- -------
Revenues $14,461 $13,070 $42,602 $41,565
-------- -------- -------- --------
Cost of goods sold 11,614 10,910 34,192 34,597
Selling, general and administrative
expenses 2,773 2,744 8,057 8,173
-------- -------- -------- --------
14,387 13,654 42,249 42,770
-------- -------- -------- --------
OPERATING INCOME (LOSS) 74 (584) 353 (1,205)
Interest expense, net (356) (240) (945) (784)
-------- -------- -------- --------
LOSS FROM OPERATIONS
BEFORE INCOME TAXES (282) (824) (592) (1,989)
Provision for income taxes (41) 28 4 119
-------- -------- -------- --------
NET LOSS ($241) ($852) ($596) ($2,108)
======== ======== ======== ========
Net loss per share ($.04) ($.15) ($.10) ($0.36)
======== ======== ======== ========
Average Common shares outstanding 5,855 5,855
======== ========
See notes to consolidated financial statements.
-2-
<PAGE>
HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(000 Omitted)
-------------------
Nine Months Ended
-------------------
February 28,
1995 1994
--------- --------
Cash flows from operating activities:
Net loss ($596) ($2,108)
Adjustments to reconcile net loss
to net cash provided by operating activities
Depreciation and amortization 1,731 1,938
(Increase) Decrease in accounts receivable (792) 1,427
(Increase) decrease in inventories (111) 2,063
Increase (decrease) in accrued income taxes 80 (164)
Decrease in accounts payable, accrued salaries
and wages and other accrued expenses (236) (529)
Increase in other assets (793) (1,222)
-------- --------
Net cash provided (used) by operating activities (717) 1,405
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (1,509) (1,424)
Proceeds from sale of property, plant and equipment - 84
Proceeds from sale of discontinued operation - 3,102
-------- --------
Net cash provided (used) by investing activities (1,509) 1,762
-------- --------
Cash flows from financing activities:
Increase in long-term debt 1,603
Increase (decrease) in short-term debt 252 (3,883)
-------- --------
Net cash provided (used) by financing activities 1,855 (3,883)
Effect of exchange rate changes on cash 18 -
-------- --------
Net decrease in cash and cash equivalents (353) (716)
Cash and cash equivalents - beginning of year 940 844
-------- --------
Cash and cash equivalents - end of period $587 $128
======== ========
See notes to consolidated financial statements
-3-
<PAGE>
HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
-----------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
The accompanying consolidated financial statements of Hi-Shear Industries
Inc. and its subsidiaries (Company) have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. The
results of operations of any interim period are subject to year-end audit and
adjustments, and are not necessarily indicative of the results of operations for
the fiscal year. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended May 31, 1994.
-4-
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
Results of Operations
Revenues for the third quarter ended February 28, 1995 were $14.5 million
compared with $13.1 million for last year's third quarter. Revenues increased
slightly to $42.6 million for the nine months ended February 28, 1995 from $41.6
million for the same last year period. The Company was able to generate an
operating profit of $74,000 for the third quarter of fiscal 1995 as compared to
an operating loss of $584,000 in the third quarter of the prior year. For the
first nine months of fiscal 1995, the Company's operating income was $353,000,
compared to last year's nine month operating loss of $1,205,000. The net loss
for the three months ended February 28, 1995 was $241,000 or $.04 a share versus
net loss of $852,000 or $.15 a share for the same three month period last year.
For the nine months ended February 28, 1995, the net loss was $596,000 or $.10 a
share as compared to net loss of $2.1 million or $.36 a share for the same
period last year.
The improvement in operating results is due primarily to the effects of
cost reduction and production improvement programs instituted at the beginning
of the current fiscal year. Through this effort the Company has been able to
achieve improved operating performance even though the commercial fastener
market remains depressed due to severe cutbacks in production of new aircraft.
These reduced production levels have caused overcapacity in the aircraft
fastener market resulting in severe pressure on fastener pricing. The Company's
operating difficulties are the result of lower unit pricing combined with
increased production costs associated with inefficient production levels.
Although the Company is continuing in its program of cost reductions and
production improvements, management expects that respectable operating levels
will be difficult to achieve during this downturn in the commercial aircraft
industry.
Interest expense increased in the current quarter and nine month period due
to an increase in interest rates.
The Company did not record a provision or benefit for federal income taxes
in the third quarter or nine months of fiscal 1995 due to the Company's tax loss
carryforward position, in accordance with the rules of Statement on Financial
Accounting Standards No. 109, "Accounting For Income Taxes."
-5-
<PAGE>
Liquidity and Capital Resources
The Company currently maintains a secured three year revolving credit and
term loan facility primarily to provide working capital for the domestic
Aerospace Fastening Systems operation. At February 28, 1995 the Company had
$12,676,000 outstanding under this facility at 11%. A U.K. subsidiary maintains
a separate $2.3 million working capital loan facility which had an outstanding
balance of $256,000 currently being utilized.
Working capital at February 28, 1995 was $24,063,000 compared to
$23,646,000 at May 31, 1994. The increase is due to increased levels of
accounts receivable and inventories.
The Company believes that cash flow from operations and available credit
facilities will provide sufficient liquidity to meet working capital, capital
expenditures and other ongoing business requirements. Capital expenditures,
consisting primarily of plant modifications and the normal upgrading and
replacement of existing machinery and equipment is expected to be approximately
$2.2 million in fiscal 1995.
-6-
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
None.
-7-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HI-SHEAR INDUSTRIES INC.
By: s/David A. Wingate
------------------------------
David A. Wingate, Chairman,
President & Chief Executive
By: s/Victor J. Galgano
------------------------------
Victor J. Galgano, Vice
President & Chief Financial
Officer
Date: April 7, 1995
-------------
-8-
