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 August 31, 1995
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Commission file number 1-7633
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Hi-Shear Industries Inc.
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(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, New York 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
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5,854,618 Common Shares were outstanding as of October 3, 1995.
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HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
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INDEX
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Page
Number
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Part I. Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets as of
August 31, 1995 and May 31, 1995 1
Consolidated Statements of Operations
for the three months ended
August 31, 1995 and 1994 2
Consolidated Statements of Cash Flows
for the three months ended
August 31, 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 1. Legal Proceedings 7
Item 6. Exhibits and Reports on Form 8-K 7
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HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(000 Omitted)
------------------------
August 31, May 31,
1995 1995
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ASSETS
Current assets:
Cash and equivalents $942 $636
Accounts receivable - net 10,302 9,879
Inventory 22,015 22,821
Other current assets 1,963 1,510
-------- --------
Total current assets 35,222 34,846
Property, plant and equipment, at cost 27,604 27,207
Less: Accumulated depreciation 16,474 16,067
-------- --------
Net property, plant & equipment 11,130 11,140
Other assets 3,603 3,528
-------- --------
$49,955 $49,514
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $2,426 $1,835
Accounts payable 3,295 2,851
Accrued income taxes 295 145
Accrued salaries and wages 1,801 1,607
Other accrued expenses 5,651 6,125
-------- --------
Total current liabilities 13,468 12,563
Long-term debt 10,108 9,872
Stockholders' equity:
Common stock 614 614
Paid-in capital 34,572 34,572
Accumulated deficit (2,446) (1,971)
Cumulative translation and pension
adjustments (3,657) (3,432)
Less treasury stock (2,704) (2,704)
-------- --------
Total Stockholders' Equity 26,379 27,079
-------- --------
$49,955 $49,514
======== ========
See notes to consolidated financial statements.
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<PAGE>
HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(000 Omitted)
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Three Months Ended
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August 31,
1995 1994
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Revenues $14,877 $13,838
Cost of goods sold 12,552 11,331
Selling, general and administrative expenses 2,470 2,550
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15,022 13,881
OPERATING LOSS (145) (43)
Interest expense, net (342) (276)
-------- --------
LOSS BEFORE INCOME TAXES (487) (319)
Provision for (benefit from) income taxes (12) 9
-------- --------
NET LOSS ($475) ($328)
======== ========
Average Common shares outstanding 5,855 5,855
======== ========
NET LOSS PER SHARE OF COMMON STOCK ($0.08) ($0.06)
======== ========
See notes to consolidated financial statements.
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<PAGE>
HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(000 Omitted)
------------------
Three Months Ended
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August 31,
1995 1994
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Cash flows from operating activities:
Net loss ($475) ($328)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 613 579
Decrease (increase) in accounts receivable (544) 654
Decrease in inventories 685 120
Increase in accrued income taxes 160 58
Increase (decrease) in accounts payable,
accrued salaries and wages and other
accrued expenses 234 (110)
Increase in other assets (555) (566)
-------- --------
Net cash provided by operating activities 118 407
-------- --------
Cash flows from investing activities:
Capital expenditures (664) (825)
Proceeds from sale of property and equipment 85 -
-------- --------
Net cash used for investing activities (579) (825)
-------- --------
Cash flows from financing activities:
Proceeds from (payment of) short-term debt 638 (1)
Proceeds from long-term debt 12,332 12,445
Payment yment of long-term debt (12,096) (12,569)
-------- --------
Net cash provided by (used for) financing
activities 874 (125)
-------- --------
Effect of exchange rate changes on cash (107) (9)
-------- --------
Net increase (decrease) in cash and cash equivalents 306 (552)
Cash and cash equivalents - beginning of year 636 940
-------- --------
Cash and cash equivalents - end of period $942 $388
======== ========
See notes to consolidated financial statements
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<PAGE>
HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
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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, 1995.
Note B - Subsequent Event
On October 9, 1995 Hi-Shear Industries signed a definitive
agreement for the sale of its aerospace fastener subsidiary, Hi-Shear
Corporation and allied companies, to GFI Industries S.A. for $46
million in cash. GFI, a publicly traded French company, has
aerospace, automotive and industrial fastener operations which
primarily serve the European market. The proposed sale, which is
expected to be finalized in early 1996, would be subject to the
approval of Hi-Shear Industries' stockholders and of regulatory
authorities. The transaction represents the sale of substantially all
of Hi-Shear Industries' operating assets except for its net operating
loss carryforwards and its claims against the U.S. Navy in respect of
the termination of certain contracts. A decision in favor of Hi-Shear
Industries by the Armed Services Board of Contract Appeals has been
appealed by the U.S. Department of Justice. Hi-Shear Industries plans
to use approximately $12.5 million of the proceeds to repay existing
indebtedness. No plan for the disposition of the remaining proceeds
has yet been made. Proxy materials will be disseminated to
stockholders in the near future. David A. Wingate, Chairman and
Chief Executive Officer of Hi-Shear Industries, Philip M. Slonim, a
director of Hi-Shear Industries, and certain other stockholders of
Hi-Shear Industries, who together hold approximately 30.4% of the
outstanding common stock, have agreed to vote in favor of the
transaction.
-4-
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Results of Operations
Revenues for the first quarter ended August 31, 1995 were
$14.9 million compared with $13.8 million for last year's first
quarter. The Company incurred an operating loss of $145,000 for
the first quarter of fiscal 1996 compared with a loss of $43,000
reported for the first quarter of the prior year. The net loss
for the first three months of fiscal 1996 was $475,000 or $.08 a
share compared with a net loss of $328,000 or $.06 a share for
the same period last year.
The decline in operating results, despite an increase in
revenues, is primarily attributable to the prolonged downturn in
production of commercial aircraft. This low level of aircraft
production has negatively impacted the domestic and foreign
fastener industry resulting in overcapacity, downward pressure on
pricing levels and decreased profitability. In addition, the
Company has incurred higher than anticipated costs in the current
quarter associated with restructuring its manufacturing
operations. The Company has taken steps to bring these costs
under control but expects difficult operating conditions to
continue for the next several quarters.
Interest expense increased in the current quarter due to an
increase in interest rates.
The Company did not record a provision or benefit for
federal income taxes in the first quarter of fiscal 1996 due to
the Company's tax loss carryforward position, in accordance with
the rules of Statement of Financial Accounting Standards No. 109,
"Accounting For Income Taxes."
-5-
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition (continued)
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 August 31, 1995 the Company had $11,200,000
outstanding under this facility at 10.75%. The Company also
utilizes operating leases to satisfy the larger capital
expenditure requirements of its fastener operations. A U.K.
subsidiary maintains a separate $2.3 million working capital term
loan facility of which $1,300,000 was outstanding at August 31,
1995.
Working capital at August 31, 1995 was $21,754,000 compared
to $22,283,000 at May 31, 1995. The decline is primarily due to
a reduction in inventories and an increase in short term debt,
offset by increases in accounts receivable.
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
$3.5 million in fiscal 1996.
-6-
<PAGE>
PART II - OTHER INFORMATION
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Item 1. Legal Proceedings
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On September 28, 1995 the Company reported that the United
States Department of Justice had appealed the Armed Services
Board of Contract Appeals May 30, 1995 decision converting the
1991 terminations for default of two contracts with the U.S. Navy
into terminations for the convenience of the Government.
The Department of Justice currently has until December 29, 1995
to file a brief stating the basis for the appeal.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
On June 12, 1995 the Company reported that it had received a
favorable decision in appeals relating to the termination of
certain contracts with the U.S. Navy.
-7-
<PAGE>
SIGNATURES
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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: October 12, 1995
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-8-
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