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 29, 1996
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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, 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
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5,854,618 Common Shares were outstanding as of April 8, 1996.
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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
February 29, 1996 and May 31, 1995 . . . . . . . . . 1
Consolidated Statements of Operations
for the three and nine month
periods ended February 29, 1996
and February 28, 1995 . . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows
for the nine month periods ended
February 29, 1996 and February 28, 1995 . . . . . . 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
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HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(000 Omitted)
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February 29, May 31,
1996 1995
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ASSETS
Current assets:
Cash and equivalents $33,503 $636
Accounts receivable - net - 9,879
Inventory - 22,821
Other current assets 75 1,510
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Total current assets 33,578 34,846
Property, plant and equipment, at cost 269 27,207
Less: Accumulated depreciation 166 16,067
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Net property, plant & equipment 103 11,140
Other assets 1,452 3,528
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$35,133 $49,514
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $- $1,835
Accounts payable 1,200 2,851
Accrued income taxes 520 145
Accrued salaries and wages - 1,607
Other accrued expenses 1,867 6,125
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Total current liabilities 3,587 12,563
Long-term debt - 9,872
Stockholders' equity:
Common stock 614 614
Paid-in capital 34,572 34,572
Accumulated deficit (936) (1,971)
Cumulative translation and pension adjustment - (3,432)
Less treasury stock (2,704) (2,704)
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Total Stockholders' Equity 31,546 27,079
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$35,133 $49,514
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See notes to consolidated financial statements.
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HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(000 Omitted)
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Three Months Ended Nine Months Ended
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Feb. 29, Feb. 28, Feb. 29, Feb. 28,
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1996 1995 1996 1995
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Revenues $15,144 $14,461 $46,285 $42,602
--------- ---------- --------- ---------
Cost of goods sold 11,946 11,614 37,850 34,192
Selling, general and administrative
expenses 3,148 2,773 8,329 8,057
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15,094 14,387 46,179 42,249
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OPERATING INCOME 50 74 106 353
Net gain on disposal of subsidiary (net
of tax of $500) 2,013 - 2,013 -
Interest expense, net (342) (356) (1,032) (945)
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INCOME (LOSS) FROM OPERATIONS
BEFORE INCOME TAXES 1,721 (282) 1,087 (592)
Provision for income taxes 12 (41) 52 4
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NET INCOME (LOSS) $1,709 ($241) $1,035 ($596)
========= ========== ========= =========
Net income (loss) per share $.29 ($.04) $.18 ($.10)
========= ========== ========= =========
Average Common shares outstanding 5,855 5,855
========= =========
See notes to consolidated financial statements.
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HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(000 Omitted)
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Nine Months Ended
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Feb. 29, Feb. 28,
1996 1995
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Cash flows from operating activities:
Net income (loss) $1,035 ($596)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities
Net gain on disposal of subsidiary (2,013) -
Depreciation and amortization 1,786 1,731
Increase in accounts receivable (1,063) (792)
(Increase) decrease in inventories 1,227 (111)
Increase in accrued income taxes 64 80
Increase (decrease) in accounts payable, accrued
salaries and wages and other accrued expenses 622 (236)
Increase in other assets (792) (793)
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Net cash provided by (used for) operating
activities 866 (717)
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Cash flows from investing activities:
Capital expenditures (3,344) (1,509)
Net proceeds from sale of subsidiary 45,717 -
Proceeds from sale of property and equipment 83 -
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Net cash provided by (used for) used for
investing activities 42,456 (1,509)
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Cash flows from financing activities:
Proceeds from (payment of) short-term debt (409) 252
Proceeds from long-term debt 39,141 39,251
Payment of long-term debt (49,188) (37,648)
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Net cash provided by (used for) financing
activities (10,456) 1,855
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Effect of exchange rate changes on cash 1 18
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Net increase (decrease) in cash and cash equivalents 32,867 (353)
Cash and cash equivalents - beginning of year 636 940
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Cash and cash equivalents - end of period $33,503 $587
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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 - Sale of Hi-Shear Corporation
On February 26, 1996, pursuant to approval received at the Annual Meeting
of shareholders on February 23, 1996, the Company sold its aerospace fastener
subsidiary, Hi-Shear Corporation and allied companies, to GFI Industries S.A.
for $46 million in cash. The sale represents substantially all of the Company's
operating assets. The Company's claims against the U.S. Navy in respect of the
termination of certain contracts as well as related tax loss carry-forwards are
being retained. Finalization of the purchase price will be based upon the
completion and review of the closing balance sheet of Hi-Shear Corporation and
verification of the net asset value as required under the terms of the sale.
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<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
Results of Operations
On February 26, 1996, the Company completed the sale of its aerospace
fastener businesses to GFI Industries S.A. for $46 million subject to
adjustment. The sale constitutes the disposition by the Company to all of its
operating businesses. The following is a discussion of operations for the
period prior to the sale.
Revenues for the third quarter ended February 29, 1996 were $15.1 million
compared with $14.5 million for last year's third quarter. Revenues increased
to $46.3 million for the nine months ended February 29, 1996 from $42.6 million
for the same last year period. The Company achieved operating income of $50,000
for the third quarter of fiscal 1996 compared to operating income of $74,000 for
the third quarter of the prior year. For the first nine months of fiscal 1996,
the Company's operating income was $106,000, compared to last year's nine month
operating income of $353,000. The net income for the three months ended
February 29, 1996 was $1,709,000 or $.29 a share versus net loss of $241,000 or
$.04 a share for the same three month period last year. For the nine months
ended February 29, 1996, the net income was $1,035,000 or $.18 a share as
compared to net loss of $596,000 or $.10 a share for the same period last year.
A gain on the sale of a subsidiary of $2,013,000 or $.34 a share is reflected in
both current year periods.
The decline in operating results, despite an increase in revenues, is
primarily attributable to the prolonged downturn in production of commercial
aircraft. The 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. Although orders for
aircraft fasteners are improving, increases in pricing levels remain difficult
to achieve. Operating margins remain tight and the Company is still working off
older, lower price contracts which is having an adverse effect on operating
results. In addition, increasing material and labor costs are eroding the
savings achieved on cost reduction and production improvement programs
instituted at the beginning of fiscal 1995. We have instituted measures to
begin dealing with this situation and expect that operating conditions will
gradually improve over the next several quarters.
Interest expense increased in the current quarter and nine month period due
to an increase in interest rates.
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<PAGE>
The Company did not record a provision or benefit for federal income taxes
in the third quarter or nine months of fiscal 1996 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."
Liquidity and Capital Resources
The Company has maintained a secured three year revolving credit and term
loan facility primarily to provide working capital for the domestic Aerospace
Fastening Systems operation. A U.K. subsidiary maintained a separate $2.3
million working capital loan facility. Under the terms of an agreement
involving the sale of the aerospace fastener subsidiaries to GFI Industries
S.A., these obligations were satisfied on February 26, 1996.
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<PAGE>
PART II - OTHER INFORMATION
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Item 6 Exhibits and Reports on Form 8-K
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None.
-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
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David A. Wingate, Chairman,
President & Chief Executive
By: /s/Victor J. Galgano
------------------------------
Victor J. Galgano, Vice
President & Chief Financial
Officer
Date: April 10, 1996
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