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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1997
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from ______________ to __________________
Commission file number 001-12810
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HI-SHEAR TECHNOLOGY CORPORATION
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(Exact name of small business issuer as specified in its charter)
Delaware 22-2535743
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization (Identification No.)
24225 Garnier Street, Torrance, CA 90505-5355
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(Address of principal executive offices)
(Issuer's telephone number) (310) 784-2100
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(Former name, former address and former fiscal year, if changed since last
report. Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subjected to such filing requirements for the past 90 days.
[X] Yes [ ] No
[X] Yes [ ] No
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
6,636,000 of Common Stock,
$.001 par value as of August 31, 1997.
Transitional Small Business Disclosure
Format (Check one): [ ] Yes [X] No
HI-SHEAR TECHNOLOGY CORPORATION
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INDEX
PAGE NO.
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PART 1 - FINANCIAL INFORMATION
Condensed consolidated Balance Sheets ........................... 1
August 31, 1997 and May 31, 1997
Condensed consolidated Statement of Operations .................. 2
three months ended August 31, 1997
and August 31, 1996
Condensed consolidated Statement of Cash Flow .................. 3
three months ended August 31, 1997
and August 31, 1996
Notes to Financial Statements ................................... 4
PART 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ........... 4
CONDITION AND RESULTS OF OPERATIONS
SIGNATURES ................................................. 6
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PART I FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS
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AUGUST 31, MAY 31,
1997 1997
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(UNAUDITED)
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ASSETS:
Current Assets:
Cash $ 58,000 $ 19,000
Accounts Receivable 5,308,000 6,307,000
Inventories 3,112,000 2,633,000
Prepaid expenses an other current assets 76,000 50,000
------------------------ ----------------------
Total current assets 8,554,000 9,009,000
Equipment, Net 1,576,000 1,491,000
Other Assets, net
Deferred costs 268,000 298,000
Other intangible assets 114,000 115,000
------------------------ ----------------------
Total $ 10,512,000 $ 10,913,000
======================== ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to bank $ 2,286,000 $ 2,511,000
Current portion of long-term debt 73,000 128,000
Accounts payable 1,520,000 1,763,000
Accrued payroll and related costs 448,000 423,000
Other accrued liabilities 413,000 456,000
------------------------ ----------------------
Total current liabilities 4,740,000 5,281,000
Long-Term Debt 8,000 16,000
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Total liabilities 4,748,000 5,297,000
Excess of Net Assets Acquired Over Purchase Price 794,000 829,000
Stockholders' Equity
Preferred stock, $1.00 par value; 500,000 shares
authorized; no shares issued
Common stock, $.001 par value - 25,000,000 shares
authorized; issued and outstanding, 6,636,000 shares
at August 31, 1997 ; 6,636,000 shares at May 31, 1997 7,000 7,000
Additional paid-in capital 7,001,000 7,001,000
Accumulated deficit (2,038,000) (2,221,000)
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Total stockholders' equity 4,970,000 4,787,000
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TOTAL $ 10,512,000 $ 10,913,000
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See notes to financial statements.
1
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PART I FINANCIAL INFORMATION
HI-SHEAR TECHNOLOGY CORPORATION
STATEMENTS OF OPERATIONS (UNAUDITED)
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THREE-MONTH PERIOD
ENDED AUGUST 31,
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1997 1996
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REVENUES $ 3,579,000 $ 3,276,000
Cost of Revenues 2,610,000 2,382,000
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GROSS PROFIT 969,000 894,000
Selling, General and Administrative Expenses 632,000 598,000
Research and Development Expenses 98,000 77,000
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OPERATING INCOME 239,000 219,000
Interest Expense (Income) 54,000 70,000
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INCOME BEFORE PROVISION FOR INCOME TAXES 185,000 149,000
Provision for Income Taxes 2,000 2,000
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NET INCOME $ 183,000 $ 147,000
==================== ====================
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE $ 0.03 $ 0.02
==================== ====================
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING
DURING THE PERIOD 6,636,000 6,628,000
================ ================
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See notes to financial statements.
2
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HI-SHEAR TECHNOLOGY CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
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THREE-MONTH PERIOD
ENDED AUGUST 31,
---------------------------------------------
1997 1996
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CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 183,000 $ 147,000
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization 125,000 112,000
Amortization of excess of net assets
acquired over purchase price (35,000) (35,000)
Changes in assets and liabilities:
Accounts receivable 999,000 68,000
Inventories (478,000) (41,000)
Prepaid expenses and other assets (26,000) -
Accounts payable (243,000) (14,000)
Accrued payroll and related costs 25,000 (153,000)
Other accrued liabilities (43,000) 13,000
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Net cash (used in) provided by
operating activities 507,000 97,000
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CASH FLOWS FROM INVESTING ACTIVITIES-
Purchase of equipment (180,000) (38,000)
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CASH FLOWS FROM FINANCING ACTIVITIES-
Proceeds (payments) on note payable to bank (225,000) (25,000)
Proceeds from stock options exercised - 15,000
Principal payments on long-term debt (63,000) (59,000)
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Net cash provided by
(used in) financing activities (288,000) (69,000)
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NET INCREASE (DECREASE) IN CASH 39,000 (10,000)
CASH, BEGINNING OF PERIOD 19,000 76,000
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CASH, END OF PERIOD $ 58,000 $ 66,000
=================== ====================
</TABLE>
See notes to financial statements.
3
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
Reference is made to the Company's Annual Report on Form
10-KSB for the year ending May 31, 1997.
The accompanying unaudited financial statements reflect all
adjustments which, in the opinion of the Company, are the
results of operations for the interim periods presented. All
such adjustments are of a normal, recurring nature. The
results of the Company's operations for any interim period are
not necessarily indicative of the results for full fiscal
year.
PART 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Hi-Shear Technology Corporation designs and manufactures highly
reliable electronic and pyrotechnic-separation products for the
aerospace industry, and has adapted its technology to a select group of
emerging commercial products. Its aerospace products are primarily used
in commercial space satellites and launch vehicles, exploration
missions, strategic missiles, advanced fighter aircraft and military
systems. The Company's aerospace products are used by customers ranging
from commercial satellite manufacturers, launch vehicle assemblers,
NASA, the U.S. Government, foreign space agencies and commercial launch
ventures, and others in the aerospace business.
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the
financial statements included elsewhere in this report. This discussion
contains forward-looking statements about the Company's business, and
actual results may differ from those anticipated in these
forward-looking statements as a result of certain factors including,
the acceptance and pricing of its new products, the development and
nature of its relationship with key strategic partners, the allocation
of the federal budget and the economy in general.
Three Months Ended August 31, 1997, compared with Three Months Ended
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August 31, 1996.
----------------
Revenues for the quarter ending August 31, 1997 were $3,579,000 as
compared to $3,276,000 for the same period last year. This represents a
9% increase over the same period last year and was due to an increase
in commercial aerospace shipments during the period. The Company's
increase in new orders for commercial aerospace products during fiscal
year 1997 led to this increase in revenues as orders were completed and
shipped during the first quarter.
Gross profit for the quarter ended August 31, 1997 was $969,000 or 27%
of revenues as compared to $894,000 or 27% of revenues for the same
period last year. The quarter's selling, general and administrative
expenses, although up slightly, were 17.6% of revenues as compared to
18.2% of revenues during the same period last year. Research and
development spending for the quarter was up 27% compared to the same
period last year and reflect continued new commercial product
development efforts. As a result of the foregoing, operating income for
the
4
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period was $239,000 or 6.7% of revenues comparable to the $219,000 or
6.7% of revenues in the same period last year.
Interest expenses of $54,000 for the quarter were lower than interest
expense during the same period last year due to lower borrowing. Net
income for the first quarter was $183,000 or 5.1% of revenues up from
the $147,000 or 4.5% of revenues for the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company generated $507,000 of cash from operations for the first
three months of fiscal 1998 as compared with $97,000 for the first
three months of fiscal 1997. This improvement reflects the increased
operating profits earned this period, as well as increased collections
of its accounts receivable from shipments made in the previous quarter.
In September 1997, the Company collected the $150,000 receivable under
its international license agreement for the manufacture and sale of the
LIFESHEAR and LINESHEAR cutting tools and the license agreement remains
fully in effect.
5
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HI-SHEAR TECHNOLOGY CORPORATION
Date: 26 September 1997 By: /s/ Thomas R. Mooney
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Thomas R. Mooney
Chairman and President
Date: 26 September 1997 By: /s/ George W. Trahan
-------------------- --------------------
George W. Trahan
Executive Vice President
(Principle Accounting Officer)
6
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