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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 November 30, 2000
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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
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: Approximately 6,670,000 of Common
Stock, $.001 par value as of November 30, 2000. Transitional Small Business
Disclosure Format (Check one): [ ] Yes [X] No
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HI-SHEAR TECHNOLOGY CORPORATION
INDEX
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Balance Sheets........................................................1
November 30, 2000 and May 31, 2000
Statement of Operations...............................................2
Three-months and six-months ended November 30, 2000
and November 30, 1999
Statement of Cash Flows...............................................3
Six-months ended November 30, 2000
and November 30, 1999
Notes to Financial Statements.........................................4
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL................5
CONDITION AND RESULTS OF OPERATIONS
SIGNATURES.....................................................................7
ii
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<TABLE>
PART I FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS
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<CAPTION>
NOVEMBER 30, MAY 31
2000 2000
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 443,000 $ 0
Accounts receivable 7,218,000 8,906,000
Inventories 4,391,000 2,909,000
Deferred taxes 775,000 775,000
Prepaid expenses and other current assets 366,000 382,000
------------ ------------
Total current assets 13,193,000 12,972,000
Land Held for Sale 846,000 846,000
Equipment, Net 3,070,000 3,307,000
Deferred Taxes 1,007,000 1,060,000
Intangible Assets 97,000 100,000
------------ ------------
$18,213,000 $18,285,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to bank $ 4,420,000 $ 4,550,000
Current portion of long-term debt 835,000 835,000
Trade accounts payable 1,155,000 725,000
Accrued payroll and related costs 550,000 615,000
Other accrued liabilities 287,000 274,000
------------ ------------
Total current liabilities 7,247,000 6,999,000
Long-Term Debt, less current portion 1,121,000 1,539,000
------------ ------------
Total liabilities 8,368,000 8,538,000
Excess of Net Assets Acquired Over Purchase Price 345,000 414,000
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 6,670,000 shares 7,000 7,000
Additional paid-in capital 7,193,000 7,193,000
Retained earnings 2,300,000 2,133,000
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Total stockholders' equity 9,500,000 9,333,000
------------ ------------
TOTAL $18,213,000 $18,285,000
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</TABLE>
1
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<TABLE>
HI-SHEAR TECHNOLOGY CORPORATION
STATEMENTS OF OPERATIONS
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<CAPTION>
SIX-MONTH PERIOD THREE-MONTH PERIOD
ENDED NOVEMBER 30, ENDED NOVEMBER 30,
---------------------------- ----------------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
REVENUES $ 5,310,000 $ 5,566,000 $ 2,997,000 $ 2,008,000
Cost of Revenues 3,566,000 3,606,000 2,033,000 1,229,000
------------ ------------ ------------ ------------
GROSS MARGIN 1,744,000 1,960,000 964,000 779,000
Selling, General and Administrative Expenses 1,156,000 1,974,000 603,000 968,000
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) 588,000 (14,000) 361,000 (189,000)
Interest (Expense) (338,000) (178,000) (162,000) (95,000)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAX AND TAX CREDITS 250,000 (192,000) 199,000 (284,000)
Provision for Income Taxes (Credits) 83,000 (300,000) 68,000 (200,000)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 167,000 $ 108,000 $ 131,000 $ (84,000)
============ ============ ============ ============
EARNINGS PER COMMON SHARE AND PER
COMMON SHARE ASSUMING DILUTION $ 0.03 $ 0.02 $ 0.02 $ (0.01)
============ ============ ============ ============
WEIGHTED NUMBER OF COMMON SHARES 6,670,000 6,670,000 6,670,000 6,670,000
============ ============ ============ ============
WEIGHTED NUMBER OF COMMON SHARES
ASSUMING DILUTION 6,670,000 6,671,000 6,670,000 6,670,000
============ ============ ============ ============
</TABLE>
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<TABLE>
HI-SHEAR TECHNOLOGY CORPORATION
STATEMENT OF CASH FLOWS
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<CAPTION>
SIX-MONTH PERIOD
ENDED NOVEMBER 30,
----------------------------
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 167,000 $ 108,000
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization 293,000 276,000
Amortization of excess of net assets
acquired over purchase price (68,000) (69,000)
Deferred taxes 53,000 (336,000)
Changes in assets and liabilities:
Accounts receivable 1,688,000 1,804,000
Inventories (1,482,000) (1,593,000)
Prepaid expenses and other assets 16,000 (25,000)
Accounts payable 430,000 (1,554,000)
Accrued payroll and related costs (65,000) (155,000)
Other accrued liabilities 13,000 (117,000)
------------ ------------
Net cash provided by (used in) operating activities 1,045,000 (1,661,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in land held for sale 0 (1,128,000)
Purchase of equipment (54,000) (193,000)
------------ ------------
Net cash flows provided by (used in) investing activities (54,000) (1,321,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (payments) from note payable to a bank (130,000) 1,422,000
Proceeds from stock options exercised 0 0
Proceeds from long-term debt to a bank, net 0 1,630,000
Principal payments on long-term debt (418,000) (136,000)
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Net cash provided by
(used in) financing activities (548,000) 2,916,000
------------ ------------
NET INCREASE (DECREASE) IN CASH 443,000 (66,000)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 0 33,000
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 443,000 $ (33,000)
============ ============
</TABLE>
3
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NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Reference is made to the Company's Annual Report on Form
10-KSB for the year ending May 31, 2000.
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB and Rule 10-01 of Regulation S-X.
Therefore, they do not include all the information and
footnotes required by generally accepted accounting principles
for complete financial statements.
The accompanying 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.
2. EARNINGS PER SHARE
The following data show the amounts used in computing earnings
per share and the weighted number of common shares assuming
dilution.
<TABLE>
<CAPTION>
Six-Month Period Ended November 30,
-----------------------------
2000 1999
<S> <C> <C>
Net Income $ 167,000 $ 108,000
============= =============
Weighted Number of Common
Shares Outstanding during the Period 6,670,000 6,670,000
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Effect of Dilutive Securities Options 0 1,000
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Weighted Number of Common Shares and
Dilutive Potential Common Stock used 6,670,000 6,671,000
in Diluted EPS
============= =============
</TABLE>
Options on 105,000 shares of common stock were not included in computing EPS
assuming dilution for the six-month period ended November 30, 2000 because their
effects were antidilutive. Options on 145,000 shares of common stock were not
included in computing diluted EPS for the six-month period ended November 30,
1999 because their effects were antidiultive.
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ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Hi-Shear Technology Corporation designs and manufactures high
reliability pyrotechnic, mechanical and electronic products for the
aerospace industry, and has adapted its technology to a select group of
emerging non-aerospace products. Its aerospace products are primarily
used in commercial space satellites and launch vehicles, exploration
missions, strategic missiles, advanced fighter aircraft and military
systems. Customers such as commercial satellite manufacturers, launch
vehicle assemblers, the U.S. Government including NASA, foreign space
agencies and commercial launch ventures, and others in the aerospace
business widely use the Company's aerospace products. In addition,
Hi-Shear has developed a low-cost environmentally safe air bag inflator
technology for use in automobile air bag safety systems and specialized
cutters for use by rescue workers in emergency situations.
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. The statements are 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 November 30, 2000 compared with Three Months Ended
November 30, 1999
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Revenues recognized during the second quarter ended November 30, 2000
were $2,997,000, which was $989,000 more than the total revenues
recognized during the same quarter last year. The increase in revenues
is reflective of an increase in revenue generating events, such as
shipments of products and performance on contracts for which revenue is
recognized on a percentage of completion basis. Production efficiencies
implemented during the last year contributed to the Company's ability
to improve productivity.
Gross margin for the quarter was $964,000, or 32% of revenues, as
compared to $779,000, or 39% of revenues, for the same period last
year. The increase in gross margin resulted from the increase in
revenues.
Selling, general and administrative expenses of $603,000 have been
reduced compared to the $968,000 reported for the same period last
year. This is the result of significant efficiency improvements and
successful cost reduction efforts.
Operating income of $361,000, or 12% of revenues, during the quarter
was improved from the $189,000 operating loss reported for the same
quarter last year. Implementation of manufacturing efficiencies,
lowered administrative costs and reduced manufacturing lead times
contributed to the increase in operating income.
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Interest expense during the second quarter increased from $95,000 last
year to $162,000 this year. The increase is a result of both higher
interest rates, which were driven by the changes in the benchmark prime
rate, and an increase in borrowing to fund working capital needs
previously supplied by customers in the form of progress payments.
Income before provision for income taxes was $199,000 for the quarter
ended November 30, 2000 as compared to a reported $284,000 loss before
income tax credits for the same period last year. Net income for the
second quarter ended November 30, 2000 was $131,000, or $0.02 per
share, as compared to a net loss of $84,000 for the same period last
year.
Six-Months Ended November 30, 2000 compared with Six Months Ended
November 30, 1999
-----------------------------------------------------------------
Revenues for the six months were $5,310,000 as compared to $5,566,000
last year. A lower level of launch vehicle component shipments due
during this period accounted for the difference.
Gross margin for the six months ended November 30, 2000 was $1,744,000,
or 33% of revenues, down slightly from the $1,960,000, or 35% of
revenues, for the same period last year. This gross margin during the
period resulted from lower revenues and a larger proportion of
electronic product revenues compared to the same six month period last
year.
Selling, general and administrative expenses decreased to $1,156,000
for the six months ended November 30, 2000 compared to $1,974,000
reported for the same period last year, as the result of the Company's
significant efficiency improvements and successful cost reduction
efforts.
Operating income of $588,000, or 11% of revenues, during the six months
period was improved from the $14,000 operating loss reported for the
same period last year. Implementation of manufacturing efficiencies,
lowered administrative costs and reduced manufacturing lead times
contributed to the increase in operating income.
Interest expense during the six months ended November 30 increased from
$178,000 last year to $338,000 this year. Higher interest rates, which
relate directly to increases in the prime rate, together with the need
to utilize bank borrowing to replace working capital previously
obtained from customers' progress payments, resulted in increased
interest expense.
Income before provision for income taxes was $250,000 for the six
months ended November 30, 2000 as compared to a reported $192,000 loss
before income tax credits for the same period last year. Net income for
the six months period was $167,000, or $0.03 per share, as compared to
net income of $108,000, or $0.02 per share, reported for the same
period last year.
Liquidity and Capital Resources
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Positive cash flow of $1,045,000 was provided by operating activities
during the six months period ended November 30, 2000, as compared to
negative cash flow of $1,661,000 resulting from operating activities
last year. The significant improvement in cash flow compared to last
year was primarily the result of successful cash control efforts,
collections of outstanding accounts receivable, and reduced cash
requirements resulting from lower costs.
6
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SIGNATURES
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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: January 16, 2001 By: /s/ George W. Trahan
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George W. Trahan
President and CEO
Date: January 16, 2001 By: /s/ Gregory J. Smith
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Gregory J. Smith
Vice President and CFO
