10-K 1 a10-k.txt 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended May 31, 2000 Commission file number 1-7633 HI-SHEAR INDUSTRIES INC. 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 Securities registered pursuant to section 12(b) of the act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ---------------------------- ------------------------- Common Stock, $.10 par value Over The Counter Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE 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 and (2) has been subject to such filing requirements for the past 90 days. Yes X No On August 18, 2000, 5,854,618 shares of the Registrant's Common Stock were outstanding. Of these shares, 1,677,218 shares were held by persons who may be deemed to be affiliates. The aggregate market value (based on the average bid and ask price of these shares on the Over The Counter Exchange of $2.06 a share) of the 4,177,400 shares held by non-affiliates of the registrant was $8,605,000. DOCUMENTS INCORPORATED BY REFERENCE None. PART I ITEM 1. BUSINESS (a) General Development of Business HI-SHEAR INDUSTRIES INC.("the Company"), a Delaware corporation organized in 1976, was engaged primarily in the manufacture and sale of high technology Aerospace Fastening Systems products through its wholly-owned subsidiary, Hi-Shear Corporation ("HSC") until February 26, 1996. During the fiscal year ended May 31, 1991, the Company adopted a plan to discontinue the operations of Hi-Shear's Space and Defense segment, comprised of Hi-Shear Technology Corp. ("HSTC") and Defense Systems Corporation ("DSC"). The operation of DSC was terminated in March 1991 and in June 1993, the Company completed the sale of HSTC to a group led by the management of the subsidiary. On February 26, 1996, the Company completed the sale of Hi-Shear Corporation and its subsidiaries which included Hi-Shear Automotive Corp., Hi-Shear Holdings Limited, and Hi-Shear Fasteners Europe Limited, to GFI Industries S.A. (GFI") of Belfort, France for $46 million. With the completion of this sale the Company disposed of its last remaining operating assets and effectively ceased operations. (b) Narrative Description of Business With the sale of its last remaining manufacturing operation on February 26, 1996, the Company no longer conducts an operating business. As outlined in the Company's "Notice Of Annual Meeting of Stockholders" dated January 8, 1996, the Company currently anticipates that upon final resolution of its claims against the U.S. Navy, it will complete the distribution of its assets to stockholders and seek stockholder approval to dissolve the Company. The Company currently has four full-time employees. ITEM 2. PROPERTIES The Company's corporate headquarters are located in an office building at North Hills, New York, where 2,475 square feet of space are leased at a current annual rental of approximately $66,000 under a lease which expires October 31, 2002. HSI Properties, Inc., a wholly-owned subsidiary of the Company, owned 16 acres of land in Saugus, California, with incidental structures (2,700 sq. ft.) which it had leased to a former subsidiary, Hi-Shear Technology Corp., for $101,238 per year. The lease expired May 31, 1999. On June 4, 1999 this land was purchased by Hi-Shear Technology Corp. in accordance with the lease terms. See SALE OF LAND in the notes to consolidated financial statements. 1 ITEM 3. LEGAL PROCEEDINGS In 1991, the U.S. Navy terminated for default two contracts held by a discontinued subsidiary of the Company and sought reimbursement of progress payments totaling $11.2 million made against these contracts. The Company appealed the default terminations and on May 31, 1995 its appeal was sustained. This decision effectively released the Company from any obligation to repay progress payments received under the contracts. On January 31, 1996, the Company filed damage claims against the U.S. Navy totaling $62.9 million. The government audited these claims but was unwilling to negotiate a settlement of these claims with the Company. As a result, on February 11, 1997, the Company filed an appeal before the Armed Services Board of Contract Appeals requesting an adjudication of this dispute. The Board conducted hearings on this appeal during August and September 1998. Each side subsequently filed post hearing briefs and rebuttal briefs in February and March 1999. On March 17, 2000, the Board issued a decision awarding the Company claim damages totaling $18,410,000 plus interest. On July 17, 2000, the Company was notified that the Justice Department had filed an appeal regarding this damage award. See COMMITMENTS AND CONTINGENCIES in the notes to consolidated financial statements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's Common Stock had, until August 1, 1996, been traded on the New York Stock Exchange ("NYSE") under the symbol "HSI." On August 1, 1996, the Company made an initial liquidating distribution of approximately $23.4 million ($4.00 per share). Prior to that the Company had not paid a dividend on common stock since August 1990. Concurrent with this distribution, the NYSE suspended trading in the Company's common stock and made application to delist the issue. The following table sets forth the high and low prices per share of the Company's Common Stock, as derived from trades executed on the Over-The-Counter Exchange. 2

As of August 18, 2000 there were approximately 700 holders of record of the Company's Common Stock. ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected financial information of the Company and its subsidiaries for the five years ended May 31, 2000. This selected financial information should be read in conjunction with the Consolidated Financial Statements and notes thereto, and Management's Discussion and Analysis of Results of Operations and Financial Condition included elsewhere herein.

(A) Includes revenues and income (loss) from operations of HSC through February 26, 1996 at which date HSC was sold. For the year ended May 31, 1996, net income (loss) includes a gain on the sale of HSC in the amount of $1.8 million. With the completion of this sale, the Company disposed of its last remaining operating assets and effectively ceased operations. 4 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION On February 26, 1996, the Company sold its last remaining operating entity, Hi-Shear Corporation and its subsidiaries and effectively ceased operations. The Company had previously disposed of its business activities dealing with space and defense in June 1993 and had since that time been reporting their operating activities as discontinued operations. The results of operations of the Company include the operating activities of Hi-Shear Corporation and subsidiaries through February 26, 1996. RESULTS OF OPERATIONS The Company had no operating activities subsequent to the sale of Hi-Shear Corporation during fiscal 1996. The $1.2 million of general and administrative costs incurred in both fiscal 2000 and 1999 consists primarily of the ongoing costs necessary to pursue the settlement of the Company's dispute with the U.S. Navy. The gain on sale land recorded during the current fiscal year was the result of the sale of real estate owned by the Company. The interest income reported in fiscal 2000, 1999 and 1998 was due to interest earned on the investment of the proceeds retained from the sale of land and the sale of Hi-Shear Corporation. The Company did not record a provision or benefit for federal income taxes due to it's tax loss carryforward position. LIQUIDITY AND CAPITAL RESOURCES On February 26, 1996, the Company completed the sale of Hi-Shear Corporation to GFI Industries S.A. for a total purchase price of $46 million generating net proceeds from the sale, after deducting transaction costs, of $44.4 million. Of that amount, approximately $13 million was used to repay all amounts outstanding under the Company's loan agreements and the remaining balance was deposited in short term investment accounts. With the sale of Hi-Shear Corporation the Company no longer had operating businesses and announced its intention to liquidate and distribute the proceeds from the sale of Hi-Shear Corporation as well as any settlement received from the resolution of the Company's long standing dispute with the U.S. Navy. In this regard, the Company made an initial liquidating distribution to shareholders of approximately $23.4 million ($4.00 per share) on August 1, 1996. On June 4, 1999, the Company received $1.1 million as proceeds from the sale of real estate which was previously leased to a former subsidiary. This amount, in addition to $300,000 in borrowing obtained from a 5 corporate officer have been used to provide working capital for the Company. At May 31, 2000 the Company had $70,000 in cash and cash equivalents. See SALE OF LAND and ADVANCES FROM OFFICER in the notes to consolidated financial statements. On May 31, 1995 the Company learned that its appeal of the default terminations filed by the Navy with regard to the two contracts being held by a subsidiary, Defense Systems Corporation had been sustained and converted to termination for the convenience of the government. On January 31, 1996 the Company filed damage claims against the U.S. Navy totaling $62.9 million. The government has audited these claims but has not expressed a willingness to negotiate a settlement of these claims with the Company. As a result, on February 11, 1997, the Company filed an appeal before the Armed Services Board of Contract Appeals requesting an adjudication of this dispute. The Board conducted hearings on this appeal during August and September 1998. Each side subsequently filed post hearing briefs and rebuttal briefs in February and March 1999. On March 17, 2000 the Board issued its decision awarding the Company claim damages totaling $18,410,000. On July 17, 2000 the Company received notification that the Justice Department had filed an appeal covering both the May 30, 1995 (entitlement) and March 17, 2000 (Quantum) decisions of the Armed Services Board of Contract Appeals. As a result of the above, the amount or timing of the ultimate recovery cannot be predicted at this time. The Company's cash requirements include ongoing costs relating to pursuing the settlement of the Company's dispute with the U.S. Navy and normal recurring general and administrative expenses. The Company is taking additional measures to reduce expenses and anticipates that existing cash and cash equivalents and advances from officers will be sufficient to satisfy the Company's cash requirements through the time of settlement with the U.S. Navy and final liquidation of the Company. FORWARD LOOKING STATEMENTS The statements in this Management's Discussion and Analysis which are not historical fact are forward looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The statements are subject to risks and uncertainties, including, but not limited to uncertainties surrounding the Company's dispute with the U.S. Navy which could cause actual results to vary materially from those discussed herein. 6 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES PAGE Report of Independent Accountants..................... 8 Consolidated Balance Sheets........................... 9 Consolidated Statements of Operations................. 10 Consolidated Statements of Stockholders' Equity....... 11 Consolidated Statements of Cash Flows................. 12 Notes to Consolidated Financial Statements............ 13 7 REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors and Stockholders Hi-Shear Industries Inc. North Hills, New York In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, stockholders' equity and cash flows present fairly, in all material respects, the financial position of Hi-Shear Industries Inc. and its subsidiaries at May 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended May 31, 2000 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in the Commitments and Contingencies note to Consolidated Financial Statements, the Company is involved in a dispute with the U.S. Navy regarding the termination of certain contracts. The Company has filed damage claims totaling $62.9 million against the Navy with respect to these contracts, however, a settlement has not been reached and the claims are being contested by the Navy. Therefore, the amount or timing of the recovery cannot be predicted at this time and no recognition of income related to this claim has been made in the consolidated financial statements. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Summary of Significant Accounting Policies Note to Consolidated Financial Statements, on February 26, 1996, the Company sold its last operating asset and effectively ceased operations. Since that date the Company has suffered recurring losses and cash flow deficit from operations that raise substantial doubt about its ability to continue as a going concern. The Company is presently in the process of liquidation, and management's plans in regard to this matter are further discussed in the Summary of Significant Accounting Policies Note to Consolidated Financial Statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. PRICEWATERHOUSECOOPERS LLP Los Angeles, California July 20, 2000 8 HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

See notes to consolidated financial statements. 9 HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS

See notes to consolidated financial statements. 10 HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years ended May 31, 2000, 1999 and 1998

See notes to consolidated financial statements 11 HI-SHEAR INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

See notes to consolidated financial statements 12 HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies followed in the preparation of the accompanying consolidated financial statements of Hi-Shear Industries Inc. and Subsidiaries (the "Company") are summarized below: Basis of Presentation. With the sale of Hi-Shear Corporation, the Company no longer conducts an operating business. The Company currently anticipates that upon final resolution of its claims against the U.S. Navy, it will complete the distribution of its assets to stockholders and seek stockholder approval to dissolve the Company. Until that time, management's plans to continue as a going concern include reducing expenses and obtaining bank or officers' loans, as required. Principles of Consolidation. The consolidated financial statements include the accounts of Hi-Shear Industries Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates and Assumptions. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Cash and Equivalents. The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The cash balances on deposit are held principally at one financial institution and at times, have exceeded insurable amounts. The Company believes it mitigates its risks by investing in or through a major financial institution. Cash and cash equivalents are reflected in the accompanying consolidated balance sheet at amounts considered by management to reasonably approximate fair value. Property and Equipment. Land, equipment and fixtures are carried at cost. For financial reporting purposes, depreciation expense is provided on a straight line basis, using estimated useful lives of 3 to 10 years for equipment and fixtures. Accelerated methods have been used for tax purposes where permitted. Upon disposition, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in earnings for the period. Income Taxes. The Company and its subsidiaries file consolidated federal and state income tax returns. Deferred provision is made for income taxes resulting from timing differences in the recognition of income and expense for tax and financial reporting purposes. The Company utilizes Statement of Financial Standards No. 109 "Accounting for Income Taxes" which 13 HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) requires recognition of deferred tax assets and liabilities for temporary differences and net operating loss (NOL) and tax credit carryforwards. Under this statement, deferred income taxes are established based on enacted tax rates expected to be in effect when temporary differences are scheduled to reverse and NOL and tax credit carryforwards are expected to be utilized. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Earnings Per Share. Basic net income (loss) per share is computed by dividing the net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common shareholders by the weighted average number of common and common equivalent shares outstanding during the period. The Company did not have any common equivalent shares outstanding during the years ended May 31, 2000, 1999 and 1998. Recent Accounting Standards. In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities". This statement requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. The provisions of the statement are effective the first quarter of 2001, as amended by SFAS No. 137 in June 1999. The Company does not believe that the new standard will have a material impact on the Company's financial statements. SALE OF SUBSIDIARY 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 its subsidiaries to GFI Industries S.A. of Belfort, France for $46 million in cash. The sale was treated as a sale of stock for accounting purposes. As a result, the Company recognized a gain of approximately $1.8 million in its statement of operations. The sales price was subject to adjustment based upon a review of the closing balance sheet of Hi-Shear Corporation and verification by GFI of the net asset value as required under the terms of the sale. The Company and GFI were unable to reach an agreement on the net asset value with GFI requesting downward adjustments to the sales price totaling $6.4 million. The disagreement was submitted to arbitration as required under the Stock Purchase Agreement. After reviewing material submitted by both parties, the arbitrator decided in favor of the Company and essentially 14 HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) finalized the purchase price at $46 million. Additionally, under the terms of the agreement for the sale of HSC, the Company was restricted from distributing to its stockholders, by means of dividend or otherwise, at least $3.0 million of the purchase price through March 31, 1997. Subsequent to that date, the Company may distribute any remaining funds not utilized for operations. PROVISION FOR INCOME TAXES The components of the income tax provision are summarized as follows:

15 HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes, and the amounts used for income tax purposes. The major components of deferred tax liabilities and assets as of May 31, 2000 and 1999 were as follows:

As of May 31, 2000, the Company had a federal net operating loss carryforward of approximately $15,640,000 which expires between 2006 and 2020, state net operating loss carryforwards of approximately $7,680,000 expiring between 2001 and 2020 and alternative minimum tax credit carryforward of $273,000 with no expiration. ADVANCES FROM OFFICER OF THE COMPANY On March 1, 2000, David A. Wingate, Chairman, President and Chief Executive of Hi-Shear Industries Inc. entered into an agreement with a bank to obtain a $500,000 unsecured line of credit at an interest rate of prime plus 1.5%. Mr. Wingate is making these funds available to the Company at essentially the same rate of interest. At May 31, 2000 the Company had been advanced $300,000 against this line. PENSION AND INCENTIVE COMPENSATION PLANS The Company maintains a 401(k) Profit Sharing Plan for all employees. Company contributions to this Plan were $9,000, $11,000 and $9,000 for the years ended May 31, 2000, 1999 and 1998, respectively. 16 HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) SALE OF LAND On June 4, 1999, in accordance with the terms of a lease between HSI Properties Inc., a wholly owned subsidiary of the Company, and Hi-Shear Technology Corporation (HSTC) dated June 4, 1993, HSTC exercised its option to purchase the property it was leasing in Saugus California. The sales price was $1,000,000 plus escalations totaling $124,864 which resulted in a gain on sale of land of approximately $ 1,037,000. The total proceeds of $1,124,864 have been used as working capital by the Company. COMMITMENTS AND CONTINGENCIES In March 1991, the Company terminated the operations of one of its subsidiaries, Defense Systems Corporation in Reno, Nevada. As a result of shutting down operations at this facility, two contracts with the U.S. Navy were terminated for default. The Company appealed the default terminations and on May 31, 1995 its appeals from the default terminations was sustained by the Armed Services Board of Contract Appeals. This decision released the Company from any obligation to repay progress payments received under the contracts, and entitled the Company to recover contract and additional costs expended in connection with the contracts. On January 31, 1996, the Company filed damage claims against the U.S. Navy totaling $62.9 million. The government audited these claims but did not express a willingness to negotiate a settlement of these claims with the Company. As a result, on February 11, 1997, the Company filed an appeal before the Armed Services Board of Contract Appeals requesting an adjudication of this dispute. The Board conducted hearings on this appeal during August and September 1998. Each side subsequently filed post hearing briefs and rebuttal briefs in February and March 1999. On March 17, 2000 the Board issued its decision awarding the Company claim damages totaling $18,410,000. On July 17, 2000 the Company received notification that the Justice Department had filed an appeal covering both the May 30, 1995 (entitlement) and March 17, 2000 (quantum) decisions of the Armed Services Board of Contract Appeals. As a result of the above, the amount or timing of the recovery cannot be predicted at this time. The Company had previously written off additional costs associated with this matter due to the uncertainty of the outcome, however, since the rendering of the favorable decision on May 30, 1995, the Company began accruing additional costs incurred, primarily claims preparation and legal, as claims receivable. At May 31, 2000 claims receivable of $4.6 million are included as other long term assets on the balance sheet, as management believes, in conjunction with outside counsel, such amounts are reasonable and collectable. In addition, the Company has netted deferred legal cost, subject to negotiations, against other assets of approximately $1.8 million which will 17 HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) be settled upon final resolution of the claim with the U.S. Navy. Since the ultimate recovery of these claims cannot presently be determined, no recognition from any settlement proposal, other than the claim receivable noted above, has been reflected in the accompanying financial statements. Subsequent to the completion of the trial against the U.S. Navy, certain employees involved in preparing the case were promised a discretionary bonus contingent upon the successful recovery of monetary claims. In this regard, the Company has entered into agreements with two of these individuals providing for the payment of bonuses totaling 8% of the claim proceeds recovered. The Company is involved in various other actions arising in the normal course of business with respect to contracts and employment claims. Management, after taking into consideration legal counsel's evaluation of all contingent matters believes that the disposition of these matters will not have a material adverse effect on the Company's financial position, net income or cash flows. In addition to related property taxes and insurance, the Company made net rental payments of approximately, $66,000, $62,000 and $96,000, for the years ended May 31, 2000, 1999 and 1998, respectively. At May 31, 2000 the Company's commitment for future minimum lease payments under noncancellable operating leases is $156,000, expiring in October, 2002. 18 HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) SUMMARY OF QUARTERLY RESULTS (UNAUDITED) The following summarizes unaudited quarterly financial data for the fiscal years ended May 31, 2000 and May 31, 1999:

19 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY NAME Principal Occupation and Position Harold L. Bernstein Lawyer. Secretary of the Company. Victor J. Galgano Vice President and Chief Financial Officer of the Company. Philip M. Slonim Private investor. David A. Wingate Chairman of the Board, Chief Executive Officer and President of the Company. Arthur M. Winston Investment Manager, Glickenhaus & Co. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth the cash compensation for services rendered to the Company and its subsidiaries during the fiscal years 2000, 1999 and 1998, paid to or accrued for those persons who were, at May 31, 2000, the Company's Chief Executive and all of the other executive officers of the Company and subsidiaries whose total annual salary and bonus exceeded $100,000: SUMMARY COMPENSATION TABLE

20 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of August 18, 2000, certain information concerning the persons known to management to be the beneficial owners of more than 5% of the Company's common stock, and for all of the Company's officers and directors as a group. Except as otherwise indicated, the persons listed have sole voting and investment power with respect to shares beneficially owned by them.

(1) Firm and related entities have investment discretion regarding this aggregate number of shares, which are beneficially owned by many investment clients. (2) Share ownership is based upon information in Amendment No. 48 to Schedule 13D filed with the Securities and Exchange Commission. (3) Include shares held by Mr. Wingate as the sole trustee of The Wingate Family Trust of 1980 and shares held by Mr. Wingate's spouse as the sole trustee of a revocable trust. Does not include 150,000 shares owned by The David A. & Shoshanna Wingate Foundation Inc. of which Mr. Wingate is one of four directors. (4) Share ownership is based upon information in Schedule 13G filed with the Securities and Exchange Commission. (5) Mr. Slonim and spouse hold these shares as trustees of a revocable trust. 21 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) Financial Statements - See "Index to Consolidated Financial Statements" in Part II Item 8 herein. (a) (2) Financial Statement Schedules All schedules have been omitted because they are inapplicable, not required, or the required information is included elsewhere in the financial statements or notes thereto. (a) (3) Exhibits (3)(a) Certificate of Incorporation of the Company, restated to include amendments adopted September 30, 1980, filed as an Exhibit to the Company's Report on Form 10-K filed with the Commission on August 28, 1981 and incorporated herein by reference. (3)(b) By Laws of the Company, as amended March 27, 1986, filed as an Exhibit to the Company's Report on Form 10-K filed with the Commission on August 26, 1986 and incorporated herein by reference. (10)(a) Contingent Compensation Agreement between the Company and an executive signed as of December 26, 1985 (updated November 17, 1987), filed as an Exhibit to the Company's Report on Form 10-K filed with the Commission on August 26, 1986 and incorporated herein by reference. (10)(b) Employment agreement dated October 16, 1989 between the Company and an executive, filed as an Exhibit to the Company's Report on Form 10-K filed with the Commission on August 24, 1991 and incorporated herein by reference. (22) Subsidiaries of the Company, filed herewith. All other required exhibits have been previously reported in the Company's prior 10-K's. ITEM 14 (b) REPORTS ON FORM 8-K On March 20, 2000, the Company reported that it had received a decision in a series of long standing appeals before the Armed Services Board of Contract Appeals. 22 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Company 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 and Chief Executive By /s/ Victor J. Galgano --------------------------------- Victor J. Galgano, Vice President and Chief Financial Officer August 24, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. By /s/ Harold L. Bernstein -------------------------------- Harold L. Bernstein, Director August 24, 2000 .................... Date By /s/ Philip M. Slonim -------------------------------- Philip M. Slonim, Director August 24, 2000 ..................... Date By /s/ Arthur M. Winston -------------------------------- Arthur M. Winston, Director August 24, 2000 ..................... Date 23

HI SHEAR INDUSTRIES INC 10-K