10-Q 1 a2045372z10-q.txt 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM I0-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended FEBRUARY 28, 2001 ----------------- Commission file number 1-7633 ------ HI-SHEAR INDUSTRIES INC. ----------------------- (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 ------- ------ 5,854,618 Common Shares were outstanding as of April 9, 2001. HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES ------------------------------------------ INDEX

Page Number ------ Part I. Financial Information: Item 1. Financial Statements: Consolidated Balance Sheets as of ~~November~~February 3028, ~~2000~~2001 and May 31, 2000 1 Consolidated Statements of Discontinued Operations for the three and ~~six~~nine months ended ~~November~~February 3028, ~~2000~~2001 and ~~1999~~February 29, 2000 2 Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~November~~February 3028, ~~2000~~2001 and ~~1999~~February 29, 2000 3 Notes to Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 Item 3. Quantitative and Qualitative Disclosures About Market Risk 76 Part II. Other Information: 7

HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(000 Omitted) ----------------------------- ~~November~~February 3028, May 31, ~~2000~~2001 2000 -------------- ----------- (Unaudited) ASSETS Current assets: Cash and equivalents $~~133~~23,456 $70 Other 3940 52 -------------- ----------- Total current assets ~~172~~23,496 122 Property and equipment, at cost ~~175~~158 175 Less: Accumulated depreciation (~~159~~154) (147) -------------- ----------- Net property and equipment 164 28 Other assets ~~4,586~~- 4,654 -------------- ----------- $423,~~774~~500 $4,804 ============== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Advances from officer $~~500~~ - $300 Accrued income taxes 3624 18 Other accrued expenses ~~239~~4,589 126 -------------- ----------- Total current liabilities ~~775~~4,613 444 Stockholders' equity: Common stock 614 614 Paid-in capital 11,153 11,153 ~~Accumulated~~Retained ~~deficit~~earnings (~~5,064~~accumulated deficit) 9,824 (4,703) Less treasury stock (2,704) (2,704) -------------- ----------- Total stockholders' equity 318,~~999~~887 4,360 -------------- ----------- $423,~~774~~500 $4,804 ============== ===========

See notes to consolidated financial statements. -1-

HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF DISCONTINUED OPERATIONS (Unaudited) (000 Omitted except per share data) ----------------------------------------------- Three Months Ended ~~Six~~Nine Months Ended ---------------------- ----------------------~~---~~ ~~November~~Feb. ~~30,~~28 ~~November~~Feb. ~~30,~~29 ~~2000~~Feb. ~~1999~~28 Feb. 29 2001 2000 ~~1999~~2001 2000 ---------------------- ---------------------- General and administrative expense $~~117~~6,084 $~~268~~324 $~~329~~6,413 $~~612~~936 Gain on sale of ~~land~~property -(25) - -(25) (1,037) ~~Interest~~Settlement of claims (~~income~~13,578) ~~expense~~- 12(13,578) - Interest income (67,359) 22(2) (157,337) (17) ---------------------- ---------------------- Income (Loss) Before Income Taxes ~~(129)~~14,878 (~~262~~322) ~~(351)~~14,527 ~~440~~118 Provision for income taxes 5- 5 10- 1015 ---------------------- ---------------------- Net Income (Loss) ($~~134)~~14,878 ($~~267~~327) ($~~361)~~14,527 $~~430~~103 ====================== ====================== Basic and diluted earnings per common share: Net Income (Loss) ($02.~~02)~~54 ($0.0506) ($02.~~06)~~48 $0.0702 ====================== ====================== Weighted average common shares outstanding 5,855 5,855 5,855 5,855 ====================== ======================

See notes to consolidated financial statements. -2- HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (000 Omitted) ---------------------- ~~Six~~Nine Months Ended ~~November~~Feb.28 ~~30,~~Feb.29 2001 2000 ~~1999~~ ---------------------- Cash flows from operating activities: Net income ~~(loss) (~~$~~361)~~14,527 $~~430~~103 Adjustments to reconcile net income ~~(loss)~~ to net cash used for operating activities: Depreciation and amortization 16 12 8 Increase (decrease) in accrued income taxes 186 (135) Gain on sale of ~~land~~property -- (1,037) Increase (decrease) in other accrued expenses ~~113~~4,463 (2630) Decrease (increase) in other assets 814,666 (~~149~~132) ---------------------- Net cash used for operating activities ~~(137)~~23,678 (~~787~~1,089) ---------------------- Cash flows from investing activities: Proceeds from sale of ~~land~~property --8 1,117 ---------------------- Net cash provided by investing activities --8 1,117 ---------------------- Cash flows from financing activities: Proceeds from advances from ~~officer~~officers 200 -- Payment on advances from officer (500) -- ---------------------- Net cash provided by financing activities ~~200~~(300) -- ---------------------- Net increase in cash and cash equivalents 6323,386 ~~330~~28 Cash and cash equivalents - beginning of period 70 33 ---------------------- Cash and cash equivalents - end of period $~~133~~23,456 $~~363~~61 ======================

See notes to consolidated financial statements. -3- HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying consolidated financial statements of Hi-Shear Industries Inc. and its subsidiaries (The Company) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The interim financial statements presented herein have not been audited by independent public accountants, but include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial condition, results of operations and cash flows for such periods. However, these results are not necessarily indicative of results for any other interim period or for the full year. The consolidated balance sheet data presented herein for May 31, 2000 was derived from the Company's audited consolidated financial statements for the fiscal year then ended. The preparation of financial statements in accordance with generally accepted accounting principles requires the Company's management to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual amounts could differ from these estimates. 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, 2000. With the sale of Hi-Shear Corporation and Subsidiaries ("HSC") on February 26, 1996, the Company no longer conducts an operating business. The Company currently anticipates that now that it has received full payment of its claims against the U.S. Navy, it will seek stockholder approval to dissolve the Company and complete the distribution of its assets to stockholders. Note B - Settlement of Claims On February 6, 2001, the Company received payment of $25,696,525, including interest, representing full settlement of damage claims against the U.S. Navy arising from the termination of two contracts held by a subsidiary, Defense Systems Corporation. The Company is in the process of settling obligations with attorneys, contractors and other individuals and has established a reserve included in Other Accrued Expenses on the Balance Sheet which should be sufficient to satisfy these obligations. Once this is accomplished, the Company intends to seek a shareholder vote to liquidate the Company and distribute remaining assets to shareholders. Note C - Net Income 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 per share is computed by dividing the net income (loss) attributable to common shareholders by the weighted average number of common and common equivalent -4- shares outstanding during the period. The Company did not have any common equivalent shares outstanding during the three and nine month periods ended February 28, 2001 and February 29, 2000. Note D - 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) a former subsidiary, dated June 4, 1993, HSTC exercised its option to purchase the property it was leasing in Saugus California. The sales price was $1,124,864. Proceeds from the sale were used as working capital by the Company. Note E - 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 + 1.5%. Mr. Wingate made 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. With the receipt of the U.S. Navy settlement, the Company repaid this obligation in full. Note F - Income Taxes As a result of the utilization of available tax loss carry forwards and credits, the Company has no current provision for federal or state income taxes. -5- Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition. Results of Operations On February 26, 1996, the Company sold its last remaining operating entity, Hi-Shear Corporation and its subsidiaries and effectively ceased operations. Since that time the Company has reduced corporate staff and expenses to a minimum level. During the nine month periods ended February 28, 2001 and February 29, 2000, corporate overhead totaled $6,413,000 and $936,000 , respectively. The current nine month period includes accruals necessary to satisfy legal and contractual obligations, previously capitalized costs and the current costs incurred in pursuing the settlement of the Company's dispute with the U.S. Navy. During the prior nine month period the Company recorded a gain on the sale of land held by the Company. The interest income reported during the current period relates to the interest received on the U.S. Navy settlement. The interest income reported during the prior period was due to interest earned on the investment of the proceeds retained from the sale land. At May 31, 2000, the Company had available federal and state net operating loss carryforwards of approximately $15,640,000 and $7,680,000, respectively, which are being utilized to totally offset the current period tax provision. Liquidity and Capital Resources The Company's remaining cash requirements consist primarily of satisfying remaining legal, contractual and tax obligations and whatever additional costs are necessary in liquidating the Company. As previously stated, it is the intention of the Company, now that the final settlement with the U.S. Navy has been achieved, to seek a shareholder vote to liquidate the Company and distribute remaining assets to shareholders. 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. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable -6- PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS None Item 2. CHANGES IN SECURITIES None Item 3. DEFAULT UPON SENIOR SECURITIES None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None Item 5. OTHER INFORMATION None Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27. Financial Data Schedule (b) Reports on Form 8-K None -7- SIGNATURES 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/s David A. Wingate --------------------------------- David A. Wingate, Chairman, President & Chief Executive By: s/s Victor J. Galgano --------------------------------- Victor J. Galgano, Vice President & Chief Financial Officer Date: April 10, 2001 -8-

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