Hi Shear Industries Inc – ‘10-K’ for 5/31/97

As of:  Thursday, 8/28/97   ·   For:  5/31/97   ·   Accession #:  912057-97-29327   ·   File #:  1-07633

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

Annual Report   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         27    124K 
 2: EX-27       Financial Data Schedule                                2      6K 

10-K   —   Annual Report
Document Table of Contents

10-K
1st Page of 27
TOC
↑Top
Previous
Next
↓Bottom
Just 1st
 
      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, 1997   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, 1997, 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 $2.25  a      
share) of the 4,177,400 shares held by non-affiliates of the registrant was     
$9,400,000.                                                                     

     Documents Incorporated by Reference

     None.

10-K
2nd Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 2nd
      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.  

In June, 1994, the automotive division of Hi-Shear Corporation was      
incorporated as Hi-Shear Automotive Corp.                                       

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", 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 5,300 square feet of space are leased at a current 
annual rental of approximately $145,000 under a lease which expires May 31,     
1998.                                                                           

HSI Properties, Inc., a wholly-owned subsidiary of the Company, owns 16 
acres of land in Saugus, California, with incidental structures (2,700 sq. ft.) 
currently being leased to a former subsidiary, Hi-Shear Technology Corp., for   
$93,600 per year.  The lease expires May 31, 1999.                              

2 

10-K
3rd Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 3rd
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 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 has  
set a hearing date of April 6, 1998.  The hearing is expected to last several   
weeks after which the Board will render a decision as to the amount of claim    
damages to be awarded to the Company.  See Commitments and Contingencies in the 
notes to consolidated financial statements.                                     

On February 26, 1996, the Company completed the sale of Hi-Shear        
Corporation and related entities to GFI Industries S.A. of Belfort, France.  As 
specified in the Stock Purchase Agreement, the sales price was subject to       
adjustment based upon a review of the closing consolidated balance sheet of     
Hi-Shear Corporation and verification of the net asset value.  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 finalized the purchase price at $46        
million.  See Sale of Subsidiary 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 reported on the NYSE Composite Tape for the periods  
indicated through August 1, 1996.  The high and low prices per share for the    
periods included subsequent to August 1, 1996 were derived from trades executed 
on the Over-The-Counter Exchange.                                               

3 

10-K
4th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 4th
                                        Per Common Share
                                        Market Price
                                        ----------------
                                    High     Low
                                    ----     ---

Quarter Ended                                                                   
August 1996.........................              $6.50     $2.50           
November 1996.......................               2.88      2.38           
February 1997.......................               2.63      2.38           
May 1997............................               2.91      2.38           
                                       -----     -----
Fiscal Year Ended May 31, 1997                      $6.50     $2.38             
                                       -----     -----
                                       -----     -----
Quarter Ended                                                               
August 1995.........................              $8.13     $6.63           
November 1995.......................               7.63      6.75           
February 1996.......................               7.88      4.50           
May 1996............................               6.50      5.63           
                                       -----     -----
Fiscal Year Ended May 31, 1996                      $8.13     $4.50             
                                       -----     -----
                                       -----     -----

   As of August 18, 1997 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, 1997.  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.                                                                         

                                                        [Enlarge/Download Table]

                                                           For the Fiscal Year Ended May 31,           
                                                 ----------------------------------------------------- 
                                                   1997       1996       1995       1994       1993    
                                                 ---------  ---------  ---------  ---------  --------- 
                                                     (Dollars in thousands except per share data)      
                                                                                                       
Selected Statement of                                                                                  
 Operations Data:                                                                                      
Revenues from operations(A)                      $      --  $  46,400  $  58,639  $  56,465  $  71,519 
                                                            ---------  ---------  ---------  --------- 
                                                            ---------  ---------  ---------  --------- 
Income (loss) before discontinued operations     $  (1,283) $   1,106  $    (545) $  (2,974) $    (943)
Loss from discontinued operations(B)                    --         --         --     (2,616)    (7,312)
                                                 ---------  ---------  ---------  ---------  --------- 
Net income (loss)                                $  (1,283) $   1,106  $    (545) $  (5,590) $  (8,255)
                                                 ---------  ---------  ---------  ---------  --------- 
                                                 ---------  ---------  ---------  ---------  --------- 
Weighted Average Shares Outstanding                  5,855      5,855      5,855      5,855      5,855 
                                                 ---------  ---------  ---------  ---------  --------- 
                                                 ---------  ---------  ---------  ---------  --------- 
Per Common Share Data:                                                                                 
Income (loss) before discontinued operations(A)  $    (.22) $     .19  $    (.09) $    (.51) $    (.16)
Loss from discontinued operations (B)                   --         --         --       (.45)     (1.25)
                                                 ---------  ---------  ---------  ---------  --------- 
Net income (loss)                                $    (.22) $     .19  $    (.09) $    (.96) $   (1.41)
                                                 ---------  ---------  ---------  ---------  --------- 
                                                 ---------  ---------  ---------  ---------  --------- 

4 

10-K
5th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 5th
                                                                [Download Table]

                                                  As of May 31,                    
                              -----------------------------------------------------
                                1997       1996       1995       1994       1993   
                              ---------  ---------  ---------  ---------  ---------
                                              (Dollars in thousands)               
                                                                                   
Selected Balance Sheet Data:                                                       
Current assets                $   5,105  $  31,103  $  34,846  $  35,659  $  44,324
Current liabilities                 640      1,131     12,563     12,013     24,025
Working capital                   4,465     29,972     22,283     23,646     20,299
Total assets                      7,555     32,748     49,514     49,115     58,826
Long-term debt                       --         --      9,872      9,953         --
Stockholders' equity              6,915     31,617     27,079     27,149     34,801

(A) Includes revenues and income (loss) from operations of HSC through February 
26, 1996 at which date HSC was sold.  With the completion of this sale, the     
Company disposed of its last remaining operating assets and effectively ceased  
operations.                                                                     

(B) The loss from discontinued operations in fiscal 1994 includes additional    
expenses, legal costs and an unexpected shortfall in amounts realized from the  
sale of material and equipment of a discontinued operation.  In fiscal 1993 the 
loss from discontinued operations includes an after-tax provision of $6.2       
million ($1.05 per share) to write down the net assets of the discontinued      
businesses to their estimated realizable values, record estimated transaction   
costs and report operating results during the phaseout period.                  

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                                                           

Fiscal 1997 compared to 1996                                                    

The Company had no operating activities subsequent to the sale of Hi-Shear      
Corporation during fiscal 1996.  The $1.8 million of general and administrative 
costs incurred in fiscal 1997 include professional and other costs associated   
with the dispute over price adjustment on the sale of Hi-Shear Corporation as   
well as the ongoing costs necessary to pursue the settlement of the Company's   
dispute with the U.S. Navy.                                                     

The interest income reported in fiscal 1997 was due to interest earned on the   
investment of the proceeds from the sale of Hi-Shear Corporation.  The          
investable proceeds declined considerably after the initial liquidating         
distribution to shareholders of approximately $23.4 million on August 1, 1996.  

The Company did not record a provision or benefit for federal income taxes due  
to it's tax loss carryforward position.                                         

Fiscal 1996 compared to 1995                                                    

The Company's results of operations were significantly impacted by the shorter  
period of operating activities due to the sale of Hi-Shear Corporation on       
February 26, 1996.  For the year ended May 31, 1996, the Company recorded a gain
(net of transaction costs) on the sale of Hi-Shear Corporation of approximately 
$1.8 million.  Operating income decreased $744,000 from $958,000 in fiscal 1995 
to $214,000 in fiscal 1996 due to the shortened operating period as well as     
continued downward pressure on pricing levels and increasing material and labor 
costs associated with production.                                               

The interest income reported in fiscal 1996 was due to interest earned on the   
investment of the proceeds from the sale of Hi-Shear Corporation.  Interest     
expense declined $227,000 from $1.3 million in fiscal 1995 to $1.1 million in   
the comparable 1996 period due to the repayment of approximately $13 million of 
amounts outstanding                                                             

5 

10-K
6th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 6th
on the Company's loan agreements with proceeds from the sale                    
of Hi-Shear Corporation.                                                        

With the exception of a provision for alternative minimum tax in fiscal 1996 and
1995, the Company did not record a provision or benefit for federal income taxes
due to the Company's tax loss carryforward position.                            

Liquidity and Capital Resources                                                 

The Company's principal sources of liquidity have consisted of cash provided by 
operating activities and, until the sale of Hi-Shear Corporation, bank          
financing.  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.  Under the     
terms of the agreement for the sale of Hi-Shear Corporation, the Company was    
required to maintain working capital of not less than $3,000,000 through March  
31, 1997.  Subsequent to that date there are no restrictions on Company         
distributions.  At May 31, 1997 the Company had $5.0 million remaining in cash  
and cash equivalents.                                                           

On May 31, 1995 the Company learned that is 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 has set a hearing date of April 6,  
1998.  The hearing is expected to last several weeks after which the Board will 
render a decision as to the amount of claim damages to be awarded to the        
Company.  It is not certain at this time how long it will take the ASBCA to     
render its decision or whether the government will try to appeal the Boards     
decision.  Therefore the total amount or timing of the ultimate recovery cannot 
be predicted at this time.                                                      

6 

10-K
7th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 7th
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 anticipates that existing cash
and cash equivalents  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.  Although management cannot currently estimate when 
these situations will be resolved, the Company has retained what it considers   
sufficient funds to allow it to pursue equitable settlements with regard to all 
open matters currently pending.                                                 

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 

10-K
8th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 8th
REPORT OF INDEPENDENT ACCOUNTANTS               

Board of Directors and Stockholders                                             
Hi-Shear Industries Inc.                                                        
North Hills, New York                                                           

We have audited the accompanying consolidated balance sheets of Hi-Shear  
Industries Inc. and Subsidiaries as of May 31, 1997 and 1996, and the related   
consolidated statements of operations,stockholders' equity and cash flows for   
each of the three years in the period ended May 31, 1997, and the financial     
statement schedule listed in the Index at Item 14(a)(2) of this form 10-K.      
These financial statements and the financial statement schedule are the         
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements and the financial statement schedule based
on our audits.                                                                  

We conducted our audits in accordance with generally accepted auditing    
standards.  Those standards 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.  An audit also includes
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Hi-Shear       
Industries Inc. and Subsidiaries as of May 31, 1997 and 1996, and the           
consolidated results of their operations and their cash flows for each of the   
three years in the period ended May 31, 1997 in conformity with generally       
accepted accounting principles.  In addition, in our opinion, the financial     
statement schedule referred to above, when considered in relation to the basic  
financial statements taken as a whole, presents fairly, in all material         
respects, the information required to be included therein.                      

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 may be 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.                                          

On February 26, 1996, the Company sold its last operating asset and     
effectively ceased operations.  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.                                                           

              COOPERS & LYBRAND L.L.P.

Los Angeles, California                                                         
July 18, 1997                                                                   

8 

10-K
9th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 9th
HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES 
CONSOLIDATED BALANCE SHEETS 

                                                        [Enlarge/Download Table]

                                                                                             May 31,        
                                                                                       -------------------- 
                                                                                         1997       1996    
                                                                                       ---------  --------- 
                                                                                           (000 Omitted)    
                                                                                                            
    ASSETS                                                                                                  
Current assets:                                                                                             
  Cash and equivalents                                                                 $   4,952  $  30,914 
  Other                                                                                      153        189 
                                                                                       ---------  --------- 
      Total current assets                                                                 5,105     31,103 

Property and equipment, at cost:                                                                            
  Land                                                                                        80         80 
  Equipment and fixtures                                                                     126        188 
                                                                                       ---------  --------- 
                                                                                             206        268 
  Less, accumulated depreciation and amortization                                            (91)      (170)
                                                                                       ---------  --------- 
                                                                                             115         98 
Other assets                                                                               2,335      1,547 
                                                                                       ---------  --------- 
          Total assets                                                                 $   7,555  $  32,748 
                                                                                       ---------  --------- 
                                                                                       ---------  --------- 
    LIABILITIES AND STOCKHOLDERS' EQUITY                                                                    

Current liabilities:                                                                                        
  Accrued income taxes                                                                 $      40  $      43 
  Other accrued expenses                                                                     600      1,088 
                                                                                       ---------  --------- 
      Total current liabilities                                                              640      1,131 

Commitments and contingencies                                                                               

Stockholders' equity:                                                                                       
  Capital stock:                                                                                            
  Preferred stock, $1 par value: authorized 500,000 shares; none issued                       --         -- 
  Common stock, $.10 par value: authorized 10,000,000 shares; issued 6,139,756 shares        614        614 
  Paid-in capital                                                                         11,153     34,572 
  Accumulated deficit                                                                     (2,148)      (865)
  Less treasury stock, at cost (285,138 shares)                                           (2,704)    (2,704)
                                                                                       ---------  --------- 
                                                                                           6,915     31,617 
                                                                                       ---------  --------- 
      Total liabilities and stockholders' equity                                       $   7,555  $  32,748 
                                                                                       ---------  --------- 
                                                                                       ---------  --------- 

See notes to consolidated financial statements.                                 

9 

10-K
10th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 10th
HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF OPERATIONS 

                                                                [Download Table]

                                                    Years ended May 31,       
                                              ------------------------------- 
                                                1997       1996       1995    
                                              ---------  ---------  --------- 
                                                                              
                                                    (000 Omitted except       
                                                      per share data)         
Revenues:                                                                     
  Net sales                                   $      --  $  45,268  $  57,484 
  Other                                              --      1,132      1,155 
                                              ---------  ---------  --------- 
                                                      0     46,400     58,639 
                                              ---------  ---------  --------- 
Cost of goods sold                                   --     37,316     46,855 
Selling, general and administrative expenses      1,773      8,870     10,826 
                                              ---------  ---------  --------- 
                                                  1,773     46,186     57,681 
                                              ---------  ---------  --------- 
    Operating income (loss)                      (1,773)       214        958 
Gain on sale of subsidiary                           --      1,768         -- 
Interest income                                     515        434          6 
Interest expense                                     (1)    (1,071)    (1,298)
                                              ---------  ---------  --------- 
    Income (loss) before income taxes            (1,259)     1,345       (334)
Provision for income taxes                           24        239        211 
                                              ---------  ---------  --------- 
    Net income (loss)                         ($  1,283) $   1,106  ($    545)
                                              ---------  ---------  --------- 
                                              ---------  ---------  --------- 
Weighted average Common shares outstanding        5,855      5,855      5,855 
                                              ---------  ---------  --------- 
    Net income (loss) per share               ($   0.22) $    0.19  ($   0.09)
                                              ---------  ---------  --------- 
                                              ---------  ---------  --------- 

See notes to consolidated financial statements.                                 

10

10-K
11th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 11th
HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 
YEARS ENDED MAY 31, 1997, 1996 AND 1995 

                                                        [Enlarge/Download Table]

                                                                                           Cumulative                     
                                                                                           translation,                   
                                                      Common Stock              Retained   pension and    Treasury Stock  
                                                     ---------------  Paid-in   earnings      other      ---------------- 
                                                     Shares   Amount  captial   (deficit)  adjustments   Shares   Amount  
                                                     ------   ------  --------  --------   -----------   ------   ------- 
                                                                                                                          
                                                                                (000 Omitted)                             
Balance, May 31, 1994                                6,140     $614   $ 34,572  ($1,426)     ($3,907)     (285)   ($2,704)
Unrealized foreign currency translation adjustments     --       --         --       --          378        --        --  
Net loss                                                --       --         --     (545)          --        --        --  
Pension adjustment                                      --       --         --       --           97        --        --  
                                                     ------   ------  --------  --------   -----------   ------   ------- 
Balance, May 31, 1995                                6,140      614     34,572   (1,971)      (3,432)     (285)   (2,704 )
Unrealized foreign currency translation adjustments     --       --         --       --         (265)       --        --  
Realized foreign currency translation and pension                                                                         
  adjustments upon sale of subsidiary                   --       --         --       --        3,697        --        --  
Net Income                                              --       --         --    1,106           --        --        --  
                                                     ------   ------  --------  --------   -----------   ------   ------- 
Balance, May 31, 1996                                6,140      614     34,572     (865)           0      (285)   (2,704 )
Distribution to Stockholders                            --       --    (23,419)      --           --        --        --  
Net Loss                                                --       --         --   (1,283)          --        --        --  
                                                     ------   ------  --------  --------   -----------   ------   ------- 
                                                     6,140     $614   $ 11,153  ($2,148)     $     0      (285)   ($2,704)
                                                     ------   ------  --------  --------   -----------   ------   ------- 
                                                     ------   ------  --------  --------   -----------   ------   ------- 

See notes to consolidated financial statements                                  

11

10-K
12th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 12th
HI-SHEAR INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                                                      Years Ended May 31,         
                                                                               ---------------------------------- 
                                                                                  1997        1996        1995    
                                                                               ----------  ----------  ---------- 
                                                                                                                  
                                                                                         (000 Omitted)            
Cash flows from operating activities:                                                                             
Net income (loss)                                                              ($   1,283) $    1,106  ($     545)
Adjustments to reconcile net income (loss) to cash provided by operating                                          
  activities:                                                                                                     
      Net gain on sale of subsidiary                                                   --      (1,768)         -- 
      Depreciation and amortization                                                    13       1,789       2,006 
      (Increase) decrease in accounts receivable                                       --      (1,181)        235 
      Decrease in inventories                                                          --         693         813 
      Increase in other assets                                                       (752)       (842)     (1,642)
      Increase (decrease) in accrued income taxes                                      (3)         95         (61)
      Increase (decrease) in accounts payable, accrued salaries and wages and                                     
        other accrued expenses                                                       (488)     (1,295)       (144)
                                                                               ----------  ----------  ---------- 
        Net cash provided by (used for) operating activities                       (2,513)     (1,403)        662 
                                                                               ----------  ----------  ---------- 
Cash flows from investing activities                                                                              
  Capital expenditures                                                                (30)     (3,344)     (1,649)
  Net proceeds from sale of subsidiary                                                 --      45,397          -- 
  Proceeds from sale of property and equipment                                         --          83          45 
                                                                               ----------  ----------  ---------- 
        Net cash provided by (used for) investing activities                          (30)     42,136      (1,604)
                                                                               ----------  ----------  ---------- 
Cash flows from financing activities:                                                                             
  Liquidating distribution                                                        (23,419)         --          -- 
  Proceeds from (payment of) short-term debt                                           --        (409)        701 
  Proceeds from long-term debt                                                         --      39,141      50,918 
  Payment of long-term debt                                                            --     (49,188)    (50,999)
                                                                               ----------  ----------  ---------- 
        Net cash provided by (used for) financing activities                      (23,419)    (10,456)        620 
                                                                               ----------  ----------  ---------- 
Effect of exchange rate changes on cash                                                --           1          18 
                                                                               ----------  ----------  ---------- 
Net increase (decrease) in cash and cash equivalents                              (25,962)     30,278        (304)
Cash and cash equivalents--beginning of year                                       30,914         636         940 
                                                                               ----------  ----------  ---------- 
Cash and cash equivalents--end of year                                         $    4,952  $   30,914  $      636 
                                                                               ----------  ----------  ---------- 
                                                                               ----------  ----------  ---------- 

Supplemental disclosures of cash flow information                                                                 
  Cash paid during the year for:                                                                                  
    Interest                                                                           $1      $1,049      $1,232 
    Income taxes                                                                       27         341         239 

See notes to consolidated financial statements                                  

12

10-K
13th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 13th
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.  The financial statements reflect the operating    
results of Hi-Shear Corporation and Subsidiaries ("HSC") until its sale on      
February 26, 1996.  With the sale of HSC,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.                                                           

Principles of Consolidation.  The consolidated financial statements       
include the accounts of Hi-Shear Industries Inc. and its majority-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 exceed 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.                                           

13

10-K
14th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 14th
HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES             
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)                

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. Effective June 1, 1993 the Company    
adopted Statement of Financial Standards No. 109 "Accounting for Income         
Taxes" which 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.  Earnings per share are computed based on weighted    
average number of common shares outstanding (excludes treasury stock) during    
the periods.  The effect of common stock equivalents is not significant for     
any periods presented.                                                          

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 and the related    
balance sheet accounts of Hi-Shear Corporation and its affiliated companies     
were removed from the Company's consolidated balance sheet.  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 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 all        
remaining funds.                                                                

14

10-K
15th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 15th
HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES       
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)  

Loan Agreements                                                                 

Prior to February 26, 1996, the Company maintained a revolving line of  
credit which provided for borrowings tied to a percentage of eligible           
accounts receivable and inventory with a maximum borrowing capacity of $15      
million.  Borrowings under this agreement were collateralized by                
substantially all of the assets of HSC.  Concurrent with the sale of HSC, the   
Company used a portion of the proceeds of the sale to pay off this loan         
obligation as well as a term loan facility maintained by a foreign subsidiary   
of HSC.  At May 31, 1997 and 1996, the Company had no credit facilities or      
other loan agreements.                                                          

Provision For Income Taxes                                                      

The components of the income tax provision are summarized as follows:   

                                                        [Enlarge/Download Table]

                                                                                                   Years ended May 31,        
                                                                                            --------------------------------- 
                                                                                               1997        1996       1995    
                                                                                               -----     ---------  --------- 
                                                                                                      (000 Omitted)           

                                                                                                                              
Current:                                                                                                                      
   Domestic                                                                                                                   
        Federal............................................................................  $      --   $     160  $      24 
        State and local....................................................................         24          58         27 
        Foreign............................................................................         --          21        187 
                                                                                                   ---   ---------  --------- 
                                                                                                    24         239        238 
                                                                                                   ---   ---------  --------- 
Deferred:                                                                                                                     
   Domestic                                                                                                                   
        Federal............................................................................         --          --         -- 
        State and local....................................................................         --          --         -- 
   Foreign.................................................................................         --          --        (27)
                                                                                                   ---   ---------  --------- 
                                                                                                    --          --        (27)
                                                                                                   ---   ---------  --------- 
   Total income tax provision..............................................................  $      24   $     239  $     211 
                                                                                                   ---   ---------  --------- 
                                                                                                   ---   ---------  --------- 

15

10-K
16th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 16th
HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)    

The components included in determining the provision for income         
taxes are shown below:                                                          

                                                        [Enlarge/Download Table]

                                                                                               Years ended May 31,       
                                                                                         ------------------------------- 
                                                                                           1997       1996       1995    
                                                                                         ---------  ---------  --------- 
                                                                                                                         
                                                                                                  (000 Omitted)          

Tax provision at federal income tax statutory rate...................................... $    (428) $     457  $    (113)
Increase (decrease) in taxes resulting from:                                                                             
    Permanent differences...............................................................        --         --        (11)
    Foreign tax rate differences........................................................        --          1         39 
    Alternative minimum tax.............................................................        --        177         24 
    Benefit of operating loss carryforwards.............................................        --       (457)        -- 
    Unrecognized tax benefit                                                                   430         --        236 
    State and local taxes on income, net of federal tax benefit.........................        16         38         18 
    Other...............................................................................         6         23         18 
                                                                                         ---------  ---------  --------- 
Income tax provision per consolidated statements of operations.......................... $      24  $     239  $     211 
                                                                                         ---------  ---------  --------- 
                                                                                         ---------  ---------  --------- 

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,       
1997 and 1996 were as follows:                                                  

                                                                [Download Table]

                                                         May 31,        
                                                  --------------------- 
                                                     1997       1996    
                                                  ---------   --------- 
                                                                        
                                                       (000)Omitted     
Assets                                                                  
    Federal net operating loss carryforwards       $   3,081  $   2,841 
    State net operating loss caryforwards                321        299 
    Foreign tax credit carryforwards                      --         39 
    Alternative minimum tax credit carryforwards         369        369 
    Charitable contribution carryforwards                 --        119 
    Other                                                142        190 
                                                   ---------  --------- 
        Total deferred tax assets                      3,913      3,857 
                                                   ---------  --------- 
    Valuation allowance                               (3,913)    (3,857)
                                                   ---------  --------- 
        Net deferred taxes                         $      --  $      -- 
                                                   ---------  --------- 
                                                   ---------  --------- 

As of May 31, 1997, the Company had a federal net operating loss        
carryforward of approximately $10,400,000 which expires between 2006 and        
2012, state net operating loss carryforward of approximately $5,100,000         
expiring between 1998 and 2000 and alternative minimum tax credit               
carryforward of $369,000 with no expiration.                                    

16

10-K
17th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 17th
HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES             
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)                

Pension and Incentive Compensation Plans                                        

Prior to February 26, 1996, the Company maintained a defined benefit    
pension plan and deferred investment profit sharing plan covering               
substantially all of its eligible domestic employees.  The Company also had     
contractual arrangements with certain key employees which provided for          
supplemental retirement benefits.  The Company's policy was to fund pension     
costs annually based on accrued amounts and to amortize past service pension    
costs over a thirty-year period. Effective with the sale of HSC on February     
26, 1996, these plans and related liabilities and assets were assumed by the    
purchaser of HSC. For the fiscal year ended May 31, 1996 and 1995, the          
Company incurred total pension costs of approximately $ 365,000 and $532,000,   
respectively.                                                                   

HSC had a discretionary incentive compensation plan which provided      
current and deferred compensation to various employees based upon the           
achievement of specific levels of operational earnings and other financial      
performance criteria.  The amounts charged to expense under these plans were    
$0 and $62,000 for the years ended May 31, 1996, and 1995, respectively.        

Pension coverage for employees of Hi-Shear Corporation's foreign        
subsidary was provided through a separate plan.  Obligations under this plan    
were provided for by depositing funds with a trustee.  The 1996 and 1995        
pension cost for the plan was $150,000 and $197,000, respectively.              

Contributions to Hi-Shear Corporation's Deferred Investment Profit      
Sharing Plan under Section 401(k) of the Internal Revenue Code were $285,000    
and $444,000 for the years ended May 31, 1996 and 1995, respectively.           
Subsequent to the sale of HSC, the Company transferred the balances of its      
corporate employees who participated in this plan to a new Hi-Shear             
Industries Inc. 401(k) Profit Sharing Plan. Company contributions to this       
Plan were $12,000 and $28,000 for the years ended May 31, 1997 and 1996,        
respectively.                                                                   

Capital Stock                                                                   

Common stock outstanding at May 31, 1997 does not include               
284,222 shares reserved under the Company's stock option incentive              
plan.  At May 31, 1997, there were no options outstanding under this            
plan.                                                                           

17

10-K
18th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 18th
HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES               
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)            

Operating Segment Information and Concentration of Credit Risk                  

Prior to the sale of Hi-Shear Corporation on February 26, 1996, the Company     
operated primarily in one industry segment, the manufacture and sale of         
precision fastening systems and components.  The Company serviced its           
worldwide customer base from two manufacturing facilities located in Torrance   
California and Rugby England. Financial information for fiscal 1996, includes   
the operating activity for the nine month period prior to the sale.             

Sales and transfers between geographic areas were generally priced to recover   
cost plus an appropriate mark-up for profit.  Sales and transfers from          
domestic to foreign locations amounted to $1,110,000 and $1,566,000 for         
fiscal 1996 and 1995, respectively.  Sales and transfers from foreign to        
domestic locations were not material for any period presented.  Operating       
profit is revenue less related costs and direct and allocated operating         
expenses, excluding interest and corporate expenses.  Corporate assets are      
those assets maintained for general purposes, principally cash and cash         
equivalents and corporate facilities.                                           

In fiscal 1996 and 1995, approximately 13% and 17%  respectively, of revenue    
was attributable to a single customer who purchases through several different   
divisions and plants.                                                           

A summary of the Company's operations by geographic area is presented below:    

                                                        [Enlarge/Download Table]


(Dollars in thousands)                                                               1997       1996       1995    
---------------------------------------------------------------------------------  ---------  ---------  --------- 
                                                                                                                   
Net Revenues to Unaffiliated                                                                                       
  Customers:                                                                                                       
    United States                                                                  $      --  $  36,547  $  46,547 
    Foreign                                                                               --      9,853     12,092 
                                                                                   ---------  ---------  --------- 
                                                                                   $      --  $  46,400  $  58,639 
                                                                                   ---------  ---------  --------- 
                                                                                   ---------  ---------  --------- 
Operating Profit:                                                                                                  
    United States                                                                  $      --  $   2,518  $   3,233 
    Foreign                                                                               --        189        341 
                                                                                   ---------  ---------  --------- 
                                                                                          --      2,707      3,574 
Gain on Sale of Subsidiary                                                                --      1,768         -- 
Corporate Expenses                                                                    (1,773)    (2,493)    (2,616)
Interest Income (Expense), net                                                           514       (637)    (1,292)
                                                                                   ---------  ---------  --------- 
Profit (Loss) before income taxes                                                  $  (1,259) $   1,345  $    (334)
                                                                                   ---------  ---------  --------- 
                                                                                   ---------  ---------  --------- 
Identifiable Assets                                                                                                
    United States                                                                  $      --  $      --  $  37,146 
    Foreign                                                                               --         --      9,000 
    Corporate                                                                          7,555     32,748      3,368 
                                                                                   ---------  ---------  --------- 
                                                                                   $   7,555  $  32,748  $  49,514 
                                                                                   ---------  ---------  --------- 
                                                                                   ---------  ---------  --------- 

18

10-K
19th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 19th
HI-SHEAR INDUSTRIES INC.                    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)    

Foreign operations were conducted primarily in Europe.  Certain products were   
manufactured in the United States and exported to foreign customers.  Export    
sales from domestic operations were $4,700,000 and $8,300,000 for the years     
ended May 31, 1996 and 1995, respectively.                                      

The Company sold aerospace and transportation fastening systems worldwide,      
primarily to major aircraft and automotive manufacturers. Concentrations of     
credit risk were limited due to the large number of customers which comprise    
the Company's customer base.  Credit was extended based upon an evaluation of   
each customer's financial condition, and generally, collateral was not          
required.  Credit losses, if any, have been provided for in the financial       
statements, and have been consistently within management's expectations.        

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.  These        
claims are subject to government audit and their amount may be contested by     
the U.S. Navy.  Therefore 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, the company began       
accruing additional costs incurred, primarily claims preparation and legal,     
as claims receivable.  At May 31, 1997 claims receivable of $2.3 million are    
included as other long term assets on the balance sheet, as management          
believes such amounts are reasonable and collectable. 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 statments.                              

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.                                                           

19

10-K
20th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 20th
HI-SHEAR INDUSTRIES INC.                
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company's operations were conducted from leased facilities, all of  
which were under operating leases which expired at various dates through        
2004.  The Company also had operating leases covering machinery and equipment   
which provided for the Company to pay operating expenses.  All leases, other    
than the lease of corporate office space, were assigned to the purchaser of     
HSC or terminated.                                                              

In addition to related property taxes and insurance, the Company made net 
rental payments of approximately, $138,000, $950,000 and $1,278,000, for the    
years ended May 31, 1997, 1996 and 1995, respectively.  At May 31, 1997 the     
Company's commitment for future minimum lease payments under a noncancellable   
operating leases is $145,000.                                                   

20

10-K
21st Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 21st
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, 1997 and May 31, 1996:                                            

                                                                [Download Table]

                                        For The Quarter Ended                     
                             ---------------------------------------------------- 
                              Aug 31,       Nov 30,       Feb 28,        May 31,  
                               1996          1996          1997           1997    
                             ---------     ---------     ---------     -----------
                                                                                  
                                    (000 Omitted, except per share data)          
Revenues (B)                 $       0     $       0     $       0      $       0 
                             ---------     ---------     ---------     -----------
                             ---------     ---------     ---------     -----------
Gross profit (B)             $       0     $       0     $       0      $       0 
                             ---------     ---------     ---------     -----------
                             ---------     ---------     ---------     -----------
Net loss                     ($    277)    ($    242)    ($    425)     ($    339)
                             ---------     ---------     ---------     -----------
                             ---------     ---------     ---------     -----------
Net loss per share           ($   0.05)    ($   0.04)    ($   0.07)     ($   0.06)
                             ---------     ---------     ---------     -----------
                             ---------     ---------     ---------     -----------



                              Aug 31,       Nov 30,       Feb 29,        May 31,  
                               1995          1995          1996           1996    
                             ---------     ---------     ---------     -----------
                                                                                  
Revenues (B)                 $  14,877     $  16,264     $  15,144      $     115 
                             ---------     ---------     ---------     -----------
                             ---------     ---------     ---------     -----------
Gross profit (B)             $   2,325     $   2,912     $   3,198      $     649 
                             ---------     ---------     ---------     -----------
                             ---------     ---------     ---------     -----------
Net income (loss)            ($    475)    ($    199)    $   1,709(A)   $      71 
                             ---------     ---------     ---------     -----------
                             ---------     ---------     ---------     -----------
Net income (loss) per share  ($   0.08)    ($   0.03)    $    0.29      $     .01 
                             ---------     ---------     ---------     -----------
                             ---------     ---------     ---------     -----------

(A) Includes gain on sale of subsidiary of $2,013                               

(B) Includes revenue, gross profit and income (loss) from operations of HSC     
    through February 26, 1996 at which date HSC was sold. With the completion of
  this sale, the Company disposed of its last remaining operating assets and
  effectively ceased operations. As a result of the sale, the Company had no
revenue or gross profit during fiscal 1997.                             

21

10-K
22nd Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 22nd
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                       

                                                        [Enlarge/Download Table]


Name                                Principal Occupation and Position                           
----                 ---------------------------------------------------------------------------
                                                                                                
Harold L. Bernstein   Lawyer. Secretary of the Company. Director of Pressure Piping Components, 
                      Inc. (until 1985 a manufacturer of industrial products).                  

Victor J. Galgano     Vice President and Chief Financial Officer of the Company. Director of    
                      Pressure Piping Components, Inc.                                          

Philip M. Slonim      Private investor. Chairman of Pressure Piping Components, Inc.            

David A. Wingate      Chairman of the Board, Chief Executive Officer and President of the       
                      Company. Director of Pressure Piping Components, Inc.                     

Arthur M. Winston     Investment Manager, Glickenhaus & Co. Director of Lea Ronal, Inc. (a      
                      processor of chemical specialties for the electronics and metal finishing 
                      industries). Director of Pressure Piping Components, Inc.                 

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 1997,      
1996 and 1995, paid to or accrued for those persons who were, at May 31,        
1997, 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:                                                                       

22

10-K
23rd Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 23rd
Summary Compensation Table                                                      

                                        Annual
                                        Compensation
                                                        Salary         Bonus
Name and Principal Position                  Year           $              $    
---------------------------                  ----         ------         -----  

David A. Wingate                             1997         $325,000         0    
Chairman, President & Chief Executive        1996          462,000         0    
                                         1995          458,000         0

Robert A. Schell                             1997          175,000         0    
Vice President & Chief Operating             1996          175,000         0    
Officer/Space and Defense                 1995          175,000         0 

Victor J. Galgano                            1997          162,000         0    
Vice President and Chief Financial           1996          162,000         0    
Officer                                   1995          150,000         0 

Item 12.  Security Ownership of Certain Beneficial Owners and                   
Management                                                                      

The following table sets forth, as of August 18, 1997, 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.             

                                                     Percent
                                                      of
Name and Address of                       Amount                Common          
Beneficial Owner                     Beneficially Owned         Stock           
-------------------                  ------------------        --------         

GAMCO Investors, Inc.                1,475,690 (1)(2)          25.21%           
One Corporate Center                                                        
Rye, NY 10580                                                               

David A. Wingate                     1,181,494 (3)             20.18%           
3333 New Hyde Park Road                                                     
North Hills, NY 11042                                                       

Corbyn Invesment Management            669,950 (4)             11.44%           
2330 West Joppa Rd., Suite 108                                              
Lutherville, MD 21093                                                       

Philip M. Slonim                       446,067 (5)              7.62%           
P.O. 27835                                                                  
San Diego, CA 92128                                                         

All directors and officers as a                                                 
group                             1,677,218                 28.65%        
                          ---------                 ------

23

10-K
24th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 24th
(1)  Firm and related entities have investment discretion regarding             
this aggregatenumber of shares, which are beneficially owned by many            
investment clients.                                                             

(2)  Share ownership is based upon information in Amendment No. 46 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.                                                                

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                                 

Schedule II - Valuation and Qualifying Accounts       

All other 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-K
25th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 25th
    (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                                                 

None.                                                                   

24

10-K
26th Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 26th
                                                                     SCHEDULE II

HI-SHEAR INDUSTRIES INC. AND SUBSIDIARIES 
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
For the years ended May 31, 1997, 1996 and 1995 

                                                        [Enlarge/Download Table]

                                                      Balance                                                            
                                                     beginning    Charged to      Charged                       Balance  
                                                        of         costs and     to other                      at end of 
                   Description                        period       expenses      accounts    Deductions (A)     period   
--------------------------------------------------  -----------  -------------  -----------  ---------------  -----------
                                                                                                                         
1997:                                                                                                                    
  Valuation adjustment for deferred income tax                                                                           
    assets........................................      $3,857            $0           $56              $0        $3,913 
                                                    -----------         -----        -----          ------    -----------
                                                    -----------         -----        -----          ------    -----------
1996:                                                                                                                    
  Valuation adjustment for deferred income tax                                                                           
    assets........................................      $7,988             $0           $0          $4,131        $3,857 
                                                    -----------         -----        -----          ------    -----------
                                                    -----------         -----        -----          ------    -----------
1995:                                                                                                                    
  Valuation adjustment for deferred income tax                                                                           
    assets........................................      $7,139             $0         $849              $0        $7,988 
                                                    -----------         -----        -----          ------    -----------
                                                    -----------         -----        -----          ------    -----------

(A) Deductions are the result of utilization of net operating loss carryforwards
and reversal of other temporary differences.                            

25

10-K
Last Page of 27
TOC
1st
Previous
Next
↓Bottom
Just 27th
      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 26, 1997                                                                 

 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 26, 1997                                       
....................                                      
Date                                      

By /s/ Philip M. Slonim                                                         
--------------------                                                      
Philip M. Slonim, Director                                                

August 26, 1997                                       
.....................                                     
Date                                      

By /s/ Arthur M. Winston                                                        
---------------------                                                     
Arthur M. Winston, Director                                               

August 26, 1997                                       
.....................                                     
Date                                      

26

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K’ Filing		Date		First		Last			Other Filings
		5/31/99		2					10-K
		5/31/98		2					10-K
		4/6/98		3		6
Filed on:		8/28/97
		8/26/97		27
		8/18/97		1		23
		7/18/97		8
For Period End:		5/31/97		1		26
		3/31/97		6		14
		2/11/97		3		6
		8/1/96		3		6
		5/31/96		4		26			10-K
		2/26/96		2		21			8-K
		2/23/96		14					NT 10-Q
		1/31/96		3		19
		5/31/95		3		26			10-K
		6/1/93		14
									List all Filings