ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
PRESSURE PIPING COMPONENTS, INC. ("PPC", "Company") was originally incorporated under Delaware law in October 1980 as "HSI-Sub, Inc.", a wholly- owned and inactive subsidiary of Hi-Shear Industries Inc., a Delaware corporation whose common stock is listed and traded on the New York Stock Exchange ("Hi-Shear"). In March 1984, the Company was activated to hold all of the outstanding shares of Midwood Industries, Inc. ("Midwood") and Tube-Line Corporation ("Tube-Line"), the wholly-owned subsidiaries of Hi-Shear which for 20 years had comprised the Pressure Piping Components Division of Hi-Shear and its predecessor. In March 1984, Midwood and Tube-Line were merged with and into the Company and thereupon became the wholly-owned subsidiary of Hi-Shear engaged in the pressure piping components business. Effective May 29, 1984, Hi-Shear distributed to its stockholders all of the outstanding shares of PPC. At the time of the distribution the Company's business consisted of the manufacture and distribution of stainless steel fittings and flanges, the importation and distribution of foreign carbon steel fittings and flanges and the manufacture and distribution of domestic carbon steel fittings and flanges.
Subsequent to the distribution, the pressure piping components business as a whole did not demonstrate any significant economic improvement. Management therefore decided to reduce the size of the business and create greater liquidity with a view to possibly utilizing the cash generated to invest in its remaining operations. After taking initial steps to reorganize the business by selling the stainless steel division in December 1984 and liquidating the foreign import operation in April 1985, management reevaluated its remaining carbon steel business. In light of the fact that profit margins in the industry continued to show no signs of improvement a decision was made that, in the best interests of preserving the capital left in the Company, substantially all of the assets of the domestic carbon steel business should be sold. On August 7, 1985, the assets of the domestic carbon steel business were sold and the Company ceased operations.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS AND CLASSES OF PRODUCTS OR SERVICES
With the sale of its last remaining manufacturing operation on August 7, 1985, the Company no longer conducts an operating business.
(C) NARRATIVE DESCRIPTION OF BUSINESS
With the sale of its last remaining operating assets in August 1985, the Company has reviewed and continues to review and evaluate acquisition opportunities.
EMPLOYEES
The Company currently has no full time employees.
ITEM 2.

ITEM 2. PROPERTIES
The Company's headquarters are located at 3333 New Hyde Park Road, North Hills, New York in space shared with Hi-Shear Industries Inc. (HSI). HSI is charging the Company a fee for providing administrative services.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None. PART II
ITEM 5.

ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since June 20, 1984, the date on which the Company's shares of Common stock were first released from escrow and distributed to the HSI stockholders, the Company's Common Stock has been traded in the over-the-counter market. The following table sets forth the range of the bid and asked prices for the Company's Common Stock during the periods indicated, as reported by the National Association of Securities Dealers Automated Quotation System:
Bid Asked ------------------- Fiscal 1996 High Low High Low - ----------- --------- --------- First Quarter $.38 $.38 $.56 $.56 Second Quarter .38 .38 .56 .56 Third Quarter .38 .38 .56 .56 Fourth Quarter .38 .38 .56 .56 Fiscal 1995 - ----------- First Quarter $.38 $.38 $.56 $.56 Second Quarter .38 .38 .56 .56 Third Quarter .38 .38 .56 .56 Fourth Quarter .38 .38 .56 .56
The Company has no present intention to pay dividends on its common stock and does not anticipate a change in the policy in the foreseeable future.
As of August 23, 1996, there were approximately 1,400 holders of record of the Company's common stock.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information of the Company for the five years ended May 31, 1996. This information should be read in conjunction with the Financial Statements and notes thereto, and the business background information provided under Item I.
Year Ended May 31, ------------------------------------------- 1996 1995 1994 1993 1992 ---- ---- ---- ---- ----
(In thousands, except per share data)
Investment Income $108 $107 $65 $100 $122
Income (Loss) Before Income Tax provision $54 $119 $(140) $45 $59
Net Income (Loss) $47 $118 $(141) $44 $55
Average Common Shares Outstanding 4,100 4,100 4,100 4,188 4,400
Net Income (Loss) Per Common Share $.01 $.03 $(.03) $.01 $.01
Total Assets $2,659 $2,614 $2,584 $2,641 $2,658
Earnings per share are computed based on the weighted average number of common shares outstanding (excluding Treasury stock) during the periods.
The Company has not paid a cash dividend since becoming a publicly-held company.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
With the sale of its last remaining operating assets on August 7, 1985, the Company effectively ceased its operations. Since that time the Company has invested the funds generated from the sale of its former businesses primarily in U.S. Treasury Bills, U.S. government-backed municipal obligations and bank time deposits while it has explored several alternatives relating to the future of the Company including the acquisition of several businesses.
In that regard the Company entered into negotiations during fiscal 1994 to purchase certain assets and the business of a company that was in bankruptcy reorganization. Such negotiations subsequently proved unsuccessful and the Company recognized incurred and estimated costs totaling $150,000 in 1994 in conjunction with this unsuccessful attempt. Actual costs of the unsuccessful negotiations were $90,000 resulting in a credit to income of $60,000 in 1995 to reflect the actual costs.
While it has been the Company's intention to explore investment opportunities, our limited resources has made this task a difficult one. At May 31, 1996, the Company had $2,658,000 of cash and cash equivalents, primarily bank time deposits. If a suitable investment opportunity does not develop, the Company may seek shareholder approval to dissolve the Company.
Investment income has remained stable over the past two years reflecting both consistent levels of cash invested and interest rates. Investment income declined in 1994 due to an overall decline in interest rates and levels of cash invested.
The Company has adequate working capital and investment income to fund general and administrative expenses.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PRESSURE PIPING COMPONENTS, INC.
Report of Independent Accountants 5 Financial Statements - Balance Sheets 6 Statements of Operations 7 Statements of Stockholders' Equity 8 Statements of Cash Flows 9 Notes to Financial Statements 10-12
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders of Pressure Piping Components, Inc.
We have audited the financial statements of Pressure Piping Components, Inc., as of May 31, 1996 and 1995, and the related statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended May 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits 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 financial position of Pressure Piping Components, Inc. as of May 31, 1996 and 1995 and the results of its operations and its cash flows for each of the three years in the period ended May 31, 1996, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Melville, New York August 1, 1996
PRESSURE PIPING COMPONENCOMPONENTS, INC. BALANCE SHEETS
MAY 31, ------------------------ ASSETS 1996 1995 --------- -------- (IN THOUSANDS) ------------------------ Current Assets: Cash and Cash Equivalents $2,658 $2,604 Other - 9 --------- -------- Total Current Assets 2,658 2,613 Other Assets 1 1 --------- -------- Total Assets $2,659 $2,614 ========= ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities: Accrued Expenses $20 $22 --------- -------- Total Current Liabilities 20 22 --------- --------
Stockholders' Equity: Preferred Stock $1.00 Par Value: Authorized - 500,000 Shares; Issued - None - - Common Stock $.10 Par Value: Authorized 10,000,000 Shares; Issued 4,614,539 Shares 461 461 Paid-In Capital 11,803 11,803 Accumulated Deficit (9,442) (9,489) --------- -------- 2,822 2,775 Less: Treasury Stock - at cost (514,083 Shares) 183 183 --------- -------- Total Stockholders' Equity 2,639 2,592 --------- -------- Total Liabilities and Stockholder's Equity $2,659 $2,614 ========= ========
See Notes to Financial Statements
See Notes to Financial Statements
PRESSURE PIPING COMPONENTS, INC. STATEMENTS OF STOCKHOLDERS' EQUITY Years Ended May 31, 1996, 1995 and 1994
See Notes to Financial Statements
PRESSURE PIPING COMPONENTS, INC. STATEMENTS OF CASH FLOWS
See Notes to Financial Statements
PRESSURE PIPING COMPONENTS, INC. NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Earnings Per Share - Earnings per share are computed based on the weighted average number of common shares outstanding during each period.
Cash and Cash Equivalents - Cash and cash equivalents for the purposes of reporting cash flows include cash on deposit and amounts due from a bank maturing within 90 days of purchase. 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 balance sheet at amounts considered by management to reasonably approximate fair value.
Investments - Investments with maturities between three and twelve months are considered to be short-term investments. Such investments are carried at cost, which approximates market. Cost in computing gain or loss on sales of investments is determined on a specific identification basis. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities" which the Company adopted on June 1, 1994. The statement requires that marketable equity and debt securities be classified into three categories; (i) held to maturity securities, (ii) trading securities and (iii) available for sale securities. Unrealized gains and losses resulting from available for sale securities are reported as a separate component of shareholders' equity. Unrealized gains and losses from trading securities are reported on the statement of operations. The Company did not have investments in debt or equity securities as of the date of adoption and, as such, the adoption had no effect on the financial statements.
Income Taxes - Effective June 1, 1993, the Company changed its method of accounting for income taxes from the deferred method to the liability method required by Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." As permitted under the new Statement, prior years' financial statements have not been restated. The cumulative effect of adopting this Statement as of June 1, 1993 was immaterial to the net loss for the period.
Other - The preparation of financial statements in conformity with generally accepted accounting principles requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue
PRESSURE PIPING COMPONENTS, INC. NOTES TO FINANCIAL STATEMENTS - (Continued)
and expenses during the reporting period. The most significant assumptions and estimates relate to income taxes. Actual results could differ from those estimates.
2. INCOME TAXES
The provision for income taxes consists of state income taxes of $7,000, $1,000 and $1,000 for each of the years ended May 31, 1996, 1995 and 1994, respectively.
The following is a reconciliation of the statutory income tax rate to the effective income tax rate.
Years Ended May 31, ----------------------------------------- 1996 1995 1994 ----------- ----------- ------------ Amount % Amount % Amount % ------ ---- ------ ---- ------ ---- (In Thousands) -------------------------------------- Federal tax provision (benefit) at statutory rate ... $16 34 $40 34 $(48)(34) Loss not currently eligible for federal tax benefit carryback. 48 34 Utilization of tax Loss carryforward (16) (34) (40) (34) State and local taxes on income ........ 7 15 1 1 1 1 ----- ---- ------ ---- ------ --- Provision for income taxes ............ $7 15 $1 1 $1 1 ===== ==== ====== ==== ====== ===
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. At May 31, 1996 and 1995, the Company had deferred tax assets of $3,244,000 and $3,260,000 representing $9,541,000 and $9,587,000, respectively, of net operating loss
PRESSURE PIPING COMPONENTS, INC. NOTES TO FINANCIAL STATEMENTS - (Continued)
carryforwards. Of the $9,541,000 of net operating loss carryforwards at May 31, 1996, $7,723,000 expires in the year 2000 and the balance in the years 2001 through 2010. A valuation allowance at May 31, 1996 and 1995 of $3,244,000 and $3,260,000, respectively, has been recognized to offset the entire amount of the related deferred tax asset due to the uncertainty of realizing the benefit of the loss carryforwards.
The reduction of the valuation allowance of $16,000 in 1996 resulted from utilization of net operating loss carryforwards.
3. TRANSACTIONS WITH HI-SHEAR INDUSTRIES INC.
Certain Directors of the Company are executive officers of, and one Director owns more than ten percent of the outstanding common stock of, Hi-Shear Industries Inc. ("HSI"). HSI provides substantially all administrative services for the Company for which it charges the Company a management fee. Included in general and administrative costs are certain overhead charges from HSI of $18,000 per year for 1996, 1995 and 1994.
4. ACQUISITION COSTS
The Company entered into negotiations during fiscal 1994 to purchase certain asets and the business of a company that was in bankruptcy reorganization. Such negotiations subsequently proved unsuccessful and the Company recognized incurred and estimated costs totaling $150,000 in 1994 in conjunction with this unsuccessful attempt. Actual costs of the unsuccessful negotiations were $90,000 resulting in a credit to income of $60,000 in 1995 to reflect the actual costs.
PRESSURE PIPING COMPONENTS, INC. NOTES TO FINANCIAL STATEMENTS - (Continued)
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Director Name Principal Occupation Age Since - ---- -------------------- --- --------
Philip M. Chairman of the Board of the 76 1984 Slonim Company. Private investor since 1981. Director of Hi-Shear Industries Inc. (former parent of the Company).
David A. President and Chief Executive of the 75 1984 Wingate Company since October 1987. Chair- man of the Board, Chief Executive (and President since October 1987) of Hi-Shear Industries Inc. since 1977.
Victor J. Vice President and Chief Financial 53 1989 Galgano Officer of the Company and of Hi-Shear Industries Inc. since 1989. Director of Hi-Shear Industries Inc.
Harold L. Lawyer. Vice President, General 75 1988 Bernstein Counsel and Secretary of the Company. General Counsel and Secretary (and Vice President until 1986) of Hi-Shear Industries Inc. since 1977. Director of Hi- Shear Industries Inc.
PRESSURE PIPING COMPONENTS, INC. NOTES TO FINANCIAL STATEMENTS - (Continued)
Arthur M. Investment Manager, Glickenhaus 52 1991 Winston & Co. Director of Hi-Shear Industries Inc.
David A. Wingate is the brother-in- law of Philip M. Slonim.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
The Company's executive officers are employees of, and paid by, the Company's former parent.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security ownership of certain beneficial owners
Set forth below is certain information concerning persons who beneficially own more than 5% of the Company's voting common stock, as of August 23, 1996:
AMOUNT PERCENTAGE NAME AND ADDRESS OF BENEFICIALLY COMMON OF BENEFICIAL OWNER OWNED STOCK - ------------------- ----- -----
David A. Wingate 1,100,000 26.83% 3333 New Hyde Park Road North Hills, NY 11042
Philip M. Slonim 425,559 10.38% Box 27835 San Diego, CA 92128
Mario J. Gabelli 272,371 6.64% One Corporate Center Rye, NY 10580
Herzog, Heine, Geduld, Inc. 264,314 6.45% 525 Washington Blvd. Jersey City, NJ 07310
PRESSURE PIPING COMPONENTS, INC. NOTES TO FINANCIAL STATEMENTS - (Continued)
(b) Security ownership of management
The following table sets forth, as of August 23, 1996 all information concerning those directors who are beneficial owners of voting stock, and concerning all directors and officers of the Company as a group:
Amount Percentage Name and address of Beneficially Common Beneficial Owner Owned Stock - ---------------- ------------ ----------
David A. Wingate 1,100,000(1) 26.83% Philip M. Slonim 425,559(2) 10.38% Harold L. Bernstein 62,000(3) 1.51% Directors and Officers as a Group (3 Persons including those named above) 1,587,559 38.72%
(1) Mr. D.A. Wingate holds these shares as trustee of the Wingate Family Trust of 1980.
(2) Mr. Slonim and spouse hold these shares as trustees of revocable trusts.
(3) Includes shares owned by Mr. Bernstein's spouse.
(c) Changes in control
The Company knows of no contractual arrangements which may at a subsequent date result in a change of control of the Company.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Directors of the Company are Executive Officers of, and one Director owns more than ten percent of the outstanding common stock of, Hi-Shear Industries Inc. (HSI). See Note 3 of the Notes to Financial Statements for a description of transactions between the Company and HSI, which note is incorporated herein by reference.
PRESSURE PIPING COMPONENTS, INC. NOTES TO FINANCIAL STATEMENTS - (Continued)
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements - See "Index to Financial Statements" in Part II Item 8 herein. (a) (2) Financial Statement Schedules
All schedules have been omitted because they are inapplicable, not required, or the required information is included elsewhere in the financial statements or notes thereto.
(a) (3) Exhibits
(a) Certificate of Incorporation of Company, filed with the Commission on August 27, 1985 and incorporated herein by reference.
(c) By-Laws of Company, filed with the Commission on August 28, 1985 and incorporated herein by reference.
(b) Reports on Form 8-K
None.
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.
PRESSURE PIPING COMPONENTS, INC.
By ---------------------------- Philip M. Slonim, Chairman
By --------------------------- David A. Wingate, Director, President & Chief Executive
By --------------------------- Victor J. Galgano, Director, Vice President & Chief Financial Officer
Dated: August 28, 1996
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 dates indicated.
By Dated: ----------------------------- Harold L. Bernstein, Director
By Dated: ----------------------------- Arthur M. Winston, Director