Glassmaster 10QSB 2003 Q3 Quarterly report (small business)

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-QSB


x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
		For the quarterly period ended June 1, 2003

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

GLASSMASTER COMPANY

(Exact name of small business issuer as specified in its charter)


South Carolina	0-2331	57-0283724

(State or other jurisdiction of Incorporation of organization	(Commission File Number)	(IRS Employer Identification No.)


PO Box 788, Lexington SC				29071

(Address of principal executive offices)				(Zip Code)

Issuer’s Telephone Number, including area code: 803-359-2594

No Change

(Former name, former address and former fiscal year, if changed since last report)

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 YESx NOo

	(2)		Has been subject to such filing requirements for the past 90 days YESx NOo

Common shares outstanding June 1, 2003: 1,643,390 par value $0.03

GLASSMASTER COMPANY

FORM 10-QSB

FOR THE QUARTER ENDED JUNE 1, 2003


		PAGE

Part I	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Balance Sheets as of June 1, 2003 (Unaudited) and August 31, 2002	3

	Income Statements for the Three Months ended June 1, 2003 and June 2, 2002 (Unaudited)	4

	Income Statements for the Nine Months ended June 1, 2003 and June 2, 2002 (Unaudited)	5

	Statement of Cash Flows for the Nine Months ended June 1, 2003 and June 2, 2002 (Unaudited)	6

	Notes to Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis	9

Item 3.	Controls and Procedures	10

Part II	OTHER INFORMATION

Item 5.	Other Information	11

Item 6.	Exhibits and Reports on Form 8-K	11

SIGNATURES		12

CERTIFICATIONS		13

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Glassmaster Company
Consolidated Comparative Balance Sheet
(Thousands)


				June 1, 2003					August 31, 2002

				(Unaudited)
ASSETS
Current Assets:
	Cash						$	98				$	173
	Accounts Receivable (Net of Reserve)							2,522					2,818
	Other Current Receivables							35					7
	Inventories:
		Raw Materials		$	2,019				$	1,812
		Work in Process			467					342
		Finished Products			556			3,042		569			2,723

	Deferred Income Taxes							48					48
	Prepaid Expenses and Other Current Assets							319					49

			Total Current Assets					6,064					5,818

Fixed Assets (Net of Dep’n)
	Property and Equipment (at cost)							3,494					4,283

Other Assets
	CSV Life Insurance, Deferred Tax Assets and Other Unamortized Assets							1,306					1,334


Total Assets							$	10,864				$	11,435

LIABILITIES AND STOCKHOLDERS EQUITY

Current Liabilities:
	Accounts Payable						$	2,039				$	2,248
	Accrued Expenses							233					174
	Notes & Mortgages Payable							4,099					3,733

			Total Current Liabilities					6,371					6,155

Long Term Liabilities
	Notes, Mtges, and Debentures Due After One Year							4,376					4,865


Total Liabilities								10,747					11,020

Stockholders’ Equity
	Capital Stock (Authorized 5,000,000 Shares $0.03 Par — 1,643,390 (2003), 1,630,696 (2002)
		Shares Issued and Outstanding		$	49				$	49
	Paid-In Capital				1,367					1,367
	Donated Capital				124					124
	Retained Earnings				(1,423	)		117		(1,125	)		415


Total Liabilities and Equity							$	10,864				$	11,435

The accompanying notes to financial statements are an integral part of this statement.

Glassmaster Company
Consolidated Comparative Income Statement
(In thousands except per share amounts)(Unaudited)


			Three Months Ended

			June 1, 2003		June 2, 2002

Net Sales			$	3,971	$	4,322
		Cost of Sales		3,158		3,574

Gross Profit				813		748

Costs and Expenses:
		Selling		190		199
		General and Administrative		196		225
		Other Income and Expense — Net		165		133

Total Costs and Expenses				551		557

Income (Loss) From Operations				262		191
		Interest Expense		113		169


Income (Loss) Before Income Taxes				149		22
		Income Taxes		0		0


Net Income (Loss)			$	149	$	22


Net (Loss) Per Share (1,643,390 Shares)				0.09
Net (Loss) Per Share (1,630,696 Shares)						.01
	(Basic and Diluted)

Dividends Paid Per Share			$	0.00	$	0.00

The accompanying notes to financial statements are an integral part of this statement.

Glassmaster Company
Consolidated Comparative Income Statement
(In thousands except per share amounts)(Unaudited)


			Nine Months Ended

			June 1, 2003			June 2, 2002

Net Sales			$	11,958		$	12,864
		Cost of Sales		10,296			11,305

Gross Profit				1,662			1,559

Costs and Expenses:
		Selling		552			567
		General and Administrative		461			681
		Other Income and Expense — Net		540			353

Total Costs and Expenses				1,553			1,601

Income (Loss) From Operations				109			(42	)
		Interest Expense		406			510


Income (Loss) Before Income Taxes				(297	)		(552	)
		Income Taxes		0			0


Net Income (Loss)			$	(297	)	$	(552	)


Net (Loss) Per Share (1,643,390 Shares)				(0.18	)
Net (Loss) Per Share (1,630,696 Shares)							(0.34	)
	(Basic and Diluted)

Dividends Paid Per Share			$	0.00		$	0.00

The accompanying notes to financial statements are an integral part of this statement.

Glassmaster Company
Consolidated Statement of Cash Flows
(Thousands)(Unaudited)


				Nine Months Ended

				June 1, 2003			June 2, 2002

Cash Flows From Operating Activities
	Net Income			$	(297	)	$	(552	)
	Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities:
		Depreciation			506			569
		Amortization			39			36
		Increase in Deferred Income Taxes			0			0
		(Gain) Loss on Sale of Assets			(35	)		0
		Changes in Operating Assets & Liabilities:
			Decrease (Increase) in Receivables		269			125
			Decrease (Increase) in Inventories		(318	)		91
			Decrease (Increase) in Prepaid Expenses & Other Current Assets		(271	)		(52	)
			Increase (Decrease) in Accounts Payable		(209	)		(256	)
			Increase (Decrease) in Accrued Expenses		59			(45	)

Net Cash Provided (Used) By Operating Activities					(257	)		(84	)


Cash Flows From Investing Activities
	Additional Investment in Fixed Assets				(31	)		(96	)
	Cash Received From Sale of Assets				350			0
	Increase (Decrease) in CSV Life Insurance				0			167
	Additional Investment in Other Assets				(12	)		(14	)

Net Cash Provided (Used) By Investing Activities					307			57


Cash Flows From Financing Activities
	Proceeds from Exercise of Stock Options				0			10
	Proceeds from Short-Term Borrowings				181			0
	Repayment of Short-Term Borrowings				(14	)		(393	)
	Proceeds from Long-Term Obligations				8			253
	Repayment of Long-Term Obligations				(497	)		(110	)
	Net Increase (Decrease) in Short-Term Revolving Lines of Credit				197			213

Net Cash Provided (Used) By Financing Activities					(125	)		(27	)


Net Increase (Decrease) In Cash					(75	)		(54	)

Cash At Beginning of Period					173			99


Cash At End of Period				$	98		$	45

Supplemental Disclosures of Cash Flow Information
	Cash Paid For:
		Interest (Net of Amount Capitalized)		$	370		$	501
		Income Taxes			0			0

The accompanying notes to financial statements are an integral part of this statement.

Glassmaster Company
Notes to Consolidated Financial Statements (Unaudited)

NOTE 1 – Basis of Presentation

The accompanying unaudited financial statements which include the accounts of Glassmaster Company (“Glassmaster” or “the Company”) and its wholly owned subsidiary Glassmaster Controls Company, Inc. (“Controls”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows have been included. Operating results for the nine-month period ended June 1, 2003 are not necessarily indicative of the results that may be expected for the full fiscal year ended August 31, 2003. For further information, refer to the Consolidated Financial Statements and Notes to Financial Statements included in the Company’s Annual Report on Form 10-KSB for the year ended August 31, 2002.

NOTE 2 – Revenue Recognition

Revenue from the sale of the Company’s manufactured products is recognized when persuasive evidence of an arrangement exists, the product has been delivered to the customer, the product selling price is fixed or determinable, and collection of the resulting receivable is reasonably assured.

NOTE 3 – Accounts Receivable

The company continually reviews accounts for collectability and establishes an allowance for losses on trade receivables. Accounts receivables have been reduced by an allowance for doubtful accounts in the amount of $129,686 and $147,018 as of June 1, 2003 and June 2, 2002, respectively.

NOTE 4 – Reclassification

Certain prior year amounts may have been reclassified to conform with the current year presentation.

NOTE 5 – Notes and Mortgages Payable

Substantially all property, plant and are pledged as collateral for borrowings. In addition, inventories and customer receivables are pledged as collateral to provide the company and it’s subsidiary with revolving lines of credit for working capital requirements. The amount available for borrowings under these lines of credit varies with fluctuations in the amount of inventories on hand and customer receivables outstanding with maximum available credit lines of $2,500,000 for the company and $1,150,000 for the company’s subsidiary. The balances as of June 1, 2003 were $2,100,576 and $895,998 and the balances as of June 2, 2002 were $1,994,435 and $912,500, respectively.

As disclosed in the company’s Form 10-QSB filing dated January 16, 2003, the company and its wholly owned subsidiary had received loan modification commitments from its primary lenders that extended the maturity dates of these revolving loan agreements to July 7, 2003 and June 30, 2003, respectively. During the second quarter the company asked for and was granted temporary deferments from making principal payments on its long-term debt by its lender in South Carolina. These deferments have been on a month to month basis and to date total $270,000. On March 14, 2003 this same lender advanced an additional $146,000 in short term working capital to supplement the liquidity of the company pending further evaluation of the overall credit relationship. Both primary lenders have recently completed appraisals of all real estate and equipment owned by the company to determine a current valuation of the collateral underlying the loans. In addition, the company has provided the lenders with updated projections of operating cash flows. On April 11, 2003 the company’s lender in South Carolina revised its loan agreement to extend the maturity date from July 7, 2003 to September 5, 2003. Both lenders have so far expressed a willingness to continue to work with the company while alternative sources of debt and equity financing are pursued.

Glassmaster Company
Notes to Consolidated Financial Statements (Unaudited)

NOTE 6 – Segment Reporting

The Company classifies its business into two segments based on products offered and geographic location; Industrial Products and Controls and Electronics. The Industrial Products segment produces extruded synthetic monofilament line, pultruded fiberglass products, and composites that are sold for use in a variety of industrial applications and markets. The Controls and Electronics segment produces flexible cable controls, mechanical and electronic HVAC controls, molded control panels and electronic testing equipment, that are sold for use in the heavy truck, marine, and agricultural industries and is a contract manufacturer of custom electronic products.

The Company evaluates performance based on profit or loss from operations before income taxes not including nonrecurring gains and losses. There are currently no significant intersegment sales and transfers, therefore no eliminations have been made to the information below. Included in the tables below is relevant financial data provided by each reportable segment. The amounts shown in the Other column are generally those expenses and assets which are associated with the Company’s corporate headquarters and other entity wide expenses which have not been included in segment information.


	Three Months Ended June 1, 2003

	Industrial		Controls &
	Products		Electronics		Other			Total

Segment Assets	$	5,241,412	$	3,891,227	$	1,731,831		$	10,864,470
Revenues from External Customers		2,484,049		1,486,591					3,970,640
Segment Profit (Loss)		343,335		99,036		(180,328	)		262,043
Interest Expense		84,938		27,843					112,781

Income (Loss) Before Income Taxes									149,262


	Three Months Ended June 2, 2002

	Industrial		Controls &
	Products		Electronics		Other			Total

Segment Assets	$	6,374,147	$	3,645,548	$	1,576,656		$	11,596,351
Revenues from External Customers		2,966,766		1,344,493					4,311,259
Segment Profit (Loss)		276,632		59,391		(144,659	)		191,364
Interest Expense		136,205		33,377					169,582

Income (Loss) Before Income Taxes									(21,782	)


	Nine Months Ended June 1, 2003

	Industrial		Controls &
	Products		Electronics		Other			Total

Segment Assets	$	5,241,412	$	3,891,227	$	1,731,831		$	10,864,470
Revenues from External Customers		7,441,406		4,516,838					11,958,244
Segment Profit (Loss)		502,506		175,055		(568,778	)		108,783
Interest Expense		319,671		86,403					406,074

Income (Loss) Before Income Taxes									(297,291	)


	Nine Months Ended June 2, 2002

	Industrial		Controls &
	Products		Electronics		Other			Total

Segment Assets	$	6,374,147	$	3,645,548	$	1,576,656		$	11,596,351
Revenues from External Customers		8,461,781		4,370,456					12,832,237
Segment Profit (Loss)		305,576		79,987		(427,445	)		(41,882	)
Interest Expense		406,198		103,825					510,023

Income (Loss) Before Income Taxes									(551,905	)

Item 2. Management’s Discussion and Analysis

RESULTS OF OPERATIONS

Consolidated Net Sales for the third quarter ended June 1, 2003 were $3,970,640, a decrease of 8.1% when compared with prior year third quarter sales of $4,321,625. The decrease in comparative third quarter sales is due to lower sales at Monofilament resulting from continued weakness in the industrial sector of the U.S. economy. Sales in the third quarter at Glassmaster Controls increased 10.5% compared to the same period of the prior year as sales of electronic controls and circuit boards continue to grow while sales of mechanical controls and control panels have remained flat due to a prolonged slump in the domestic truck manufacturing industry. Year to date consolidated sales total $11,958,244, a decrease of 7.0% when compared to prior year to date sales of $12,863,842. Industrial Products segment sales have declined by approximately 12.4% while Controls and Electronics segment sales have increased 3.4% when compared to the prior year nine month period.

Gross Profit realized during the third quarter increased to $813,000, or 20.5% of sales, from $747,810, or 17.3% of sales in the year ago third quarter. The increase in gross profit is due a favorable mix of product sales and manufacturing cost reductions at Monofilament. Notwithstanding the lower sales volumes, year to date gross profit margins have increased to 13.9% of sales this year to date from 12.1% of sales last year due to manufacturing cost reductions and a favorable mix of products sold. The company continues in its efforts to reduce the costs of manufacturing on all its products. Any significant future increase in gross margins will result from increasing levels of orders and throughput at Monofilament and higher rates of utilization on electronic production equipment at Controls.

Selling, G&A, and Other Income and Expenses (Net) increased to $550,957, or 13.9% of sales, in the current year third quarter, compared to $556,446, or 12.9% of sales in the prior year comparative period. On a year to date basis, these expenses total $1,551,974, or 13.0% of sales, compared with $1,600,592, or 12.4% of sales last year.

Interest Expense totaled $112,781 during this year’s third quarter compared with $169,581 last year, a decrease of 33.5%. Year to date interest expense totals $406,073 compared with $510,023 last year, a decline of 20.4%. The decrease in interest expense is attributable to a decline in interest rates and lower average borrowings outstanding compared to last year’s quarterly and year to date periods.

The Income (Loss) Before Income Taxes was $149,292 during the current year third quarter compared with $21,782 in the year ago quarter. The year to date loss totals ($297,291) versus ($551,904) last year.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows from operating activities were ($257,696) during the first nine months of the 2003 fiscal year compared with ($84,483) during the prior year period. The decline in cash provided from operating activities is primarily due to cash used for inventories and prepaid items at Controls and a significant decline in trade credit payables outstanding at Industrial Products.

Item 2. Management’s Discussion and Analysis (Cont’d)

Cash (provided) used by investing activities year to date was ($306,801) compared to ($57,320) in the year ago period. Cash received from the sale of the Newberry, SC plant in the first quarter of this fiscal year and lower purchases of equipment at Controls this year to date compared with the prior year period accounts for the change. The current year comparative improvement was partially offset by $167,182 in proceeds realized from the surrender of all life insurance policies associated with a key man benefit program that occurred in the prior year period.

Net cash provided (used) by financing activities was ($123,930) in the current year to date period versus ($27,278) last year. The increase in cash used by investing activities is primarily due to the net proceeds from the sale of the Newberry, SC facility having been applied to debt reduction. The current year period benefited from additional short term debt and from principal payment deferrals on long-term obligations that were granted by the company’s primary lender in South Carolina. See Note 5, Notes and Mortgages Payable, for further information regarding these payment deferrals and a current status of the company’s discussions with its lenders.

The company currently anticipates that its cash requirements during the remainder of the 2003 fiscal year will be provided from operations and from borrowings under existing and committed credit lines.

Item 3. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. The Company’s principal executive officer and its principal financial officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)), have concluded that, as of such date, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities.

(b) Changes in internal controls. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s disclosure controls and procedures subsequent to the date of their evaluation, nor were there any significant deficiencies or material weaknesses in the Company’s internal controls. As a result, no corrective actions were required or undertaken.

PART II — OTHER INFORMATION

Item 5. Other Information


	On June 30, 2003 the company filed a Current Report on Form 8-K to disclose the resignation of its independent auditors, Brittingham, Dial and Jeffcoat, CPA’s, P.A. The company has retained Elliott Davis, LLC as its independent auditors effective August 1, 2003.

Item 6. Exhibits and Reports on Form 8-K

	a)		Exhibits Exhibit 99.1 – Certification of Periodic Report

	b)		Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended June 1, 2003.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		GLASSMASTER COMPANY LEXINGTON, SC

Date: July 15, 2003		/s/ Raymond M. Trewhella

		Raymond M. Trewhella
		(CEO and Chairman of the Board,
		Principal Executive Officer)

Date: July 15, 2003		/s/ Richard E. Trewhella

		Richard E. Trewhella
		(Corporate Controller & Treasurer,
		Principal Financial Officer)

Certifications

I, Raymond M. Trewhella , certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Glassmaster Company;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: July 15, 2003

/s/ Raymond M. Trewhella

Raymond M. Trewhella
CEO and Chairman of the Board
Principal Executive Officer

Certifications (cont’d)

I, Richard E. Trewhella, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Glassmaster Company;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: July 15, 2003

/s/ Richard E. Trewhella

Richard E. Trewhella
Corporate Controller & Treasurer
Principal Financial Officer

Glassmaster (GLMA) Inactive 10QSB2003 Q3 Quarterly report (small business)