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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 May 28, 2000.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission file number 0-2331
GLASSMASTER COMPANY
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(Exact name of small business issuer as specified in its charter)
South Carolina 57-0283724
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(State or other jurisdiction of (IRS Employer
Incorporation of organization) Identification No.)
PO Box 788, Lexington SC 29071
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(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number, including area code: 803-359-2594
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No Change
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(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
YES X NO
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(2) Has been subject to such filing requirements for the past 90 days
YES X NO
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Common shares outstanding May 28, 2000: 1,630,696 par value $0.03
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Glassmaster Company
Consolidated Comparative Balance Sheet
(Thousands)
May 28, 2000 August 31, 1999
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(Unaudited)
ASSETS
Current Assets:
Cash $ 164 $ 126
Accounts Receivable (Net of Reserve) 3,710 2,676
Other Current Receivables 111 145
Inventories:
Raw Materials $ 1,875 $ 1,312
Work in Process 520 513
Finished Products 918 3,313 1,007 2,832
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Prepaid Expenses and Other Current Assets 207 170
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Total Current Assets 7,505 5,949
Fixed Assets (Net of Dep'n)
Property and Equipment (at cost) 5,491 5,697
Other Assets
CSV Life Insurance and Other Unamortized Assets 760 630
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Total Assets $13,756 $12,276
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LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable $ 2,462 $ 1,404
Accrued Expenses 256 298
Accrued Income Taxes 0 0
Notes & Mortgages Payable 3,789 2,914
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Total Current Liabilities 6,507 4,616
Long Term Liabilities
Notes & Mtges, Due After One Year $ 4,804 $ 4,805
Deferred Income Taxes 0 4,804 0 4,805
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Total Liabilities 11,311 9,421
Stockholders' Equity
Capital Stock (Authorized 5,000,000 Shares $0.03
Par - 1,630,696 (2000), 1,630,696 (1999)
Shares Issued and Outstanding $ 49 $ 49
Paid-In Capital 1,358 1,358
Donated Capital 124 124
Retained Earnings 914 2,445 1,325 2,856
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Total Liabilities and Equity $13,756 $12,276
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Glassmaster Company
Consolidated Comparative Income Statement
(In thousands except per share amounts)(Unaudited)
Three Months Ended
May 28, 2000 May 30, 1999
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Net Sales $ 6,263 $ 5,479
Cost of Sales 5,438 4,718
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Gross Profit 825 761
Costs and Expenses:
Selling 340 356
General and Administrative 239 263
Other Income and Expense - Net 149 205
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Total Costs and Expenses 728 824
Income From Operations 97 (63)
Interest Expense 197 173
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Income Before Income Taxes (100) (236)
Income Taxes (142) (80)
Net Income $ 42 $ (156)
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Net Income Per Share (1,630,696 Shares) .03 (0.10)
(Basic and Diluted)
Dividends Paid Per Share $ 0.00 $ 0.00
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Glassmaster Company
Consolidated Comparative Income Statement
(In thousands except per share amounts)(Unaudited)
Nine Months Ended
May 28, 2000 May 30, 1999
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Net Sales $ 15,926 $ 16,180
Cost of Sales 13,995 14,181
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Gross Profit 1,931 1,999
Costs and Expenses:
Selling 822 893
General and Administrative 785 760
Other Income and Expense - Net 451 661
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Total Costs and Expenses 2,058 2,314
Income From Operations (127) (315)
Interest Expense 550 498
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Income Before Income Taxes (677) (813)
Income Taxes (267) (276)
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Net Income $ (410) $ (537)
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Net Income Per Share (1,630,696 Shares) (0.25) (0.33)
(Basic and Diluted)
Dividends Paid Per Share $ 0.00 $ 0.00
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Glassmaster Company
Consolidated Statement of Cash Flows
(Thousands)(Unaudited)
Nine Months Ended
May 28, 2000 May 30, 1999
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Cash Flows From Operating Activities
Net Income $ (410) $ (537)
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation 670 702
Amortization 8 7
Increase in Deferred Income Taxes (264) (193)
Loss on Disposal of Fixed Assets 0 9
Changes in Operating Assets & Liabilities:
Decrease (Increase) in Receivables (999) (119)
Decrease (Increase) in Inventories (481) (284)
Decrease (Increase) in Prepaid Expenses &
Other Current Assets (37) (226)
Increase (Decrease) in Accounts Payable 1,058 87
Increase (Decrease) in Accrued Expenses (43) (37)
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Net Cash Provided (Used) By Operating Activities (498) (591)
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Cash Flows From Investing Activities
Additional Investment in Fixed Assets 464 375
Increase (Decrease) in CSV Life Insurance (139) 0
Additional Investment in Other Assets 13 5
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Net Cash Used By Investing Activities 338 380
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Cash Flows From Financing Activities
Proceeds from Exercise of Stock Options 0 3
Payment of Dividend 0 0
Proceeds from Short-Term Borrowings 200 0
Repayment of Short-Term Borrowings (151) 7
Proceeds from Long-Term Obligations 875 44
Repayment of Long-Term Obligations (938) (379)
Net Increase (Decrease) in Short-Term Revolving
Lines of Credit 888 1,218
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Net Cash Provided (Used) By Financing Activities 874 893
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Net Increase (Decrease) In Cash 38 (78)
Cash At Beginning of Period 126 143
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Cash At End of Period $ 164 $ 65
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Supplemental Disclosures of Cash Flow Information
Cash Paid For:
Interest (Net of Amount Capitalized) $ 530 $ 501
Income Taxes (84) 17
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Glassmaster Company
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements 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 have
been included. Operating results for the nine-month period ended May 28, 2000
are not necessarily indicative of the results that may be expected for the year
ended August 31, 2000. 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, 1999. Certain prior
year amounts may have been reclassified to conform with the 2000 presentation.
Item 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS
Consolidated sales for the third quarter ended May 28, 2000 were
$6,263,009, an increase of 14.3% compared with the third quarter of the 1999
fiscal year. The increase in comparative third quarter sales is due to
significantly improved shipments of monofilament products. Sales at the
Monofilament Division rose almost 39% compared to the prior year quarter, but
the increase was partially offset by a sales decline of nearly 22% at Controls.
The decrease in sales at Controls is due to a slowdown in heavy truck
manufacturing and model year engineering changes at its largest customer. New
production contracts that were scheduled to initiate during the quarter have
been mostly delayed into the calendar year fourth quarter. On a comparative year
to date basis, sales of monofilament have increased 8.1% while controls and
electronics sales have declined 12.9% when compared to the prior year.
Consolidated sales year to date total $15,925,525, a decrease of 1.6% when
compared to prior year to date sales of $16,180,060.
Gross profit during the third quarter totaled $824,887, or 13.17% of
sales compared to $760,901, or 13.71% of sales in the year ago quarter. While
total gross profit improved during the quarter due to the increase in sales at
Monofilament, gross margins, when measured as a percent of sales, declined
slightly due to significantly reduced manufacturing activity at Controls.
Similarly, on a year to date basis, improving gross margins at Monofilament have
been offset by a decline at Controls. With manufacturing cost adjustments at
Controls to be implemented during the fourth quarter and improving sales
anticipated in the first quarter of the 2001 fiscal year, as well as continued
high output levels expected at Monofilament, consolidated comparative gross
margins should improve during the period.
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Item 2. Management's Discussion and Analysis (Cont'd)
Selling, G&A, and Other Expenses totaled $728,040, or 11.6% of sales,
during this year's third quarter, compared with $823,879, or 15.0% of sales,
during the prior year third quarter. The decline in quarterly expenses is
primarily due to reduced selling and administrative expenses at Composites and
lower corporate expenses related to employee benefit plans. On a year to date
basis, these expenses total $2.06 million, or 12.9% of sales, compared with
$2.31 million, or 14.3% of sales last year. The decline in year to date expenses
is due to non-recurring credits and miscellaneous income at Controls coupled
with the aforementioned third quarter expense reductions. Interest expense
increased approximately 13.7% in the third quarter compared with the prior year
period but remained relatively unchanged from the prior year at 3.14% of sales.
Year to date interest expense totaled $549,844 versus $498,221 last year, an
increase of 10.4% and due primarily to higher average borrowings required to
support working capital and higher average interest rates on short term
borrowings.
Income (Loss) before income taxes was ($99,611) during the current year
third quarter compared with ($235,735) in the year ago quarter and totals
($676,546) year to date versus ($813,046) last year. The provision (benefit) for
income taxes was ($141,869) in the third quarter and ($266,656) year to date,
compared with ($80,150) and ($276,436), respectively, last year. The benefits
from income taxes recognized in these periods are associated with net operating
tax loss carry-forwards that will be used to offset future taxable income.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were ($499,000) for the nine-month
period ended May 28, 2000 compared with ($591,000) during the comparable period
of the prior fiscal year. The small improvement is primarily due to expanded use
of trade credit to finance increases in receivables and inventories resulting
from increased sales activity at Monofilament.
Cash used by investing activities so far this year totals $338,000
compared with $380,000 during last year's comparable nine-month period. While
capital expenditures have increased slightly from the prior year due to capacity
expansion projects at Controls and Monofilament, the net cash used by investing
activities declined as a result of cash values that were extracted from key man
life insurance policies covering individuals who are no longer employed by the
company.
Net cash provided by financing activities was $875,000 during this
year's first nine months versus $893,000 in the prior year period. Additional
long-term debt at Controls associated with capital equipment acquired to expand
electronics production capabilities and to re-finance existing long-term
mortgage debt that was maturing, was offset by a decline in the increase in
borrowings under the company's short-term revolving lines of credit this year
versus last year. Approximately $200,000 additional long-term funding remains
available under the terms of the long-term financing agreement and Glassmaster
Controls Company intends to borrow the balance of the committed funds during the
fourth quarter of the 2000 fiscal year to fund the remaining capital additions.
The Monofilament Division will complete the acquisition and installation of a
$450,000 extrusion line during the fourth quarter of the fiscal year.
Approximately 80% of the project was complete as of the end of the third quarter
and the company is currently seeking medium-term funding for the project to
supplement working capital.
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Item 2. Management's Discussion and Analysis (Cont'd)
Other than previously discussed, no new material capital expenditures
are planned and the company currently anticipates that its cash requirements
during the remainder of the 2000 fiscal year will be provided from operations
and from borrowings under existing and committed credit lines.
PART II - OTHER INFORMATION
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits.
Exhibit No. Description
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27 May 28, 2000 Financial Data Schedule
b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter ended
May 28, 2000.
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Glassmaster Company
Lexington SC
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
Date July 13, 2000 /s/ Raymond M. Trewhella
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Raymond M. Trewhella
(President and
Principal Executive Officer)
Date July 13, 2000 /s/ Steven R. Menchinger
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Steven R. Menchinger
(Treasurer, Controller, and
Principal Financial Officer)
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EXHIBIT INDEX
Exhibit
No. Description
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27 Financial Data Schedule
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