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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 June 3, 2001.
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission file number 0-2331
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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 [ ]
(2) Has been subject to such filing requirements for the past 90
days
YES [X] NO [ ]
Common shares outstanding June 3, 2001: 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)
June 3, 2001 August 31, 2000
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(Unaudited)
ASSETS
Current Assets:
Cash $ 47 $ 190
Accounts Receivable (Net of Reserve) 2,551 3,352
Other Current Receivables 196 17
Inventories:
Raw Materials $ 2,230 $ 1,584
Work in Process 385 486
Finished Products 1,083 3,698 1,103 3,173
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Prepaid Expenses and Other Current Assets 264 195
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Total Current Assets 6,756 6,927
Fixed Assets (Net of Dep'n)
Property and Equipment (at cost) 5,168 5,581
Other Assets
CSV Life Insurance and Other Unamortized Assets 1,012 953
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Total Assets $12,936 $13,461
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LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable $ 2,202 $ 2,344
Accrued Expenses 199 208
Accrued Income Taxes 0 0
Notes & Mortgages Payable 3,939 3,575
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Total Current Liabilities 6,340 6,127
Long Term Liabilities
Notes & Mtges, Due After One Year $ 4,808 $ 5,114
Deferred Income Taxes 410 5,218 0 5,114
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Total Liabilities 11,558 11,241
Stockholders' Equity
Capital Stock (Authorized 5,000,000 Shares $0.03
Par - 1,630,696 (2001), 1,630,696 (2000)
Shares Issued and Outstanding $ 49 $ 49
Paid-In Capital 1,358 1,358
Donated Capital 124 124
Retained Earnings (153) 1,378 689 2,220
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Total Liabilities and Equity $12,936 $13,461
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Glassmaster Company
Consolidated Comparative Income Statement
(In thousands except per share amounts)(Unaudited)
Three Months Ended
June 3, 2001 May 28, 2000
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Net Sales $ 4,385 $ 6,263
Cost of Sales 4,010 5,438
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Gross Profit 375 825
Costs and Expenses:
Selling 218 340
General and Administrative 194 239
Other Income and Expense - Net 199 149
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Total Costs and Expenses 611 728
Income From Operations (236) 97
Interest Expense 214 197
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Income Before Income Taxes (450) (100)
Income Taxes 0 (142)
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Net Income $ (450) $ 42
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Net Income Per Share (1,630,696 Shares) (0.28) .03
(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
June 3, 2001 May 28, 2000
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Net Sales $ 14,240 $ 15,926
Cost of Sales 12,528 13,995
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Gross Profit 1,712 1,931
Costs and Expenses:
Selling 697 822
General and Administrative 628 785
Other Income and Expense - Net 580 451
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Total Costs and Expenses 1,905 2,058
Income From Operations (193) (127)
Interest Expense 649 550
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Income Before Income Taxes (842) (677)
Income Taxes 0 (267)
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Net Income $ (842) $ (410)
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Net Income Per Share (1,630,696 Shares) (0.52) (0.25)
(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
June 3, 2001 May 28, 2000
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Cash Flows From Operating Activities
Net Income $ (842) $ (410)
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation 669 670
Amortization 27 8
Increase in Deferred Income Taxes 0 (264)
(Gain)Loss on Disposal of Fixed Assets (26) 0
Changes in Operating Assets & Liabilities:
Decrease (Increase) in Receivables 622 (999)
Decrease (Increase) in Inventories (525) (481)
Decrease (Increase) in Prepaid Expenses &
Other Current Assets (70) (37)
Increase (Decrease) in Accounts Payable (138) 1,058
Increase (Decrease) in Accrued Expenses (13) (43)
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Net Cash Provided (Used) By Operating Activities (296) (498)
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Cash Flows From Investing Activities
Additional Investment in Fixed Assets 272 464
Cash Received From Sale of Fixed Assets (42) 0
Increase (Decrease) in CSV Life Insurance 0 (139)
Additional Investment in Other Assets 86 13
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Net Cash Used By Investing Activities 316 338
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Cash Flows From Financing Activities
Proceeds from Exercise of Stock Options 0 0
Payment of Dividend 0 0
Proceeds from Short-Term Borrowings 650 200
Repayment of Short-Term Borrowings (671) (151)
Proceeds from Long-Term Obligations 510 875
Repayment of Long-Term Obligations (406) (938)
Net Increase (Decrease) in Short-Term Revolving
Lines of Credit 386 888
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Net Cash Provided (Used) By Financing Activities 469 874
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Net Increase (Decrease) In Cash (143) 38
Cash At Beginning of Period 190 126
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Cash At End of Period $ 47 $ 164
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Supplemental Disclosures of Cash Flow Information
Cash Paid For:
Interest (Net of Amount Capitalized) $ 627 $ 530
Income Taxes 0 (84)
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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 June 3, 2001
are not necessarily indicative of the results that may be expected for the year
ended August 31, 2001. 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, 2000. Certain prior
year amounts may have been reclassified to conform with the 2001 presentation.
Item 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS
Consolidated sales for the third quarter ended June 3, 2001 were
$4,385,257, a decline of 30% when compared to the third quarter of the 2000
fiscal year. The decrease in comparative third quarter sales is due to
significantly reduced demand for monofilament products. Monofilament Division
sales were down 41.8% from last year's third quarter as all product classes
suffered from the dramatic slowing of the manufacturing sector of the national
economy, where the majority of monofilament product sales occur. Orders began to
improve as the third quarter ended and some of the large industrial customers
indicated business conditions were showing signs of improving. While fourth
quarter monofilament sales will be lower than the prior year's comparable
quarter, sales should recover somewhat from the depressed levels of the third
quarter. Partially offsetting the decline in monofilament sales was a 9.6%
increase in third quarter sales at Glassmaster Controls due to higher sales of
electronic controls and circuit boards. The strategy to diversify the Controls
business into electronics has significantly added to the revenue base of this
operation. Year to date sales of electronic products have increased 271% versus
last year, while sales of mechanical products have declined 10.6% this year to
date due to the slowdown in the heavy truck and bus industry. Overall, sales at
Controls have increased 2.1% so far this year compared with the prior year to
date period.
Year to date consolidated sales total $14,240,056, a decrease of 10.6%
when compared to prior year to date sales of $15,925,525. Industrial Products
segment sales have declined by 15.5% while Controls and Electronics segment
sales have increased 2.1% when compared to the first nine months of the prior
fiscal year.
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Item 2. Management's Discussion and Analysis (Cont'd)
Gross profit during the third quarter totaled $374,663, or 8.5% of
sales compared to $824,887, or 13.2% of sales in the year ago quarter. The
decrease in gross profit is due to the steep decline in sales and related
manufacturing throughput at Monofilament. As the third quarter progressed, it
became apparent that the normally strong third quarter order patterns for
monofilament were not going to materialize. Division management immediately
adjusted manufacturing output to current sales levels by idling excess capacity,
reducing the workforce, and accelerating cost reduction measures already
underway. Positive results from taking these steps were being seen as the third
quarter concluded and the Monofilament Division should be well positioned to
experience improving gross margins as sales levels recover.
Selling, G&A, and Other Expenses totaled $610,148, or 13.9% of sales,
during this year's third quarter, compared with $728,040, or 11.6% of sales,
during the prior year third quarter. The decrease in quarterly expenses is
primarily due to variable selling expenses that declined in tandem with sales at
Monofilament, but cost reduction efforts and the closure of the Newberry, SC
facility contributed to the decline. On a year to date basis, these expenses
total $1,905,015, or 13.4% of sales, versus $2,057,359, or 12.9% of sales last
year to date. Additional cost reductions have been identified and are being
implemented during the fourth quarter to further reduce expenses on an on-going
basis.
Interest expense was $214,046 during the third quarter compared with
the prior year period total of $196,459, an increase of 8.9%. Year to date
interest expense totals $648,380 versus $549,844 last year, an increase of
17.9%. The increased interest costs for the quarter and year to date periods are
due to higher average borrowings required to support working capital and to
purchase new electronics and extrusion manufacturing equipment during the last
year. The benefits of lower interest rates on short term borrowings lessened the
impact of higher debt levels during the third quarter. Interest expense will
begin to decline as rates have fallen further and inventory and receivable
levels are reduced due to improved turnover.
Income (Loss) before income taxes was ($449,530) during the current
year third quarter compared with ($99,611) in the year ago quarter. The decline
in pre-tax income is due to lower sales and gross profit at Monofilament. Year
to date income (loss) before taxes totals ($841,739) versus ($676,546) last year
and net income (loss) of ($841,739) compares with ($409,890) in the prior year.
Income tax benefits associated with net operating tax loss carry-forwards of
$266,656 were recognized during the prior year to date period, whereas no such
benefit from taxes has been recognized this year.
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Item 2. Management's Discussion and Analysis (Cont'd)
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were ($295,660) during the
nine-month period ended June 3, 2001 compared with ($498,544) during the
comparable period of the prior fiscal year. The improvement in cash provided
from operating activities is due to a significant decline in accounts receivable
outstanding this year versus last year due to lower sales levels during the
third quarter at Monofilament. Partially offsetting the benefits of lower
receivables were higher inventory levels and reduced trade credit outstanding at
Controls. Cash generated by operating activities is expected to improve further
in the fourth quarter as inventory levels are reduced and operating earnings
improve due to lower overall expenses and improving sales.
Cash used by investing activities so far this year totals $315,831
compared with $338,256 last year. While net capital expenditures are
significantly lower this year versus last year, the prior year investments in
fixed assets were partially offset by the extraction of excess cash values from
key man life insurance policies covering individuals that were no longer
employed by the company. There are currently no material capital expenditures
planned.
Net cash provided by financing activities was $467,973 this year to
date compared with $874,708 last year. The decline in cash provided by financing
activities is primarily due to a smaller increase in borrowings under the
company's short-term revolving credit agreements that are secured by accounts
receivable and inventories. While inventories are higher as of the end of the
third quarter by approximately $385,000 this year compared to last, accounts
receivable declined by $1,158,000 and led to reduced short-term borrowings,
primarily during the third quarter, when monofilament sales declined
significantly.
The working capital of the company has been negatively impacted by
operating losses incurred during the third quarter. A short-term loan, provided
to the company by its primary lender in December 2000, in the amount of $300,000
($250,000 borrowed and currently outstanding) matured in June, 2001. The company
has requested its lender to extend the maturity date of the note to coincide
with the maturity of its primary revolving credit agreement in December, 2001.
As of the date of this report, the company has not received lender approval of
the note modification, however, indications are the request will be approved.
The company currently anticipates that its cash requirements during the
remainder of the 2001 fiscal year will be provided from operations and from
borrowings under existing and committed credit lines.
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PART II - OTHER INFORMATION
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits.
None.
b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter
ended June 3, 2001.
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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 18, 2001 /s/ Raymond M. Trewhella
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Raymond M. Trewhella
(President and
Principal Executive Officer)
Date July 18, 2001 /s/ Steven R. Menchinger
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Steven R. Menchinger
(Treasurer, Controller, and
Principal Financial Officer)
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