<PAGE> 1
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 March 3, 1996 .
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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
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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 March 3, 1996: 1,613,096 par value $0.03
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Glassmaster Company
Consolidated Comparative Balance Sheet
(Thousands)
<TABLE>
<CAPTION>
March 3, 1996 August 31, 1995
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(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
------
Current Assets:
- - ---------------
Cash $ 100 $ 162
Accounts Receivable (Net of Reserve) 4,137 3,580
Other Current Receivables 21 22
Inventories:
Raw Materials $ 1,735 $ 1,643
Work in Process 588 489
Finished Products 801 3,124 618 2,750
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Prepaid Expenses and Other Current Assets 143 141
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Total Current Assets 7,525 6,655
Fixed Assets (Net of Dep'n)
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Property and Equipment (at cost) 5,672 5,679
Other Assets
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CSV Life Insurance and Other Unamortized Assets 253 253
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Total Assets $13,450 $12,587
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LIABILITIES AND STOCKHOLDERS EQUITY
-----------------------------------
Current Liabilities:
- - --------------------
Accounts Payable $ 2,034 $ 1,656
Accrued Expenses 204 250
Accrued Income Taxes (28) -0-
Notes & Mortgages Payable 4,093 3,453
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Total Current Liabilities 6,303 5,359
Long Term Liabilities
- - ---------------------
Notes & Mtges, Due After One Year $ 3,251 $ 3,347
Deferred Income Taxes 453 3,704 453 3,800
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Total Liabilities 10,007 9,159
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Stockholders' Equity
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Capital Stock (Authorized 5,000,00 Shares $0.03
Par - 1,613,096 (1996), 1,601,029 (1995)
Shares Issued and Outstanding $ 48 $ 48
Paid-In Capital 1,342 1,323
Donated Capital 124 124
Retained Earnings 1,929 3,443 1,933 3,428
------- ------- ------- -------
Total Liabilities and Equity $13,450 $12,587
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</TABLE>
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Glassmaster Company
Consolidated Comparative Income Statement
(In thousands except per share amounts)(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 3, 1996 March 5, 1995
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<S> <C> <C>
Net Sales $ 5,500 $ 6,463
Cost of Sales 4,613 5,262
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Gross Profit 887 1,201
Costs and Expenses:
Selling 276 335
General and Administrative 237 263
Other Income and Expense - Net 209 342
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Total Costs and Expenses 722 940
Income From Operations 165 261
Interest Expense 162 135
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Income Before Income Taxes and
Extraordinary Item 3 126
Income Taxes (8) 49
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Income Before Extraordinary Item 11 77
Extraordinary Gain - Storm Damage
(Net of Income Taxes of $170,772) 0 287
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Net Income $ 11 $ 364
======= =======
Earnings Per Share (1,601,737 Shares) 0.23
Earnings Per Share (1,613,096 Shares) 0.01
Dividends Paid Per Share $ 0.03 $ 0.06
======= =======
</TABLE>
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Glassmaster Company
Consolidated Comparative Income Statement
(In thousands except per share amounts)(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 3, 1996 March 5, 1995
------------- -------------
<S> <C> <C>
Net Sales $11,297 $11,869
Cost of Sales 9,438 9,696
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Gross Profit 1,859 2,173
Costs and Expenses:
Selling 532 605
General and Administrative 522 541
Other Income and Expense - Net 436 563
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Total Costs and Expenses 1,490 1,709
Income From Operations 369 464
Interest Expense 315 244
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Income Before Income Taxes and
Extraordinary Item 54 220
Income Taxes 9 83
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Income Before Extraordinary Item 45 137
Extraordinary Gain - Storm Damage
(Net of Income Taxes of $170,772) 0 287
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Net Income $ 45 $ 424
======= =======
Earnings Per Share (1,601,737 Shares) 0.27
Earnings Per Share (1,613,096 Shares) 0.03
Dividends Paid Per Share $ 0.03 $ 0.06
======= =======
</TABLE>
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Glassmaster Company
Consolidated Statement of Cash Flows
(Thousands)(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 3, 1996 March 5, 1995
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<S> <C> <C>
Cash Flows From Operating Activities
- - ------------------------------------
Net Income $ 45 $ 424
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation 329 355
Amortization 5 4
Loss on Disposal of Assets 0 30
Increase in Deferred Income Taxes 0 171
Changes in Operating Assets & Liabilities:
Decrease (Increase) in Receivables (556) (1,740)
Decrease (Increase) in Inventories (375) (1,188)
Decrease (Increase) in Prepaid Expenses &
Other Current Assets (69) (25)
Increase (Decrease) in Accounts Payable 400 1,551
Increase (Decrease) in Accrued Expenses (28) (388)
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Net Cash Provided (Used) By Operating Activities (249) (806)
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Cash Flows From Investing Activities
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Additional Investment in Fixed Assets 322 1,277
Disposal of Fixed Assets - Net Book Value 0 (42)
Increase (Decrease) in CSV Life Insurance 0 (1)
Additional Investment in Other Assets 5 3
Payment of Dividend 48 96
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Net Cash Used By Investing Activities 375 1,333
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Cash Flows From Financing Activities
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Proceeds from Exercise of Stock Options 18 13
Proceeds from Conversion of Debentures to Common Stock 0 47
Proceeds from Short-Term Borrowings 285 53
Repayment of Short-Term Borrowings (58) (277)
Proceeds from Long-Term Obligations 1,419 409
Repayment of Long-Term Obligations (1,511) (329)
Net Increase (Decrease) in Short-Term Revolving
Lines of Credit 409 2,247
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Net Cash Provided (Used) By Financing Activities 562 2,163
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Net Increase (Decrease) In Cash (62) 24
Cash At Beginning of Period 162 91
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Cash At End of Period $ 100 $ 115
======= =======
Supplemental Disclosures of Cash Flow Information
Cash Paid For:
Interest (Net of Amount Capitalized) $ 310 $ 276
Income Taxes (32) 219
</TABLE>
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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 six-month
period ended March 3, 1996 are not necessarily indicative of the results that
may be expected for the year ended August 31, 1996. 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, 1995. Certain prior year amounts may have been reclassified
to conform with the 1996 presentation.
Item 2. Management's Discussion and Analysis
RESULT OF OPERATIONS
Consolidated sales for the second quarter ended March 3, 1996 were
$5,500,218, a decrease of approximately 15% when compared to the second quarter
of the 1995 fiscal year and sales decreased by 5% when compared to this year's
first quarter. Year-to-date sales of $11,296,528 declined by 5% compared to
the same six-month period of last year. Each of the company's operating
divisions reported decreases in second quarter sales when compared with both
the prior year period and with the current year's fiscal first quarter. Second
quarter sales reported by the Monofilament Division decreased by 13% compared
to the same period of last year. Year-to-date sales of monofilament products
are approximately 7% lower than prior year-to-date sales. Monofilament sales
have been adversely affected by the loss of a key customer that has decided to
produce and package its own weed trimmer line, and by another significant
customer in the textile weaving business that has filed for protection from
creditors under Chapter 11 of the U.S. Bankruptcy code. When sales are
adjusted to eliminate those two key customers from the comparable periods,
sales increased by approximately 15% on a year-to-date basis and increased 9%
during this year's second quarter compared to last year's second quarter. The
company's Industrial Products and Composites Division reported second quarter
sales decreased by 37% compared to the prior year quarter and decreased 11%
when compared to the current year first quarter. This division announced the
introduction of a new line of commercial and recreational marine antennas at
the end of last fiscal year and its authorized dealers have been slow to place
orders for the redesigned antennas until their existing inventories have been
sold. The spring buying season should relieve dealer inventories and allow
orders and shipments to improve. Glassmaster Controls Company ("Controls")
reported year-to-date sales have increased by approximately 8% when compared to
last year, although second quarter sales decreased by 12% compared to the prior
year's second quarter and were 12% less than the current year's first quarter.
The recent decrease in orders and shipments experienced by Controls is
attributable to a corresponding slowdown in retail sales and production in the
medium and heavy duty truck industry. This industry has forecasted production
levels for 1996 of 20% to 25% below those for 1995. The company, however,
believes the affect of the trucking industry slowdown on Controls revenues will
be tempered by recent efforts to broaden the product offerings and customer
base to take advantage of selling opportunities in the farm equipment and
marine industries.
6
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Gross profit margins during the second quarter were 16.1% this year
versus 18.6% in last year's second quarter and on a year-to-date basis have
decreased from 18.3% last year to 16.5% so far this year. The deterioration in
gross margins is primarily due to reduced output levels at all operating
locations adjusting to decreased customer demand. Raw material prices appear
to be generally stabilized after several supplier price increases were incurred
during 1995. Manufacturing costs are being reduced where possible and profit
margins will improve as production levels and shipments increase.
Selling and General & Administrative expenses have decreased to 9.3%
of sales this year to date from 9.9% of sales last year due to cost containment
and reduction efforts at the division level. Other expenses are lower by
$98,000 this year to date compared to last year due to a decrease in costs
associated with employee benefit plans. Interest expense has increased by
$70,000 (29%) for the first six months of this fiscal year compared to the
prior year due to higher average debt levels incurred to finance building and
equipment expansions at Controls and to provide additional working capital
required to finance higher inventory and receivables levels that have resulted
from slower than normal asset turnover. Longer lead times for some key raw
materials have led to higher inventories and expanding foreign shipments sold
on extended terms are primarily responsible for the increase in accounts
receivable.
Second quarter Income Before Taxes and Extraordinary Item was $2,729
compared to $125,801 last year while year-to-date totals were $53,767 versus
$220,340 last year. Net Income for the second quarter was $10,512 compared to
$363,933 last year and was $45,124 year to date versus $423,970 last year to
date. The prior year Net Income figures include an Extraordinary Gain of
$287,061 (net of income taxes of $170,772) that resulted from the excess of
property and casualty insurance proceeds received over the net book value of
assets destroyed by tornado in August, 1994.
LIQUIDITY AND CAPITAL RESOURCES
The working capital of the company has decreased by approximately
$74,000 so far this year and totals $1.2 million as of the end of the second
quarter. During the first six months of the current fiscal year working
capital was used to fund additional equipment and tooling purchases of
$322,000. In January the company paid a cash dividend of $.03 per common share
(approximately $48,000).
Year-to-date increases in Accounts Receivable ($556,000) and
Inventories ($375,000) have been funded primarily by borrowings against
short-term revolving credit facilities secured by receivables and inventories.
In South Carolina, the Receivables and Inventory Financing Agreement provides
for a revolving line of credit up to $4.0 million. As of March 3, 1996,
borrowings outstanding against this credit line were approximately $2.7
million. In Michigan, Glassmaster Controls has in place a similar revolving
credit line and there was $280,000 outstanding with approximately $550,000
available for borrowing as of March 3, 1996.
During the third quarter of this fiscal year a seven-year operating
lease involving monofilament extrusion equipment expires. The company
presently intends to exercise its option to purchase the equipment at lease
expiration at the then fair market value of the equipment. If the purchase
option is exercised, the company plans to fund the acquisition of the equipment
with a five-year term loan.
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Glassmaster Company
Lexington SC
PART II - OTHER INFORMATION
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
27 Financial Data Schedule (for SEC use only)
</TABLE>
b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter
ended March 3, 1996.
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 April 12, 1996 /s/ Raymond M. Trewhella
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Raymond M. Trewhella
(President and
Principal Executive Officer)
Date April 12, 1996 /s/ Steven R. Menchinger
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Steven R. Menchinger
(Treasurer, Controller, and
Principal Financial Officer)
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
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<S> <C>
27 Financial Data Schedule (for SEC use only)
</TABLE>
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S QUARTERLY REPORT ON FORM 10-QSB FOR THE PERIOD ENDED MARCH 3, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> MAR-03-1996
<CASH> 100
<SECURITIES> 0
<RECEIVABLES> 4,225
<ALLOWANCES> 88
<INVENTORY> 3,124
<CURRENT-ASSETS> 7,525
<PP&E> 9,898
<DEPRECIATION> 4,226
<TOTAL-ASSETS> 13,450
<CURRENT-LIABILITIES> 6,303
<BONDS> 3,251
0
0
<COMMON> 48
<OTHER-SE> 3,395
<TOTAL-LIABILITY-AND-EQUITY> 13,450
<SALES> 11,297
<TOTAL-REVENUES> 11,297
<CGS> 9,438
<TOTAL-COSTS> 9,438
<OTHER-EXPENSES> 1,490
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 315
<INCOME-PRETAX> 54
<INCOME-TAX> 9
<INCOME-CONTINUING> 45
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
