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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 March 2, 1997.
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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 2, 1997: 1,620,096 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 2, 1997 August 31, 1996
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(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 86 $ 129
Accounts Receivable (Net of Reserve) 3,411 2,725
Other Current Receivables 294 176
Inventories:
Raw Materials $ 1,714 $ 1,617
Work in Process 624 652
Finished Products 765 3,103 631 2,900
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Prepaid Expenses and Other Current Assets 190 82
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Total Current Assets 7,084 6,012
Fixed Assets (Net of Dep'n)
Property and Equipment (at cost) 5,672 5,876
Other Assets
CSV Life Insurance and Other Unamortized Assets 335 339
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Total Assets $13,091 $12,227
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LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable $ 1,946 $ 1,268
Accrued Expenses 218 195
Accrued Income Taxes 0 2
Notes & Mortgages Payable 3,509 3,050
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Total Current Liabilities 5,673 4,515
Long Term Liabilities
Notes & Mtges, Due After One Year $ 3,366 $ 3,669
Deferred Income Taxes 514 3,880 514 4,183
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Total Liabilities 9,553 8,698
Stockholders' Equity
Capital Stock (Authorized 5,000,000 Shares
$0.03 Par - 1,620,096 (1997), 1,617,096 (1996)
Shares Issued and Outstanding $ 49 $ 49
Paid-In Capital 1,344 1,341
Donated Capital 124 124
Retained Earnings 2,021 3,538 2,015 3,529
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Total Liabilities and Equity $13,091 $12,227
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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 2, 1997 March 3, 1996
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<S> <C> <C>
Net Sales $5,401 $ 5,500
Cost of Sales 4,411 4,613
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Gross Profit 990 887
Costs and Expenses:
Selling 275 276
General and Administrative 263 237
Other Income and Expense - Net 218 209
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Total Costs and Expenses 756 722
Income From Operations 234 165
Interest Expense 152 162
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Income Before Income Taxes and
Extraordinary Item 82 3
Income Taxes 28 (8)
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Net Income $ 54 $ 11
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Earnings Per Share (1,620,096 Shares) 0.03
Earnings Per Share (1,613,096 Shares) 0.01
Dividends Paid Per Share $ 0.00 $ 0.00
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</TABLE>
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Glassmaster Company
Consolidated Comparative Income Statement
(In thousands except per share amounts)(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 2, 1997 March 3, 1996
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<S> <C> <C>
Net Sales $ 10,177 $11,297
Cost of Sales 8,425 9,438
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Gross Profit 1,752 1,859
Costs and Expenses:
Selling 510 532
General and Administrative 519 522
Other Income and Expense - Net 415 436
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Total Costs and Expenses 1,444 1,490
Income From Operations 308 369
Interest Expense 304 315
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Income Before Income Taxes and
Extraordinary Item 4 54
Income Taxes (2) 9
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Net Income $ 6 $ 45
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Earnings Per Share (1,620,096 Shares) 0.00
Earnings Per Share (1,613,096 Shares) 0.03
Dividends Paid Per Share $ 0.00 $ 0.03
======== =======
</TABLE>
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Glassmaster Company
Consolidated Statement of Cash Flows
(Thousands)(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 2, 1997 March 3, 1996
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<S> <C> <C>
Cash Flows From Operating Activities
Net Income $ 6 $ 45
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation 373 329
Amortization 4 5
Changes in Operating Assets & Liabilities:
Decrease (Increase) in Receivables (803) (556)
Decrease (Increase) in Inventories (204) (375)
Decrease (Increase) in Prepaid Expenses &
Other Current Assets (108) (69)
Increase (Decrease) in Accounts Payable 696 400
Increase (Decrease) in Accrued Expenses 3 (28)
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Net Cash Provided (Used) By Operating Activities (33) (249)
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Cash Flows From Investing Activities
Additional Investment in Fixed Assets 170 322
Additional Investment in Other Assets 0 5
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Net Cash Used By Investing Activities 170 327
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Cash Flows From Financing Activities
Proceeds from Exercise of Stock Options 3 18
Payment of Dividend 0 (48)
Proceeds from Short-Term Borrowings 100 285
Repayment of Short-Term Borrowings (100) (58)
Proceeds from Long-Term Obligations 0 1,419
Repayment of Long-Term Obligations (303) (1,511)
Net Increase (Decrease) in Short-Term Revolving
Lines of Credit 460 409
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Net Cash Provided (Used) By Financing Activities 160 514
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Net Increase (Decrease) In Cash (43) (62)
Cash At Beginning of Period 129 162
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Cash At End of Period $ 86 $ 100
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Supplemental Disclosures of Cash Flow Information
Cash Paid For:
Interest (Net of Amount Capitalized) $ 292 $ 310
Income Taxes (6) (32)
</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 2, 1997
are not necessarily indicative of the results that may be expected for the year
ended August 31, 1997. 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, 1996. Certain prior
year amounts may have been reclassified to conform with the 1997 presentation.
Item 2. Management's Discussion and Analysis
RESULT OF OPERATIONS
Consolidated sales for the second quarter ended March 2, 1997 were
$5,401,223, a decrease of approximately 2% when compared to the second quarter
of the 1996 fiscal year. The decrease in second quarter sales is due to a 19%
decline in sales by the Composites Division when compared to the same prior year
period. Year-to-date sales total $10,177,443 and are 10% less than last year's
six-month total sales. Year-to-date sales are lower by 7% at Composites, 9% at
Monofilament, and 11% at Controls. The decrease in sales at Composites is
primarily due to the decision by a key customer to discontinue its purchase of
an antenna that contributed significantly to the revenue base of this division.
New products are in development and by the end of the fourth quarter of this
fiscal year should begin to generate the sales needed to replace and exceed
revenue lost. Sales by the Monofilament Division are lower due to the transition
from high volume, lower margin products such as bulk nylon trimmer line to lower
volume, better profit margin products like polyester weaving filaments. At
Glassmaster Controls Company sales are lower due to a prolonged slowdown in
production levels by its largest segment of customers, heavy duty truck
manufacturers. Late in the second quarter, order patterns began to accelerate
and sales are expected to exceed prior year levels during the remainder of this
fiscal year.
Gross profit margins during the second quarter were 18.3% this year
compared to 16.1% in last year's second quarter and on a year-to-date basis have
increased to 17.2% of sales this year versus 16.4% of sales last year. The
increase in gross margins compared to last year is due to a better mix of
products and favorable raw material costs at Monofilament and improved
manufacturing efficiencies at Controls. This improvement in consolidated gross
profit margins was restrained due to the addition of technical and production
personnel at Composites. The additional staff will have a negative affect on
profit margins at Composites until additional product sales are realized.
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Selling, General and Administrative, and Other Expenses were 4.6%
higher during this year's second quarter when compared to last year due to
higher claims experienced relative to employee insurance plans. On a
year-to-date basis these expenses are lower by 3.2% compared with the prior
year. Interest expense declined slightly during the second quarter and
year-to-date periods when compared to last year due to lower average debt
levels.
Net Consolidated Income for the second quarter was $53,513 compared to
$10,513 last year, and year-to-date Net Income totals $6,194 versus $45,125 last
year. This year's second quarter results include a provision for Income Taxes of
$28,292, while last year included an Income Tax benefit of $7,783.
LIQUIDITY AND CAPITAL RESOURCES
The working capital of the company has decreased by approximately
$86,000 so far this year and totals $1.4 million as of the end of the second
quarter. During the first six months of this fiscal year, working capital was
used to fund additional equipment and tooling purchases of $170,000 whereas in
the prior year comparable period $322,000 was spent on capital additions. The
company has repaid approximately $300,000 in long-term debt so far this fiscal
year.
The net operating assets and liabilities of the company have increased
by approximately $416,000 this year do to increases in accounts receivable
($803,000) and inventories ($204,000). The increased operating capital
requirement was funded by supplier trade credit and by borrowings under
short-term credit facilities secured by receivables and inventories. These
financing agreements provide for total revolving credit up to $4.5 million. As
of March 2, 1997, borrowings outstanding under the credit lines were
approximately $2.4 million.
The company recently entered into agreements to purchase additional
production equipment at Controls ($130,000) and Monofilament ($150,000) and
expects to fund these acquisitions with five-year term debt and working capital.
Other than these equipment additions, the company currently anticipates that its
cash requirements during the remainder of this fiscal year will be provided by
operating activities and from existing and committed credit facilities.
7
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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.
Exhibit No. Description
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27 March 2, 1997 Financial Data Schedule
(SEC Use Only)
b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter
ended March 2, 1997.
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 11, 1997 /s/ Raymond M. Trewhella
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Raymond M. Trewhella
(President and
Principal Executive Officer)
Date April 11, 1997 /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
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 2, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> MAR-02-1997
<CASH> 86
<SECURITIES> 0
<RECEIVABLES> 3,773
<ALLOWANCES> 68
<INVENTORY> 3,103
<CURRENT-ASSETS> 7,084
<PP&E> 10,603
<DEPRECIATION> 4,931
<TOTAL-ASSETS> 13,091
<CURRENT-LIABILITIES> 5,673
<BONDS> 3,366
0
0
<COMMON> 49
<OTHER-SE> 3,489
<TOTAL-LIABILITY-AND-EQUITY> 13,091
<SALES> 5,401
<TOTAL-REVENUES> 5,401
<CGS> 4,411
<TOTAL-COSTS> 4,411
<OTHER-EXPENSES> 756
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 152
<INCOME-PRETAX> 82
<INCOME-TAX> 28
<INCOME-CONTINUING> 54
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
