<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-KSB
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 1998 Commission File Number 0-2331
--------------- -------
GLASSMASTER COMPANY
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0283724
- ---------------------------------------- ---------------------
(State of incorporation) (IRS Employer ID No.)
PO Box 788, Lexington SC 29071
- ---------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 803-359-2594
------------------------------
Securities registered pursuant to Section 12 (b) of the Exchange Act: None
----------
Securities registered pursuant to Section 12 (g) of the Exchange Act:
Title of Class: Common Stock, par value $.03 per share
--------------------------------------------------------------
Indicate by an "X" whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days. YES X NO
--- ---
Indicate by an "X" if disclosure of delinquent filers in response to Item 405 of
regulation S-B is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. X
---
State issuer's revenues for its most recent fiscal year. $24,548,803 .
---------------
The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $1,551,618 as of October 31, 1998, based on the
average high and low sales price of $2.375 per share.
The number of shares outstanding of the registrant's common stock, as of October
31, 1998 was 1,627,896 shares.
DOCUMENTS INCORPORATED BY REFERENCE
The information set forth under items 9, 10, 11, and 12 of Part III of this
report is incorporated by reference from the issuer's definitive proxy statement
for the 1999 annual meeting of stockholders that will be filed no later than
December 31, 1998.
<PAGE> 2
- 2 -
PART I
Item 1. Business
(a) General Development of Business
The Company was founded in 1946 as the Koolvent Metal Awning Company
and incorporated under the laws of the State of South Carolina. During 1958 the
Glassmaster line of fiberglass pleasure boats was introduced. In 1959 the metal
awning division was sold to concentrate efforts on the pleasure boat business,
the corporate name was changed to Glassmaster Plastics Company, and the Company
became a publicly held corporation and presently has approximately 1,250
stockholders.
In 1982, the corporate name was changed to Glassmaster Company (the
"Company") and, as a result of the cyclical nature of the pleasure boat
business, the Company began to diversify into industrial related manufacturing.
During 1982 and 1983 the Company developed from within manufacturing facilities
to produce extruded monofilament and fiberglass antennas. The ensuing five years
saw these operations experience steady growth and by the end of the 1988 fiscal
year were the dominant business segment of the Company.
On September 1, 1988, the Company purchased the NYBRAD product line
and related manufacturing assets from Allied-Signal, Inc. NYBRAD is a brush
material of abrasive monofilament used in surface finishing and deburring. On
November 1, 1988, the Company announced the purchase of the industrial control
product line and related manufacturing assets from Speareflex Corporation of
Kalamazoo, Michigan. This business consists primarily of flexible steel wire
controls and plastic control panels for use in industrial and automotive
applications. The acquisition of these two product lines has allowed the Company
to further diversify and expand its line of industrial related products.
On November 17, 1989, the Company announced its decision to
discontinue the manufacture and sale of fiberglass boats.
In June, 1994, the Company completed the purchase of a 95,000
square-foot manufacturing plant in Kalamazoo, Michigan, and relocated its
wholly-owned subsidiary, Glassmaster Controls Co., Inc. from a leased facility
in Otsego, Michigan to the new plant during the first quarter of the 1995 fiscal
year.
On August 16, 1994 a tornado completely destroyed a 25,000
square-foot warehouse in Lexington, SC. During the 1995 fiscal year,
construction was completed on a 35,000 square-foot addition to the Monofilament
plant in Lexington, SC. This addition effectively replaces the warehouse
destroyed by the tornado and gives the Monofilament Division additional
manufacturing space.
There have been no bankruptcy, receivership, or similar proceedings
to the registrant since its inception. During the last three years there has
been no material acquisition or disposition of any significant amount of assets
other than that described above or in the ordinary course of business.
(b) Narrative Description of Business
The Company is a manufacturer of thermoplastic and thermoset plastic
materials that result in a variety of products within a single industry segment
and are categorized by product line as follows: extruded (thermoplastic)
synthetic monofilament, pultruded (thermoset) fiberglass and composites, and
flexible steel wire controls and molded plastic control panels.
The Company's Monofilament Division extrudes monofilaments from
nylon, polyester, polyolefins and other engineering resins for use in a wide
array of markets and applications including textiles (sewing thread), lawn and
garden care (trimmer line), recreational products (fish line), and industrial
weaving and industrial filtration. Monofilament, as produced by the Company,
begins with a thermoplastic resin which is processed through a melting device
(extruder) and subsequently oriented to form single strand fibers of various
diameters, tensile strengths and moduli. Specialized monofilaments for
industrial applications are manufactured for use in other major industries
including paper machine clothing for the paper industry and abrasive bristles
for brushes used in metal and wood finishing. The Company markets its
monofilament products primarily on a private brand basis, which are sold by
company salesmen to original equipment manufacturers and distributors throughout
North America and, to a lesser degree, Europe, South America, and the Pacific
Rim.
<PAGE> 3
- 3 -
Item 1. Business (Cont'd)
The Company's Composites Division manufactures a line of fiberglass
marine and CB antennas for use in pleasure craft and commercial fishing vessels.
This division also manufactures pultruded fiberglass rod stock used in a number
of specialty products and the Glassmaster Composite Modular Building System(TM).
Antennas, composites, and reinforced plastic products are sold through in-house
salesmen and regional manufacturers' sales representatives and distributed
throughout North America.
The Company manufactures and assembles a wide range of flexible steel
wire controls and molded plastic control panels through its wholly-owned
subsidiary, Glassmaster Controls Co., Inc., located in Kalamazoo, Michigan.
These products are used primarily in medium and large capacity trucks and to a
lesser degree in automobiles, farm equipment and recreational boats, and are
sold through manufacturers' representatives or directly to original equipment
manufacturers throughout North America.
The names "Glassmaster", "CompCore", "NYBRAD", and "Glassmaster
Composite Modular Building System" are registered trademarks of the Company. The
Company has applied for a U.S. Patent for its recently introduced product, the
"Glassmaster Composite Modular Building System".
The Company believes it is a significant competitor in the United
States market for specialty monofilament products and marine CB antennas. While
firm price competition can be experienced within some lines of the monofilament
and flexible wire control products, overall, the Company produces products which
center on performance, engineering and customer service and it is these product
lines which provide the Company with a stable revenue base. Sales and
profitability growth are dependent to varying degrees upon favorable economic
conditions and penetration into the industrial textile and paper machine
clothing industries, as well as the domestic truck industry. Unfavorable weather
conditions can have an impact on monofilament trimmer line sales.
Sales of the Company's industrial products are somewhat seasonal with
sales to the lawn and garden care and marine antenna markets concentrated in the
second and third quarters of the fiscal year (December - May). While some
fluctuations in inventory levels will occur from time to time, the Company is
not required to carry significant amounts of inventory to meet delivery
requirements or to carry unusually large amounts of materials and supplies to
insure itself of a continuous allotment of goods from suppliers. The Company
does not provide extended payment terms to its customers in excess of those
normally offered for these industries. The dependence upon any one customer or
small group of customers is not material. The Company currently offers no
product or service requiring government approval and the effect of existing or
probable government regulations on the operations of the Company is considered
to be immaterial.
At August 31, 1998, the order backlog was $2,344,844 compared to
$1,897,881 at August 31, 1997.
The Company has no full-time employees engaged in research and
development activities, however, certain employees spend a portion of their time
in new product development and process improvement. Expenditures for research
and development were approximately $427,000 in 1998 and $373,000 in 1997.
No material effects have resulted from compliance with federal,
state, and local provisions regulating the discharge of materials into the
environment, or any other regulations protecting the environment. The Company
does not expect to make any material capital expenditures for environmental
control facilities for the current or succeeding fiscal year.
The Company and its subsidiary furnished employment for approximately
218 persons at August 31, 1998 and 192 persons at August 31, 1997.
<PAGE> 4
- 4 -
Item 2. Properties
General corporate offices, the monofilament manufacturing facilities
(Plant I & II), and the Monofilament Division offices are located at 126
Glassmaster Road in Lexington, South Carolina. The total facility is composed of
170,000 square feet, and is owned by the Company in fee simple.
The Company operates its Composites Division offices and
manufacturing plant at 71 Industrial Park Road in Newberry, South Carolina. The
total facility is composed of 31,000 square feet and is owned by the Company in
fee simple.
Glassmaster Controls Co., Inc. operates its industrial controls
business at 831 Cobb Ave. in Kalamazoo, Michigan. The total facility is composed
of 95,000 square feet and is owned by the Company in fee simple.
The Company believes that facilities are adequate for the immediate
future, and that the machinery and equipment used in these facilities are well
maintained and in good operating condition. Estimated percentage utilization
capacities during the year ended August 31, 1998 were as follows: Monofilament
Plant - 90%; Composites Plant - 35%; Controls Plant - 50%.
Item 3. Legal Proceedings
There are no material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted during the fourth quarter of the
fiscal year covered by this report to a vote of security holders through the
solicitation of proxies or otherwise.
Item 5. Market for Registrants Common Equity and Related Stockholder Matters
(a)(1) The Company's common stock trades on The Nasdaq SmallCap Market tier of
the Nasdaq Stock Market under the symbol GLMA.
(a)(1)(ii)The table below sets forth the high and low sales price per share
during each quarter in the last two years as quoted on the Small Cap Market tier
of the Nasdaq Stock Market.
<TABLE>
<CAPTION>
Quarter Ending High Low
-------------- ---- ---
<S> <C> <C>
August 31, 1996 .625 .500
December 1, 1996 .625 .500
March 2, 1997 .813 .813
June 1, 1997 .750 .625
August 31, 1997 .875 .750
November 30, 1997 4.750 2.875
March 1, 1998 4.125 3.500
May 31, 1998 3.875 2.563
August 31, 1998 2.500 1.500
</TABLE>
Since September 1, 1998 and to the date of this report, the high and low sales
price per share was $2.375 and $2.188, respectively.
(b) There were 1,209 shareholders of record at October 31, 1998.
(c)(1) On October 24, 1997, Directors of the Company declared a cash dividend of
$.03 per common share payable on or about January 30, 1998 to stockholders of
record on January 9, 1998. On January 30, 1996 the Company paid a cash dividend
of $.03 per common share.
(c)(2) According to the terms of a financing agreement, the Company is
restricted from paying cash dividends unless approved by the lending
institution.
<PAGE> 5
- 5 -
PART II
Item 6. Management's Discussion and Analysis
Review of Operations
Comparison of 1998 to 1997
Consolidated sales increased 15% to $24.6 million during the fiscal
year ended August 31, 1998 compared to prior year sales of $21.3 million. Net
Income for the year declined to $119,434, or $.07 per share from $234,699, or
$.14 per share in 1997.
Net Sales. Sales by the Monofilament Division increased 12.9% to
$16.5 million from $14.6 million in 1997. Shipments of monofilament improved
across the product line, particularly sewing thread and nylon weaving and
trimmer line products. Sales of recently developed specialty filaments also
contributed to the year over year increase in monofilament sales.
Sales by the Composites Division improved 15% to $1.5 million this
year compared to $1.3 million in the prior year. The increase was primarily due
to new specialty pultruded products introduced during the year. This division
also introduced the Glassmaster Composites Modular Building System(TM) during
1998. This new product is a corrosive-resistant, non-conductive composite
building framework system that offers an alternative to competitive products
made out of aluminum, steel, or plastics. To date this product has been
purchased primarily for product evaluation by potential customers, and therefore
did not contribute significantly to 1998 sales.
Glassmaster Controls Company ("Controls") sales increased 22.6% to
$6.4 million from $5.2 million last year. The increase in sales was fueled
primarily by growth in the heavy-duty truck manufacturing business. This segment
of customers comprises approximately 65% of Controls' annual sales and their
production volumes, which began improving during 1997, continued to expand
throughout most of this fiscal year. Investments in surface mount and through
hole circuit-board assembly equipment and the acquisition of Amtest, Inc., a
small Michigan corporation, specializing in the development, manufacture, and
sale of automotive related electronic testing equipment has allowed Controls to
offer products with electronic characteristics that will complement its full
range of mechanical cable and wire assemblies and control panels. While these
new product offerings contributed modestly to 1998 sales, additional engineering
and marketing efforts are underway that will potentially enable this product
line to generate significant revenue growth during the 1999 fiscal year.
Gross Profit. Total gross profit increased 4% compared to the prior
year due to the expansion in sales. However, when expressed as a percent of
sales, gross profit declined to 16.1% of sales during the 1998 fiscal year
compared with 17% in 1997. The decline in gross profit percent is attributable
to product development costs and related manufacturing inefficiencies as well as
an unfavorable mix of products sold at Composites.
Expenses. Total expenses increased by $260,000 primarily due to
higher variable selling expenses associated with the increased sales volumes and
additional advertising expense at Composites. As a percentage of sales, total
expenses declined to 12.7% in 1998, compared with 13.4% of sales in 1997.
Income From Operations. Operating income declined 11% to $827,000
this year from $933,000 last year despite the increase in sales. The decline in
operating income is due to the decline in gross profit at Composites which more
than offset improvements in operating income at both Monofilament and Controls.
Interest Expense. Interest expense declined slightly from the prior
year and was 2.6% of sales this year compared to 3.0% of sales during 1997.
While average debt levels were higher this year versus the prior year due to
increased capital expenditures and reduced cash flow generated from operations,
the company took advantage of lower long-term interest rates and refinanced a
significant percentage of its short-term debt thereby realizing interest cost
savings.
Provision for Income Taxes. The effective income tax rate increased
over the 1997 rate due to a decrease in the tax benefit resulting from
accelerated depreciation methods utilized for tax purposes and an increase in
taxable income associated with life insurance not deductible for tax purposes.
<PAGE> 6
- 6 -
Item 6. Management's Discussion and Analysis (Cont'd)
Comparison of 1997 to 1996
(Excerpted from the 1997 Form 10-KSB)
Consolidated sales for the fiscal year ended August 31, 1997 were
$21.3 million compared to $22.3 million last year, a decrease in sales of 4.5%.
Net income for the 1997 fiscal year was $234,699, an increase of 79% when
compared with prior year net income of $131,433. Earnings were $.14 per share
this year as compared with $.08 per share in 1996.
Net Sales. A significant decline in shipments of bulk and packaged
nylon trimmer line products caused sales by the Monofilament Division to
decrease about 5.6% to $14.6 million. Profit margins on sales of trimmer line
products have been declining for several years due to price competition which
led to the decision to transition the product mix toward more technically
oriented, higher margin products including polyester weaving filaments. Trimmer
line shipments represented 30% of total monofilament sales in 1996 but declined
to less than 17% of sales in 1997, while polyester filaments increased from 16%
of sales in 1996 to 25% of sales during 1997. The shift in product mix had the
intended effect as total gross profit realized by this division increased 14% in
spite of the decline in total sales.
Sales by the company's Composites Division were $1.3 million in
fiscal year 1997 versus $1.7 million in the prior year. The 23% decrease in
year-to-year sales reported by this division is primarily due to the decision by
a key customer to discontinue purchasing a certain antenna that contributed
significantly to the revenue base of this division. Product development was
intensified during the 1997 fiscal year in an effort to generate sales to
replace the lost revenue but no significant additions to the product line were
completed during the year. The division currently expects these new products to
begin generating meaningful revenue during the third quarter of the 1998 fiscal
year.
Glassmaster Controls Company ("Controls") sales increased 7.2% to
$5.2 million. Prior year investments in new manufacturing equipment,
particularly an expansion of die-casting capabilities, allowed Controls to offer
additional products that contributed significantly to 1997 fiscal year sales. An
improving outlook by the largest segment of customers, heavy-duty truck
manufacturers, and efforts to expand product offerings into electronic control
panel and cable assemblies began to contribute additional sales during the
fourth quarter of 1997. These developments should enable sales generated by
Controls to continue to advance during 1998.
Gross Profit. Gross profit as a percentage of sales increased to
17.8% this fiscal year versus 16.8% last year. The increase in gross margins
compared to the prior year is primarily due to a better mix of products sold
combined with favorable raw material costs at Monofilament and improved
manufacturing efficiencies at Controls. The improvement in profit margins has
been significantly restrained due to the addition of technical and production
personnel at Composites to assist in new product development efforts. Profit
margins at Composites will continue to be impacted until additional product
sales are realized.
Expenses. Selling expenses during 1997 declined from the prior year
by approximately $47,000, but remained at just under 5% of sales. General and
Administrative and Other expenses totaled $1.75 million and increased over the
1996 amount by approximately 3.7% due to an increase in the average net cost per
employee for health insurance benefits of approximately 9%. The Provision for
Doubtful Accounts declined by 60% to $43,376 when compared with the prior year.
Last year's amount included a charge off of $103,323 related to a former
customer's bankruptcy proceedings (See Note 2 to the Notes to Financial
Statements). This year's specific charge off related to this account was
$24,985.
Income from Operations. Although 1997 sales decreased by 4.5% from
last year, operating income increased 9.5% to $933,241 when compared with the
prior year. The increase in operating income was due primarily to the improved
product mix and resulting higher gross margins at Monofilament and better
manufacturing efficiencies at Controls.
Interest Expense. Interest expense declined slightly from the prior
year but remained just under 3% of sales. Average interest rates remained
relatively unchanged and total debt decreased by $221,575, or 3.3%, when
compared with 1996.
Provision for Income Taxes. Total income tax expense was $65,169, or
21.7% of pre-tax income for 1997 compared with $70,260, or 34.8% of pre-tax
income, during 1996. The decrease in the effective income tax rate is primarily
due to a reduction in the amount of alternative minimum tax due this year versus
1996.
<PAGE> 7
- 7 -
Item 6. Management's Discussion and Analysis (Cont'd)
Liquidity and Capital Resources
Cash provided by operating activities declined during the 1998 fiscal
year to $680,191 compared with $971,488 last year. The decline in cash provided
was due to lower consolidated net income and increased inventory levels at
Composites associated with the introduction of the modular building system
product line.
Cash used by investing activities totaled $1,233,489 this year versus
$763,184 during 1997, an increase of 61%. Additional investments in fixed assets
at Monofilament to add extrusion capacity and at Composites to expand
capabilities and product offerings account for the increase.
Net cash provided by financing activities was $577,032 this year
compared to ($218,574) in the 1997 fiscal year. On June 30, 1998 the company
entered into a long-term loan agreement that restructured the company's debt by
refinancing approximately $2.4 million of existing term and mortgage loan debt
and converting $2.6 million of existing short-term lines of credit into a single
$5.0 million ten-year term loan. The refinancing boosted working capital as
reflected in the balance sheet by about $2.7 million. The company also renewed
its short-term revolving line of credit for an additional three-year period.
This $2.5 million line of credit is secured by accounts receivable and inventory
and will provide operating capital through July, 2001.
In July, 1998 the Monofilament Division entered into a contract to
purchase extrusion process-improvement equipment at a cost of approximately
$150,000. This equipment will be delivered during the second quarter of the 1999
fiscal year. No other material commitments for capital expenditures existed at
year-end.
The Company currently anticipates that its cash requirements during
the 1999 fiscal year will be provided from operations and borrowings under
existing and committed credit lines.
Year 2000 Disclosure. The Company uses a number of computer software
programs and operating systems in its internal operations, including
applications used in its financial, order-management, manufacturing, and
communications systems. The inability of computer software programs to
accurately recognize, interpret, and process date codes designating the year
2000 and beyond could cause systems to yield inaccurate results or encounter
operating problems, including interruption of the business operations such
systems control. The Company has analyzed its internal computer-based systems,
as well as its embedded micro-controller-based systems, identified potential
vulnerabilities, and has implemented a plan to make any necessary changes to
insure these systems are year 2000 compliant. Based on information thus far
available to the Company, the Company does not believe it will incur
expenditures in dealing with these internal-based year 2000 issues that will
have a material impact on the financial condition of the Company. (see Note 10).
The Company also may be exposed to risks from computer systems of
parties with which the Company transacts business. Were problems to develop with
such other third-party systems, they could have a material adverse affect on the
Company. In response to this, the Company is taking steps, including contacting
its strategic suppliers and customers, to determine the extent to which the
Company may be vulnerable to those parties' failure to remedy their own year
2000 issues and to ascertain what actions, if needed, may be taken by the
Company in response to such risks. Based on this review and on third-party
questionnaire responses the Company has received to date, the Company is not
aware of any situations in which year 2000 issues with its third-party
relationships could cause potential interruptions that would have a material
adverse affect on the Company's business, financial condition or results of
operations.
Item 7. Financial Statements
Financial Statements of Glassmaster Company and the Notes to
Financial Statements for the fiscal years ended August 31, 1998 and 1997 appear
on pages 11 through 21, the Index to the Exhibits and Exhibits appear on pages
23 through 25, and the Report of Independent Auditors appears on page 22 of this
report.
Item 8. Changes in Disagreements with Accountants on Accounting and Financial
Disclosure
There have been no changes in or disagreements with accountants on
accounting financial disclosures.
<PAGE> 8
- 8 -
PART III
Items 9, 10, 11, and 12. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16 (a) of the Exchange Act; Executive
Compensation; Security Ownership of Certain Beneficial Owners and Management;
and Certain Relationships and Related Transactions.
Information for items 9-12 of this report appears in the Proxy
Statement for the 1999 Annual Meeting of Shareholders to be held on January 22,
1999 and is incorporated herein by reference.
PART IV
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-B)
Exhibit No. Exhibit
----------- -------
3.1 Amended and Restated Certificate of
Incorporation of the Company, filed as Exhibit
3.1 to Form 10-K for the year ended August 31,
1991 and incorporated herein by reference.
3.2 Amended and Restated Bylaws of the Company,
filed as exhibit 3.2 to Form 10-K for the year
ended August 31, 1991 and incorporated herein
by reference.
10 Amended and restated Glassmaster Company 1992
Incentive Stock Option Plan, filed as exhibit
10 to Form 10-KSB for the year ended August 31,
1993 and incorporated herein by reference.
11 Statement re Computation of Per Share Earnings
21 Subsidiaries of the Registrant
27 Financial Data Schedule (SEC use only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the
fiscal year ended August 31, 1998.
<PAGE> 9
- 9 -
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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
By /s/ Raymond M. Trewhella By /s/ Steven R. Menchinger
-------------------------------- --------------------------------
Raymond M. Trewhella, President Steven R. Menchinger, Corporate
(Principal Executive Officer) Controller and Treasurer
(Principal Financial Officer)
(Principal Accounting Officer)
Date November 25, 1998 Date November 25, 1998
-------------------------------- --------------------------------
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant, and in the capacities, and on the dates indicated.
By /s/ Stephen W. Trewhella By /s/ Raymond M. Trewhella
--------------------------------- -------------------------------
Stephen W. Trewhella, Director Raymond M. Trewhella, Director
Date November 25, 1998 Date November 25, 1998
-------------------------------- -------------------------------
By /s/ H. D. Harrelson By /s/ Melvin L. Chavis
--------------------------------- -------------------------------
H. D. Harrelson, Director Melvin L. Chavis, Director
Date November 25, 1998 Date November 25, 1998
-------------------------------- -------------------------------
By /s/ James F. Kane By /s/ John Taylor
--------------------------------- -------------------------------
James F. Kane, Director John Taylor, Director
Date November 25, 1998 Date November 25, 1998
-------------------------------- -------------------------------
<PAGE> 10
GLASSMASTER COMPANY
LEXINGTON, SC
FINANCIAL STATEMENTS
FISCAL YEARS ENDED AUGUST 31, 1998 AND 1997
Page No.
--------
Balance Sheet .................................11
Statement of Stockholders Equity ..............12
Income Statement ..............................13
Statement of Cash Flows .......................14
Notes to Financial Statements .................15-21
Independent Auditor's Report ..................22
<PAGE> 11
GLASSMASTER COMPANY
LEXINGTON SC
BALANCE SHEET
AUGUST 31, 1998 AND 1997
<TABLE>
<CAPTION>
August 31, 1998 August 31, 1997
------------------------- -------------------------
<S> <C> <C> <C> <C>
Assets
Cash $ 142,806 $ 119,072
Accounts Receivable - Trade $3,433,186 $3,268,863
Less: Allowance for Doubtful Accts 59,844 3,373,342 56,394 3,212,469
---------- ----------
Accounts Receivable - Other 6,876 144,457
Inventories 3,150,406 2,740,768
Prepaid Expenses 58,322 11,290
Deferred Income Taxes 22,107 19,702
----------- -----------
Current Assets 6,753,859 6,247,758
Fixed Assets (Net of Depreciation)
Manufacturing Property 6,184,946 5,802,591
Other Assets 532,788 436,547
----------- -----------
Total Assets $13,471,593 $12,486,896
=========== ===========
Liabilities
Accounts Payable 1,601,630 1,421,762
Accrued Expenses 258,932 239,290
Accrued Income Taxes 16,915 11,754
Notes and Mortgages Payable - Current 1,882,092 3,410,457
----------- -----------
Current Liabilities 3,759,569 5,083,263
Other Liabilities
Notes and Mortgages Payable - Long Term 5,272,306 3,085,984
Deferred Income Taxes 590,924 5,863,230 550,752 3,636,736
----------- ----------- ---------- -----------
Total Liabilities 9,622,799 8,719,999
Stockholders' Equity
Capital Stock (Authorized 5,000,000 Shares
$.03 Par - 1,627,896 (1998), 1,620,096 (1997)
Shares Issued and Outstanding) 48,837 48,603
Paid-In Capital 1,355,124 1,344,058
Donated Capital 124,210 124,210
Retained Earnings 2,320,623 3,848,794 2,250,026 3,766,897
--------- ----------- ---------- -----------
Total Liabilities and Equity $13,471,593 $12,486,896
=========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of this statement.
<PAGE> 12
GLASSMASTER COMPANY
LEXINGTON SC
STATEMENT OF STOCKHOLDERS EQUITY
FISCAL YEARS ENDED AUGUST 31, 1998 AND 1997
<TABLE>
<CAPTION>
August 31, 1998 August 31, 1997
--------------- ---------------
<S> <C> <C>
Capital Stock:
Balance - September 1 $ 48,603 $ 48,513
Proceeds from Sale of Shares
Under Stock Option Plan 234 90
----------- ----------
Balance - August 31 48,837 48,603
----------- ----------
Additional Paid In Capital:
Balance - September 1 1,344,058 1,341,148
Proceeds from Sale of Shares
Under Stock Option Plan 11,066 2,910
----------- ----------
Balance - August 31 1,355,124 1,344,058
----------- ----------
Donated Capital: 124,210 124,210
----------- ----------
Retained Earnings:
Balance - September 1 2,250,026 2,015,327
Net Income 119,434 234,699
Common Stock Dividends Paid (48,837) 0
----------- ----------
Balance - August 31 2,320,623 2,250,026
----------- ----------
Total Stockholders Equity $ 3,848,794 $3,766,897
=========== ==========
</TABLE>
The accompanying notes to financial statements are an
integral part of this statement.
<PAGE> 13
GLASSMASTER COMPANY
LEXINGTON SC
INCOME STATEMENT
FISCAL YEARS ENDED AUGUST 31, 1998 AND 1997
<TABLE>
<CAPTION>
August 31, 1998 August 31, 1997
--------------- ---------------
<S> <C> <C>
Sales $24,548,803 $21,321,501
Cost of Sales 20,609,145 17,536,019
----------- -----------
Gross Profit on Sales 3,939,658 3,785,482
Expenses
Selling Expense 1,234,059 1,057,839
General and Administrative and Other Expense 1,834,293 1,751,026
Provision for Doubtful Accounts 44,358 43,376
----------- -----------
Total Expenses 3,112,710 2,852,241
----------- -----------
Income from Operations 826,948 933,241
Interest Expense 628,406 633,373
----------- -----------
Income Before Income Taxes 198,542 299,868
Provision for Income Taxes
Current 35,094 36,307
Deferred 44,014 28,862
----------- -----------
Total - Provision for Income Taxes 79,108 65,169
----------- -----------
Net Income $ 119,434 $ 234,699
=========== ===========
Earnings Per Common Share (Basic and Diluted)
Income from Continuing Operations $ .07 $ .14
=========== ===========
Net Income Per Share $ .07 $ .14
=========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of this statement.
<PAGE> 14
GLASSMASTER COMPANY
LEXINGTON SC
STATEMENT OF CASH FLOWS
FISCAL YEARS ENDED AUGUST 31, 1998 AND 1997
<TABLE>
<CAPTION>
August 31, 1998 August 31, 1997
--------------- ---------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $ 119,434 $ 234,699
Adjustments to Reconcile Net Income to Net Cash Provided
(Used) by Operating Activities:
Depreciation & Amortization 808,689 757,235
Increase in Deferred Income Taxes 44,014 28,862
Gain on Sale of Assets (16,655)
Changes in Operating Assets and Liabilities:
Accounts Receivable Decrease (Increase) (23,292) (455,623)
Inventories Decrease (Increase) (409,638) 149,519
Prepaid Expenses Decrease (Increase) (47,032) 49,189
Accounts Payable Increase (Decrease) 179,868 153,320
Accrued Expenses Increase (Decrease) 19,642 44,419
Income Taxes Payable Increase (Decrease) 5,161 9,868
----------- ---------
Net Cash Provided (Used) by Operating Activities 680,191 971,488
----------- ---------
Cash Flows From Investing Activities
Cash Payments for the Purchase of Fixed Assets (1,183,642) (675,681)
Cash Payments for the Procurement of Patents (11,999)
Cash Received from Sale of Assets 16,655
Cash Surrender Value - Life Insurance (54,503) (87,503)
----------- ---------
Net Cash Provided (Used) by Investing Activities (1,233,489) (763,184)
----------- ---------
Cash Flows From Financing Activities
Proceeds From Issuance of Common Stock 11,300 3,000
Proceeds From Issuance of Short-term Debt 300,000 100,000
Proceeds From Issuance of Long-Term Debt 5,110,712 174,588
Principal Payments on Short-Term Debt (250,000) (100,000)
Principal Payments on Long-Term Debt (3,274,162) (791,808)
Dividends Paid (48,837)
Net Increase (Decrease) in Line of Credit (1,228,592) 395,646
Cash Payments for Loan Closing Costs (43,389)
----------- ---------
Net Cash Provided (Used) by Financing Activities 577,032 (218,574)
----------- ---------
Net Increase (Decrease) in Cash 23,734 (10,270)
Cash at Beginning of Year 119,072 129,342
----------- ---------
Cash at End of Year $ 142,806 $ 119,072
=========== =========
Supplemental Disclosures of Cash Flow Information
Cash Paid For:
Interest (Net of Amount Capitalized) $ 631,977 $ 616,895
Income Taxes Paid 29,933 26,439
</TABLE>
The accompanying notes to financial statements are an
integral part of this statement.
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
August 31, 1998 and 1997
Note 1. Summary of Significant Accounting Policies
Description of Business
Glassmaster Company is a manufacturer of extruded (thermoplastic)
synthetic monofilament, pultruded (thermoset) fiberglass composites,
and flexible steel wire controls and molded plastic control panels.
The company markets its monofilament products primarily on a private
brand basis, which are sold by company salesmen to original equipment
manufacturers and distributors throughout North America, and to a
lesser degree, Europe, South America, and the Pacific Rim. The
Company's fiberglass products and composites are sold through in-house
salesmen and regional manufacturers' sales representatives and are
distributed throughout the United States and Canada. Flexible steel
wire controls and control panels are sold through manufacturers'
representatives or directly to original equipment manufacturers
throughout North America.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
Principles of Consolidation
The consolidated financial statements for the year ended August
31, 1998 and 1997 include the accounts of Glassmaster Company and its
wholly-owned subsidiary, Glassmaster Controls Company, Inc., which was
organized and incorporated under the laws of the State of Michigan, on
October 28, 1988. All material inter-company transactions have been
eliminated.
Cash and Cash Equivalents
For the purpose of the statement of cash flows, the company
considers all short-term debt securities purchased with a maturity of
three months or less to be cash equivalents.
Accounts Receivable
The company provides an allowance for losses on trade receivables
based on a review of its past collection history. Accounts receivables
have been reduced by an allowance for doubtful accounts in the amount
of $59,844 and $56,394 for the years ended August 31, 1998 and 1997
respectively.
Inventories
The method of determining the amount of inventories is lower of
cost or market on a first-in, first-out basis. Inventories as shown on
the Balance Sheet are classified below:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Materials & Supplies $ 1,714,351 $ 1,603,906
Work In Process 478,137 468,722
Finished Products 957,918 668,140
----------- -----------
Total $ 3,150,406 $ 2,740,768
=========== ===========
</TABLE>
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
August 31, 1998 and 1997
Note 1. Summary of Significant Accounting Policies (Cont'd)
Fixed Assets
The basis for determining the values of fixed assets is cost.
Included in land is property valued at $100,374 which was donated to
the Company by Lexington County, South Carolina.
The provision for depreciation charged against income for the
fiscal years ended August 31, 1998, and 1997, totaled $801,286, and
$722,421 respectively. The company computes depreciation using the
straight-line method over the estimated useful lives of the assets as
indicated below.
The company uses applicable accelerated methods for tax purposes.
<TABLE>
<CAPTION>
Estimated
Asset Classification 1998 1997 Useful Life
-------------------- ------------ ------------ -----------
<S> <C> <C> <C>
Land $ 190,274 $ 190,274 N/A
Buildings 3,819,937 3,793,946 30-40 Years
Furniture & Fixtures 454,116 376,597 5-7 Years
Automotive Equipment 312,419 304,416 3-5 Years
Plant Equipment 6,566,489 5,673,978 7-10 Years
Tooling and Dies 908,885 756,095 3-5 Years
----------- -----------
Total 12,252,120 11,095,306
Less: Accumulated Depreciation (6,067,174) (5,292,715)
----------- -----------
Net $ 6,184,946 $ 5,802,591
=========== ===========
</TABLE>
Income Taxes
Components of the provision for income taxes on continuing
operations are shown below:
<TABLE>
<CAPTION>
1998 1997
---- ----
Current Deferred Current Deferred
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Federal $ 35,094 $ 47,361 $ 36,307 $ 32,251
State -0- (3,347) -0- (3,389)
Foreign -0- -0- -0- -0-
-------- --------- -------- -------
Total $ 35,094 $ 44,014 $ 36,307 $ 28,862
----- ======== ========= ======== ========
</TABLE>
The principal elements accounting for the difference between the
statutory federal income tax rate and the effective rates are:
<TABLE>
<CAPTION>
1998 1997
-------- ---------
<S> <C> <C>
Expected tax at statutory rates $ 67,504 $ 100,198
Increase (decrease) resulting from effect of:
Depreciation (13,394) (49,439)
Net effect of increase in CSV of Life
Insurance over premiums paid (707) (13,592)
Alternative Minimum Tax (credit) (13,689) 1,438
Other (4,620) (2,298)
-------- ---------
Current Tax Provision $ 35,094 $ 36,307
======== =========
</TABLE>
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
August 31, 1998 and 1997
Note 1. Summary of Significant Accounting Policies (Cont'd)
Income Taxes (Cont'd)
For South Carolina tax purposes a net operating loss
carry-forward of $281,122 is available for future periods. The
carry-forward will expire in the year ended August 31, 2013.
For income tax reporting, an Alternative Minimum Tax credit of
$16,446 is indefinitely available to reduce future regular taxes. For
financial statement reporting, the credit has been recognized as a
deferred tax asset.
The net deferred tax assets and liabilities consisted of the
following components as of August 31, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Deferred Tax Assets Relating to:
Allowance for Doubtful Accounts $ 22,107 $ 19,702
Alternative Minimum Tax Credit 16,446 30,135
South Carolina Tax NOL Carryovers 14,056 6,614
Deferred Tax Liabilities Relating to:
Property and Equipment (590,924) (550,752)
--------- ---------
Net Deferred Tax Liability (538,315) (494,301)
========= =========
</TABLE>
The components giving rise to the deferred tax assets and
liability described above have been included in the accompanying
balance sheet as of August 31, 1998 and 1997 as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Current Assets $ 22,107 $ 19,702
Other Assets 30,502 36,749
Other Liabilities (590,924) (550,752)
</TABLE>
Advertising
The company follows the policy of charging the costs of
advertising to expense as incurred. Advertising expense was $113,040
and $77,144 for the years ended August 31, 1998 and 1997,
respectively.
Note 2. Accounts Receivable - Other
Accounts Receivable - Other consists mainly of management's
estimate of the amount it will recover from a customer currently in
bankruptcy proceedings. The company has recorded a receivable of $0
and $130,000 as of August 31, 1998 and 1997 respectively. During 1998
$105,273 was received from the bankruptcy proceedings. The balance of
the receivable was charged to bad debts.
Note 3. Other Assets
Other assets are composed of the following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
CSV Life Insurance $ 392,261 $ 337,758
Deferred Tax Asset 30,502 36,749
Loan fees, net of Amortization 58,026 22,040
Other 51,999 40,000
--------- ---------
Total $ 532,788 $ 436,547
----- ========= =========
</TABLE>
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
August 31, 1998 and 1997
Note 4. Notes and Mortgages Payable
Substantially all property, plant and equipment and a portion of
CSV Life Insurance are pledged as collateral for the scheduled
borrowings. In addition, inventories and customer receivables are
pledged as collateral to provide the Company 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 $2.5 million for the company
and $650,000 for the company's subsidiary. The balances as of August
31, 1998 were $751,396 and $350,000 and the balances as of August 31,
1997 were $1,894,914 and $435,000. These credit agreements are subject
to renegotiation and renewal every three-year period. The current
contracts will expire July 1, 2001 and January 29, 1999.
Special provisions of the loan agreements restrict payment of
cash dividends without the consent of the lender as well as providing
for minimum working capital requirements and maximum debt to net worth
requirements in addition to providing for other minimum financial
ratio requirements. The company was not in violation of any of these
loan covenants as of August 31, 1998.
The following table sets forth the Company's indebtedness at the
end of fiscal years 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
---- ----
Current Long-Term Current Long-Term
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Financial Institutions
Mortgages, interest ranging
from 8.15% to 8.8% fixed,
maturities to 2008 $ 361,892 $4,906,783 $ 87,861 $1,651,005
Notes, interest ranging from
Prime + .5% to Prime + 1.25%,
maturities within 12 months 1,351,396 0 2,679,914 0
Installment Notes, interest range
from 1.9% to Prime + 1%,
maturities to 2002 160,511 202,793 634,634 1,263,956
Local Government 2nd Mortgage,
interest at 3% fixed,
maturity November 9, 2004 8,293 162,730 8,048 171,023
---------- ---------- ---------- ----------
Totals $1,882,092 $5,272,306 $3,410,457 $3,085,984
========== ========== ========== ==========
</TABLE>
The Prime interest rate was 8.50% for the years ended August 31,
1998 and 1997.
The principal maturities on the notes and mortgages payable over
the next five years is as follows:
<TABLE>
<CAPTION>
Fiscal
Year Ending Principal
----------- ----------
<C> <C>
1999 $1,882,092
2000 930,418
2001 448,896
2002 460,060
2003 477,994
After 2003 2,954,938
----------
Total $7,154,398
==========
</TABLE>
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
August 31, 1998 and 1997
Note 5. Leases
The Company entered into an operating lease for various pieces of
equipment on August 19, 1997. The lease calls for monthly payments of
$11,171 for a period of sixty months. Future minimum lease payments
under the lease are as follows:
<TABLE>
<CAPTION>
Fiscal
Year Ending Amount
----------- --------
<C> <C>
1999 $134,052
2000 134,052
2001 134,052
2002 122,881
--------
Total $525,037
========
</TABLE>
Note 6. Stock Options
The Company has an incentive stock option plan. Under the plan
the Company may grant options for up to 260,000 shares of common
stock. Options granted under the plan become exercisable at varying
percentages from date of grant through expiration, either at
termination of employment or ten years after date of grant. The
exercise price of each option is equal to the market price of the
company's stock on the date of grant. The exercise prices for the
options range from $1 to $4.
Following is a summary of the status of the incentive stock
options for the years ended August 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
----------------------- --------------------------
Weighted Weighted
Average Average
Number Exercise Number Exercise
Of Shares Price Of Shares Price
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Outstanding-Beginning of Year 49,700 $ 3.03 70,300 $ 2.74
Exercised (7,800) 1.45 (3,000) 1.00
Forfeited (5,400) 3.22 (17,600) 2.22
-------- --------
Outstanding-End of Year 36,500 3.34 49,700 3.03
======== ========
Options Exercisable at
End of Year 30,800 3.22 37,100 2.70
======= ========
</TABLE>
Following is a summary of the status of the incentive options
outstanding at August 31, 1998:
<TABLE>
<CAPTION>
Outstanding Options Exercisable Options
--------------------------------------------------------- ---------------------
Weighted
Average Weighted
Remaining Average
Exercise Contractual Exercise Exercise
Price Number Life Price Number Price
-------- ------ ----------- -------- ------ --------
<C> <C> <C> <C> <C> <C>
$ 1.00 8,000 4 years $ 1.00 8,000 $ 1.00
4.00 28,500 6 years 4.00 22,800 4.00
</TABLE>
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
August 31, 1998 and 1997
Note 7. Earnings Per Share
The weighted average number of shares used in the computation of
basic and diluted earnings per common share were 1,625,748 in 1998 and
1,618,904 in 1997. Options on 36,500 and 49,700 shares of common stock
as of August 31, 1998 and 1997 respectively were not included in
computing diluted earnings per share because their effects were
antidilutive.
Note 8. Defined Contribution Plan
The Company established a qualified 401(K) defined contribution
plan effective January 1, 1990. The plan year ends on December 31.
Participation in the plan is voluntary and employees may contribute
from 1% to 15% of eligible compensation on a tax-deferred basis.
The amount to be contributed by the Company will be determined
each year prior to December 1. The proposed match for the plan year
(1998) is $.25 for each $1.00 of employee contributions up to a
maximum 6% of eligible compensation.
The plan provides for the Company to make a discretionary
contribution on behalf of all eligible employees (those with one full
year of active service) regardless of whether they have elected to
voluntarily participate in the plan. This discretionary contribution
will be allocated based on a ratio of the employees' total W-2
earnings to the total W-2 earnings of all eligible employees. Any
discretionary contribution will be dependent upon the overall
profitability of the corporation and will be made with the approval of
the Board of Directors.
The amount of expense charged to operations was $82,285 for the
year ended August 31, 1998 and $63,525 for 1997.
Note 9. Financial Instruments
(A) Balance Sheet Financial Instruments
The carrying amount reported in the balance sheets for cash and
cash equivalents, accounts receivable and accounts payable
approximates fair value because of the immediate or short-term
maturity of these financial instruments. The carrying amount for
long-term debt approximates fair value because the underlying
instruments are primarily at current market rates.
(B) Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist of accounts receivable. All
receivables originate from the Company's normal business activities as
described in note one. These receivables are unsecured.
Note 10. Year 2000 Disclosure
The Company utilizes several computer-based systems in its
internal operations to facilitate critical functions including order
management, manufacturing, communications, and financial analysis and
reporting. The year 2000 problem is basically an issue of how
computers, embedded systems, or software store and use dates. Any of
the Company's systems or programs that utilize date-sensitive software
or embedded micro-controllers may potentially recognize a date field
stored as two digits ("00") as the year 1900 rather than the year
2000, which could result in miscalculation or system failures. The
Company is committed to minimizing the risks associated with the year
2000 issue and as such, has devised and implemented a plan to insure
that the Company's internal information systems will be year 2000
compliant by May 31, 1999. The plan includes an Internal Assessment
Phase, whereby the Company's internal information systems are analyzed
and non-year 2000 compliant hardware and software identified and
scheduled for replacement or upgrade; a Vendor Assessment Phase, when
the Company contacts all strategic suppliers, service providers, and
customers to inquire and subsequently receive assurances (or
intentions) regarding their year 2000 compliance; and an Upgrade,
Implementation, and Testing Phase, whereby non-compliant hardware and
software is upgraded or replaced and implemented into the normal
business operations of the Company and subsequently tested for year
2000 compatibility and compliance.
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
August 31, 1998 and 1997
Note 10. Year 2000 Disclosure (Cont'd)
The Company has completed the Internal and Vendor Assessment Phases
and has begun the Upgrade, Implementation and Testing Phase. The
Company currently estimates the total cost to complete the projects
associated with this plan to be approximately $70,000. To date, the
Company has expended $40,000 of this total with approximately $28,000
having been expended in the fiscal year ended August 31, 1998. The
Company does not consider the costs of year 2000 remediation to be
material and will pay for the associated costs with internally
generated funds. No information technology projects have been
cancelled or deferred due to year 2000 remediation costs and in fact,
certain information systems projects have been accelerated to coincide
with the Upgrade, Implementation and Testing Phase of the plan.
The Company may be exposed to risks from computer systems of third
parties with which the Company transacts business. Although the Vendor
Assessment Phase of the plan did not disclose any potential
third-party problems, there can be no assurances that unknown costs
may not ultimately be incurred as a result of third-party year 2000
disruptions. The Company will recognize these costs as they are
incurred.
<PAGE> 22
GLASSMASTER COMPANY
LEXINGTON, S.C.
OCTOBER 30, 1998
We have audited the consolidated balance sheets of Glassmaster Company
and subsidiary as of August 31, 1998 and 1997, and the related statements
of income, stockholders' equity, and cash flows, for the two-year period
ended August 31, 1998. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Glassmaster Company and subsidiary as of August 31, 1998 and 1997, and the
respective results of its operations and its cash flows for the two-year
period ended August 31, 1998, in conformity with generally accepted
accounting principles.
Brittingham, Dial & Jeffcoat
Certified Public Accountants
501 State Street
PO Box 5949
West Columbia, SC 29171
<PAGE> 23
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Exhibit Sequential Page No.
- ----------- ------- -------------------
<S> <C> <C>
3.1 Amended and Restated Certificate of Incorporation of the Company,
filed as Exhibit 3.1 to Form 10-K for the year ended August 31,
1991 and incorporated herein by reference. ---
3.2 Amended and Restated Bylaws of the company, filed as Exhibit 3.2
to Form 10-K for the year ended August 31, 1991 and incorporated
herein by reference. ---
10 Amended and restated Glassmaster Company 1992 Incentive Stock
Option Plan, filed as exhibit 10 to Form 10-KSB for the year
ended August 31,
1993 and incorporated herein by reference. ---
11 Computation of Earnings Per Share for two years ended August 31, 1998
and 1997. 24
21 Subsidiaries of the Company. 25
27 Financial Data Schedule (SEC use only). ---
</TABLE>
<PAGE> 1
EXHIBIT 11
GLASSMASTER COMPANY
COMPUTATION OF EARNINGS PER SHARE
For the two years ended August 31, 1998
(Thousands except for per share figures)
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Primary:
Income from Continuing Operations $ 119 $ 235
Income from Discontinued Operations 0 0
------ ------
Net Income $ 119 $ 235
====== ======
Basic:
Average Shares Outstanding 1,626 1,618
Per Share Amounts:
Continuing Operations $ .07 $ .14
Discontinued Operations 0 0
------ ------
Net Income $ .07 $ .14
Diluted:
Average Shares Outstanding 1,626 1,618
Net effect of dilutive stock options under the treasury stock
method using the average market price 0 0
------ ------
Total 1,626 1,618
Per Share Amounts:
Continuing Operations $ .07 $ .14
Discontinued Operations 0 0
------ ------
Net Income $ .07 $ .14
</TABLE>
<PAGE> 1
EXHIBIT 21
Subsidiaries of Glassmaster Company
1) Glassmaster Controls Company, Inc. is a wholly-owned subsidiary of the
Company, organized and incorporated under the laws of the State of
Michigan on October 28, 1988.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE PERIOD ENDED AUGUST 31, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-31-1998
<CASH> 143
<SECURITIES> 0
<RECEIVABLES> 3,433
<ALLOWANCES> 60
<INVENTORY> 3,150
<CURRENT-ASSETS> 6,754
<PP&E> 12,252
<DEPRECIATION> 6,067
<TOTAL-ASSETS> 13,472
<CURRENT-LIABILITIES> 3,760
<BONDS> 5,272
0
0
<COMMON> 49
<OTHER-SE> 3,800
<TOTAL-LIABILITY-AND-EQUITY> 13,472
<SALES> 24,549
<TOTAL-REVENUES> 24,549
<CGS> 20,609
<TOTAL-COSTS> 20,609
<OTHER-EXPENSES> 3,069
<LOSS-PROVISION> 44
<INTEREST-EXPENSE> 628
<INCOME-PRETAX> 198
<INCOME-TAX> 79
<INCOME-CONTINUING> 119
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 119
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE PERIOD ENDED AUGUST 31, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-31-1997
<CASH> 119
<SECURITIES> 0
<RECEIVABLES> 3,268
<ALLOWANCES> 56
<INVENTORY> 2,741
<CURRENT-ASSETS> 6,248
<PP&E> 11,095
<DEPRECIATION> 5,293
<TOTAL-ASSETS> 12,487
<CURRENT-LIABILITIES> 5,083
<BONDS> 3,086
0
0
<COMMON> 49
<OTHER-SE> 3,718
<TOTAL-LIABILITY-AND-EQUITY> 12,487
<SALES> 21,322
<TOTAL-REVENUES> 21,322
<CGS> 17,536
<TOTAL-COSTS> 17,536
<OTHER-EXPENSES> 2,809
<LOSS-PROVISION> 43
<INTEREST-EXPENSE> 633
<INCOME-PRETAX> 300
<INCOME-TAX> 65
<INCOME-CONTINUING> 235
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 235
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
