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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 1, 1998.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission file number 0-2331
GLASSMASTER COMPANY
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(Exact name of small business issuer as specified in its charter)
South Carolina 57-0283724
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(State or other jurisdiction of (IRS Employer
Incorporation of organization Identification No.)
PO Box 788, Lexington SC 29071
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(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number, including area code: 803-359-2594
No Change
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant:
(1) Has filed all reports required to be filed by Section 13 or 15
(d) of the Securities Exchange Act of 1934 during the
preceding 12 months
YES X NO
----- -----
(2) Has been subject to such filing requirements for the past 90
days
YES X NO
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Common shares outstanding March 1, 1998: 1,627,896 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 1, 1998 August 31, 1997
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(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 77 $ 119
Accounts Receivable (Net of Reserve) 4,206 3,213
Other Current Receivables 63 144
Inventories:
Raw Materials $ 2,011 $ 1,604
Work in Process 515 469
Finished Products 732 3,258 668 2,741
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Prepaid Expenses and Other Current Assets 234 31
-------- -------
Total Current Assets 7,838 6,248
Fixed Assets (Net of Dep'n)
Property and Equipment (at cost) 6,015 5,803
Other Assets
CSV Life Insurance and Other Unamortized Assets 442 436
-------- -------
Total Assets $14,295 $12,487
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable $ 2,925 $ 1,422
Accrued Expenses 197 239
Accrued Income Taxes 2 12
Notes & Mortgages Payable 4,102 3,410
-------- -----
Total Current Liabilities 7,226 5,083
Long Term Liabilities
Notes & Mtges, Due After One Year $ 2,779 $ 3,086
Deferred Income Taxes 551 3,330 551 3,637
------- -------- ------- ------
Total Liabilities 10,556 8,720
Stockholders' Equity
Capital Stock (Authorized 5,000,00 Shares $0.03
Par - 1,627,896 (1998), 1,617,096 (1997)
Shares Issued and Outstanding $ 49 $ 49
Paid-In Capital 1,355 1,344
Donated Capital 124 124
Retained Earnings 2,211 3,739 2,250 3,767
------- -------- ------- -------
Total Liabilities and Equity $14,295 $12,487
</TABLE>
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Glassmaster Company
Consolidated Comparative Income Statement
(In thousands except per share amounts)(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 1, 1998 March 2, 1997
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<S> <C> <C>
Net Sales $ 6,040 $5,401
Cost of Sales 5,177 4,411
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Gross Profit 863 990
Costs and Expenses:
Selling 286 275
General and Administrative 266 263
Other Income and Expense - Net 200 218
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Total Costs and Expenses 752 756
Income From Operations 111 234
Interest Expense 157 152
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Income (Loss) Before Income Taxes (46) 82
Income Taxes (11) 28
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Net Income (Loss) $ (35) $ 54
======= ======
Earnings Per Share (1,617,096 Shares) $ 0.03
Earnings (Loss) Per Share (1,627,896 Shares) ($0.02)
Dividends Paid Per Share $ 0.03 $ 0.00
======= ======
</TABLE>
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Glassmaster Company
Consolidated Comparative Income Statement
(In thousands except per share amounts)(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 1, 1998 March 2, 1997
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<S> <C> <C>
Net Sales $11,627 $ 10,177
Cost of Sales 9,797 8,425
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Gross Profit 1,830 1,752
Costs and Expenses:
Selling 561 510
General and Administrative 523 519
Other Income and Expense - Net 428 415
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Total Costs and Expenses 1,512 1,444
Income From Operations 318 308
Interest Expense 306 304
------- --------
Income (Loss) Before Income Taxes 12 4
Income Taxes 2 (2)
------- --------
Net Income (Loss) $ 10 $ 6
======= ========
Earnings Per Share (1,620,096 Shares) $ 0.00
Earnings (Loss) Per Share (1,627,896 Shares) $ 0.01
Dividends Paid Per Share $ 0.03 $ 0.00
======= ========
</TABLE>
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Glassmaster Company
Consolidated Statement of Cash Flows
(Thousands)(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 1, 1998 March 2, 1997
------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $ 10 $ 6
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation 403 373
Amortization 4 4
Changes in Operating Assets & Liabilities:
Decrease (Increase) in Receivables (912) (803)
Decrease (Increase) in Inventories (517) (204)
Decrease (Increase) in Prepaid Expenses &
Other Current Assets (203) (108)
Increase (Decrease) in Accounts Payable 1,503 696
Increase (Decrease) in Accrued Expenses (53) 3
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Net Cash Provided (Used) By Operating Activities 235 (33)
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Cash Flows From Investing Activities
Additional Investment in Fixed Assets 615 170
Additional Investment in Other Assets 9 0
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Net Cash Used By Investing Activities 624 170
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Cash Flows From Financing Activities
Proceeds from Exercise of Stock Options 11 3
Payment of Dividend (49) 0
Proceeds from Short-Term Borrowings 0 100
Repayment of Short-Term Borrowings (49) (100)
Proceeds from Long-Term Obligations 0 0
Repayment of Long-Term Obligations (306) (303)
Net Increase (Decrease) in Short-Term Revolving
Line of Credit 740 460
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Net Cash Provided (Used) By Financing Activities 347 160
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Net Increase (Decrease) In Cash (42) (43)
Cash At Beginning of Period 119 129
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Cash At End of Period $ 77 $ 86
======= =====
Supplemental Disclosures of Cash Flow Information
Cash Paid For:
Interest (Net of Amount Capitalized) $ 319 $ 292
Income Taxes 30 (6)
</TABLE>
5
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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 1, 1998
are not necessarily indicative of the results that may be expected for the year
ended August 31, 1998. 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, 1997. Certain prior
year amounts may have been reclassified to conform with the 1998 presentation.
Item 2. Management's Discussion and Analysis
RESULT OF OPERATIONS
Consolidated sales for the second quarter ended March 1, 1998 were
$6,040,452, an increase of 12% when compared to the prior year second quarter
sales. The increase in comparative quarterly sales is due to sales increases of
approximately 9% at the Monofilament Division and 22% at Glassmaster Controls.
Year-to-date sales total $11,627,381 and are 14% higher than last year's
six-month total sales. Monofilament year-to-date sales are 11% ahead of last
year's totals and Glassmaster Controls' sales have increased by more than 32%
when compared to the previous year six-month period. Sales by the Composites
Division were 13% higher during the second quarter when compared with the prior
year but were 3% less on a year-to-date comparative basis.
Gross profit margins during the second quarter were 14.3% of sales
compared with 18.3% of sales in the prior year quarter. Year-to-date profit
margins as a percent of sales were 15.7% versus last year's 17.2%. The quarterly
and year-to-date decline in profit margins can be attributed to costs incurred
at Composites during an intensive product development phase. The Composites
Division introduced a new product line during the quarter, the Glassmaster
Composite Modular Building SystemTM, and all direct and indirect costs of
development have been charged against current period income. Gross profit
margins will improve at Composites as revenues from these new products are
realized.
Selling, G&A, and Other Expenses totalled $751,961 during the second
quarter, or about 12% of sales, compared with $756,066, or 14% of sales, during
the prior year quarter. These expenses represent approximately 13% of
year-to-date sales versus 14% of sales during last fiscal year's first six
months. Interest expense was slightly higher in dollar terms when compared with
last year's quarterly and year-to-date periods but declined as a percent of
sales in both comparative periods.
The second quarter of the current fiscal year showed a net consolidated
loss of ($35,064) compared with net income of $53,513 during last year's second
quarter. On a year-to-date basis net income was $9,708 this year versus $6,194
last year.
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LIQUIDITY AND CAPITAL RESOURCES
Cash provided (used) by operating activities totalled $235,000 during
the six-month period ended March 1, 1998 compared with ($33,000) during the
comparable period of the prior fiscal year. The increase is primarily due to
improved operating earnings and expanded use of trade credit at Monofilament and
Controls.
Cash used by investing activities so far this year totals $624,000
compared with $170,000 in last year's comparable period. Additional investment
in equipment and tooling at Composites to develop and manufacture new products
and at Monofilament and Controls to expand production capabilities accounts for
the increase. The Monofilament Division is currently in the process of acquiring
and installing a $500,000 monofilament extrusion line. This project should be
completed by July 1, 1998. A second new extrusion line that will be similar in
function and cost will be added during the first and second quarters of the 1999
fiscal year. The company intends to fund this additional capital investment
either with term debt or with operating lease funding.
Net cash provided by financing activities during the first six months
of the year was $347,000 compared with $160,000 last year. The increase in cash
provided is primarily due to a net increase in the company's short-term
revolving lines of credit of $740,000 so far this year versus an increase of
$460,000 last year. The lines of credit were used to fund the additional
investments in equipment and tooling and to pay a $.03 per share dividend. These
revolving credit agreements provide for borrowings of up to $4.65 million. Total
borrowings outstanding under these credit lines were $3.1 million as of March 1,
1998. The company intends to restructure its debt so as to convert a significant
percentage of the outstanding short-term revolving credit lines into long-term
debt financing at more favorable interest rates. This debt refinancing will have
a favorable impact on the debt service and working capital position of the
company and provide funding for committed and future capital additions.
PART II - OTHER INFORMATION
Item 5. Other Information - None.
7
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Glassmaster Company
Lexington SC
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits.
Exhibit No. Description
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27 March 1, 1998 Financial Data Schedule
b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter
ended March 1, 1998.
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 14, 1998 /s/ Raymond M. Trewhella
-------------------------- ------------------------
Raymond M. Trewhella
(President and
Principal Executive Officer)
Date April 14, 1998 /s/ Steven R. Menchinger
-------------------------- ------------------------
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 (for SEC use only)
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 1, 1998 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-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> MAR-01-1998
<CASH> 77
<SECURITIES> 0
<RECEIVABLES> 4,281
<ALLOWANCES> 75
<INVENTORY> 3,258
<CURRENT-ASSETS> 7,838
<PP&E> 11,711
<DEPRECIATION> 5,696
<TOTAL-ASSETS> 14,295
<CURRENT-LIABILITIES> 7,226
<BONDS> 2,779
0
0
<COMMON> 49
<OTHER-SE> 3,690
<TOTAL-LIABILITY-AND-EQUITY> 14,295
<SALES> 6,040
<TOTAL-REVENUES> 6,040
<CGS> 5,177
<TOTAL-COSTS> 5,177
<OTHER-EXPENSES> 752
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 157
<INCOME-PRETAX> (46)
<INCOME-TAX> (11)
<INCOME-CONTINUING> (35)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (35)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
