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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 May 31, 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
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No Change
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant:
(1) Has filed all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12 months
YES [X] NO [ ]
(2) Has been subject to such filing requirements for the past 90 days
YES [X] NO [ ]
Common shares outstanding May 31, 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>
May 31, 1998 August 31, 1997
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(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 109 $ 119
Accounts Receivable (Net of Reserve) 4,234 3,213
Other Current Receivables 63 144
Inventories:
Raw Materials $ 2,130 $ 1,604
Work in Process 554 469
Finished Products 562 3,246 668 2,741
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Prepaid Expenses and Other Current Assets 197 31
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Total Current Assets 7,849 6,248
Fixed Assets (Net of Dep'n)
Property and Equipment (at cost) 6,188 5,803
Other Assets
CSV Life Insurance and Other Unamortized Assets 443 436
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Total Assets $14,480 $12,487
======== =======
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable $ 3,083 $ 1,422
Accrued Expenses 261 239
Accrued Income Taxes 7 12
Notes & Mortgages Payable 4,198 3,410
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Total Current Liabilities 7,549 5,083
Long Term Liabilities
Notes & Mtges, Due After One Year $ 2,609 $ 3,086
Deferred Income Taxes 551 3,160 551 3,637
------- -------- ------- ------
Total Liabilities 10,709 8,720
Stockholders' Equity
Capital Stock (Authorized 5,000,000 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 2,243 3,771 2,250 3,767
------- -------- ------- -------
Total Liabilities and Equity $14,480 $12,487
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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
May 31, 1998 June 1, 1997
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<S> <C> <C>
Net Sales $ 6,655 $ 5,641
Cost of Sales 5,608 4,569
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Gross Profit 1,047 1,072
Costs and Expenses:
Selling 354 289
General and Administrative 264 264
Other Income and Expense - Net 225 207
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Total Costs and Expenses 843 760
Income From Operations 204 312
Interest Expense 166 164
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Income Before Income Taxes 38 148
Income Taxes 6 45
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Net Income $ 32 $ 103
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Net Income Per Share (1,620,096 Shares) 0.06
Net Income Per Share (1,627,896 Shares) 0.02
Dividends Paid Per Share $ 0.00 $ 0.00
======== =======
</TABLE>
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Glassmaster Company
Consolidated Comparative Income Statement
(In thousands except per share amounts)(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
May 31, 1998 June 1, 1997
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<S> <C> <C>
Net Sales $18,282 $15,819
Cost of Sales 15,405 12,995
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Gross Profit 2,877 2,824
Costs and Expenses:
Selling 915 799
General and Administrative 788 783
Other Income and Expense - Net 653 622
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Total Costs and Expenses 2,356 2,204
Income From Operations 521 620
Interest Expense 473 468
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Income Before Income Taxes 48 152
Income Taxes 7 43
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Net Income $ 41 $ 109
======== =======
Net Income Per Share (1,620,096 Shares) 0.07
Net Income Per Share (1,627,896 Shares) 0.03
Dividends Paid Per Share $ 0.03 $ 0.00
======== =======
</TABLE>
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Glassmaster Company
Consolidated Statement of Cash Flows
(Thousands)(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
May 31, 1998 June 1, 1997
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<S> <C> <C>
Cash Flows From Operating Activities
Net Income $ 41 $ 109
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation 605 560
Amortization 5 6
Changes in Operating Assets & Liabilities:
Decrease (Increase) in Receivables (940) (857)
Decrease (Increase) in Inventories (505) (142)
Decrease (Increase) in Prepaid Expenses &
Other Current Assets (167) (56)
Increase (Decrease) in Accounts Payable 1,662 677
Increase (Decrease) in Accrued Expenses 18 135
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Net Cash Provided (Used) By Operating Activities 719 432
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Cash Flows From Investing Activities
Additional Investment in Fixed Assets 990 756
Additional Investment in Other Assets 12 0
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Net Cash Used By Investing Activities 1,002 756
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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 300 100
Repayment of Short-Term Borrowings (175) (152)
Proceeds from Long-Term Obligations 90 132
Repayment of Long-Term Obligations (567) (502)
Net Increase (Decrease) in Short-Term Revolving
Lines of Credit 663 649
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Net Cash Provided (Used) By Financing Activities 273 230
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Net Increase (Decrease) In Cash (10) (94)
Cash At Beginning of Period 119 129
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Cash At End of Period $ 109 $ 35
========= =======
Supplemental Disclosures of Cash Flow Information
Cash Paid For:
Interest (Net of Amount Capitalized) $ 477 $ 457
Income Taxes 30 (6)
</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 nine-month period ended May 31, 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
RESULTS OF OPERATIONS
Consolidated sales for the third quarter ended May 31, 1998 were
$6,655,084 an increase of approximately 18% when compared to the third quarter
of the 1997 fiscal year. The increase in third quarter sales is due to sales
increases of 15% at the Monofilament Division, 61% at the Composites Division,
and 16% at Glassmaster Controls when compared to the prior year period.
Year-to-date sales total $18,282,465 and are almost 16% ahead of last year's
nine-month total sales of $15,818,744. Year-to-date sales have increased by 13%
at Monofilament, 14% at Composites, and by 26% at Controls when compared with
the prior year-to-date period. A continuation of favorable demand across the
product line at both Monofilament and Controls and new product sales at
Composites contributed to the improved quarterly and year-to-date sales.
Gross profit margins during the third quarter were 15.7% of sales this
year compared to 19% of sales in last year's third quarter. Year-to-date profit
margins as a percent of sales have declined to 15.7% this year from 17.9% of
sales last year to date. Profit margins continue to be impacted by product
development costs at Composites. During the past eighteen months the Composites
Division has been aggressively developing new product lines intending to broaden
its revenue base by entering markets not directly related to its traditional
market segment, fiberglass marine antennas. As sales of these new higher margin
products accelerate and manufacturing efficiencies improve, the company expects
the Composites Division to begin contributing to profit margin growth.
Selling, General and Administrative, and Other Expenses increased by
11% during the third quarter and were up by 7% year to date when compared with
the prior year periods. The increase is primarily due to sales and marketing
costs associated with Composites' new product offerings. When expressed as a
percent of sales these expenses declined slightly when compared with the prior
year-to-date and quarterly periods.
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Item 2. Management's Discussion and Analysis (Cont'd)
Interest expense is relatively unchanged when compared with the prior
year third quarter and year-to-date periods as average debt levels and interest
rates have remained relatively stable. However, interest expense declined to
2.5% of sales during this year's third quarter and to 2.6% of sales year to date
from 2.9% and 3.0% of sales, respectively, during last year's comparable
periods.
Net Income for the third quarter was $31,776 compared to $103,092 last
year, and year-to-date Net Income totals $41,484 versus $109,286 last year.
Earnings Per Share for the third quarter was $0.02 compared with $0.06 during
the prior year quarter and on a year-to-date basis totals $0.03 per share this
year versus $0.07 last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $719,000 for the nine-month
period ended May 31, 1998 compared with $432,000 during the comparable period of
the prior fiscal year. The increase can be attributed to the expanded use of
trade credit to fund increases in accounts receivable associated with sales
growth at all locations and new product inventory at Composites.
Cash used by investing activities so far this year totals $1,002,000
compared with $756,000 during last year's comparable nine-month 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.
Net cash provided by financing activities during the first nine months
of the year was $273,000. The increase can be attributed to additional
borrowings under the company's short-term lines of credit that were used to fund
the additional investments in equipment and tooling. So far this fiscal year
additional investment in fixed assets totals $990,000 and has been funded
primarily with working capital. As a result, the company's working capital has
declined to $300,000 as of May 31, 1998 from $1,165,000 as of August 31, 1997
and the current portion of notes and mortgages payable has increased to $4.2
million from $3.4 million, respectively.
Subsequent to the end of the third quarter and on June 30, 1998 the
company entered into a loan agreement that restructures its debt by refinancing
approximately $2.4 million of existing term and mortgage loan debt and
converting approximately $2.6 million of existing short-term lines of credit
into a single $5.0 million ten-year term loan. This debt refinancing, if
reflected in the Balance Sheet as of May 31, 1998, would have reduced the
current portion of notes and mortgages payable from $4.2 million to
approximately $1.5 million and increased long-term debt to $5.3 million from
$2.6 million. Working capital would have improved by $2.7 million. In addition,
current maturities of long-term debt are reduced to $561,740 from $715,117,
representing an annual reduction in principal payments due of approximately
$153,000. The lower interest rates provided by the refinancing will save the
company approximately $60,000 annually in interest costs.
In conjunction with the previously discussed term debt refinancing, the
company is negotiating to renew its primary short-term revolving line of credit.
The company currently anticipates the renewal to be for an additional three-year
period with total borrowings available under the credit line to be reduced from
$4.0 million to $2.5 million. Immediately following the term debt refinancing on
June 30, 1998, total borrowings outstanding under this credit line were
approximately $200,000.
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Item 2. Management's Discussion and Analysis (Cont'd)
With the long-term debt refinancing in place and the anticipated
renewal of its primary revolving credit line secured, the company anticipates
that its cash requirements during the remainder of this fiscal year and into the
1999 fiscal year will be provided by operating activities and from existing and
committed credit facilities.
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 May 31, 1998 Financial Data Schedule
b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter
ended May 31, 1998.
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Glassmaster Company
Lexington SC
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GLASSMASTER COMPANY
Date July 14, 1998 /s/ Raymond M. Trewhella
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Raymond M. Trewhella
(President and
Principal Executive Officer)
Date July 14, 1998 /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
10
<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 MAY 31, 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> MAY-31-1998
<CASH> 109
<SECURITIES> 0
<RECEIVABLES> 77
<ALLOWANCES> 4,311
<INVENTORY> 3,246
<CURRENT-ASSETS> 7,849
<PP&E> 12,086
<DEPRECIATION> 5,898
<TOTAL-ASSETS> 14,480
<CURRENT-LIABILITIES> 7,549
<BONDS> 2,609
0
0
<COMMON> 49
<OTHER-SE> 3,722
<TOTAL-LIABILITY-AND-EQUITY> 14,480
<SALES> 6,655
<TOTAL-REVENUES> 6,655
<CGS> 5,608
<TOTAL-COSTS> 5,608
<OTHER-EXPENSES> 843
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 166
<INCOME-PRETAX> 38
<INCOME-TAX> 6
<INCOME-CONTINUING> 32
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
