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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 February 28, 1999.
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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 February 28, 1999: 1,630,696 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>
February 28, 1999 August 31, 1998
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(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 109 $ 143
Accounts Receivable (Net of Reserve) 3,236 3,373
Other Current Receivables 58 7
Inventories:
Raw Materials $ 2,079 $ 1,714
Work in Process 513 478
Finished Products 1,170 3,762 958 3,150
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Prepaid Expenses and Other Current Assets 300 81
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Total Current Assets 7,465 6,754
Fixed Assets (Net of Dep'n)
Property and Equipment (at cost) 6,064 6,185
Other Assets
CSV Life Insurance and Other Unamortized Assets 642 533
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Total Assets $14,171 $13,472
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LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable $ 1,883 $ 1,602
Accrued Expenses 222 259
Accrued Income Taxes 0 17
Notes & Mortgages Payable 2,974 1,882
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Total Current Liabilities 5,079 3,760
Long Term Liabilities
Notes & Mtges, Due After One Year $ 5,030 $ 5,272
Deferred Income Taxes 591 5,621 591 5,863
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Total Liabilities 10,700 9,623
Stockholders' Equity
Capital Stock (Authorized 5,000,000 Shares $0.03
Par - 1,630,696 (1999), 1,627,896 (1998)
Shares Issued and Outstanding $ 49 $ 49
Paid-In Capital 1,358 1,355
Donated Capital 124 124
Retained Earnings 1,940 3,471 2,321 3,849
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Total Liabilities and Equity $14,171 $13,472
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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
February 28, 1999 March 1, 1998
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<S> <C> <C>
Net Sales $ 5,450 $ 6,040
Cost of Sales 4,703 5,177
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Gross Profit 747 863
Costs and Expenses:
Selling 275 286
General and Administrative 250 266
Other Income and Expense - Net 219 200
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Total Costs and Expenses 744 752
Income From Operations 3 111
Interest Expense 168 157
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Income Before Income Taxes (165) (46)
Income Taxes (60) (11)
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Net Income $ (105) $ (35)
======= =======
Net Income Per Share (1,627,896 Shares) (0.02)
(Basic and Diluted)
Net Income Per Share (1,630,696 Shares) (0.06)
(Basic and Diluted)
Dividends Paid Per Share $ 0.00 $ 0.03
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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
February 28, 1999 March 1, 1998
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<S> <C> <C>
Net Sales $ 10,702 $ 11,627
Cost of Sales 9,464 9,797
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Gross Profit 1,238 1,830
Costs and Expenses:
Selling 537 561
General and Administrative 497 523
Other Income and Expense - Net 456 428
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Total Costs and Expenses 1,490 1,512
Income From Operations (252) 318
Interest Expense 325 306
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Income Before Income Taxes (577) 12
Income Taxes (196) 2
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Net Income $ (381) $ 10
======== ========
Net Income Per Share (1,627,896 Shares) 0.01
(Basic and Diluted)
Net Income Per Share (1,630,696 Shares) (0.23)
(Basic and Diluted)
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
February 28, 1999 March 1, 1998
----------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $ (381) $ 10
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation 468 403
Amortization 4 4
Increase in Deferred Income Taxes (113) 0
Changes in Operating Assets & Liabilities:
Decrease (Increase) in Receivables 87 (912)
Decrease (Increase) in Inventories (612) (517)
Decrease (Increase) in Prepaid Expenses &
Other Current Assets (219) (203)
Increase (Decrease) in Accounts Payable 281 1,503
Increase (Decrease) in Accrued Expenses (54) (53)
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Net Cash Provided (Used) By Operating Activities (539) 235
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Cash Flows From Investing Activities
Additional Investment in Fixed Assets 347 615
Additional Investment in Other Assets 0 9
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Net Cash Used By Investing Activities 347 624
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Cash Flows From Financing Activities
Proceeds from Exercise of Stock Options 3 11
Payment of Dividend 0 (49)
Proceeds from Short-Term Borrowings 0 0
Repayment of Short-Term Borrowings (47) (49)
Proceeds from Long-Term Obligations 0 0
Repayment of Long-Term Obligations (234) (306)
Net Increase (Decrease) in Short-Term Revolving
Lines of Credit 1,131 740
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Net Cash Provided (Used) By Financing Activities 853 347
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Net Increase (Decrease) In Cash (33) (42)
Cash At Beginning of Period 143 119
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Cash At End of Period $ 110 $ 77
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Supplemental Disclosures of Cash Flow Information
Cash Paid For:
Interest (Net of Amount Capitalized) $ 338 $ 319
Income Taxes 17 30
</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 February 28, 1998 are not necessarily indicative of the results
that may be expected for the year ended August 31, 1999. 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, 1998. Certain prior year amounts may have been
reclassified to conform with the 1999 presentation.
Item 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS
Consolidated sales for the second quarter ended February 28, 1999 were
$5,449,763, a decrease of 9.8% when compared with the prior year second quarter
sales. The decrease in comparative quarterly sales is due to a decline in
product shipments of 14% at the Monofilament Division and 41% at the Composites
Division. Difficult economic conditions in several foreign markets and the
corresponding impact on the North American textile industry has directly
affected demand for many of the company's monofilament products. The slowdown
in the textile markets and a loss of a key customer account for the decrease in
monofilament sales. Composites Division sales have declined due to a decision
to discontinue the manufacture and sale of certain low-margin products while
sales of recently introduced products have been less than anticipated.
Glassmaster Controls sales increased by 8.5% during the second quarter compared
to the prior year period due to new product shipments. Year-to-date
consolidated sales are 8% less than the prior year six-month period due to a
decrease in sales of 10% at Monofilament and 35% at Composites. Glassmaster
Controls sales have increased 5% this year to date compared with the prior year
period.
Gross profit margins during the second quarter were 13.7% of sales
compared with 14.3% of sales in the prior year quarter. Year-to-date profit
margins as a percent of sales were 11.6% versus last year's 15.7%. The
quarterly and year-to-date decline in profit margins is due to lower sales,
pricing pressures, and a less favorable mix of products sold at Monofilament
coupled with lower sales and inefficient capacity utilization at Composites.
While gross margins during the second quarter did improve compared with the
first quarter's 9.3% of sales gross profit, any further improvement in margins
this fiscal year will be restrained absent new product sales growth at both
Composites and Monofilament.
Selling, G&A, and Other Expenses totaled $744,059 during the second
quarter, or about 14% of sales, compared with $751,961, or 12% of sales, during
the prior year second quarter. These expenses represent approximately 14% of
year-to-date sales versus 13% of sales during last fiscal year's first six
months. Interest expense was slightly higher when compared with last year's
quarterly and year-to-date periods due to increased borrowings.
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Item 2. Management's Discussion and Analysis (Cont'd)
The second quarter of the current fiscal year showed a net
consolidated loss of ($105,006) compared with last year's second quarter loss
of ($35,064). On a year-to-date basis the net loss totals ($381,026) compared
with net income of $9,708 last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities total ($539,000) for the
six-month period ended February 28, 1999 compared with $235,000 during the
comparable period of the prior fiscal year. The decline in cash provided from
operating activities is primarily due to operating losses incurred as a result
of lower sales and corresponding gross profit.
Cash used by investing activities so far this year totals $347,000
compared with $624,000 during last year's comparable six-month period. A
reduced investment in fixed assets this year compared with the prior year
period accounts for the decrease. The prior year period included equipment and
tooling expenditures at Composites associated with the development of its new
product, the Glassmaster Composite Modular Building System(TM) as well as added
extrusion equipment to boost capacity at Monofilament. These capital addition
projects are now essentially complete and no further material commitments for
capital additions are currently planned for the remainder of this fiscal year.
Net cash provided by financing activities was $853,000 during this
year's first six months compared with $347,000 in the prior year period. The
increase can be attributed to higher net borrowings under the company's
revolving lines of credit due to operating losses incurred so far this fiscal
year compared with an operating profit recognized during last year's comparable
six months. These revolving credit agreements provide for borrowings of up to
$3.15 million. Total borrowings outstanding under these credit lines were $2.15
million as of February 28, 1999.
The company currently anticipates that its cash requirements during
the remainder of the 1999 fiscal year will be provided from operations and from
borrowings under existing and committed credit lines.
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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 February 28, 1999 Financial Data Schedule
b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter ended
February 28, 1999.
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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 April 13, 1999 /s/ Raymond M. Trewhella
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Raymond M. Trewhella
(President and
Principal Executive Officer)
Date April 13, 1999 /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 FEBRUARY 28, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> FEB-28-1999
<CASH> 109
<SECURITIES> 0
<RECEIVABLES> 3,294
<ALLOWANCES> 58
<INVENTORY> 3,762
<CURRENT-ASSETS> 7,465
<PP&E> 12,600
<DEPRECIATION> 6,536
<TOTAL-ASSETS> 14,171
<CURRENT-LIABILITIES> 5,079
<BONDS> 5,030
0
0
<COMMON> 49
<OTHER-SE> 3,422
<TOTAL-LIABILITY-AND-EQUITY> 14,171
<SALES> 10,702
<TOTAL-REVENUES> 10,702
<CGS> 9,464
<TOTAL-COSTS> 9,464
<OTHER-EXPENSES> 1,490
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 325
<INCOME-PRETAX> (577)
<INCOME-TAX> (196)
<INCOME-CONTINUING> (381)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (381)
<EPS-PRIMARY> (0.23)
<EPS-DILUTED> (0.23)
</TABLE>
