<PAGE> 1
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 27, 2000.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission file number 0-2331
GLASSMASTER COMPANY
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0283724
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
Incorporation of organization Identification No.)
PO Box 788, Lexington SC 29071
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number, including area code: 803-359-2594
No Change
- --------------------------------------------------------------------------------
(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 February 27, 2000: 1,630,696 par value $0.03
---------------------------------
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Glassmaster Company
Consolidated Comparative Balance Sheet
(Thousands)
<TABLE>
<CAPTION>
February 27, 2000 August 31, 1999
----------------- ---------------
(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 84 $ 126
Accounts Receivable (Net of Reserve) 3,595 2,676
Other Current Receivables 65 145
Inventories:
Raw Materials $ 1,691 $ 1,312
Work in Process 504 513
Finished Products 1,123 3,318 1,007 2,832
------- -------
Prepaid Expenses and Other Current Assets 189 170
-------- -------
Total Current Assets 7,251 5,949
Fixed Assets (Net of Dep'n)
Property and Equipment (at cost) 5,387 5,697
Other Assets
CSV Life Insurance and Other Unamortized Assets 776 630
-------- -------
Total Assets $13,414 $12,276
======== =======
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable $ 2,316 $ 1,404
Accrued Expenses 239 298
Accrued Income Taxes 0 0
Notes & Mortgages Payable 3,774 2,914
-------- -------
Total Current Liabilities 6,329 4,616
Long Term Liabilities
Notes & Mtges, Due After One Year $ 4,682 $ 4,805
Deferred Income Taxes 0 4,682 0 4,805
----- -------- ----- ------
Total Liabilities 11,011 9,421
Stockholders' Equity
Capital Stock (Authorized 5,000,000 Shares $0.03
Par - 1,630,696 (2000), 1,630,696 (1999)
Shares Issued and Outstanding $ 49 $ 49
Paid-In Capital 1,358 1,358
Donated Capital 124 124
Retained Earnings 872 2,403 1,325 2,856
----- -------- ------- -------
Total Liabilities and Equity $13,414 $12,276
======== =======
</TABLE>
2
<PAGE> 3
Glassmaster Company
Consolidated Comparative Income Statement
(In thousands except per share amounts)(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
February 27, 2000 February 28, 1999
----------------- -----------------
<S> <C> <C>
Net Sales $ 5,378 $ 5,450
Cost of Sales 4,758 4,703
------- -------
Gross Profit 620 747
Costs and Expenses:
Selling 253 275
General and Administrative 268 250
Other Income and Expense - Net 130 219
------- -------
Total Costs and Expenses 651 744
Income From Operations (31) 3
Interest Expense 183 168
------- -------
Income Before Income Taxes (214) (165)
Income Taxes (2) (60)
-------
Net Income $ (212) $ (105)
======= =======
Net Income Per Share (1,630,696 Shares) (0.13) (0.06)
(Basic and Diluted)
Dividends Paid Per Share $ 0.00 $ 0.00
======= =======
</TABLE>
3
<PAGE> 4
Glassmaster Company
Consolidated Comparative Income Statement
(In thousands except per share amounts)(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
February 27, 2000 February 28, 1999
----------------- -----------------
<S> <C> <C>
Net Sales $ 9,663 $ 10,702
Cost of Sales 8,557 9,464
-------- --------
Gross Profit 1,106 1,238
Costs and Expenses:
Selling 482 537
General and Administrative 545 497
Other Income and Expense - Net 302 456
-------- --------
Total Costs and Expenses 1,329 1,490
Income From Operations (223) (252)
Interest Expense 354 325
-------- --------
Income Before Income Taxes (577) (577)
Income Taxes (125) (196)
-------- --------
Net Income $ (452) $ (381)
======== ========
Net Income Per Share (1,630,696 Shares) (0.28) (0.23)
(Basic and Diluted)
Dividends Paid Per Share $ 0.00 $ 0.00
======== ========
</TABLE>
4
<PAGE> 5
Glassmaster Company
Consolidated Statement of Cash Flows
(Thousands)(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
February 27, 2000 February 28, 1999
----------------- -----------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $ (452) $ (381)
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation 446 468
Amortization 5 4
Increase in Deferred Income Taxes (138) (113)
Changes in Operating Assets & Liabilities:
Decrease (Increase) in Receivables (838) 87
Decrease (Increase) in Inventories (485) (612)
Decrease (Increase) in Prepaid Expenses &
Other Current Assets (20) (219)
Increase (Decrease) in Accounts Payable 914 281
Increase (Decrease) in Accrued Expenses (62) (54)
------- -------
Net Cash Provided (Used) By Operating Activities (630) (539)
------- -------
Cash Flows From Investing Activities
Additional Investment in Fixed Assets 137 347
Additional Investment in Other Assets 13 0
------- -------
Net Cash Used By Investing Activities 150 347
------- -------
Cash Flows From Financing Activities
Proceeds from Exercise of Stock Options 0 3
Payment of Dividend 0 0
Proceeds from Short-Term Borrowings 200 0
Repayment of Short-Term Borrowings (59) (47)
Proceeds from Long-Term Obligations 600 0
Repayment of Long-Term Obligations (723) (234)
Net Increase (Decrease) in Short-Term Revolving
Lines of Credit 720 1,131
------- -------
Net Cash Provided (Used) By Financing Activities 738 853
------- -------
Net Increase (Decrease) In Cash (42) (33)
Cash At Beginning of Period 126 143
------- -------
Cash At End of Period $ 84 $ 110
======= =======
Supplemental Disclosures of Cash Flow Information
Cash Paid For:
Interest (Net of Amount Capitalized) $ 351 $ 338
Income Taxes (84) 17
</TABLE>
5
<PAGE> 6
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 27,
2000 are not necessarily indicative of the results that may be expected for the
year ended August 31, 2000. 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, 1999. Certain prior
year amounts may have been reclassified to conform with the 2000 presentation.
Item 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS
Consolidated sales for the second quarter ended February 27, 2000 were
$5,378,567, a decrease of 1.3% when compared with prior year second quarter
sales. The decrease in comparative second quarter sales is due to a slight
decline in sales at Glassmaster Controls, primarily due to product mix changes
related to the introduction of new truck models at its largest customer. Second
quarter sales at the Monofilament Division were higher compared with the prior
year period but were offset by a decline in sales at Composites, leading to
relatively unchanged sales in the industrial products segment. On a comparative
year to date basis, controls and electronics segment sales have declined 8% in
the first six months of the 2000 fiscal year versus last year, while industrial
products segment sales have declined 10.4%. The decrease in sales of controls
and electronics is due to truck model changes and production slowdowns at its
largest customer. New production contracts on existing and new products will
initiate during the second half of the fiscal year and solid sales growth at
Controls is expected. Industrial products segment sales are lower due to
difficult market conditions in the North American textile industry that impacted
monofilament sales, and a decrease in sales of composites due to discontinued
product lines and the sale of the marine antenna business. As the second quarter
came to a close, order patterns for monofilament products had significantly
improved and, combined with new product revenue, the remainder of the fiscal
year should reflect positive sales growth at Monofilament when compared with the
prior year periods.
Gross profit margins during the second quarter declined to 11.5% of
sales from 13.7% of sales in the year ago second quarter primarily due to lower
sales levels at Composites. Year-to-date profit margins as a percent of sales
are relatively unchanged from the prior year to date period at 11.5% of sales.
Gross margins are expected to improve as the fiscal year progresses in
association with anticipated sales growth.
6
<PAGE> 7
Item 2. Management's Discussion and Analysis (Cont'd)
Selling, G&A, and Other Expenses totaled $650,880, or 12.1% of sales,
during this year's second quarter, compared with $744,059, or 13.7% of sales,
during the prior year second quarter. The decline is due primarily to
non-recurring credits and miscellaneous income at Controls. On a year to date
basis, these expenses total $1.33 million, or 13.7% of sales, compared with
$1.49 million, or 13.9% of sales last year. Interest expense has increased
approximately 9% for both the second quarter and year to date periods when
compared with the prior year due to higher average borrowings required to
support working capital and slightly higher average interest rates on short term
borrowings.
Income (Loss) before income taxes was ($213,599) during the current
year second quarter compared with ($164,662) in the year ago quarter and totals
($576,934) year to date versus ($577,312) last year. The provision (benefit) for
income taxes was ($1,400) in the second quarter and ($124,787) year to date,
compared with ($59,656) and ($196,286), respectively, last year. While last
year's second quarter included a benefit from income taxes associated with net
operating loss carry-forwards, this year's second quarter does not recognize the
tax benefit to be derived from the operating losses incurred.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were ($629,000) for the six-month
period ended February 27, 2000 compared with ($539,000) during the comparable
period of the prior fiscal year. The decline in cash provided from operating
activities is primarily due to increased accounts receivable outstanding,
resulting from increased sales activity near the end of this year's second
quarter. The large increase in accounts receivable this year was partially
offset by an increase in outstanding trade credit.
Cash used by investing activities so far this year totals $150,000,
compared with $347,000 during last year's comparable six-month period. The
decline in cash used by investing activities is due to a reduced investment in
fixed assets this year compared with the prior year period, the result of less
equipment and tooling spending at Controls and Composites.
Net cash provided by financing activities was $738,000 during this
year's first six months compared with $853,000 in the prior year period.
Additional long-term debt at Controls associated with capital equipment acquired
to expand electronics production capabilities and to re-finance existing
long-term mortgage debt that was maturing, was more than offset by a smaller
increase in borrowings under the company's short term revolving lines of credit
this year when compared to the prior year period. Approximately $400,000
additional long-term funding remains available under the terms of the financing
agreement and Glassmaster Controls Company intends to borrow the balance of the
committed funds during the remainder of the 2000 fiscal year to fund additional
capital equipment. The Monofilament Division currently plans to invest
approximately $200,000 to acquire equipment necessary to complete the assembly
and installation of a $450,000 extrusion line. This capital addition was
initiated in 1998 and approximately $250,000 of equipment was acquired, but
completion of the project was delayed when market conditions deteriorated.
Recently accelerating demand for existing monofilament products, as well as
capacity requirements related to new product sales growth and related production
commitments, led to the decision to complete the addition. The company currently
intends to seek medium-term lease financing to fund the entire capital project.
7
<PAGE> 8
Item 2. Management's Discussion and Analysis (Cont'd)
Other than previously discussed, no new material capital expenditures
are planned and the company currently anticipates that its cash requirements
during the remainder of the 2000 fiscal year will be provided from operations
and from borrowings under existing and committed credit lines.
YEAR 2000 DISCLOSURE
As more fully discussed in previous filings, the company's Year 2000
Compliance Plan ("the Plan") was initiated in early 1998 and involved three
phases 1) The Internal Assessment Phase, 2) The Vendor Assessment Phase, and 3)
the Upgrade Implementation and Testing Phase. The Plan was intended to mitigate
all known deficiencies in both internal and external information technology
("IT") systems related to the Year 2000 issue and provide for contingency plans
in the event of Year 2000 failures. The company completed enterprise-wide
testing of critical systems, the final phase of the Plan, during December, 1999.
As of the date of this report, there have been no recognizable failures
of any internal information systems or computer controlled processes, nor have
any disruptions in normal operations occurred as a result of any external agent
year 2000 related failures. The company intends to continue to monitor all
internal and external IT systems and processes during the year 2000 for any
indication of failures.
PART II - OTHER INFORMATION
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits.
Exhibit No. Description
----------- -----------
27 February 27, 2000 Financial Data Schedule
b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter ended
February 27, 2000.
8
<PAGE> 9
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, 2000 /s/ Raymond M. Trewhella
--------------------------- ----------------------------------
Raymond M. Trewhella
(President and
Principal Executive Officer)
Date April 13, 2000 /s/ Steven R. Menchinger
-------------------------- -----------------------------------
Steven R. Menchinger
(Treasurer, Controller, and
Principal Financial Officer)
9
<PAGE> 10
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
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 27, 2000
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-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> FEB-27-2000
<CASH> 84
<SECURITIES> 0
<RECEIVABLES> 3,735
<ALLOWANCES> 75
<INVENTORY> 3,318
<CURRENT-ASSETS> 7,251
<PP&E> 12,133
<DEPRECIATION> 6,746
<TOTAL-ASSETS> 13,414
<CURRENT-LIABILITIES> 6,329
<BONDS> 4,682
0
0
<COMMON> 49
<OTHER-SE> 2,354
<TOTAL-LIABILITY-AND-EQUITY> 13,414
<SALES> 9,663
<TOTAL-REVENUES> 9,663
<CGS> 8,557
<TOTAL-COSTS> 8,557
<OTHER-EXPENSES> 1,329
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 354
<INCOME-PRETAX> (577)
<INCOME-TAX> (125)
<INCOME-CONTINUING> (452)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (452)
<EPS-BASIC> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
