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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 November 28, 1999.
[ ] 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 November 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>
NOVEMBER 28, 1999 AUGUST 31, 1999
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(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 91 $ 126
Accounts Receivable (Net of Reserve) 2,722 2,676
Other Current Receivables 191 145
Inventories:
Raw Materials $ 1,459 $ 1,312
Work in Process 491 513
Finished Products 1,325 3,275 1,007 2,832
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Prepaid Expenses and Other Current Assets 301 170
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Total Current Assets 6,580 5,949
FIXED ASSETS (Net of Dep'n)
Property and Equipment (at cost) 5,595 5,697
OTHER ASSETS
CSV Life Insurance and Other Unamortized Assets 770 630
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TOTAL ASSETS $12,945 $12,276
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LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 1,824 $ 1,404
Accrued Expenses 255 298
Accrued Income Taxes 0 0
Notes & Mortgages Payable 3,417 2,914
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Total Current Liabilities 5,496 4,616
LONG TERM LIABILITIES
Notes & Mtges, Due After One Year $ 4,833 $ 4,805
Deferred Income Taxes 0 4,833 0 4,805
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TOTAL LIABILITIES 10,329 9,421
STOCKHOLDERS' EQUITY
Capital Stock (Authorized 5,000,000 Shares $0.03
Par - 1,630,896 (2000), 1,627,896 (1999)
Shares Issued and Outstanding $ 49 $ 49
Paid-In Capital 1,358 1,358
Donated Capital 124 124
Retained Earnings 1,085 2,616 1,325 2,856
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TOTAL LIABILITIES AND EQUITY $12,945 $12,276
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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
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November 28, 1999 November 29, 1998
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<S> <C> <C>
Net Sales $ 4,284 $ 5,252
Cost of Sales 3,799 4,762
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Gross Profit 485 490
Costs and Expenses:
Selling 229 262
General and Administrative 277 246
Other Income and Expense - Net 172 237
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Total Costs and Expenses 678 745
Income (Loss) From Operations (193) (255)
Interest Expense 170 158
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Income (Loss) Before Income Taxes (363) (413)
Income Taxes (123) (137)
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Net Income (Loss) $ (240) $ (276)
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Net Income (Loss) Per Share (1,630,696 Shares) (0.15)
(Basic and Diluted)
Net Income (Loss) Per Share (1,627,896 Shares) (0.17)
(Basic and Diluted)
Dividends Paid Per Share $ 0.00 $ 0.00
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</TABLE>
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Glassmaster Company
Consolidated Statement of Cash Flows
(Thousands)(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
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November 29, 1999 November 28, 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ (240) $ (276)
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation 224 234
Amortization 2 2
Increase in Deferred Income Taxes (137) (137)
Changes in Operating Assets & Liabilities:
Decrease (Increase) in Receivables (92) 148
Decrease (Increase) in Inventories (443) (587)
Decrease (Increase) in Prepaid Expenses &
Other Current Assets (132) (74)
Increase (Decrease) in Accounts Payable 420 346
Increase (Decrease) in Accrued Expenses (43) (47)
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Net Cash Provided (Used) By Operating Activities (441) (391)
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CASH FLOWS FROM INVESTING ACTIVITIES
Additional Investment in Fixed Assets 121 141
Additional Investment in Other Assets 5 0
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Net Cash Used By Investing Activities 126 141
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Exercise of Stock Options 0 0
Proceeds from Short-Term Borrowings 0 0
Repayment of Short-Term Borrowings (4) (73)
Proceeds from Long-Term Obligations 440 0
Repayment of Long-Term Obligations (411) (117)
Net Increase (Decrease) in Short-Term Revolving
Lines of Credit 507 648
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Net Cash Provided (Used) By Financing Activities 532 458
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Net Increase (Decrease) In Cash (35) (74)
Cash At Beginning of Period 126 143
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Cash At End of Period $ 91 $ 69
======= ======
Supplemental Disclosures of Cash Flow Information
Cash Paid For:
Interest (Net of Amount Capitalized) $ 159 $ 157
Income Taxes 0 17
</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 three-month period ended November 28,
1999 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 first quarter ended November 28, 1999 (2000
fiscal year) were $4,283,949, a decrease of 18.4% when compared to sales of
$5,251,795 during the first quarter of the 1999 fiscal year. The decline in
first quarter sales is primarily due to a decrease in shipments of monofilament
and composites products that are included in the company's industrial products
segment. Monofilament sales of specialty sewing threads and filaments used in
woven textiles have been impacted by difficult market conditions in the North
American textile industry, while sales of composites products have declined due
to discontinued low-margin product lines. Industrial products segment sales
declined 20.5% overall in the year's first quarter versus the prior year
comparable period. Sales by the controls and electronics segment were lower by
approximately 11% this year compared with the year ago quarter. The decrease in
sales of controls and electronics is due to a temporary slowdown in production
of medium duty trucks at a primary customer's manufacturing facilities and the
discontinuance of a certain product class resulting from a truck model
engineering change. Orders for textile related monofilaments have improved
recently as foreign competitive pressures have abated somewhat due to improving
economic conditions in Asia. Sales of monofilament products, as well as controls
and electronics, are expected to improve as customers complete their evaluation
process of recently developed custom products.
Gross profit realized during the first quarter declined only slightly
to $485,000 from $490,000 in the year ago quarter despite the decline in sales
of nearly $1 million. Gross profit as a percent of sales improved to 11.3% of
first quarter sales compared with 9.3% of sales during last year's first quarter
primarily due to the elimination of low-margin product lines and cost reductions
at composites. Gross profit margins are expected to improve in tandem with
future sales growth associated with new product development.
Selling, G&A, and Other Expenses were $678,438, or 15.8% of sales,
during this year's first quarter versus $745,392, or 14.2% of sales in the year
ago first quarter. The decrease in dollar terms can be attributed to lower
variable selling expenses associated with the decline in sales, while the
increase in expenses when expressed as a percent of sales is primarily due to
higher costs associated with employee benefit programs in conjunction with
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Item 2. Management's Discussion and Analysis (Cont'd)
the lower sales. Interest expensed increased slightly to $170,388 this year
compared to $157,664 last year due to higher average borrowings required to
support working capital.
Income (Loss) before income taxes was ($363,335) during the current
year first quarter compared with ($412,649) in the year ago quarter. The decline
in the pre-tax loss is primarily due to better operating margins in the
industrial products segment attributable to cost reductions at Composites. Net
Consolidated Income (Loss) was ($239,948) in this year's first quarter compared
to ($276,019) last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were ($441,000) during the first
quarter of the 2000 fiscal year compared with ($390,000) during the prior year
first quarter. The decline in cash provided from operating activities is
primarily due to increases in outstanding trade receivables and prepaid items
that were partially offset by a smaller increase in inventories and a larger
increase in outstanding trade credit during the current year first quarter
compared to the prior year.
Cash used by investing activities during the first quarter was $126,000
compared to $141,000 in the year ago quarter. A reduced investment in fixed
assets this year compared to the prior year period accounts for the decrease in
cash used by investing activities.
Net cash provided by financing activities was $532,000 in the current
year first quarter versus $458,000 last year. The increase can be attributed to
additional long-term debt at the controls and electronics segment associated
with additional capital equipment acquired to expand electronics production
capabilities and capacity and to re-finance existing long-term mortgage debt
that was maturing. Approximately $400,000 additional long-term funding is
available under the terms of the financing agreement and Glassmaster Controls
Company intends to borrow the balance of the committed funds during the second
and third quarters of the 2000 fiscal year to fund additional capital equipment.
As discussed more fully in the company's annual report on Form 10-KSB
for the fiscal year ending August 31, 1999, the company is in violation of
certain financial covenants contained in its primary lending agreements due to
operating losses incurred during the 1999 fiscal year. At the date of the 10-KSB
filing the company had requested, but not yet received, temporary waivers for
the loan covenant violations from the financial institutions involved. The
company has since received the waivers for the specified loan covenant
violations through the period ending August 31, 2000.
The company's $650,000 revolving line of credit that provides working
capital for Glassmaster Controls Company expires on January 31, 2000. The
company expects this credit line to be renewed with similar terms for another
one-year period.
As of the date of this report, 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 borrowings under existing and committed credit
lines.
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Item 2. Management's Discussion and Analysis (Cont'd)
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
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27 November 28, 1999 Financial Data Schedule
b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter ended
November 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 January 14, 2000 /s/ Raymond M. Trewhella
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Raymond M. Trewhella
(President and
Principal Executive Officer)
Date January 14, 2000 /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
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 NOVEMBER 28, 1999
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-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> NOV-28-1999
<CASH> 91
<SECURITIES> 0
<RECEIVABLES> 2,782
<ALLOWANCES> 60
<INVENTORY> 3,275
<CURRENT-ASSETS> 6,580
<PP&E> 12,118
<DEPRECIATION> 6,523
<TOTAL-ASSETS> 12,945
<CURRENT-LIABILITIES> 5,496
<BONDS> 4,833
0
0
<COMMON> 49
<OTHER-SE> 2,567
<TOTAL-LIABILITY-AND-EQUITY> 12,945
<SALES> 4,284
<TOTAL-REVENUES> 4,284
<CGS> 3,798
<TOTAL-COSTS> 3,798
<OTHER-EXPENSES> 678
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170
<INCOME-PRETAX> (363)
<INCOME-TAX> (123)
<INCOME-CONTINUING> (240)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (240)
<EPS-BASIC> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
