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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 December 3, 2000.
( ) 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
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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 December 3, 2000: 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>
December 3, 2000 August 31, 2000
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<S> <C> <C> <C> <C>
(Unaudited)
ASSETS
Current Assets:
Cash $ 14 $ 190
Accounts Receivable (Net of Reserve) 3,022 3,352
Other Current Receivables 37 17
Inventories:
Raw Materials $ 1,904 $ 1,584
Work in Process 453 486
Finished Products 1,343 3,700 1,103 3,173
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Prepaid Expenses and Other Current Assets 272 195
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Total Current Assets 7,045 6,927
Fixed Assets (Net of Dep'n)
Property and Equipment (at cost) 5,575 5,581
Other Assets
CSV Life Insurance and Other Unamortized Assets 1,016 953
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Total Assets $13,636 $13,461
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LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable $ 2,289 $ 2,344
Accrued Expenses 195 208
Accrued Income Taxes 0 0
Notes & Mortgages Payable 4,287 3,575
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Total Current Liabilities 6,771 6,127
Long Term Liabilities
Notes & Mtges, Due After One Year $ 5,041 $ 5,114
Deferred Income Taxes 0 5,041 0 5,114
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Total Liabilities 11,812 11,241
Stockholders' Equity
Capital Stock (Authorized 5,000,000 Shares $0.03
Par - 1,630,696 (2001), 1,630,696 (2000)
Shares Issued and Outstanding $ 49 $ 49
Paid-In Capital 1,358 1,358
Donated Capital 124 124
Retained Earnings 293 1,824 689 2,220
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Total Liabilities and Equity $13,636 $13,461
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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
December 3, 2000 November 28, 1999
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<S> <C> <C>
Net Sales $ 4,589 $ 4,284
Cost of Sales 4,138 3,799
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Gross Profit 451 485
Costs and Expenses:
Selling 238 229
General and Administrative 211 277
Other Income and Expense - Net 184 172
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Total Costs and Expenses 633 678
Income (Loss) From Operations (182) (193)
Interest Expense 214 170
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Income (Loss) Before Income Taxes (396) (363)
Income Taxes 0 (123)
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Net Income (Loss) $ (396) $ (240)
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Net Income (Loss) Per Share (1,630,696 Shares) (0.24) (0.15)
(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
December 3, 2000 November 28, 1999
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<S> <C> <C>
Cash Flows From Operating Activities
Net Income $(396) $(240)
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation 205 224
Amortization 5 2
Increase in Deferred Income Taxes 0 (137)
Changes in Operating Assets & Liabilities:
Decrease (Increase) in Receivables 310 (92)
Decrease (Increase) in Inventories (527) (443)
Decrease (Increase) in Prepaid Expenses &
Other Current Assets (77) (132)
Increase (Decrease) in Accounts Payable (52) 420
Increase (Decrease) in Accrued Expenses (16) (43)
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Net Cash Provided (Used) By Operating Activities (548) (441)
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Cash Flows From Investing Activities
Additional Investment in Fixed Assets 199 121
Additional Investment in Other Assets 68 5
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Net Cash Used By Investing Activities 267 126
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Cash Flows From Financing Activities
Proceeds from Exercise of Stock Options 0 0
Proceeds from Short-Term Borrowings 200 0
Repayment of Short-Term Borrowings (56) (4)
Proceeds from Long-Term Obligations 100 440
Repayment of Long-Term Obligations (173) (411)
Net Increase (Decrease) in Short-Term Revolving
Lines of Credit 568 507
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Net Cash Provided (Used) By Financing Activities 639 532
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Net Increase (Decrease) In Cash (176) (35)
Cash At Beginning of Period 190 126
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Cash At End of Period $ 14 $ 91
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Supplemental Disclosures of Cash Flow Information
Cash Paid For:
Interest (Net of Amount Capitalized) $ 196 $ 159
Income Taxes 0 0
</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 December 3,
2000 are not necessarily indicative of the results that may be expected for the
year ended August 31, 2001. 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, 2000. Certain prior
year amounts may have been reclassified to conform with the 2001 presentation.
Item 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS
Consolidated sales for the first quarter ended December 3, 2000 (2001
fiscal year) were $4,588,711, an increase of 7.1% when compared to sales of
$4,283,949 during the first quarter of the 2000 fiscal year. The increase in
first quarter sales is due to improved shipments at Monofilament primarily of
products developed during the past year for new OEM customers. These new
industrial applications are expected to fuel future revenue growth as sales of
this division's more traditional monofilaments, such as specialty sewing threads
and fish lines, continue to experience declining sales due to changing markets.
At Glassmaster Controls, sales were unchanged from prior year first quarter
sales as the slowdown in heavy and medium-duty truck manufacturing, which began
in the fourth quarter of the 1999 fiscal year, continues to impact its largest
segment of customers. Current forecasts call for this industry to slow further
before beginning to recover late in 2001. Electronics product development and
sales continue to build momentum and significant revenue growth from this
product class is expected during the remainder of the fiscal year. In addition,
Controls was recently awarded a supplier contract to produce a component that
will be used in the production of car seats. The contract will initiate during
the third quarter of this fiscal year and is expected to increment revenue by
approximately $750,000 annually.
Gross profit realized during the first quarter declined to $450,747, or
9.8% of sales, from $485,492, or 11.3% of sales, in the year ago first quarter.
The decrease in gross profit is due to lower sales at Composites resulting from
the sale of the marine antenna business which occurred at the end of the prior
year first quarter. Increased variable manufacturing expense at Controls
associated with higher employee insurance costs, as well as an increase in fixed
manufacturing costs as electronics capabilities were expanded, both contributed
to the gross profit decline. Higher material and labor costs at Monofilament
were absorbed through an increase in output during the first quarter of this
year, as sales and inventory levels both were higher than during the comparable
year ago period. These higher costs at Monofilament led to selling price
increases on several product classes, the first such price adjustment in four
years. The new selling prices were generally effective after the end of the
first quarter.
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Item 2. Management's Discussion and Analysis (Cont'd)
Gross margins are expected to improve as electronic product sales and related
manufacturing throughput at Controls accelerate, price increases on existing
product lines and new product sales at Monofilament are fully realized, and
further manufacturing cost reductions at all operating divisions are identified
and implemented. In addition, during the first quarter, the Composites Division
was relocated from its facility in Newberry, SC to excess space available at the
Lexington, SC site. Gross margins will benefit due to lower overall
manufacturing expenses as a result of this consolidation of operations.
Selling, G&A, and Other Expenses declined from $678,438, or 15.8% of
sales, during the prior year first quarter, to $632,958, or 13.8% of sales in
the current year period. The decline is due to favorable claims experience
associated with the company's employee health plan and a decline in general and
administrative expenses due to the relocation of the Composites Division and
closure of the Newberry facility.
Interest expensed totaled $213,912 during this year's first quarter
compared with $170,388 last year, an increase of almost 26%. The increase in
interest expense is attributable to higher borrowings necessary to support
working capital and to purchase new electronics and extrusion manufacturing
equipment during the last year, as well as higher average interest rates.
Income (Loss) before income taxes was ($396,123) during the current
year first quarter compared with ($363,335) in the year ago quarter. Income tax
benefits associated with net operating tax loss carry-forwards totaling $123,387
were recognized in last year's first quarter, whereas no such benefit from taxes
was recognized in the current year quarter. The net loss for the quarter was
($396,123) compared with ($239,948) last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were ($548,368) during the first
quarter of the 2001 fiscal year compared with ($441,139) during the prior year
first quarter. The decline in cash provided from operating activities is
primarily due to an increased investment in inventories at both Monofilament and
Controls. At Monofilament, finished goods inventory increased as standard
products were run for stock, while at Controls, raw materials and purchased
parts increased as a requirement for new electronic circuit board production and
supply contracts that are to initiate during the second quarter. Inventory
levels are expected to decline significantly during the second quarter as they
are converted to accounts receivable and cash.
Cash used by investing activities during the first quarter was $226,792
compared to $125,998 in the year ago quarter. Additional investment in equipment
at Controls to expand manufacturing capabilities and costs capitalized as
unamortized other assets, incurred during the relocation of the Composites
operations, account for the increase. No new material capital expenditures are
currently planned.
Net cash provided by financing activities was $639,493 in the current
year first quarter versus $531,884 last year. Additional short term debt that
was advanced by officers of the company and that is expected to be converted to
long term subordinated convertible debt during the second quarter, combined with
increased borrowings under short term revolving credit lines to supplement
working capital, account for the increase.
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Item 2. Management's Discussion and Analysis (Cont'd)
On December 28, 2000, the company entered into a financing agreement
that will provide a $2.5 million revolving credit facility for the company's
working capital. This financing agreement essentially replaces an existing
agreement and related credit line that was held by another financial institution
and that was due to expire on December 31, 2000. The new agreement is for a
period of one year. Additionally, this financing agreement provides for a
$300,000 short term credit line to supplement working capital and that is
scheduled to mature in June, 2001. To further supplement operating capital, the
company will issue subordinated convertible debentures that are expected to be
sold to individual investors in a private placement during the second quarter of
the current fiscal year. The original authorization provided for up to $500,000
in subordinated debt, but that amount was recently increased to $750,000.
The company currently anticipates that its cash requirements during the
remainder of the 2001 fiscal year will be provided from operations, from
borrowings under existing and committed credit lines, and from the sale of the
subordinated convertible debentures.
PART II - OTHER INFORMATION
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits.
None.
b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter
ended December 3, 2000.
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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 16, 2001 /s/ Raymond M. Trewhella
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Raymond M. Trewhella
(President and
Principal Executive Officer)
Date January 16, 2001 /s/ Steven R. Menchinger
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Steven R. Menchinger
(Treasurer, Controller, and
Principal Financial Officer)
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January 16, 2001
Securities Exchange Commission
Attn: Filing Desk 1-4
450 Fifth Street NW
Washington DC 20549-1004
RE: Commission File Number 0-2331
Gentlemen:
Pursuant to regulations of the Securities and Exchange Commission, submitted
herewith for filing on behalf of Glassmaster Company, (the "Company"), is the
Company's Quarterly Report on Form 10-QSB for the fiscal quarter ended December
3, 2000.
This filing is being effected by direct transmission to the Commission's EDGAR
System.
Very truly yours,
Steven R. Menchinger
Corporate Secretary
SRM:paw
Encs
