SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended May 26, 1995
Commission File No. 1-5548
Penobscot Shoe Company
(Exact name of registrant as specified in its charter)
Maine
(State or other jurisdiction of incorporation or organization)
01-0139580
(IRS Employer identification no.)
450 North Main Street, Old Town Maine
(Address of principal executive offices)
04468
(Zip code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Registrant's telephone number, including area code: (207) 827-4431
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, and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__
No _____
Common stock of 1,482,117 shares, $1 par value, was outstanding at
May 26, 1995
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<TABLE>
PENOBSCOT SHOE COMPANY
CONDENSED BALANCE SHEET
(In thousands)
<CAPTION>
May 26, 1995 November 25, 1994
(Unaudited) (Note (a))
<S> <C> <C>
CURRENT ASSETS:
Cash & Cash Equivalents $2,637 $1,308
Marketable Securities 3,049 2,556
Refundable income taxes 52 52
Accounts receivable 1,692 3,690
Inventories (Note 2) 3,020 2,469
Other current assets 622 490
_______ _______
TOTAL CURRENT ASSETS $11,071 $10,565
PROPERTY AND EQUIPMENT, AT COST:
Buildings $1,412 $1,409
All Other 1,602 1,594
Less accumulated depreciation
and amortization 2,608 2,542
_______ _______
NET PROPERTY AND EQUIPMENT $406 $461
_______ _______
TOTAL ASSETS $11,478 $11,026
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $669 $530
Other current liabilities 451 467
_______ _______
TOTAL CURRENT LIABILITIES $1,120 $997
DEFERRED INCOME TAXES $328 $131
SHAREHOLDERS' EQUITY:
Common stock, $1 par value:
authorized 2,000,000 shares:
issued 1,533,042 $1,533 $1,533
Capital in excess of par value 1,109 1,109
Retained earnings 7,364 7,526
Add net unrealized gain on
available-for-sale securities
(Note (b)) 293 na
Less treasury stock at cost
50,925 shares; 270 270
NET SHAREHOLDERS' EQUITY _______ _______
(Note 3) $10,030 $9,898
TOTAL LIABILITIES AND SHARE- _______ _______
HOLDERS' EQUITY $11,478 $11,026
======= =======
<FN>
Note: (a) The balance sheet at November 25, 1994, has been derived from
the audited financial statements at that date.
(b) The Company adopted Statement of Accounting Standard No. 115
"Accounting for Certain Investments in Debt and Equity Securities"
effective November 26, 1994.
See notes to the condensed finincial statements.
</TABLE>
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<TABLE>
PENOBSCOT SHOE COMPANY
STATEMENT OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
For the For the
Second Quarter Ended Six Months Ended
____________________ ____________________
May May May May
26, 1995 27, 1994 26, 1995 27, 1994
<S> <C> <C> <C> <C>
Net Sales $2,455 $3,667 $5,575 $6,656
Cost and operating expenses:
Cost of sales 1,629 2,596 3,695 4,551
Selling and administrative
expenses 1,018 1,103 2,104 2,125
_______ _______ _______ _______
Operating income (loss) (192) (33) (224) (21)
Other income 142 50 195 164
_______ _______ _______ _______
Income before income taxes (50) 17 (29) 144
Income taxes (23) 4 (16) 52
_______ _______ _______ _______
Net income ($27) $13 ($13) $91
======= ======= ======= =======
Per Common Share:
Net income ($0.02) $0.01 ($0.01) $0.06
Dividends declared 0.05 0.05 0.10 0.10
Average number of common shares
outstanding 1,482,117 1,482,040 1,482,117 1,477,448
<FN>
See notes to the condensed financial statements.
</TABLE>
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<TABLE>
PENOBSCOT SHOE COMPANY
STATEMENT OF CASH FLOWS
For Six Months Ended May 26, 1995 and May 27, 1994
(In thousands)
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating
activities:
Net cash provided (used) by
operating activities $1,487 $598
Cash flows from investing
activities:
Proceeds from sale of assets 0 0
Capital expenditures (10) (16)
_______ _______
Net cash provided (used) by
investing activities (10) (16)
Cash flows from financing activities:
Dividends paid (148) (148)
Purchase of treasury stock 0 21
Net cash provided (used) by _______ _______
financing activities (148) (127)
Net increase (decrease) in _______ _______
cash and cash equivalents 1,329 454
Cash and cash equivalent at
beginning of period 1,308 1,514
Cash and cash equivalent at _______ _______
end of period 2,637 1,968
======= =======
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest $0 $0
Income taxes 101 66
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PENOBSCOT SHOE COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED FINANCIAL STATEMENTS
The condensed balance sheet as of May 26, 1995, the statements of income
for the second quarter and six-month periods ended May 26, 1995 and May 27,
1994, and the condensed statements of cash flows for the six-month periods
then ended have been prepared by the Company, without audit. In the opinion
of management, all necessary adjustments, which include normal recurring
adjustments, have been made to present fairly the financial position, results
of operations, and cash flows at May 26, 1995 and for the other periods
presented. The results of operations for the period ended May 26, 1995 are
not necessarily indicative of operating results for the full year.
2. INVENTORIES
Inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
5/26/95 11/25/94 5/27/94
<S> <C> <C> <C>
FIFO Cost:
finished shoes $3,530 $2,825 $3,408
shoes in process 24 35 53
raw materials 393 302 548
_______ _______ _______
$3,947 $3,162 $4,009
Excess of FIFO cost over
LIFO inventory value (927) (693) (954)
_______ _______ _______
$3,020 $2,469 $3,054
======= ======= =======
</TABLE>
The Company uses the LIFO method because it more realistically
reflects operating results by charging current costs against current
revenues.
3. SHAREHOLDERS' EQUITY
During the six months ended May 26, 1995, shareholders' equity changed
due to the net loss of $13,000, dividends declared of $148,000 and an increase
of $293,000 resulting from the inclusion of a net unrealized gain on
available-for-sale securities held by the Company. Effective November 26,
1994, the Company adopted Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities",
necessitating the inclusion of this net unrealized gain on the balance sheet.
<PAGE>
PENOBSCOT SHOE COMPANY
MANAGEMENT DISCUSSION AND ANALYSIS OF THE SUMMARY OF OPERATIONS
Liquidity and Capital Resources:
At May 26, 1995, Penobscot Shoe Company had working capital of
approximately $9,952,000 versus approximately $9,568,000 at November 25, 1994,
an increase of $384,000. The ratio of current assets to current liabilities at
May 26, 1995, was 9.9 to 1, compared to 10.6 to 1, at November 25, 1994.
The statement of cash flows for the six months ended May 26, 1995,
shows an increase of $1,329,000 in cash and cash equivalents since November
25, 1994. The Company's operations provided $1,487,000 since November 25,
1994, primarily due to seasonal fluctuations in accounts receivable. The
Company's quarterly dividend amounted to a use of $148,000 during the period
and capital expenditures for equipment amounted to a further use of $10,000
during the period.
The increases in the Company's inventory, other current assets and
accounts payable, as well as the decrease in accounts receivable since
November 25, 1994, were the result of ordinary fluctuations.
Management believes that Penobscot Shoe Company remains financially well
structured to consider a variety of financing options should the need arise and
will make choices depending on economic conditions at the time. Options
available include conversion of marketable securities held by the Company into
cash and cash equivalents. The Company also has an established line of credit
with a major bank available for direct borrowing at the prime rate should the
need arise.
Results of Operations:
Net sales for the second quarter ended May 26, 1995 were $2,455,000,
down 33% from $3,667,000 in the same quarter last year. A net loss of
$27,000, or $.02 per share, was incurred in the current quarter compared to
net income of $13,000, or $.01 per share, last year.
For the six months ended May 26, 1995, net sales were $5,575,000, down 16%
from $6,656,000 a year ago. A net loss of $13,000, or $.01 per share, was
incurred in the current year-to-date period, versus net income of $91,000, or
$.06 per share, in the corresponding period last year.
The significant drop in net sales for the second quarter compared to a
year ago was due to lower sales of both prime merchandise and surplus
inventory. The ongoing weak retail environment had a negative impact on second
quarter sales causing to increased cancellations and reduced reorders.
<PAGE>
PENOBSCOT SHOE COMPANY
MANAGEMENT DISCUSSION AND ANALYSIS OF THE SUMMARY OF OPERATIONS
Results of Operations: (continued)
Cost of sales was 66% of net sales in the second quarter compared to 71% a
year ago resulting in gross profit margins of 34% and 29% in the 1995 and 1994
quarters, respectively. The lower level of surplus sales in the current
quarter was the primary reason for this gross margin improvement. Selling and
administrative expenses in the current quarter were lower than a year ago due
to lower variable costs related to the decrease in sales volume.
Other income in the second quarter of 1995 was $142,000, pre-tax, compared
to $50,000, pre-tax, in the corresponding quarter in 1994. The current quarter
included gains on the sale of securities of $76,000, pre-tax, compared to
less than $1,000 last year. Interest income was $16,000, pre-tax, higher than
the previous year due to both higher interest rates and higher cash balances
invested.
While advance bookings for the Fall 1995 season are approximately level
with a year ago, the pervasive retail dilemma will continue to stress the
Company's margins in the second half of fiscal 1995 compared to last year.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) No exhibits or reports on Form 8-K have been filed during the
last quarter of the period covered by this report.
<PAGE>
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 under-
signed thereunto duly authorized.
Penobscot Shoe Company
_________________________
(Registrant)
Date: June 29, 1995 Paul Hansen
_________________________
By: Paul Hansen
President and
Chief Executive Officer
Date: June 29, 1995 David L. Keane
_________________________
By: David L. Keane
Vice President/Finance and
Administration
