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 August 25, 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
August 25, 1995
<PAGE>
<TABLE>
PENOBSCOT SHOE COMPANY
CONDENSED BALANCE SHEET
(In thousands)
<CAPTION>
August 25, 1995 November 25, 1994
(Unaudited) (Note (a))
<S> <C> <C>
CURRENT ASSETS:
Cash & Cash Equivalents $ 762 $1,308
Marketable Securities 3,090 2,556
Refundable income taxes 52 52
Accounts receivable 3,162 3,690
Inventories (Note 2) 3,532 2,469
Other current assets 665 490
_______ _______
TOTAL CURRENT ASSETS $11,262 $10,565
PROPERTY AND EQUIPMENT, AT COST:
Buildings $1,412 $1,409
All Other 1,604 1,594
Less accumulated depreciation
and amortization 2,639 2,542
_______ _______
NET PROPERTY AND EQUIPMENT $377 $461
_______ _______
TOTAL ASSETS $11,639 $11,026
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $676 $530
Other current liabilities 508 467
_______ _______
TOTAL CURRENT LIABILITIES $1,184 $997
DEFERRED INCOME TAXES $344 $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 7,423 7,526
Add net unrealized gain on
available-for-sale securities
(Note (b)) 316 na
Less treasury stock at cost
50,925 shares; 270 270
NET SHAREHOLDERS' EQUITY _______ _______
(Note 3) $10,111 $9,898
TOTAL LIABILITIES AND SHARE- _______ _______
HOLDERS' EQUITY $11,639 $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 financial statements.
</TABLE>
<PAGE>
<TABLE>
PENOBSCOT SHOE COMPANY
STATEMENT OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
For the For the
Third Quarter Ended Nine Months Ended
____________________ ____________________
August August August August
25, 1995 26, 1994 25, 1995 26, 1994
<S> <C> <C> <C> <C>
Net Sales $3,872 $4,090 $9,447 $10,745
Cost and operating expenses:
Cost of sales 2,587 2,571 6,282 7,122
Selling and administrative
expenses 1,130 1,070 3,233 3,195
_______ _______ _______ _______
Operating income (loss) 156 449 (68) 428
Other income 65 (261) 260 (97)
_______ _______ _______ _______
Income before income taxes 221 188 192 332
Income taxes 88 73 72 125
_______ _______ _______ _______
Net income $133 $115 $120 $207
======= ======= ======= =======
Per Common Share:
Net income $0.09 $0.08 $0.08 $0.14
Dividends declared 0.05 0.05 0.15 0.15
Average number of common shares
outstanding 1,482,117 1,482,117 1,482,117 1,480,025
<FN>
See notes to the condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
PENOBSCOT SHOE COMPANY
STATEMENT OF CASH FLOWS
For Nine Months Ended August 25, 1995 and August 26, 1994
(In thousands)
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating
activities:
Net cash provided (used) by
operating activities $ (311) $(654)
Cash flows from investing
activities:
Proceeds from sale of assets 0 0
Capital expenditures (12) (24)
_______ _______
Net cash provided (used) by
investing activities (12) (24)
Cash flows from financing activities:
Dividends paid (222) (222)
Purchase of treasury stock 0 21
Net cash provided (used) by _______ _______
financing activities (222) (202)
Net increase (decrease) in _______ _______
cash and cash equivalents (546) (880)
Cash and cash equivalent at
beginning of period 1,308 1,514
Cash and cash equivalent at _______ _______
end of period 762 634
======= =======
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest $0 $0
Income taxes 117 118
</TABLE>
<PAGE>
PENOBSCOT SHOE COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED FINANCIAL STATEMENTS
The condensed balance sheet as of August 25, 1995, the statements of income
for the third quarter and nine-month periods ended August 25, 1995 and August
26, 1994, and the condensed statements of cash flows for the nine-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 August 25, 1995 and for the other periods
presented. The results of operations for the period ended August 25, 1995 are
not necessarily indicative of operating results for the full year.
2. INVENTORIES
Inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
8/25/95 11/25/94 8/26/94
<S> <C> <C> <C>
FIFO Cost:
finished shoes $4,079 $2,825 $4,116
shoes in process 72 35 22
raw materials 310 302 558
_______ _______ _______
$4,461 $3,162 $4,696
Excess of FIFO cost over
LIFO inventory value (930) (693) (973)
_______ _______ _______
$3,532 $2,469 $3,723
======= ======= =======
</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 nine months ended August 25, 1995, shareholders' equity changed
due to the net income of $120,000, dividends declared of $222,000 and an
increase of $316,000 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 August 25, 1995, Penobscot Shoe Company had working capital of
approximately $10,078,000 versus approximately $9,568,000 at November 25, 1994,
an increase of $510,000. The ratio of current assets to current liabilities at
August 25, 1995, was 9.5 to 1, compared to 10.6 to 1, at November 25, 1994.
The statement of cash flows for the nine months ended August 25, 1995,
shows a decrease of $546,000 in cash and cash equivalents since November
25, 1994. The Company's operations used $311,000 since November 25,
1994, primarily due to seasonal fluctuations in inventory. The Company's
quarterly dividend amounted to a use of $222,000 during the period and
capital expenditures for equipment amounted to a further use of $12,000
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 third quarter ended August 25, 1995 were $3,872,000,
down 5% from $4,090,000 in the same quarter last year. Net income for the
current quarter was $133,000, or $.09 per share, up from $115,000, or $.08
per share, a year ago.
For the nine months year-to-date net sales were $9,447,000, down 12%
from $10,745,000 in 1994. Net income for the current year-to-date period was
$120,000, or $.08 per share, compared to $207,000, or $.14 per share, last
year.
Last year's third quarter earnings were significantly reduced by provision
for a non-recurring after-tax charge of $170,000 related to the settlement of
litigation. Earnings for the 1994 quarter were $.19 per share before this non-
recurring event, compared to the current quarter's reported earnings of $.09
per share.
<PAGE>
PENOBSCOT SHOE COMPANY
MANAGEMENT DISCUSSION AND ANALYSIS OF THE SUMMARY OF OPERATIONS
Results of Operations: (continued)
The 5% drop in net sales in the third quarter compared to last year was
due to fewer pairs of footwear shipped in the quarter. This volume reduction
was reflective of the continuing weakness in the retail environment.
Cost of sales was 67% of net sales in the third quarter compared to 63% a
year ago resulting in gross profit margins of 33% and 37% in the 1995 and 1994
quarters, respectively. The lower gross margin was a result of timing and
largely offset the comparatively higher margins reported in the second
quarter. The increase in overhead expenses versus a year ago reflects
increased investment in selling and marketing efforts.
Other income (expense) in the third quarter of 1995 was $65,000, pre-tax,
compared to ($261,000), pre-tax, a year ago. Last year's expense was due the
non-recurring charge mentioned earlier in this analysis.
As reported last quarter, the weakness in the retail marketplace will
continue to stress the Company's margins for the balance of fiscal 1995
compared to last year.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
No 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: October 4, 1995 Paul Hansen
_________________________
By: Paul Hansen
President and
Chief Executive Officer
Date: October 4, 1995 David L. Keane
_________________________
By: David L. Keane
Vice President/Finance and
Administration
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-24-1995
<PERIOD-END> AUG-25-1995
<CASH> 762
<SECURITIES> 3,090
<RECEIVABLES> 3,579
<ALLOWANCES> (550)
<INVENTORY> 3,532
<CURRENT-ASSETS> 11,262
<PP&E> 3,016
<DEPRECIATION> 2,639
<TOTAL-ASSETS> 11,639
<CURRENT-LIABILITIES> 1,528
<BONDS> 0
<COMMON> 1,533
0
0
<OTHER-SE> 8,578
<TOTAL-LIABILITY-AND-EQUITY> 11,639
<SALES> 9,447
<TOTAL-REVENUES> 9,447
<CGS> 6,282
<TOTAL-COSTS> 3,233
<OTHER-EXPENSE> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (260)
<INCOME-PRETAX> 192
<INCOME-TAX> 72
<INCOME-CONTINUING> 120
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
