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 23, 1996
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 1,459,817 shares, $1 par value, was outstanding at
August 23, 1996
<PAGE>
<TABLE>
PENOBSCOT SHOE COMPANY
CONDENSED BALANCE SHEET
(In thousands)
<CAPTION>
August 23, 1996 November 24, 1995
(Unaudited) (Note (a))
<S> <C> <C>
CURRENT ASSETS:
Cash & Cash Equivalents $ 379 $1,301
Marketable Securities 3,219 3,271
Refundable income taxes - -
Accounts receivable 3,157 3,492
Inventories (Note 2) 4,118 3,054
Other current assets 520 341
_______ _______
TOTAL CURRENT ASSETS $11,393 $11,459
PROPERTY AND EQUIPMENT, AT COST:
Buildings $1,412 $1,413
All Other 725 1,617
Less accumulated depreciation
and amortization 1,933 2,660
_______ _______
NET PROPERTY AND EQUIPMENT $204 $369
_______ _______
TOTAL ASSETS $11,598 $11,828
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $609 $791
Other current liabilities 458 496
_______ _______
TOTAL CURRENT LIABILITIES $1,067 $1,287
DEFERRED INCOME TAXES $146 $146
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 7,898 7,667
Add net unrealized gain on available-
for-sale securities (Note (b)) 233 356
Less treasury stock at cost
73,225 and 50,925 shares; 389 270
NET SHAREHOLDERS' EQUITY _______ _______
(Note 3) $10,384 $10,395
TOTAL LIABILITIES AND SHARE- _______ _______
HOLDERS' EQUITY $11,598 $11,828
======= =======
<FN>
Note: (a) The balance sheet at November 24, 1995, 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
23, 1996 25, 1995 23, 1996 25, 1995
<S> <C> <C> <C> <C>
Net Sales $3,865 $3,872 $11,114 $9,447
Cost and operating expenses:
Cost of sales 2,697 2,587 7,610 6,282
Selling and administrative
expenses 996 1,130 3,179 3,233
_______ _______ _______ _______
Operating income (loss) 172 156 325 (68)
Other income 154 65 423 260
_______ _______ _______ _______
Income before income taxes 327 221 748 192
Income taxes 131 88 297 72
_______ _______ _______ _______
Net income $196 $133 $451 $120
======= ======= ======= =======
Per Common Share:
Net income $0.13 $0.09 $0.31 $0.08
Dividends 0.05 0.05 0.15 0.15
Average number of common shares
outstanding 1,461,833 1,482,117 1,472,605 1,482,117
<FN>
See notes to the condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
PENOBSCOT SHOE
COMPANY STATEMENT OF
CASH FLOWS
For Nine months Ended August 23, 1996 and August 25, 1995
(In thousands)
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating
activities:
Net cash provided (used) by
operating activities $(633) ($311)
Cash flows from investing
activities:
Proceeds from sale of assets 67 0
Capital expenditures (16) (12)
_______ _______
Net cash provided (used) by
investing activities 51 (12)
Cash flows from financing activities:
Dividends paid (221) (222)
Purchase of treasury stock (119) 0
Net cash provided (used) by _______ _______
financing activities (340) (222)
Net increase (decrease) in _______ _______
cash and cash equivalents (922) (546)
Cash and cash equivalent at
beginning of period 1,301 1,308
Cash and cash equivalent at _______ _______
end of period $ 379 $ 762
======= =======
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest $0 $0
Income taxes 444 117
</TABLE>
<PAGE>
PENOBSCOT SHOE COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED FINANCIAL STATEMENTS
The condensed balance sheet as of August 23, 1996 the statements of
income for the third quarter periods ended August 23, 1996 and August
25, 1995, 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 23, 1996 and for the other
periods presented. The results of operations for the period ended August 23,
1996 are not necessarily indicative of operating results for the full year.
2. INVENTORIES
Inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
8/23/96 11/24/95 8/25/95
<S> <C> <C> <C>
FIFO Cost:
finished shoes $4,815 $3,355 $4,079
shoes in process 0 22 72
raw materials 43 232 310
_______ _______ _______
$4,857 $3,609 $4,461
Excess of FIFO cost over
LIFO inventory value (739) (555) (930)
_______ _______ _______
$4,118 $3,054 $3,020
======= ======= =======
</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 23, 1996, shareholders' equity
changed due to net income of $451,000, dividends declared of $ 221,000,
purchases of treasury stock of $119,000 and a decrease of $123,000
resulting from a decrease in the 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 23, 1996, Penobscot Shoe Company had working capital of
approximately $10,326,000 versus approximately $10,172,000 at November
24, 1995, an increase of $154,000. The ratio of current assets to
current liabilities at August 23, 1996, was 10.7 to 1, compared to 8.9
to 1, at November 24, 1995.
The statement of cash flows for the nine months ended August 23, 1996, shows
a decrease of $922,000 in cash and cash equivalents since November 24, 1995.
The Company's operations used $633,000 since November 24, 1995, primarily
due to seasonal fluctuations in inventory. The Company's quarterly dividend
amounted to a use of $221,000 during the period, purchases of treasury shares
used $119,000 and capital expenditures for equipment amounted to a further use
of $16,000. Proceeds from the sale of machinery and equipment provided $67,000
since November 24, 1995.
The decreases in accounts receivable and accounts payable, and the increases
in inventories and other current assets since November 24, 1995, were all the
result of ordinary fluctuations. The changes in property and equipment and the
related accumulated depreciation accounts resulted from the closure of the
Company's plant in Old Town, Maine. The majority of the equipment and
machinery from that plant were sold or disposed of during the quarter,
resulting in the reduction in net property and equipment since November 24,
1995.
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 23, 1996, were $3,865,000,
about equal to sales of $3,872,000 in the same period last year. Net income
for the current quarter was $196,000, or $.13 per share, compared to net
income of $133,000, or $.09 per share, in the corresponding quarter last year.
For the nine months year-to-date, net sales were $11,114,000, up 18% from
$9,447,000 a year ago. Net income for the year-to-date period was $451,000,
or $.31 per share, versus net income of $120,000, or $.08 per share, last year.
During the third quarter the Company ceased production at its plant on
Gilman Falls Avenue in Old Town, Maine. The closure was in response to a
decline in the portion of the product line that had been assembled in Old Town.
A restructuring charge of approximately $150,000, pre-tax, was taken as a
result of this closure.
Cost of sales was 69.8% of net sales in the third quarter compared to 66.8%
a year ago resulting in gross profit margins of 30.2% and 33.2% in the 1996
and 1995 quarters, respectively. The majority of the decline in gross profit
margin from last year was a result of the restructuring charge discussed
previously. Without the impact of that charge, the gross profit margin in the
current quarter would have been 32.9%.
Selling and administrative costs in the third quarter were approximately
12 % lower than last year. Lower advertising, commissions, and selling
expenses were a result of both timing and efficiencies realized in selling
efforts.
Other income in the current quarter was enhanced by a favorable settlement of
litigation, which amounted to $100,000, pre-tax. This litigation against our
insurance carrier was related to the issue of insurance coverage arising out
of a case settled two years ago.
The sales growth of Trotters during the first nine months of 1996 has been
based largely on a stronger retail environment than a year ago and on increased
distribution of the brand. Future growth will be dependent upon a continuation
of these same two factors.
<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 undersigned thereunto duly authorized.
Penobscot Shoe Company
_________________________
(Registrant)
Date: October 7, 1996 Paul Hansen
_________________________
By: Paul Hansen
President and
Chief Executive Officer
Date: October 7, 1996 David L. Keane
_________________________
By: David L. Keane
Vice President/Finance
and Administration
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-29-1996
<PERIOD-END> AUG-23-1996
<CASH> 379
<SECURITIES> 3,219
<RECEIVABLES> 3,157
<ALLOWANCES> (596)
<INVENTORY> 4,118
<CURRENT-ASSETS> 11,393
<PP&E> 2,137
<DEPRECIATION> 1,933
<TOTAL-ASSETS> 11,598
<CURRENT-LIABILITIES> 1,067
<BONDS> 0
<COMMON> 1,533
0
0
<OTHER-SE> 8,851
<TOTAL-LIABILITY-AND-EQUITY> 11,598
<SALES> 11,114
<TOTAL-REVENUES> 11,114
<CGS> 7,610
<TOTAL-COSTS> 10,789
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (423)
<INCOME-PRETAX> 748
<INCOME-TAX> 297
<INCOME-CONTINUING> 451
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 451
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
