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 29, 1997
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 1,387,691 shares, $1 par value, was outstanding at
August 29, 1997
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PENOBSCOT SHOE COMPANY
CONDENSED BALANCE SHEET
(In thousands)
<CAPTION>
August 29, 1997 November 29, 1996
(Unaudited) (Note (a))
<S> <C> <C>
CURRENT ASSETS:
Cash & Cash Equivalents $ 659 $ 548
Marketable Securities 3,223 3,299
Accounts receivable 3,168 3,319
Inventories (Note 2) 5,383 4,036
Other current assets 487 433
_______ _______
TOTAL CURRENT ASSETS $12,921 $11,635
PROPERTY AND EQUIPMENT, AT COST:
Buildings $ 1,436 $ 1,417
All Other 541 368
Less accumulated depreciation
and amortization 1,659 1,584
_______ _______
NET PROPERTY AND EQUIPMENT $ 318 $ 201
_______ _______
TOTAL ASSETS $13,239 $11,836
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 822 $ 503
Notes payable 1,360 0
Other current liabilities 384 740
_______ _______
TOTAL CURRENT LIABILITIES $ 2,566 $ 1,243
DEFERRED INCOME TAXES $ 99 $ 99
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 8,313 8,234
Add net unrealized gain on
available-for-sale securities
(Note (b)) 400 355
Less treasury stock at cost
145,351 and 137,877 shares; 782 737
NET SHAREHOLDERS' EQUITY _______ _______
(Note 3) $10,574 $10,494
TOTAL LIABILITIES AND SHARE- _______ _______
HOLDERS' EQUITY $13,239 $11,836
======= =======
<FN>
Note: (a) The balance sheet at November 29, 1996, 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>
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<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
29, 1997 23, 1996 29, 1997 23, 1996
<S> <C> <C> <C> <C>
Net Sales $3,864 $3,865 $10,405 $11,114
Cost and operating expenses:
Cost of sales 2,634 2,697 7,001 7,610
Selling and administrative
expenses 1,091 996 3,221 3,179
______ _______ _______ _______
Operating income 139 172 183 325
Other income 180 154 287 423
______ _______ _______ _______
Income before income taxes 320 327 470 748
Income taxes 126 131 183 297
_______ _______ _______ _______
Net income $ 193 $ 196 $ 287 $ 451
======= ======= ======= =======
Per Common Share:
Net income $ 0.14 $ 0.13 $ 0.21 $ 0.31
Dividends 0.05 0.05 0.15 0.15
Average number of common shares
outstanding 1,387,796 1,461,833 1,390,589 1,472,605
<FN>
See notes to the condensed financial statements.
</TABLE>
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<TABLE>
PENOBSCOT SHOE COMPANY
STATEMENT OF CASH FLOWS
For Nine Months Ended August 29, 1997 and August 23, 1996
(In thousands)
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating
activities:
Net cash provided (used) by
operating activities $ 556 $ (633)
Cash flows from investing
activities:
Proceeds from sale of assets 0 67
Capital expenditures (191) (16)
_______ _______
Net cash provided (used) by
investing activities (191) 51
Cash flows from financing activities:
Dividends paid (209) (221)
Purchase of treasury stock (45) (119)
Net cash provided (used) by _______ _______
financing activities (254) (340)
Net increase (decrease) in _______ _______
cash and cash equivalents 111 (922)
Cash and cash equivalent at
beginning of period 548 1,301
Cash and cash equivalent at _______ _______
end of period $ 659 $ 379
======= =======
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest $ 9 $ 0
Income taxes 387 444
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PENOBSCOT SHOE COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED FINANCIAL STATEMENTS
The condensed balance sheet as of August 29, 1997, the statements of
income for the third quarter ended August 29, 1997 and August 23, 1996,
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 29, 1997 and for the other periods
presented. The results of operations for the period ended August 29, 1997
are not necessarily indicative of operating results for the full year.
2. INVENTORIES
Inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
8/29/97 11/29/96 8/23/96
<S> <C> <C> <C>
FIFO Cost:
finished shoes $5,478 $4,465 $4,815
raw materials 14 20 43
_______ _______ _______
$5,492 $4,485 $4,858
Excess of FIFO cost over
LIFO inventory value (108) (449) (739)
_______ _______ _______
$5,383 $4,036 $ 4,118
======= ======= =======
</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 29, 1997, shareholders' equity
changed due to the net income of $287,000, dividends declared of $209,000,
treasury stock purchases of $45,000 and a $45,000 increase 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
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 29, 1997, Penobscot Shoe Company had working capital of
approximately $10,355,000 versus approximately $10,392,000 at November
29, 1996, a decrease of $37,000. The ratio of current assets to current
liabilities at August 29, 1997, was 5.0 to 1, compared to 9.4 to 1, at
November 29, 1996. The change in the current ratio since November 29,
1996 was attributable to seasonal use of the credit line as discussed
below.
The statement of cash flows for the nine months ended August 29, 1997,
shows an increase of $111,000 in cash and cash equivalents since November
29, 1996. The Company's operating activities provided $556,000 since
November 29,1996, due mainly to the use of an existing credit line established
with a major bank. To fund short-term seasonal growth in inventory the Company
uses an established line of credit for short-term borrowings rather than to
liquidate marketable securities held by the Company. Increases in inventory
and accounts payable as well as decreases in accounts receivable and other
current liabilities were due primarily to seasonal fluctuations. Uses of cash
in the nine month period included the payment of the Company's quarterly
dividend which amounted to $209,000, and capital expenditures for property and
equipment which totaled $191,000 during the period. The increase in property
and equipment reflects the purchase of new data processing hardware and software
and the upgrading of existing equipment.
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 29, 1997, were $3,864,000,
approximately equal to the net sales of $3,865,000 in the same quarter last
year. Net income in the current quarter was $193,000, or $.14 per share,
compared to net income of $196,000, or $.13 per share, a year ago.
For the nine months year-to-date, net sales were $10,405,000, down 6%
from $11,114,000 a year ago. Net income for the year-to-date period was
$287,000, or $.21 per share, versus $451,000, or $.31 per share last year.
Cost of sales was 68.2% of net sales in the third quarter compared to
69.8% a year ago resulting in gross profit margins of 31.8% and 30.2% in the
1997 and 1996 quarters, respectively. Last year, during the third quarter the
Company ceased production at its plant in Old Town, Maine. A restructuring
charge of approximately $150,000, pre-tax, was taken as a result of this
closure. Without the impact of that charge, the gross profit margin in the
third quarter of 1996 would have been 32.9%. The remaining differences in the
gross margin were due mostly to timing of shipments.
Selling and administrative costs in the third quarter were approximately
10% higher that last year. New marketing and sales programs amounted to about
half of the increase. The balance of the increase was a combination of many
factors including costs related to maintaining the factory building which was
closed a year ago, and which is currently on the real estate market, and higher
freight and warehousing costs due to the UPS strike.
Other income in the current quarter included gains from the sales of
securities which amounted to approximately $147,000, pre-tax, compared to $4
pre-tax, a year ago. Last year's third quarter other income was enhanced
by a favorable settlement of litigation, which amounted to $100,000,
pre-tax.
<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: September 26, 1997 Paul Hansen
_________________________
By: Paul Hansen
President and
Chief Executive Officer
Date: September 26, 1997 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-28-1997
<PERIOD-END> AUG-29-1997
<CASH> 659
<SECURITIES> 3,223
<RECEIVABLES> 3,699
<ALLOWANCES> (531)
<INVENTORY> 5,383
<CURRENT-ASSETS> 12,921
<PP&E> 1,977
<DEPRECIATION> 1,659
<TOTAL-ASSETS> 13,239
<CURRENT-LIABILITIES> 2,566
<BONDS> 0
<COMMON> 1,533
0
0
<OTHER-SE> 9,041
<TOTAL-LIABILITY-AND-EQUITY> 13,239
<SALES> 10,405
<TOTAL-REVENUES> 10,405
<CGS> 7,001
<TOTAL-COSTS> 10,222
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9
<INCOME-PRETAX> 470
<INCOME-TAX> 183
<INCOME-CONTINUING> 287
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 287
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
