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 30, 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 1,387,891 shares, $1 par value, was outstanding at
May 30, 1997
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<TABLE>
PENOBSCOT SHOE COMPANY
CONDENSED BALANCE SHEET
(In thousands)
<CAPTION>
May 30, 1997 November 29, 1996
(Unaudited) (Note (a))
<S> <C> <C>
CURRENT ASSETS:
Cash & Cash Equivalents $1,191 $ 548
Marketable Securities 3,448 3,299
Accounts receivable 1,856 3,319
Inventories (Note 2) 4,033 4,036
Other current assets 572 433
_______ _______
TOTAL CURRENT ASSETS $11,100 $11,635
PROPERTY AND EQUIPMENT, AT COST:
Buildings $ 1,432 $ 1,417
All Other 524 368
Less accumulated depreciation
and amortization 1,629 1,584
_______ _______
NET PROPERTY AND EQUIPMENT $ 327 $ 201
_______ _______
TOTAL ASSETS $11,427 $11,836
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 475 $ 503
Other current liabilities 366 740
_______ _______
TOTAL CURRENT LIABILITIES $ 841 $ 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 8,189 8,234
Add net unrealized gain on
available-for-sale securities
(Note (b)) 436 355
Less treasury stock at cost
145,151 and 137,877 shares; 780 737
NET SHAREHOLDERS' EQUITY _______ _______
(Note 3) $10,487 $10,494
TOTAL LIABILITIES AND SHARE- _______ _______
HOLDERS' EQUITY $11,427 $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
Second Quarter Ended Six Months Ended
May May May May
30, 1997 24, 1996 30, 1997 24, 1996
<S> <C> <C> <C> <C>
Net Sales $2,439 $3,024 $6,541 $7,249
Cost and operating expenses:
Cost of sales 1,594 2,073 4,367 4,913
Selling and administrative
expenses 984 1,034 2,130 2,184
______ _______ _______ _______
Operating income (140) (83) 44 152
Other income 45 131 107 269
______ _______ _______ _______
Income before income taxes (95) 48 151 421
Income taxes (40) 17 57 166
_______ _______ _______ _______
Net income $ (55) $ 31 $ 94 $ 255
======= ======= ======= =======
Per Common Share:
Net income $ (0.04) $ 0.02 $ 0.07 $ 0.17
Dividends 0.05 0.05 0.10 0.10
Average number of common shares
outstanding 1,388,864 1,474,265 1,391,989 1,478,169
<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 30, 1997 and May 24, 1996
(In thousands)
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating
activities:
Net cash provided (used) by
operating activities $ 996 $1,074
Cash flows from investing
activities:
Proceeds from sale of assets 0 0
Capital expenditures (170) (14)
_______ _______
Net cash provided (used) by
investing activities (170) (14)
Cash flows from financing activities:
Dividends paid (139) (148)
Purchase of treasury stock (44) (63)
Net cash provided (used) by _______ _______
financing activities (183) (211)
Net increase (decrease) in _______ _______
cash and cash equivalents 643 849
Cash and cash equivalent at
beginning of period 548 1,301
Cash and cash equivalent at _______ _______
end of period $1,191 $ 2,150
======= =======
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest $ 0 $ 0
Income taxes 384 432
</TABLE>
<PAGE>
PENOBSCOT SHOE COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED FINANCIAL STATEMENTS
The condensed balance sheet as of May 30, 1997, the statements of
income for the second quarter ended May 30, 1997 and May 24, 1996,
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 30, 1997 and for the other periods
presented. The results of operations for the period ended May 30, 1997
are not necessarily indicative of operating results for the full year.
2. INVENTORIES
Inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
5/30/97 11/29/96 5/24/96
<S> <C> <C> <C>
FIFO Cost:
finished shoes $4,156 $4,465 $3,630
shoes in process 0 0 4
raw materials 17 20 215
_______ _______ _______
$4,173 $4,485 $3,849
Excess of FIFO cost over
LIFO inventory value (140) (449) (728)
_______ _______ _______
$4,033 $4,036 $ 3,121
======= ======= =======
</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 30, 1997, shareholders' equity
changed due to the net income of $94,000, dividends declared of $139,000,
treasury stock purchases of $44,000 and an increase of $81,000 resulting
from an 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 May 30, 1997, Penobscot Shoe Company had working capital of
approximately $10,259,000 versus approximately $10,392,000 at November
29, 1996, a decrease of $133,000. The ratio of current assets to current
liabilities at May 30, 1997, was 13.2 to 1, compared to 9.4 to 1, at
November 29, 1996.
The statement of cash flows for the six months ended May 30, 1997,
shows an increase of $643,000 in cash and cash equivalents since November
29, 1996. The Company's operations provided $996,000 since November 29,
1996, primarily due to seasonal fluctuations in accounts receivable. The
Company's quarterly dividend amounted to a use of $139,000 during the
period and capital expenditures for equipment amounted to a further use
of $170,000 during the period.
The decrease in the Company's accounts receivable and other current
liabilities and the increase in other current assets since November 29, 1996,
were the result of ordinary fluctuations. The increase in property and
equipment reflects the purchase of new data processing equipment 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 second quarter ended May 30, 1997, were $2,439,000,
down 19% from $3,024,000 last year. A net loss of $55,000, or $.04 per share,
was incurred in the second quarter compared to net income of $31,000, or
$.02 per share, in the corresponding quarter last year. The current quarter's
net income benefited from a LIFO gain of approximately $41,000, or $.03 per
share. Last year the second quarter did not include a LIFO gain. In the
second quarter last year, gains from the sales of securities contributed
approximately $45,000, or $.03 per share, to net income. This year such gains
were insignificant.
For the six months year-to-date, net sales were $6,541,000, down 10% from
$7,249,000 a year ago. Net income for the year-to-date period was $94,000,
or $.07 per share, versus $255,000, or $.17 per share last year. The current
year-to-date period has benefited from LIFO gains totaling approximately
$157,000, or $.11 per share. In fiscal 1996, no LIFO gains were realized in
the first half of the year. For the six months year-to-date periods, gains
from the sales of securities amounted to approximately $6,000, or less than
$.01 per share, and $93,000, or $.06 per share, in 1997 and 1996 respectively.
The decrease in second quarter net sales compared to last year was due to
volume factors. The poor winter boot season that affected the first quarter
was followed by unseasonable weather in much of the country resulting in
weak demand for Spring merchandise. Accordingly, reorders for Spring 97
merchandise lagged behind a year ago comparatives throughout the quarter.
Higher returns and allowances, due largely to returns of winter boots,
further reduced the sales volume compared to a year ago.
Improved sales during the second half of the year will be contingent on a
strengthened retail environment.
Cost of sales was 65.4% in the second quarter compared to 68.6% a year ago,
resulting in gross profit margins of 34.6% and 31.4% in the 1997 and 1996
quarters, respectively. The current period includes a pre-tax LIFO
liquidation gain of $69,000. Without the LIFO gain, the gross profit margin
in the second quarter would have been 31.8%. No LIFO liquidation gain was
realized in the first half of last year. The LIFO liquidation gain is the
result of reductions in the inventory originally assembled in our
Old Town, Maine factory. That factory was closed in August 1996, and since
that date LIFO gains have been recognized quarterly as the remaining
domestically assembled inventory is liquidated. The inventory sourced from
overseas locations is accounted for as a separate LIFO inventory pool that
was not affected by the factory closure. Selling and administrative costs in
the second quarter were down approximately 5% from a year ago. Most of this
decrease was due to costs variable on sales.
<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: June 27, 1997 Paul Hansen
_________________________
By: Paul Hansen
President and
Chief Executive Officer
Date: June 27, 1997 David L. Keane
_________________________
By: David L. Keane
Vice President/Finance and
Administration
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-28-1997
<PERIOD-END> MAY-30-1997
<CASH> 1,191
<SECURITIES> 3,448
<RECEIVABLES> 2,359
<ALLOWANCES> (503)
<INVENTORY> 4,033
<CURRENT-ASSETS> 11,100
<PP&E> 1,956
<DEPRECIATION> 1,629
<TOTAL-ASSETS> 11,427
<CURRENT-LIABILITIES> 841
<BONDS> 0
<COMMON> 1,533
0
0
<OTHER-SE> 9,298
<TOTAL-LIABILITY-AND-EQUITY> 11,427
<SALES> 6,541
<TOTAL-REVENUES> 6,541
<CGS> 4,367
<TOTAL-COSTS> 6,497
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 151
<INCOME-TAX> 57
<INCOME-CONTINUING> 94
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
