SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549
FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended November 28, 1997
Commission File No. 1-5548-1
PENOBSCOT SHOE COMPANY
(Exact name of registrant as specified in its
charter)
1
<PAGE>
A Maine Corporation
State of Incorporation
01-0139580
IRS Employer Id. No.
450 North Main Street, Old Town, Maine 04468
(Address of principal executive offices)
207-827-4431
(Registrant's Phone)
Securities registered pursuant to Section 12(b) of the
Act:
Title of each class Name of exchange on which registered
Common $1.00 Par Value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $1.00
(Title of Class)
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes__x___ No_____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein, and
will not be contained to the best of the Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. / /
On February 6, 1998, there were 1,374,991 shares of the registrant's
common stock, $1.00 par value, outstanding. The aggregate market value of
the 609,039 shares of stock held by all non-affiliates of the registrant,
based on the closing price of the stock on the American Stock Exchange on that
date, was $3,350,261.
Documents Incorporated By Reference
Incorporated Documents Form - 10K Reference
Annual Report to Stockholders for the Parts II, IV
fiscal year ended November 28, 1997
Proxy Statement dated February 25, 1998 Part III
This report consists of 29 sequentially numbered pages. The indices
of exhibits may be found on pages 7 and 11.
2
<PAGE>
PART I
ITEM 1. BUSINESS
a) The Registrant's Products and Services
The Registrant, Penobscot Shoe Company (herein referred to as
the "Company"), was incorporated in 1935, and has been engaged in the
manufacture, importing and sale of branded footwear to retailers. Its
principal products today are women's casual and tailored footwear,
including boots and sandals, selling in the moderate price range.
In 1997, all of the Company's sales were made under the exclusive
brand name, TROTTERS, to approximately 1,600 locations.
To achieve these sales, the Company employs a national sales force
which is compensated on a commission basis. The efforts of this sales force
and the identity and value of the Company's principal trademark, TROTTERS,
are supported by trade advertising on a national basis, cooperative advertising
programs and promotional assistance to retailers.
The Company is continually seeking new customers, but, since it does
not have long-term contracts with its customers, there can be no assurance
that its business will be constant or grow. On February 6, 1998, the Company
had orders in-house of approximately $6,130,000, as compared to orders of
approximately $5,368,000 one year ago. Changes in backlog do not necessarily
indicate sales trends, as in-house orders frequently fluctuate according to
customers' inventory plans as well as the Company's ability to deliver.
Net sales for 1997 decreased 4% from the preceding year which had increased
by 22% from 1995. Total pairs of footwear shipped were approximately the same
in 1997 as in 1996. A poor winter boot season affected the first quarter of
1997 and was followed by unseasonable weather in much of the country resulting
in weak demand for Spring merchandise. Despite some short-term up-ticks in the
retail environment for footwear later in the year, much of fiscal 1997 suffered
from general weakness in the footwear market. During the fourth quarter, net
sales included significant shipments of inventory at reduced prices. This had
the effect of reducing the overall average selling price per pair, which
decreased approximately 3% from the preceding year.
The Company expects 1998 to produce a moderate increase in sales, fueled
primarily by new products and greater penetration into top accounts.
In August 1996, the Company ceased production at its manufacturing
facility in Old Town, Maine. The decision to cease domestic assembly of
footwear was due to a decline in the portion of the product line which
had been produced in that facility. The profitability of the products which
had been assembled in Old Town had declined to a point where the operation
was no longer economically viable. Approximately 15% of the Company's
products were assembled in Old Town in 1996, down from 27% in 1995.
All of the Company's products are purchased as finished footwear from
overseas sources. The emphasis on sourcing finished footwear from overseas
has helped the Company to maintain its price competitiveness and quality
control.
3
<PAGE>
PART I
ITEM 1. BUSINESS (continued)
(a) The Registrant's Products and Services (continued)
The Company had approximately 42 employees on November 28, 1997,
while the number of employees at November 29, 1996 was 43.
The Company's sole line of business is the importing and sale of
footwear, as described above.
(b) Material Factors Affecting the Company's Business.
(1) Competition
There are many well-managed, well-financed competitors
supplying moderately-priced footwear to the market served by the Company.
Pricing continues to be a major area of competition inasmuch as imports
constitute a sizable majority of all footwear sold in the American market.
Other important areas of competition include quality, fashion, the reliability
and timeliness of delivery, and the provision of in-stock service in a range
of sizes and widths. The Company makes a special effort to maintain an
inventory of its better selling styles in a large variety of sizes and
widths. This allows it to satisfy retailers' needs more efficiently and more
quickly than can some of its competitors. The Company believes that it is
recognized as one of the leaders in the industry in its ability to provide
this service, known as open-stock reorder availability.
(2) Seasonality
The Company's business is characterized by two major
selling seasons, one for the Fall retail season and the other for the Spring
retail season. Sales for the Fall season generally account for slightly more
than half of a year's sales, while the Spring sales account for the balance.
Although a portion of the Company's products are not imported until orders
for them have been received, the Company imports a certain amount of its
basic and more traditional styles ahead of the receipt of orders. This is
necessary in order to mitigate the current trend whereby incoming orders are
concentrated in a shorter period of time and closer to the retail selling
season. In addition, the Company imports for in-stock inventories those
shoes projected to be best sellers, in order to facilitate open-stock reorder
availability as described above. The risk involved with the early purchase of
the Company's product is the potential for surplus inventory if the selling
patterns do not materialize as forecast. The resulting surplus inventory must
be sold at reduced margins with a corresponding negative impact on earnings.
Considerable effort has been devoted to minimizing this risk through improved
forecasting techniques and sound inventory management. The Company finances
the normal buildup of its finished goods inventory by the use of available
liquid working capital.
4
<PAGE>
(3) Forward-Looking Statements
This report contains certain forward looking statements regarding the
Company. The Company desires to take advantage of the "safe harbor" provisions
of the Private Securities Act of 1995 and in that regard is cautioning the
readers of this report that a number of important risk factors could affect the
Company's actual results of operations and may cause changes in the Company's
strategy with the result that the Company's operations and results may differ
materially from those expressed in any forward-looking statements made by, or
on behalf of, the Company. These risk factors include, among others, general
economic and market conditions, the rate of growth in the footwear market and
consumer acceptance of the Company's product line, and the risk factors that
are discussed from time-to-time in the Company's SEC reports, including, but
not limited to, the report on Form 10-K for the fiscal year ended November 28,
1997.
PART I
ITEM 1. BUSINESS (continued)
(c) Executive Officers of the Registrant
<TABLE>
<CAPTION>
The following is a list of the Company's executive officers, their
ages, positions and offices, as of November 28, 1997:
Name Age Position presently held and period of service
<S> <C> <C>
Paul Hansen 57 President and Chief Executive Officer since
1994, Chief Operating Officer from 1988
to 1993, Treasurer from 1986 to 1994 and
Executive Vice President from 1981-1988.
Employed by the Company since 1966.
Wilhelm Pfander 60 Vice President since 1977.
Employed by the Company since 1963.
David L. Keane 45 Vice President since 1987, Treasurer since
1994. Employed by the Company since 1985.
William Hoskins 56 Vice President since 1994. Employed by the
Company since 1993.
Gerald E. Rudman 69 Clerk since 1969, Director since 1975.
Company General Counsel.
</TABLE>
PART I
ITEM 2. PROPERTIES
The Company owns two buildings in Old Town, Maine, which is
approximately 15 miles from Bangor, Maine. Both of the buildings in Old
Town are made of steel, brick and concrete construction. One of the buildings
had been used for manufacturing and is currently surplus to the Company's
needs. That building contains approximately 69,000 square feet and is listed
for sale or lease. The other, which is used for the Company's executive
offices and warehousing, contains approximately 74,500 square feet.
5
<PAGE>
Both buildings are in good condition and have suitable transportation
facilities.
ITEM 3. LEGAL PROCEEDINGS
In September 1987, the Company and numerous other parties entered
into two Administrative Orders by Consent issued by the U.S. Environmental
Protection Agency and the Maine Department of Environmental Protection,
regarding the removal of hazardous wastes from two locations in Maine. The
Company initially established a loss contingency of $75,000 to cover
anticipated liabilities in these two proceedings. The amount of this accrual
was determined based on several factors which were known at that time.
These factors included the EPA apportionment percentage applicable to
Penobscot Shoe Company, the volume and type of materials contributed to the
sites by the Company, and the estimated costs for remedial actions at the
sites. Additionally, costs of cleanup were estimated utilizing available past
experience of other companies and sites. The loss contingency was charged
against earnings during fiscal 1987. Costs totaling $14,000 have been incurred
to date and a reserve of $61,000 remains in place.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
No matter was submitted to a vote of the Company's security
holders during the last quarter of the Company's fiscal year.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Reference is made to the information set forth on page 25 of the
Company's annual report to stockholders for the fiscal year ended November
28, 1997 ("1997 Annual Report"), filed herewith as Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to the Selected Financial Data set forth on page
25 of the Company's 1997 Annual Report filed herewith as Exhibit 13.
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the Management's Discussion and Analysis
of Financial Condition and Results of Operations set forth on page 24 of the
Company's 1997 Annual Report, filed herewith as Exhibit 13.
6
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
Incorporated by reference from the financial statements of the
Company included in the 1997 Annual Report, filed herewith as Exhibit 13.
See Index to Financial Statements and Schedules set forth in response to Part
IV, Item 14 of this Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
Identification of Directors and Directorships
Reference is made to the information set forth in the Company's definitive
Proxy Statement which is to be filed with the Securities and Exchange
Commission on or about February 25, 1998.
Identification of Executive Officers
This information is set forth in Part I, Item 1 (c) of this report.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information set forth in the Company's definitive
Proxy Statement which is to be filed with the Securities and Exchange
Commission on or about February 25, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Reference is made to the information set forth in the Company's definitive
Proxy Statement which is to be filed with the Securities and Exchange
Commission on or about February 25, 1998.
PART III
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Not applicable
7
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) 1. and 2. Financial Statements and Financial Statement Schedules:
Incorporated by reference to the financial statements of the
Company included in the 1997 Annual Report filed herewith as Exhibit 13.
See the Index to Financial Statements and Schedules included with the
Additional Financial Statements and Schedules filed with this Annual Report.
(a) 3. Exhibits:
The index on page 13, directly preceding the exhibits, lists all of
the exhibits either filed as a part of this annual report or incorporated
herein by reference.
(b) Reports on Form 8-K:
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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
Paul Hansen
By: Paul Hansen
President and
Chief Executive Officer
David L. Keane
By: David L. Keane
Vice President/Finance and Administration
Date: February 26, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Irving Kagan Date Gerald E. Rudman Date
Director Director
Paul Hansen Date
Director
8
<PAGE>
PENOBSCOT SHOE COMPANY
FINANCIAL STATEMENTS
FORM 10K, PART IV, ITEM 14 (a)1 AND (a)2
YEAR ENDED NOVEMBER 28, 1997
PENOBSCOT SHOE COMPANY
FINANCIAL STATEMENTS
FORM 10K, PART IV, ITEM 14 (a)1 AND (a)2
(a) 1. Financial Statements
The report of independent certified public accountants and the
following financial statements of the registrant included in the Annual
Report of the registrant to its stockholders for the year ended November 28,
1997, are incorporated herein by reference:
Balance sheets at November 28, 1997 and November 29, 1996
Statements of income for the years ended November 28, 1997,
November 29, 1996, and November 24, 1995
Statements of shareholders' equity for the years ended November 28,
1997, November 29, 1996, and November 24, 1995
Statements of cash flows for the years ended November 28, 1997,
November 29, 1996, and November 24, 1995
Notes to financial statements
2. Financial Statement Schedules
Report of independent certified public accountants
Schedule II - Valuation and qualifying accounts and reserves
Other schedules have been omitted because they are either not
required, not applicable, or the information is given in the Financial
Statements, including the notes thereto.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Penobscot Shoe Company
Old Town, Maine
The audits referred to in our report dated January 13, 1998,
relating to the financial statements of Penobscot Shoe Company which is
incorporated in Item 8 of this Form 10-K by reference to the annual report
to shareholders for the year ended November 28, 1997, included the audit of
the financial statement schedule listed in the accompanying index. This
financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based upon our audits.
In our opinion, such financial statement schedules present fairly, in
all material respects, the information set forth therein.
Boston, Massachusetts
January 13, 1998 BDO Seidman, LLP
9
<PAGE>
<TABLE>
<CAPTION>
PENOBSCOT SHOE COMPANY
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In Thousands)
Column A Column B Column C Column D Column E
Additions Deductions
Balance at Charged to Charged to Balance
beginning costs and other accts at end
of period expenses -describe -describe of period
<S> <C> <C> <C> <C> <C>
Deducted from Assets to
Which they Apply:
For the Year Ended November 28, 1997
Reserve for Doubtful Accounts $323 $185 $208(a) $300
Reserve for Cash Discounts 23 4 27
Reserve for Returns & Allowances 124 27 151
$470 $216 $0 $208 $478
For the Year Ended November 29, 1996
Reserve for Doubtful Accounts $335 $132 $144(a) $323
Reserve for Cash Discounts 22 1 23
Reserve for Returns & Allowances 111 13 124
$468 $146 $0 $144 $470
For the Year Ended November 24, 1995
Reserve for Doubtful Accounts $315 $67 $47 (a) $335
Reserve for Cash Discounts 26 (4) 22
Reserve for Returns & Allowances 145 (34) 111
$486 $29 $0 $47 $468
Note (a) - Accounts written off net of recoveries.
</TABLE>
10
<PAGE>
Index to Exhibits
3(a) Articles of Incorporation and by-laws of the Registrant, filed with
the Commission in 1965 as Exhibit 3(a) to the Registrant's Form S-1
Registration Statement (Registration No. 2-23907) are incorporated
herein by reference.
13 Annual Report to Stockholders for the fiscal year ended
November 28, 1997.
PENOBSCOT SHOE COMPANY 1997 ANNUAL REPORT
DIRECTORS
IRVING KAGAN GERALD E. RUDMAN
Chairman of the Board Senior Partner,
Rudman & Winchell (Law firm)
JAMES L. MOODY, JR. FRANCIS J. GUTHRIE
Retired Chairman of the Board Executive Vice President
Hannaford Bros. Co. Marketing and Sales
Fortis Benefits Insurance Company
JOHN I. RIDDLE PAUL HANSEN
Retail Real Estate and President and
Shopping Center Consultant Chief Executive Officer
OFFICERS
PAUL HANSEN WILHELM PFANDER
President and Vice President-Manufacturing
Chief Executive Officer
DAVID L. KEANE WILLIAM HOSKINS
Treasurer and Vice President-Sales
Vice President
Finance and Administration
GERALD E. RUDMAN
Corporate Clerk
11
<PAGE>
February 6, 1998
TO OUR SHAREHOLDERS...
Net sales for the fiscal year ended November 28, 1997, were $14,826,000, down 4%
from $15,429,000 last year. Net income for fiscal 1997 was $444,000, or $.32
per share, compared to $857,000, or $.59 per share, in fiscal 1996.
LIFO gains for the full year were approximately $.14 per share in each of the
two years, 1997 and 1996. It is not expected that LIFO accounting will have
any significant impact on earnings for fiscal 1998.
For the fourth quarter of fiscal 1997, net sales were $4,421,000, up 2% from
$4,315,000 a year ago. Net income for the current quarter was $156,000, or
$.11 per share, down from net income of $406,000, or $.29 per share in the
same quarter last year.
During the fourth quarter, net sales included significant shipments of surplus
inventory at reduced prices as a result of the weak retail footwear environment
that existed much of the year. LIFO gains amounted to approximately $.01 per
share in the current quarter compared to approximately $.13 per share in the
fourth quarter a year ago.
The Company expects 1998 to produce a moderate increase in sales, fueled
primarily by new products and greater penetration into top accounts.
Sincerely,
Irving Kagan Paul Hansen
Chairman of the Board President and Chief Executive Officer
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
For the Years Ended November 28, 1997,
November 29, 1996 and November 24, 1995
(In thousands, except for share data)
1997 1996 1995
<S> <C> <C> <C>
Net Sales $ 14,826 $ 15,429 $ 12,681
Costs and operating expenses (Notes 1 and 3)
Cost of sales 10,266 10,291 8,218
Selling and administrative expenses 4,181 4,234 4,140
14,447 14,525 12,358
Operating income 379 904 323
Other income (expense), net (Note 7) 372 539 412
Income before taxes on income 751 1,443 735
Taxes on income (Notes 1 and 8) 307 586 297
Net income $ 444 $ 857 $ 438
12
<PAGE>
Per common share:
Net income (Note 1) $ .32 $ .59 $ .30
Dividends declared $ .20 $ .20 $ .20
Weighted average share outstanding 1,391,000 1,458,568 1,482,117
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended November 28, 1997,
November 29, 1996 and November 24, 1995
(In thousands, except for share data)
Additional
Common Stock Paid-in Retained Unrealized Treasury Stock
Shares Amount Capital Earnings Gains Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, November 25, 1994 1,533,042 $1,533 $1,109 $7,526 $ - 50,925 $270
Net income for year - - - 438 - - -
Marketable securities (note 1 ) - - - - 356 - -
Dividends paid ($.20 per share) - - - (297) - - -
Balance, November 24, 1995 1,533,042 1,533 1,109 7,667 356 50,925 270
Net income for year - - - 857 - - -
Purchase of treasury stock - - - - - 86,952 467
Marketable securities (note 1 ) - - - - (1) - -
Dividends paid ($.20 per share) - - - (290) - - -
Balance, November 29, 1996 1,533,042 1,533 1,109 8,234 355 137,877 737
Net income for the year - - - 444 - - -
Purchase of treasury stock - - - - - 13,974 81
Exercise of stock options - - - (9) - (3,800) (19)
Marketable securities (note 1) - - - - 94 - -
Dividends paid ($.20 per share) - - - (277) - - -
Balance, November 28, 1997 1,533,042 $1,533 $1,109 $8,392 $449 148,051 $799
See accompanying notes to financial statements
PENOBSCOT SHOE COMPANY
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEETS
November 28, 1997 and November 29, 1996
(In thousands)
ASSETS 1997 1996
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 1) 403 548
Marketable securities (Notes 1, 2 and 5) 3,457 3,299
Receivables (Notes 1,8 and 10):
Trade, less allowances of $478 and $470 3,733 3,292
Other 20 27
Inventories (Notes 1 and 3) 4,283 4,036
Prepaid expenses and other (Notes 4 and 8) 382 433
TOTAL CURRENT ASSETS 12,278 11,635
13
<PAGE>
PROPERTY AND EQUIPMENT (Note 1):
Land 66 66
Land improvements 5 4
Buildings and improvements 1,437 1,417
Machinery and equipment 403 298
1,911 1,785
Less accumulated depreciation and amortization 1,618 1,584
NET PROPERTY ANDEQUIPMENT 293 201
TOTAL ASSETS $12,571 $11,836
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 597 $ 502
Notes payable (Note 5) 750 -
Accruals (Notes 1 and 6)
Salaries, wages and commissions 43 159
Retirement plan 176 183
Income taxes 7 188
Other 136 141
Dividends payable 69 70
TOTAL CURRENT LIABILITIES 1,778 1,243
DEFERRED INCOME TAXES (Notes 1 and 8) 109 99
COMMITMENTS AND CONTINGENCIES
(Notes 4, 5, 6, 9 and 10)
SHAREHOLDERS' EQUITY (Notes 1 and 9):
Common stock, $1 par - shares
authorized 2,000,000; issued 1,533,042 1,533 1,533
Additional paid-in capital 1,109 1,109
Retained earnings 8,392 8,234
11,034 10,876
Unrealized gain on marketable securities
(Notes 1 and 2) 449 355
Less treasury stock, at cost,
148,051 and 137,877 shares 799 737
TOTAL SHAREHOLDERS' EQUITY 10,684 10,494
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $12,571 $11,836
See accompanying notes to financial statements
PENOBSCOT SHOE COMPANY
</TABLE>
<TABLE>
<CAPTION>
14
<PAGE>
STATEMENT OF CASH FLOWS
For the Years Ended November 28, 1997,
November 29, 1996 and November 24, 1995
(In thousands)
1997 1996 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 444 $ 857 $ 438
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 101 87 128
Provision for losses on accounts receivable 171 132 67
Gain on sale of marketable securities (228) (226) (178)
(Gain) loss on sale property and equipment (7) 20 -
Deferred income taxes 54 (48) (11)
Changes in operating assets and liabilities:
Receivables (605) 41 183
Inventories (247) (982) (585)
Prepaid expenses and other (56) (90) (65)
Accounts payable 95 (289) 261
Accruals (309) 249 29
Dividends payable (1) (4) -
Total adjustments (1,033) (1,110) (171)
Net cash provided(used) by operating activities (589) (253) 267
Cash flows from investing activities:
Proceeds from sale of marketable securities 1,474 1,554 949
Purchase of marketable securities (1,246) (1,358) (890)
Proceeds from sale of property and equipment 7 81 -
Purchase of property and equipment (192) (20) (36)
Net cash provided by investing activities 43 257 23
Cash flows from financing activities:
Notes payable 750 - -
Dividends paid (278) (290) (297)
Purchase of treasury stock (83) (467) -
Exercise of stock options 12 - -
Net cash provided(used) by investing activities 401 (757) (297)
Net (decrease) in cash and cash equivalents (145) (753) (7)
Cash and cash equivalents at beginning of year 548 1,301 1,308
Cash and cash equivalents at end of year $403 $ 548 $1,301
</TABLE>
Supplemental Disclosure of Cash Flow Information
Payments for income taxes amounted to $434,000, $553,000 and $284,000 in
1997, 1996 and 1995, respectively. Cash paid for interest expense in 1997 and
1996 was $35,000 and $3,000, respectively. There was no interest paid in 1995.
Unrealized gains on marketable securities were $752,000, $594,000 and $596,000
in 1997, 1996 and 1995, respectively.
See accompanying notes to financial statements
PENOBSCOT SHOE COMPANY
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Summary of Business Operations and Significant Accounting Policies
Business Operations:
The Company is engaged in the design, importing and sale of women's casual
and tailored footwear, including boots and sandals, for the retail market
throughout the United States.
Fiscal Year:
The Company's fiscal year ends on the last Friday in November. Fiscal years
1997 and 1995 included 52 weeks while the year 1996 included 53 weeks.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Marketable Securities:
The Company accounts for investments in debt and equity securities under the
provisions of Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" ("SFAS No. 115").
The Company classifies the debt and equity securities as available-for-sale
securities, and therefore records them at fair market value.
The cost of securities sold is based on the first-in, first-out method in the
determination of realized gains and losses. Unrealized gains and losses are
recorded as a separate component of stockholders' equity. Realized gains and
losses are recognized in the results of operations.
Inventories:
Inventories are stated at cost, not in excess of market. Cost is determined
on a last-in, first-out ("LIFO") basis.
Property, Equipment and Depreciation:
Property and equipment are stated at cost. Depreciation is computed using
the straight line method over the following estimated useful lives:
Years
Land improvements 10
Buildings and improvements 10-33
Machinery and equipment 3-10
Retirement Plan:
The Company has a defined benefit retirement plan covering substantially all
employees. The Company's policy is to fund retirement cost as accrued. Plan
assets consist principally of equity securities and corporate and US
Government obligations. The plan was fully funded at November 28, 1997.
16
<PAGE>
Financial Instruments and Concentrations of Credit Risk:
The fair values of debt securities and equity investments are based
on quoted market prices at the reported date for those investments. The
estimated fair value of the Company's other financial instruments, which
include cash, trade receivables notes payable to bank and accounts payable,
approximate their carrying value. At November 28, 1997 and November 29, 1996,
the Company's trade receivables were primarily due from the retail trade. The
Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Credit losses relating to
customers have consistently been within management's expectations.
Income Per Share:
Net income per share amounts are based on the weighted average number of
common shares outstanding. Common stock equivalents, consisting of
outstanding stock options, are included in the computation when their
effect is dilutive.
Cash Equivalents:
The Company considers all highly liquid instruments with a maturities of three
months or less when purchased to be cash equivalents.
Income Taxes:
Income taxes are based on income (loss) for financial reporting purposes and
reflect a current tax liability (asset) for the estimated taxes payable
(recoverable) in the current-year tax return and changes in deferred taxes.
Deferred tax liabilities or assets are recognized for the estimated tax
effects of temporary differences between financial reporting and taxable
income (loss) and for tax credit and loss carryforwards based on enacted tax
laws and rates.
Stock Based Compensation:
Effective November 30, 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for Stock-
Based Compensation." The Company has elected to continue to account for stock
options at their intrinsic value with disclosure of the effects of fair value
accounting on net earnings (loss) and earnings (loss) per share on a pro forma
basis (See note 9).
New Accounting Pronouncements Not Adopted:
Statement of Financial Standards No. 128 "Earnings per Share," (SFAS No. 128)
issued by the Financial Accounting Standards Board, establishes standards for
computing and presenting earnings per share. The effect of adopting SFAS
No. 128 is not expected to be material. The Company is required to adopt the
disclosure requirements of SFAS No. 128 during the year ended November 27, 1998.
17
<PAGE>
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," (SFAS No. 130) establishes standards for reporting and display of
comprehensive income, its components, and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures,
SFAS No. 130 requires that all items are required to be recognized under current
accounting standards as components of comprehensive income reported in a
financial statement that is displayed with the same prominence as other
financial statements.
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," which supersedes SFAS No. 14, "Financial Reporting for Segments of
a Business Enterprise," establishes standards for the way that public
enterprises report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas, and major customers. SFAS No. 131 defines operating
segments as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.
SFAS No. 130 and SFAS No. 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Due to recent issuance of these standards,
management has been unable to fully evaluate the impact, if any, they may have
on future financial statement disclosures.
Advertising:
The Company expenses advertising costs as incurred. Advertising expense was
approximately $618,000, $569,000 and $528,000 in 1997, 1996 and 1995
respectively.
(2) Marketable Securities
At November 28, 1997 and November 29, 1996, marketable securities consisted of
the following (in thousands):
Fair Market Value Cost
1997 1996 1997 1996
Preferred and
common stock $ 2,176 $ 1,406 $ 1,519 $ 917
U.S. Government and
U.S. Government
agency obligations 795 1,524 746 1,428
Mutual funds 109 73 95 62
Corporate bonds 377 296 345 298
Total $ 3,457 $ 3,299 $ 2,705 $ 2,705
Gross unrealized gains and losses at November 28, 1997, were $757,000 and
$5,000, respectively. Gross unrealized gains and losses at November 29, 1996,
were $597,000 and $3,000, respectively.
18
<PAGE>
The contractual maturity of debt securities are summarized as follows at
November 28, 1997:
Fair Market
Value Cost
Within 1 year $ - $ -
After 1 year through 5 years 267 263
After 5 years through 10 years 578 556
After 10 years 327 272
Total debt securities $ 1,172 $ 1,091
(3) Inventories
Inventories are summarized as follows (in thousands):
1997 1996
FIFO Cost:
Finished shoes $ 4,318 $ 4,358
Raw materials 15 20
4,333 4,378
Excess of FIFO cost over
LIFO inventory value (50) (342)
$ 4,283 $ 4,036
The Company uses the LIFO method because it more realistically reflects
operating results by charging current costs against current revenues.
Some companies in the same industry use the first-in, first-out ("FIFO")
method. Had the Company's inventory been stated using the FIFO method, the
inventory would be greater by approximately $50,000 and $342,000 at
November 28, 1997 and November 29, 1996, respectively. Reported net income
would have been lower by approximately $172,000 ($.12 per share), $127,000
($.09 per share) and $84,000 ($.06 per share) in 1997, 1996 and 1995,
respectively.
During 1997, 1996 and 1995, cost of sales included charges for goods carried
at prior years' LIFO values which were less than the cost of current
purchases. This result was to increase net income by approximately $201,000
($.14 per share), $205,000 ($.14 per share) and $182,000 ($.12 per share) in
1996, 1995 and 1994, respectively.
(4) Retirement Plan
The Company has a retirement plan covering substantially all of its employees.
<TABLE>
<CAPTION>
The following table sets forth the plan's funded status at November 28, 1997
and November 29, 1996 (in thousands):
19
<PAGE>
Actuarial present value of 1997 1996
benefit obligation:
<S> <C> <C>
Accumulated benefit obligation,
including vested benefits of
$3,023 and $3,090 $ (3,131) $ (3,205)
Projected benefit obligation $ (3,341) $ (3,319)
Unrecognized net gain from
past experience difference from
that assumed (2,071) (1,351)
Plan assets at fair market value 5,856 5,085
Prior service cost not yet recognized
in net periodic pension cost 7 9 )
Unrecognized transition assets being
amortized over 15 years (165) (198)
Prepaid pension cost $ 286 $ 226
</TABLE>
<TABLE>
<CAPTION>
Net periodic pension expense (credit) in 1997, 1996 and 1995 included the
following (in thousands):
1997 1996 1995
<S> <C> <C> <C>
Service cost $ 55 $ 43 $ 33
Interest cost 235 239 218
Return on plan assets (309) (294) (278)
Net amortization
and deferral (41) (32) (35)
Net periodic pension
expense (credit) $ (60) $ (44) $ (62)
</TABLE>
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation
were 7.5% and 6%, respectively. The expected long-range rate of return on
assets was 7.5%.
5) Short-term Borrowings
At November 28, 1997, the Company has a line of credit of $4,750,000 for
letters of credit and short-term borrowings. Borrowings under this
arrangement are secured by the company's marketable securities portfolio
and bear interest at the bank's prime rate minus 1.5%. There were no
short-term borrowings during fiscal 1995. During fiscal 1997 and 1996,
the maximum amount of short-term borrowings under these arrangements was
$1,500,000 and $315,000 respectively, with an interest rate paid of 7.00%
and 8.25%. At November 28, 1997, commitments against letters of credit
were approximately $313,000.
20
<PAGE>
(6) Commitments and Contingencies
Supplemental retirement benefit:
The Company provides retirement benefits to its former chief executive
officer in accordance with a supplemental retirement plan approved by the
Board of Directors. The present value of the estimated future payments under
this benefit program of $176,000 in 1997 and $183,000 in 1996 is reflected
in the accompanying financial statements as accrued retirement plan. Retirement
payments under this program amounted to $20,000 in both 1997 and 1996.
Employment death benefit:
The Board of Directors has voted to make payments to spouses and minor
children of certain officers in the aggregate amount of approximately
$244,000 in the event of officers' deaths while employed.
Litigation:
In September 1987, the Company and numerous other parties entered into two
Administrative Orders by Consent issued by the U.S. Environmental Protection
Agency and the Maine Department of Environmental Protection regarding the
removal of hazardous wastes from two locations in Maine. The Company
initially established a loss contingency of $75,000 to cover anticipated
liabilities in these two proceedings. Costs totaling $14,000 have been incurred
to date.
(7) Other Income (Expense), Net
<TABLE>
<CAPTION>
Other income (expense), net, consists of the following (in thousands):
1997 1996 1995
<S> <C> <C> <C>
Interest income $ 154 $ 200 $ 218
Dividend income 28 23 25
Gain on sale
of securities 229 226 178
Interest expense (35) (3) -
Litigation settlement - 100 -
Other, net (4) (7) (9)
$ 372 $ 539 $ 412
</TABLE>
(8) Taxes on Income (Credit)
<TABLE>
<CAPTION>
The provision (credit) for income taxes is comprised of
the following (in thousands):
Fiscal Year Current Deferred Total
<S> <C> <C> <C>
1997:
Federal $ 194 $ 41 $ 235
State 59 13 72
$ 253 $ 54 $ 307
21
<PAGE>
1996:
Federal $ 472 $ (37) $ 435
State 162 (11) 151
$ 634 $ (48) $ 586
1995:
Federal $ 296 $ (8) $ 288
State 12 (3) 9
$ 308 $ (11) $ 297
</TABLE>
Deferred tax assets (liabilities) are comprised of the following
(in thousands)
1997 1996
Deferred tax asset:
Accounts receivable reserves $ 193 $ 188
Inventory valuation 22 31
Deferral related to
marketable securities (303) (240)
Basis difference of accrued
liabilities 95 134
$ 7 $ 113
Deferred tax liability:
Depreciation $ 6 $ (8)
Deferral related to prepaid
pension costs (115) (91)
$(109) $ (99)
<TABLE>
<CAPTION>
A reconciliation on income at the United States statutory rate to
the effective rate follows:
1997 1996 1995
<S> <C> <C> <C>
Taxes on income
computed at the
United States
statutory rate 34.0% 34.0% 34.0%
State and local
taxes, net of
federal benefit 6.3 6.1 5.5
Dividends received
deduction (.8) (.4) (.8)
Other - net 1.4 .9 1.7
Effective tax rate 40.9% 40.46 40.4%
</TABLE>
22
<PAGE>
(9) Stock Options Plan
The Company has a nonqualified stock option plan (the "Plan") designed to
reward key employees of the Company. Options are available for the purchase
of shares of the Company's common stock at an exercise price as determined by
the Board of Directors, but at a price not less than the fair market value of
the common stock at the time the option in granted. The Plan provides that
options for the purchase of up to 75,000 shares of common stock may be granted,
of which 33,000 shares remained available at November 28, 1997. Changes in the
outstanding options under the Plan are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Outstanding at
beginning of year 29,800 29,800 29,800
Exercised (price of
$3.125 per share) (3,800) - -
Outstanding at end of
year (prices range
from $3.125 to $5.00
per share) 26,000 29,800 29,800
Weighted average exercise
price $3.486 $3.439 $3.439
Available for grant
at end of year 33,000 33,000 33,000
The weighted average remaining contractual life of the shares at November 28,
1997 is 4.1 years. The Company accounts for its stock based compensation using
the intrinsic value method. Accordingly, no compensation cost has been
recognized for its stock option plan. Had compensation cost for the Company's
stock option plan been determined based on the fair value at grant dates for
awards under the plan consistent with the method of Statement of Financial
Accounting Standards No. 123, the Company's net income and earnings per share
for fiscal 1995, 1996 and 1997 would not have been affected, as options were
neither granted nor vested during these years.
(10) Significant Sales and Concentration of Credit Risk
In 1997, 1996 and 1995, the Company derived revenues from a single customer
totaling $1,909,000, $2,134,000 and $1,407,000, respectively. Included
in accounts receivable are amounts due from this customer of approximately
$608,000 and $605,000 at November 28, 1997 and November 29, 1996, respectively.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
(11) Summarized Quarterly Results of Operations
(unaudited)
(In thousands except per share data)
1997 1996
<S> <C> <C>
First quarter
Revenue $4,103 $4,225
Gross profit 1,330 1,385
Net income 149 224
Net income
per common share .11 .15
Second quarter
Revenue $2,439 $3,024
Gross profit 845 951
Net income (loss) (54) 31
Net income (loss)
per common share (.04) .02
Third quarter
Revenue $3,864 $3,865
Gross profit 1,230 1,168
Net income 193 196
Net income
per common share .14 .13
Fourth quarter
Revenue $4,420 $4,315
Gross profit 1,155 1,635
Net income 157 406
Net income
per common share .11 .29
</TABLE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Penobscot Shoe Company
Old Town, Maine
We have audited the accompanying balance sheets of Penobscot Shoe Company
as of November 28, 1997 and November 29, 1996, and the related statements
of income, shareholders' equity, and cash flows for each of the three years
in the period ended November 28, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
24
<PAGE>
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Penobscot Shoe Company at
November 28, 1997 and November 29, 1996, and the results of its operations
and its cash flows for each of the three years in the period ended November
28, 1997, in conformity with generally accepted accounting principles.
Boston, Massachusetts
January 13, 1998
BDO Seidman, LLP
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(In thousands, except per share amounts)
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Selected Financial Data
Net Sales $ 14,826 $ 15,429 $ 12,681 $ 14,506 $14,861
Income Before Taxes $ 751 $ 1,443 $ 735 $ 832 $ 1,087
Net Income $ 444 $ 857 $ 438 $ 510 $ 663
Net Income per Share $ .32 $ .59 $ .30 $ .34 $ .45
Cash Dividends Declared per
Common Share $ .20 $ .20 $ .20 $ .20 $ .20
At year-end:
Total Assets $ 12,571 $ 11,836 $ 11,828 $ 11,026 $ 11,290
Working Capital $ 10,500 $ 10,392 $ 10,172 $ 9,568 $ 9,212
Shareholders' Equity $ 10,684 $ 10,494 $ 10,395 $ 9,898 $ 9,664
Book Value per Common Share
Outstanding at Year End $ 7.71 $ 7.52 $ 7.01 $ 6.68 $ 6.55
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources:
Penobscot Shoe Company's net working capital increased by $108,000 during 1997,
compared to an increase of $220,000 and $604,000 in 1996 and 1995, respectively.
Working capital at the end of 1997 was $10,500,000, compared to $10,392,000 at
the end of 1996 and $10,172,000 at the end of 1995. The current ratio for each
of the last three years was 6.9 to 1, 8.1 to 1 and 8.9 to 1, respectively.
25
<PAGE>
The Statement of Cash Flows for the year ended November 28, 1997, shows a
decrease in cash and cash equivalents of $145,000. The Company's operations used
$589,000 during 1997, primarily due to increased accounts receivable. The
payment of the Company's quarterly dividend amounted to $277,000 during 1997.
During 1997, the Company used $192,000 for capital purchases, mainly new and
upgraded data processing equipment, and used $72,000 to purchase treasury stock.
Borrowings under the terms of the Company's existing credit line were used to
fund short-term cash needs in the fourth quarter of fiscal 1997. These
borrowings provided $750,000 during 1997.
During 1997, the total value of the Company's inventory increased by $247,000.
In 1996, the inventory had increased by $985,000 from 1995. Inventory as
measured in pairs of footwear actually decreased slightly in 1997. A reduction
in the LIFO reserve during 1997 accounted for the decrease in inventory value.
In both 1997 and 1996, the portion of inventory comprised of domestically
assembled footwear decreased, reducing the amount of inventory carried at prior
years' LIFO values. As a result, in each of the last two years cost of sales
was charged for goods carried at prior years' LIFO values which were
significantly less than the cost of current purchases. The effect of these LIFO
liquidations was to increase earnings by $201,000, or $.14 per share, and
$205,000, or $.14 per share, in 1997 and 1996, respectively. As of the end of
fiscal 1997, there was no remaining domestic inventory. Therefore, it is not
expected that LIFO accounting will have any significant impact on earnings for
for fiscal year 1998.
The increase in marketable securities was primarily due to the adoption of
Statement of Accounting Standards No. 115 "Accounting for Certain Investments in
Debt and Equity Securities" on November 26, 1994. As a result of the adoption of
this accounting standard, marketable securities includes $752,000 of unrealized
gain and a deferred tax liability of $303,000 is recorded on the balance sheet
as an offset to prepaid expenses and other. The increases in accounts receivable
and accounts payable and the decreases in accrued expenses were primarily a
result of timing.
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
of $4,750,000 with a major bank available at the bank's prime rate minus 1.5%.
The Company had no material commitments for capital expenditures as of
November 28, 1997.
Results of Operations:
Net sales for 1997 decreased 4% from the preceding year which had increased by
22% from 1995. Total pairs of footwear shipped were approximately the same in
1997 as in 1996. A poor winter boot season affected the first quarter of 1997
and was followed by unseasonable weather in much of the country resulting in
weak demand for Spring merchandise. Despite some short-term up-ticks in the
26
<PAGE>
retail environment for footwear later in the year, much of fiscal 1997 suffered
from general weakness in the footwear market. During the fourth quarter the
Company sold surplus footwear at reduced prices. This had the effect of reducing
the overall average selling price per pair, which decreased approximately 2%
from the prior year.
The Company's business is characterized by two major selling seasons, one for
the Fall retail season and the other for the Spring retail season. Sales for the
Fall season generally account for slightly more than half of a year's sales,
while the Spring sales account for the balance.
Cost of sales was 69% of net sales in 1997, 67% in 1996 and 65% in 1995. The
gross profit percentage was 31% , 33% and 35% in 1997, 1996 and 1995
respectively. The previously discussed sale of surplus footwear during 1997 was
responsible for this lower margin. In 1996, costs related to the closure of the
Company's domestic assembly factory reduced margins by approximately 1%.
Selling and administrative costs decreased by approximately $53,000, or 1%, from
1996. In 1996, these expenses had increased by approximately 2% from 1995. The
decrease in the current year was mainly due variable costs.
In 1997, other income totaled $372,000, pre-tax. Gains from the sales of
securities amounted to $233,000, pre-tax, and interest income amounted to
$150,000. In the fiscal year 1996, other income amounted to $539,000, pre-tax,
including $226,000 in gains from the sales of securities and interest income of
$200,000. Also in 1996, other income was increased by a gain of $100,000 related
to the settlement of litigation.
The Company is required to adopt the disclosure requirements of SFAS No. 128
during the year ended November 27, 1998. SFAS No. 130 and SFAS No. 131 are
effective for financial statements beginning after December 15, 1997 and require
comparative information for earlier years to be restated. Due to recent issuance
of these standards, management has been unable to fully evaluate the impact, if
any, they may have on future financial statement disclosures
MARKET FOR THE COMPANY'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS
Principal Market, Transfer Agent and Registrar
The principal market on which the Company's Common Stock is traded is the
American Stock Exchange. The Transfer Agent and Registrar for the Company's
Common Stock is Chase Mellon Shareholder Services, 111 Founders Plaza,
E. Hartford, CT 06108. As of November 28, 1997, there were 222 holders of
record of the Company's Common Stock.
27
<PAGE>
Stock Price and Dividend Information
<TABLE>
The table presents the high and low sales prices as reported by the American
Stock Exchange, and dividend information for the Company's Common Stock
for each quarterly period during the past two years.
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
1997
High 7 1/8 6 3/4 6 11/16 6 3/8
Low 5 3/8 5 1/4 5 1/2 5 3/4
Dividends $.05 $.05 $.05 $.05
1996
High 4 7/8 6 1/4 5 7/8 6 3/8
Low 4 1/4 4 7/8 4 3/4 5 3/8
Dividends $.05 $.05 $.05 $.05
</TABLE>
PENOBSCOT SHOE COMPANY
PO BOX 545, OLD TOWN, MAINE 04468
TROTTERS
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE>5
<MULTIPLIER>1000
<S> <C>
<FISCAL-YEAR-END> NOV-28-1997
<PERIOD-END> NOV-28-1997
<PERIOD-TYPE> YEAR
<CASH> 403
<SECURITIES> 3457
<RECEIVABLES> 3211
<ALLOWANCES> 478
<INVENTORY> 4283
<CURRENT-ASSETS> 12278
<PP&E> 1911
<DEPRECIATION> 1618
<TOTAL-ASSETS> 12571
<CURRENT-LIABILITIES> 1778
<BONDS> 0
<COMMON> 1533
0
0
<OTHER-SE> 9151
<TOTAL-LIABILITY-AND-EQUITY> 12571
<SALES> 14826
<TOTAL-REVENUES> 14826
<CGS> 10266 28
<TOTAL-COSTS> 14447
<OTHER-EXPENSES> (372)
<LOSS-PROVISION> 185
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> 751
<INCOME-TAX> 307
<INCOME-CONTINUING> 444
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 444
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
