<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
- ---
Act of 1934
For the quarterly period ended April 30, 1996.
or
___ Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to ________________________
Commission File number 0-24026
MAXWELL SHOE COMPANY INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2599205
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification number)
101 Sprague Street, Box 37, Readville, (Boston),MA 02137-0037
(Address of principal executive offices) (Zip code)
(617) 364-5090
(Registrant's telephone number, including area code)
None
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
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______
-----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Shares of common stock outstanding at July 23, 1996:
Class A 2,525,000
Class B 5,063,317
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------
MAXWELL SHOE COMPANY INC.
BALANCE SHEETS
(Unaudited -- In Thousands)
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
------------- --------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................................ $ 10,405 $ 6,685
Accounts receivable, net................................................. 17,314 17,834
Inventory, net........................................................... 12,683 12,394
Prepaid expenses......................................................... 640 833
Deferred tax asset....................................................... 885 970
-------------- --------------
Total current assets........................................................ 41,927 38,716
Property and equipment, net................................................. 1,107 1,180
Other assets................................................................ 12 12
-------------- --------------
$ 43,046 $ 39,908
============== ==============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................................... $ 1,008 $ 928
Accrued expenses......................................................... 2,671 2,509
Current portion of capital lease obligation.............................. 171 182
-------------- --------------
Total current liabilities................................................... 3,850 3,619
Capital lease obligation.................................................... 531 605
Stockholders' equity:
Preferred stock, par value $.01, 1,000 shares authorized,
none outstanding......................................................... 0 0
Class A common stock, par value $.01, 20,000 shares authorized, 2,525
shares outstanding...................................................... 25 25
Class B common stock, par value $.01, 10,000 shares authorized, 5,063
shares outstanding....................................................... 51 51
Additional paid-in capital............................................... 27,312 27,312
Retained earnings........................................................ 11,277 8,296
-------------- --------------
Total stockholders' equity.................................................. 38,665 35,684
-------------- --------------
$ 43,046 $ 39,908
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
MAXWELL SHOE COMPANY INC.
STATEMENTS OF INCOME
(Unaudited -- In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30 April 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales.................................................. $ 26,774 $ 24,188 $ 50,479 $ 46,013
Cost of sales.............................................. 20,857 17,717 38,742 33,568
---------- ---------- ---------- ---------
Gross profit............................................... 5,917 6,471 11,737 12,445
Operating expenses:
Selling................................................... 1,305 1,047 2,453 2,208
General and administrative................................ 2,290 2,162 4,731 4,246
---------- ---------- ---------- ---------
3,595 3,209 7,184 6,454
---------- ---------- ---------- ---------
Operating income........................................... 2,322 3,262 4,553 5,991
Other expenses (income)
Interest-bank borrowings.................................. 10 88 20 152
Other, net................................................ (155) 18 (275) 54
---------- ---------- ---------- ---------
(145) 106 (255) 206
---------- ---------- ---------- ---------
Income before income taxes................................. 2,467 3,156 4,808 5,785
Income taxes............................................... 937 1,262 1,827 2,314
---------- ---------- ---------- ---------
Net income................................................. $ 1,530 $ 1,894 $ 2,981 $ 3,471
========== ========== =========== =========
Net income per share....................................... $ 0.19 $ 0.23 $ 0.36 $ 0.42
========== ========== ========== =========
Shares used to compute net income per share................ 8,221 8,365 8,221 8,356
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
MAXWELL SHOE COMPANY INC.
STATEMENTS OF CASH FLOWS
(Unaudited -- In Thousands)
<TABLE>
<CAPTION>
Six Months
Ended
April 30,
-----------------------------
1996 1995
-------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................................................ $ 2,981 $ 3,471
Adjustments to reconcile net income to net cash provided (used) by operating activities
Depreciation and amortization........................................................... 118 100
Deferred income taxes................................................................... 85 (157)
Doubtful accounts provision............................................................. (61) 29
Changes in operating assets and liabilities:
Accounts receivable................................................................... 581 (1,119)
Inventory............................................................................. (289) 815
Prepaid expenses...................................................................... 193 (1,049)
Other assets.......................................................................... 0 (282)
Accounts payable...................................................................... 80 (1,675)
Accrued expenses...................................................................... 162 (1,528)
-------------- -------------
Net cash provided (used) by operating activities.......................................... 3,850 (1,395)
INVESTING ACTIVITIES
Purchases of property and equipment....................................................... (45) (37)
-------------- -------------
Net cash used by investing activities..................................................... (45) (37)
FINANCING ACTIVITIES
Net proceeds on bank borrowings........................................................... 0 426
Proceeds from capital lease............................................................... 0 717
Payments on capital lease obligations..................................................... (85) (77)
-------------- -------------
Net cash provided (used) by financing activities.......................................... (85) 1,066
-------------- -------------
Net increase (decrease) in cash and cash equivalents...................................... 3,720 (366)
Cash and cash equivalents at beginning of year............................................ 6,685 618
-------------- -------------
Cash and cash equivalents at end of quarter............................................... $ 10,405 $ 252
============== =============
Interest paid............................................................................. $ 20 $ 152
============== =============
Income taxes paid......................................................................... $ 1,651 $ 3,961
============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
MAXWELL SHOE COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
APRIL 30, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of Maxwell Shoe Company
Inc. (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments, consisting only
of normal recurring adjustments, considered necessary for a fair
presentation have been included. The results of the interim periods
presented herein are not necessarily indicative of the results to be
expected for any other interim period or the full year. These financial
statements should be read in conjunction with the financial statements and
notes thereto for the year ended October 31, 1995 included in the Company's
10-K Annual Report for the fiscal year ended October 31, 1995.
2. NET INCOME PER SHARE
Net income per share is computed based on the weighted average number of
common shares outstanding during the period adjusted for incremental shares
assumed issued for dilutive common stock equivalents in the form of stock
options.
3. STOCK BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25), in accounting for
its stock-based compensation plans, rather than the alternative fair value
accounting method provided for under Financial Accounting Standards Board
Statement No. 123, "Accounting for Stock-Based Compensation." Under APB 25,
when the exercise price of options granted under these plans equals the
market price of the underlying stock on the date of the grant, no
compensation expense is required.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following tables set forth net sales by product line or category of
business:
<TABLE>
<CAPTION>
Three Months Ended
April 30,
---------------------------------------------
(in millions)
1996 1995
---- ----
<S> <C> <C> <C> <C>
Mootsies Tootsies $ 15.4 57.6% $ 15.8 65.3%
Jones New York Footwear 6.5 24.2 4.7 19.2
Private Label Footwear 2.7 10.0 2.6 10.7
Closeout 2.2 8.2 1.1 4.8
----------- --------- ----------- -----------
$ 26.8 100.0% $ 24.2 100.0%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
April 30,
---------------------------------------------
(in millions)
1996 1995
---- ----
<S> <C> <C> <C> <C>
Mootsies Tootsies $ 28.8 57.0% $ 30.0 65.2%
Jones New York Footwear 11.2 22.3 7.8 17.0
Private Label Footwear 7.2 14.2 5.3 11.6
Closeout 3.3 6.5 2.9 6.2
----------- --------- ----------- -----------
$ 50.5 100.0% $ 46.0 100.0%
</TABLE>
Three Months Ended April 30, 1996 Compared to Three Months Ended April 30, 1995
Net sales were $26.8 million for the three months ended April 30, 1996
compared to $24.2 million for the same period in the prior year, an increase of
10.7%. The net sales increase was due to a 39.0% increase in the sales of Jones
New York footwear, offset by a decrease of 2.4% in net sales generated by
Mootsies Tootsies, and a 3.4% increase in sales of private label footwear over
the same period of the prior year.
The gross profit margin in the second quarter of fiscal 1996 was $5.9
million as compared to $6.5 million in the second quarter of fiscal 1995 or
22.1% of net sales as compared to 26.8% for the same quarter in 1995. The
decrease in gross margins for the second quarter of fiscal 1996 was largely due
to the continued soft retail market for dress type footwear.
Selling, general and administrative expenses increased $386,000 during the
second quarter of fiscal 1996. This increase was due to additional staffing
expenses added in the later part of fiscal 1995 which are included in the
second fiscal quarter of 1996, and increased advertising and promotional selling
expenses.
Other income was $155,000 for the three months ended April 30, 1996
compared to other expenses of $18,000 for the same period in the prior year.
This balance comprises principally gains ands losses from forward exchange
contracts entered into in anticipation of future purchases of inventory
denominated in foreign currencies and interest income from the investment of
cash equivalents.
6
<PAGE>
Interest expense was $10,000 for the three months ended April 30, 1996
compared to $88,000 for the three months ended April 30, 1995. Interest expense
in the second quarter of fiscal 1996 related only to capital leases, as the
Company incurred no short term borrowing in the second quarter of fiscal 1996.
The Company has an effective income tax rate of 38% for fiscal 1996 as
compared to 40% in fiscal 1995. The decrease is attributable to the prior
year's actual tax liability being less than amounts estimated for financial
reporting purposes.
Six Months Ended April 30, 1996 Compared to Six Months Ended April 30, 1995
Net sales were $50.5 million for the six months ended April 30, 1996
compared to $46.0 million for the same period in the prior year, an increase of
9.7%. The net sales increase was due to an increase of 44.3% in net sales of
Jones New York footwear, and a 35.1% increase in sales of private label footwear
over the same period of the prior year, offset by a 4.2 % decrease in the sales
of Mootsies Tootsies.
The gross profit margin decreased from $12.4 million to $11.7 million in
the first six months of fiscal 1996 or 23.3 % as compared to 27.0% for the same
period in 1995. As a percentage of net sales the decrease was due to an
increase of private label footwear and continued soft retail market for dress
type footwear.
Selling, general and administrative expenses were $7.2 million for the six
months ended April 30, 1996 compared to $6.5 million for the same period in the
prior year. The increase was due to additional staffing expenses added in the
later part of fiscal 1995 which are now part of the first six months of 1996,
and increased advertising and promotional expenses.
Other income was $275,000 for the six months ended April 30, 1996 compared
to other expense of $54,000 for the same period in the prior year. This balance
comprises principally gains and losses from forward exchange contracts entered
into in anticipation of future purchases of inventory denominated in foreign
currencies and interest income from the investment of cash equivalents.
Interest expense was $20,000 for the six months ended April 30, 1996
compared to $152,000 for the six months ended April 30, 1995. Interest expense
for the six months ended April 30, 1996, related only to capital leases, as the
Company incurred no short term borrowing in the first half of fiscal 1996.
At April 30, 1996 and 1995, the Company had unfilled customer orders
(backlog) of $40.9 million and $46.0 million respectively. The Company believes
this decrease is due to the recent tendency of its retail customers to order
footwear later in the selling season than has been the case previously. The
backlog at a particular time is affected by a number of factors, including
seasonality and the scheduling of manufacturing and shipment of products.
Orders generally may be canceled by customers without financial penalty.
Accordingly, a comparison of backlog from period to period is not necessarily
meaningful and may not be indicative of eventual actual shipments to customers.
The Company expects that substantially all of its backlog at April 30, 1996 will
be shipped within six months from such date.
Liquidity and Capital Resources
The Company has relied primarily upon internally generated cash flows from
operations and borrowings under its revolving credit facility to finance its
operations and expansion. Net cash provided by operating activities totaled
approximately $3.9 million in the six-month period ended April 30, 1996, as
compared to net cash used of $1.4 million for the same period in 1995. Despite
a lower net income in 1996, the net cash provided by operating activities
increased as a result of reduced working capital needs. At April 30, 1996,
working capital was $38.1 million as compared to $35.1 million at October 31,
1995. Working capital may vary from time to time as a result of seasonal
requirements, the timing of early factory shipments and the Company's in-stock
position, which requires increased inventories, and the timing of accounts
receivable collections.
7
<PAGE>
The Company currently has a $25.0 million revolving credit facility,
renewable under certain conditions annually, which is secured by substantially
all of the assets of the Company. A portion of the revolving credit facility can
be utilized to issue letters of credit to guarantee payment of the Company's
purchases of footwear manufactured overseas. Amounts available under the
revolving credit facility are based on eligible accounts receivable, inventory,
and a portion of the open letters of credit. As of April 30, 1996, total
outstanding letters of credit were $13.4 million and $11.6 million was available
for future borrowings.
Capital expenditures of warehouse and office equipment were minimal for the
six months ended April 30, 1996. The Company utilizes operating leases for
substantially all of its management information systems and related equipment.
The Company has entered into forward exchange contracts in anticipation of
future purchases of inventory denominated in foreign currency, principally the
Italian lira. At April 30, 1996, forward exchange contracts totaling $2.0
million were outstanding with settlement dates ranging from May 1, 1996 through
July 31, 1996. The Company expects that future inventory purchases will require
sufficient foreign currency to meet these commitments.
The Company anticipates that it will be able to satisfy its cash
requirements for the remainder of fiscal 1996, including its expected growth,
primarily with cash flow from operations, supplemented by borrowings under its
revolving credit facility.
8
<PAGE>
PART II. OTHER INFORMATION
ITEM 1: Legal Proceedings.
----------------------
None.
ITEM 2: Changes in Securities.
----------------------
None.
ITEM 3: Defaults Upon Senior Securities.
-------------------------------
None.
ITEM 4: Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
(a) The Company's Annual Meeting of Stockholders was held on April 4,
1996
(b) The following directors were elected to serve until the 1997
Annual Meeting of Stockholders or until their successors have
been duly elected and qualified. Of the 2,525,000 shares (1 vote
per share) of Class A common stock and the 5,063,317 shares (10
votes per share) of Class B common stock outstanding, the
directors were elected by the following votes:
<TABLE>
<CAPTION>
Name Number of Votes Received
---- ------------------------
For Withheld Authority
--- ------------------
<S> <C> <C>
Maxwell V. Blum 52,834,253 80,000
Mark J. Cocozza 52,834,253 80,000
Betty Ann Blum 52,831,253 83,000
Marjorie W. Blum 52,831,253 83,000
Stephen A. Fine 52,834,253 79,000
Jonathan K. Layne 52,834,253 79,000
Malcolm L. Sherman 52,832,853 81,400
</TABLE>
ITEM 5: Other Information.
-----------------
On June 4, 1996 the Company issued a press release, a copy of which is
filed as Exhibit 99.
ITEM 6: Exhibits and Reports on From 8-K:
---------------------------------
(a) Reports on Form 8-K
There were no reports filed on Form 8-K during the three
months ended April 30, 1996.
(b) Exhibits:
99-- Press release issued by the Company June 4, 1996
9
<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.
Maxwell Shoe Company Inc.
Date: July 23, 1996 By:/s/ Richard J. Bakos
--------------------
Richard J. Bakos
Vice President Finance and
Chief Financial Officer
10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION PAGE
<S> <C> <C>
27 Financial Data Schedule
99 Press release issued by the Company
on June 4, 1996.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> APR-30-1996
<CASH> 10,405
<SECURITIES> 0
<RECEIVABLES> 18,030
<ALLOWANCES> 716
<INVENTORY> 12,683
<CURRENT-ASSETS> 41,927
<PP&E> 2,429
<DEPRECIATION> 1,322
<TOTAL-ASSETS> 43,046
<CURRENT-LIABILITIES> 3,850
<BONDS> 0
0
0
<COMMON> 76
<OTHER-SE> 38,589
<TOTAL-LIABILITY-AND-EQUITY> 43,046
<SALES> 50,479
<TOTAL-REVENUES> 50,479
<CGS> 38,742
<TOTAL-COSTS> 38,742
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20
<INCOME-PRETAX> 4,808
<INCOME-TAX> 1,827
<INCOME-CONTINUING> 2,981
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,981
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
<PAGE>
Press Release
For More Information, Call:
Richard J. Bakos; Chief Financial Officer For Immediate Release
Phone: (617) 333-4007
MAXWELL SHOE COMPANY INC.
ANNOUNCES AGREEMENT TO ACQUIRE
SAM & LIBBY TRADEMARKS AND TRADENAMES
Readville, MA--June 4, 1996-- MAXWELL SHOE COMPANY INC. (NASDAQ: MAXS) and SAM
& LIBBY, INC. (NASDAQ: SAML) today announced an agreement has been reached for
Maxwell Shoe to acquire from Sam & Libby, Inc. all worldwide rights to Sam &
Libby's trademarks and tradenames for $5.5 million cash.
Maxwell V. Blum, Chairman of the Board and Chief Executive Officer of Maxwell
Shoe Company stated: "We are enthusiastic about the acquisition of the Sam &
Libby brand names which have, through significant advertising over a period of
several years, developed strong recognition by consumers. We intend to design,
develop and market the Sam & Libby brands through department and specialty
stores commencing with the Spring 1997 line and will position the footwear to
sell at $30 to $45 retail price points."
Mark J. Cocozza, President and Chief Operating Officer of Maxwell Shoe Company
said: "This acquisition will allow us to achieve our strategic objective of
increasing our share of the casual and dress footwear market. Sam & Libby is a
well recognized women's and children's brand which will compliment our other
branded footwear lines which include Mootsies Tootsies, Mootsies Kids, Jones New
York and Jones New York Sport."
<PAGE>
The binding letter of intent reached today between Maxwell Shoe Company and Sam
& Libby, Inc. is subject to a definitive agreement and Sam & Libby, Inc.
stockholder approval. Stockholders holding in excess of 50% of Sam & Libby
Inc.'s common stock have agreed to vote in favor of the proposed transaction.
Maxwell Shoe Company announced that it expects the acquisition to be completed
during the third or fourth quarter of fiscal 1996. Sam & Libby, Inc. will
market and sell existing inventory and will ship Fall 1996 orders under the Sam
& Libby name through October 1996.
Sam Edelman, Chairman of the Board and Chief Executive Officer of Sam & Libby,
Inc. stated " I am excited about the development of the Sam & Libby name through
Maxwell Shoe Company. Upon completion of the transaction, Sam & Libby, Inc.
will evaluate plans for the remainder of the business."
________________
Maxwell Shoe Company Inc., designs, develops and markets moderately priced
casual and dress footwear for women under the Mootsies Tootsies brand name as
well as for children under the Mootsies Kids brand name. The Company also
designs, develops and markets "better" and "upper moderate" women's casual and
dress footwear under the Jones New York and Jones New York Sport brand names.
