<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 January 31, 1997.
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 02137-0037
Readville, (Boston),MA (Zip code)
(Address of principal
executive offices)
(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 March 14, 1997:
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>
January 31, October 31,
1997 1996
---------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents............... $ 1,476 $10,393
Accounts receivable, net................ 26,048 16,853
Inventory, net.......................... 19,482 12,175
Prepaid expenses........................ 221 127
Deferred tax asset...................... 950 730
------- -------
Total current assets...................... 48,177 40,278
Property and equipment, net............... 1,120 1,039
Trademarks................................ 5,408 5,500
Other assets.............................. 12 12
------- -------
$54,717 $46,829
======= =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................ $ 2,902 $ 880
Accrued expenses........................ 7,978 3,733
Current portion of capital lease
obligation............................. 127 142
------- -------
Total current liabilities................. 11,007 4,755
Capital lease obligation.................. 443 469
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....................... 15,879 14,217
------- -------
Total stockholders' equity................ 43,267 41,605
------- -------
$54,717 $46,829
======= =======
</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
January 31,
1997 1996
------- -------
<S> <C> <C>
Net sales................................ $28,764 $23,705
Cost of sales............................ 21,503 17,884
------- -------
Gross profit............................. 7,261 5,821
Operating expenses:
Selling................................ 1,770 1,145
General and administrative............. 2,793 2,444
------- -------
4,563 3,589
------- -------
Operating income......................... 2,698 2,232
Other expenses (income)
Interest............................... 7 10
Amortization of Trademarks............. 91 -
Other, net............................. (80) (120)
------- -------
18 (110)
------- -------
Income before income taxes............... 2,680 2,342
Income taxes............................. 1,018 890
------- -------
Net income............................... $ 1,662 $ 1,452
======= =======
Net income per share..................... $0.20 $0.18
======= =======
Shares used to compute
net income per share................... 8,358 8,219
</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>
Three Months
Ended
January 31,
-------------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................... $ 1,662 $ 1,452
Adjustments to reconcile net income to
net cash provided (used) by
operating activities
Depreciation and amortization.......... 157 58
Deferred income taxes.................. (220) (16)
Doubtful accounts provision............ 30 53
Changes in operating assets and
liabilities:
Accounts receivable.................... (9,225) (1,441)
Inventory.............................. (7,307) (5,567)
Prepaid expenses....................... (94) 521
Accounts payable....................... 2,022 560
Accrued income taxes................... 1,514 287
Accrued expenses....................... 2,731 690
-------- --------
Net cash used by operating activities.... (8,730) (3,403)
INVESTING ACTIVITIES
Purchases of property and equipment...... (146) (28)
-------- --------
Net cash used by investing activities.... (146) (28)
FINANCING ACTIVITIES
Payments on capital lease obligations.... (41) (42)
-------- --------
Net cash used by financing activities.... (41) (42)
Net decrease in cash and
cash equivalents....................... (8,917) (3,473)
Cash and cash equivalents
at beginning of year................... 10,393 6,685
-------- --------
Cash and cash equivalents
at end of quarter...................... $ 1,476 $ 3,212
======== ========
Interest paid.......................... $ 7 $ 10
======== ========
Income taxes paid...................... $ 107 $ 1
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
MAXWELL SHOE COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
January 31, 1997
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, 1996
included in the Company's 10-K Annual Report for the fiscal year ended
October 31, 1996.
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 recorded.
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
January 31,
---------------------------
(in millions)
1997 1996
<S> <C> <C> <C> <C>
Mootsies Tootsies $15.4 53.4% $13.3 56.1%
Jones New York Footwear 7.9 27.4 4.8 20.3
Sam & Libby 2.3 8.0 - -
Private Label Footwear 2.6 9.0 4.5 19.0
Closeout .6 2.2 1.1 4.6
----- ----- ----- -----
$28.8 100.0% $23.7 100.0%
</TABLE>
Three Months Ended January 31, 1997 Compared to Three Months Ended
January 31, 1996
Net sales were $28.8 million for the three months ended January 31, 1997
compared to $23.7 million for the same period in the prior year, an increase of
21.3%. The net sales increase was due to a 64.5% increase in net sales of Jones
New York footwear, and a 15.1% increase in net sales of Mootsies Tootsies
footwear over the same period of the prior year, offset by a decrease of 42.4%
in net sales generated by private label footwear.
Gross profits in the first quarter of fiscal 1997 were $7.3 million as
compared to $5.8 million in the first quarter of fiscal 1996, or 25.2% of net
sales as compared to 24.6% for the same quarter in 1996. The increase in gross
margins for the first quarter of fiscal 1997 was due to improved gross margins
in the branded lines of footwear and a decrease in net sales of private label
sales which carry a lower gross margin.
Selling, general and administrative expenses increased $974,000 during the
first quarter of fiscal 1997 due to an increase in aggregate compensation and
corresponding fringe benefits added as a result of new personnel associated with
launching the Company's Sam & Libby brand and administrative charges which are
volume related.
Other expense was $18,000 for the three months ended January 31, 1997
compared to other income of $110,000 for the same period in the prior year.
During the first fiscal quarter of 1997, amortization expense relating to the
acquisition of the Sam & Libby trademark was offset by interest income. There
were no lira contracts during this period. In 1996, the account comprised
principally net gains 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. Included in other
expense was interest expense of $7,000 for the three months ended January 31,
1997 compared to $10,000 for the three months ended January 31, 1996. Interest
expense in the first quarters of fiscal 1997 and 1996 was incurred only for
capital leases, as the Company incurred no short term borrowing in either of the
first quarters.
The Company has accrued an effective income tax rate of 38% for the relevant
periods in fiscal years 1997 and 1996.
At January 31, 1997 and 1996, the Company had unfilled customer orders
(backlog) of $47.1 million and $31.4 million respectively, an increase of 50.1%.
The increase was in all branded footwear and the new Sam &
6
<PAGE>
Libby footwear lines. 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 January 31, 1997 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 used by operating activities totaled
approximately $8.7 million in the three month period ended January 31, 1997, as
compared to net cash used of $3.4 million for the same period in 1996. Working
capital was $37.2 million at January 31, 1997 as compared to $35.5 million at
October 31, 1996. 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.
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 January 31, 1997, total
outstanding letters of credit were $9.4 million and $15.6 million was available
for future borrowings.
Capital expenditures of warehouse and office equipment were minimal for the
three months ended January 31, 1997. The Company utilizes operating leases for
substantially all of its management information systems and related equipment.
The Company anticipates that it will be able to satisfy its cash requirements
for the remainder of fiscal 1997, including its expected growth, primarily with
cash flow from operations, supplemented by borrowings under its revolving credit
facility.
Certain statements contained in this Form 10-Q regard matters that are not
historical facts and are forward looking statements (as such term is defined in
the rules promulgated pursuant to the Securities Act of 1933, as amended (the
"Securities Act")). Because such forward looking statements include risks and
uncertainties, actual results may differ materially from those expressed in or
implied by such forward looking statements. Factors that could cause actual
results to differ materially include, but are not limited to; changing consumer
preference, competition from other footwear manufacturers, loss of key
employees, general economic conditions and adverse factors impacting the retail
footwear industry, and the inability by the Company to source its products due
to political or economic factors or the imposition of trade or duty
restrictions. The Company undertakes no obligation to release publicly the
results of any revisions to these forward looking statements that may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
7
<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.
---------------------------------------------------
None.
ITEM 5: Other Information.
-----------------
None.
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 January 31, 1997.
(b) Exhibits:
99 -- Press release issued by the Company on January 15,
1997.
8
<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: March 14, 1997 By:/s/ Richard J. Bakos
--------------------------------
Richard J. Bakos
Vice President Finance and
Chief Financial Officer
9
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION PAGE
99 Press Release Issued by the Company 11
January 15, 1997
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 1,476
<SECURITIES> 0
<RECEIVABLES> 26,808
<ALLOWANCES> 760
<INVENTORY> 19,482
<CURRENT-ASSETS> 48,268
<PP&E> 2,630
<DEPRECIATION> 1,510
<TOTAL-ASSETS> 54,808
<CURRENT-LIABILITIES> 11,099
<BONDS> 0
0
0
<COMMON> 76
<OTHER-SE> 43,191
<TOTAL-LIABILITY-AND-EQUITY> 54,808
<SALES> 28,764
<TOTAL-REVENUES> 28,764
<CGS> 21,503
<TOTAL-COSTS> 21,503
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 31
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 2,680
<INCOME-TAX> 1,018
<INCOME-CONTINUING> 1,662
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,662
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
<PAGE>
Press Release
For more information call:
Richard J. Bakos; Chief Financial Officer For Immediate Release
Phone: (617) 333-4007 January 15, 1997
MAXWELL SHOE COMPANY INC. ANNOUNCES SAM & LIBBY
LICENSE AGREEMENT WITH INTER-PACIFIC CORPORATION
Hyde Park, Mass.- January 15, 1997- MAXWELL SHOE COMPANY INC. (NASDAQ:MAXS)
announced that it has entered into a license agreement with Inter-Pacific
Corporation, a 40 year old California based seller and distributor of men's,
women's and children's footwear, for the licensing of the Sam & Libby trademark
for slippers and E.V.A. sandals. Maxwell Shoe Company purchased all worldwide
rights to the Sam & Libby trademarks and tradenames on August 20, 1996.
Maxwell V. Blum, Chairman of the Board and Chief Executive Officer of Maxwell
Shoe Company stated, " We are enthusiastic about the agreement with Inter-
Pacific which will assist us in further developing the Sam & Libby brand name."
_______________________
Maxwell Shoe Company Inc., designs, develops and markets casual and dress
footwear for women and children. The company's brands include Mootsies Tootsies,
Jones New York Sport, Jones New York dress footwear and Sam & Libby. The
Company plans to begin shipping the recently acquired Sam & Libby brands for
Spring 1997.
