-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GUlGjsZwNtyVgn7HEi8uDPR2VNg0TFZKziViW51cAwu/+LuHrjK7qG7mFXrVI4Sq sQhaPxUB1wIh2sGq7eZKjg== 0000077326-99-000014.txt : 19991018 0000077326-99-000014.hdr.sgml : 19991018 ACCESSION NUMBER: 0000077326-99-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990827 FILED AS OF DATE: 19991008 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENOBSCOT SHOE CO CENTRAL INDEX KEY: 0000077326 STANDARD INDUSTRIAL CLASSIFICATION: FOOTWEAR, (NO RUBBER) [3140] IRS NUMBER: 010139580 STATE OF INCORPORATION: ME FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05548 FILM NUMBER: 99725412 BUSINESS ADDRESS: STREET 1: 450 NORTH MAIN ST CITY: OLD TOWN STATE: ME ZIP: 04468 BUSINESS PHONE: 2078274431 MAIL ADDRESS: STREET 1: PENOBSCOT SHOE CO STREET 2: P O BOX 545 CITY: OLD TOWN STATE: ME ZIP: 04468 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended August 27, 1999 Commission File No. 1-5548 Penobscot Shoe Company (Exact name of registrant as specified in its charter) Maine (State or other jurisdiction of incorporation or organization) 01-0139580 (IRS Employer identification no.) 450 North Main Street, Old Town Maine (Address of principal executive offices) 04468 (Zip code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Registrant's telephone number, including area code: (207) 827-4431 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ Common stock of 1,388,291 shares, $1 par value, was outstanding at August 27, 1999. PENOBSCOT SHOE COMPANY CONDENSED BALANCE SHEET (In thousands)
August 27, 1999 November 27, 1998 (Unaudited) (Note (a)) CURRENT ASSETS: Cash & Cash Equivalents $ 482 $ 454 Marketable Securities 3,860 3,757 Accounts receivable 3,950 3,825 Inventories (Note 2) 7,142 6,568 Other current assets 416 575 _______ _______ TOTAL CURRENT ASSETS $15,851 $15,179 PROPERTY AND EQUIPMENT, AT COST: Buildings $ 1,443 $ 1,443 All Other 450 496 Less accumulated depreciation and amortization 1,742 1,725 _______ _______ NET PROPERTY AND EQUIPMENT $ 151 $ 214 _______ _______ TOTAL ASSETS $16,002 $15,393 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Accounts payable $ 1,400 $ 1,088 Notes payable 365 1,475 Other current liabilities 842 802 _______ _______ TOTAL CURRENT LIABILITIES $ 2,607 $ 3,365 DEFERRED INCOME TAXES $ 168 $ 168 SHAREHOLDERS' EQUITY: Common stock, $1 par value: authorized 2,000,000 shares: issued 1,533,042 $ 1,533 $ 1,533 Capital in excess of par value 1,109 1,109 Retained earnings 11,004 9,602 Add net unrealized gain on available-for-sale securities 389 455 Less treasury stock at cost 144,752 and 154,752 shares 808 839 NET SHAREHOLDERS' EQUITY _______ _______ (Note 3) $13,227 $11,860 TOTAL LIABILITIES AND SHARE- _______ _______ HOLDERS' EQUITY $16,002 $15,393 ======= ======= Note: (a) The balance sheet at November 27, 1998, has been derived from the audited financial statements at that date. See notes to the condensed financial statements.
PENOBSCOT SHOE COMPANY STATEMENT OF INCOME (In thousands, except per share amounts) (Unaudited)
For the For the Third Quarter Ended Nine Months Ended August 27 August 28 August 27 August 28 1999 1998 1999 1998 Net Sales $5,835 $5,637 $16,709 $14,657 Cost and operating expenses: Cost of sales 3,670 3,782 10,448 9,888 Selling and administrative expenses 1,186 1,226 3,924 3,606 _______ _______ _______ _______ Operating income 978 629 2,337 1,163 Other income 148 216 350 481 _______ _______ _______ _______ Income before income taxes 1,126 845 2,687 1,644 Income taxes 452 339 1,077 658 _______ _______ _______ _______ Net income $ 673 $ 506 $1,609 $ 986 ======= ======= ======= ======= Earnings Per Share: Basic $0.49 $0.37 $1.16 $0.72 Diluted $0.48 $0.36 $1.16 $0.71 Cash dividends per share 0.05 0.05 0.15 0.15 Average number of common shares outstanding Basic 1,388,291 1,377,889 1,383,676 1,376,255 Diluted 1,398,781 1,391,441 1,393,290 1,387,886 See notes to the condensed financial statements.
PENOBSCOT SHOE COMPANY STATEMENT OF CASH FLOWS For Nine Months Ended August 27, 1999 and August 28, 1998 (In thousands)
1999 1998 Cash flows from operating activities: Net cash provided by operating activities $ 160 $ 554 Cash flows from investing activities: Proceeds from sale of assets 0 0 Capital expenditures 46 (26) _______ _______ Net cash (used) by investing activities 46 (26) Cash flows from financing activities: Dividends paid (208) (206) (Purchase)/Sale of treasury stock 31 (39) Net cash (used) by _______ _______ financing activities (177) (245) Net increase in _______ _______ cash and cash equivalents 28 283 Cash and cash equivalent at beginning of period 454 403 Cash and cash equivalent at _______ _______ end of period $ 482 $ 686 ======= ======= Supplemental Disclosure of Cash Flow Information Cash paid during the period for: Interest $ 19 $ 23 Income taxes 852 538
PENOBSCOT SHOE COMPANY NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) 1. CONDENSED FINANCIAL STATEMENTS The condensed balance sheet as of August 27, 1999, the statements of income for the third quarter ended August 27, 1999 and August 28, 1998, and the condensed statements of cash flows for the nine-month periods then ended have been prepared by the Company, without audit. In the opinion of management, all necessary adjustments, which include normal recurring adjustments, have been made to present fairly the financial position, results of operations, and cash flows at August 27, 1999 and for the other periods presented. The results of operations for the period ended August 27, 1999 are not necessarily indicative of operating results for the full year. 2. INVENTORIES Inventories are summarized as follows (in thousands):
8/27/99 11/27/98 8/28/98 FIFO Cost: finished shoes $7,123 $6,618 $5,630 raw materials 5 11 15 _______ _______ _______ $7,128 $6,629 $5,645 Excess of FIFO cost over LIFO inventory value 15 (61) (112) _______ _______ _______ $7,143 $6,568 $5,533 ======= ======= =======
The Company uses the LIFO method because it more realistically reflects operating results by charging current costs against current revenues. 3. SHAREHOLDERS' EQUITY During the nine months ended August 27, 1999, shareholders' equity changed due to the net income of $1,609,000, dividends declared of $208,000, a sale of treasury stock of $31,000 and a $66,000 decrease in the net unrealized gain on available-for-sale securities held by the Company. 4. EARNINGS PER SHARE Basic earnings per share are calculated based on the weighted average number of shares outstanding. Diluted earnings per share are calculated based on the same number of shares plus additional shares representing stock distributable under stock-based plans computed using the treasury stock method. PENOBSCOT SHOE COMPANY MANAGEMENT DISCUSSION AND ANALYSIS OF THE SUMMARY OF OPERATIONS 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 Litigation Reform 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-Q for the quarter ended August 27, 1999. Liquidity and Capital Resources: At August 27, 1999, Penobscot Shoe Company had working capital of approximately $13,244,000 versus approximately $11,815,000 at November 27, 1998, an increase of $1,429,000. The ratio of current assets to current liabilities at August 27, 1999, was 6.1 to 1, compared to 4.5 to 1, at November 27, 1998. The statement of cash flows for the nine months ended August 27, 1999, shows an increase of $28,000 in cash and cash equivalents since November 27, 1998. The Company's operations provided $160,000 since November 27, 1998, including net income of $1,609,000 and ordinary fluctuations in various current asset and liability accounts. The fluctuations included increases in accounts payable, inventory and accounts receivable, all mainly as a result of timing. The Company's quarterly dividend amounted to a use of $208,000 during the nine month period. The Company received $31,000 in a sale of treasury stock. Management believes that Penobscot Shoe Company remains financially well structured to consider a variety of financing options should the need arise and will make choices depending on economic conditions at the time. Options available include conversion of marketable securities held by the Company into cash and cash equivalents. The Company also has an established line of credit with a major bank available for direct borrowing at the prime rate minus 1.5% should the need arise. Year 2000 Disclosure: The Company continues to assess and work to mitigate its Year 2000 exposure as it pertains to management and operational information systems, key outside vendor and key customer Year 2000 compliance programs. The assessment of all internal management and operational information systems is being supervised and conducted by a team led by the Executive Vice President of Finance and Administration that includes the Company's in-house information technology staff. The assessment of all critical internal systems is complete and all necessary modifications are now done. Testing is underway to determine if any further modifications are necessary in this area. Testing will continue throughout the year and into early 2000 as we watch for any unforseen problems that may arise. At this time, the Company is unable to determine the actual cost of correcting any deficiencies found during the assessment. Based on the fact that no significant unanticipated remedial costs have been identified to date, the Company does not anticipate that the ultimate costs of any additional required remediation will be significant. Based on the Company's efforts to date, the Company presently believes that the Year 2000 Issue will not pose significant operational problems for its computer systems. The software used by the Company in its operations was developed over time by in-house programmers. Unlike many other software programs that used a two digit date and have led to the problems now being addressed worldwide, the Company's system was based on the use of a one digit date. As a result, many of the issues being faced for the Year 2000 problems were faced previosly in the period of 1989-1990. This experience allowed the Company to utilize in-house staff to make the modifications needed to be Year 2000 compliant, and to make those modifications at a relatively modest cost. If the Company failed to make the necessary and proper modifications, the Year 2000 Issue could result in a system failure or miscalculations causing disruptions to operations, including, among other things, a temporary inability to correctly process some transactions, send invoices, or engage in similar normal business activities. The Company's ongoing assessment of Year 2000 risks relating to non-information technology components such as internal telecommunications, heating and ventilation equipment has not revealed any problem. The Company continues to communicate with significant suppliers, shippers, telecommunications companies and customers to determine the extent to which the Company may be vulnerable to a failure by any of these third parties to remediate their own Year 2000 issues. The Company is dependent on many outside resources for both products and services. Regardless of the Company's efforts to verify Year 2000 compliance with domestic and non-domestic third parties involved in sourcing, manufacturing, shipping and ordering, there can be no assurance that one or more of such third parties will not encounter a Year 2000 problem that would materially and aversely impact the Company's results of operations. The failure of some of these third parties to be Year 2000 compliant could have a material adverse impact on the Company's ability to deliver product. The Company is in the process of identifying contingency arrangements to minimize the adverse impact of third party Year 2000 problems that could interfere with the Company's operations. Results of Operations: Net sales for the third quarter ended August 27, 1999, were $5,835,000, up 3% from $5,637,000 in the same quarter last year. Net income for the current quarter was $673,000, or $.48 per share, compared to $506,000, or $.37 per share, in the third quarter last year. Gains from the sales of securities contributed approximately $.05 per share to third quarter earnings compared to approximately $.08 per share a year ago. For the nine months year-to-date, net sales were $16,709,000, up 14% from $14,657,000 a year ago. Net income for the year-to-date period was $1,609,000, or $1.16 per share, versus $986,000, or $.72 per share, last year. Gains from the sales of securities added $.11 and $.17 per share to year-to-date earnings in 1999 and 1998, respectively. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27. Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K have been filed during the last quarter of the period covered by this report. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the under- signed thereunto duly authorized. Penobscot Shoe Company _________________________ (Registrant) Date: October 8, 1999 Irving Kagan _________________________ By: Irving Kagan Chairman of the Board and Chief Executive Officer Date: October 8, 1999 David L. Keane _________________________ By: David L. Keane Executive Vice President/ Finance and Administration EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 3RD QTR 10-Q
5 1000 9-MOS NOV-26-1999 AUG-27-1999 482 3,860 4,438 (488) 7,142 15,851 1,893 1,742 16,002 2,607 0 1,533 0 0 11,694 16,002 16,709 17,059 10,448 14,372 0 0 19 2,687 1,077 1,609 0 0 0 1,609 1.16 1.16
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