SECURITIES AND EXCHANGE COMMISSION
Washington, DC
Form 10-QSB
Quarterly Report under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended September 30, 1997 Commission File No. 0-774
DANIEL GREEN COMPANY
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 15-0327010
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
ONE MAIN STREET
DOLGEVILLE, NEW YORK 13329
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (315) 429-3131
Former name, former address and former fiscal year, if changed
since last report: None.
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 Act of 1934 during the preceding twelve months and (2)
has been subject to the filing requirements for at least the past
90 days. YES X NO
CLASS OUTSTANDING AT SEPTEMBER 30, 1997
Common Stock $2.50 par value 1,511,892 Shares
<PAGE>
DANIEL GREEN COMPANY
INDEX
Page
Number
Index . . . . . . . . . . . . . ...... . . . . . . . . . 1
PART I - Financial Statements
Balance Sheets, Assets
September 30, 1997 & December 31, 1996 . . . . . . . 2
Balance Sheets, Liabilities & Stockholders' Equity
September 30, 1997 & December 31, 1996 . . . . . . . 3
Statements of Operations for the three & nine month
periods ended September 30, 1997 & 1996 . . . . . . . 4
Statements of Cash Flows for the nine months ended
September 30, 1997 & 1996 . . . . . . . . . . . . . . 5
Notes to Financial Statements ...... . . . . . . . . . . . . 6
Management Discussion & Analysis of Financial Condition
and Results of Operations . ...... . . . . . . . . . . 7
PART II - Other Information . . . . . ...... . . . . . . . 9
1
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DANIEL GREEN COMPANY
Balance Sheets
ASSETS
Sept 30, December 31
1997 1996
(Unaudited) (*)
Current Assets:
Cash $ 9,655 $ 13,213
Accounts Receivable, trade
less allowances for doubtful accounts
(1997 - $222,487 1996 - $200,000) 6,090,667 6,582,081
Income Tax Refund Receivable 256,738 157,704
Inventories, at lower of cost (FIFO) or market:
Raw Materials 1,978,895 2,026,140
Work In Process 581,896 1,351,945
Finished Goods 7,419,736 5,075,618
----------- -----------
Total Inventories 9,980,527 8,453,703
Other Current Assets 97,667 69,479
----------- -----------
Total Current Assets 16,435,254 15,276,180
Property, plant & equipment:
Real Estate and Water Power, at cost 3,336,554 3,270,968
Machinery, Equipment, & Lasts, at cost 5,527,214 5,427,718
----------- -----------
8,863,768 8,698,686
Less: Accumulated Depreciation 7,153,177 6,900,371
----------- -----------
Property, plant, & equipment-net 1,710,589 1,798,315
Other Assets:
Prepaid Pension Expense 2,375,369 2,375,369
Other Assets 101,296 114,963
----------- -----------
Total Other Assets 2,476,665 2,490,332
Total Assets $20,622,508 $19,564,827
=========== ===========
(*) Derived from Audited Financial Statements.
See notes to financial statements.
2
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DANIEL GREEN COMPANY
Balance Sheets
Liabilities & Stockholders' Equity
Sept 30 December 31
1997 1996
(Unaudited) (*)
Current Liabilities:
Notes Payable, line of credit $ 5,565,438 $ 4,537,856
Notes Payable, current 808,435 591,979
Accounts Payable, trade 760,463 480,130
Accrued Salaries & Commissions 58,995 209,427
Accrued Cooperative Advertising 469,854 307,909
Other Accrued Liabilities 51,037 119,123
Deferred Income Tax Liability 258,193 258,193
Capital Lease Obligation, current 3,950 23,480
--------- ---------
Total Current Liabilities 7,976,365 6,528,097
Notes Payable, non-current 1,735,907 1,708,240
Deferred Tax Liability 262,716 262,716
--------- ---------
Total Liabilities 9,974,988 8,499,053
Stockholders' Equity
Common Stock 3,779,730 3,779,730
Paid-in-excess of par value 312,500 312,500
Retained Earnings 6,555,290 6,973,544
--------- ---------
Total Stockholders' Equity 10,647,520 11,065,774
Total Liabilities & Stockholders' Equity $20,622,508 $ 19,564,827
========== ==========
(*) Derived from Audited Financial Statements.
See notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
DANIEL GREEN COMPANY
Statements of Operations
(Unaudited)
For the For the
Three Months Ended Nine Months Ended
Sept 30 Sept 30 Sept 30 Sept 30
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Sales $ 5,610,869 $ 7,341,607 $ 13,280,759 $ 15,125,224
Costs and Expenses:
Cost of Goods Sold 4,066,245 5,366,797 9,564,334 11,282,725
Selling, General,
& Administrative 1,323,288 1,470,607 3,992,706 4,054,494
Interest Expense 148,537 187,255 398,322 622,897
------------ ------------ ------------ ------------
Total Costs & Expenses 5,538,070 7,024,659 13,955,362 15,960,116
Income (Loss) before
credit for Income Taxes 72,799 316,948 (674,603) (834,892)
(Provision) Credit
for Income Taxes (27,664) (120,440) 256,349 317,259
------------ ------------ ------------ ------------
Net Income (Loss) 45,135 $ 196,508 ($ 418,254) ($ 517,633)
============ ============ ============ ============
Net Income (Loss)
per Share $0.03 $0.13 ($0.28) ($0.43)
============ ============ ============ ============
Shares Outstanding 1,511,892 1,511,892 1,511,892 1,195,225
</TABLE>
See notes to financial statements.
4
<PAGE>
DANIEL GREEN COMPANY
Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
Sept 30 Sept 30
1997 1996
Operating Activities:
Net Loss $ (418,254) $ (517,633)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation 252,806 254,291
Amortization 18,402 18,402
Net Pension Credit 0 (54,623)
Changes in assets & liabilities:
(increases) decreases in:
Accounts Receivable, trade 491,414 347,324
Income Tax Refund Receivable (99,034) 132,563
Inventories (1,526,824) 623,141
Other Current Assets (28,188) 124,240
Other Assets (4,733) (3,872)
increases (decreases) in:
Accounts Payable, trade 280,333 1,118,295
Accrued Salaries & Commissions (150,432) (125,070)
Accrued Cooperative Advertising 161,945 (100,000)
Other Accrued Liabilities (68,086) (37,783)
----------- -----------
Net Cash Provided (Used)
by Operating Activities: (1,090,651) 1,779,275
----------- -----------
Investing Activities:
Purchase of property & equipment (165,082) (105,405)
Disposal of property & equipment 0 75,509
----------- -----------
Net Cash Used in Investing Activities: (165,082) (29,896)
----------- -----------
Financing Activities:
Net Borrowings (Payments) on
Line of Credit 1,027,582 (2,784,646)
Net Borrowings and
Repayments of Notes Payable 244,123 (486,717)
Principal payments under capital lease (19,530) 3,786
Net Proceeds of Issuance of Common Stock 0 1,500,000
----------- -----------
Net Cash Provided by (Used)
in Financing activities 1,252,175 (1,767,577)
Net (Decrease) in Cash (3,558) (18,198)
Cash at Beginning of Period 13,213 29,762
----------- -----------
Cash at End of Period $ 9,655 $ 11,564
=========== ===========
See notes to financial statements.
5
<PAGE>
DANIEL GREEN COMPANY
Notes to Financial Statements
Note 1. In the opinion of the Company, the accompanying unaudited financial
statements contain adjustments, all of which are of a normal and
recurring nature, necessary to present fairly the financial position as
of September 30, 1997 and the results of operations and cash flows for
the three and nine months then ended.
Note 2. The results of operations for the three and nine months ended September
30, 1997 are not necessarily indicative of the results to be expected
for the full year.
Note 3. In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No.128, "Earnings per
Share," which is effective for financial statements for both interim
and annual periods ending after December 15, 1997. This new standard
requires dual presentation of basic and diluted earnings per share
(EPS) on the face of the earnings statement and requires a
reconciliation of the numerators and denominators of basic and diluted
EPS calculations. The Company's current EPS calculations conforms to
basic EPS. Diluted EPS will not be materially different from basis EPS
since the issuance of common shares upon exercise of outstanding stock
options would not be materially dilutive.
Note 4. In June 1997, FASB issued SFAS No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information." SFAS No.130 establishes standards for
reporting and disclosure of comprehensive income and in components in
financial statement format. Comprehensive income is defined as the
change in equity of a business enterprise during a period from
transactions and other events and circumstances from nonowner sources.
Items considered comprehensive income including foreign currency items,
minimum pension liability adjustments and unrealized gains and losses
on certain investments in debt and equity securities. SFAS No. 130 is
effective for financial statements for fiscal years beginning after
December 15, 1997. The Company is currently evaluating what impact this
standard will have on its disclosure.
Note 5. SFAS No. 131 established standards for the reporting information about
operating segments by public entities in annual financial statements
and requires that those entities report selected information about
operating segments in interim financial reports issued for
shareholders. This Statement supersedes SFAS No, 14, Financial
Reporting for Segments of a Business Enterprise and amends SFAS No. 94,
"Consolidation of All-Majority-Owned-Subsidiaries." SFAS No. 131
requires that public entities report financial and descriptive
information about its reportable business segments. This statement is
effective for financial statements for periods beginning after December
15, 1997. The Company is currently evaluating what impact this standard
will have on its disclosures.
6
<PAGE>
DANIEL GREEN COMPANY
Management Discussion & Analysis of Financial Condition
and Results of Operations
1. Liquidity and Capital Resources
Cash flow used by operations for the first nine months of 1997 was $1.1
million compared with $1.8 million provided by operations for the first nine
months of 1996. This decrease in cash was the result of higher inventories,
lower income, and offset by accounts receivable and accounts payable.
Inventories increased by $1.5 million or 18% over the historical low balance at
December 31, 1996. When compared to September 30, 1996, the inventory value
on-hand at September 30, 1997 is 2.9% lower, but, changes have occurred within
each inventory category. Raw materials and work-in-process have been
significantly reduced in comparison with last year and reflect curtailed
production activity. Finished goods has increased by 12.4% due to lower sales
demand, but a larger percentage of stock reflects imported footwear.
The Company's line of credit at September 30, 1997 is $5.6 million and
remains relatively unchanged as compared to $5.5 million at September 30, 1996.
The increase in short term borrowings reflects the Company's additional
borrowings to finance inventory.
In comparison to the first nine months of 1996, the Company has
increased capital expenditures in 1997 by $59,677. These expenditures were
primarily made to upgrade computer systems.
The Company's borrowing requirements for working capital purposes are
seasonal with peak borrowing periods between June and mid September. On July 17,
1997 the Company obtained a short term loan from Riedman Corporation, which owns
approximately 31% of the Company's outstanding shares. Under the loan agreement
with Riedman Corporation, the Company was allowed to receive and borrow up to
$1,000,000, at a fixed rate per annum equal to the prime rate published in the
Wall Street Journal on the date of the agreement, plus two percentage points.
Total advances under this loan agreement through September 30, 1997 have been
$500,000, and the Company does not anticipate additional borrowings. All
outstanding amounts were paid to Riedman Corporation on October 31, 1997, from
funds received after the termination of the Company's defined benefit plan.
Subsequent to December 31, 1996, the Company elected to terminate its
defined benefit pension plan and implement a defined contribution 401(k) savings
plan. The Company has completed its analysis of the financial statement effect
of terminating the plan and concluded that it will have a positive effect on the
Company's financial position and results of operations.
Management is not aware of any known demands, commitments or events
which would materially affect its liquidity, and there are no material
expenditures or commitments which would affect capital resources in a
significant way. Cash generated by operations, supplemented by short-term
borrowings, should cover planned requirements.
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," which will be effective during the fourth quarter of 1997. SFAS No. 128
will require the Company in its fourth quarter and in its annual report to
restate all previously reported earnings per share information to conform with
the new pronouncement's requirements. The Company anticipates that earnings per
share calculated in conformity with SFAS No. 128 will not differ materially from
current figures because the issuance of common shares upon the exercise of
outstanding stock options would not be materially dilutive.
7
<PAGE>
Liquidity and Capital Resources (continued)
The Financial Accounting Standards Board recently issued SFAS No. 130
on "Reporting Comprehensive Income" and SFAS No. 131 on "Disclosures about
Segments of an Enterprise and Related Information." The "Reporting Comprehensive
Income" standard is effective for fiscal years beginning after December 15,
1997. The standard changes the reporting of certain items currently reported in
the common stock equity section of the balance sheet and is not expected to have
a material effect on the Company's financial statements, The "Disclosures about
Segments of an Enterprise and Related Information" standard is effective for
fiscal years beginning after December 15, 1997. This standard requires that
public companies report certain information about operating segments in their
financial statements. It also establishes related disclosures about products and
services, geographical areas, and major customers. The Company is currently
evaluating what impact this standard will have on its disclosures.
2. Results of Operations
Net sales for the third quarter ended September 30, 1997 were $5.6
million, a decrease of 23.6% from last year's third quarter sales of $7.3
million. On a year-to-date basis, total sales are $13.3 million or 12.2% lower
than the net sales of $15.1 million reported for the first nine months of 1996.
Sales for the third quarter of this year do not include a major customer
shipment that took place at the end of the third quarter in 1996.
Gross margin as a percentage of net sales for the third quarter of 1997
was 27.5% compared to the prior year's level of 26.9%. On a year-to-date basis,
the Company's gross margin is 28.0% compared to 25.4% in 1996. This increase has
been achieved by a shift in product mix to higher margin products.
Selling, general and administrative expenses in the third quarter of
1997 are below 1996 by $147,319 or 10%. This decrease reflects lower selling and
retail costs. Retail selling expenses are down significantly due to the closing
of several retail outlets in 1996.
Interest expense for the third quarter of 1997 has decreased by $38,718
as compared to the third quarter of last year. Through September, the Company
has reduced its interest expense by $224,575 or 36% over 1996. This decrease
reflects a lower borrowing rate of interest and reduced spending levels.
The Company produced net income before taxes of $72,799 in the third
quarter of 1997, compared to $316,948 in 1996. On an after-tax basis, income for
the quarter was $45,135 or $.03 per share as opposed to income of $196,508 or
$.13 per share in 1996.
Through the first nine months of 1997, the Company had an after-tax
loss of $418,254 or $.28 per share. This compares to last year's performance of
an after-tax loss of $517,633 or $.43 per share.
As of September 30, 1997, the Company was in violation of a bank
covenant relating to operating income as outlined in the loan agreement with
KeyBank National Association. On October 23, 1997 the Company obtained a waiver
on this financial covenant. In consideration of this waiver, the Company
forfeited a $1,000,000 capital expenditure line,
previously provided by the Lender.
8
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DANIEL GREEN COMPANY
Part II - Other Information
1. Legal Proceedings - None.
2. Changes in Securities - None.
3. Default upon Senior Securities - None.
4. Submission of matters to a vote of security holders - None.
5. Other Information - None.
6. Exhibits and reports on Form 8K - None.
9
<PAGE>
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.
DANIEL GREEN COMPANY
Registrant
Date: November 13, 1997 /s/ Stanley W. Kabot
Stanley W. Kabot, Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> SEP-30-1997
<CASH> 9,655
<SECURITIES> 0
<RECEIVABLES> 6,090,667
<ALLOWANCES> 222,487
<INVENTORY> 9,980,527
<CURRENT-ASSETS> 16,435,254
<PP&E> 8,863,768
<DEPRECIATION> 7,153,177
<TOTAL-ASSETS> 20,622,508
<CURRENT-LIABILITIES> 7,976,365
<BONDS> 1,998,623
0
0
<COMMON> 3,779,730
<OTHER-SE> 6,867,790
<TOTAL-LIABILITY-AND-EQUITY> 20,622,508
<SALES> 13,280,759
<TOTAL-REVENUES> 13,280,759
<CGS> 9,564,334
<TOTAL-COSTS> 9,564,334
<OTHER-EXPENSES> 3,992,706
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 398,322
<INCOME-PRETAX> (674,603)
<INCOME-TAX> 256,349
<INCOME-CONTINUING> (418,254)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (418,254)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> (.28)
</TABLE>
