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 June 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)
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 JUNE 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
June 30, 1997 & December 31, 1996 . . . . . . . 2
Balance Sheets, Liabilities & Stockholders' Equity
June 30, 1997 & December 31, 1996 . . . . . . . 3
Statements of Operations for the three & six month
periods ended June 30, 1997 & 1996 . . . . . . . 4
Statements of Cash Flows for the six months ended
June 30, 1997 & 1996 . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . 6
Management Discussion & Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . 7
PART II - Other Information . . . . . . . . . . . . .11
1
<PAGE>
DANIEL GREEN COMPANY
Balance Sheets
ASSETS
June 30 December 31
1997 1996
(Unaudited) (*)
----------- -------------
Current Assets:
Cash $ 11,913 $ 13,213
Accounts Receivable, trade
less allowances for doubtful accounts
(1997 - $227,168 1996 - $200,000) 3,873,217 6,582,081
Income Tax Refund Receivable 285,461 157,704
Inventories, at lower of cost (FIFO) or market:
Raw Materials 1,950,337 2,026,140
Work In Process 1,123,013 1,351,945
Finished Goods 8,250,522 5,075,618
----------- -----------
Total Inventories 11,323,872 8,453,703
Other Current Assets 101,916 69,479
----------- -----------
Total Current Assets 15,596,379 15,276,180
Property, plant & equipment:
Real Estate and Water Power, at cost 3,271,158 3,270,968
Machinery, Equipment, & Lasts, at cost 5,482,385 5,427,718
8,753,543 8,698,686
Less: Accumulated Depreciation 7,075,619 6,900,371
----------- -----------
Property, plant, & equipment-net 1,677,924 1,798,315
Other Assets:
Prepaid Pension Expense 2,375,369 2,375,369
Other Assets 156,551 114,963
----------- -----------
Total Other Assets 2,531,920 2,490,332
Total Assets $19,806,223 $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
June 30 December 31
1997 1996
(Unaudited) (*)
------------ ------------
Current Liabilities:
Notes Payable, line of credit $ 4,977,663 $ 4,537,856
Notes Payable, current 592,515 591,979
Accounts Payable, trade 959,298 480,130
Accrued Salaries & Commissions 72,080 209,427
Accrued Cooperative Advertising 371,604 307,909
Other Accrued Liabilities 142,233 119,123
Deferred Income Tax Liability 258,193 258,193
Capital Lease Obligation, current 6,294 23,480
----------- -----------
Total Current Liabilities 7,379,880 6,528,097
Notes Payable, non-current 1,561,242 1,708,240
Deferred Tax Liability 262,716 262,716
----------- -----------
Total Liabilities 9,203,838 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 6,510,155 6,973,544
----------- -----------
Total Stockholders' Equity 10,602,385 11,065,774
Total Liabilities & Stockholders' Equity $19,806,223 $19,564,827
=========== ===========
(*) Derived from Audited Financial Statements.
See notes to financial statements.
3
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<TABLE>
<CAPTION>
DANIEL GREEN COMPANY
Statements of Operations
(Unaudited)
For the For the
Three Months Ended Six Months Ended
June 30 June 30 June 30 June 30
1997 1996 1997 1996
-------------------------- ---------------------------
<S> <C> <C> <C> <C>
Net Sales $ 3,850,881 $ 4,020,072 $ 7,669,890 $ 7,783,617
Costs and Expenses:
Cost of Goods Sold 2,550,840 3,051,121 5,498,089 5,915,928
Selling, General,
& Administrative 1,376,031 1,272,443 2,669,418 2,583,887
Interest Expense 108,933 204,679 249,785 435,642
----------- ----------- ----------- -----------
Total Costs & Expenses 4,035,804 4,528,243 8,417,292 8,935,457
Loss before
credit for Income Taxes (184,923) (508,171) (747,402) (1,151,840)
Credit for Income Taxes 70,270 193,105 284,013 437,699
----------- ----------- ----------- -----------
Net Loss ($ 114,653) ($ 315,066) ($ 463,389) ($ 714,141)
=========== =========== =========== ===========
Net Loss per Share ($0.07) ($0.30) ($0.31) ($0.68)
=========== =========== =========== ===========
Shares Outstanding 1,511,892 1,063,235 1,511,892 1,050,064
</TABLE>
See notes to financial statements.
4
<PAGE>
DANIEL GREEN COMPANY
Statements of Cash Flows
(Unaudited)
For the Six Months Ended
June 30 June 30
1997 1996
----------------------------
Operating Activities:
Net Loss $ (463,389) $ (714,141)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation 175,248 199,209
Amortization 12,268 12,268
Net Pension Credit 0 (36,415)
Changes in assets & liabilities:
(increases) decreases in:
Accounts Receivable, trade 2,708,864 2,693,499
Income Tax Refund Receivable (127,757) 10,784
Inventories (2,870,169) (647,209)
Other Current Assets (32,437) 60,819
Other Assets (53,856) (3,872)
increases (decreases) in:
Accounts Payable, trade 479,168 992,211
Accrued Salaries (137,347) (137,071)
Accrued Cooperative Advertising 63,695 (200,000)
Other Accrued Liabilities 23,110 21,925
----------- -----------
Net Cash Provided (Used)
by Operating Activities: (222,602) 2,252,007
----------- -----------
Investing Activities:
Purchase of property & equipment (54,857) (54,184)
Net Cash Used in Investing Activities: (54,857) (54,184)
Financing Activities:
Net (Payments) Borrowings on
Line of Credit 439,807 (3,362,851)
Repayments of Notes Payable (146,462) (341,400)
Principal payments under capital lease (17,186) (11,822)
Net Proceeds of Issuance of Common Stock 0 1,500,000
----------- -----------
Net Cash Provided by (Used)
in Financing activities 276,159 (2,216,073)
Net (Decrease) in Cash (1,300) (18,250)
Cash at Beginning of Period 13,213 29,762
----------- -----------
Cash at End of Period $ 11,913 $ 11,512
=========== ===========
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 June 30, 1997 and the results of operations and cash flows for the
three and six months then ended.
Note 2. The results of operations for the three and six months ended June
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.
6
<PAGE>
DANIEL GREEN COMPANY
Management Discussion & Analysis of Financial Condition
and Results of Operations
1. Liquidity and Capital Resources
For the six months ended June 30, 1997, the Company used $222,602 of cash
for operations. This compares with $2,252,007 of cash provided by operations for
the first six months of 1996. The primary use of cash went for the build-up of
inventory to support sales orders in subsequent months. Inventories have
increased by $2,870,169 or 34% since the beginning of the year. This increase in
inventory reflects the unusually low level of stock at the end of 1996 and the
significant increase in purchases made this year over last year of imported
footwear. In comparison to last year, the Company's inventory stands at
$11,323,872 or 2% lower than the June 1996 level of $11,547,451. As of June 30,
1997, inventory quantities are 6% below June 1996.
The Company continues to be successful in its collections of accounts
receivable. Receivables were reduced by $2,708,864 or 41% from the beginning of
the year, as compared to a $2,693,499 or a 37% reduction through the first six
months of 1996. Total liabilities increased by $704,785 or 8.3% since the
beginning of the fiscal year. The increases are reflected in accounts payable,
and in the additional borrowings of $439,807 through the first six months of
1997.
The Company entered into a new credit arrangement with KeyBank National
Association on April 14, 1997. The agreement provided the Company with: an
$8,000,000 revolving line of credit (the "revolver"); a $1,000,000 equipment
line of credit and a $2,100,000 mortgage/term loan. The credit facility is for a
three year period and bears interest at LIBOR plus 2.25%. Permitted borrowings
against the revolver are a percentage of eligible accounts receivable, finished
goods and raw material inventory, subject to certain limitations. These include
a cap on the total amount of eligible inventory. Pursuant to the terms of the
revolver, the inventory cap was reduced by $500,000 on August 1, 1997. Towards
the end of the second quarter, the Company had projected and disclosed to its
Directors that the Company would have negative availability under the revolver
beginning toward the end of July and running through the early part of
September. The projected shortfall was directly related to the still outstanding
refinancing of the Company's long term debt. The long term debt that was
continued at the time of the new financing with KeyBank was to be increased by
an estimated $2,000,000 which would have provided the Company with adequate
liquidity. This financing has been delayed; however, the Company continues to
work towards obtaining the additional $2,000,000. To maintain availability under
the revolver, the Company initially sought to arrange a short term loan with
KeyBank, which would be repaid with funds that the Company expects to receive
following the termination of its existing pension plan and reversion to the
Company of any overfunding. However, the terms and conditions required by
KeyBank were not acceptable to the Company and steps were taken to seek short
term financing from another lender.
7
<PAGE>
Liquidity and Capital Resources (continued)
Riedman Corporation, which owns approximately 31% of the Company's
outstanding shares, proposed a short term borrowing solution to the Company
which was approved by the Board of Directors at a special meeting held on July
17, 1997. Under the loan agreement, Riedman Corporation will make advances in
the aggregate principal amount of 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. Repayment of the loan with accrued
interest will be due on or before December 31, 1997, and payment will be from
the funds received after the termination of the Company's pension plan and
reversion to the Company of any overfunding. In connection with the loan
agreement, the Company has granted Riedman Corporation an option to purchase up
to 25,000 shares of the Company's authorized and unissued Common Stock at a
price of $4.75 per share.
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 not completed its analysis of the financial statement
effect of terminating the plan, but, upon completion, it is expected to 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, once the Riedman Corporation loan
has been obtained, 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.
2. Results of Operations
Net sales for the second quarter were $3,850,881 and 4.2% lower than
last year during this period. For the first half of the year, net sales amounted
to $7,669,890 which is 1.5% lower than net sales reported for the first six
months of 1996. Shipments for the second quarter were down by 3% compared to
last year. On a year-to-date basis, total shipments are slightly ahead of 1996.
Sales are down for the quarter because of reduced shipments to several of the
Company's larger customers.
Cost of goods sold for the second quarter was 66.2% of net sales as
compared to 75.9% in 1996. This reduction occurred due to sales mix:
higher-margin products were sold during the quarter, accounting adjustments
9
<PAGE>
Results of Operations (continued)
that were made to reclassify some personnel costs into the selling, general and
administrative cost category and manufacturing spending levels for the quarter
in balance with estimates. On a year-to-date basis, cost of sales is 4.3% below
last year's percentages.
Selling, general and administrative expenses in the second quarter of
1997 are ahead of 1996 by $103,588. This increase relates to reclassification of
expenses previously recorded under the cost of goods sold section and higher
expenses incurred, for advertising and selling purposes.
Interest expense has been lowered by $95,746 over 1996 due to the
Company's refinancing of its credit facilities in April, and a lower borrowing
rate of interest. Through June, the Company has reduced its interest expense by
$185,857 over last year.
The Company incurred a net loss before taxes of $184,923 in the second
quarter of 1997, a decrease of $323,248 over last year. On an after-tax basis,
the loss for the quarter was $114,653 or $.07 per share as opposed to a $315,066
after-tax loss of $.30 per share in 1996.
The net loss for the first half of the year was $463,389 or $.31 per
share. This compares to last year's first six month loss of $714,141 or $.68 per
share.
The Company's efforts through the remainder of the year will be to
achieve sales targets. Selling, general, and administrative expenses will be
monitored and spending levels will be reduced, wherever possible. Interest
expense is expected to decrease well below last year.
10
<PAGE>
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
11
<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:
Stanley W. Kabot, Chief
Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 11,913
<SECURITIES> 0
<RECEIVABLES> 3,873,217
<ALLOWANCES> 227,168
<INVENTORY> 11,323,872
<CURRENT-ASSETS> 15,596,379
<PP&E> 8,753,543
<DEPRECIATION> 7,075,619
<TOTAL-ASSETS> 19,806,223
<CURRENT-LIABILITIES> 7,379,880
<BONDS> 1,823,958
0
0
<COMMON> 3,779,730
<OTHER-SE> 6,822,655
<TOTAL-LIABILITY-AND-EQUITY> 19,806,223
<SALES> 3,850,881
<TOTAL-REVENUES> 3,850,881
<CGS> 2,550,840
<TOTAL-COSTS> 2,550,840
<OTHER-EXPENSES> 1,376,031
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 108,933
<INCOME-PRETAX> (184,923)
<INCOME-TAX> 70,270
<INCOME-CONTINUING> (114,653)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (114,653)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
