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, 1998 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, 1998
Common Stock $2.50 par value 1,698,329
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DANIEL GREEN COMPANY
INDEX
Page Number
Index .............................................................i
PART I - Financial Information
Balance Sheets, Assets
June 30, 1998 & December 31, 1997................................2
Balance Sheets, Liabilities & Stockholders' Equity
June 30, 1998 & December 31, 1997................................3
Statements of Operations for the three months and six
month periods ended June 30, 1998 and 1997.......................4
Statements of Cash Flows for the six months ended
June 30, 1998 and 1997...........................................5
Notes to Financial Statements.........................................6
Management Discussion & Analysis of Financial Condition
and Results of Operations........................................7
PART II - Other Information...........................................9
i
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2
DANIEL GREEN COMPANY
Balance Sheets
ASSETS
June 30, December 31,
1998 1997
(Unaudited) (*)
------------ ------------
Current Assets:
Cash $ 4,800 $ 901,875
Accounts Receivable, trade
less allowances for doubtful accounts
(1998 - $164,831 1997 - $231,000) 2,513,913 5,721,431
Deferred Income Tax Asset 287,306 287,306
Income Tax Receivable 555,433 0
Inventories, at lower of cost (FIFO) or market:
Raw Materials 1,675,292 1,941,033
Work In Process 116,697 374,484
Finished Goods 6,892,046 6,153,858
----------- -----------
Total Inventories 8,684,035 8,469,375
Other Current Assets 3,605 65,656
----------- -----------
Total Current Assets 12,049,092 15,445,643
Property, plant & equipment:
Real Estate and Water Power, at cost 3,374,864 3,374,864
Machinery, Equipment, & Lasts, at cost 5,636,197 5,565,199
----------- -----------
9,011,061 8,940,063
Less: Accumulated Depreciation 7,342,715 7,232,416
Property, plant & equipment, net 1,668,346 1,707,647
Other Assets:
Prepaid Pension Expense 744,896 894,896
Other Assets 125,752 114,687
----------- -----------
Total Other Assets 870,648 1,009,583
----------- -----------
Total Assets $14,588,086 $18,162,873
=========== ===========
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3
DANIEL GREEN COMPANY
Balance Sheets
Liabilities & Stockholders' Equity
June 30 December 31
1998 1997
(Unaudited) (*)
----------- -----------
Current Liabilities:
Notes Payable, line of credit $ 454,756 $ 2,219,802
Notes Payable, current 561,548 562,030
Accounts Payable, trade 418,153 303,492
Accrued Salaries & Commissions 111,240 240,065
Other Accrued Liabilities 95,327 283,261
Income Tax Payable 0 421,389
----------- -----------
Total Current Liabilities 1,641,024 4,030,039
Notes Payable, non-current 1,044,931 1,325,104
Deferred Tax Liability 611,726 611,726
----------- -----------
Total Liabilities 3,297,681 5,966,869
Stockholders' Equity
Common Stock 4,245,823 4,245,823
Paid-in-excess of par value 741,303 741,303
Retained Earnings 6,303,279 7,208,878
----------- -----------
Total Stockholders' Equity 11,290,405 12,196,004
----------- -----------
Total Liabilities & Stockholders' Equity $14,588,086 $18,162,873
=========== ===========
(*) Derived from audited financial statements.
See notes to financial statements.
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4
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
1998 1997 1998 1997
--------------------------------------------------------
Net Sales $ 2,701,872 $ 3,723,117 $ 5,201,335 $ 7,046,879
Costs and Expenses:
Cost of Goods Sold 1,970,797 2,971,016 4,273,554 5,564,163
Selling, General,
& Administrative 1,012,136 897,620 2,288,125 2,191,007
Interest Expense 46,666 108,933 100,301 249,785
----------- ----------- ----------- -----------
Total Costs and
Expenses 3,029,599 3,977,569 6,661,980 8,004,955
----------- ----------- ----------- -----------
Loss before credit
for Income Taxes (327,727) (254,452) (1,460,645) (958,076)
Credit for Income
Taxes 124,536 96,691 555,045 364,069
----------- ----------- ----------- -----------
Net Loss ($ 203,191) ($ 157,761) ($ 905,600) ($ 594,007)
=========== =========== =========== ===========
Net Loss per Share:
Basis ($.12) ($.10) ($.53) ($.39)
Diluted ($.12) ($.10) ($.53) ($.39)
Shares Outstanding:
Basic 1,698,329 1,511,892 1,698,329 1,511,892
Diluted 1,698,329 1,511,892 1,698,329 1,511,892
See notes to financial statements.
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5
DANIEL GREEN COMPANY
Statements of Cash Flows
(Unaudited)
For the Six Months Ended
June 30 June 30
1998 1997
------------ ------------
Operating Activities:
Net Loss $ (905,600) $ (594,007)
Adjustments to reconcile net loss to net
cash provided(used)by operating activities:
Depreciation 109,499 175,248
Amortization 0 12,268
Changes in assets & liabilities:
(increases) decreases in:
Accounts Receivable, trade 3,207,518 2,708,864
Income Tax Receivable (555,433) (66,555)
Inventories (214,660) (2,870,169)
Other Current Assets 62,051 (32,437)
Other Assets 138,935 (53,856)
increases (decreases) in:
Accounts Payable, trade 114,661 479,168
Accrued Salaries (128,825) (137,347)
Income Taxes Payable (421,389) 0
Deferred tax liability 0 (258,193)
Other Accrued Liabilities (187,934) 281,304
----------- -----------
Net Cash Provided(Used)by Operating
Activities 1,218,823 (222,602)
Investing Activities:
Purchase of property & equipment (70,198) (54,857)
----------- -----------
Net Cash Used in Investing Activities (70,198) (54,857)
Financing Activities:
Net Payments on Line of Credit (1,765,046) 439,807
Repayments of Notes Payable (280,654) (146,462)
Principal payments under Capital Leases 0 (17,186)
Net Cash(Used)Provided by Financing
Activities (2,045,700) 276,159
----------- -----------
Net Decrease in Cash (897,075) (1,300)
Cash at Beginning of Period 901,875 13,213
Cash at End of Period $ 4,800 $ 11,913
=========== ===========
See notes to financial statements.
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6
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, 1998 and the results of
operations and cash flows for the six months then ended.
Note 2. The results of operations for the six months ended June 30, 1998
are not necessarily indicative of the results to be expected for
the full year.
Note 3. The Company's financial statements for the quarter ended June 30,
1998 have been restated due to an error in accounting for the
sale of certain products. The Company erroneously recognized
sales for product shipped to a customer on a consigned basis. The
previous practice of the Company was to adjust these sales
numbers on an annual basis, for year-end reporting purposes.
Since the Company expects these types of consignment arrangements
to increase in the future, the Company decided that it was
necessary to account for them properly on an interim basis as
well.
The effects of this restatement on the net loss and net loss per
share for the quarter and the six month period ended June 30,
1997 were as follows:
For the For the
Quarter Ended Six Months Ended
June 30, 1997 June 30, 1997
Net Loss Net Loss
Net Loss Per Share Net Loss Per Share
Previously
Reported ($114,653) ($ 0.07) ($463,389) ($ 0.31)
Restatement ($ 43,108) ($ 0.03) ($130,618) ($ 0.08)
As Restated ($157,761) ($ 0.10) ($594,007) ($ 0.39)
<PAGE>
7
DANIEL GREEN COMPANY
Management Discussion & Analysis of Financial Condition
and Results of Operations
1. Liquidity and Capital Resources
For the first six months of 1998, the Company generated $1,218,823 in cash from
operating activities, compared to using $222,601, for the same period in 1997.
At the end of the second quarter, accounts receivable decreased by $736,293 or
22.7 percent over last year and is $3,207,518 lower compared to the end of
fiscal year 1997. Inventories ended the quarter of 1998, at $8,684,035 which is
$3,082,175 lower than one year ago and has increased slightly from the beginning
of the year. The reduction in inventory levels from a year ago, reflects the
Company's efforts to control and reduce the number of shoes in stock. During the
second quarter, the Company hired a Merchandising Manager to coordinate
production planning, inventory management and product distribution.
Total debt consists of notes payable, the line of credit, and capital lease
obligations. At the end of the second quarter of 1998, total debt stands at
$2,061,235 as compared with $7,137,714 a year ago, for an overall decrease of
$5,076,479 or 71.1 percent. This decrease is the result of the proceeds from
terminating the Company's defined benefit plan during the fourth quarter of
1997, by cash generated from operating activities, and by regular repayments of
the debt during the first and second quarters of 1998. In addition, lower
spending levels throughout the first six months of 1998, also contributed to
this significant decrease.
The Company currently has in place a revolving line of credit ("revolver"), with
KeyBank National Association which contains financial covenants. The Company is
in compliance with all the covenants of the revolver, and all other debt
agreements.
Management is not aware of any known demands, commitments or events that would
materially affect its liquidity. 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.
2. Results of Operations
Net sales for the second quarter were approximately $2.7 million which is 27.4
percent lower than last year during this timeframe. For the first six months,
net sales amounted to approximately $5.2 million, a 26.2 percent decline from
net sales in the first six months of 1997. The decline in sales represents
reduced shipments to several major customers, and the loss of a large customer
due to competition. This decline in sales has carried-over form the first three
months of this year, and the Company expects this trend to continue throughout
the next two quarters.
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8
Gross profit during the second quarter of 1998, amounted to approximately $.7
million, or 27.1 percent of net sales. This compares with a gross profit percent
of 20.2 percent in the same quarter of 1997. For the six months, the gross
profit percentage is 17.8 percent compared to 21.0 percent in 1997. The decrease
in gross profit percentages from year to year, reflects a higher degree of
underabsorbed overhead (due to lower production volumes) being reported for the
first half of 1998 compared with last year.
For the quarter and six months, total selling, general and administrative
expenses were 12.8 percent and 4.4 percent higher, respectively, than expenses
reported during the comparable periods of 1997. The increase in selling, general
and administrative expenses primarily represents: the costs associated with
administering the Company's new 401(k) plan - employer contributions and stock
allocations, and the timing of expenditures related to the new compensation
program for the field sales force.
During the second quarter of 1998, net interest expense amounted to
approximately $47 thousand compared to approximately $109 thousand a year ago.
For the six months, net interest expense has also declined to approximately $100
thousand in 1998 from approximately $250 thousand in 1997. This decrease in net
interest expense is principally due to lower spending levels in 1998, compared
to last year, and a lower utilization of Company's revolving line of credit.
The Company incurred a net loss before taxes of approximately $328 thousand in
the second quarter of 1998, an increase of 28.8 percent over last year. On an
after-tax basis, the loss for the quarter was approximately $203 thousand or
$.12 per share as opposed to approximately $158 thousand after tax loss of $.10
per share in 1997.
The net loss for the first half of the year was approximately $906 thousand or
$.53 per share. This compared to last year's first six month loss of
approximately $594 thousand or $.39 per share.
The Company's efforts throughout the remainder of the year will be to achieve
revised sales targets. Overall expenditures will continue to be lower than last
year and recent cost reductions should impact the Company's financial results
for the last six months of 1998.
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9
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.
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: August 14, 1998 /s/ Greg Alan Tunney
Greg Alan Tunney
President
/s/ Janet S. Cool
Janet S. Cool
Financial Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,800
<SECURITIES> 0
<RECEIVABLES> 2,678,744
<ALLOWANCES> 164,831
<INVENTORY> 8,684,035
<CURRENT-ASSETS> 12,049,092
<PP&E> 9,011,061
<DEPRECIATION> 7,342,715
<TOTAL-ASSETS> 14,588,086
<CURRENT-LIABILITIES> 1,641,024
<BONDS> 0
0
0
<COMMON> 11,290,405
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 14,588,086
<SALES> 5,201,335
<TOTAL-REVENUES> 5,201,335
<CGS> 4,273,554
<TOTAL-COSTS> 2,288,125
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100,301
<INCOME-PRETAX> (1,460,645)
<INCOME-TAX> (555,045)
<INCOME-CONTINUING> (905,600)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (905,600)
<EPS-PRIMARY> (0.53)
<EPS-DILUTED> (0.53)
</TABLE>
