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 March 31, 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 MARCH 31, 1998
Common Stock $2.50 par value 1,698,329
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DANIEL GREEN COMPANY
INDEX
Page
Number
Index . . . . . . . . . . . . . . . . . . . . . . . 1
PART I - Financial Information
Balance Sheets, Assets
March 31, 1998 and December 31, 1997 . . . . . . . . 2
Balance Sheets, Liabilities & Stockholders' Equity
March 31, 1998 and December 31, 1997 . . . . . . . . 3
Statements of Operations for the three months ended
March 31, 1998 and March 31, 1997 . . . . . . . . . 4
Statements of Cash Flows for the three months ended
March 31, 1998 and March 31, 1997 . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . . . 6
Management Discussion & Analysis of Financial Conditions
and Results of Operations . . . . . . . . . . . . . . 8
PART II - Other Information . . . . . . . . . . . . . . . . . 11
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DANIEL GREEN COMPANY
Balance Sheets
ASSETS
March 31 December 31
1998 1997
(Unaudited) (*)
Current Assets:
Cash $ 6,395 $ 901,875
Accounts Receivable, trade
less allowances for doubtful accounts
(1998 - $248,505 1997 - $231,000) 3,410,299 5,721,431
Deferred Income Tax Asset 287,306 287,306
Income Tax Receivable 430,897 0
Inventories, at lower of cost (FIFO) or market:
Raw Materials 2,048,692 1,941,033
Work In Process 148,261 374,484
Finished Goods 6,114,762 6,153,858
---------- -----------
Total Inventories 8,311,715 8,469,375
Other Current Assets 0 65,656
---------- -----------
Total Current Assets 12,446,612 15,445,643
Property, plant & equipment:
Real Estate and Water Power, at cost 3,374,864 3,374,864
Machinery, Equipment, & Lasts, at cost 5,591,709 5,565,199
---------- ---------
8,966,573 8,940,063
Less: Accumulated Depreciation 7,299,092 7,232,416
---------- -----------
Property, plant & equipment, net 1,667,481 1,707,647
Other Assets:
Prepaid Pension Expense 819,896 894,896
Other Assets 97,217 114,687
---------- -----------
Total Other Assets 917,113 1,009,583
---------- -----------
Total Assets $15,031,206 $18,162,873
========== ===========
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DANIEL GREEN COMPANY
Balance Sheets
Liabilities & Stockholders' Equity
March 31 December 31
1998 1997
(Unaudited) (*)
Current Liabilities:
Notes Payable, line of credit $ 459,607 $ 2,219,802
Notes Payable, current 562,754 562,030
Accounts Payable, trade 487,446 303,492
Accrued Salaries & Commissions 171,394 240,065
Other Accrued Liabilities 60,542 283,261
Income Tax Payable 0 421,389
---------- ----------
Total Current Liabilities 1,741,743 4,030,039
Notes Payable, non-current 1,184,142 1,325,104
Deferred Tax Liability 611,726 611,726
---------- ----------
Total Liabilities 3,537,611 5,966,869
Stockholder's Equity
Common Stock 4,245,823 4,245,823
Paid-in-excess of par value 741,303 741,303
Retained Earnings 6,506,469 7,208,878
---------- ----------
Total Stockholders' Equity 11,493,595 12,196,004
---------- ----------
Total Liabilities & Stockholders' Equity $15,031,206 $18,162,873
(*) Derived from audited financial statements.
See notes to financial statements.
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DANIEL GREEN COMPANY
Statements of Operations
(Unaudited)
For the Three Months Ended
March 31 March 31
1998 1997
--------- ---------
Net Sales $ 2,499,463 $ 3,323,762
Costs and Expenses:
Cost of Goods Sold 2,302,757 2,593,147
Selling, General, & Administrative 1,275,989 1,293,387
Interest Expense 53,635 140,852
--------- ---------
Total Costs and Expenses 3,632,381 4,027,386
--------- ---------
Loss before credit for Income Taxes (1,132,918) (703,623)
Credit for Income Taxes 430,509 267,594
--------- ---------
Net Loss ($702,409) ($436,246)
========= =========
Net Loss per Share:
Basic ($0.41) ($0.29)
========= =========
Diluted $0.41 $0.29
--------- ---------
Shares Outstanding:
Basic 1,698,329 1,511,892
--------- ---------
Diluted 1,698,329 1,511,892
See notes to financial statements.
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DANIEL GREEN COMPANY
Statements of Cash Flows
(Unaudited)
For the Three Months Ended
March 31 March 31
1998 1997
---------- ---------
Operating Activities:
Net Loss $ (702,409) $ (436,246)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation 65,876 87,624
Amortization 0 6,134
Changes in assets & liabilities:
(increases) decreases in:
Accounts Receivable, trade 2,311,132 2,519,707
Income Tax Refund Receivable (430,897) (268,437)
Inventories 157,660 (1,549,638)
Other Current Assets 65,656 3,727
Other Assets 17,470 (4,966)
increases (decreases) in:
Accounts Payable, trade 183,954 264,273
Accrued Salaries (68,671) (136,956)
Income Taxes Payable (421,389) 0
Deferred tax liability 0 (258,193)
Other Accrued Liabilities (222,719) 216,970
---------- ---------
Net Cash Provided by Operating Activities 1,030,663 444,000
Investing Activities:
Purchase of property & equipment (25,710) (2,841)
---------- ---------
Net Cash Used in Investing Activities (25,710) (2,841)
Financing Activities:
Net Payments
on Line of Credit (1,760,195) (237,839)
Repayments of Notes Payable (140,238) (195,513)
0 (8,507)
Net Cash Used in Financing Activities (1,900,433) (441,908)
Net Decrease in Cash (895,480) (749)
Cash at Beginning of Period $901,875 94,875 13,213
---------- ---------
Cash at End of Period $ 6,395 $ 12,464
========== =========
See notes to financial statements.
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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 March 31, 1998 and the results of
operations and cash flows for the three months then ended.
Note 2. The results of operations for the three months ended March 31,
1998 are not necessarily indicative of the results to be
expected for the full year.
Note 3. Prior Period Adjustment The Company's financial statements for
the quarter ended March 31, 1997 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 effect of this restatement on the net loss and net loss
per share for the quarter ended March 31, 1997 was as follows:
Net Loss
Net Loss Per Share
Previously reported ($348,737) ($0.23)
Restatement ($87,510) ($0.06)
- ----------- --------- -------
As Restated ($436,246) ($0.29)
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DANIEL GREEN COMPANY
Management Discussion & Analysis of Financial Condition
and Results of Operations
1. Liquidity and Capital Resources
For the quarter ended March 31, 1998, net cash flows from operating
activities were $1,030,663 as compared to $444,000 for the first quarter in
1997.
Although the Company experienced a higher first quarter loss than in
1997 ($702,409 versus $436,246), lower inventory levels along with the Company's
continued efforts to reduce accounts receivable, enabled the Company to
dramatically improve its cash from operations. Inventories in the first quarter
of 1998 were $8,311,715 compared to $10,003,341 at the end of March 31, 1997.
Lower purchases during the first quarter along with decreases in production
levels have contributed to this change. The majority of cash provided by
operations was used to pay down debt.
Accounts receivable decreased at the end of the first quarter of 1998,
to $3,410,299 from $4,062,374 at the end of the same quarter of 1997, and has
gone down by $2,311,132 since the beginning of the fiscal year.
The Company has a credit arrangement with KeyBank National Association
which provides the Company with an $8,000,000 revolving line of credit and a
$2,100,000 mortgage/term loan. The revolver carries an interest rate of LIBOR
plus 2.25% and will expire on April 30, 2000. The revolver is secured by
accounts receivable, inventory, equipment and cash. The Company's borrowing
against the revolver is at an all-time low and stands at $459,607, compared to
$4,299,967 a year ago. Based on the balance owed under the revolving line of
credit, the Company believes it will be better positioned this year to handle
working capital needs during the peak borrowing periods of June through
September.
The mortgage term loan is secured by the Company's manufacturing
facilities and totaled $1,746,896 as of March 31, 1998.
The line of credit contains
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certain financial covenants relative to working capital, tangible net worth,
total debt to tangible net worth and debt service coverage. All financial
covenants, with the exception of the debt service coverage, are measured for
compliance on an annual basis. The debt service coverage ratio is measured for
compliance quarterly. The Company was not in compliance with the debt service
coverage covenant as of March 31, 1998. On May 12th, the Company obtained a
waiver from KeyBank National Association. Going forward, the Company and KeyBank
are currently reviewing and establishing a new debt service coverage covenant
for 1998.
Management is not aware of any known demands, commitments or events
which 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
Shipments of footwear products were 25% lower in comparison to the
first quarter of 1997. The Company believes that its first quarter sales results
are based, in part, on a carry-over of poor retailing activity during the 4th
quarter of 1997. This situation has resulted in many customers carrying higher
inventory levels, reducing orders placed, and therefore fewer shipments being
made by the Company during the 1st quarter of 1998.
Cost of goods sold for the first quarter was 92.1% of net sales as
compared to 78.0% in 1997. Due to inventory on-hand at the end of 1997, the
Company produced fewer shoes in the first quarter of 1998 and charged-off more
fixed manufacturing costs to operations than last year. In addition, sales of
higher margined products in the quarter were 43% below sales levels reported
last year. Both of these conditions led to a higher cost of goods sold
percentage, for the first quarter of 1998 as compared to 1997. Selling, general
and administrative (SG&A) expenses for the first quarter of 1998 are slightly
below 1997 by $17,398 or 1.3%. As a percentage of sales, SG&A expenses for the
first quarter of 1998 are up considerably over last year. Several factors
account for this increase: (1) billings received during the first quarter for
services provided by the Company's law firm and computer software company, (2)
the timing effect of changing since January 1, 1998,
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the compensation plan of our field sales force from a commission-based to a
salaried plus incentive-based program; and (3) expenses related to the "new"
defined contribution 401(k) savings plan. For the first quarter of 1998, the
defined contribution expense amounted to approximately $88,000. In the first
quarter of 1997, the Company did not have a decrease. The prior year didn't
commence until the third quarter.
Interest expense for the first quarter of 1998 has decreased by $87,217
or 61.9% compared to the first quarter of 1997. This significant decrease
reflects, in part, lower debt levels.
The Company incurred a net loss before taxes of $1,132,918 in the first
quarter of 1998, compared to a pre-tax loss of $703,623 last year. On an
after-tax basis, the loss for the quarter was ($702,409) or ($0.41) per share as
opposed to a ($436,246) after-tax loss of ($0.29) per share in the first quarter
of 1997.
On March 30, 1998 the Company hired Mr. Greg Tunney as its new
President and Chief Operating Officer. Mr. Tunney was previously the Vice
President, National Sales Manager of the Naturalizer and Dr. Scholl's Division
of the Brown Shoe Company located in St. Louis, Missouri.
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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.
At the Annual Meeting of Stockholders held on March 27, 1998 and
adjourned to April 1, 1998, stockholders present in person and by proxy
voted upon two proposals other than the election of Directors:
Proposal I
To amend the articles of organization to permit meetings of
stockholders to be held anywhere in the United States, as listed on the Proxy
Statement dated March 3, 1998. Of the total shares outstanding, 1,383,531 or 81%
voted on Proposal I as follows:
For 1,347,514 or 97.3%
Against 31,261 or 2.2%
Abstained 4,756 or .3%
No Vote 0 or 0%
Proposal II
To ratify the selection of Deloitte & Touche LLP as independent
auditors for the Company. Of the total shares outstanding, 1,383,531 or 81%
voted on Proposal II as follows:
For 1,373,911 or 99.3%
Against 7,020 or .5%
Abstained 2,600 or .1%
No Vote 0 or 0%
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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: May 15, 1998 /s/ Stanley W. Kabot
Stanley W. Kabot
Chief Financial Officer,
Treasurer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-30-1998
<CASH> 6,395
<SECURITIES> 0
<RECEIVABLES> 3,658,803
<ALLOWANCES> 248,504
<INVENTORY> 8,311,715
<CURRENT-ASSETS> 12,446,612
<PP&E> 8,966,573
<DEPRECIATION> 7,299,092
<TOTAL-ASSETS> 15,031,206
<CURRENT-LIABILITIES> 1,741,743
<BONDS> 0
0
0
<COMMON> 11,493,595
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 15,031,206
<SALES> 2,499,463
<TOTAL-REVENUES> 2,499,463
<CGS> 2,302,757
<TOTAL-COSTS> 1,275,989
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,635
<INCOME-PRETAX> (1,132,918)
<INCOME-TAX> (430,509)
<INCOME-CONTINUING> (702,409)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (702,409)
<EPS-PRIMARY> (0.41)
<EPS-DILUTED> (0.41)
</TABLE>
