SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
Quarterly Report under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended March 31, 1999 Commission File No. 0-774
DANIEL GREEN COMPANY
(Name of Small Business Issuer 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)
Issuer's telephone number, including area code: (315) 429-3131
Former name, former address and former fiscal year, if changed since last
report: None.
Check whether the issuer: (1)filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past twelve months (or for such
shorter period that the registrant was required to file such reports),and(2)has
been subject to the filing requirements for the past 90 days. YES X NO
CLASS OUTSTANDING AT MARCH 31, 1999
Common Stock $2.50 par value 1,566,779
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DANIEL GREEN COMPANY
INDEX
Page
Number
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PART I - Financial Information
Balance Sheets, Assets
March 31, 1999 & December 31, 1998. . . . . . . . . . . . . . . . . 2
Balance Sheets, Liabilities & Stockholders' Equity
March 31, 1999 & December 31, 1998. . . . . . . . . . . . . . . . . 3
Statements of Operations for the three months ended
March 31, 1999 and March 31, 1998 . . . . . . . . . . . . . . . . . 4
Statements of Cash Flows for the three months ended
March 31, 1999 and March 31, 1998 . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . 6
Management Discussion & Analysis of Financial Conditions
and Results of Operations. . . . . . . . . . . . . . . . . . . . . 7
PART II - Other Information . . . . . . . . .. . . . . . . . . . . . . 10
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DANIEL GREEN COMPANY
Balance Sheets
ASSETS
March 31 December 31
1999 1998
(Unaudited) (*)
------------ ------------
Current Assets:
Cash $ 5,400 $ 7,300
Accounts Receivable, trade
less allowances for doubtful accounts
(1999 - $175,760 1998 - $250,000) 2,973,860 4,205,979
Deferred Income Tax Asset 164,124 164,124
Income Tax Receivable
387,142 387,142
Inventories, at lower of cost (FIFO) or market:
Raw Materials 1,072,827 995,918
Work In Process 132,489 82,795
Finished Goods 3,805,845 4,402,186
----------- -----------
Total Inventories 5,011,161 5,480,899
Other Current Assets 1,797 50,275
----------- -----------
Total Current Assets 8,543,484 10,295,719
Property, plant & equipment:
Real Estate and Water Power, at cost 2,560,504 2,560,504
Machinery, Equipment, & Lasts, at cost 1,557,129 1,526,742
----------- -----------
4,117,633 4,087,246
Less: Accumulated Depreciation 3,254,974 3,180,179
----------- -----------
Property, plant & equipment, net 862,659 907,067
Other Assets:
Deferred income tax asset 389,565 267,905
Other Assets 104,722 69,399
----------- -----------
Total Other Assets 494,287 337,304
----------- -----------
Total Assets $ 9,900,430 $11,540,090
=========== ===========
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DANIEL GREEN COMPANY
Balance Sheets
Liabilities & Stockholders' Equity
March 31 December 31
1999 1998
(Unaudited) (*)
------------ ------------
Current Liabilities:
Notes Payable, line of credit $ 282,166 $ 1,144,092
Notes Payable, current 1,084,256 1,212,424
Accounts Payable, trade 551,524 833,177
Accrued Salaries & Commissions 107,410 21,242
Other Accrued Liabilities 290,778 301,802
------------ ------------
Total Current Liabilities 2,316,134 3,512,737
Notes Payable, non-current 107,290 116,361
------------ ------------
Total Liabilities 2,423,424 3,629,098
Stockholders' Equity
Common Stock 4,245,823 4,245,823
Paid-in-excess of par value 741,303 741,303
Retained Earnings 3,120,321 3,516,189
8,107,447 8,503,315
Less: Treasury Stock (630,441) (592,323)
------------ ------------
Total stockholders' equity 7,477,006 7,910,992
------------ ------------
Total Liabilities & Stockholders' Equity $ 9,900,430 $ 11,540,090
============ ============
(*) 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
1999 1998
----------- -----------
Net Sales $ 2,887,025 $ 2,499,463
Costs and Expenses:
Cost of Goods Sold 2,423,254 2,477,502
Selling, General, & Administrative 960,064 1,101,244
Interest Expense 21,233 53,635
----------- -----------
Total Costs and Expenses 3,404,551 3,632,381
----------- -----------
Loss before credit for Income Taxes (517,526) (1,132,918)
Credit for Income Taxes 121,660 430,509
----------- -----------
Net Loss ($ 395,866) ($ 702,409)
=========== ===========
Net Loss per Share:
Basic ($0.25) ($0.46)
Diluted ($0.25) ($0.46)
Weighted Average Shares Outstanding:
Basic 1,570,925 1,511,892
Diluted 1,570,925 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
1999 1998
------------ ------------
Operating Activities:
Net Loss $ (395,866) $ (702,409)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 74,795 80,103
Amortization 9,771 9,771
Net Pension Expense 0 75,000
Changes in assets & liabilities:
(Increases) decreases in:
Accounts Receivable, trade 1,232,119 2,311,132
Income Tax Refund Receivable 0 (430,897)
Inventories 469,738 157,660
Other Current Assets 48,478 9,672
Other Assets (166,754) (17,705)
Increases (decreases) in:
Accounts Payable, trade (281,653) 183,954
Accrued Salaries 86,168 12,716
Accrued Cooperative Advertising (50,160) (123,203)
Income Taxes Payable 0 (421,389)
Other Accrued Liabilities 39,135 (98,726)
----------- -----------
Net Cash Provided by Operating Activities 1,065,771 1,045,679
Investing Activities:
Proceeds from disposals of property/equip 0 800
Purchase of property & equipment (30,387) (39,938)
----------- -----------
Net Cash Used in Investing Activities (30,387) (39,138)
Financing Activities:
Net Payments on Line of Credit (861,926) (1,760,195)
Repayments of Notes Payable (137,240) (140,238)
Purchase of Treasury Stock (38,118) 0
Principal Payment Capital Lease 0 (1,588)
----------- -----------
Net Cash Used in Financing Activities (1,037,284) (1,902,021)
----------- -----------
Net(Decrease)in Cash (1,900) (895,480)
Cash at Beginning of Period 7,300 901,875
----------- -----------
Cash at End of Period $ 5,400 $ 6,395
=========== ===========
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, 1999 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, 1999
are not necessarily indicative of the results to be expected for the
full year.
Note 3. Basic and diluted net loss per share for the three months ended March
31, 1998 have been restated as the Company did not consider the
Company's unallocated shares in its 401(k) Plan as treasury stock when
computing the originally reported amounts.
Basic Diluted
Net loss per share, as reported ($0.41) ($0.41)
Effect of restatement ($0.05) ($0.05)
Net loss per share, as restated ($0.46) ($0.46)
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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, 1999, net cash flows from operating
activities were $1,065,771 as compared to $1,045,679 for the first quarter in
1998.
The Company experienced a lower first quarter loss than in 1998
($395,866 versus $702,409). Involvement of a re-aligned sales force in more
effective customer account control and collection, combined with more aggressive
payment terms, reduced accounts receivable enabling the Company to improve its
cash from operations. Significant reductions in manufacturing activities, due to
the implementation of the scheduled restructuring plan, referenced in the 1998
Annual Report, resulted in an inventory reduction of $469,738 from December 31,
1998 levels. Inventories in the first quarter of 1999 were $5,011,161 compared
to $8,311,715 at the end of March 31, 1998.
Accounts receivable decreased at the end of the first quarter of 1999,
to $2,973,860 from $3,410,299 at the end of the same quarter of 1998, and has
gone down by $1,232,119 since the beginning of the fiscal year.
Prudent debt management for the first quarter of 1999 resulted in a
borrowing balance on the revolving line of credit of $282,166 compared to
$459,607 at March 31, 1998. The Company was able to achieve a lower borrowing
balance in the first quarter of 1999 solely with cash provided by operating
activities.
Through the first quarter of 1999, the Company had a credit arrangement
with KeyBank National Association which provided the Company with an $8,000,000
revolving line of credit and a $2,100,000 mortgage/term loan. The revolver is
secured by accounts receivable, inventory, equipment and cash. As of March 31,
1999 the Company was not in compliance with certain financial covenants
contained in those loan agreements. Management is currently negotiating with
several financial institutions to facilitate new credit arrangements. During the
interim period Keybank National Association has extended to the Company a
forbearance agreement until new financing arrangements are secured.
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The mortgage term loan is secured by the Company's manufacturing
facilities and totaled $1,047,621 as of March 31, 1999.
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
Although shipments of footwear products increased by 13,300 pairs or 7%
over the comparable period for 1998, net sales increased $387,562 or 16% due to
higher average selling prices.
Cost of goods sold for the first quarter was 84% of net sales as
compared to 99% in 1998. Due to inventory on-hand at the end of 1998, together
with the implementation of planned restructuring of the Company, there was a
significant reduction in footwear production. However, production and overhead
expenses were not proportionately reduced to the lower level of production.
Accelerating the 1999 workforce reduction program resulted in recognizing
($58,000) of unbudgeted severance cost in the 1999 first quarter. Purchases of
imported product increased $285,000 or 120% over year to date purchases for
March 1998. Selling, general and administrative (SG&A) expenses for the first
quarter of 1999, are below 1998 by $141,180 or 12.8%. As a percentage of sales,
SG&A expenses for the first quarter of 1999 are down considerably over last year
by 11%. These reductions were achieved by a concentrated effort by all Company
employees to recognize unnecessary or wasteful spending. Effective January 1,
1999 the Company approved two new policies: Expenditure Authorization Policy and
Procedure; and Travel, Entertainment, and Other Business Expense Policy and
Procedure, in a further effort to control costs and expenses. A significant
savings was realized in re-establishing a commission-based compensation plan for
our field sales force. Thereby, eliminating the 100%-reimbursed travel
expense/salaried program initiated in 1998.
Interest expense for the first quarter of 1999 has decreased by $32,402
or 60% compared to the first quarter of 1998. This significant decrease is a
result of lower debt levels.
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Page 9
The Company incurred a net loss before taxes of ($517,526) in the first
quarter of 1999, compared to a pre-tax loss of ($1,132,918) last year. On an
after-tax basis, the loss for the quarter was ($395,866) or ($0.25) per share as
opposed to a ($702,409) after-tax loss of ($0.46) per share in the first quarter
of 1998.
3. Year 2000
The Company uses software and related computerized information systems
that will be affected by the date change in the year 2000. The Company believes
it does not have any significant non-information technology systems that will be
affected by the change in the year 2000. Based on its assessment, the Company
has determined that it will replace or upgrade major portions of its computer
hardware and software so that its computer systems will properly use and
recognize dates beyond December 31, 1999. Based on the most current information
compiled by the Company, the Company believes that the costs of addressing the
year 2000 issue will be considerably less than the $850,000 estimate stated in
the 1998 Annual Report. The Company expects to complete all year 2000
programming changes prior to the fourth quarter of 1999. The estimated costs of,
and time frame related to, this project are based on estimates of the Company's
management, and there can be no assurance that actual costs will not differ
materially from the current expectations. While the Company plans to devote the
necessary resources to resolve all significant year 2000 issues in a timely
manner, which includes developing a contingency plan by the end of the second
quarter of 1999, if such processing issues are not resolved in a timely manner,
the year 2000 issue could have a material impact on the operations and financial
condition of the Company.
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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.
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 12, 1999 /s/ John E. Brigham
John E. Brigham
Chief Financial Officer,
Treasurer
/s/ Greg A. Tunney
Greg A. Tunney
President & COO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 5,400
<SECURITIES> 0
<RECEIVABLES> 3,149,620
<ALLOWANCES> 175,760
<INVENTORY> 5,011,161
<CURRENT-ASSETS> 8,543,484
<PP&E> 4,117,633
<DEPRECIATION> 3,254,974
<TOTAL-ASSETS> 9,900,430
<CURRENT-LIABILITIES> 2,316,134
<BONDS> 0
0
0
<COMMON> 7,477,006
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 9,900,430
<SALES> 2,887,025
<TOTAL-REVENUES> 2,887,025
<CGS> 2,423,254
<TOTAL-COSTS> 960,064
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,233
<INCOME-PRETAX> (517,526)
<INCOME-TAX> (121,660)
<INCOME-CONTINUING> (395,866)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (395,866)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
