SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Quarterly Report under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended June 30, 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 JUNE 30, 1999
Common Stock $2.50 par value 1,563,685
Transitional Small Business Disclosure Format (Check One) Yes __ No X
<PAGE>
DANIEL GREEN COMPANY
INDEX
Page
Number
Index.......................................................................1
PART I - Financial Information
Balance Sheets, Assets
June 30,1999 and December 31, 1998..................................2
Balance Sheets, Liabilities & Stockholders' Equity
June 30,1999 and December 31, 1998..................................3
Statements of Operations for the three months and six months periods ended
June 30, 1999 and 1998..............................................4
Statements of Cash Flows for the six months ended
June 30, 1999 and 1998..............................................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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DANIEL GREEN COMPANY
Balance Sheets
ASSETS
June 30 December 31
1999 1998
(Unaudited) (*)
------------ ------------
Current Assets:
Cash $ 5,400 $ 7,300
Accounts Receivable, trade
less allowances for doubtful accounts
(1999 - $259,914 1998 - $250,000) 2,453,931 4,205,979
Deferred Income Tax Asset 164,124 164,124
Income Tax Receivable 0 387,142
Inventories, at lower of cost (FIFO) or market:
Raw Materials 122,453 995,918
Work In Process 0 82,795
Finished Goods 4,031,202 4,402,186
----------- -----------
Total Inventories 4,153,655 5,480,899
Other Current Assets 1,574 50,275
----------- -----------
Total Current Assets 6,778,684 10,295,719
Property, plant & equipment:
Real Estate and Water Power, at cost 2,560,504 2,560,504
Machinery, Equipment, & Lasts, at cost 1,554,157 1,526,742
----------- -----------
4,114,661 4,087,246
Less: Accumulated Depreciation 3,342,895 3,180,179
----------- -----------
Property, plant & equipment, net 771,766 907,067
Other Assets:
Deferred income tax asset 859,798 267,905
Other Assets 217,968 69,399
----------- -----------
Total Other Assets 1,077,766 337,304
----------- -----------
Total Assets $ 8,628,216 $11,540,090
=========== ===========
2
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DANIEL GREEN COMPANY
Balance Sheets
Liabilities & Stockholders' Equity
June 30 December 31
1999 1998
(Unaudited) (*)
------------ ------------
Current Liabilities:
Notes Payable, line of credit $ 497,657 $ 1,144,092
Notes Payable, current 957,987 1,212,424
Accounts Payable, trade 328,066 833,177
Accrued Salaries & Commissions 204,261 21,242
Accural for Closed Facilities 353,250 0
Other Accrued Liabilities 259,553 301,802
------------ ------------
Total Current Liabilities 2,600,774 3,512,737
Notes Payable, non-current 98,115 116,361
------------ ------------
Total Liabilities 2,698,889 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 1,641,858 3,516,189
------------ ------------
6,628,984 8,503,315
Less: Treasury Stock (699,657) (592,323)
------------ ------------
Total stockholders' equity 5,929,327 7,910,992
------------ ------------
Total Liabilities & Stockholders' Equity $ 8,628,216 $ 11,540,090
============ ============
(*) Derived from audited 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
1999 1999 1999 1999
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $2,263,351 $2,701,872 $5,150,376 $5,201,335
Costs and Expenses
Cost of Goods Sold 2,826,588 1,783,724 5,249,842 4,261,226
Selling, General &
Administrative 1,354,715 1,199,209 2,314,779 2,300,453
Interest Expense 30,744 46,666 51,977 100,301
--------------------------------------------------------------------------
Total Costs and Expenses 4,212,047 3,029,599 7,616,598 6,661,980
Loss before credit for
Income Taxes (1,948,696) (327,727) (2,466,222) (1,460,645)
Credit for Income Taxes 470,233 124,536 591,893 555,045
--------------------------------------------------------------------------
Net Loss $(1,478,463) $ (203,191) $(1,874,329) $ (905,600)
==========================================================================
Net Loss per Share:
Basic $ (0.95) $ (0.13) $ (1.20) $ (0.60)
Diluted $ (0.95) $ (0.13) $ (1.20) $ (0.60)
Shares Outstanding:
Basic 1,556,445 1,523,975 1,563,685 1,517,934
Diluted 1,556,445 1,523,975 1,563,685 1,517,934
See notes to financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DANIEL GREEN COMPANY
Statements of Cash Flows
(Unaudited) For the
For Six Months Ended
June 30 June 30
1999 1999
---------------------------------
<S> <C> <C>
Operating Activities:
Net Loss $(1,874,329) $ (905,600)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 164,804 160,206
Amortization 19,543 19,543
Changes in assets & liabilities:
(Increases) decreases in:
Accounts Receivable, trade 1,752,048 3,207,518
Income Tax Refund Receivable 387,142 (555,433)
Inventories 1,327,244 (214,660)
Other Current Assets 48,701 62,051
Other Assets (760,005) 119,394
Increases (decreases) in:
Accounts Payable, trade (505,111) 114,661
Accrued Salaries & Commissions 183,019 (128,825)
Accrued Cooperative Advertising (10,371) (93,296)
Income Tax Payable 0 (421,389)
Other Accrued Liabilities 321,372 (94,638)
-----------------------------------
Net Cash Provided by Operating Activities 1,054,057 1,269,532
Investment Activities:
Proceeds from disposals of property/equip. 0 1,194
Purchase of property & equipment (29,505) (122,100)
-----------------------------------
Net cash used in Investing Activities (29,505) (120,906)
Financing Activities:
Net Payments on Line of Credit (646,435) (1,765,046)
Repayments of Notes Payable (272,683) (280,655)
Purchase of Treasury Stock (107,334) 0
Principal Payment Capital Lease 0 0
-----------------------------------
Net Cash Used n Financing Activities (1,026,452) (2,045,701)
-----------------------------------
Net (Decrease in Cash (1,900) (897,075)
Cash at Beginning of Period 7,300 901,875
-----------------------------------
Cash at End of Period $ 5,400 $ 4,800
===================================
See notes to financial statements.
</TABLE>
5
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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
normal and recurring nature, necessary to present fairly the
financial position as of June 30, 1999 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, 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
and six months ended June 30, 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. The effects of this restatement
for the quarter and the six months period ended June 30, 1998
were as follows:
<TABLE>
<CAPTION>
For the Quarter Ended For the Six Months Period
JUNE 30, 1998 Ended JUNE 30, 1998
BASIC DILUTED BASIC DILUTED
<S> <C> <C> <C> <C>
Net loss per share, as reported ($ 0.12) ($ 0.12) ($ 0.53) ($ 0.53)
Effect of restatement ($ 0.01) ($ 0.01) ($ 0.07) ($ 0.07)
Net loss per share, as restated ($ 0.13) ($ 0.13) ($ 0.60) ($ 0.60)
</TABLE>
6
<PAGE>
DANIEL GREEN COMPANY
Management Discussion & Analysis of Financial Condition and
Results of Operations
1. Liquidity and Capital Resources
For the first six months of 1999, the Company generated $1,054,057 in cash
from operating activities compared to $1,269,532 cash generated for the
same period in 1998. At the end of the second quarter, accounts receivable
decreased by $262,734 or 10.5% over last year and is $1,752,048 lower
compared to the end of fiscal year 1998. Inventories ended the second
quarter of 1999 at $4,153,655 which is $4,530,380 or 52.2% lower than the
1998 comparable period and has, as expected with the discontinuance of
manufacturing as of June 30, 1999, decreased from the beginning of the year
by $1,327,244. Naturally, under the Company's restructured status as a
merchandiser, work-in-process inventory has been eliminated and raw
material inventory has been significantly reduced. Sales of raw materials
to vendors manufacturing our footwear will continue to reduce raw material
inventory into the third quarter. Finished merchandise inventory will be
adjusted on a monthly basis to reflect the change in overhead absorption
rate due to the mid-year conversion from manufacturer to merchandiser.
Total debt consists of notes payable and the current line of credit
balance. At the end of the second quarter of 1999, total indebtedness
consisted of: line of credit balance of $497,657, notes payable, current
$957,987 and notes payable, noncurrent $98,115; a total debt of $1,553,759,
as compared with $2,061,235 a year ago, for an overall decrease of $507,476
or 24.6%. In an effort to conserve cash, employment levels in the
manufacturing area were reduced to essential minimums. Work weeks were
abbreviated to accommodate only required footwear production. Significantly
lower spending levels throughout the first six months of 1999, also
contributed to debt reduction. Proceeds from terminating the Company's
defined benefit plan during the fourth quarter of 1997, affected 1998
second quarter debt reduction.
Through the second 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 June 30, 1999 the Company was not in compliance with certain
financial covenants contained in those loan agreements. Management executed
a credit agreement with a new financial institution on August 11, 1999.
Prior to that date KeyBank National Association extended to the Company
forbearance agreements until the new financing arrangements were completed.
7
<PAGE>
The mortgage term loan is secured by the Company's facilities and totaled
$921,907 as of June 30, 1999.
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 $2.3 million which is
16.2% lower than last year during this timeframe. For the first six months
of 1999, net sales amounted to $5,150,376, a slight decrease of 1% from net
sales in the first six months of 1998. The number of pairs shipped
increased 3.6% from 363,358 year to date June 1998 to 376,676 year to date
June 1999. However, the average selling price per pair of $13.67 is 11.6%
lower that $15.46 for the same period in 1998. The lower price points of
slow moving/closeout inventory written down in the prior year, introduction
of lower priced specialty footwear, and promotional markdowns drove the
lower average selling price per pair.
Cost of goods sold for the three months ended June 30, 1999 totaled
$2,826,588 an increase of $1,042,864 or 58.5% over the comparable 1998
period, resulting in a gross loss of $563,237 for the 1999 second quarter
compared to a gross profit of $918,148 for the 1998 period. For the six
months, the Company recognized a gross loss of $99,466 compared to a 1998
gross profit of $940,109. These losses are largely attributable to the
significant inventory reductions. Other factors contributing to the
increase to cost of goods sold were, a higher degree of underabsorbed
overhead due to low production volume reported for the first half of 1999
and severance payments to terminated production employees of approximately
$251,000.
For the quarter and six months, total selling, general and administrative
expenses were 13% and 0.6% higher, respectively, than expenses reported
during the comparable periods of 1998. Expenditures for promotional items,
such as design and development of new display stands, a more aggressive
national advertising campaign and dealers' promotional literature
identifying the new "Comfy Line" attributed approximately $140,000.
Forbearance fees with KeyBank and other expenses associated to the
refinancing process, year to date, total $68,000. An accrual of $200,000
was established during the second quarter of 1999 for costs associated with
closing and securing facilities previously used by the Company for
manufacturing purposes.
During the second quarter of 1999, net interest expense amounted to $30,744
compared to $46,666 a year ago. For the six months, net interest expense
has declined to $51,977 in 1999 from $100,301 in 1998. This decrease in net
interest
8
<PAGE>
expense is principally due to lower spending levels in 1999, 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 $1.9 million
in the second quarter of 1999, an increase of $1.6 million over last year.
On an after-tax basis, the loss for the quarter was approximately $1.5
million or $0.95 per share as opposed to approximately $203 thousand after
tax loss of $0.13 per share in 1998.
The net loss for the first half of the year was approximately $1.9 million
or $1.20 per share. This compared to last year's first six months loss of
approximately $906 thousand or $0.60 per share.
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 approximately $150
thousand. 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 development of a contingency plan, 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.
9
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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: August 13, 1999 /s/ John E. Brigham
John E. Brigham
Chief Financial Officer,
Treasurer
/s/ Greg A. Tunney
Greg A. Tunney
President & COO
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 5,400
<SECURITIES> 0
<RECEIVABLES> 2,713,845
<ALLOWANCES> 259,914
<INVENTORY> 4,153,655
<CURRENT-ASSETS> 6,778,684
<PP&E> 4,114,661
<DEPRECIATION> 3,342,895
<TOTAL-ASSETS> 8,628,216
<CURRENT-LIABILITIES> 2,600,774
<BONDS> 0
0
0
<COMMON> 5,929,327
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,628,216
<SALES> 5,150,376
<TOTAL-REVENUES> 5,150,376
<CGS> 5,249,842
<TOTAL-COSTS> 2,314,779
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,977
<INCOME-PRETAX> (2,466,222)
<INCOME-TAX> (591,893)
<INCOME-CONTINUING> (1,874,329)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,874,329)
<EPS-BASIC> (1.20)
<EPS-DILUTED> (1.20)
</TABLE>
