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 September 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 SEPTEMBER 30, 1999
Common Stock $2.50 par value 1,568,860
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
September 30,1999 and December 31, 1998.................................2
Balance Sheets, Liabilities & Stockholders' Equity
September 30,1999 and December 31, 1998.................................3
Statements of Operations for the three months and nine months periods ended
September 30, 1999 and 1998............................................4
Statements of Cash Flows for the nine months ended
September 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..................................................10
<PAGE>
DANIEL GREEN COMPANY
Balance Sheets
Assets
September 30 December 31
1999 1998
(Unaudited) (*)
-------------------------------
Current Assets:
Cash $ 5,000 $ 7,300
Accounts Receivable, trade
less allowances for doubtful accounts
(1999 - $359,409 1998 - $250,000) 3,331,565 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 83,408 995,918
Work in Process 0 82,795
Finished Goods 4,472,652 4,402,186
----------------------------
Total Inventories 4,556,060 5,480,899
Other Current Assets 626,999 50,275
----------------------------
Total Current Assets 8,683,748 10,295,719
Property, plant & equipment:
Real Estate and Water Power, at cost 2,560,504 2,560,504
Machinery, Equipment & Lasts, at cost 1,573,696 1,526,742
----------------------------
4,134,200 4,087,246
Less: Accumulated Depreciation 3,312,786 3,180,179
----------------------------
Property, plant & equipment, net 821,414 907,067
Other Assets:
Deferred income tax asset 846,001 267,905
Deferred financing costs 470,749 29,417
Other Assets 178,660 39,982
----------------------------
Total Other Assets 1,495,410 337,304
Total Assets $11,000,572 $11,540,090
============================
(*)Derived from audited financial statements.
2
<PAGE>
DANIEL GREEN COMPANY
Balance Sheets
Liabilities & Stockholders' Equity
September 30 December 31
1999 1998
(Unaudited) (*)
--------------------------------
Current Liabilities:
Notes Payable, line of credit $ 2,319,707 $ 1,144,092
Notes Payable, current 100,096 1,212,424
Accounts Payable, trade 1,138,030 833,177
Accrued Salaries & Commissions 67,977 21,242
Accural for Closed Facilities 145,982 153,250
Other Accrued Liabilities 172,201 148,552
--------------------------------
Total Current Liabilities 3,943,993 3,512,737
Notes Payable, non-current 863,330 116,361
--------------------------------
Total Liabilities 4,807,323 3,629,098
Stockholders' Equity:
Common Stock 4,245,823 4,245,823
Paid-in-excess of par value 815,940 741,303
Retained Earnings 1,685,550 3,516,189
--------------------------------
6,747,313 8,503,315
Less: Treasury Stock (554,064) (592,323)
--------------------------------
Total Stockholders' Equity 6,193,249 7,910,992
Total Liabilities & Stockholders' Equity $ 11,000,572 $ 11,540,090
================================
(*) Derived from audited financial statements.
See notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
DANIEL GREEN COMPANY
Statements of Operations
(unaudited)
For the For the
Three Months Ended Nine Months Ended
September 30 September 30 September 30 September 30
1999 1998 1999 1998
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $ 3,694,844 $ 3,188,641 $ 8,845,220 $ 8,389,976
Costs and Expenses:
Cost of Goods Sold 2,583,448 2,326,707 7,833,290 7,155,839
Selling, General &
Administrative 988,871 2,154,822 3,303,650 3,887,370
Interest Expense 65,035 48,419 117,012 148,720
-------------------------------------------------------------
Total Costs and Expenses 3,637,354 4,529,948 11,253,952 11,191,929
Income (loss)before (Provision)
Credit for Income Taxes 57,490 (1,341,307) (2,408,732) (2,801,953)
(Provision)Credit for Income Taxes (13,797) 509,697 578,096 1,064,742
-------------------------------------------------------------
Net Income (Loss) $ 43,693 $ (831,610) $ (1,830,636) $ (1,737,211)
=============================================================
Net Income (Loss) per Share:
Basic $ 0.03 $ (0.53) $ (1.17) $ (1.13)
Diluted $ 0.03 $ (0.53) $ (1.17) $ (1.13)
Shares Outstanding:
Basic 1,579,211 1,579,514 1,568,860 1,538,460
Diluted 1,579,211 1,579,514 1,568,860 1,538,460
See notes to financial statements.
</TABLE>
4
<PAGE>
DANIEL GREEN COMPANY
Statements of Cash Flows
(Unaudited)
For Nine Months Ended
September 30 September 30
1999 1998
-----------------------------
Operating Activities:
Net Loss $(1,830,636) $(1,737,211)
Adjustments to reconcile net loss to net
cash (used)provided by operating activities:
Depreciation 218,734 240,309
Amortization 29,417 29,315
Changes in assets & liabilities:
(Increases) decreases in:
Accounts Receivable, trade 874,414 2,554,374
Income Tax Refund Receivable 387,142 (1,064,742)
Inventories 924,839 316,013
Other Current Assets (576,724) 63,233
Other Assets (656,850) 164,516
Increases ( decreases) in:
Accounts Payable, trade 304,853 260,864
Accrued Salaries & Commissions 46,735 (167,688)
Accrued Cooperative Advertising 19,629 (63,296)
Income Tax Payable 0 (421,389)
Other Accrued Liabilities (3,248) (99,837)
--------------------------
Net Cash (Used) Provided by Operating Activities (261,695) 74,461
Investment Activities:
Proceeds from disposals of property/equip 0 2,173
Purchase of property & equipment (133,082) (258,407)
--------------------------
Net Cash Used in Investing Activities (133,082) (256,234)
Financing Activities:
Net Borrowings(Payments) -Line of Credit 1,175,615 (267,251)
Repayments of Notes Payable (365,359) (421,251)
Issue (Purchase) of Treasury Stock 38,259 (24,000)
Acquisition Activities (59,926) 0
Other Refinancing Expenses (96,112) 0
Commitment Fee for Refinancing (300,000) 0
--------------------------
Net Cash Provided (Used) in Financing Activities 392,477 (712,502)
--------------------------
Net (Decrease) in Cash (2,300) (894,275)
Cash at Beginning of Period 7,300 901,875
--------------------------
Cash at End of Period $ 5,000 $ 7,600
==========================
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 September 30, 1999 and
the results of operations and cash flows for the three and
nine months then ended.
Note 2. The results of operations for the three and nine months
ended September 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 nine months ended September 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 nine months period ended
September 30, 1998 were as follows:
<TABLE>
<CAPTION>
For the Quarter Ended For the Nine Months Period
September 30, 1998 Ended September 30, 1998
BASIC DILUTED BASIC DILUTED
<S> <C> <C> <C> <C>
Net loss per share, as reported ($0.49) ($0.49) ($1.02) ($1.02)
Effect of restatement ($0.04) ($0.04) ($0.11) ($0.11)
Net loss per share, as restated ($0.53) ($0.53) ($1.13) ($1.13)
</TABLE>
6
<PAGE>
DANIEL GREEN COMPANY
Management Discussion & Analysis of Financial Condition and
Results of Operations
1. Liquidity and Capital Resources
For the first nine months of 1999, the Company's operating activities used
$261,695 in cash, compared to $74,461 cash generated for the same period in
1998. At the end of the third quarter, accounts receivable increased by
$164,509 or 5.2% over last year and is $874,414 lower compared to the end
of fiscal year 1998. Inventories ended the third quarter of 1999 at
$4,556,060 which is $3,597,302 or 44.1% lower than the 1998 comparable
period and has decreased from the beginning of the year by $924,839. The
reduction in inventory from 1998 fiscal year end figures reflects the
elimination of work-in-process inventory and significant reductions in raw
material inventory due to the Company's restructured status as a
merchandiser. In-transit footwear of 96,000 pairs contributed to the
increase of $70,466 in finished goods inventory. 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. The increase of $576,724 in other current assets is
attributable to establishment of a Sundries Accounts Receivable to
accommodate for sales of raw materials to vendors manufacturing our
footwear. Sundries receivable collections are expected within the fourth
quarter.
Total debt consists of notes payable and the current line of credit
balance. At the end of the third quarter of 1999, total indebtedness
consisted of: line of credit balance of $2,319,707, notes payable, current
$100,096 and notes payable, noncurrent $863,330; a total debt of
$3,283,133, as compared with $3,418,434 a year ago, for an overall decrease
of $135,301 or 3.96%. The Company's borrowing requirements for working
capital purposes are seasonal with peak borrowing periods between June and
mid September. Accelerated footwear shipment scheduling in anticipation of
the traditionally busy holiday season was the primary factor during the
third quarter for increased line of credit borrowings.
As of August 11, 1999 the Company had in place a revolving line of credit
("revolver"), with Manufacturers and Traders Trust Company (M&T Bank),
Buffalo, New York, which provided the Company with a $5,500,000 revolving
line of credit and a $838,097 mortgage/term loan (80% guaranteed by FMHA).
The revolver is secured by accounts receivable, inventory, equipment and
cash. Revolving line termination date, without an event of default, is July
30, 2002. The interest rate established on the revolving line, prior to an
event of default, is prime rate plus one percent (1%) per annum. The
mortgage term loan is secured by the Company's facilities and totaled
$838,097 as of September 30, 1999. The term loan's principal and interest
payments are based on a ten-year amortization with a balloon payment on
7
<PAGE>
April 1, 2001. Term loan interest rates, prior to an event of default, are
LIBOR plus two and one-quarter percent (2 1/4%) per annum.
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 third quarter were $3,694,844, 15.9% higher than last
year during this timeframe. For the nine months period ended September 30,
1999, net sales amounted to $8,845,220, an increase of 5.4% to the
comparable 1998 net sales. Variations between the actual customer style
demand and the sales style forecast, combined with the slower than
anticipated start up of foreign supply sources contributed to the lower
than expected sales figures for the third quarter of 1999. The number of
units sold increased 7.8% from 575,200 year to date September 1998 to
619,886 year to date September 1999. However, the average selling price per
pair of $14.27 is 2.2% lower that $14.59 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 September 30, 1999 totaled
$2,583,448 an increase of $256,741 or 11.0% over the comparable 1998
period. Gross profit during the third quarter of 1999, amounted to
$1,111,396 or 30 percent of net sales. This compared to a gross profit
percentage of 27 percent in the same quarter of 1998. For the nine months,
the gross profit percentage is 11.4% compared to 14.7% in 1998. During the
third quarter of 1999, the Company had significantly higher freight costs
in product delivery from foreign vendors. Additional expenses were incurred
during the 1999 third quarter to assist our Mexican vendors in achieving
adequate production levels to meet customers' demands and establishing
alternate sources of product supply. Other factors contributing to the cost
of goods sold increase were, underabsorbed overhead due to sub-normal
production levels during the first half of 1999 and severance payments to
terminated production employees.
For the quarter and nine months, total selling, general and administrative
expenses decreased 54.1% and 15.0% , respectively, from expenses reported
during the comparable periods of 1998. A reversal of the accrual of
$200,000 established during the second quarter of 1999 for costs associated
with closing and securing facilities previously used by the Company for
manufacturing purposes, was processed during the third quarter. Significant
reductions in benefit plan expenses and payroll taxes occurred during the
third quarter due to decreases in employment levels. Travel expense was
also reduced through the third quarter of 1999.
8
<PAGE>
During the third quarter of 1999, net interest expense amounted to $65,035
compared to $48,419 a year ago. Increased borrowings during the quarter and
higher interest rates under the new bank loan agreement led to the higher
quarterly interest expense. For the nine months, net interest expense has
declined to $117,021 in 1999 from $148,720 in 1998. This decrease in net
interest expense is principally due to a lower utilization of the Company's
revolving line of credit.
The Company produced net income before taxes of $57,490 in the third
quarter of 1999, compared to a net loss before taxes of $1,341,307 for the
1998 period. On an after-tax basis, income for the quarter was $43,693 or
$0.03 per share as opposed to the after-tax loss of $831, 610 or $0.53 per
share in 1998.
Through the first nine months of 1999, the Company had an after-tax loss of
$1,830,636 or $1.17 per share. This compared to last year's performance of
an after-tax loss of $1,737,211 or $1.13 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 $155
thousand. The Company expects to complete all year 2000 programming changes
prior to the end of the fourth quarter of 1999. Currently, our MIS
department has completed approximately 80% of the scheduled Y2K programming
changes. 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
<PAGE>
DANIEL GREEN COMPANY
Part II - Other Information
11 Legal Proceedings - None.
21 Changes in Securities - None.
31 Default upon Senior Securities - None.
41 Submission of matters to a vote of security holders. - None
51 Other Information - None.
61 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: November 12, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 5,000
<SECURITIES> 0
<RECEIVABLES> 3,690,974
<ALLOWANCES> 359,409
<INVENTORY> 4,556,060
<CURRENT-ASSETS> 8,683,748
<PP&E> 4,134,200
<DEPRECIATION> 3,312,786
<TOTAL-ASSETS> 11,000,572
<CURRENT-LIABILITIES> 3,943,993
<BONDS> 0
0
0
<COMMON> 6,193,249
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,000,572
<SALES> 8,845,220
<TOTAL-REVENUES> 8,845,220
<CGS> 7,833,290
<TOTAL-COSTS> 3,303,650
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 117,012
<INCOME-PRETAX> (2,408,732)
<INCOME-TAX> (578,096)
<INCOME-CONTINUING> (1,830,636)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,830,636)
<EPS-BASIC> (1.17)
<EPS-DILUTED> (1.17)
</TABLE>
