<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
Date of Report (Date of earliest event reported) March 30, 2000
DANIEL GREEN COMPANY
------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 000-00774 150327010
------------------------------------------------------------------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of incorporation) File Number) Identification No.)
450 N. Main Street, Old Town, Maine 04468
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (207) 827-4431
One Main Street, Dolgeville, New York 13329
------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE> 2
ITEM 2, ACQUISITION OR DESPOSITION OF ASSETS
On March 30, 2000 Daniel Green Company (the "Company") acquired all of
the outstanding stock of Penobscot Shoe Company ("Pendoscot") for approximately
$17.8 million in cash and the assumption of certain obligations. The details of
the event were reported in the Current Report on Form 8-K filed by the Company
with the Securities and Exchange Commission on March 31, 2000. The historical
financial statements of Penobscot and pro forma financial data required by such
Report could not be prepared in time for filing therewith. Those financial
statements and the pro forma financial data are included in this Amendment No.
1 to the Current Report as allowed by Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired (Penobscot)
Independent Auditors' Report
Report of Independent Certified Public Accountants
Balance Sheets at November 26, 1999 and November 27, 1998
Statements of Income for the Years Ended November 26, 1999
and November 27, 1998 and for the three months ended
February 25, 2000 and February 26, 1999
Statements of Shareholders' Equity for the years ended
November 26, 1999 and November 27, 1998
Statements of Cash Flows for the Years Ended November 26,
1999 and November 27, 1998 and for the three months ended
February 25, 2000 and February 26, 1999
Notes to Financial Statements
(b) Pro Forma Financial Data of Daniel Green Company
Pro Forma Statement of Operations for the year ended
December 31, 1999
Pro Forma Statement of operations for the three months ended
March 31, 2000
Pro Forma Statement of operations for the three months ended
March 31, 1999
Notes to Pro Forma Financial Data
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto authorized.
DANIEL GREEN COMPANY
(Registrant)
Dated: June 12, 2000 By: /s/ James R. Reidman
--------------------
James R. Riedman, CEO
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Penobscot Shoe Company
Old Town, Maine
We have audited the accompanying balance sheet of Penobscot Shoe Company as of
November 26, 1999, and the related statements of income, shareholders' equity,
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such 1999 financial statements present fairly, in all material
respects, the financial position of the Company as of November 26, 1999, and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Rochester, New York
January 14, 2000
(February 10, 2000 as to Note 9)
F-1
<PAGE> 5
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Penobscot Shoe Company
Old Town, Maine
We have audited the accompanying balance sheet of Penobscot Shoe Company as of
November 27, 1998, and the related statements of income, shareholders' equity,
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting priciples used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Penobscot Shoe Company at
November 27, 1998, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
/s/ BDO Seidman, LLP
Boston, Massachusetts
January 12, 1999
F-2
<PAGE> 6
PENOBSCOT SHOE COMPANY
BALANCE SHEETS
NOVEMBER 26, 1999 AND NOVEMBER 27, 1998
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
ASSETS 1999 1998
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 504 $ 454
Investments 3,985 3,757
Receivables (less allowances of $502 in 1999 and $526 in 1998) 3,380 3,825
Inventories 7,037 6,568
Prepaid expenses and other 231 168
-------- --------
Total current assets 15,137 14,772
PREPAID PENSION COST 528 407
PROPERTY AND EQUIPMENT:
Land 66 66
Land improvements 5 5
Buildings and improvements 1,443 1,443
Machinery and equipment 392 425
-------- --------
1,906 1,939
Less accumulated depreciation 1,763 1,725
-------- --------
Net property and equipment 143 214
-------- --------
TOTAL ASSETS $ 15,808 $ 15,393
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 871 $ 1,088
Notes payable 550 1,475
Accruals:
Salaries, wages and commissions 144 313
Retirement plan 160 168
Income taxes 481 129
Other 97 123
Dividends payable -- 69
-------- --------
Total current liabilities 2,303 3,365
DEFERRED INCOME TAXES 213 168
SHAREHOLDERS' EQUITY:
Common stock - $1 par; authorized 2,000,000 shares; 1,533,042
shares issued 1,533 1,533
Additional paid-in capital 1,109 1,109
Retained earnings 11,003 9,602
Accumulated other comprehensive income 455 455
-------- --------
14,100 12,699
Less: treasury stock at cost, 144,752 shares in 1999 and
154,752 shares in 1998 (808) (839)
-------- --------
Total shareholders' equity 13,292 11,860
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 15,808 $ 15,393
======== ========
</TABLE>
See notes to financial statements.
F-3
<PAGE> 7
PENOBSCOT SHOE COMPANY
STATEMENTS OF INCOME
YEARS ENDED NOVEMBER 26, 1999 AND NOVEMBER 27, 1998 AND THREE MONTHS ENDED
FEBRUARY 25, 2000 AND FEBRUARY 26, 1999
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
(unaudited)
-----------------------------------------------------------------------------------------
Three Months Three Months
Year Ended Year Ended Ended Ended
November 26, November 27, February 25, February 26,
1999 1998 2000 1999
<S> <C> <C> <C> <C>
NET SALES $ 21,665 $ 19,607 $ 5,854 $ 5,705
---------- ---------- ---------- ----------
COSTS AND OPERATING
EXPENSES:
Cost of sales 13,464 12,868 3,335 3,715
Selling and administrative
expenses 5,475 4,664 1,434 1,397
---------- ---------- ---------- ----------
Total costs and operating
expenses 18,939 17,532 4,769 5.112
---------- ---------- ---------- ----------
OPERATING INCOME 2,726 2,075 1,085 593
OTHER INCOME, NET 428 483 690 68
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 3,154 2,558 1,775 661
INCOME TAXES 1,476 1,072 713 265
---------- ---------- ---------- ----------
NET INCOME $ 1,678 $ 1,486 $ 1,062 $ 396
========== ========== ========== ==========
NET INCOME PER COMMON SHARE:
Basic $ 1.21 $ 1.08 $ 0.77 $ 0.29
========== ========== ========== ==========
Diluted $ 1.20 $ 1.07 $ 0.77 $ 0.28
========== ========== ========== ==========
WEIGHTED AVERAGE SHARE
OUTSTANDING:
Basic 1,384,829 1,376,643 1,388,291 1,378,291
========== ========== ========== ==========
Diluted 1,394,856 1,389,217 1,388,291 1,393,075
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 8
PENOBSCOT SHOE COMPANY
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED NOVEMBER 26, 1999 AND NOVEMBER 27, 1998
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
--------------------------- PAID-IN RETAINED COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS INCOME
<S> <C> <C> <C> <C> <C>
Balance, November 28, 1997 1,533,042 $ 1,533 $ 1,109 $ 8,392 $ 449
Net income -- -- -- 1,486 --
Unrealized gain on investments -- -- -- -- 6
Total comprehensive income -- -- -- -- --
Sale of treasury stock -- -- -- -- --
Purchase of treasury stock -- -- -- -- --
Dividends declared ($.20 per share) -- -- -- (276) --
--------- ---------- ---------- ---------- ----------
Balance, November 27, 1998 1,533,042 1,533 1,109 9,602 455
Net income -- -- -- 1,678 --
Total comprehensive income -- -- -- -- --
Sale of treasury stock -- -- -- -- --
Dividends declared ($.20 per share) -- -- -- (277) --
--------- ---------- ---------- ---------- ----------
1,533,042 $ 1,533 $ 1,109 $ 11,003 $ 455
========= ========== ========== ========== ==========
--------------------------------------------------------------------------
TREASURY
STOCK TOTAL
<S> <C> <C>
Balance, November 28, 1997 $ (799) $ 10,684
Net income -- 1,486
Unrealized gain on investments -- 6
----------
Total comprehensive income -- 1,492
Sale of treasury stock 31 31
Purchase of treasury stock (71) (71)
Dividends declared ($.20 per share) -- (276)
---------- ----------
Balance, November 27, 1998 (839) 11,860
Net income -- 1,678
----------
Total comprehensive income -- 1,678
Sale of treasury stock 31 31
Dividends declared ($.20 per share) -- (277)
---------- ----------
$ (808) $ 13,292
========== ==========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 9
PENOBSCOT SHOE COMPANY
STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 26, 1999 AND NOVEMBER 27, 1998 AND THREE MONTHS ENDED
FEBRUARY 25, 2000 AND FEBRUARY 26, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
------------------------------------
YEAR ENDED YEAR ENDED THREE MONTHS THREE MONTHS
NOVEMBER 26, NOVEMBER 27, ENDED ENDED
1999 1998 FEBRUARY 25, 2000 FEBRUARY 26, 1999
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,678 $ 1,486 $ 1,062 $ 396
------- ------- ------- -------
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization 101 107 15 26
Gain on sale of investments (310) (381) -- --
Gain on sale of property and equipment (8) -- -- --
Changes in operating assets and liabilities:
Receivables 445 (72) (4,611) (29)
Inventories (469) (2,285) 325 1,252
Prepaid expenses and other assets (142) (68) (240) 66
Accounts payable (217) 491 (224) 262
Accruals 149 371 716 23
Deferred income taxes (10) (70) -- --
------- ------- ------- -------
Total adjustments (461) (1,907) (4,019) 1,600
------- ------- ------- -------
Net cash provided (used) by operating activities 1,217 (421) (2,957) 1,996
------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investments 1,041 1,556 2,981 28
Purchases of investments (946) (1,465) -- --
Proceeds from sale of property and equipment 8 -- -- --
Purchases of property and equipment (30) (28) (3) (10)
------- ------- ------- -------
Net cash provided by investing activities 73 63 2,978 18
------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable (payments) proceeds, net (925) 725 (550) (1,475)
Dividends paid (346) (276) -- (69)
Purchase of treasury stock -- (71) -- --
Sale of treasury stock 31 31 -- --
------- ------- ------- -------
Net cash (used) provided by financing activities (1,240) 409 (550) (1,544)
------- ------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 50 51 (529) 470
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 454 403 504 454
------- ------- ------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 504 $ 454 $ (25) 924
======= ======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Payments for income taxes were $1,134, and $1,019 in 1999,
and 1998, respectively. Cash paid for interest in 1999 and
was $32, and $45, respectively.
</TABLE>
See notes to financial statements.
F-6
<PAGE> 10
PENOBSCOT SHOE COMPANY
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 26, 1999 AND NOVEMBER 27, 1998
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
BUSINESS OPERATIONS - The Company is engaged in the design, importing and
sale of women's casual and tailored footwear, including boots and sandals,
for the retail market throughout the United States.
FISCAL YEAR - The Company's fiscal year ends on the last Friday in
November, which results in a 52 or 53 week year. Fiscal years 1999 and
1998 included 52 weeks.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principals requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
CASH EQUIVALENTS - The Company considers all highly liquid investments with
maturities of three months or less when purchased to be cash equivalents.
INVESTMENTS - The Company classifies its investments in debt and equity
securities as available-for-sale securities, and therefore records them at
fair market value. The cost of investments sold is based on the first-in,
first-out method in the determination of realized gains and losses.
Realized gains and losses are recognized in the results of operations.
Unrealized gains and losses, net of income taxes, are recorded as a
separate component of shareholders' equity.
INVENTORIES - Inventories are stated at cost, not in excess of market. Cost
is determined on a last-in, first-out ("LIFO") basis.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the following
estimated useful lives:
<TABLE>
<CAPTION>
YEARS
<S> <C>
Land improvements 10
Buildings and improvements 10 - 33
Machinery and equipment 3 - 10
</TABLE>
The Company continually reviews property and equipment to determine that
the carrying values have not been impaired by estimating the future
discounted cash flows expected to result from the use of the property and
equipment. No impairment expense was necessary in 1999 and 1998.
FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK - The fair values
of debt securities and equity investments are based on quoted market prices
for those investments. The estimated fair values of the Company's other
financial instruments, which include cash, receivables, notes payable, and
accounts payable approximate their carrying values. At November 26, 1999
and November 27, 1998, the Company's receivables were primarily due from
retailers.
The Company performs periodic credit evaluations of its customers financial
condition and generally does not require collateral. Credit losses relating
to customers have consistently been within the Company's expectations.
F-7
<PAGE> 11
ADVERTISING--The Company expenses advertising costs as incurred advertising
expense was approximately $705,000 and $553,000 in 1999 and 1998,
respectively.
INCOME TAXES - Income taxes are based on income for financial reporting
purposes and reflect a current tax liability for the estimated taxes
payable in the current year tax return and changes in deferred taxes.
Deferred tax liabilities or assets are recognized for the estimated tax
effects of temporary differences between financial reporting and taxable
income.
NET INCOME PER COMMON SHARE - The Company's basic net earnings per common
share is computed by dividing net income by the actual weighted average
number of common shares outstanding during the period. Diluted earnings per
share include the actual weighted average number of common shares
outstanding and dilutive stock options.
COMPREHENSIVE INCOME - Comprehensive income includes all changes in
shareholders' equity during the period except those resulting from
investments by owners and distribution to owners. The Company's
comprehensive income includes net income and an unrealized gain on
investments.
BUSINESS SEGMENTS - The Company operates in only one business segment.
Long-lived assets are entirely located in the United States. In 1999 and
1998, the Company derived net sales from a single customer totaling
$2,169,000, and $2,691,000, respectively. Included in receivables are
amounts due from this customer of approximately $315,000 and $532,000 at
November 26, 1999 and November 27, 1998, respectively.
RECLASSIFICATIONS - Certain reclassifications have been made to the 1998
financial statements to conform to the classifications used in 1999.
NEW ACCOUNTING PRONOUNCEMENTS - Effective December 1, 1998, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 132
"Employers' Disclosures about Pensions and Other Postretirement Benefits".
SFAS No. 132 revises employers' disclosures about pension and other
postretirement benefit plans but does not change the measurement or
recognition of those plans. Restatement of disclosures for prior years has
been made for comparative purposes.
In June 1998, the Financial Accounting Standards Boards issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 requires companies to
recognize all derivatives contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. If certain conditions are
met, a derivative may be specified as a hedge, the objective of which is to
match the timing of gain or loss recognition on the hedging derivative with
the recognition of (i) the changes in the fair value of the hedged asset or
liability or (ii) the earnings effect of the hedged forecasted transition.
For a derivative not designated as a hedging instrument, the gain or loss
is recognized in income in the period of change. SFAS No. 133 is effective
for the Company in fiscal year 2001.
Historically, the Company has not entered into derivative contracts either
to hedge existing risks or for speculative purposes. Accordingly, the
Company does not expect adoption of the new standard to affect its
financial statements.
UNAUDITED FINANCIAL DATA--The interim financial data relating to the three
months ended February 25, 2000 and February 24, 1999 is unaudited; however,
in the opinion of the Company's management, the interim data includes all
adjustments, consisting of only normal recurring adjustments, necessary for
a fair statement of the results for the interim period. The results for the
three months ended February 25, 2000 and February 24, 1999 are not
necessarily indicative of the results to be expected for the full year or
any other interim period.
F-8
<PAGE> 12
2. INVESTMENTS
At November 26, 1999 and November 27, 1998, investments consisted of the
following (in thousands):
<TABLE>
<CAPTION>
FAIR MARKET VALUE COST
------------------- -------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Preferred and common stock $2,244 $2,083 $1,615 $1,466
U.S. Government and U.S. Government
agency obligations 1,096 908 1,090 830
Mutual funds 429 376 325 354
Corporate bonds 216 390 197 345
------ ------ ------ ------
Total $3,985 $3,757 $3,227 $2,995
====== ====== ====== ======
</TABLE>
Gross unrealized gains and losses at November 26, 1999 were $871,000 and
$113,000, respectively. Gross unrealized gains and losses at November 27,
1998 were $801,000 and $39,000, respectively.
The contractual maturities of debt securities are summarized as follows at
November 26, 1999 (in thousands):
<TABLE>
<CAPTION>
FAIR MARKET
VALUE COST
<S> <C> <C>
Within 1 year $ 100 $ 100
After 1 year through 5 years 255 252
After 5 years through 10 years 589 585
After 10 years 368 350
------ ------
Total debt securities $1,312 $1,287
====== ======
</TABLE>
3. INVENTORIES
Inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Acquisition cost:
Finished shoes $ 6,928 $ 6,618
Raw materials 13 11
------- -------
6,941 6,629
LIFO reserve 96 (61)
------- -------
$ 7,037 $ 6,568
======= =======
</TABLE>
F-9
<PAGE> 13
4. RETIREMENT PLAN
The Company has a retirement plan covering substantially all of its
employees. The Company's policy is to fund retirement cost as accrued. Plan
assets consist principally of equity securities and corporate and U.S.
Government obligations. The plan was fully funded at November 26, 1999 and
November 27, 1998.
The components of net periodic pension credit for 1999 and 1998
consist of the following (in thousands):
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
The components of the net periodic pension credit are:
Service cost $ 98 $ 53
Interest cost 235 236
Expected return on plan assets (373) (343)
Amortization of prior service cost 30 2
Amortization of transition obligation (asset) (33) (33)
Recognized actuarial loss (78) (36)
----- -----
Net periodic benefit credit $(121) $(121)
===== =====
</TABLE>
The following table sets forth the plan's funded status at November 26,
1999 and November 27, 1998 (in thousands):
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
The change in the benefit obligation is:
Benefit obligation at beginning of year $ 3,316 $ 3,341
Service cost 98 53
Interest cost 235 236
Amendments 195 --
Actuarial loss (gain) (70) (83)
Actual benefits and expenses paid (428) (231)
------- -------
Benefit obligation at end of year $ 3,346 $ 3,316
======= =======
The change in plan assets is:
Fair value of assets at beginning of year $ 6,443 $ 5,856
Actual return on plan assets 536 818
Actual benefits paid (428) (231)
------- -------
Fair value of assets at end of year $ 6,551 $ 6,443
======= =======
The funded status is:
Fair value of assets at end of year $ 6,551 $ 6,443
Benefit obligation at end of year 3,346 3,316
------- -------
Funded status 3,205 3,127
Unrecognized actuarial loss gain (2,749) (2,594)
Unrecognized net transition obligation (asset) (99) (132)
Unrecognized prior service cost 171 6
------- -------
Net prepaid benefit cost $ 528 $ 407
======= =======
</TABLE>
The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit
obligation in 1999 and 1998 were 7.5% and 6%, respectively. The expected
long-range rate of return on assets was 7.5% for both years.
F-10
<PAGE> 14
SUPPLEMENTAL RETIREMENT BENEFIT - The Company provides retirement benefits
to its former chief executive officer in accordance with a supplemental
retirement plan approved by the Board of Directors. The present value of
the estimated future payments under this benefit program of $160,000 in
1999 and $168,000 in 1998 is reflected in the accompanying balance sheets
as accrued retirement plan. Retirement payments under this program amounted
to $20,000 in both 1999 and 1998.
EMPLOYMENT DEATH BENEFIT - The Board of Directors has voted to make
payments to spouses and minor children of certain officers in the aggregate
amount of approximately $244,000 in the event of officers' deaths while
employed. In December 1998, the Company incurred a death benefit liability
in the amount of approximately $165,000 due to the death of an officer
subsequent to year end.
5. NOTES PAYABLE
At November 26, 1999, the Company had a line of credit with a bank of
$4,750,000 for the letters of credit and short-term borrowings. Borrowings
under this arrangement as of November 26, 1999 and November 27, 1998
totaled $550,000 and $1,475,000, respectively, and are secured by the
Company's investment portfolio and bear interest at the bank's prime
lending rate minus 1.5%. At November 26, 1999, commitments against letters
of credit were approximately $400,000.
6. OTHER INCOME - NET
Other income, net, consists of the following (in thousands):
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Interest income $ 126 $ 126
Dividend income 29 30
Gain on sale of investments 310 381
Interest expense (32) (45)
Other expense, net (5) (9)
----- -----
$ 428 $ 483
===== =====
</TABLE>
7. INCOME TAXES
Income taxes is comprised of the following (in thousands):
<TABLE>
<CAPTION>
Fiscal Year CURRENT DEFERRED TOTAL
<S> <C> <C> <C>
1999:
Federal $ 1,177 $ (8) $ 1,169
State 309 (2) 307
------- -------- -------
$ 1,486 $ (10) $ 1,476
======= ======== =======
1998:
Federal $ 880 (54) 826
State 262 (16) 246
------- -------- -------
$ 1,142 $ (70) $ 1,072
======= ======== =======
</TABLE>
F-11
<PAGE> 15
Deferred tax assets (liabilities) are comprised of the following (in
thousands):
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Deferred tax asset:
Receivable reserves $ 202 $ 212
Inventory reserves 203 135
Deferral related to investments (303) (307)
Basis difference of accrued liabilities 72 92
----- ----
$ 174 $ 132
===== ====
Deferred tax liability:
Depreciation $ -- $ (4)
Deferral related to prepaid pension costs (213) (164)
----- ----
$(213) $(168)
===== ====
</TABLE>
The deferred tax asset is included in prepaid expenses and other in the
accompanying balance sheets. A reconciliation of taxes on income at the
United States statutory rate to the effective rate follows:
<TABLE>
<CAPTION>
Fiscal Year 1999 1998
<S> <C> <C>
Taxes on income computed at the United States
statutory rate 34.0 % 34.0 %
State and local taxes, net of federal benefit 7.4 6.1
Dividends received deduction (.2) (.3)
Other - net 5.6 2.1
---- ----
Effective tax rate 46.8 % 41.9 %
==== ====
</TABLE>
8. STOCK OPTION PLAN
The Company has a non-qualified stock option plan (the "Plan") designed to
reward key employees of the Company. Options are available for the purchase
of shares of the Company's common stock at an exercise price as determined
by the Board of Directors, but at a price not less than the fair market
value of the common stock at the time the option is granted. The Plan
provides that options for the purchase of up to 75,000 shares of common
stock may be granted, of which 33,000 shares remained available for grant
at November 26, 1999. Changes in the outstanding options under the Plan are
summarized as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Outstanding at beginning of year 26,000 26,000
Exercised (price of $3.125 per share) (10,000) --
------- ------
Outstanding and exercisable at end of
year (exercise prices range from $3.125
to $5.00 per share) 16,000 26,000
======= ======
Weighed average exercise price $ 3.486 $ 3.486
======= ======
</TABLE>
The Company accounts for its stock based compensation plan using the
intrinsic value method. Accordingly, no compensation cost has been
recognized for its stock option plan. Had compensation cost for the
Company's stock option plan been determined based on the fair value at
grant dates for awards under the plan consistent with the method of
Statement of Financial Accounting Standards No. 123, the Company's net
income and earnings per share for fiscal 1999 and 1998 would not have
been affected as options were neither granted nor vested during these
years. All outstanding and exercisable shares at November 26, 1999
were exercised subsequent to year end and the plan was cancelled, (see
note 9).
F-12
<PAGE> 16
9. ACQUISITION OF COMMON STOCK AND SUBSEQUENT EVENTS
On November 23, 1999, PSC Acquisition Corp., a wholly-owned subsidiary of
Riedman Corporation, acquired 81.8% of the outstanding common stock of the
Company for $11.75 per share. On January 17, 2000, the remaining shares of
outstanding common stock were acquired when PSC Acquisition Corp. and the
Company merged with the Company being the surviving corporation. As a
result of the merger, the Company is a wholly-owned subsidiary of Riedman
Corporation and the Company's shares were deregistered under the Securities
Exchange Act of 1934, as amended. In addition, all outstanding and
exercisable stock options were cancelled in exchange for a sum equal to the
difference between $11.75 per share and the exercise price per share of the
options and the Company's Stock Option Plan was cancelled.
On February 10, 2000, Riedman Corporation entered into a definitive stock
purchase agreement to sell all of the outstanding shares of the Company to
the Daniel Green Company ("Daniel Green"). Daniel Green is engaged
primarily in the import and sale of leisure footwear. Sales are made
principally to retailers in the United States. Riedman Corporation is a
major stockholder of Daniel Green and one of Riedman Corporation's owners
is Daniel Green's Chairman and Chief Executive Officer. The pending
acquisition is subject to regulatory approval and other matters and is
expected to close by the end of March 2000.
F-13
<PAGE> 17
DANIEL GREEN COMPANY
PRO FORMA FINANCIAL DATA
(Unaudited)
Pro Forma Consolidated Statements of Operations
The following unaudited pro forma consolidated statements of operations have
been derived from the statements of operations of Daniel Green Company
("acquirer" or "the Company") for the year ended December 31, 1999 and the
quarters ended March 31, 2000 and 1999, and from the statements of operations of
Penobscot Shoe Company ("acquiree") for the year ended November 26, 1999 and for
the quarters ended March 31, 2000 and 1999. Such information has been adjusted
to give effect to the acquisition transaction as if it had occurred on January
1, 1999. The pro forma consolidated statements of operations are presented for
informational purposes only and do not purport to be indicative of the results
of operations that actually would have resulted if the acquisition transaction
had been consummated on January 1, 1999 nor which may result from future
operations.
A pro forma balance sheet has not been presented here because the acquisition
transaction is reflected in the Company's consolidated balance sheet as of March
31, 2000 contained in the Company's 10-QSB, as filed with the Securities and
Exchange Commission in May 2000.
The Pro Forma Consolidated Statements of Operations should be read in
conjunction with the notes thereto and the Company's consolidated financial
statements and related notes thereto contained in the Company's Form 10-QSB for
the quarter ended March 31, 2000, as filed with the Securities and Exchange
Commission in May 2000, and Form 10-KSB for the year ended December 31, 1999, as
filed with the Securities and Exchange Commission in March 2000.
F-14
<PAGE> 18
DANIEL GREEN COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(Unaudited)
(IN THOUSANDS EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
Acquirer Acquiree Pro Forma Pro Forma
Historical Historical Adjustments Balance
---------- ---------- ----------- -------
<S> <C> <C> <C> <C>
Net Sales $14,867 $21,665 $ 0 $36,532
Operating Expenses:
Cost of Goods Sold 11,972 13,464 0 25,436
Selling & Administrative Expenses 4,713 5,475 8 (1) 10,196
--------------------------------------------------------------------
Total Operating Expenses 16,685 18,939 8 35,632
--------------------------------------------------------------------
Operating (Loss) Income (1,818) 2,726 (8) 900
Other Income 0 460 0 460
Interest Expense (193) (32) (975)(2) (1,200)
--------------------------------------------------------------------
(Loss) Earnings Before Income Taxes (2,011) 3,154 (983) 160
Income Tax (Benefit) Provision (483) 1,476 (937)(3) 56
--------------------------------------------------------------------
Net (Loss) Earnings ($1,528) $ 1,678 ($46) $ 104
====================================================================
Net (Loss) Earnings per Share:
Basic ($ 0.97) $ 1.21 $ 0.07 (4)
============================= ===========
Diluted ($ 0.97) $ 1.20 $ 0.07 (4)
============================= ===========
Weighted Average Shares Outstanding:
Basic 1,569,086 1,384,829 1,569,086
============================= ===========
Diluted 1,569,086 1,394,856 1,569,086
============================= ===========
</TABLE>
The accompanying notes are an integral part of this unaudited Pro Forma
Consolidated Statement of Operations.
F-15
<PAGE> 19
DANIEL GREEN COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000
(Unaudited)
(IN THOUSANDS EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
Acquirer Acquiree Pro Forma Pro Forma
Historical Historical Adjustments Balance
---------- ---------- ----------- -------
<S> <C> <C> <C> <C>
Net Sales $1,156 $6,514 $ 0 $ 7,670
--------------------------------------------------------------------
Operating Expenses:
Cost of Goods Sold 1,307 3,745 0 5,052
Selling & Administrative Expenses 1,809 1,364 22 (1) 3,195
--------------------------------------------------------------------
Total Operating Expenses 3,116 5,109 22 8,247
--------------------------------------------------------------------
Operating (Loss) Income (1,960) 1,405 (22) (577)
Other Income 0 23 0 23
Interest Expense (69) (6) (345)(2) (420)
--------------------------------------------------------------------
(Loss) Earnings Before Income Taxes (2,029) 1,422 (367) (974)
Income Tax (Benefit) Provision (487) 573 (323)(3) (237)
--------------------------------------------------------------------
Net (Loss) Earnings ($1,542) $ 849 ($44) ($737)
====================================================================
Net (Loss) Earnings per Share:
Basic ($0.99) $ 0.61 ($0.47)(4)
============================= ===========
Diluted ($0.99) $ 0.61 ($0.47)(4)
============================= ===========
Weighted Average Shares Outstanding:
Basic 1,564,532 1,388,291 1,564,532
============================= ===========
Diluted 1,564,532 1,388,291 1,564,532
============================= ===========
</TABLE>
The accompanying notes are an integral part of this unaudited Pro Forma
Consolidated Statement of Operations.
F-16
<PAGE> 20
DANIEL GREEN COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
(Unaudited)
(IN THOUSANDS EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
Acquirer Acquiree Pro Forma Pro Forma
Historical Historical Adjustments Balance
---------- ---------- ----------- -------
<S> <C> <C> <C> <C>
Net Sales $2,887 $6,102 $ 0 $ 8,989
--------------------------------------------------------------------
Operating Expenses:
Cost of Goods Sold 2,423 3,478 0 5,901
Selling & Administrative Expenses 960 1,740 5 (1) 2,705
--------------------------------------------------------------------
Total Operating Expenses 3,383 5,218 5 8,606
--------------------------------------------------------------------
Operating (Loss) Income (496) 884 (5) 383
Interest Expense (21) (8) (256)(2) (285)
--------------------------------------------------------------------
(Loss) Earnings Before Income Taxes (517) 876 (261) 98
Income Tax (Benefit) Provision (124) 351 (204)(3) 23
--------------------------------------------------------------------
Net (Loss) Earnings ($393) $ 525 ($57) $ 75
====================================================================
Net (Loss) Earnings per Share:
Basic ($0.25) $ 0.05 (4)
=========== ===========
Diluted ($0.25) $ 0.05 (4)
=========== ===========
Weighted Average Shares Outstanding:
Basic 1,571,133 1,571,133
=========== ===========
Diluted 1,571,133 1,571,133
=========== ===========
</TABLE>
The accompanying notes are an integral part of this unaudited Pro Forma
Consolidated Statement of Operations.
F-17
<PAGE> 21
DANIEL GREEN COMPANY
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Reflects amortization of goodwill of approximately $900,000 resulting
from the acquisition over 15 years and an adjustment for depreciation
expense based on the fair values assigned to the acquiree's property
and equipment acquired.
(2) Represents additional interest expense on indebtedness required to fund
the acquisition and working capital requirements.
(3) Represents an adjustment for income taxes based on the pro forma pretax
income (loss) and effective income tax rate for the period.
(4) Calculated based on pro forma net income (loss).
F-18
