<PAGE> 1
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, 2000 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)
OLD TOWN, MAINE 04468
(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, 2000
Common Stock $2.50 par value 1,560,789
Transitional Small Business Disclosure Format, (check one) YES NO X
--- ---
<PAGE> 2
DANIEL GREEN COMPANY
INDEX
<TABLE>
<CAPTION>
Page
Number
<S> <C>
Index.......................................................................... 1
PART I - Financial Information
Consolidated Balance Sheets, Assets
March 31,2000 and December 31, 1999................................... 2
Consolidated Balance Sheets, Liabilities & Stockholders' Equity
March 31,2000 and December 31, 1999................................... 3
Consolidated Statements of Operations for the three months ended
March 31, 2000 and 1999............................................... 4
Consolidated Statements of Cash Flows for the three months ended
March 31, 2000 and 1999............................................... 5
Notes to Consolidated Financial Statements..................................... 6
Management Discussion & Analysis of Financial Condition and Results
of Operations......................................................... 8
PART II - Other Information.................................................... 11
</TABLE>
i
<PAGE> 3
DANIEL GREEN COMPANY
Consolidated Balance Sheets
Assets
<TABLE>
<CAPTION>
March 31 December 31
2000 1999
(Unaudited) (*)
-----------------------------
Current Assets:
<S> <C> <C>
Cash $ 494,562 $ 225,079
Investments 718,000 0
Accounts Receivable, trade
less allowances for doubtful accounts
(2000 - $211,906 1999 - $321,000) 6,674,907 4,167,612
Deferred Income Tax Asset 535,500 101,629
Finished Goods Inventories, at lower of
cost (FIFO) or market 9,994,888 3,542,255
Other Current Assets 139,888 71,725
----------------------------
Total Current Assets 18,557,745 8,108,300
Property, plant & equipment:
Buildings & Land, at cost 2,560,504 2,560,504
Machinery & Equipment, at cost 2,887,835 1,594,847
----------------------------
5,448,339 4,155,351
Less: Accumulated Depreciation 3,371,507 3,333,701
----------------------------
Property, plant & equipment, net 2,076,832 821,650
Other Assets:
Deferred income tax asset 1,089,369 815,176
Deferred financing costs 448,585 435,612
Goodwill 896,483 0
Prepaid Pension Cost 2,500,000 0
Other Assets 3,895 70,923
----------------------------
Total Other Assets 4,938,332 1,321,711
Total Assets $25,572,909 $10,251,661
=============================
</TABLE>
(*)Derived from audited financial statements.
See notes to consolidated financial statements.
<PAGE> 4
DANIEL GREEN COMPANY
Consolidated Balance Sheets
Liabilities & Stockholders' Equity
<TABLE>
<CAPTION>
March 31 December 31
2000 1999
(Unaudited) (*)
--------------------------------
Current Liabilities:
<S> <C> <C>
Notes Payable, line of credit $ -- $ 1,903,078
Notes Payable, current 898,217 864,754
Accounts Payable, trade 1,326,320 548,816
Accrued Salaries & Commissions 233,492 170,935
Accural for Closing Dolgeville Facility & Severance 508,811 0
Income Tax Payable 922,300 0
Other Accrued Liabilities 644,279 206,448
--------------------------------
Total Current Liabilities 4,533,419 3,694,031
Notes Payable, line of credit 7,619,229 0
Notes Payable, noncurrent 6,021,201 81,087
Other Liability 2,489,928 0
--------------------------------
Total Liabilities 20,663,777 3,775,118
Stockholders' Equity:
Common Stock 4,245,823 4,245,823
Paid-in-excess of par value 815,940 815,940
Retained Earnings 445,764 1,987,992
--------------------------------
5,507,527 7,049,755
Less: Treasury Stock (598,395) (573,212)
--------------------------------
Total Stockholders' Equity 4,909,132 6,476,543
Total Liabilities & Stockholders' Equity $ 25,572,909 $ 10,251,661
================================
</TABLE>
(*) Derived from audited financial statements.
See notes to consolidated financial statements.
<PAGE> 5
DANIEL GREEN COMPANY
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
March 31 March 31
2000 1999
<S> <C> <C>
Net Sales $ 1,155,557 $ 2,887,025
Costs and Expenses:
Cost of Goods Sold 1,306,657 2,423,254
Selling, General &
Administrative 1,808,866 960,064
Interest Expense 69,282 21,233
----------------------------
Total Costs and Expenses 3,184,805 3,404,551
Loss before Credit
for Income Taxes (2,029,248) (517,526)
Credit for Income Taxes 487,020 124,206
----------------------------
Net Loss $(1,542,228) $ (393,320)
============================
Net Loss per share:
Basic $ (0.99) $ (0.25)
Diluted $ (0.99) $ (0.25)
Shares Outstanding:
Basic 1,564,532 1,571,133
Diluted 1,564,532 1,571,133
</TABLE>
See notes to consolidated financial statements.
<PAGE> 6
DANIEL GREEN COMPANY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For Three Months Ended
March 31 March 31
2000 1999
-------------------------
Operating Activities:
<S> <C> <C>
Net Loss $ (1,542,228) $ (393,320)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 37,806 74,795
Amortization 39,755 9,771
Changes in assets & liabilities:
(Increases) decreases in:
Accounts Receivable, trade 2,150,221 1,232,551
Inventories (529,147) 469,738
Other Current Assets (41,757) 48,046
Other Assets (487,019) (169,300)
Increases ( decreases) in:
Accounts Payable, trade 9,602 (281,653)
Accrued Salaries & Commissions (34,702) 86,168
Other Accrued Liabilities 578,672 (11,024)
-------------------------------
Net Cash Provided by Operating Activities 181,203 1,065,772
Investment Activities:
Acquisition of business less cash acquired (11,485,900) 0
Purchase of property & equipment (42,988) (30,388)
-------------------------------
Net Cash Used in Investing Activities (11,528,888) (30,388)
Financing Activities:
Net Borrowings(Payments) -Line of Credit 5,716,152 (861,926)
Net Borrowings (Payments) of Notes Payable 5,978,926 (137,240)
Purchase of Treasury Stock (25,183) (38,118)
Other Refinancing Expenses (52,727) 0
-------------------------------
Net Cash Provided (Used) in Financing Activities 11,617,168 (1,037,284)
-------------------------------
Net Increase (Decrease) in Cash 269,483 (1,900)
Cash at Beginning of Period 225,079 7,300
-------------------------------
Cash at End of Period $ 494,562 $ 5,400
================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 7
DANIEL GREEN COMPANY
Notes to Consolidated Financial Statements
Note 1. In the opinion of the Company, the accompanying unaudited
consolidated 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, 2000 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,
2000 are not necessarily indicative of the results to be
expected for the full year.
Note 3. Due to severe global competition, the Company ceased domestic
manufacturing and transitioned to a fully sourced importer
during 1999. At the same time, several acquisition
opportunities were aggressively evaluated and pursued. This
activity resulted in acquiring certain assets of one of the
Company's largest competitors, L. B. Evans and Son ("Evans")
on February 3, 2000. In addition, the Company purchased all of
the outstanding shares of Penobscot Shoe Company ("Penobscot")
from Riedman Corporation on March 30, 2000. Penobscot Shoe
Company has been making women's footwear for over 60 years and
is based in Old Town, Maine. Since a significantly more modern
distribution facility, with excess capacity came with the
Penobscot acquisition, it was decided that relocating the
Daniel Green operation to Maine would provide the most
efficient and effective platform for optimizing the synergies
from the three businesses. Effective May 1, 2000, and pursuant
to a public announcement made by the Company on March 30,
2000, the Company's headquarters and distribution operation
currently located in Dolgeville, New York will relocate to,
and consolidate with, the newly acquired operations in Old
Town, Maine. Accordingly, the Company recorded an expense
totaling $508,811 for the purposes of closing the Dolgeville
facility ($400,000) and severance to terminated employees
($108,811).
Note 4. The acquisition of Penobscot has been accounted for under the
purchase method of accounting and, accordingly, the operation
results of Penobscot have been included in the Company's
consolidated financial statements since the date of
acquisition. The estimated fair market value of assets and
liabilities acquired was $15.398 million and $4.853 million
respectively. The acquired liabilities include a $2,490
million obligation to dissenting stockholders of the acquired
company. This obligation was classified as long-term since the
Company intends to finance the payment on a long-term basis
and has a specific long-term financing arrangement in place
for such purpose on terms that are readily determinable. The
excess of the aggregate purchase price over the estimated fair
market value of the net assets acquired was approximately
$.897 million, which is being amortized on a straight-line
basis over 15 years.
<PAGE> 8
The following summary presents unaudited proforma consolidated
results of operations as if the acquisition had occurred at
the beginning of 2000 and 1999, and include adjustments for
estimated amounts of goodwill amortization, depreciation of
fixed assets acquired based on their estimated fair values,
increased interest expense assuming the purchase consideration
had resulted in additional borrowing during the periods
presented. The pro forma results are for illustrative purposes
only, and do not purport to be indicative of the actual
results which would have occurred had the transaction been
consummated as of the earlier dates, nor are they indicative
of results of operations which may occur in the future. The
results do not reflect synergies.
<TABLE>
<CAPTION>
Quarter Ended March 31, 2000 1999
----------------------------------------------------------------------------
<S> <C> <C>
In thousands, except per share amounts (unaudited)
Net Sales $7,670 $8,989
Net Earnings (Loss) (737) 75
Net Earnings (Loss) per Common Share (0.47) .05
</TABLE>
<PAGE> 9
DANIEL GREEN COMPANY
Management Discussion & Analysis of Financial Condition and
Results of Operations
1. Liquidity and Capital Resources
As disclosed in Note 3 to the Consolidated Financial Statements
included herein, the Company acquired L.B. Evans & Son (Evans) and
Penobscot Shoe Company (Penobscot) during the quarter ended March 2000.
For the quarter ended March 31, 2000, net cash flows from operating
activities generated $181,203 compared to $1,065,772 cash generated for
the same period in 1999. Accounts receivable as at March 31, 2000,
inclusive of Penobscot, were $6,674,907. The Company's net accounts
receivable, excluding Penobscot were $2,017,391, a decrease of $956,037
or 32.2% from the comparable 1999 period and decreased $2,150,221 from
the end of fiscal year 1999. Inventories, which included finished
products from the two acquisitions, ended the first quarter of 2000 at
$9,994,888. The Company's inventory for the first quarter of 2000
excluding the acquired inventories of Penobscot, was $3,365,919, which
is $1,645,242 or 32.8% lower than the 1999 comparable period and has
increased from the beginning of the year by $529,147.
At the end of the first quarter of 2000, total indebtedness consisted
of: line of credit balance, noncurrent of $7,619,229, notes payable,
current $898,217, notes payable, noncurrent $6,021,201, and a liability
related to the dissenting stockholders of Penobscot of $2,489,928; a
total debt of $17,028,575. The Company's borrowing increased
significantly due to the acquisition activities of Evans $781,294 and
Penobscot $11,442,101. The Company's total debt prior to acquisition
activities was $3,096,546, as compared with $1,473,712 a year ago, an
increase of $1,622,834 or 110.1%.
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. The revolving line termination date is
July 30, 2002. The interest rate established on the revolving line is
prime rate plus one percent (1%) per annum. The mortgage term loan is
secured by the Company's facilities and totaled $805,897 as of March
31, 2000. The mortgage term loan's principal and interest payments are
based on a ten-year amortization with a balloon payment on April 1,
2001. The mortgage term loan interest rate is LIBOR plus two and
one-quarter percent (2 -1/4%) per annum.
<PAGE> 10
On March 30, 2000, the Company entered into a new loan agreement with
M&T Bank to support recent acquisition and working capital
requirements. The prior agreement was amended in is entirety to, among
other things:
- Provide a revolving credit facility in the maximum principal
amount of $12,500,000;
- Provide an additional term loan facility in the principal amount of
$6,000,000;
- Provide a supplement loan facility in the principal amount of up to
$2,800,000;
- Convert the Revolving Line Loan under the prior agreement into loans
under this agreement;
- Add Penobscot as a borrower under this agreement; and
- Make certain other changes to the terms and conditions of the prior
agreement.
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
borrowings, should cover planned requirements.
2. Results of Operations
Net sales for the first quarter were $1,155,557, a decrease of
$1,731,468 or 60.0% lower than last year during this timeframe.
Included in the 2000 first quarter net sales were $23,191 net sales
attributable to Evans and one day of net sales of Penobscot of
$101,274. The elimination of low margin products traditionally sold by
the Company during the first quarter resulted in the majority of sales
loss during the first quarter. Sourcing delays of inventory deliveries
resulted in the cancellations of orders and reduced reorders for the
same period. In addition, the Company experienced a heavier rate of
returned merchandise and/or allowances during the first quarter of 2000
compared to the same period in 1999. The Company expects this problem
to be corrected by the end of the second quarter. The number of units
sold decreased 28.7% from 199,036 year to date March 1999 to 141,899
year to date March 2000. The average selling price per pair of $10.72
is 26.3% lower that $14.54 for the same period in 1999. The lower price
points of slow moving/closeout inventory written down in the prior year
drove the lower average selling price per pair.
Cost of goods sold for the three months ended March 31, 2000 totaled
$1,306,657 a decrease of $1,116,597 or 46.1% over the comparable 1999
period. The negative gross profit during the first quarter of 2000
amounted to $151,100 compared to a gross profit of $463,771 for the
same quarter of 1999.
The first quarter total selling, general and administrative expenses
increased 88.4% from expenses reported during the comparable period of
1999. An accrual of $508,811 was established during the first quarter
of 2000 for costs associated with closing and securing the Company's
Dolgeville location and terminated employees' severance packages.
<PAGE> 11
During the first quarter of 2000, net interest expense amounted to
$69,282 compared to $21,233 a year ago. Increased borrowings during the
quarter due to acquisition activities led to the higher interest
expense.
The Company incurred a loss before taxes of $2,029,248 in the first
quarter of 2000, compared to a pre-tax loss of $517,526 for the 1999
period. On an after-tax basis, the net loss for the quarter was
$1,542,228 or $0.99 per share as opposed to a net loss of $393,320 or
$0.25 per share in 1999.
<PAGE> 12
DANIEL GREEN COMPANY
Part II - Other Information
1. Legal Proceedings
(a) On March 7, 2000 a lawsuit was filed in the United States District
Court for the Southern District of New York by Group USA, Inc. alleging
trademark infringement and unfair competition based upon the Company's
distribution, manufacture and sale of footwear products bearing a
trademark that is claimed to be a colorable imitation of the
interlocking DG design trademarks owned by Group USA. The complaint
seeks to enjoin the Company's use of the mark and the destruction of
all Company products and promotional materials which display the mark.
The complaint also seeks to recover Daniel Green Company's profits from
use of the mark and unspecified damages sustained by Group USA.
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.
(a) Form 8K was filed March 30, 2000 regarding acquisition of Penobscot
Shoe Company.
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: 5/12/00 /s/ John E. Brigham
------------------ -------------------------
John E. Brigham
Chief Financial Officer,
Treasurer
/s/ James R. Riedman
-------------------------
JAMES R. RIEDMAN, CEO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 494,562
<SECURITIES> 718,000
<RECEIVABLES> 6,886,813
<ALLOWANCES> 211,906
<INVENTORY> 9,994,888
<CURRENT-ASSETS> 18,557,745
<PP&E> 5,448,339
<DEPRECIATION> 3,371,507
<TOTAL-ASSETS> 25,572,909
<CURRENT-LIABILITIES> 4,533,419
<BONDS> 0
0
0
<COMMON> 4,909,132
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 25,572,909
<SALES> 1,155,557
<TOTAL-REVENUES> 1,155,557
<CGS> 1,306,657
<TOTAL-COSTS> 1,808,866
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,282
<INCOME-PRETAX> (2,029,248)
<INCOME-TAX> (487,020)
<INCOME-CONTINUING> (1,542,228)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,542,228)
<EPS-BASIC> (0.99)
<EPS-DILUTED> (0.99)
</TABLE>
