MOUNT GILEAD, N.C., June 14, 2017 /PRNewswire/ -- McRae Industries, Inc. (Pink Sheets: MCRAA and MCRAB) reported consolidated net revenues for the third quarter of fiscal 2017 of $24,092,000 as compared to $25,150,000 for the third quarter of fiscal 2016.  Net earnings for the third quarter of fiscal 2017 amounted to $1,202,000, or $0.50 per diluted Class A common share as compared to $681,000, or $0.28 per diluted Class A common share, for the third quarter of fiscal 2016.  

Consolidated net revenues for the first nine months of fiscal 2017 totaled $82,078,000 as compared to $85,681,000 for the first nine months of fiscal 2016. Net earnings for the first nine months of fiscal 2017 amounted to $4,361,000, or $1.81 per diluted Class A common share, as compared to net earnings of $4,075,000, or $1.68 per diluted Class A common share, for the first nine months of fiscal 2016.

THIRD QUARTER FISCAL 2017 COMPARED TO THIRD QUARTER FISCAL 2016

Consolidated net revenues totaled $24.1 million for the third quarter of fiscal 2017 as compared to $25.1 million for the third quarter of fiscal 2016. Sales related to our western/lifestyle boot products for the third quarter of fiscal 2017 totaled $10.1 million as compared to $12.5 million for the third quarter of fiscal 2016. This 19% decrease in net revenues is primarily a result of decreased sales in our premium western boots, children's boots, and women's fashion boots. Revenues from our work boot products grew approximately 9%, from $12.6 million for the third quarter of fiscal 2016 to $13.7 million for the third quarter of fiscal 2017, primarily due to an increase in production of military boots related to our multiple government contracts.   

Consolidated gross profit for the third quarter of fiscal 2017 amounted to approximately $5.8 million as compared to $5.6 million for the third quarter of fiscal 2016. Gross profit as a percentage of net revenues was up from 22.3% for the third quarter of fiscal 2016 to 24.2% for the third quarter of fiscal 2017. This is primarily a result of the increase in work boot product sales, specifically our military boots.

Consolidated selling, general and administrative ("SG&A") expenses have decreased from $4.5 million for the third quarter of fiscal 2016 to $4.0 million for the third quarter of fiscal 2017.  This was primarily driven by decreased expenditures for commissions, salaries, and advertising.

As a result of the above, the consolidated operating profit for the third quarter of fiscal 2017 amounted to $1.8 million as compared to $1.1 million for the third quarter of fiscal 2016.

FIRST NINE MONTHS FISCAL 2017 COMPARED TO FIRST NINE MONTHS FISCAL 2016

Consolidated net revenues for the first nine months of fiscal 2017 totaled $82.1 million as compared to $85.7 million for the first nine months of fiscal 2016. Our western and lifestyle product sales totaled $38.0 million for the first nine months of fiscal 2017 as compared to $47.2 million for the first nine months of fiscal 2016, with the decrease coming from declines in our women's, children's, and premium western boot sales. Net revenues from our work boot business grew from $38.3 million for the first nine months of fiscal 2016 to $43.2 million for the first nine months of fiscal 2017. This increase in work boot products net revenues resulted primarily from higher military boot shipments associated with our U. S. Government contracts and commercial sales.

Consolidated gross profit totaled $20.6 million for the first nine months of fiscal 2017 as compared to $21.6 million for the first nine months of fiscal 2016. Gross profit attributable to our western and lifestyle products totaled $13.2 million for the first nine months of fiscal 2017, down from $16.8 million for the first nine months of fiscal 2016. This decrease in gross profit is directly correlated with the decrease in sales. Our work boot products gross profit grew from $4.6 million for the first nine months of fiscal 2016 to $7.1 million for the first nine months of fiscal 2017. This increase was driven by the higher military boot shipments mentioned above.

Consolidated selling, general and administrative ("SG&A") expenses totaled approximately $13.8 million for the first nine months of fiscal 2017 as compared to $15.1 million for the first nine months of fiscal 2016. This decrease in SG&A expenses resulted primarily from decreased expenditures for commissions, salaries, and advertising.

As a result of the above, the consolidated operating profit amounted to $6.8 million for the first nine months of fiscal 2017 as compared to $6.5 million for the first nine months of fiscal 2016.

Financial Condition and Liquidity

Our financial conditions remain strong at April 29, 2017 as cash and cash equivalents totaled $28.1 million as compared to $15.7 million at July 30, 2016. Our working capital increased from $50.5 million at July 30, 2016 to $53.8 million at April 29, 2017.

We currently have two lines of credit totaling $6.75 million, all of which was fully available at April 29, 2017. One credit line totaling $1.75 million (which is restricted to one hundred percent of the outstanding receivables due from the Government) expires in January 2018. Our $5.0 million line of credit, which also expires in January 2018, is secured by the inventory and accounts receivable of our Dan Post Boot Company subsidiary. We believe that our current cash and cash equivalents, cash generated from operations, and available credit lines will be sufficient to meet our capital requirements for the remainder of fiscal 2017.

For the first nine months of fiscal 2017, operating activities provided approximately $14.2 million of cash. Net earnings, as adjusted for depreciation, contributed approximately $5.3 million of cash. A reduction in inventory, accounts receivables, and other assets provided approximately $9.5 million of cash. Accounts payable and other liabilities used approximately $0.6 million.

Net cash used by investing activities totaled approximately $0.3 million, primarily for manufacturing equipment.

Net cash used in financing activities totaled $1.5 million.  Dividend payments used approximately $0.9 million and common stock purchases used approximately $0.6 million.

Forward-Looking Statements

This press release includes certain forward-looking statements.  Important factors that could cause actual results or events to differ materially from those projected, estimated, assumed or anticipated in any such forward-looking statements include: the effect of competitive products and pricing, risks unique to selling goods to the Government (including variation in the Government's requirements for our products and the Government's ability to terminate its contracts with vendors), changes in fashion cycles and trends in the western boot business, loss of key customers, acquisitions, supply interruptions, additional financing requirements, our expectations about future Government orders for military boots, loss of key management personnel, our ability to successfully develop new products and services, and the effect of general economic conditions in our markets.

 

McRae Industries, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)








April 29,
2017


July 30,
2016


ASSETS





Current assets: 










Cash and cash equivalents


$28,081


$15,673






Short term securities


377


501






Accounts and notes receivable, net


12,344


12,708






Inventories, net


18,949


27,944






Income tax receivable


-


897






Prepaid expenses and other current assets


262


433






  Total current assets


60,013


58,156






Property and equipment, net


7,597


8,147






Other assets:










Deposits


14


14






Long term securities


3,667


3,520






Real estate held for investment


3,560


3,602






Amounts due from split-dollar life insurance


2,288


2,288






Trademarks


2,824


2,824






  Total other assets


12,353


12,248






 Total assets


$79,963


$78,551





McRae Industries, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)








April 29,
2017


July 30,
2016


LIABILITIES AND SHAREHOLDERS' EQUITY





Current liabilities: 










Accounts payable


$3,263


$4,696






Accrued employee benefits


1,028


1,090






Accrued payroll and payroll taxes


1,006


1,207






Accrued income tax


98


-






Other


775


698






  Total current liabilities


6,170


7,691











Shareholders' equity:





Common Stock:





  Class A, $1 par value; authorized 5,000,000 shares
     issued and outstanding, 2,014,842 and 2,030,658
     shares, respectively


2,015


2,031






  Class B, $1 par value; authorized 2,500,000 shares;
     issued and outstanding, 383,254 and 387,628 shares,
     respectively


383


388






Unrealized losses on investments, net of tax


(2)


(59)






Retained earnings


71,397


68,500






Total shareholders' equity


73,793


70,860






  Total liabilities and shareholders' equity


$79,963


$78,551

 

 

McRae Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data)

(Unaudited)










Three Months Ended


Nine Months Ended


April 29,


April 30,


April 29,


April 30,

2017

2016

2017

2016









Net revenues

$24,092


$25,150


$82,078


$85,681









Cost of revenues

18,266


19,552


61,497


64,079









Gross profit

5,826


5,598


20,581


21,602









Selling, general and administrative expenses

3,990


4,517


13,767


15,089









Operating profit 

1,836


1,081


6,814


6,513









Other income

123


78


277


271









Earnings before income taxes

1,959


1,159


7,091


6,784









Provision for income taxes

757


478


2,730


2,709









Net earnings 

$1,202


$681


$4,361


$4,075

























Earnings per common share:
















Earnings per common share: 








     Basic earnings per share:








        Class A

$0.57


$0.31


$2.08


$1.92

        Class B

0.13


0.13


0.39


0.39

     Diluted earnings per share:








        Class A

0.50


0.28


1.81


1.68

        Class B

NA


NA


NA


NA









Weighted average number of common shares outstanding:








       Class A

2,021,668


2,033,799


2,027,679


2,037,655

       Class B

384,860


388,381


386,688


389,818

        Total

2,406,528


2,422,180


2,414,367


2,427,473

 

 

McRae Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)








Nine Months Ended



April 29,


April 30,



2017

2016






Net cash provided by operating activities


14,192


4,364






Cash Flows from Investing Activities:










Proceeds from sale of assets


87


-






Purchase of land for investment


(45)


(13)






Capital expenditures


(375)


(2,581)






Proceeds from securities


34


-






Purchase of securities


-


(78)






Net cash used in investing activities


(299)


(2,672)






Cash Flows from Financing Activities:










Purchase of common stock


(546)


(340)






Dividends paid


(939)


(945)






Net cash used in financing activities


(1,485)


(1,285)






Net (Decrease) Increase in Cash and Cash equivalents


12,408


407






Cash and Cash Equivalents at Beginning of Year


15,673


15,437






Cash and Cash Equivalents at End of Year 


$28,081


$15,844

 

SOURCE McRae Industries, Inc.


Source: McRae Industries, Inc.