McRae Industries, Inc. Reports Earnings For Fiscal 2017
MOUNT GILEAD, N.C., Nov. 15, 2017 /PRNewswire/ -- McRae Industries, Inc. (Pink Sheets: MCRAA and MCRAB) reported consolidated net revenues for fiscal 2017 of $104,316,000 as compared to $108,758,000 for fiscal 2016. Net earnings for fiscal 2017 totaled $5,083,000 as compared to $4,692,000 for fiscal 2016. Net earnings per diluted Class A common share were $2.11 for fiscal 2017 as compared to $1.93 for fiscal 2016.
CONSOLIDATED RESULTS OF OPERATIONS, FISCAL 2017 COMPARED TO FISCAL 2016
Consolidated net revenues for fiscal 2017 amounted to approximately $104.3 million as compared to $108.8 million for fiscal 2016. Our western/lifestyle boot segment, which includes western wear, ladies fashion, and children footwear products under the Dan Post, Laredo, Dingo, El Dorado, and John Deere brand names, experienced a decrease in revenue of 17% from $58.8 million in 2016 to $48.8 million in 2017. Women's fashion and premium children's boots had the largest sales decrease. Net revenues for our work boot segment, which includes Dan Post, Laredo, John Deere, and McRae Industrial work boot products along with our military boots, increased by 9.5% with sales increasing from $49.7 million in fiscal 2016 to $54.2 million in 2017. The military boot sales increased by 15.2% from $39.6 million in 2016 to $45.6 million in 2017, while all other work boot brands decreased 12.8% from $10.1 million in fiscal 2016 to $8.6 million in fiscal 2017.
Consolidated gross profit for fiscal 2017 totaled $25.6 million as compared to $26.9 million for fiscal 2016. Gross margin for the western/lifestyle segment decreased from 35% in fiscal 2016 to 34.2% in fiscal 2017. Gross margins on our work boot segment increased slightly from 12.3% in fiscal 2016 to 15.8% in fiscal 2017 because of manufacturing efficiencies, a higher volume of production, and better product mix in our military boots.
Consolidated selling, general and administrative ("SG&A") expenses amounted to $17.8 million as compared to $19.8 million for fiscal 2016. This was primarily driven by decreased commissions, salaries, advertising, and a company-wide effort to minimize expenditures.
As a result of the above, consolidated operating profit totaled approximately $7.8 million for fiscal 2017 as compared to $7.1 million for fiscal 2016.
FINANCIAL CONDITION AND LIQUIDITY
At July 29, 2017, our financial condition and liquidity remained strong as cash and cash equivalents totaled $28.1 million as compared to $15.7 million at July 30, 2016. Our working capital totaled $56.5 million at July 29, 2017 as compared to $52.8 million at July 30, 2016.
We currently have two lines of credit totaling $6.75 million, both of which were fully available at July 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. The $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.
Net cash provided by operating activities for fiscal 2017 amounted to approximately $14.8 million. Net earnings, as adjusted for depreciation, contributed approximately $6.3 million of cash, and a reduction in income tax receivable contributed approximately $0.7 million. Lower inventory levels throughout the business provided approximately $9.7 million of cash. The timing of payments for accounts payable and lower accrued payroll used approximately $2.6 million of cash.
Net cash used in investing activities totaled approximately $0.7 million. The majority was used for capital expenditures and the purchase of securities. This was partially offset by proceeds from the sale of securities.
Net cash used to finance our dividend payments and the purchase of common stock totaled approximately $1.8 million.
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 fiscal 2018.
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)
July 29, July 30,
2017 2016
---- ----
ASSETS
Current assets:
Cash and cash
equivalents $28,057 $15,673
Short term securities 505 501
Accounts and notes
receivable, less
allowances 12,331 12,708
of $1,625 and $1,975,
respectively
Inventories, net 18,273 27,944
Income tax receivable 329 1,055
Prepaid expenses and
other current assets 550 433
Deferred tax assets 1,674 2,130
----- -----
Total current assets 61,719 60,444
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Property and equipment,
net 7,391 8,147
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Other assets:
Deposits 14 14
Long term securities 3,804 3,520
Real estate held for
investment 3,601 3,602
Amounts due from split-
dollar life insurance 2,288 2,288
Trademarks 2,824 2,824
----- -----
Total other assets 12,531 12,248
------ ------
Total assets $81,641 $80,839
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McRae Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
July 29, July 30,
2017 2016
---- ----
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,510 $4,696
Accrued employee
benefits 1,144 1,090
Accrued payroll and
payroll taxes 809 1,207
Other 714 698
--- ---
Total current
liabilities 5,177 7,691
----- -----
Deferred tax liabilities 2,263 2,288
----- -----
Total liabilities 7,440 9,979
----- -----
Shareholders' equity:
Common Stock:
Class A, $1 par value;
authorized 5,000,000
shares 2,015 2,031
issued and outstanding,
2,030,658 and 2,039,335
shares, respectively
Class B, $1 par value;
authorized 2,500,000 384 388
shares; issued and
outstanding, 387,629
and
391,189 shares,
respectively
Unrealized losses on
investments, net of tax (5) (59)
Retained earnings 71,807 68,500
------ ------
Total shareholders'
equity 74,201 70,860
------ ------
Total liabilities and
shareholders' equity $81,641 $80,839
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McRae Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
For Years Ended July 29, July 30, August 1,
2017 2016 2015
---- ---- ----
Net revenues $104,316 $108,758 $108,673
Cost of revenues 78,739 81,837 79,347
------ ------ ------
Gross profit 25,577 26,921 29,326
Selling, general and
administrative expenses 17,755 19,782 19,025
------ ------ ------
Operating profit 7,822 7,139 10,301
Other income 357 366 324
Interest expense - - (2)
--- --- ---
Earnings before income
taxes 8,179 7,505 10,623
Provision for income taxes 3,096 2,813 3,982
----- ----- -----
Net earnings $5,083 $4,692 $6,641
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Earnings per common share:
Earnings per common share:
Diluted earnings per share:
Class A 2.11 1.93 2.73
Class B NA NA NA
Weighted average number of
common shares outstanding:
Class A 2,024,470 2,035,906 2,038,645
Class B 385,830 389,271 391,879
------- ------- -------
Total 2,410,300 2,425,177 2,430,524
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McRae Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
July 29, July 30, August 1,
2017 2016 2015
---- ---- ----
For Years Ended
Cash Flows from Operating Activities:
Net earnings $5,083 $4,692 $6,641
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 1,211 907 785
Amortization of bond premiums - - 3
(Gain) loss on sale of assets (2) (6) -
Loss on sale of securities 6 62 -
Deferred income taxes 398 951 (75)
Changes in operating assets and liabilities:
Accounts receivable, net 377 2,928 (2,208)
Inventories 9,671 (2,187) (3,469)
Prepaid expenses and other
assets (117) 99 21
Accounts payable (2,186) (903) 1,821
Accrued employee benefits 54 (537) (171)
Accrued payroll and payroll
taxes (398) (18) 64
Income tax receivable/
payable 726 (933) 816
Other 16 146 89
--- --- ---
Net cash provided by
operating activities 14,839 5,201 4,317
------ ----- -----
Cash Flows from Investing Activities:
Proceeds from sale of assets 13 15 -
Purchase of land for
investment - (17) (9)
Capital expenditures (465) (3,237) (3,380)
Proceeds from sale of
securities 833 484 75
Purchase of securities (1,040) (609) (3,183)
------ ---- ------
Net cash used in investing
activities (659) (3,364) (6,497)
---- ------ ------
Cash Flows from Financing Activities:
Purchase of common stock (545) (342) -
Dividends paid (1,251) (1,259) (1,263)
------ ------ ------
Net cash used in financing
activities (1,796) (1,601) (1,263)
------ ------ ------
Net (Decrease) Increase in
Cash and Cash equivalents 12,384 236 (3,443)
Cash and Cash Equivalents at
Beginning of Year 15,673 15,437 18,880
------ ------ ------
Cash and Cash Equivalents at
End of Year $28,057 $15,673 $15,437
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SOURCE McRae Industries, Inc.
